Use of Chandlers Model in Explaining Long-Term Competitiveness of Leading Economies - Case Study Example

FINAL PROJECT Contents Introduction 3 Theoretical framework analysis – Chandler’s Model 3 Use of Chandler’s Model in explaining long-term competitiveness of leading economies 5 The United States 5 China 6 United Kingdom 7 Japan 8 Germany 8 Conclusion 9 References 11 Introduction Alfred Chandler introduced Chandler model. With the help of this model detail analysis of firm can be done. Based on this model Alfred Chandler developed a theory which focused on detailed observation and analysis of business. It helped the business to improve its managerial corporation. In this report detailed analysis is done on Chandler’s model which shows hoe the theory of this model are implemented in managerial enterprise. The theory of Chandler model deals with the competitiveness of major economies of the world. Managerial economies play a vital role in Chandler’s theory for managing large scale enterprises and its management. In this case study various nations of the world like US, UK, Germany, China and Japan are mentioned for explaining the impact and important of this theory. The theory of Chandler is used in modern corporate companies. There is a strong relationship between strategies developed from this theory and modern economic condition of the world. There are various advantage and disadvantages of this theory which are discussed in this report in details. Chandler theory has become very much important in the modern world. Various management enterprises use this theory for experiencing growth and success of the companies. Theoretical framework analysis – Chandler’s Model Chandler theory highlights various functions which an enterprise undertakes for managing its business. According to Alfred Chandler large industries or companies are considered as managerial enterprise. This model involves in a detail analysis of corporate organizations. First part of Chandler model shows different economic components affecting the business (Chesbrough and Crowther, 2006). In the second part different theories are linked with this model analyzing the business situation. Third step of this model shows various perspectives to deal with issues related to this theory and organizational management (Sturgeon, 2002). Enterprises described in this theory take different decisions according to its business hierarchy. This model also highlights how large organizations develop important investment decisions based on its organizational structure. Managers and executive propose various options and decisions for growth and development of business. The theory states that board of directors of large enterprise or governing body finally select best option for the company (Cohen and Harcourt, 2003). The theory mainly focuses on economics of scale which every large organization aims to achieve. Effective organizational management, distribution system and production have huge contribution for getting economic of scale. Large organizations try to achieve it for getting various benefits from large scale of production. Economics of scale means lowering the cost of production on per unit by increasing output volume. For achieving this, companies implement strategies to improve its investment process and decision. This helps the organization to establish its strong presence in the market or industry (Lamoreaux Raff and Temin, 2008). Large organizations also get advantage in its product manufacturing process. These companies produce a wide range of products. Sometimes they use company common raw materials for producing different types of products. This helps the companies to get the benefit of economics of scope. By using those common raw materials these companies are able to lower to product price. Both economics of scale and scope are achieved by the company through full utilization of its resources and setting up different ways of getting consistent material flow (Toms and Wright, 2005). These strategies help the firms to increase its production volume and efficiency in its organizational performance. Use of Chandler’s Model in explaining long-term competitiveness of leading economies The United States In USA the theory of Chandler is used by many large organizations. Chemical industry of this country is important example of this theory which follows capitalism in its managerial functions. Companies in this industry gains competitive advantages by implementing this theory. Retail industry of USA experiences a huge competition. Many big firms are present in this industry which plays a vital role in making the competition tough (Whittington and Mayer, 2000). Retail industry of USA experiences an oligopoly market. Many new companies are establishing its business in this industry. As a result numbers of firms are increasing day by day in USA retail market. Most of the organizations in this industry follow horizontal organizational structures which help them to establish strong position in competitive market. This organizational structure also has a strong influence on the company to make its employees capable enough to develop rational decision. It plays a major role in improving individual employees and their performance level (Zey and Swenson, 2001). Large retail organizations of USA focus more on maximizing its product and services by increasing its output level. Accor4ding to Chandler theory these large organizations implements different managerial functions which helps the company to get economics of scale and economics of scope. These companies implement various strategies for selling huge number of products and services at a low price. In the present time big retail companies of USA are expanding their different functions for producing and selling large amount of product and services (Chandler Jr, 2005). The owners of these companies influence the decision making process of the organizations. They are in places in important position in the firm. As a result the decisions implemented by these firms are very much appropriate for creating a strong position for the companies. To increase productivity, larger companies also do mergers and acquisitions. It helps them to increase their capital strength and customer base (Zott and Amit, 2008). Therefore it can be inferred that by implementing Chandler theory, large retail companies of USA are able to change and improve themselves according to changing business environment. The theory focuses on investment based on three function like production, distribution and organizational functions. All of these functions have become a vital part in the success and development of these companies. As a result the companies are getting more options regarding good investment and improving their organizational structure for making their decision making process easy (Toms and Wilson, 2003). China The business history of China is very different from other nations of the world. Maximum industries of China are performing their business activities in modern ways which keep on changing with time. By following this business model the country is able to make its economy very strong. A major change in China’s economy was brought after the reform of 1978. In this country Chandler’s theory is not very useful in its different industrial segments. Electronic goods manufacturing industry of China serves as a most suitable example to prove this. In this a large number of companies are present (Van Stel, Carree and Thurik, 2005). Most of these companies follow flat industrial structure. This industry has a strong connection between government owned companies and private companies. There are many small companies and local business which do not put much effort to manage its decision making approach. Electronic goods manufacturing industry of China follows flexibility in its product manufacturing process for increasing its efficiency. Companies of this industry do not pay much attention in having economics of scale or economics of scale (Sturgeon, 2002). These companies do not use any social networking site or any kind of personal relationship for selling their products. Therefore this can be inferred that Chandler’s theory do not has so much importance in electronic goods manufacturing industry of China. United Kingdom Chandler theory can be well implemented in the industrial segments of UK. These industrial segments of UK help to show the aspect of personal capitalism. There are many types of industries are present in this country. According to Chandler theory industrial sector of UK can be divided into two major parts. One part deals with the stable industries of UK like oil, rubber, textile etc. Another part deals with dynamic industries like leisure travel, chemical, machinery, FMCD, FMCG, various branded products etc (Chesbrough, 2006). Among all of these industrial segments personal capitalism is observed more leisure travel industry. In this industrial segment personal preferences of the customers are given more priority. Major companies of this industry are privately owned. The owners of these companies mainly take business decisions. They design and establish different business functions of the companies. For this reason managing the enterprise and its different functions played a vital role in UK for supporting industrial revolution. Compared to other country UK contribution is more in second industrial revolution. The owners of different big leisure Travel Company of this country try various ways to take out company’s profit (Alvarez and Busenitz, 2001). With the help of dividend paying method the shareholders extract company’s profit. They are not so much interested about the decision making process of the company. Large organizations in leisure travel industry do not follow any such fixed hierarchical structure. These companies prefer to invest on stable things rather than risky things. The enterprises have flexible organizational structures which do not allow them to use economies of scope and economics of scale for getting competitive advantages in the market. For all of these reasons performance of companies in leisure travel industry of UK is not so good (Chandler and Vargo, 2011). Therefore the companies need to improve and manage its competencies for increasing their productivity. Japan Various industries of Japan have experienced a continuous growth and development by maintaining a strong hierarchical organizational structure. Maximum companies of this country follow systematic decision making approaches. Many businesses of Japan are family owned. In this type of company, organizational structure plays an important role in developing different functions and investment structure. In Japan Chandler’s theory is implemented easily in its construction industry (Hoffman, Hoelscher and Sorenson, 2006). Large enterprises in this industry implement various ways for achieving economics of scale and economics of scope in its production process. Companies in this industry maintain a strong organizational structure for controlling different organizational process. Globalization plays an important role in developing the construction industry of Japan. Suppliers play an important role in gaining product efficiency. Chandler model used in this industry helped the companies to implement good strategic management system for improving efficiency in their work. Technological advancement of Japan also contributed a lot in implementing this model. Large enterprises of construction companies follow vertical organizational structure (Erikson, 2002). This structure helps the companies to implement effective decisions for increasing its business efficiency. Germany Germany faces a strong competition in its different industrial segment. The industries of this country follow capitalism managerial style. Germany has oligopolistic market where large numbers of companies are present in different industrial segments. They follow various ways for achieving efficiency in their work. The whole industrial segment of Japan is divided into two parts. The first part deals with the industries like machines, synthetic alkaline, explosives, rayon etc (Hoopes, Madsen and Walker, 2003). The second part deals with the industries which produce large and heavy machines, iron and steel, industrial materials, fibers etc. Earlier companies in iron and steel industry of this country followed a flat organizational structure (Langlois, 2007). According to this structure the companies form their decision making process. But with the change of business environment of Germany large enterprises of iron and steel industry changed their organizational structure. As a result the companies implemented organizational structure where many hierarchies are present. This organizational structure helped the large organizations to implement good decisions to gain competitive advantages (Carney, 2005). These companies followed Chandler model for achieving economics of scale. Therefore Chandler model is effective in iron and steel industry of Germany. Conclusion In this case study Chandler model is described in details by highlighting different countries and industries of those countries. This model is implemented by companies for increasing its efficiency and competitive advantage. Large enterprises achieve economies of scale and scope by following this model. According to this model organizational structure plays a vital role in its decision making process. This theory has a strong impact on industry of Germany, China, UK, USA and Japan. Many modern corporate companies of these countries follow this model. There is a strong relationship between strategies developed from this theory and world’s economic condition. Various organizational functions are improved with the help of this model for managing business functions. Production, distribution and manufacturing process of industries are strongly influenced by Chandler model. Large companies try to achieve economies of scale and economies of scope for lowering its different costs. References Alvarez, S. A. and Busenitz, L. W., 2001. The entrepreneurship of resource-based theory. 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