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Multidivisional Organizational Form
The U-form structure is less suited to large organizations which offer a diversified range of goodsand services. This is because each function (production, finance, marketing etc.) has to deal with a wider variety of tasks and functions. Co-ordination of resources and the transmission of information between departments become difficult and the workload facing managers can becometoo heavy. This can even lead to conflict between departments. Multidivisional (M) type of structure emanated from the USA in the 1930s as the scale and scope of large organizations grew. Within this type of organizational structure, the firm is split into a number of quasi-independentoperating divisions. These operating divisions can be organized by geographical location (alongregional, national or international boundaries) or by product type. Each division is a quasi-firm with all the key functional areas required to deliver the given product or service. The head office of the organization oversees these divisions and is primarily involved in making longer term strategicdecisions as to the future scale and scope of the organization. Such decision making would includeregular monitoring of divisional performance, governing the activities of division managers andallocating finance to research and personnel development.Overall, the M-form organisational structure removes many of the conflicts and co-ordinationproblems inherent in the U-form structure. A closely related type of organisational structure is theholding company or H-form organization, whereby a holding (or parent company) has anownership stake (which is normally a controlling interest) in other companies (subsidiaries). Theholding company tends to have ultimate control over the subsidiary companies, but for the mostpart leaves this to the senior management of these companies. This type of structure has beenadopted by a large number of multinational companies.Overall, organizations today take on a variety of ownership forms and size characteristics. Many aresmall firms which specialize in a single product, while others are large corporations spanning theglobe and producing a diverse range of goods and services. In the economic analysis of firms,
researchers have examined what determines firms’ abilities to produc
e a wide range of products