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Terminology regarding segmentation of an organization

  • The segmentation of an organization is associated with certain terminology that is necessary to unravel before you can get into more complex issues. This article describes four key concepts to understand how an organization should be segmented according to market strategy and defined.

    ·  SBU = Strategic Business Unit : This is the main element of strategic segmentation of the organization. According Norton & Kaplan1 it is a department or unit that has or should have a mission, a strategy, a customer (internal or external) and some internal processes that allow you to perform its mission and strategy. An SBU It can be considered as any organizational division with its own strategy1 (own vision mission and consistent with the corporate) with a person in charge of it.

    It is recommended that SBU has activities throughout the value chain (i.e. have people and resources that through internal processes provide service to some customers, hoping clearly identifiable results).

    This definition distinguishes the SBU departments or services that do not have their own strategy and therefore are not candidates to build an independent strategic process.

    ·  SBA = Strategic Business Area 2 H. Igor Ansoff defined as a distinct market segment in which the company makes (or want to) their business. A SBU can act on one or more SBA.

    SBAs are identified and analysed without reference to the structure of the company or its common products. The results of this analysis are expectations of growth performance, turbulence and the SBA technology offered in the future to any competent competitor.

    The ultimate utility of the SBA is to allow management to take three strategic decisions:

    - In which SBA the company perform their business in the future?

    - What competitive position will occupy the company in each SBA?

    - What competitive strategy will the company follow to achieve its position?

    The SBU and SBA concepts are compared in Figure 1
    Figure 1: A SBA is a segment of the environment. An SBU is a unit of the company in charge of one or more SBA.

    ·  S.C.U. = Strategic Company Unit : term coined by W. E. ROTHSCHILD3: is a division of a profit centre for determining market segment. This type of division is often used in large companies (multinational).

    ·  S.C.U. Strategic Commercial Unit 4 : This is a business activity that can be separated from the rest because it has its own customers and own management functions therefore it needs a special and identifiable plan. It is a term from the area of marketing and aimed at large and small companies that perform services that are part of the same chain of value but commercially should be considered separately (e.g., a plumber with a service line repairs at home it has also opened a shop selling hardware retailers, both activities are complementary, but in commercial terms, the strategy is different).

    1. Robert S Kaplan, David P Norton. The scorecard. 3rd edition. Barcelona. 2009
    2. H. Igor Ansoff Strategic Management in business practice. USA 1997. Editorial Mexicana SA Alhambra. 2004.
    3. W.E. ROTHSCHILD. Putting it all together. New York. Amacom.1979
    4. Angela Hatton. The definitive guide marketing plan. Madrid. Pearson Education 2000.


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