Major Claim: Successful firms are the ones that first capitalize on economies of scale and scope, create management structures and invest in research and development which allows them to stay ahead of the competition.
Second Claims: Unrelated diversification leads to problems in the long run. Business ownership patterns have diminished the likelihood of many firms’ long term success.
Claims: important to invest, be committed/ companies still ignore logic/ pursuing a wide mkt is key/ hard to enter a mkt when there’s already a 1st mover/ company succeed when it dvlps an economy of scale and scope
Major Concepts
Economies of scale: Doing things on a greater scale makes things cheaper.
Economies of scope: Being able to make other things based on the knowledge and materials you have.
Functional divisions: Example: Sales, Management, Accounting.
Management Hierarchy: Levels of Management. Bosses, ect…
First Movers: First to hire managers, to grow, move. Once a firm loses the opportunity to be a first mover, it is difficult to regain competitive advantage. • Confidently seize opportunities through major commitments • Constantly improve and aggressively compete • Manage logically and systematically • “Maintain and nourish their competitive capabilities”
Research and Development: New technologies, improving quality, price/cost.
Managerial enterprises: build large and efficient pdct capacity, compete aggressively and never let up, expand mktg and distribution, lower cost and improve quality
Organization of management
Diversification: When companies buy a wide variety of other businesses. Chandler says not understanding the business will not allow you to build the business. If you are going to diversify, then do it in related businesses.
Unrelated diversification leads focusing on the financial statements
This causes the smaller businesses to do short-term thinking
Focusing on profits/ Short-term thinking leads to:
Separation of top