When a firm diversifies into different product lines and geographies, a multidivisional structure is preferred.
A multidivisional organization has one parent firm that is made up of several discrete divisions that run separate companies. Although the parent business legally owns all of the divisions, the parent firm grants the divisions great autonomy, allowing them to act freely.
Du Pont's recognition in 1921 that its "U-form" corporate structure was unsuitable for its new diversification plan resulted in a trailblazing new type of organization—the "M" or multidivisional form—that has been dubbed the most significant innovation of capitalism in the twentieth century.
The multi-divisional form (also known as the M-form or MDF) is an organizational structure in which the corporation is divided into multiple semi-autonomous sections that are guided and controlled by (financial) targets from the center.
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