Implementing Strategy in Companies That Compete Across Industries and Countries

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Managing Corporate Strategy Through the Multidivisional Structure
• Functional or product structures are not sufficient when a company enters new industries • Multidivisional structure innovations
– Divisions (operating responsibility) – Corporate headquarters staff to monitor divisions (strategic responsibility) – Each division may be organized

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Multidivisional Structure

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Advantages of a Multidivisional Structure
• • • • Enhanced corporate financial control Enhanced strategic control Growth Stronger pursuit of internal efficiency

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Problems in Implementing a Multidivisional Structure
• Establishing the divisional-corporate authority relationship • Distortion of information • Competition for resources • Transfer pricing • Short-term R&D focus • Duplication of functional resources

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Structure, Control, Culture, and Corporate-Level Strategy
• Unrelated diversification
– Easiest and cheapest strategy to manage – Allows corporate managers to evaluate divisional performance easily and accurately – Divisions have considerable autonomy – No integration among divisions is necessary

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Structure, Control, Culture, and Corporate-Level Strategy (cont’d)
• Vertical integration
– More expensive than unrelated diversification – Multidivisional structure provides necessary controls to achieve benefits from the control of resource transfers – Must strike balance between centralized and decentralized control – Divisions must have input regarding resource transfer – Managed through a combination of corporate and divisional controls

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Structure, Control, Culture, and Corporate-Level Strategy (cont’d)
• Related diversification
– Multidivisional