Major Claim: Successful firms are the ones that first capitalize on economies of scale and scope, create management structures and invest in research and development which allows them to stay ahead of the competition.
Second Claims: Unrelated diversification leads to problems in the long run. Business ownership patterns have diminished the likelihood of many firms’ long term success.
Claims: important to invest, be committed/ companies still ignore logic/ pursuing a wide mkt is key/ hard to enter a mkt when there’s already a 1st mover/ company succeed when it dvlps an economy of scale and scope
Economies of scale: Doing things on a greater scale makes things cheaper.
Economies of scope: Being able to make other things based on the knowledge and materials you have.
Functional divisions: Example: Sales, Management, Accounting.
Management Hierarchy: Levels of Management. Bosses, ect…
First Movers: First to hire managers, to grow, move. Once a firm loses the opportunity to be a first mover, it is difficult to regain competitive advantage. • Confidently seize opportunities through major commitments • Constantly improve and aggressively compete
• Manage logically and systematically
• “Maintain and nourish their competitive capabilities”
Research and Development: New technologies, improving quality, price/cost.
Managerial enterprises: build large and efficient pdct capacity, compete aggressively and never let up, expand mktg and distribution, lower cost and improve quality
Organization of management
Diversification: When companies buy a wide variety of other businesses. Chandler says not understanding the business will not allow you to build the business. If you are going to diversify, then do it in related businesses. Unrelated diversification leads focusing on the financial statements This causes the smaller businesses to do short-term thinking Focusing on profits/ Short-term thinking leads to:
Separation of top VS Middle Managers: Caused by unrelated diversification.
Stock Market Pressures: When companies focus on making investors happy. Caused by unrelated diversification.
Short term thinking: In the long run, short term thinking can be harmful to the company.
First, three major investments to “set the stage”:
1. Build large, efficient production capacity (to exploit economies of scale and scope); Scale = BIG, to get costs per unit down
Scope = efficient use of common items
2. Create extensive marketing and distribution channels
3. Establish well-organized management teams
Concept maps: logic of managerial enterprises
Production, mktg, mgmt
“Do it First, Do it Right, and Do it Best”
Major Claim: Organizational growth is characterized as a series of developmental phases (Age means growth). Management practices that work well in one phase bring on a crisis in the next (Natural process to go through stages).
Second Claims: Organizations should not try to skip phases (Example: Child growing up). Top managers whose style is no longer appropriate should remove themselves (As growing and developing, managers should give up positions to someone more suitable). Growth is not inevitable (If not wanting to grow, then it is possible to keep companies small).
As companies grow, gets out of hand, more employees are needed. Need organization and formality.
Developmental stages (Phases of evolution)
Crisis stages (Phases of revolution)
Crisis stages change the company’s organizational structure and management style.
The Five Phases of Growth
Direction: control ppl
Greiner says that the growth rate of the industry is separate from the growth rate of the company. The growth rate of the industry will only tell us how fast it will go through...
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