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Choosing a structure for a company is an important decision and must be strategically thought out because it could either aid or harm the making of business. The structure must also be a good fit for the type of activities, goals, and vision of the company. [3] The organizational structure is a reflection of how conveniently business is conducted.
Such structure is common for universities, hospitals, law firms. [47] Diversified Configuration or Divisionalized form consists of several parts having high autonomy. [47] Such structure is common for old, large organizations. [47] Innovative Configuration or Adhocracy gathers the specialists of different fields into teams for specific tasks. [47]
The theory of the firm consists of a number of economic theories that explain and predict the nature of the firm, company, or corporation, including its existence, behaviour, structure, and relationship to the market. [1] Firms are key drivers in economics, providing goods and services in return for monetary payments and rewards.
Top management is located in the central office which acts to supervise and coordinate the divisions and develop overall strategies for the business. Throughout the second half of the 20th century, the M-form proved to be the best strategy for many large firms that wished to expand their product diversification and appeal to a wider consumer base.
The size and scope of the business firm and its structure, management, and ownership, broadly analyzed in the theory of the firm. Generally, a smaller business is more flexible, while larger businesses, or those with wider ownership or more formal structures, will usually tend to be organized as corporations or (less often) partnerships.
Most of the multi-business firms have their corporate headquarters performs obligatory functions. It represents all businesses legally in respect of the regulator(s) and aggregates the financial, tax, and legal data. Similarly, the corporate headquarters can also function as the company's face to the customer and build reputational value. [13]
Many companies fall into the trap of making repeated changes in organization structure, with little benefit to the business. This often occurs because changes in structure are relatively easy to execute while creating the impression that something substantial is happening. This often leads to cynicism and confusion within the organization.
[6] [7] The relationship between the firms in a group may be formal or informal. [8] A keiretsu is one type of business group. A concern is another. Douma and Schreuder (2013) distinguish "horizontal" and "vertical business groups" as follows: 'Business groups can be horizontal or vertical as far as their structure is concerned.