Michael_A._Hitt,_R._Duane_Ireland,_Robert_E._Hosk

364 Part 3: Strategic Actions: Strategy Implementation

assets and acquiring branded businesses in

attractive industries with substantial long-

term growth potential. Textron operates a

number of independent businesses including

Bell Helicopter, Textron Aviation, Textron

Specialized Vehicles, and Textron Finance.

Leaders of these businesses are responsible

for effectively guiding the day-to-day com-

petitive actions of their units. Consistent

with the mandates of the competitive form

of the multidivisional structure, “Textron’s

Corporate Office provides oversight, direc-

tion, and assistance to its businesses.”^81 The

profit earned by individual business units

within Textron is an important measure the

firm uses to decide future capital allocations.^82

To emphasize competitiveness among

divisions, the headquarters office maintains

an arm’s-length relationship with them,

intervening in divisional affairs only to audit

operations and discipline managers whose

divisions perform poorly. In emphasizing

competition between divisions, the headquarters office relies on strategic controls to set

rate-of-return targets and financial controls to monitor divisional performance relative

to those targets. The headquarters office then allocates cash flow on a competitive basis,

rather than automatically returning cash to the division that produced it. Thus, the focus

of the headquarters’ work is on performance appraisal, resource allocation, and long-

range planning to verify that the firm’s portfolio of businesses will lead to financial success.

As is the case with the related linked diversification strategy, investors and sharehold-

ers find it challenging to understand the underlying value of the set of business units asso-

ciated with a firm implementing the unrelated diversification strategy.^83 Because of this,

upper-level managers must find effective ways of communicating their firm’s underlying

value to those investing capital in the firm.

The three major forms of the multidivisional structure should each be paired with

a particular corporate-level strategy. Table  11.1 shows these structures’ characteristics.

Table 11.1 Characteristics of the Structures Necessary to Implement the Related Constrained, Related Linked, and

Unrelated Diversification Strategies

Structural Characteristics

Overall Structural Form

Cooperative M-Form

(Related Constrained

Strategy)

SBU M-Form (Related

Linked Strategy)

Competitive

M-Form (Unrelated

Diversification Strategy)

Centralization of operations Centralized at corporate office Partially centralized (in SBUs) Decentralized to divisions

Use of integration mechanisms Extensive Moderate Nonexistent

Divisional performance

evaluation

Emphasizes subjective

(strategic) criteria

Uses a mixture of subjective

(strategic) and objective

(financial) criteria

Emphasizes objective

(financial) criteria

Divisional incentive

compensation

Linked to overall corporate

performance

Mixed linkage to corporate, SBU,

and divisional performance

Linked to divisional

performance

mobil11/Shutterstock.com

Pictured here is a Bell Helicopter, a product manufactured by one of

Textron’s business units.