Strategic Management: Organization of Corporate Diversification and Alliances - Essay Example

Instead of having the same people run many businesses at the same time that could lead to loss of focus and confusion, the M-form structure makes the lines of communication and responsibility very clear, and while it puts greater responsibility on people, it also allows them some degree of comfort by knowing that they are part of a larger group that could provide help when needed. The M-form structure achieves this by adopting the roles of the board of directors, institutional investors, senior executives, division managers, and the activity managers to the expanded scope of the firm's business activities.

The structure of a diversified firm has to be supported by the appropriate management control processes so it could evaluate the performance of the different divisions, the allocation of capital efficiently across divisions, the transfer intermediate products between divisions, and the compensation of its key people. Implementing corporate diversification leads to complex processes that need to be managed well for the firm to exploit economies of scope.