Island Home Goods pursues a related diversification strategy, deriving less than 70 percent of revenues from its original business unit, Island Furniture, and maintaining several related units including Island Lighting and Island Hardware. Which of the following structures is most likely to support this strategy?
A) M-Form with centralized decision-making power (cooperative multidivisional)
B) M-Form with decentralized decision-making power (competitive multidivisional)
C) functional with centralized decision-making power
D) functional with decentralized decision-making power

Question

Quizplus · Accepted Answer

For firms that pursue either related or unrelated diversification, the M-form is the preferred organizational structure. Firms using the M-form organizational structure to support a related-diversification strategy tend to concentrate decision making at the top of the organization. Doing so allows a high level of integration. It also helps corporate headquarters leverage and transfer across different SBUs the core competencies that form the basis for a related diversification.

Island Home Goods Pursues a Related Diversification Strategy, Deriving Less