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CHANDLER - THE ENDURING LOGIC OF INDUSTRIAL SUCCESS

Major Claim:

Successful firms capitalize on economies of scale & scope, create management structures and invest in research & development

• Once a firm loses the opportunity to be a first mover, it is difficult to regain competitive advantage

Secondary Claims:

• Growth through unrelated diversification is a poor business strategy

• Business ownership patterns have diminished the likelihood of many firms’ long-term success

CONCEPT LIST

Economies of scale: Large companies can produce products at a much lower cost than small ones because the cost per unit drops as the volume of output rises

Economies of scope: Large companies ca use the same raw materials and intermediate production processes to produce a variety of different products

• ex: McDonalds introducing their apple pie

Functional divisions, management hierarchy & geographical expansion:

• Should ensure proper communication between different sectors of the business

• Geographic expansion is based on economies of scale (long term, management strategy)

First movers: Companies that quickly dominate their industries by making large investments and gaining competitive advantage

• They confidently seize opportunities through major commitment

• Constantly improve aggressively compete

• Manage logically and systematically

• Maintain and nourish their competitive capabilities ex: Ferrari = competition, need to learn from them in order to become better

Horizontal Growth: Combining with competitors in order to grow as a company

Vertical Growth: By moving backwards to control materials and forward to control outlets ex: Pepsi buying out a bottle factory in order to have more control over the industry

Research & development: Innovation and strategy is more powerful than price. Improve existing products and develop new ones

Entrepreneurial enterprise—staying small: Staying small - specialization (pursuing growth through economies of scope and developing markets that best fit their distinctive core production and research technologies)

Diversification, related & unrelated:

• Growth through unrelated diversification is a poor business strategy

• Moving into related markets is based of economies of scope (long term, management strategy)

Separation of top vs middle managers: With diversification came the division (separation) of top management from middle managers who were responsible for running the operating divisions.

Two reasons:

• Managers had little tech knowledge of all divisions it had acquired

• Larger numbers of acquired business crated an overload in decision making

Stock market pressures: When companies focus on making investors happy. Caused by unrelated diversification. Giving in to this type of pressure will eventually cause your company to fail in the long run (affected how managers could proceed)

Short-term thinking: Large companies can be bought, sold, split up and recombined in ways that were impossible before. Such restructuring can be destructive

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GREINER - EVOLUTION AND REVOLUTION AS ORGANIZATIONS GROW

Major Claim:
• Organizational growth is characterized as a series of developmental phases • Management practices that work well in one phase bring on a crisis in the next

Second Claims:
• Organizations should not try to skip phases
• Top managers whose style is no longer appropriate should remove themselves • Growth is not certain

Five models of development

1. Age of organization: So things are good for the company for a certain period of time but will becomes a problem in another period

2. Size of organization: Problems and solutions are different as the company gets bigger

3. Stages of evolution: Only modest changes are needed to maintain the growth of the...
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