How the 'Strategic Business Unit' (SBU), structure becomes imperative in an organization with increase in number, size and diversity of divisions?

SBU is a part of a large business organization that is treated separately for strategic management purposes. The concept of SBU is helpful in creating an SBU organizational structure. It is a separate part of large business serving product markets with readily identifiable competitors. It is created by adding another level of management in a divisional structure after the divisions have been grouped under a divisional top management authority based on the common strategic interests. Very large organisations, particularly those running into several products, or operating at distant geographical locations that are extremely diverse in terms of environmental factors, can be better managed by creating strategic business units. SBU structure becomes imperative in an organisation with increase in number, size and diversity. SBUs helps such organisations by: Establishing coordination between divisions having common strategic interest.Facilitate strategic management and control.Determine accountability at the level of distinct business units.Allow strategic planning to be done at the most relevant level within the total enterprise.Make the task of strategic review by top executives more objective and more effective.Help to allocate resources to areas with better opportunities.