Has the Integrated Managerial Enterprise Contributed to the Success of Leading Economies - Assignment Example

Has the integrated managerial enterprise contributed to the success of leading economies? To what extent can this organizational form be applied in differing national circumstances? Managerial expertise is a form of business concept that was helpful for many nations to achieve economic growth. This concept was developed by Alfred Chandler through his book ‘The Visible Hand’. “In the mid 1970s, he brought out the first of a series of major works on this subject, his Visible Hand, which won the Pulitzer and Bancroft prizes in 1978. The title reference is to deliberate organizational arrangements designed to make big business work.” (Landes, 2001). His work ‘The Visible Hand’ won two awards in 1970. He was an employee in DuPont and that experience made him to look into the performance of companies in detail. His book is focused on the role of business enterprises in the economy of the country. Some of the countries that benefited from this method are USA, Germany and Japan. The concept refers to the companies or enterprises that contribute to the development of the economy. It speaks how the expertise of potential enterprises contributes to the economy in terms of production. It is the potential business enterprises that make the respective countries show their presence in the world market. Therefore, the concept is very important for many nations for acquiring economic growth. . Though managerial expertise has contributed to the success of many economies it can be seen that there are many other factors that have contributed to it. The work gives a clear understanding of how the concept has contributed to the success of the nations mentioned above. First the concept of Chandler can be studied in detail before looking into its contribution to the nations. After carefully learning the concept in detail the benefits that the economies of USA Germany and Japan has attained through this is seen. Finally the paper looks into how the concept can be applied in differing national circumstances. Alfred Chandler is a business historian. He was the person who developed the theory of Managerial Enterprise. According to him the managerial expertise and the stiff competition that contributes towards the establishment and development of the companies and organization goes hand in hand. He points out that it is this understanding that made the economies of USA, Japan and Germany to be successful during the World War 1. According to him, application of the 3M strategy made different companies to be successful during those periods. He analyzed that during the period of 1920 to 1960 many companies in USA adopted this theory and was very successful. He has mentioned the examples of General Motors, DuPont, etc. for this. “GM itself tells a fascinating story of transition from personal to corporate enterprise.” (Landes, 2001). He mentioned how General motors managed to be the best in the world. He says that the application of 3M strategy was the primary driving force for the American companies during those periods. Most of the strong companies in US adopted the 3M strategy in order to withstand the competition in the market. One such company is IBM who targeted a very large group of customers. Through this they aimed to tap the benefits of the economies of large scale. It was the adoption of this strategy that made the companies such as IBM, General Motors and DuPont to be one the strongest companies at present. Now the case of Germany can be analyzed. Germany also developed its own professional theories in order to boost up the business. This helped the country to recover from the economic crisis after the World War II. World War 2 made Germany fall short of fuel in the country. “During World War 2, Germany fought desperately to overcome an acute energy crisis, i.e., a fuel shortage.” (World War 2 German fuel Shortage, 2007). The success of the country in this regard was evident from the betterment of dye and chemical industries of the country. Germany was performing well to that extend that it was able to push back Britain who was the market leader in dye manufacturing. This was possible for Germany by the application of 3M’s in their system. Britain was actually slow moving in the field of dye manufacturing though they were the market leaders. However, Germany overtook the country by starting the production of high quality dye and thereafter became the market leader. Britain did not consider the benefits of investing in the 3M’s. More than the success of Germany it is the failure of Britain that shows the relevance of the application of 3M’s in the economic system. Another nation that benefited from the strategy was Japan. Japan faced very severe crisis after the World War 2 when almost 40% of its industries and business got destroyed. It later on underwent a process of rebuilding by continuous investments in major growth areas such as power oil etc. It was careful investments that made the country to develop. Investment was made in those areas that would aid the development of the country. Japan also had a very good labor force. At present Japans takes second position in the largest economies in the world. Japan’s economic developments were constituted by the reforms in their banking systems. They centralized the banking system and all the industries were kept under the control of the central Bank. This system is called Keiretsu system. “It can best be understood as the intricate web of relationships that links banks, manufacturers, suppliers, and distributors with the Japanese government.” (Keiretsu, 2001). Basically there are two forms of Keiretsu system such as the Horizontal and Vertical. In this system the banks have superior control over the industry and this phenomenon made the economy and industry controlled by Banks so that no monopoly will occur in the market. There is a good relationship maintained between the banks and the companies. Japan survived the competition from other countries by applying this system in their economy. Apart from all these Chandler examines in detail how the economy of UK has fallen due to their policies that did not come any where near the 3M strategy. UK still thought of surviving with their capitalist system in the economy. They focused more on boosting the family owned business and did not move foreword with an expansion idea. The family owned business made profits and the profits were shared by the members rather than continuous reinvestment. There was less scope for the business to expand as there is no huge investment directed towards the industry. The economy was driven by the limited investments of family owned business. Chandler identifies that UK too started applying the 3M strategy after certain period. The country directed very fewer goods for carrying out production activities and therefore management of the goods were simpler. The decision making process for the business was made by the family members who were not experts. There was less external influence in the industry. There was less chance for the industry to receive quality decisions. As a result of this there was a need for only limited production. A detailed study regarding the concept of integrated managerial enterprise and its influence on various leading economies has been seen. Now application of the concept on differing national circumstances can be identified. It can be seen that Chandler takes into account of only the factors such as manufacturing, management and marketing. Other factors such as finance, employee relations and public policies are not taken into account. These are equally important factors that contribute to the success of the business. He gives more importance to the internal factors that contribute to the success of the business and external factors are not much taken into account. But the other authors such as Porter and Gerschenkron takes into account the external factors. Porter explains the scenario on the basis of two different aspects such as chance and government. One of the examples of chance is war. Events have shown that war was very much advantageous to US. The world war did not affect the land of US while it affected many other nations’ such as that of UK. The US was resulted in a situation of consumerism. The high consumerism demanded more production activities and that made the economy to develop. But the scenario was different in UK. There were no consumerism and the resources of the nation were utilized heavily for War. This made the economy weak. When this is the opinion of Porter, Gerschenkron opinions that the success of US economy is the result of a well planned financial system. The capital for investment is in abundant in US. This capital was very effectively utilized for the betterment of the industries all over. The role of Government in the success of the economy is being pointed out by both the author’s. They said that government owned companies has great role in development of the economy. The best example that can be quoted for that is China where there is more number of government run companies in the country. Government will always show interest in the betterment of the economy and as a result they will show very less bias in the management of the company. And also the income generated through the operation of the company is again reinvested in the country itself. It should be noted that Chandler in all the areas of his concept refers only the giant companies that has the capacity to influence the economy. Small firms have less contribution towards the economy of any country. A country having large number of large scale companies will always have better economic growth. This is the view of Chandler and he said that the failure of UK economy is due to this. Though Chandler took into account the size of the companies Porter never considered it. The opinion of Chandler can be criticized at this instance. On one side he speaks about the size of the business and on the other he speaks about the managerial expertise. It is impossible to apply the principles in two different countries. There are many varying circumstances in different countries. These circumstances are based on the national policy and the different economic indicators. Stock market is one of the differing circumstances. The stock market practice and the relation of the stock market to the economy differ on different nation. In total the work of Chandler was a light towards certain facts related to the economy and economic indicators. He clearly explains clearly the reason behind the fall and success of many nations after the world war. He carefully identified the core factors that contributed towards the success of the nations. The concept of Chandler was a better managerial practice. The basic theme of his concept surrounded around the fact that better performance of industries is very essential for the success of an economy. This proves the role of integrated managerial enterprise in the success of a nation’s economy. References Landes, David S. (2001). The Visible Hand: The Managerial Revolution in American Business / Book Reviews. EH.Net. Retrieved December 7, 2007, from http://eh.net/bookreviews/library/landes World War 2 / German Fuel Shortage. (2007). Retrieved December 7, 2007, from http://vanrcook.tripod.com/Germanfuelshortage.htm Keiretsu. (2001, February 1). Search smb.com. Retrieved December 7, 2007, from http://searchsmb.techtarget.com/sDefinition/0,,sid44_gci518852,00.html Chandler, A.D. (1993). ‘Managerial Enterprise and Corporate Capabilities’, in G Jones and C Harvey, eds. Organisational Capability and Competitive Advantage (1995). Read More