Lesson 3 Flashcards
What is Strategic business units (SBUs)
A strategic business unit (SBU) supplies goods or services for a distinct domain of activity/business area
What are the purpose of organizing in SBUs?
- To decentralise initiative to smaller units within the corporation so each SBUs can pursue their own distinct strategy
- To allow large corporations to vary their business strategies according to the different needs of external markets
- To encourage accountability – each SBU can be held responsible for its own costs, revenues and profits
How do we create competitive advantage in a SBU?
- A lower cost structure in the company, i.e. the company can produce its product at lower costs and thus lower prices
- A unique product – which has greater value in the eyes of the customers – than the competitors’
What is a product portfolio planning?
A portfolio analysis is an analysis of the company’s product groups/business units (SBUs).
The analysis must show how the company’s products/business units are composed and what resources the individual product groups should be allocated
What is the Boston Model?
The purpose of the Boston model is to place the individual product groups in a matrix taking into account the business area’s market growth and the relative market share, i.e. in relation to the largest competitor
What is there in Boston Model?
A star is a business unit which has a high market share in a growing market
A question mark (or problem child) is a business unit in a growing market, but it does not have a high market share
A cash cow is a business unit that has a high market share in a mature market
A dog is a business unit that has a low market share in a static or declining market
What is strategy in action?
Strategy in action is about how strategies are formed and how they are implemented
What are the criteria for strategic options
Suitability
Acceptability
Feasibility
What is a GAP analysis?
Gap analysis compares achieved performance with desired performance:
- Helps to identify shortfalls in performance
- The size of the ‘gap’ provides a guide to the extent to which strategy needs to be changed – a very large gap may suggest transformational change is needed
What is Break-even analysis?
It shows at what point in terms of revenue the business will recover its fixed and variable costs and thus break even. It can be used to assess the risks associated with different price and cost structures of strategies.
What is Return?
Returns are the financial benefits which stakeholders are expected to receive from a strategy
