This paper will describe strategies and business model theories including what Strategic Business Units (SBU) are and how they affect the companies they serve. This paper has included PVH Corp. Calvin Klein unit as the case study and demonstrates the economic crisis in Europe and the United States (U.S.) and how they are able to maintain sustainability in these difficult times. Strategies and Business Model Theories
The business model innovation (where companies tend to fail) goes away from sustaining innovation (where companies succeed). The business model innovation typology (BMIT) is divided into three areas: technology (determines incremental, architectural, and radical innovations), value network (is a company’s personal relationship with its customers, suppliers and competitors), financial hurdle rate (expresses the relationship of a given projects financial projections to the lowest practical return) (Koen, Bertels, & Elsum, 2011). If companies want to be successful in creating new business models they must leave behind their old strategies and develop new training skills for their employees. The financial hurdle rate is the main needle mover when it comes to whether a company is going to be successful in either BMIT or sustaining innovation (Koen, Bertels, & Elsum, 2011). Generally speaking a business model is as good as the executives who use it or re-evaluate it. If these executives fully comprehend the model and how it should work throughout the entire company they will be rewarded with very useful assessments from their employees. A business model does not include competition, because that is considered a strategy. By developing a successful strategy that deals specifically with competition companies can expect to be set apart from their competitors naturally. Understanding these differences of using business model and strategies correctly will help companies be sustainable (Margretta, 2002). Strategic Business Units (SBU’s)
SBU’s focus on customers while also balancing traditional product centered divisions. They tend to create technological advancements and spur innovation throughout the entire company. “SBU’s that are define by the markets they serve allow manufacturers to be more effective” (Bond & Kren, 2004). Golden, states the link between SBU’s strategy and its accomplishments are connected by the personal relationships they have with their upper level executives. In order to be successful in these SBU’s they must be able to control their activities and processes related to its strategies and avoid those functions that are unrelated. Typically a SBU’s strategy decides the “nature of its product-market environment(s), and the competencies required” to be implemented. Golden states there are four different strategy theories underlying SBU’s (1992): 1. Prospector-has an external oriented strategy
2. Defender-singular orientation internally
3. Analyzer-tends to be in between the two extremes
4. Reactor-inability to strategize only reacts
The SBU’s ability to succeed depends heavily on their specific strategies if given sole responsibility to control those decisions. The study also proved upper level executives must give their full support if their SBU’s are going to be successful (Golden, 1992). The traditional SBU model of “ensuring market focus, entrepreneurial control, clear accountability and clean measurements” are not as effective in today’s competitive arena. They are being reorganized so that their limits are being expanded into other activities to promote sharing, sourcing, and re-combination (Jonk, 2007). Jonk states his SBU 2.0 is not just excepting new responsibilities, but most importantly developing a new way of looking at things. For example upper management need not be compensated for managing lots of personnel, but rightly compensated for properly “managing and developing their core business through a network of contracts for delivering the...
Please join StudyMode to read the full document