Multi-divisional form

Multi-divisional form (also knows as "M-form" of "MDF")^[1][2][3] is a term used to describe the legal structure of a company.

Overview

Multi-divisional forms simply means that there is one parent company, and that parent company owns smaller companies that use its brand and name. The whole organization is ultimately controlled by central management, but most decisions are left to autonomous divisions.^[2] Generally, a parent company will own all of the smaller companies and the smaller companies will provide one service.

History

Multi-divisional form became popular in the United States in the 1960s. Companies that did not use it turned out to develop slower.^[3]

Main points

The main benefits to this style of organizations are:

• If one division fails and collapses, it doesn't threaten the rest of the business.
• It can still use the brand and name of its parent company.
• The company can be more flexible about its operations.

The main negative points about this business are:

• Increased accounting.
• You can end up paying more taxes if not careful.
• It can produce reckless decisions.

You generally find this structure of business in companies that operate worldwide. As the company operates in many different regions of the world, there are different rules and regulations that each company has to abide by and by creating a company like this, it allows that business to concentrate on the rules and regulations it must concentrate on rather than worrying about its sister companies.

List of multi-divisional form companies

1. Virgin Group - the parent company of Virgin Trains, Virgin Mobile, Virgin Records, Virgin Blue Holdings, et cetera.
2. América Móvil - owns Tracfone, which owns Net10.

All are smaller companies owned by the parent company, and use the same brand and logo. In some cases, the same website is shared, but for accounting and legal purposes, they are completely separate.

See also

• Conglomerate

References

1. ^ "Historical Development of Organizational Structure". Faculty.babson.edu. http://faculty.babson.edu/krollag/org_site/encyclop/history_struct.html. Retrieved 2010-05-30. 
2. ^ ^{a b} Economics-Dictionary.com. "multidivisional form definition". Economics-dictionary.com. http://www.economics-dictionary.com/definition/multidivisional-form.html. Retrieved 2010-05-30. 
3. ^ ^{a b} http://www.jstor.org/pss/2393256