Question

What does SBU stand for? Explain the objectives and benefits of SBU. Discuss any tool for evaluation and allocating the resources to SBUs.

Answer 1

ANSWER:

SBU stand for Strategic Business Units. SBU indicates an independently managed division of a large organisation, having its own mission, vision, and objectives, whose planning is done separately from other businesses of the organisation. The mission, vision, and objectives of the division are both distinct from the parent enterprise and elemental to the long-duration performance of the company. The main objective of SBU is to form to target a specific market segment, which needs expertise in production or management, not present in the parent company; thus promote the existing business with innovations and better management control.

The main benefits of SBU are:

--It supports cooperation among the departments of the company which holds similar range of activities

-- It leads to improvement of strategic management. The management of the strategic business units get more independence to manage their own unit thus it provides them the opportunity to be more innovative and creative.

-- SBU’s make the company organized. When handling multiple products, it is easier when there are separate businesses units thus can be held accountable for the success or failure of the business

-- There is an improvement of accounting operations and accountancy becomes more transparent. Profit and loss and balance sheets will look easier and more manageable when the statements are prepared separately for separate SBU's.

-- SBU makes easier planning of activities

-- It allows the organization to concentrate on the target audience and give cost leadership to the organisation.

One of the tools of SBU is the matrix structure which is an organizational design that groups employees by both function and product. The organizational structure is very flat, and the matrix structure is differentiated into whatever functions are required for the accomplishment of specific goals. Each functional worker generally reports to the functional heads, however does not normally work directly under their supervision. All decisions are taken by experts thus allows the employees to widen their skills. Since there is a specialization thus leads to optimum utilization of resources.