WEEK 13

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

1.      Business Dictionary (2013) Strategic Business Unit,(online) http://www.businessdictionary.com/definition/strategic-business-unit-SBU.html (Accessed on October 6,2013)

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