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Lead from the center. How to manage divisions dynamically.

M E Raynor1, J L Bower

  • 1Business Administration, Harvard Business School in Boston, USA.

Harvard Business Review
|May 11, 2001
PubMed
Summary

In turbulent markets, corporate headquarters should be more directive, not less. This ensures strategic flexibility and future collaboration opportunities between company divisions.

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Area of Science:

  • Business Strategy
  • Organizational Management

Background:

  • Traditional business strategy advocates for divisional autonomy, especially amid market uncertainty.
  • This approach assumes divisions possess superior knowledge of local markets and emerging trends.

Purpose of the Study:

  • To challenge the conventional wisdom on divisional autonomy in uncertain markets.
  • To propose a more directive role for corporate headquarters in managing interdivisional cooperation.

Main Methods:

  • Analysis of four corporations: Sprint, WPP, Teradyne, and Viacom.
  • Examination of traditional diversification models (related vs. unrelated divisions).

Main Results:

  • Research suggests corporate offices should be more directive in turbulent markets.
  • A dynamic approach to interdivisional cooperation, allowing varying degrees of relatedness, is advocated.
  • Balancing current divisional autonomy with future cooperation needs is crucial for corporate-level strategic flexibility.

Conclusions:

  • Companies need a dynamic strategy for managing divisions, adapting cooperation levels based on circumstances.
  • Corporate headquarters must actively guide divisional strategy to foster future collaboration without sacrificing current competitiveness.
  • Four tactics are offered to assist executives in dynamically managing corporate divisions.

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