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Strategy and Organisation Chapter 5 Summary: Business Strategy
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A detailed summary of chapter 5 of the book: Strategy and Organisation of Utrecht University
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Chapter 5: Business StrategyBusiness strategy is concerned with seeking competitive advantage in
markets at the business rather than the corporate level.
Identifying Strategic Business Units
A strategic business unit (SBU) supplies goods or services for a distinct
domain of activity. A small business focused on a single market would
count as a strategic business unit. Typically within a large diversified
corporation multiple SBUs exist and each SBU will have responsibility for
its own business strategy and profit performance.
::::There are two types of SBU business strategies:
Generic competitive strategies, including cost leadership,
differentiation, focus and hybrid strategies. It is important to see how
these strategies are sustainable over time.
Interactive strategies, considers the interaction with competitors, in
hypercompetitive environments and includes both cooperative
strategies and game theory.
The SBU concept has three effects within a large organisation. First, SBUs
decentralise initiative to smaller units within the corporation as a whole.
Second, SBUs allow large corporations to vary their business strategies
according to the different needs of the various external markets they
serve. Finally, the SBU concept encourages accountability.
Identifying the right boundaries for SBUs is often complex. In many
corporations, SBU boundaries change frequently as well.
::::Two basic criteria that can help identify appropriate SBUs:
Market-based criteria: Different parts of an organisation might be
regarded as the same SBU if they are targeting the same customer
types, through the same sorts of channels and facing similar
competitors.
Capabilities-based criteria: Parts of an organisation should only be
regarded as the same SBU if they have similar strategic capabilities.
Generic Competitive Strategies
Competitive strategy is concerned with how an SBU achieves competitive
advantage in its domain of activity. Competitive strategy therefore
involves issued such as costs, product features and branding. Competitive
advantage is about how an SBU creates value for its users both greater
than the costs of supplying them and superior to that of rival SBUs.
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