Decentralization, Strategy, and Effectiveness of Strategic Business Units in Multibusiness Organizations

Abstract

The relationship between decentralization and the effectiveness of strategic business units (SBUs) within multibusiness organizations is examined. Three strategic continua are considered— build-harvest, differentiation-low cost, and prospector-defender; in each case it is proposed that the degree of decentralization of decision-making authority delegated to the general manager of the SBU should be closely aligned with the SBU's strategy to optimize the effectiveness of the SBU.