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Comm 210

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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:

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