Logic of managerial enterprise, that is, the dynamic logic of growth

and competition that drives modern industrial capitalism.

The logic of managerial enterprise begins with economics and the
cost advantages that scale and scope provide in technologically
advanced, capital-intensive industries large plants can produce
products at a much lower cost than small ones because the cost per
unit drops as the volume of output rises. (This is what is meant by
economies of scale.) In addition, large plants can use many of the
same raw and semi finished materials and intermediate production
processes to make a variety of different products. (This is what is
meant by economies of scope)
Cost advantages of economies of scale and cope
These cost advantages can only be realized if the flow of materials
through the plant can be kept constant to assure capacity utilization.
Leading to the investments of large plants.
Economies of scale pushing costs down by expanding, forcing
smaller competitors out of the market, taking control of the market,
Economies of scope reducing production costs
First movers those who first made these large scale investments and
applied economies of scope and scale, as well as design a hierarchy
system of managers, as well as rapid expansion into national and
international markets all while making the proper investments into
distribution plants , managers coordinate flow through distribution and
production
Research and development these first movers were dominating
whole industries. In order to be competitive among the few that had
the market share, innovation and strategy overpowered. Improving
quality and creating new markets as well as by lowering costs. They
located better sources of supply and provided more effective
marketing services. They differentiated their products (branding,
packaging, advertising campaigns. Their research led them to move
rapidly into growing markets and out of declining ones. They were
what we eventually were to call oligopolies, battling in oligopolistic
markets. Market share and profits would change constantly.

Companies grew horiztonally (combining with competitors) and

vertically (by moving backward to control materials and forward to
control outlets)
Long term strategies imposed by management were based on the
principle for continuing growth. Grow by moving into related product
markets or by moving abroad.
Geographic expansion was usually based on economies of scale, while
moves into related product markets more often rested on economies of
scope. In both cases, the companies capabilities to be organized in
this oligopolistic competition prevailed and provided the dynamic for
continuing growth.
Companies grow by: direct investment, merger and acquisition,
expansion overseas, expansion into new product lines and also by the
companys direct senior decision makers.
Recap: essential investments in production distribution and
management
Choosing locations based on strategic shipping receiving points for raw
materials and shipping out the finished goods.
Efficiency in productivity. For instance: steady flow of material from
arrival through production to storage and shipment of the final
products.
Investments in marketing, distribution and management.
Managerial Hierarchies
First movers dont always make the best decisions. Although they are
pioneers, they fall behind in innovation and application for continuing
growth which leads to them being pushed out of markets they once
controlled/international markets.
High-volume manufacturing/production process
Mergers/Acquisitions helped both parties survive and hope to take
back a market share that they previously had or create their own
space. These mergers would reorganize and rationalize the merged
companies.

Centralizing its administrative structures, creating functional

departments, selling off obsolete assets and investing in up to date
machinery and technologies.
Capabilities developed by exploiting economies of scale ands cope
encouraged process and product innovation.
Efficient management decisions and actions lead to continued growth.
Essential in obtaining and maintaining a competitive position in World
Markets.
Although the opportunity to make first mover investnments and create
a managerial enterprise is present, it can be short lived if mismanaged
along with a series of bad decisions and investments.
You can be pushed out of your own domestic market, as your
customers are inclined to purchase product from your competitors to
help maximize their output and profit.
Industrial Growth.
Failing to make long term investments, to create organizational
capabilities and then continuing to reinvest, you stay small or sold out
if not pushed out
Diversifying in closely related or unrelated product lines.
Growth comes primarily by moving abroad or into new markets in
related industries.
Markets become saturated by increased competition leading to
underutilized capacity, which push costs to rise.
Business machinery executives responded by reinvesting to improve
their capabilities in their own and closely related industries.
Diversification by investing in completely unrelated markets through
acquisitions and not direct investments. Managers were convinced
they were skilled in any industry and would try and repeat the process
in a market they knew nothing about.
Unprecedented diversification led to the separation of top management
at the corporate office from the middle managers who were

responsible for running the operating divisions and battling for profits
and market share.
Top manager had little to no specific knowledge of or experience with
the technological processes and markets of the divsions or subsidiaries
they has acquired.
The second was simply that the large number of acquired businesses
created an extraordinary overload in decision making at the corporate
office.
Weaknesses appeared from the separation of top and operating
management quickly led to another phenomenon the sale of operating
units in unheard of numbers. Divestitures.
The coming of an institutionalized market for corporate control.
Intense competition forced senior managers to reinvest in reshaping
and rationalizing operations to maintain or regain competitiveness.
Pursuing growth through economies of scope and developing markets
that best fit their distinctive core production and research
technologies.
Spinning off products by narrowing product lines.
Epxnading output in existing higher value added specialities and
acquiruing pioneering companies in new areas
Reduce price, assure qulirt ands provide essential servies. If they fail
to become managerial enterprises and fail to maintain and nourish
their competitive capabilities they will lose markets and profits to those
in other nations and other industries that do.