Business Unit Strategy

Each business unit within a corporation needs its own strategy to prevail over existing and potential rivals.

In today's increasingly turbulent markets—characterized by digital disruption and blurring industry boundaries—devising and executing a winning strategy is harder than ever. Business unit strategy is a critical complement to corporate strategy. If corporate strategy is about determining the optimal allocation of capital across a portfolio of strategic business units, the objective of business unit strategy is to decide how best to deploy that capital to create value. A business unit only prospers if it can satisfy the changing needs of its chosen customers both more fully and more profitably than its competitors. 

The Three Ingredients of a Successful Business Unit Strategy

  1. Context. A rich, nuanced, and real-time understanding of the competitive environment is an essential ingredient of good business unit strategy. How are leading-edge customers—and their economics and options—changing? What are potential vectors of disruption? Where are today’s profit pools and how are they likely to evolve? How well are competitors, both traditional and emerging, positioned to respond? What potent new business models could change the game? And what style of strategy is most likely to win?
  2. Advantage. A clear and candid assessment of the business unit's true sources of competitive advantage is the next critical element. What gives the business a right to win in today’s and tomorrow’s markets? Is the advantage based on cost, capabilities, intellectual property, unique access to data, position in an ecosystem, or other factors? Are key moves required to acquire new assets or capabilities? Which combination of choices—of customers, markets, and investments—has the greatest potential to create value relative to rivals?
  3. Link to Execution. A direct and agile connection between the strategy and the business is the final component. What is the right approach to create alignment around the strategy? How to set and communicate goals? How to create tight market feedback loops that enable rapid learning and adaptation of the strategy?

Featured Ideas

Strategy Palette

Different strategic environments call for different styles of strategy. BCG’s Strategy Palette, the concept at the heart of our best-selling book Your Strategy Needs a Strategy, lays out the options.

Learn more about the Strategy Palette

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