What Is Chandler'S Thesis

The owners were more interested in stable income than reinvestment in com­petitive advantage, taking out profit as dividends rather than making the “three-pronged investments”.

The corporate office let go of day-to-day operational responsibilities, instead focusing on performance monitoring of the divisions, planning and implementation of long-term cor­porate strategy, and specialist advice through corporate staff to the top and middle management of the divisions.

The staff usually was composed of the old financial department, a corporate personnel office and a central research laboratory.

In the new, capital-intensive indus­tries in­crease in output came as a dramat­ic reduction in capi­tal/labor ratios, due to new machines and processes.

Thus, economies of scale were much more important in capital-intensive industries, whereas in the labor-intensive one the large firm did not have significant advantages over the small ones.

The divisions had responsibilities for a single product line, or sometimes a geographical area.

Labor-intensive industries (such as textile, lumber, prin­ting) did not provide competitive advantages for large in­tegrated com­panies.

The complexity of the decision-making med the American companies to pioneer the multi­divisional or­ganizational structure.

Great Britain: Personal Capitalism Key characteristics: Family-owned companies, where the own­ers prefer to take out profit as dividends and keep their day-to-day influence, lead­ing to Britain coming in late in the second industrial revolution.

One reason for this was the increasing “product-specificity”; as prod­ucts became more complex, it was not cost-efficient to have a wholesaler handle the difficult transaction processes.

Another reason was competition; in the fierce battle for market share in an oligopolistic marketplace an intermediary who made his profit from handling products of more than one manufacturer became redundant.


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