Business to Business Marketing (B2B)
Lecture 57
Strategic Business Unit (SBU) & BCG Matrix
Dr. Jogendra Kumar Nayak
Department of Management Studies, IIT Roorkee
1
Strategic
Business
Units
Many large companies have may different businesses and
they divide them into several SBUs. The purpose of
identifying the company’s strategic business units is to
develop separate strategies and assign appropriate
funding. An SBU has the following characteristics:
It is a single business, or a collection of
related businesses, and has a strategy that
is separate from the rest of the company.
It has its own set of competitors.
It has a manager responsible for strategic
planning and performance.
2
•
A strategic business unit or SBU operates as an independent entity, but it
has to report directly to the headquarters of the organization about the
status of its operation. It operates independently and is focused on a target
market. It is big enough to have its own support functions such as HR,
training departments etc.
• General Electric(GE) was one of the first
companies to implement Strategic Business
Units(SBUs) in the 1960's. Today, the company
has approximately 49 separate strategic
business units in energy, finance, software, water,
and healthcare etc.
3
TCS can Define its SBU on the Basis of its Services
Data and
Analytics
Cybersecurity
Internet of Things
Cloud
Consulting
Sustainability
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TCS can Define its SBU on the Basis of Industries it Serves
Energy
Healthcare
Education
Manufacturing
Life Sciences
Banking
Retail
Insurance
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Allocating
Resources
to SBUs
Managers analyze SBUs and decide as to which SBU
should be continued, expanded, phased out, and which
new businesses to be pursued. Based on these decisions,
resources are allocated. Two widely used models for this
task are:
BCG Growth-Share Matrix
GE Multifactor Portfolio Matrix
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BCG
Growth-Share
Matrix
It is a planning tool that considers two factors that
companies should consider when deciding where to
invest—company competitiveness, and market
attractiveness—with relative market share and growth rate
as the underlying drivers of these factors.
Question Mark
Star
Cash Cow
Dog
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BCG
Growth-Share
Matrix
8
Relative Market Share = % market share of Company A’s product
market share of the largest competing product.
Market growth rate =
total market unit sales in current year
total market unit sales in previous year
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Brand
L’Oreal
Mkt share
Leading
rival
Rival’s mkt
share
Relative mkt
share
Market
growth
rate%
Skin care
9
Unilever
7
129
6.5
Hair care
3
Unilever
8.8
34
3.1
Hair colour
9
Henkel
6
150
8
Fragrances
4.1
Chanel
4.5
91
2.5
10
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Question
Mark
Question marks are businesses operating with a low
market share in a high-growth market. Companies should
invest in or discard these businesses depending on their
chances of becoming stars.
For Google, Video Conferencing is a
Question Mark because:
• its product Google Meet has a
low market share, but
• the market for video conferencing
is growing rapidly.
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Star
Stars are businesses operating with a high market share
in a high-growth market. They require high funding to fight
competitors and maintain their growth rate.
For Google, Mapping Solutions is a
Star because:
• its product Google Maps Platform
has a high market share, and
• the market growth rate for
Mapping Solution is high.
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Cash Cow
Cash cows are businesses in a low-growth market where
the company has high market share. The company should
milk the cash cow for as long as it can.
For Google, Mobile Operating
System is a Cash Cow because:
• its product Android has the
highest market share, and
• the market growth rate for mobile
operating systems as slowed
down.
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Dog
Dogs are business in a low-growth market where the
company has low market share. These units typically
break even, generating barely enough cash to maintain
the business's market share. Dogs should be sold off.
For Google, Blogging Platform is a
Dog because:
• its product Blogger has a low
market share, and
• the market for blogging platforms
is in decline due to the rise in
social media platforms.
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Activity for Practical
Understanding
Take a
screenshot
Select any B2B company of
your choice and make a BCG
Matrix of their products.
B2C & B2B marketing
at DELL
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