ORG AND MGMT
Theme 1 – The Historical Context of Organisations & Management
The Enduring Logic of Industrial Success – A.D Chandler:
The logic of industrial expansion – *3 pronged investment strategy*
Production – economies of Scale/Scope
Distribution Network
Management
Research and development essential to firm’s future
Use economies of scale and scope to drive down production costs in technologically advanced, capital-intensive industries.
Large plants : Scale – can produce products at a much lower cost than small ones because cost per unit drops as the volume of output rises. Scope – can use a lot of the same raw materials and production processes to create a variety of different products. But size is not enough to fully exploit the advantages of economies of scale and scope.
Two related sets of investments – create national then international marketing and distribution organisations; then recruit teams of managers, lower and middle to coordinate flow of products, top to coordinate and monitor current operations and plan for future activities.
Dominant companies understand the logic of managerial enterprise – operating and investment decisions are made by a hierarchy of salaried managers governed by a board of directors.
‘First movers’ dominated the market - built plants and were “working out bugs” in the production process; had already established themselves in the market by creating sales and distribution organisations/networks and had recruited management teams that were “well down the learning curve”. Remained dominant even over companies with competitive advantage ie. IBM – invested heavily, other electronic companies diversified too much
The opportunity to make a first-mover investment is short lived and once the opportunity is missed it is difficult to regain competitive capabilities even in its own domestic market – eg chemical (dye) industry in Britain.
Innovation and strategy were more powerful than price.
Differentiating products primarily
The Enduring Logic of Industrial Success – A.D Chandler:
The logic of industrial expansion – *3 pronged investment strategy*
Production – economies of Scale/Scope
Distribution Network
Management
Research and development essential to firm’s future
Use economies of scale and scope to drive down production costs in technologically advanced, capital-intensive industries.
Large plants : Scale – can produce products at a much lower cost than small ones because cost per unit drops as the volume of output rises. Scope – can use a lot of the same raw materials and production processes to create a variety of different products. But size is not enough to fully exploit the advantages of economies of scale and scope.
Two related sets of investments – create national then international marketing and distribution organisations; then recruit teams of managers, lower and middle to coordinate flow of products, top to coordinate and monitor current operations and plan for future activities.
Dominant companies understand the logic of managerial enterprise – operating and investment decisions are made by a hierarchy of salaried managers governed by a board of directors.
‘First movers’ dominated the market - built plants and were “working out bugs” in the production process; had already established themselves in the market by creating sales and distribution organisations/networks and had recruited management teams that were “well down the learning curve”. Remained dominant even over companies with competitive advantage ie. IBM – invested heavily, other electronic companies diversified too much
The opportunity to make a first-mover investment is short lived and once the opportunity is missed it is difficult to regain competitive capabilities even in its own domestic market – eg chemical (dye) industry in Britain.
Innovation and strategy were more powerful than price.
Differentiating products primarily