Question at position 7 Fesla is a large firm that produces luxury cars for the US market. Recently, Fesla decided to buy an unrelated business in Italy. What is the most probable organization structure of Fesla before and after diversification?Multidivisional before, Matrix after Matrix before, Multidivisional after Multidivisional before, Functional after No reason to change organization structure Functional before, Multidivisional afterSingle choice
A
Multidivisional before, Matrix after
B
Matrix before, Multidivisional after
C
Multidivisional before, Functional after
D
No reason to change organization structure
E
Functional before, Multidivisional after

Question

Question at position 7 Fesla is a large firm that produces luxury cars for the US market. Recently, Fesla decided to buy an unrelated business in Italy. What is the most probable organization structure of Fesla before and after diversification?Multidivisional before, Matrix after Matrix before, Multidivisional after Multidivisional before, Functional after No reason to change organization structure Functional before, Multidivisional afterSingle choice

A

Multidivisional before, Matrix after

B

Matrix before, Multidivisional after

C

Multidivisional before, Functional after

D

No reason to change organization structure

E

Functional before, Multidivisional after

BlackTom AI · Accepted Answer

A firm focused on a single product line and market typically organizes by function, so Fesla was most likely organized functionally before diversification. Key concepts: functional structure groups activities by expertise (marketing, production, R&D, finance), the multidivisional (M‑form) groups by product/division and is used when a firm operates multiple businesses, and the matrix overlays functional and divisional lines to manage dual reporting (product × geography or product × function).

Step-by-step reasoning:
1. Identify Fesla’s initial situation: it “produces luxury cars for the US market” — a single industry and single market focus. When firms are relatively small in product scope, complexity is lower and they benefit from economies of scale in specialized functions. Hence a functional structure (centralized functions, streamlined decision-making within departments) is the most probable pre‑diversification organization.
2. Identify the change introduced: “decided to buy an unrelated business in Italy.” That is unrelated diversification plus international expansion. Unrelated diversification creates distinct businesses with different markets, capabilities, and performance metrics; they require separate managerial attention and accountability.
3. Match organizational form to needs: The M‑form (multidivisional) creates semi-autonomous divisions for each business, each with its own profit-and-loss responsibility, allowing clearer performance measurement, focused strategies, and reduced information overload at corporate HQ. It also handles duplicated functions and geographic differences better than a single functional chart.
4. Conclude: therefore Fesla would likely change from a functional structure to a multidivisional structure after acquiring an unrelated business.

Why other options are incorrect:
- “Multidivisional before” is unlikely given single-product focus.
- “Matrix before” is unlikely because matrix suits complex, cross-cutting projects and multiple product/geography responsibilities, not a single-product firm.
- “Multidivisional before, Functional after” reverses the logical direction; diversification normally prompts move to M‑form, not the other way.
- “No reason to change” ignores the governance and coordination problems posed by unrelated diversification.

Final confirmation: the correct choice is Functional before, Multidivisional after.

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