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.