What criteria to be considered in classifying an SBU?

The criteria that are to be considered in classifying an organizational unit as a Strategic Business Unit are:-

• An SBU would serve an external market rather than an internal market,
• It should have a clear set of external competitors which it is trying to equal or by-pass,
• It should have control over its own destiny,
• Its performance must be measurable in terms of profit and loss that is it should be a true profit center.

What is Strategic Business Unit?

Strategic Business Unit (SBU):

Here is the simplest definition of strategic business unit given below:

"Strategic Business Unit refers to a business unit which is an operating unit in an organization that sales a distinct set of products or services to an identifiable group of customers in competition with a well defined set of competitions."