Chapter 16 - Managing the multibusiness corporation. This chapter presents the following content: Structure of the multidivisional company, the role of corporate management, managing the corporate portfolio, managing individual businesses, managing internal linkages, recent trends. | Managing the Multibusiness Corporation Structure of the Multidivisional Company Theory of the M-form The divisionalized firm in practice The Role of Corporate Management Managing the Corporate Portfolio Portfolio planning techniques Value-creation through corporate restructuring Managing Individual Businesses Managing Internal Linkages Recent Trends OUTLINE 37 The Multidivisional Structure: Theory of the M-Form Efficiency advantages of the multidivisional firm: Recognizes bounded rationality—top management has limited decision-making capacity Divides decision-making according to frequency: —high-frequency operating decisions at divisional level —low-frequency strategic decisions at corporate level Reduces costs of communication and coordination: business level decisions confined to divisional level (reduces decision making at the top) Global, rather than local optimization:- functional organizations encourage functional goals. M-form structure encourages focus on profitability. Efficient allocation of resources through internal capital and labor markets Resolves agency problem-- corporate management an interface between shareholders and business-level managers. 40 The Divisionalized Firm in Practice Constraints upon decentralization. Difficult to achieve clear division of decision making between corporate and divisional levels. On-going dialogue and conflict between corporate and divisional managers over both strategic and operational issues. Standardization of divisional management Despite potential for divisions to develop distinctive strategies and structures—corporate systems may impose uniformity. Managing divisional inter-relationships Requires more complex structures, . matrix structures where functional and/or geographical structure is imposed on top of a product/market structure. Added complexity undermines the efficiency advantages of the M-form 41 The Functions of Corporate Management —Decisions over diversification, acquisition, divestment —Resource | Managing the Multibusiness Corporation Structure of the Multidivisional Company Theory of the M-form The divisionalized firm in practice The Role of Corporate Management Managing the Corporate Portfolio Portfolio planning techniques Value-creation through corporate restructuring Managing Individual Businesses Managing Internal Linkages Recent Trends OUTLINE 37 The Multidivisional Structure: Theory of the M-Form Efficiency advantages of the multidivisional firm: Recognizes bounded rationality—top management has limited decision-making capacity Divides decision-making according to frequency: —high-frequency operating decisions at divisional level —low-frequency strategic decisions at corporate level Reduces costs of communication and coordination: business level decisions confined to divisional level (reduces decision making at the top) Global, rather than local optimization:- functional organizations encourage functional goals. M-form structure encourages focus on profitability. .
