What Is Chandler'S Thesis

Economies of scope came from producing many different end products with the same raw material and inter­mediate processes “The potential economies of scale and scope, as mea­sured by rated capacity, are the physical charac­teristics of the production facilities.The actual economies of scale or scope, as determined by throughput, are organi­zational.The hierarchical organization was set up along functional line; produc­tion and marketing came first, then purchasing, R & D and finance.

The owners were more interested in stable income than reinvestment in com­petitive advantage, taking out profit as dividends rather than making the “three-pronged investments”.

Stabilization in the market was achieved by cooperation between competitors.

The head of the major functional depart­ments, the president and sometimes a full-time chairman of the board was the senior decision-making unit.

First-movers into a market or a technology got com­petitive advantages; in general, challenging the first mover meant taking customers away from him, difficult since the first-mover already had achieved economies of scale and scope compared to the challenger.

The industrial enterprise is a subspecies of the business enter­prise.

In addition to having a number of distinct operating units and being led by salaried managers (the two basic characteristics of business enterprises), it carries out modern production processes.The complexity of the decision-making med the American companies to pioneer the multi­divisional or­ganizational structure.Great Britain: Personal Capitalism Key characteristics: Family-owned companies, where the own­ers prefer to take out profit as dividends and keep their day-to-day influence, lead­ing to Britain coming in late in the second industrial revolution.Managerial capitalism (topic of Chandler’s The Visible Hand) refers to “a new type of capitalism–one in which the deci­sions about current opera­tions, employment, output, and the allocation of resources for future opera­tions were maid by salaried managers who were not owners of the enterprise”.Scale, Scope and Organizational Capabilities (General theory of why and how industrial enterprises began and evolved).The industrial enterprises grew by adding new units – dif­ferent in terms of geography, economic functions or prod­ucts.These units were added because they provided In production, increased output in the old, labor-inten­sive industries came mainly by an increase in size (adding more ma­chines and people).In ad­dition, the sales force provided information about the market.In purchasing, the reason for integration came from a need for coordination, and the cost reduction from buying in volume.Since it was difficult to challenge a first mover, only few could do it; the well-established com­panies who had the financial muscle necessary.Thus the capital-intensive markets quickly became oligopolist­ic, oc­casionally monopolistic.