Until , Sears witness steady growth and profits. By , Sears created a centralized functionally departmentalized structure for its mail-order business in which the autonomy of the buyers was limited. The departmental headquarters that supervises field units d. Lack of correlation led to errors in description. Chandler observed that the transition from one structure to another was often both delayed and painful. There was no imitation. Remember me on this computer.

This has happened frequently in recent years in rapidly growing, technology-oriented firms like Apple Computer. Enter the email address you signed up with and we’ll email you a reset link. There was no imitation. The owners divested themselves in functional activities and there was no need to engage in long-term planning. A new structure, which was product-based, was suggested to deal with the new administrative needs see Chart 4, p. At Railtex Service Co, a freight-car operator, founder faced the problem head-on: Remember me on this computer.

This had to be dismantled.

The next step is vertical integration. The financial analysis witnessed an increased usage of statistical data and forecasting methods by Donaldson Brown. This phase, by consolidating loose alliances into tightly bound entities, greatly enabled economies of scale and focused technological innovation. By Robert Hoskisson and Hicheon Kim. Expansion encouraged vertical integration and the company often bought stake in the factories that supplied their goods.

chandlers strategy structure thesis

Inspired by its success, the board went ahead to imitate the same structure in other two divisions — black sttategy and smokeless powder. Chandler’s key addition to management literature was to connect strategy and structure — since a restructuring effort is a result of a change in strategy, a company must first review its strategy, then pursue a different structure.


There is usually a single location, a single product, and a single entrepreneurial decision maker. Although the organisational M-form was implemented differently by each of the organisations, Chandler showed that the need to restructure arose from a strategic shift driven by new technologies and market changes. In a matter of a decade, the business grew immensely — upto a hundred thousand orders a day.

Loose, informal and decentralized structure brought confusion and inefficiencies. As an organization grows, however, increased volume and additional locations eventually create new challenges.

Indeed, one framework for organizational effectiveness goes even further in its analysis of interacting factors in strategy implementation. The core issue was that the above model was half-territorial and half- functional.

Changes in the market structure have implications for a firm’s strategy and structure. The far markets were managed through subsidiaries. A manufacturer might naturally move into warehousing and wholesaling.

The owners divested themselves in functional activities and there tesis no need to engage in long-term planning. Adoption of the multidivisional structure faced initial resistance due to older executives like president Irenee who were conditioned by training and experience to believe in the efficacy of the existing structure, and, hence, sought to defend it.

Chandler’s Thesis

Administration is an identifiable activity that has specifically defined tasks which are different from functional work. Railroads were the precedent chandles the growth of the great industrial enterprise see cchandlers. See charts in p. Rapid growth of urban market, coupled with enhanced connectivity, demanded higher industrial outputs and, hence, strategies of geographical dispersion and vertical integration took hold p.


He concluded that organizations do not readily change structure because their entrepreneurial founders excel at strategy but are generally neither interested in nor knowledgeable about organizational structure.

chandlers strategy structure thesis

The multi-division form or M-Form is a corporate federation of semi-independent product or geographic thewis plus a headquarters that oversees the corporate strategy and coordinates interdependencies. According to Chandler, organizations pass through three stages of development, moving from a unit structure, to a functional structure, and then to a multidivisional structure.

Struucture Frazer committee was commissioned which suggested a two- pronged hierarchical structure of functional and territorial units reporting into the President see Chart 8, p. Bypredicting a sale ofcars per year, Durant began combining various facilities and also acquiring small manufactures and created General Motors, which was, then, just a holding company.

Chandler’s thesis argued that new organisational thdsis are no more than a derivative of strategy as he defined it. Aroundafter a century of operations, the du Pont company was unclear of its future. Especially in a large firm, this is a specialized task performed by a dedicated team that does not involve in functional details 2. William Durant, who stratety as a small-time entrepreneur selling carts and carriages instruck gold with acquiring the Buick car company.

Chandler’s Thesis

Indeed, when the organization is finally restructured, the entrepreneur often leaves. Even if IBM knew the correct strategy, it could not implement it in its current structure. T Press; reprint.