Week: 13
Strategic
business unit (SBU)
In
business, a strategic business
unit (SBU) is profit center which focus on product offer and
market division. SBUs normally have a separate marketing plan, analysis of
competition, and marketing campaign, even though they may be part
of a larger trade unit.
An SBU
may be a business unit within a larger corporation,
or it may be a business unto itself or a division. Corporations may be composed
of several SBUs, each of which is responsible for its own success. 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. Manage as separate
businesses; they are in charge to a parent corporation. General electric has 49
SBUs. (Business
Dictionary, 2013)
Corporate level strategy
Corporate
level strategy is the overall strategy for a diversify organization or group.
It is generally concerned with a mix of businesses that the company should
compete in and also the ways on which individual strategy units are included
and co-ordinate. In other words, corporate
level strategy covers the strategic scope of the organization as an entire. For
most of the organizations the corporate strategic plan is the only strategic
plan required. Often strategy at
the corporate level is simply referred to as corporate strategy, or in combined
companies the corporate business strategy. The process that produces it is
called corporate strategic planning, or sometimes simply corporate planning. In
a few situations however, it may be justified to speak of corporate level
strategy to distinguish it from other kinds of planning. One of the examples of
the corporate level strategy is organization.(Porter M .E,2013)
Discuss
the corporate parenting style of Virgin Group?
There
are more than 200 different companies of virgin group. Some of them are
financial services, travelling, music, health, mobile, holidays and airlines etc.
It has a very low parental control over management system. It has to
manage different business unite successfully so proper leader style should be
apply. The democratic leadership access employees shared beliefs creating
belongings, flexibility and decentralized power makes employees to take every
single decision regarding the management objectives of different sectors. It’s
hard to expertise in different sector for top level management so by applying
democratic system create delegation and freedom makes more empowered and
motivated. With good communication and coordination the employees are
able innovate ideas and lead to Virgin Group to success path.
CASE
STUDY – VIRGIN GROUP
What
type of corporate parent is Virgin (portfolio manager, synergy manager or
parental developer)?
The
Virgin Group is more based on Parental Developer type of corporate and has a
successful remarkable brand image. The Group has a various SBUs some of them
are Green Fund, Virgin Radio, Virgin Wines, Virgin Travels, Virgin Earth,
Virgin Entertainment, Hotels and many more. The trend creates strong brand
value which adds value for investor to invest in Virgin Group. So the brand
value creates good brand reputation among customer.
How
does the Virgin Group, as a corporate parent, add value to its business?
With
good branding strategies and brand name Virgin Group is able to add value for
the firm. The trend is able to create a loyal customer and success to hold
customer in current scenario by encouraging purchasing product and services.
The Group is able to have strong market share in international market. The USP
of Group able to sell variety of product in international market with low
promotion and advertising cost.
Some
of the points that add value to the business are
a.
Democratic style
b.
Innovation
c.
Internationalizing firm (joint venture, merger etc)
d.
Understanding of market
e.
Brand name
What
is the logic of the portfolio? Why do you think they are in mobile telephony,
travel, financial service, leisure, music, holidays and health and wellness?
The
logic for portfolio of Virgin Group is expansion of business. It will directly
lead in adding value to the brand name which result adjustment and balance of
profit and loss. It reduces the risk they may exist in business. It’s hard to
earn profit from every business so Group tries to minimize the loss from one
business by getting profit from another business. The whole process is to
balance portfolio. Additional BCG Matrix, Directional policy and Parenting
Matrix manage their business portfolio.
Except
from expansion business, diversify the business is also very important in
today’s market scenario. Without diversifying it’s hard for any business to
exist for long period of time in international market.
What
are the main risk facing Virgin Group as a result of their strategy? How might
they be reduced?
The
main risks facing Virgin Group as a result of their strategy are as follow
a.
Wide portfolio
The
Virgin Group have huge portfolio so improper management may lead the whole
Group to heavy risk.
b.
Huge dependent in brand
The
Group exists due to its brand value. But some scenario, defect in single sector
may harm to whole Group. Example-Virgin Airlines, in 2001 loss in this sector
leads direct loss in other sector.
c.
Risk reduction
Need to make strategy for every sector that defect in single
sector wont effect other sector with in a Group
Reference
2. Porter M. E,(2013) Corporate Lebel
Strategy(online) http://www.isc.hbs.edu/firm-corpstrat.htm (Accessed on October 5, 2013)
3. www.virgingroup.com
