The Multi-divisional Firm

Paper Summary:

This paper examines the concept of the multi-divisional firm, which came into existence after World War I when a few major companies that had diversified (with respect to products, markets, and/or processes) found it necessary to restructure and reorganize themselves to manage these diverse operations and ensure efficient allocation of resources. It analyzes the organizational structure known as M-form, which encompasses a general corporate office or headquarters along with product- or regionally-based divisions containing functionally differentiated departments further subdivided into work units. It evaluates how structural organization of this kind is associated with organizational growth as well as enhanced profitability.

From the Paper:

"Conversely, M-form organizations do enjoy some very substantial strengths. Such entities tend to have large capital asset bases, to enjoy economies of scale linked to their capacity to use internal suppliers while simultaneously creating internal markets for products and services, and to capitalize upon extant distribution, marketing, information/intelligence-gathering research and development, and financial management systems. Scott (Chapter 10, p. 278) states that the "coupling" or linkages within such diversified organizations can be either loose or tight, with an inherent flexibility that can structure individual linkages to meet strategic and other goals and objectives. Thus, an additional strength of the form is that it does facilitate the manipulation of centralized and decentralized activities and functions to meet known and situational needs."

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