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These strategic business units are also referred to as independent business units or strategic planning
units. The main philosophical concept behind the formation of strategic business units is to serve a
clear and defined market segment along with a clear and defined strategy. These business units have
to contain all the needs and corporate capabilities of the respective organization. The entire portfolio
of the concerned business has to be managed by allocation of managerial and capital resources for
serving the overall interest of the entire organization. This helps in developing a balance in the
earnings, sales and the assets at a level which is controlled and acceptable for taking the right amount
of risks.
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The strategic business unit (SBU) is created with the application of set criteria which consist of the
competitors, price models, customer groups and the overall experience of the company. It is also
sometimes seen that a number of different verticals present in the same organization having similar
competitors and target customers are amalgamated to form a single SBU. This helps in strategically
planning the overall business of the organization. This is also true for the company which has different
product ranges and some of them have similar capabilities in terms of research and development,
marketing and manufacturing. Such products can also be amalgamated to form a single unit.|
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The main notion which rests behind the concept of strategic business units is to gain a competitive
advantage in the populated marketplace. This can be done because the SBU helps in segmenting the
activities of the company in a strategic manner and the resources are thus allocated competitively.|

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