Business and Finance solutions

Since formal strategic planning began to make inroads in corporations in the
1970s, a variety of new concepts have been developed for identifying a corporation’s opportunities and for speeding up the process of strategy development. These newer concepts create problems of internal organization. In a dynamic economy, all functions of a corporation (e.g., research and development, finance, and marketing) are related. Optimizing certain functions instead of the company as a whole is far from adequate for achieving superior corporate performance.
Such an organizational perspective leaves only the CEO in a position to think in terms of the corporation as a whole. Large corporations have tried many different structural designs to broaden the scope of the CEO in dealing with complexities. One such design is the profit center concept. Unfortunately, the profit center concept emphasizes short-term consequences; also, its emphasis is on optimizing the profit center instead of the corporation as a whole. The SBU concept was developed to overcome the difficulties posed by the profit center type of organization. Thus, the first step in integrating product/market strategies is to identify the firm’s SBUs. This amounts to identifying natural businesses in which the corporation is involved. SBUs are not necessarily synonymous with existing divisions or profit centers. An SBU is composed of a product or product lines having identifiable independence from other products or product lines in terms of competition, prices, substitutability of product, style/quality, and impact of product withdrawal. It is around this configuration of products that a business strategy should be designed. In today’s organizations, this strategy may encompass products found in more than one division. By the same token, some managers may find themselves managing two or more natural businesses. This does not necessarily mean that divisional boundaries need to be redefined; an SBU can often overlap divisions, and a division can include more than one SBU.