What is the most successful business field

Business division

Business division

This instrument helps to divide the company into business units, which form the units for the strategic management of the company. Such a business unit is then called a “strategic business area” and the strategic key figures are applied to such business areas. In the past, these business areas were also called “product-market combinations”, but this does not go far enough because there are around 6 - 8 dimensions according to which the company can be divided into business units.


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Note:

We use the three terms Customer problem, Customer need and customer request as synonyms. It is a great place to discuss which one is better, and it varies depending on the type of business. While the seller of extinguishing systems clearly solves a problem, a gourmet restaurant fulfills more of a need. So some companies see themselves as Problem solver, other than Needs satisfier and again other than Wish Fulfillers. We usually use the original and leave it to you to use the term that is right for you.


In order to use a practicable structure, we provide 11 check questions here - it must be made clear, however, that there is no such thing as “the best” structure. The business area strategies are then worked out for these business areas. At the end of the day, the organization can, but does not have to, correspond to the division of business areas.

Why division of business areas?

The strategic control of the company requires control and information units that form a unit for the long-term adjustment and alignment of the company to developments and market conditions. These can thus be individually adapted and controlled. Strategic leadership is based on the development of markets, technologies and customer problems with a long-term time horizon and impact horizon. Correspondingly, the business areas of a company are to be structured according to the circumstances in order to be able to adapt them to changed or changing market conditions in good time.

Changes in the market environment, customer problems or technologies can lead to changes in these business field structures. Furthermore, the division of business areas enables you to make your own market performance comparable to the competition - or to avoid the competition with a completely different structure.

Possibilities for the division of business areas

Every company - every business can be represented with this simple model:

This model also serves as the starting point for the division of business areas. The segmentation should take place in such a way that units arise that can be specified as autonomously as possible for strategic management. Functional activities of these subsystems, such as HR, marketing or IT, however, must subsequently continue to be coordinated.

The following figure illustrates the possible variants of the business area delimitation:

A strategic business area (SGF) is then the combination of several elements, whereby the first element is the criterion for the strategic structure of the company. A breakdown by technology results in business areas that can be described as follows:

Technologies, on the basis of which certain Products be made that are over defined Sales channels to demarcated Markets for defined Customer problems in different Usage situations be sold and this in clearly delineated Regions and in a particular Competitive relationship.

A breakdown according to markets then means:

Markets / target groups with defined Customer problems for on the basis of certain Technologies certain Products be made that are over defined Sales channels to demarcated Markets be sold and this in clearly delineated Regions and in a particular Competitive relationship.

In large companies and corporations, the breakdown must be carried out in several stages. Here one also speaks of strategic business areas (SGB), which are subdivided into strategic business areas (SGF), and these in turn are divided into strategic business segments (SGS).

However, the formation of these units always follows the same logic - so we will only use the term SGF in the following.

Procedure for structuring business areas

There is never “the best business division” and therefore the formation of SGF cannot be described as a logically deductive process. There is no formula for finding the SGF outline that is best for our company. Rather, we have to search for possible solutions through systematic trial and error and weigh up their advantages and disadvantages. In order to control this process at least a little, we use the morphological box (which, by the way, was invented by a Swiss):

For each dimension, the characteristics (activities and elements are listed in the respective column. For example, all product groups offered by the company are listed in the “Products” column. This listing can also be divided into “current” and “future” - what in the case of products means that the future products that the company offers or could offer are listed in the same column below. The same procedure is used for the other dimensions.

Since the aim here is also to achieve a good result with reasonable effort, it is advisable to exclude the classifications from the start that are obviously irrelevant and out of the question (e.g. one can rule out technology as the dominant classification criterion for a trading company from the start) .

Now we choose a dimension and try to represent possible business areas. In this example we take the dimension products and put together a possible business area based on the product group "windows":

We will do the same now with the other product groups:

The customer groups dimension results in a completely different classification:

The 11 check questions

As an aid to this selection of the best dimension, we suggest these 11 check questions:

  1. Does the SGF satisfy an independent and ongoing customer problem?
  2. Does the SGF serve a clearly defined target group that is as homogeneous as possible?
  3. Can the SGF pursue its own strategy that can be differentiated from other SGFs? (Independent appearance in the market)
  4. Is an independent market service (products / services) possible?
  5. Are there good prerequisites for an economical processing of the SGF and / or possible rationalization possibilities (experience curve)?
  6. Can the income generated by the business area and the costs incurred be assigned to it?
  7. Can the responsibility for the business area be assigned to a meaningful organizational unit?
  8. Can the SGF-relevant market be worked particularly efficiently with certain types of business or sales channels?
  9. This SGF structure promotes the concentration of forces and thus also rationalization options (use of the experience curve)
  10. Can certain competitors be clearly assigned? Or else: is it possible to avoid the competition with this SGF?
  11. Would the business field be viable on its own?

The individual questions are answered with yes, no or yes and no. At the end, the total is drawn over the 11 questions and the results are used as the basis for determining the business area structure.

Record the business areas in STRATEGY.APP

With a good SGF structure, the strategy process can be started cleanly ("threaded"). We now enter this structure in the setup of our STRATEGY.APP, as follows:

Click on the big add icon on the right and a dialog window for entering the dimension will open:

You enter the dimension, e.g. products and a short but clear description, and save it.

Then click on the small add icon in the line of the dimension and the dialog window for entering the individual business areas opens.

As a result you get the list of business areas, which opens when you click on the dimension:

The dimension and the individual business areas can be edited or deleted at any time. It is possible in STRATEGY.APP to enter several dimensions with assigned business fields. In this way, strategies can be developed in different dimensions in parallel.

E.g. a company develops business field strategies according to customer groups, but would like to develop separate strategists for the sales channels “broker” and “online”. There is also a second dimension called “sales channel” and the two business areas are added to this.

But before we start, the business areas have to be described. You can now assign all elements from the morphological box to the business areas or use a simple form:

Tip on how to proceed:

If the group is big enough and there is time, let two groups work out a proposal each and discuss the results at the end.

We have put together an example for you here that you can download:

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