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Strategic Business Unit - Meaning & Definition

Published in Marketing and Strategy Terms by MBA Skool Team Last Updated: February 08, 2024Reading time:

What is Strategic Business Unit?

Strategic business unit is defined as independent unit of organisation with same organisational goals. Strategic business units are created based on the market segments catered by organisation and are generally created to increase profits. Each SBU has its own budget and also has its own sales targets along with marketing plan and thus act as independent organisation within the main organisation. Thus organisation shares the responsibility with strategic business units and thus work for betterment of organisation as whole.

These divisions within the organisations are given flexibility to act independently and has own independent leaders within strategic business units. Thus there will be CEO of SBU along with the CEO of organisation. If we take an example of KEC INTERNATIONAL LTD. It has CEO of organisation as whole ad there are CEO’s for different strategic business units like Transmission and distribution, cables, water, solar and renewable energy. These units have their own organisational structure which may or may not be similar to the organisation as whole. Advantage of SBUs are it becomes easy to manage different products within organisation.

Also decision making is shared and independent which adds responsibility on any unit. Thus strategic business unit are governed by same policy as parent organisation and helps in implementing strategy of organisation as whole.

Hence, this concludes the definition of Strategic Business Unit along with its overview.

This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

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