Comm 210
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:
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: