What is a Strategic Business Unit and Why is it Significant?


A strategic business unit is a separate unit of a company that works on its own strategies and follows the work procedures. At the same time, it also reports to the company headquarter because it may work as a separate unit but it is always a part of the bigger picture. SBUs are important for the business organizations as they ease the stress of daily work operations and also simplify the product management.  

Example of strategic business unit 

A big organization ‘X’ that deals in multiple short-term loans such as personal loans, payday loans, small business loans and bad credit loans in Ireland. Every loan product has a separate market condition and demand because all belong to same sector but have different uses. 

The company ‘X’ finds it difficult to manage all the products under one roof. As a solution, it makes separate business units for every option. One will specialize in personal loans, one will take care of the loans for poor credit people and so on. Isn’t it better for the lender to work with so many wings? In the limitless sky of competition, it is good to have so many wings. 

Significance of Strategic Business Unit

Many reasons can provide the significance of SBUs and the future of all industries depend on the presence of such business units. With globalization as a default feature of the modern era and intense competition even in the local market, SBU is a vital requirement. 

Better organization of work with individual existence

Exactly, it is the first benefit a big organization can get through a strategic business unit. With multiple products in one place, an organization can lose its control on the overall management. 

Things can become extremely confusing and can adversely affect the short-term and long-term goals. Management of everything under one system is certainly like rocket science. 

SBU can take individual decisions, can make separate strategy and separate budget.  This self-reliance makes the company stress-free as every SBU is responsible for its own actions. 

Higher profit margins with better focus

When every part of a brand is working independently, definitely it gives a better focus on one thing at a time. This practice in turn enhances the standards and an organization can serve better to the market and the customers. 

With focused efforts on one product in the chain, SBU can earn higher profit for the company. The market can be captured easily because every individual unit works for its betterment to show a great performance to the company. 

The different Strategic units energise the organization and with collective efforts of all business units, the final progress takes place. Is it really possible to manage things smoothly without the separate units? No, not at all. 

Easier Human Resource Management 

With responsibilities managed at multiple levels, it is smoother to recruit, train and manage human resource. Every unit needs to arrange things on this aspect, which keeps the burden away from the organization. 

With individual roles of every unit for a certain product line, it is possible to gain certainty and better grip on the business as well as on the market. The recruitment and termination process is clear because the company work with varied branches dedicated for collective targets. 

It becomes possible to work on the specialization of the employees because one unit can train the employees for a certain product. A company that deals in the consumer durable products such as refrigerators, micro wave, washing machine, and air conditioner. With separate units, it can teach its human resource the sale skills required for that particular product. 

Work on future goals effectively 

When a huge task is categorized in many small parts, it becomes convenient to achieve organizational goals. The strategic business units offer ease through categorization of work. They let the goals become easy for the business with varied units working separately for one big reason. 

The scrutiny of strengths and weaknesses becomes easier and also the timely action to improve the latter. With effective strategy for each and every product line in the product chain, the SBU can help the business achieve future goals.

It is important for the strategic units to report to the headquarters about their performance. In this case, every unit works in the best possible manner to send only a good report to the actual boss. It means they work hard on the tasks and targets given by the company and that achieves better future goals. 

Creation of more jobs that offer support to the economy

Of course, it is a laudable trait of the strategic business unit concept. SBU not only supports a business but also to an economy but creating multiple jobs. Every product and service unit can be a considerable reason for giving bread and butter to many mouths. 

The countless families survive on the SBUs and the brands should get the credit for this. They spread their work and exist in varied forms in the form of the different units. 

Every time a unit expands to a new location, it gives job to many people and thus the economy finds support. It is the reason that businesses have a strong role in strengthening the economy. They are the carriers of success and development. 

The past of human civilization has a positive history of businesses in offering food and shelter to many people. With advancement in technology people are even earning from home. 

The set-up of a strategic business unit 

The SBU set-up includes 3 main parts, all dedicated to a certain work for the attainment of the goals of a unit. 

  1. Organizational structure 
  2. Remuneration system
  3. Recruitment and selection process

The above points explain the role, responsibilities and significance of strategic business units. Now perhaps you have no doubt that how strongly the market needs the presence of business units. They work independently but to contribute to that one big organization which is the actual employer of all units. The businesses with scattered locations and products cannot afford to manage everything single handedly. Thanks to the strategic units that offer comfort to an organization by taking the responsibilities on it shoulders. 


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