In essence, the SBU is a profit making area that focuses on a combination of product offer and market segment, requiring its own marketing plan, competitor analysis, and marketing campaign.
Hold your breath for this… cos you gotta concentrate hard:
A Strategic Business Unit emerges at the cross-over between…
- A product offering that the company could make and
- A reachable market segment that has a high value profit potential.
That is to say, if there’s a big enough market niche for a product we can supply, then we may want to create a SBU that focuses on that opportunity.
E.g. Selling ice-cream to kids playing outdoors in hot weather – could be one SBU. Another SBU could be selling ice-cream to theater goers. Another could be selling ice-cream to supermarket goers via TV advertising.
(This obviously suggests that the overall corporate strategy is selling ice-cream).
Either your corporate strategy or personal choice through personal interest or market research will lead you to a certain market sector or industry. That market sector in itself partly defines what type of product that you will sell.
But the exact product mix and target niches are down to the SBU.
At the level of Strategic Business Unit (SBU) we have just a few core objectives:
- Selecting market segments in which to compete
- Providing a mix of well demanded products
- Outcompeting competitors through lower cost or higher quality or both or some other means to higher perceived value
This is done through 3 key areas of Strategic Business Unit Market Analysis:
- Customer / Offer Matrix
- Positioning through Competitor Profiling
- Critical Success Factors
Let’s go through them…
Customer / Offer Matrix
To arrive at identifying these SBUs a Customer / Offer Matrix is created.
A square with offerings on one axis, and customer groups on the other. Filling in the squares that offer significant market potential allows you to hone in on where to create SBUs.
Diagram shows simple example with our ice-cream sector.
Each SBU will be structured uniquely, depending on the nature of the customer relationship, competitive environment, product availability, and so on.
From this analysis you arrive at a list of competencies the organization must have to succeed, within each SBU, which are called…
Positioning (Competitor Profiling)
Successful businesses effectively manage customer perceptions. Knowing who you are competing against allows you to position your offer.
- The first step is to know the companies that are in our market space.
- To profile them for strengths and weakness.
- Then to decide on opportunities and threats by arriving at Critical Success Factors.
Critical Success Factors (CSFs)
CSFs are the things you need to do well to optimally win business.
This must pinpoint the customer requirements inherent in the product category and in the current competitive environment that will give you a competitive advantage, extending from the core competencies and values of the company.
Thus to clearly identify CSFs you must have clear definitions of the market segment and customer groups as per the Customer / Offer Matrix.
Strategic Consequences of CSFs
Each CSF dictates consequences to the SBU that must be achieved.
E.g. If Price competitiveness is seen as a CSF, then a practical consequence will include having strong cost control and efficiency, and effective lending risk assessment and margin management.
The SBU Customer / Offer Matrix can also be used to explore ideas for new SBUs by looking at market extension (new customer groups) and offering range extension (new products/services).
But the question you really want to ask yourself is…
Do I really want a lifetimes of office politics, high pressure targets, and miserly promotions amongst ever-growing competition…
Do I want a life of leisure, abundance, financial security and contribution.
Join me on the business venture that I have found to be most lucrative of all options.
Contact me and I’ll share the details with you.