Alfred ChandlerAlfred Chandler

1918-Present

Who On Earth Is This Guy?

EducatorAuthorHistorian

Family History

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

Education

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

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

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 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

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

MiddleManagers

Ownership(Diffused)

TopMgmt.

MiddleManagers

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