Chandlers article on first movers Flashcards
economies of scale
large plants make products at a lower cost than small ones because cost per unit drops as volume of output rises
proportionate saving in costs gained by increased production
economies of scope
large plants use many of the same raw semi-finished materials and intermediate production processes to make variety of products
producing multiple goods is more cost effective than producing one
what are chandler’s primary claims
successful firms must capitalize on economies of scale and scope
how to benefit from economies of scale and scope
flow of material must be kept constant
national and international marketing and distribution functions must be created
teams of lower and middle manager must be recruited (Investment in management)
investment in R & D is crucial
Chandler’s secondary claims
if companies Miss opportunity to be first mover c dead
if they don’t inverse to create organizational capabilities cannot achieve long-term success
if you grow through unrelated diversification, you will fail
business ownership patterns have diminished the likelihood of many firms long term success
what is managerial enterprise?
large industrial concerns
operating and investments decisions are made by hierarchy of salaried managers
all governed by board or directors
what were the first mover investments
invested on national and international marketing and distributions organizations
hired lower and middle managers
hired top managers
challengers had to do it all after first movers were already established
they transformed their industry in which there were only a few large boys dominating
advantages of R & D (development)
more powerful than price
improving quality
searching ways to lower cost
improving marketing
geographical expansion
it was a long term management strategy
economies of scale
moving into related product market
also long term management strategy
economies of scope
entrepreneurial enterprise (why is staying small or not growing as much gyu sometimes)
aint logical to be large sometimes (managerial enterprise)
growth through unrelated diversification aint gyu, it isn’t smart corporate decision
why was there separation of top and middle managers
top managers had little knowledge specific knowledge of or experience of the technological processes or markets of the shit they just acquired
acquired business created overload in decision making at corporate office
why was there stock market pressure
the increase of share and funds ownerships caused this
people could buy lots of shares and get control of companies
people could trade them as they pleased and make profits
To make profits, companies had to perform
why was there short term thinking
people wanted to get richer with stock market
functional structure
activities are grouped together by common function
CEO at the top then functions below, but can be bigger too no lie
still standard concept of organization
functions include marketing, R & D, manufacturing, Accounting, Marketing, etc
