Alfred Chandler

1
Alfred Chandler

• 1918-Present

2
Who On Earth Is This Guy?

• Educator
• Author
• Historian

3
Family History

• Father - Alfred DuPont Chandler
• Mother - Carol Ramsay
• Born 1918 - Guyencourt, Delaware
• 1944 - Married Fay Martin
• Had Four Children

4
Education

• 1940 - Graduated from Harvard College
• 1940-1945 - Navy - Lt. Commander
• 1947 - Masters from Harvard
• 1952 - Ph.D. Harvard
• Bunch of Honorary Degrees

5
Educator

• 1950-1951 Research Associate, MIT
• 1951-1964 Instructor - Professor, MIT
• 1963-1971 Professor, Johns Hopkins
• 1966-1970 Dept. Chair, Johns Hopkins
• 1964-1971 Director, Center for Study of
  Recent American History
• 1971-1989 Straus Professor of Business
  History, Harvard
• 1989- Emeritus

6
Author

• 1956, Henry Varnum Poor
• 1962, Strategy and Structure (Newcomen Award,
  1964)
• 1965, The Railroads
• 1971, Pierre S. duPont (with Stephen Salsbury)
• 1978, The Visible Hand (Pulitzer Bancroft
  Prizes)
• 1980, Managerial Hierarchies (with Richard
  Tedlow)
• 1985, The Coming of Managerial Capitalism
• 1988, The Essential Alfred Chandler

7
Historian

• Economic History Association (President
  1971-1972)
• Organization for American Historians
• Society for the History of Technology
• Historical Association
• American Antiquarian Society
• American Historians
• Massachusetts Historical Society
• American Academy of Arts and Sciences
• American Philosophical Society

8
His Basis

• Business Week
• Historical Perspective

9
Strategy and Structure

• Structure in big business enterprises follows
  strategy
• What is Strategy?
• What Drives Changes in Strategy?
• Multi-Purpose Divisional Structure
• Role of Business Leaders
• Key Impact on Large Industry

10
Perspective
11
The Visible Hand

• Adam Smith
• Business Two Phases
• Modern Business Is

12
The Visible Hand

• Fundamental Changes
• Production
• Distribution
• Markets
• Integration
• Human Aspect

13
The Visible Hand - Progression
Founders
Ownership (Diffused)
Middle Managers
Top Mgmt.
Middle Managers
14
Business Development

• Second Industrial Revolution
• Old Industries Transformed
• New Industries Developed
• Economic Growth and Development
• International Expansion
• Capital-Intensive Markets

15
Organizational Capabilities

• First Movers
• Market Share Changes - Non-Econ!
• Theories of the Firm
• Neoclassical Theory
• Principal-agent Theory
• Transactions Cost Theory
• Evolutionary Theory

16
Organizational Capabilities

• International Competition
• Held Back by World Events
• Reality in 1960s
• Core Competence
• Diversification
• Divestiture

17
Profit Growth

• Short-Term
• Long-Term
• Geographic
• Product

18
Criticisms

• Strategy and Structure
• Tom Peters
• Mintzberg
• The Visible Hand
• Nothing noted about newer techniques
• Nothing said of behavior sciences
• Importance of the human element
• Failure to provide evidence
• Evaluation of social costs and benefits

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Summary

• Historian
• Studied Large Industrial Business History
• Conclusions
• Structure Follows Strategy
• Decentralized, Multi-Purpose Divisional Structure
  is Optimum
• The Visible Hand of Management has Taken the
  Place of Adam Smiths Invisible Hand of Market
  Forces (Market Economy vs. Managerial Capitalism)
• Management has not basically changed since WWI

20
Summary

• Conclusions
• Market Share Driven by Functional and Strategic
  Competition, Not by Price Competition
• Firms (Physical and Human Assets) Are the Basic
  Unit of Historical Economic Analysis
• Firms Should Stick to Their Core Competencies
• Long-Term Profit Growth is Gained from Expansion
  into New Geographic or Product Markets