Full Form of SBU

The full form of SBU is Strategic Business Unit. SBU is an independent department or sub-unit of a large organization that is fully functional and focuses on a target market. It has its mission, vision, direction, objectives, and support functions, such as training and human resource departments. This unit has to report to the headquarters of the concerned organization directly.

Characteristics

The different characteristics are as follows:

You are free to use this image on you website, templates, etc., Please provide us with an attribution linkHow to Provide Attribution?Article Link to be HyperlinkedFor eg:Source: Full Form of SBU (wallstreetmojo.com)

  • Strategic Business Unit utilizes a product-market strategy.SBU is a part of the organizational structure.It is an organizational unit devoid of individual and independent legal personality.They perform activities that are considered the utmost crucial and significant for the entire organization concerning decision-making.It has a divisional structure determined by its production size, accounting processes, research and development activities, and marketing function.Strategic Business Unit decision-making autonomy comprises production, laboratory testing, finance, production preparation, accounting, and marketing.They enable the organization to enjoy autonomous planning functions.It is responsible for functions like strategic planning, performance, and profitability of the division.The Strategic Business Unit even has a set of competitors.

Types of SBU

The types of Strategic Business Unit of the BCG matrix are as follows:

#1 – Stars

It is high growth and has a high share of products or business concerns. Stars always need a lump sum investment to fund their fast growth. This type of SBU’s growth eventually slows down and turns into cash cows. Star Business Units is a profitable business. It even has attractive long-term profit earning opportunities. This type of SBU has a higher growth rate and is highly competitive. It can turn into cash cows only if it consolidates its competitive position.

#2 – Cash Cows

They generate relatively more cash in comparison to what they consume. This type of SBU has low market growth and a high share of products or businesses. Cash cowsCash CowsA cash cow is a company or a business unit that provides a consistent cash flow stream by capturing significant market share and requires a relatively lower capital investment and maintenance cost. In addition, products generated are standard and have consistent demand with higher returns at a lower risk.read more generate a lot of cash that the organization ultimately utilized by the organization in settling off its bills and supporting other strategic business units that need the investment.

#3 – Question Marks

Question Marks is a low-share business unit in a high-growth market. It produces a significant amount of cash. So, the companies must not inject further cash into this type of SBU since it lacks opportunities for future expansion.

#4 – Dogs

It is low market growth and low market share of products and businesses. This type of SBU cannot generate cash and has a very dim prospect. It is due to the low competitiveness of this SBU.

Structure of SBU

Strategic Business Unit structure comprises operating units where these units function autonomously. They comprise three levels. The corporate headquarters, SBUs, and divisions are clustered by similar positions at the top-most, middle, and bottom. The SBU groups carry their status, whereas the divisions within the same cluster with each other.

Example

ABC Ltd. manufactures customer durables such as television sets, mobile phones, laptops, and other electronic gadgets. These units are formed as independent strategic business units to track revenues separately, costs incurred, sales, and profits. The moment a unit bestows with an SBU status, it becomes easy to make effective decisions, budgets, investments, etc. In addition, with independent SBUs, it will become easy for ABC Ltd. to quickly respond to the sudden shift or changes in the product market on or before time.

Difference Between Strategic Business Unit & Division

Strategic Business Unit and divisions might seem very similar concepts. But in reality, the two are different from one another. They differ on grounds like strategic functions, results, implementation, etc. Strategic Business Units can make their own strategic decisions soon after the same gets created by an organization. SBUs can analyze the company’s competitive placement in relevant industries, develop products based on customer response and needs, and even measure their performance. Divisions usually cannot carry out such important tasks and functions.

Advantages

Some of the advantages are as follows:

  • Strategic Business Unit gives an organization ample opportunities to shape a promising future and make constructive decisions.They give ample opportunities to an organization to identify and make well-informed strategic decisions.SBU even offers multiple financial benefits to an organization.It improves strategic managementStrategic ManagementStrategic management in a business refers to the planning, management, utilization of resources to define and achieve objectives efficiently. read more in an organization.They even improve the accounting functionAccounting FunctionAccounting functions are financial systems that help in the bookkeeping of financial information in an organization, financial analysis, summary creation, reporting of transactions and act as the backbone for almost any business. Accounting as a system tries to identify, assess and record the transactions of financial nature in a very systematic approach.read more of an organization.Strategic Business Unit eases the planning of organizational activities.

Disadvantages

Some of the disadvantages are as follows:

  • Strategic Business Unit faces many difficulties while contacting the top-level management.They can also sometimes be one of the probable causes of unclear situations regarding managerial activities.SBU can also be one of the probable causes of internal tensions arising due to difficulties in accessing external and internal funding sources.

Conclusion

SBU stands for the Strategic Business Unit. Strategic Business Unit supports cooperation and coordination between multiple departments of an organization with similar functions and activities to perform and deliver. They also enable an organization to operate for a longer period as it ensures that it is fully aware of the upcoming shift and changes in the marketplace so that the same can readily adjust itself and easily survive in the highly competitive scenario.

This article has been a guide to the Full Form of SBU, i.e. (Strategic Business Unit). Here, we discuss types and examples of SBU along with characteristics, advantages, and disadvantages. You may refer to the following articles to learn more about finance: –

  • Full Form of POAFull Form of NASDAQCPA Stands for?Full Form of USPMFG Full Form