2. Alfred Chandler 1918-Present

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

4. Family History  Father - Alfred DuPont Chandler  Mother - Carol Ramsay  Born 1918 - Guyencourt, Delaware  1944 - Married Fay Martin  Had Four Children

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

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

7. 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

8. 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

9. His Basis  Business Week  Historical Perspective

10. 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

11. Perspective

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

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

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

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

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

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

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

19. 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

20. 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

21. 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