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What Is Business Unit Analysis?

By Osmand Vitez
Updated May 16, 2024
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Companies tend to have multiple business units that make up the organization. Examples include accounting production, sales, and customer service. Business unit analysis is an activity where a company reviews each unit in order to assess its effectiveness and efficiency. The review may take place under the unit’s manager and an organizational manager, which ensures objectivity in the review process. Business unit analysis often looks at the services each unit provides, the delivery method for the services, and information necessary to complete the process.

Business units often have multiple business processes, sometimes numbering in the double digits for a large department. Business unit analysis may start with defining and writing down each process within a single department. This allows the reviewing manager to understand how to create an analytical plan for studying the unit. Reviewers may also start a plan or get an idea of what they should expect to see in terms of efficiency and effectiveness. Working with the unit manager during this process is often essential.

During the actual business unit analysis, the reviewing manager should look into each service the unit completes. A review of all steps that are necessary to complete each service is often under the microscope. The purpose here is to ensure that the company wastes no resources when completing basic services. Resources may be physical inputs necessary to produce goods or labor hours from individuals working in the department. Other items may be under review here based on the services provided by a business unit.

How a business unit delivers services is almost as important as what services a business unit completes. Business unit analysis typically includes a review of the delivery methods a company employs when using resources or getting goods into the hands of consumers. Just like a company can waste resources when completing services, an ineffective delivery method can also be wasteful. In some cases, a business unit may be simply unable to complete services in an efficient manner. Therefore, companies will pay more for the same output, increasing the per-unit cost considerably.

Information is necessary to complete just about any business service. Reviews in the business unit analysis stage need to look at how a unit receives, processes, and takes advantage of given information. A business unit that takes too long during these activities may actually be unable to capitalize on the information in the best manner possible. Reviewers typically look to improve the use of information in a business unit.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.

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