Alfred Chandler 1918-Present

Who On Earth Is This Guy?  Educator  Author  Historian

Family History  Father - Alfred DuPont Chandler  Mother - Carol Ramsay  Born Guyencourt, Delaware  Married Fay Martin  Had Four Children

Education  Graduated from Harvard College  Navy - Lt. Commander  Masters from Harvard  Ph.D. Harvard  Bunch of Honorary Degrees

Educator  Research Associate, MIT  Instructor - Professor, MIT  Professor, Johns Hopkins  Dept. Chair, Johns Hopkins  Director, Center for Study of Recent American History  Straus Professor of Business History, Harvard  1989-Emeritus

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

Historian  Economic History Association (President )  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

His Basis  Business Week  Historical Perspective

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

Perspective

The Visible Hand  Adam Smith  Business: Two Phases  Modern Business Is

The Visible Hand  Fundamental Changes – Production – Distribution – Markets  Integration  Human Aspect

The Visible Hand - Progression Founders Middle Managers Ownership (Diffused) Top Mgmt. Middle Managers

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

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

Organizational Capabilities  International Competition – Held Back by World Events – Reality in 1960’s  Core Competence – Diversification – Divestiture

Profit Growth  Short-Term  Long-Term – Geographic – Product

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

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 Smith’s ‘Invisible Hand’ of Market Forces (Market Economy vs. Managerial Capitalism) – Management has not basically changed since WWI

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