Modern Business in Comparative Perspective - Chandler - Case Study Example

Modern Business in Comparative Perspective Affiliation The question is asking whether thepersistent competitiveness as well as the economic triumph of the prominent counties can be directly related to the large-scale, managerial enterprise concepts of Alfred Chandler’s. It is asking how much, in depth, this model has contributed into the enormous economic growth, currently being experienced, mostly in the top economies around the globe. In order to respond to the question, this paper will extensively assess how efficiently Chandlers concept of large-scale managerial enterprises influences the long-term success of top national economies. Also, it will assess these economies and how they influence economic designs throughout diverse national situations. The study will examine countries like the US, UK, Germany, and Japan by studying Chandlers significant exploration influences in this area throughout the past century. Introduction Chandler’s managerial enterprise theory integrates tactical decisions, internal structures and company functionality and although it has a lot of criticism, it is still used to clarify business success or failure of the late19th, 20th and even the 21st century. In contrast to the eventuality approach, Chandler tends to support the organizational way of American as the ‘one best way’ for every country. However, it makes one wonder whether one size can fit all. According to Chandler’s description of managerial enterprise, he states that it is the contemporary industrial enterprise encompassing various operational units, meant to carry out particular activities of manufacturing and distribution. It is also a control structure where the investment conclusions for present and prospect manufacture and distribution are made by different level managers that possess certain skills and understanding. The managers are responsible for managing the business, rather than the incompetent businesses owned by family. It was typical of them to introduce managers because as organizations started growing bigger, especially during the railway construction in America and Australia, families were incapable of managing such on their own. Consequently, due to the long-term achievements Chandler’s multidivisional structure (M-form) presented, many large capital-intensive initiatives adopted it in order to expand their companies into new topographical and product markets (Evan & Klemm, 1980, pp.336). The benefits of this structure is based on the split-up of top and middle managers’ tasks, which not only enables decentralization of making decisions, but also enables top management to concentrate on strategic decisions, that is, the revolution of organizational structure (Fleck,2005, pp.U5). From his perspective, he views M-form as the most operational development strategy and a dispersed structure to sustain an organization’s long-term objectives and reinforces the internalities of a company. He further demonstrates that for the successful managerial organizations, they develop through horizontal extension involving similar stage of production with rivals. The companies can also grow through vertical assimilation warranting stable source of raw supplies and forward to control purchasers. Moreover, they broaden their businesses through venturing into new geographical markets by reinforcing their in-house structural competences. The reinforcement is usually from using economies of scale and expanding into correlated product areas from exploiting economies of possibility which is founded on competitive benefits (Rodrigues, 2002, pp.24). He further elaborates that, so as to fully exploit the economies of scope and scale as well as become a first venture in a business field, it is fundamental to attain the "three-pronged investments" in producing, distributing and promoting and management. The investment can raise the amount of sales, employ and train prospective managers and growth in technology among others. Moreover, large managerial enterprises have the advantage of their magnitude to stabilize cost benefits by economies of scope and scale in capital-intensive (Toms & Wright, 2002, pp.91). Chandler claimed that large managerial enterprises have turned out to be prosperous throughout the years as a result of a simple economic reason, which he called the ‘three-pronged strategy’. In regard to this model, companies should endow heavily in both their manufacturing and distribution functions so as to completely utilize the economies of scale and scope at a domestic and global level. However, this is only applicable where the enterprise completely depends on the precise ruling of a competent professional management (Bryer, 2013, pp287). The idea was to generate organizational benefits and proficiencies from first-mover advantages through interrelated diversification. He termed the applied structure as consolidated and functionally-departmentalized. However, for those states that overlooked the concept, they were fated to little competitiveness and moderate functionality (Peterson, 1988, pp.357). Therefore, his proposition was dual: first, he emphasized on the comparative economic significances of the multi-divisional structure. Secondly, he claimed that the approaches and the so structures of radical economies are connecting towards those accepted in the US during the early 19th century (Sluyterman & Wikelman, 1993, pp. 156).For example, in the US, 86% of the companies had adopted to M-form by 1879, 50% by 1980 in Japan, 70-90% in Europe during early 90s. Various US companies such as General Motor, Standard Oil and Du point had embraced the M-form since early twentieth century. Their adoption enabled them to develop promptly and to become diversified. During the 1920s and 1960s, nearly every successful firm in the US had implemented this organizational structure. In specific, various US businesses also exploited the "three-pronged investments" to profit from the advantage of first mover resulting from economies of scale and scope (Maier, 1993, pp.773). Correspondingly, IBM also applied the "three-pronged investments" for its diverse products system 360 in order to gain advantage of being a first mover which enabled the company to gain a top spot in the computer industry. By 1969, the company had acquired 70% of the global market for its general computer. Therefore, in order for large managerial enterprises to maintain competitiveness and reduce being overtaken by their competitors, they should constantly and precisely develop their interior managerial aptitudes (Maier, 1993, pp.771). For instance, in the US motor industry, when Ford separated its leading management team, it affected its market stake negatively which fell from 55% in 1921 to 19% in 1940. During the same period GM continued with the same management team making them gain in its market share, from 11% to 45%. Hence, Ford’s defeat by GM was a direct result of failing to adopt the M-form concept. The theory has been adopted by many more managerial enterprises developing in the US such as automobile, machinery, chemicals, among others which have turned to be international companies. Companies like Du Pont and GM are currently presumed to be some of the strongest organizations in their corresponding industries due to their investment in the "three-pronged investments” theory (Sluyterman & Wikelman, 1993, pp. 154). Chandler argues that the victorious stories of the key businesses during the pre-World War I such as electrical, machineries like Siemens, Bayer & Co, among others were also recorded in the main businesses of the inter-war, where there were automobiles, and post-World War II period, that is, the consumer electronics and computers (Flingstein, 1985, pp.349). It is, is therefore, notably one of his major criticisms, for they argue that he is attempting to enclose his examples within a particular ‘American by-product’. In addition, during the period that he was writing, multinational strategies were just starting to materialize in the US. Half a century later, however, distinct modification is a typical characteristic of the American economy. It, therefore, challenges his hypothesis of global merging towards interrelated diversification strategies. The rationality of his theories can further be examined due his evaluations between irregular things (Ichiishi & Sertel, 1998, pp. 523). For example, it is not fair for one equate the US, which possesses huge market and powerful anti-trust tradition, with the much lesser Germany or even UK. Thus, organizational structure is not a consequence of strategy alone because varying businesses need varying structures. For example, capital-intensive businesses will be governed by steep hierarches, whereas, horizontal hierarchies will succeed in the labor-intensive ones. Eventually, his theory explains economic success with sole orientation to the corporate level while disregarding the importance of others (Sluyterman & Wikelman, 1993, pp. 154). It, therefore, seems that the current enterprise in the US was created upon the need to manage the adopted flow of goods. Nonetheless, it was not essentially the case with the other countries. It can, therefore, be argued that the European business structures were compelled by the internalization of the distribution of economic resources (Iversen, 2008, pp.281). Likewise, in Japan the emphasis was on the distribution of human resources. The author, however, upholds that while a managerial order can turn out to be effective for the US needs, which is at that particular period, it is not suitable to synchronize the movement of other resources. According to him, it can substantiate the central role of holding industries in Japan, the hybrid U-form and Europe (Acar, Keating, Aupperle, Hall & Engdahl, 2003, pp.1234). The growth of major businesses in Europe was largely the effect of M&A, followed by unstable, H-form structures, while by contrast holding companies became non-existent in the US by the 1960’s. Nonetheless, Chandler still finds a close relationship between Germany and the US. He does, however, recognize the dissimilarities between what he calls ‘co-operative capitalism’ and the more distinctive Anglo-Saxon model. Germany capitalizes majorly in education and training, although it is well-known for utilizing economies of scope rather than scale. Although diversification had been introduced earlier on, individual control continued into the 1990’s (Neimark & Tinker, 1987, pp.1987). Therefore, it is evident that Germany has much in mutual with the UK than Chandler gives insinuates. Managerial capitalism emphasizes only on structural growth which in turn undermines the parts played by other establishments such as the state and banks. For example, in Germany, banks played an important role as mediators, which contradict the US, because companies grew through internal finance. Alliances were a principal feature of the German economy, and were considered to be equal to holding industries in Britain. Irrespective of Chandler’s impression that cartels hold back corporate development, capital-intensive companies in Germany expanded as a consequent of cartelization since the1890’s and remained evident in the 1930’s. It can be argued that Chandler’s theory on German was only applicable in the 1930’s after which its economy was defeated during the World War II (Peterson, 1988, pp.357). When comparing the US and Germany, UK was struggling. Chandler recognizes that small size does not need diversification, although he blames it on the state’s individual capitalism for it. However, personal capitalization can describe the 19th century company, but not necessarily its descendant (The heat, 2014, pp.69). The term ‘personal capitalization’ is arguably known to be rather indefinite; therefore, it is open to various interpretations. Moreover, it is not logic to have a sole factor define the economic condition of an entire state. For example, public rule especially the financial rule of the 1950’s and 1960’s and the unsuccessful mediation of the country during the 1930’s ‘cotton crises”, have already been surveyed as possible problems to the British success (Supple, 1991, pp.507). It is infamously known as the UK failure. However, this is arguably exaggerated, in that, UK has continued, throughout the years, to be among the four leading GDP terms since 1870 up until 2004. Companies like Unilever embraced M-form structure in the country, but most large-scale businesses in the UK during the pre-World War I remained in firms with restricted scale advantages such as textiles (Binda, 2012, pp513). More precisely, main British industries were in brewing and textiles, drinks and food, even during the prevalence of M-form in the country. Such big organizations like Boots had not acquired a diversified managerial structure. Therefore, it can be noted that, Chandler’s focus was only towards the British failure stories, which he used only to support his hypotheses (Miranti, 2008, pp.295). British businesses lacked prior market information, due to the lack of faith towards banks as arbitrators. Consequently, friends and families became the major financiers. Family firms should, thus, be counted in this his argument. Chandler claims that these forms of enterprises cannot develop into successful ones mainly because profit goes back to the managers who are the owners (Lamoreaux, 1991, pp.391). Likewise, it is also assumed that there is a significant possibility that there will be negligence towards career credentials during transition of ownership to the next generation. Therefore, it can be criticized that these family set ups turn out to be challenging in themselves because they end up suppressing the firm’s growth. There are, nonetheless, researches showing that only few family businesses go past a single generation. Advocates for family-controlled corporations argue that they are a fundamental kind of enterprise across the globe and that they make major contributions to their individual economies (Bryer, 2013, pp285). The enterprise structure of Japan was traditionally the consequence of late industrialization. It encompasses combined features, the firm, the factory, and the inter-firm network. The elements are very significant and involve the trading companies and the banks. Most leading automobile companies have adopted the hierarchical structure at different managerial levels and in 1908; for example, Mitsubishi had established an organizational chart like used by the US. Diversification became prevalent among new companies during the 1950s and 1960s (Bucheli, Mahoney & Vaaler, 2010, pp.363). Conclusion There can be no denial that Chandler’s theories have contributed to the competent large economies being seen today. And although there are those instances where he failed to look from both sides of the perspective, his theories adoption around the world has significantly affected the global economies. Save for some instances, like German’s downfall during the World War II, there are very few cases where his theories turned out to be wrong. Therefore, I can strongly agree that he played a positive part in building the economy. Bibliography Acar, W, Keating, R, Aupperle, K, Hall, J, & Engdahl, R 2003, Peering at the Past Centurys Corporate Strategy Through the Looking Glass of Time-Series Analysis: Extrapolating from Chandlers Classic Mid-Century American Firms?, Journal Of Management Studies, 40, 5, pp. 1225-1254, Business Source Premier, EBSCOhost, viewed 21 March 2015. 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