Chandler

Question 1

Alfred D. Chandler

Answer 1

Successful firms capitalize on economies of scale and scope, create functional management structures. Invest in R&D and grow from related diversification.
Flow of materials must be kept constant.
National and international marketing distributions must be created
Top, lower, and middle managers must be recruited. (Management hierarchy)

Question 2

Alfred D. Chandler secondary claims

Answer 2

Once a firm loses the opportunity to be a first mover, it is hard to regain competitive advantage.
Companies need to make investments for organizational capabilities. Or there will be no long-term success.
Business ownership patterns have diminished the likelihood of many firms’ long-term success

Question 3

Economy of scale

Answer 3

Large plants can produce items at a much lower cost

More units produces, the less you pay per manufacturing of one unit

Question 4

Economy of Scope

Answer 4

Use the same raw materials, semi-finished good and production processes to make a variety of different products

Question 5

Ways that companies can grow

Answer 5

Growth through - related diversifications

Question 6

Why is unrelated diversification bad?

Answer 6

Ignores the logic of managerial enterprise
Newly acquired businesses are unrelated to the company’s core activities
Managers don’t understand new business
Could cause the company to lose money if they have to focus on the unrelated diversification rather than their main activities that made them successful

Question 7

Why does unrelated diversification happen?

Answer 7

Stock market pressure- Company focuses on making investors happy.
Short term thinking

Question 8

First movers

Answer 8

First to make large investment: R&D, hire managers, to grow, to move
Have competitive advantage and dominate the industry because:
- They’re bigger
- Got strong management in place
- They maintain and nourish their competitive capabilities while others are catching up