MIM 589 Global Strategy II
Professor Tagi Sagafi-Nejad
Chandler, Rumelt and Relevant Strategic Information
William M. Sandman
Oct. 22, 2010
In this paper I am going to talk about the basic concepts of Alfred Chandler and Richard Rumelt and how they differ from Porter’s five forces. I am also going to analyze some recent interviews with business consultants about strategy. I will also speak about the current consulting company I am working for and John Bernard’s upcoming book. I will then review several recent articles from Rumelt and then give some examples of companies that have done well to effectively use their core strategic advantages to be successful. I will then conclude with what I have learned through my work and my research about how strategy can play a vital role in managing a company. Alfred Chandler, The Visible Hand and other works
Alfred Chandler wrote a book in 1977, The Visible Hand, that helped to shape the way people look at strategy. The title meant that he was answering the question about whether the invisible hand of market coordination had played a larger role in business success or the visible hand of management? He spoke about the history of business in the United States and how the technological advances helped to shape the way organizations were structured. His empirical evidence over time helped to build a strong case. He started with some of the most basic concepts of small business operations and even included examples of slavery and management of labor in the agricultural industry. In addition, he wrote about railroad management and the innovations the railroad brought because people were then able to ship good farther and faster. The managerial innovations that spawned were specializations in accounting, financing and statistics. These congruently allowed for mass distribution. His theory on railroads basically broke down into 3 main parts: 1-large railroad firms were the first to employ middle managers,
2-organizational models of the railroad companies became examples for other firms in other industries and 3-the increased speed and reliability for distribution and manufacturing. These were the main factors and reasons why Chandler used the railroads as examples in the book.
Chandler also writes about mass distribution along with mass innovation allowing for mass production. Henry Ford and many others used the mass production model to create big organizations. These larger organizations began to merge into each other to create giant corporations, which led to even more specialization in systems, department and eventually silos of work (i.e. HR, Finance, Marketing, etc.). These departments created opportunities for middle management and systems analysis so that people could analyze whether a particular organization was doing the best job to be more efficient and effective. Managers needed to coordinate complex and interdependent systems. He also states that these big corporations prospered because they had higher productivity, lower costs and at one time or another higher profits.
Chandler along with several other authors also wrote about technological advancement and the rise of certain economies in the late 1800’s. The theories are based on technology being a major force in economic development. Increased quality in transportation and communication systems allows for more productivity. With these advancements, companies became more capital intensive. (Chandler, Amatori, Hikino, 1999) They also talk about the war and how it affected and helped the technological advancements for the growth in the 1950’s. This is similar to what Thomas L. Friedman said in Hot, Flat and Crowded, because he talks about using war as a lab for creating new technologies because you have the unique situations and constraints that allow for new
technologies to be developed. The article finishes with the authors talking...
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