IF THE OWNERS OF JALAPENO’S RESTAURANT, A MEXICAN EATERY IN ST. LOU...

2. If the owners of Jalapeno’s Restaurant, a Mexican eatery in St. Louis, open a second restaurant across

town, have they created an SBU? Explain your answer.

ANS:

The second restaurant is not an SBU, or strategic business unit. Each SBU has its own rate of return

on investment, growth potential and associated risks, and requires its own strategies and funding. This

would not be the case for a second restaurant operated under the same name by the same owners.

When properly created, an SBU will have the following characteristics:



A distinct mission and a specific target market



Control over its own resources



Its own competitors



A single business or collection of related businesses



Plans independent of other businesses of the total organization



Its own resources for handling basic business functions

These characteristics would not be shared by the second Jalapeno’s Restaurant.

PTS: 1

REF: 26

OBJ: 02-2

TOP: AACSB Communication

KEY: CB&E Model Strategy

MSC: BLOOMS Level V Synthesis