CHANDLER - CHANDLERS LOGIC OF THE MANAGERIAL ENTERPRISE...

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CHANDLER’S LOGIC OF THE MANAGERIAL ENTERPRISE Managerial enterprise refers to large industrial concerns in which operating and investment decisions are made by a hierarchy of salaried managers governed by a board of directors. Logic of Managerial Enterprise The logic of the managerial enterprise is the making of necessary investments in management, production and distribution in order to achieve economies of scale and/or scope, benefit from the learning curve, with the strategic intent of dominating a portion of an industry. Economies of Scale : cost per unit drops as the volume of output rises. Economies of Scope : large plants can use many of the same materials and processes to make a variety of different products. Both economies require the flow of materials to be constant to assure capacity utilization. This is the primal objective of improving productivity. Economies produced by major investments, results in increased size: - Distribution systems create national/international markets. - Management cadre provides coordination and control. - Geographic expansion based on economies of scale - Expanded product markets based on scope. Thus the four functions of an organization work together. COMPETITIVE DYNAMICS: When the system works, it creates a competitive dynamic within the firm. That is, all elements of the organization working together to satisfy a need within society. Examples of firms that have made the necessary investment, benefited from the learning
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CHANDLER - CHANDLERS LOGIC OF THE MANAGERIAL ENTERPRISE...

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