Alfred Chandler (1918-2007)
American economic historian (pictured right), famous for his dictum that structure must follow
strategy (see below).
Strategy and Structure
“Structure follows strategy”
i.e. an organization’s structure must be designed to achieve its strategy and exploit new market
Four American companies (the chemicals manufacturer Du Pont, General Motors, Standard Oil of New Jersey and the
retailer, Sears Roebuck) adopted a multi-divisional structure because of their different
products, businesses and geographical markets.
Managers are primarily concerned with administration and two types of decisions:
(concerned with the organization’s long-term success).
(day to day operational decisions).
It is important to distinguish between making strategy and implementing it.
Key quotes on structure and
Structure follows strategy.
Strategy can be defined as the determination of the basic long-term goals and objectives of an enterprise, and
the adoption of courses of action and the allocation of resources necessary for carrying out these goals.
Structure can be defined as the design of the organization through which the enterprise is administered.
The Visible Hand
The “visible hand” of management has a vital influence over both strategy and
Until 1850 American businesses were highly competitive and run by their owners.
Then the growth of railroads led to “managerial capitalism”, in which businesses were
controlled by salaried managers in a hierarchical structure with specialized and clearly defined roles.
Businesses grew significantly, because the railroads and national marketing and advertising opened up the whole
of the American market and made mass production possible.
Key quote on management
The modern industrial enterprise – the archetype of today’s giant corporation – resulted from the integration of
the processes of mass production with those of mass distribution within a single business firm.