Strategy and Structure: Chapters in the History of the Industrial Enterprise
Alfred D. Chandler, Jr.
Harvard Business School
University of Illinois at Urbana-Champaign's Academy for Entrepreneurial Leadership Historical Research Reference in Entrepreneurship
This book studies the changing strategies and administrative structures of U.S. industrial companies after World War II. It traces the rise of the multidivisional (decentered) type of organization used by firms carrying out the most diverse economic activities. Presented in detail are case studies of du Pont, General Motors, Standard Oil of New Jersey, and Sears. Each firm developed their new structure independently; each thought they were unique in their problems and solutions. The new structures were characterized by autonomous, integrated operating divisions with managers who had authority and facilities to make day-to-day tactical decisions, and a coordinating general office whose senior officers carried on entrepreneurial activities and coordinated, planned, and appraised the work of the divisions. From study of the four firms, Chandler found that (1) analysis of the creation of the new administrative structure required knowledge of the firm's entire administrative former history; (2) changes in organization were related to the way the firm expanded; (3) the patterns of growth reflect changes in the over-all economy, and (4) reorganizations were affected by the state of administrative science at the time. In brief, structure follows strategy, where strategy is the planning and carrying out of different types of growth, and structure is the design of the organization through which the enterprise is administered. Strategy is determination of the basic long-term goals and objectives, and adoption of necessary courses of action and allocation of resources. Structure is the lines of authority and communication between offices and officers, as well as the information and data that flow through these lines. The most complex structures result from the convergence of several basic strategies. Expansion of volume or geographical distribution led to particular structures. The theoretical questions can be framed as, (1) why is there delay in developing new organizations to meet new strategies, and (2) why the new structure emerges in the first place. In summary, found that strategic growth resulted from an awareness of the needs and opportunities (created by exogenous change) to employ existing or expanding resources more profitably. The new strategy required a new structure if the enlarged firms were to be efficient. After detailed examination of the four case studies, which represent decision-making under pressure, the author summarizes by presenting four stages in the history of large U.S. industrial enterprise: initial expansion and accumulation of resources; rationalization of use of resources; expansion into new markets and lines; and development of new structures to allow continuing mobilization of resources to meet short- and long-term market demands and trends. (TNM)
Keywords: Organizational change, Firm growth, Resource management, Resource acquisition, Manufacturing industries, Organizational structures, Firm management, Firm strategies, Strategic planning, Organizational objectives
Date posted: November 4, 2009