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What Is a Strategic Business Unit?

A strategic business unit has a different business strategy and goal than the larger company.
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  • Written By: Mary McMahon
  • Edited By: Nancy Fann-Im
  • Last Modified Date: 14 September 2014
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A strategic business unit (SBU) is an autonomous business entity inside a corporation that focuses on handling a particular product, service, or demographic. It has a different business strategy and goal than the larger company. While it supports the mission of the parent company, it also operates independently to further its own goals. The level of independence available to the SBU depends on the company's policy and the ground rules set out when it developed this independent entity.

In the strategic business unit, members of the team have much more flexibility than those working for the larger company, and they can adapt very quickly to changes in the market. This can make the unit useful for launching new products and services, where the company wants to be able to quickly adjust in response to customer feedback. Innovation may also be more common in a small working group where people do not need to report to the rest of the company, and this can create opportunities for expanding into new markets or presenting advertising material in new and interesting ways.

The company can appoint one or more managers to head the unit, allowing them to staff it as they see fit. It may have independent budgets, offices, and other markers of autonomy to make it stand out from the rest of the company. People who work for the SBU develop independent and distinctive product lines with the support of the parent company and may work to reach new target markets.

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Companies can have more than one such unit, but communication between them is often limited, and each focuses on its own tasks within the market. As companies grow and expand their offerings, these groups can be a valuable tool, allowing the main company to focus on its primary mission, while testing product expansions through smaller units. They may eventually become large and independent enough to spin off into subsidiary companies that pay for themselves with the proceeds from their activities.

When seeking managers and staff for a strategic business unit, companies look for employees known for being good at independent, creative work. People with a record of innovation, creative approaches to problems, and a commitment to the company are more likely to be selected. Employees with an interest in such opportunties can discuss them with managers to determine what kinds of openings are available and see if they are qualified.

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