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comm 210notes.docx

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Department
Commerce
Course
COMM 305
Professor
All Professors
Semester
Fall

Description
The Enduring Logic of Industrial SuccessAlfred D Chandlercost advantages can be realized by placing a companys different facilities under a single managementreduce production costs through economies of scale and scopedominant companies are those whose managers and executives understand the logic of managerial enterprisethe logic of growth and competitioneconomies of scale large companies can produce products at a much lower cost than small ones because the cost per unit drops as the volume of output riseseconomies of scope large companies can use the same raw materials and intermediate production processes to produce a variety of different products important to invest in creating national and international marketing and distribution organizationsfirst movers are the companies that quickly dominated their industries by making large investments and gaining a competitive advantageonce a firm loses the opportunity to be a first mover it is difficult to regain competitive advantageinnovation and strategy are more powerful weapons than priceimportant for companies to improve quality of products reduce costs create new markets engage in systematic research and development to improve existing products and develop new ones differentiate products from competitors move into growing markets and out of declining ones expand and enlarge plant size keep a steady flow of information and material throughout the company ensure proper communication between different sectors of the businessgeographic expansion is based on economies of scale while moving into related markets is based on economies of scopeignoring the logic of managerial enterprise can be very costly conforming to it keeps companies competitivesuccessful companies make the essential investments in production distribution marketing and managementfirst mover investmentsaggressively exploiting the cost advantages of economies of scale and scope encourages product and process innovationmany companies fail to invest reinvest and grow managerial enterprise can stagnate and managers can make wrong decisionswhen managers choose to grow through diversification which means that they acquire businesses for which they have little if any organizational capabilities to give them a competitive edge they ignore the logic of managerial enterprisegrowth is a basic goal of managerial enterprises and can be done by moving abroad or into new markets in related industries Many managers move into industries in which their enterprises have no competitive advantageThey believe that management is a general skill and so if they can be successful in their own industry they can be just as successful in othersThey invest in industries that have a greater profit potential than their own even if those industries are unrelated to their companies core capabilities Since they have no knowledge of the new industries they acquire them through acquisitions and mergers Diversification leads to the separation of top managers at the corporate office and the middle managers responsible for operations and profits This results from top managers having little knowledge of their new industries processes and markets and their lack of time since they have an overload of decision making at the corporate office managerial weaknesses many companies must invest in widespread restructuring since they have lost control of their companies due to the purchase of shares by individuals and other companies who now have part ownershipbusiness ownership patterns have diminished the likelihood of many firms longterm successimportant to hire managers with experience and skills to understand the companys products and processes markets and competitors if entrepreneurial enterprises fail to become managerial enterprises and if managerial enterprises fail to maintain their competitive capabilities they will lose markets and profits to those in other industries successful firms capitalize on economies of scale and scope create management structures and invest in research and developmentgrowth through diversification is a poor business strategy
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