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Strategic Business Unit (SBU)

  • Living reference work entry
  • First Online:
The Palgrave Encyclopedia of Strategic Management

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FormalPara Definition

A strategic business unit is a semi-autonomous division or department that usually has a set of functional departments, a unique market (or markets) and set of competitors, and is run by a senior executive who reports directly to the CEO or the top management team.

In a Harvard Business School case, Aguilar and Hamermesh (1981, n. 3) define a strategic business unit (SBU) as having: A unique set of competitors, a unique business mission, a competitor in external markets (as opposed to internal supplier), the ability to accomplish integrated strategic planning, and the ability to “call the shots” on the variables crucial to the success of the business.’ The case details how, in the late 1960s, General Electric (GE) struggled to manage a fragmented organization. To better evaluate their businesses they organized into strategic business units. Each SBU had an executive team responsible for the majority of management decisions.

Three topics merit some consideration:...

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References

  • Aguilar, F.J., and R.G. Hamermesh. 1981. General electric: Strategic position – 1981. Cambridge, MA: Harvard Business School.

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  • Chandler, A.D. 1962. Strategy and structure. Cambridge, MA: The MIT Press.

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  • Govindarajan, V. 1986. Decentralization, strategy, and effectiveness of strategic business units in multibusiness organizations. Academy of Management Review 11: 844–856.

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Author information

Authors and Affiliations

  1. Department of Management, College of Business Administration and Public Policy, Carson, CA, USA

    David G. Hoopes

Authors
  1. David G. Hoopes
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Correspondence to David G. Hoopes .

Editor information

Editors and Affiliations

  1. Stanford University , Stanford, California, USA

    Mie Augier

  2. Tusher Ctr Intellectual Capital, University of California Tusher Ctr Intellectual Capital, Berkeley, California, USA

    David J. Teece

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© 2016 The Author(s)

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Hoopes, D.G. (2016). Strategic Business Unit (SBU). In: Augier, M., Teece, D. (eds) The Palgrave Encyclopedia of Strategic Management. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-94848-2_679-1

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  • DOI: https://doi.org/10.1057/978-1-349-94848-2_679-1

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  • Publisher Name: Palgrave Macmillan, London

  • Online ISBN: 978-1-349-94848-2

  • eBook Packages: Springer Reference Business and ManagementReference Module Humanities and Social SciencesReference Module Business, Economics and Social Sciences

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