Emergence of modern corporations Flashcards
What are the 3 stages in the domestic system, pre industrial revolution ?
Businesspeople delivered raw materials to workers’ homes
Workers manufactured goods from these raw materials in their homes (typically articles of clothing)
Businesspeople picked up finished goods and paid workers wages based on number of items
What replaced the domestic system ?
Factory system
What did Alfred Chandler identify ?
¥ The multi-functional enterprise (from 1850s)
¥ The multi-divisional enterprise (from 1920s)
What is managerial capitalism ?
This is when you start to get managers that don’t own the company but are employed by the company to manage.
The second industrial revolution enabled new forms of transportation and communication to be developed. What did this allow with regards to companies ?
¥ Mass production on a huge scale, making owner-manager model difficult to implement with large workforces and wider range of tasks.
¥ Development of managers as employees and increased hierarchies
¥ Work organised into different functions (e.g. production, sales, finance etc.)
Define a Modern Multi-divisional enterprise.
Separate semi-autonomous operational divisions or profit centres
responsible for a specific product, brand or geographical area, each run by a manager.
And
2. A general strategy office or HQ where senior managers are located, supported by general advisory and financial staff. People at the top of all the divisions don’t get involved with the divisions they just work on the strategy for the divisions
What was the first Modern Multi-divisional enterprise ?
General motors
How did GM adopt a multi-divisional structure ?
product differentiation - different divisions for different car brands, with each division led by a senior manager with high degree of authority over decisions.
What distinction did Oliver Williamson make between two types of organisations ?
- U-form structures or ‘unitary’ organisation which have centralised control and authority (which would include Chandler’s ‘multi-functional enterprise’, but often relates to small firms with a centralised power structure)
- M-form structures – basically the ‘multi-divisional’ model identified by Chandler (1984).
What are the advantages of U-form companies ?
¥ Increased specialization/functionally specialised departments (e.g. production, sales, research)
¥ Critical decision-making is centralized in one “peak” person/ board of directors
¥ Appropriate for standardised production below a certain size
What are the disadvantages of M-form companies ?
¥ Cannot handle the complexity of multiple activities well/ excessive load on senior managers
¥ It becomes impossible for a small number of top managers to handle both long-run strategic and short-run operational administration
¥ Operational concerns can divert attention from strategic/competitive/entrepreneurial issues.
What is the key difference between U and M-form ?
M-form decentralises operation decisions where U centralises them.
Within M-form companies what are top managers required to be and do ?
¥ Are generalists not specialists, loyal to the whole organisation (rather than departments/divisions)
¥ Are removed from responsibility for operational activities
¥ Have time, resources, and are committed to ‘long term’ planning and financial appraisal
What are the advantages of H-form ?
¥ Frees corporate to focus on strategic concerns
¥ Facilitates diversification and growth as it can operate in accordance with different geographical locations, demographics and markets
What are the disadvantages of H-form ?
¥ Introduces additional levels of hierarchy
¥ Opportunism and information distortion problems
¥ Divisions may compete at the expense of cooperating
What does the contingency theory assume ?
– organisations with the same set of contingencies will necessarily gravitate towards similar structures
What are the key assumptions of structural contingency theory according to Clegg ?
Ð Environment: The more certain and predictable the environments in which organizations operate, the more probable it is that they will have bureaucratic structures
Ð Technology: As organizations adopt more routinized technologies – technologies with repetition and routines associated with them – they tend to become more bureaucratic
Ð Size: As organizations become bigger, they become more bureaucratic
Define bureaucratic organisation .
specialization of labour, a specific authority hierarchy, [and] a formal set of rules
What is a mechanistic organisation ?
A bureaucratic organisation most frequently to be found in stable environments (particularly in large organisations and those focusing on cost-reduction – modern example: McDonalds)
What is a organic organisation ?
A much less bureaucratic organisation more likely to be found in firms that are smaller, that operate in highly uncertain environments, and are oriented to discovery and learning (modern example – Google?)
What are the Mintzbergs five theories ?
- Simple structure – power centralised in management who direct staff activities – small entrepreneurial company with simple products.
- Machine Bureaucracy – mass-production of simple products - process standardization and low skill but high specialization – example: McDonalds.
- Professional bureaucracy – standardized skills but not processes – requires staff autonomy (hospitals).
- Divisionalized form – (the ‘m-form’ large enterprise)
Adhocracy – Expert project teams in turbulent environments
