Michael_A._Hitt,_R._Duane_Ireland,_Robert_E._Hosk

358 Part 3: Strategic Actions: Strategy Implementation

strategy (see Figure 11.4). We discuss the relationships between three diversification strat-

egies and the unique organizational structure that should be matched with each one in

the next three sections.

Using the Cooperative Form of the Multidivisional Structure to

Implement the Related Constrained Strategy

The cooperative form is an M-form structure in which horizontal integration is used to

bring about interdivisional cooperation. Divisions in a firm using the related constrained

diversification strategy commonly are formed around products, markets, or both.

In Figure 11.5, we use product divisions as part of the representation of the cooperative

form of the multidivisional structure, although market divisions could be used instead of

or in addition to product divisions to develop the figure.

We mentioned in Chapter 6 that Procter & Gamble (P&G) uses a related constrained

strategy. We note here that the firm matches the cooperative form of the multidivisional

structure to this strategy in order to effectively implement it.

As explained in Chapter 6, the related constrained strategy finds a firm sharing

resources and activities across its businesses. Consumer understanding, scale, innova-

tion, go-to-market capabilities, and brand-building are what P&G has identified as its five

“core strengths” (or core resources). These strengths are shared across the four industry-

based sectors that form the core of P&G’s cooperative multidivisional organizational structure.

These sectors are Baby, Feminine and Family Care; Beauty, Hair and Personal Care; Fabric and

Home Care; and Health and Grooming. The reason P&G shares its five core strengths across

the four industry-based sectors is that, according to the firm, these sectors are all “focused on

common consumer benefits, share common technologies, and face common competitors.”^71

Thus, through its organizational structure, P&G integrates its operations horizontally for the

purpose of developing cooperation across the four sectors in which it competes.

Sharing divisional competencies facilitates a firm’s efforts to develop economies of

scope. As explained in Chapter 6, economies of scope (cost savings resulting from the

sharing of competencies developed in one division with another division) are linked with

successful use of the related constrained strategy. Interdivisional sharing of competencies,

such as takes place within P&G, depends on cooperation, suggesting the use of the coop-

erative form of the multidivisional structure.^72

The cooperative structure uses different characteristics of structure (centraliza-

tion, standardization, and formalization) as integrating mechanisms to facilitate inter-

divisional cooperation. Frequent, direct contact between division managers, another

The cooperative form is an
M-form structure in which
horizontal integration is used
to bring about interdivisional
cooperation.

Figure 11.4 Three Variations of the Multidivisional Structure

Multidivisional

Structure

(M-form)

Strategic Business Unit

(SBU) Form

Cooperative

Form

Competitive

Form