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Segmentation
Segmentation means to divide the marketplace into parts, or segments, which are definable, accessible, actionable, and profitable and have a growth potential.
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Definition: A strategic business unit, popularly known as SBU, is a fully-functional unit of a business that has its own vision and direction. Typically, a strategic business unit operates as a separate unit, but it is also an important part of the company. It reports to the headquarters about its operational status.
Description: A strategic business unit or SBU operates as an independent entity, but it has to report directly to the headquarters of the organisation 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. There are several benefits of having an SBU. This principle works best for organisations which have multiple product structure. The best example of SBU are companies like Proctor and Gamble, LG etc. These companies have different product categories under one roof. For example, LG as a company makes consumer durables.
It makes refrigerators, washing machines, air-conditioners as well as televisions. These small units are formed as separate SBUs so that revenues, costs as well as profits can be tracked independently. Once a unit is given an SBU status, it can make its own decisions, investments, budgets etc. It will be quick to react when the product market takes a shift or changes start happening before the shift happens.
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Segmentation
Segmentation means to divide the marketplace into parts, or segments, which are definable, accessible, actionable, and profitable and have a growth potential.
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Product organisational structure is a framework in which a business is organised in separate divisions, each focusing on a different product or service and functioning as an individual unit within the company.
What is a product-based structure?
In a product-based structure (also known as a divisional structure), you assign employees into self-contained divisions according to:
- the particular line of products or services they produce
- the customers they deal with
- the geographical area they serve
The structure may have several layers of managers and employees. Each layer (ie division) can have its own marketing team, its own sales team, and so on. A manager typically reports to the head of the company by product type, eg sporting goods, housewares and general merchandise. Certain key functions (eg finance or human resources) may be provided centrally.
For example, a computer software business may divide its structure according to its two distinct customer groups - home users and business users. In such an arrangement, all employees working on the development, sales or promotion of business software would be in one division, while everyone working on software for home users would be in another.
Product structure advantages and disadvantages
Product organisation may not suit everyone, but is likely to provide distinct advantages to those businesses that:
- have particular product lines that are substantially different
- require specialised expertise for production or distribution
- target a few major customers that make up most of your business
Product structure can also help your business:
- focus on specific market segments
- meet customer needs more effectively
- extend knowledge or expertise within specialised divisions
- respond to market changes more flexibly and quickly
- encourage positive competition between each department
- coordinate and measure the performance of each division directly
Product organisational structure does have certain disadvantages, including being difficult to scale and potentially:
- duplicating functions and resources, eg a different sales team for each division
- dispersing technical expertise across smaller units
- nurturing negative rivalries among divisions
- over-emphasising divisional, rather than organisational goals
- losing central control over each separate division
Product or divisional structure is mainly suitable for larger companies with two or more key product lines, strategic customers or markets.
For businesses operating in different markets or requiring distinct units, see also organisational structure by geographical area and decentralised organisational structure.
Which of the following can be defined as the process of dividing an organization according to specific products or services being created?
Which of the following is the process of dividing an organization to offer products and meet the needs of identifiable buyers?
What kind of departmentalization happens when an organization is divided into operations related to different areas of the country?
Which of the following is an organizational structure created by superimposing one form of structure onto another?
Term Specification of the jobs to be done within an organization and the ways in which they relate to one another. | Definition Organizational Structure |
Term Organizational structure created by superimposing one form of structure onto another. | Definition Matrix Structure |