Michael_A._Hitt,_R._Duane_Ireland,_Robert_E._Hosk

360 Part 3: Strategic Actions: Strategy Implementation

that is able to benefit the most by the sharing of corporate competencies might be viewed

as receiving relative gains at others’ expense. Strategic controls are important in these

instances, as divisional managers’ performances can be evaluated, at least partly, on the

basis of how well they have facilitated interdivisional cooperative efforts. In addition,

using reward systems that emphasize overall company performance, besides outcomes

achieved by individual divisions, helps overcome problems associated with the cooper-

ative form. Still, the costs of coordination and inertia in organizations limit the amount

of related diversification attempted (i.e., they constrain the economies of scope that can

be created).^76

Using the Strategic Business Unit Form of the Multidivisional

Structure to Implement the Related Linked Strategy

Firms with fewer links or less constrained links among their divisions use the related

linked diversification strategy. The strategic business unit form of the multidivisional

structure supports implementation of this strategy. The strategic business unit (SBU)

form is an M-form consisting of three levels: corporate headquarters, strategic business

units (SBUs), and SBU divisions (see Figure 11.6). The SBU structure is used by large firms

and can be complex, given associated organization size and product and market diversity.

The strategic business unit
(SBU) form is an M-form
consisting of three levels:
corporate headquarters,
strategic business units
(SBUs), and SBU divisions.

Figure 11.6 SBU Form of the Multidivisional Structure for Implementing a Related Linked Strategy

President

Headquarters Office

Strategic

Planning

Corporate

Marketing

Corporate

Human

Resources

Corporate

Finance

Corporate

R&D

Strategic

Business

Unit

Strategic

Business

Unit

Strategic

Business

Unit

Division Division Division Division Division Division Division Division Division

Notes:

• Structural integration among divisions within SBUs, but independence across SBUs.


• Strategic planning may be the most prominent function in headquarters for managing the strategic planning approval process of SBUs for the
  president.


• Each SBU may have its own budget for staff to foster integration.


• Corporate headquarters staff members serve as consultants to SBUs and divisions, rather than having direct input to product strategy, as in the
  cooperative form.