Strategic Business Unit

(SBU)
A fully-functional profit centre of a business
relatively autonomous division of a large
company that operates as an independent
enterprise with responsibility for a
particular range of products or activities
• SBU’s typically have
 Separate marketing plan
 Competition Analysis
 Marketing campaign, etc.
• An SBU may be a business unit within a
larger corporation, or it may be a business
unto itself or a branch.
• Corporations may be composed of multiple
SBUs, each of which is responsible for its
own profitability.
• General Electric is an example of a
company with this sort of business
organization.
• SBUs are able to affect most factors which
influence their performance.
• Managed as separate businesses, they are
responsible to a parent corporation.
• General electric have 49 SBUs.
Advantages of SBU
•Allows for the organization to concentrate on
the target audience and provide cost
leadership to the company.
•Allows a company to meet the distinct needs
of the target audience by supplying products
and services that are valued by those specific
user.
 Advantages of SBU
• Advantages provided through the ability to
offer more value to your customers.
• Own separate ability to craft industry-
specific strategy as it relates to their
function.
• Helps to understand which business
activities contribute the most value.
• Enable the ability to make decisions based
on resources and efficiencies.
There are three factors that are generally seen
as determining the success of an SBU
•1. The degree of autonomy given to each
SBU manager,
•2. The degree to which an SBU shares
functional programs and facilities with other
SBUs, and
•3. The manner in which the corporation
adopts new changes in market.
 BOSTON CONSULTING
GROUP (BCG) MATRIX
• Developed by BRUCE HENDERSON of the
BOSTON CONSULTING GROUP.
• According to this technique, businesses
or products are classified as low or high
performers depending upon their market
growth rate and relative market share.
Market share and Market growth

• Market share is the percentage of the total

market that is being serviced by your
company, measured either in revenue
terms or unit volume terms
• Market growth is used as a measure of a
market’s attractiveness.
Business Portfolio Analysis (BCG-Matrix)
based on the combination of market growth and market
share relative to the next best competitor.
High
Stars Question Marks
Market Growth Rate

Cash Cows Dogs

Low
High Low
Relative Market Share
Life-Cycle Strategies
 Learning Goals

1. Know the stages of the product life

cycle
2. Realize how marketing strategies
change during the product’s life cycle
 Product Life-Cycle

• A new product progresses through a

sequence of stages from introduction to
growth, maturity, and decline. This sequence
is known as the product life cycle and is
associated with changes in the marketing
situation, thus impacting the marketing
strategy and the marketing mix.

10- 18
 Sales and Profits
Over A Product’s Life
 Product Life-Cycle
Strategies
• The Typical Product Life Cycle (PLC)
Has Five Stages
 Product Development, Introduction,
Growth, Maturity, Decline
 Not all products follow this cycle:
• Fads
• Styles
• Fashions
10- 21
 Figure 10-3:
Styles, Fashions, and Fads
 Product Life-Cycle
Strategies

PLC Stages • Begins when the

company develops a
• Product development new-product idea
• Introduction • Sales are zero
• Growth
• Investment costs are
• Maturity
high
• Decline
• Profits are negative

Goal 2: Realize how marketing strategies change during the product life cycle
 Product Life-Cycle
Strategies

PLC Stages • Low sales

• High cost per customer
• Product development acquired
• Introduction • Negative profits
• Growth • Innovators are targeted
• Maturity • Little competition
• Decline

Goal 2: Realize how marketing strategies change during the product life cycle
 Marketing Strategies:
Introduction Stage
• Product – Offer a basic product
• Price – Use cost-plus basis to set
• Distribution – Build selective distribution
• Advertising – Build awareness among early
adopters and dealers/resellers
• Sales Promotion – Heavy expenditures to
create trial

Goal 2: Realize how marketing strategies change during the product life cycle
 Product Life-Cycle
Strategies

PLC Stages • Rapidly rising sales

• Average cost per
• Product development customer
• Introduction • Rising profits
• Growth • Early adopters are
• Maturity targeted
• Decline • Growing competition

Goal 2: Realize how marketing strategies change during the product life cycle
 Marketing Strategies:
Growth Stage
• Product – Offer product extensions, service,
warranty
• Price – Penetration pricing
• Distribution – Build intensive distribution
• Advertising – Build awareness and interest in
the mass market
• Sales Promotion – Reduce expenditures to
take advantage of consumer demand

Goal 2: Realize how marketing strategies change during the product life cycle
 Product Life-Cycle
Strategies

PLC Stages • Sales peak

• Low cost per customer
• Product development • High profits
• Introduction • Middle majority are
• Growth targeted
• Maturity • Competition begins to
• Decline decline

Goal 2: Realize how marketing strategies change during the product life cycle
 Marketing Strategies:
Maturity Stage
• Product – Diversify brand and models
• Price – Set to match or beat competition
• Distribution – Build more intensive
distribution
• Advertising – Stress brand differences and
benefits
• Sales Promotion – Increase to encourage
brand switching

Goal 2: Realize how marketing strategies change during the product life cycle
 Product Life-Cycle
Strategies

PLC Stages • Declining sales

• Low cost per customer
• Product development • Declining profits
• Introduction • Laggards are targeted
• Growth • Declining competition
• Maturity
• Decline

Goal 2: Realize how marketing strategies change during the product life cycle
 Marketing Strategies:
Decline Stage
• Product – Phase out weak items
• Price – Cut price
• Distribution – Use selective distribution:
phase out unprofitable outlets
• Advertising – Reduce to level needed to
retain hard-core loyalists
• Sales Promotion – Reduce to minimal level

Goal 2: Realize how marketing strategies change during the product life cycle