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In Structure and Strategy, which are intertwined, Alfred D. Chandler creates a conviction that it has to be the structure, which is then followed by strategy (Chandler 1962, p. 14). Chandler claims that a company has to develop the best strategy and then define the most appropriate organizational structure in order to achieve the strategy. Chandler is an influential pioneer of the strategic management; his statement has come a long way. However, he only used four primary case studies, with attempts to substantiate his statement. Chandler’s argument was from the American conglomerates that were in full domination in their industry from the 1920s and forward. He also portrayed how various companies dealt with development and enhancement procedure by receiving the progressive multi-division shape. Therefore, Chandler referenced Du Pont, which is a chemical company, and General Motors, as a sample of the vehicle maker industry, Standard Oil of New Jersey, as the energy sample company, and Sears Roebuck, as the sampled company in the retail sector (Chandler 2013, p. 49). Nonetheless, Chandler’s thesis was greatly accepted in the 60’s. Today, the argument may not be perfectly suitable in the modern management due to the logistics revolution that is challenging this view. In a perfect management world, it is logical for an organization to develop a perfect strategy, and then plan on the suitable organizational map and structure.
Strategic Management Process
Strategic management involves three primary processes that are put in a systematic order. In the first phase, an in-depth situation analysis has to be undertaken. The analysis should include external and internal self-evaluation, and macro-environmental and micro-environmental analysis. In the second phase, the setting of objectives happens in concurrence with the assessment. These goals run in parallel to a set timeline, be it long-term or short-term, with the statement of vision, mission, general corporate objectives, tactical objectives, and the strategic business unit objectives. In the third phase of the strategic management course, the goals set in the second phase are aligned with the situation analysis, and, as a result, the final strategic plan suggestion is made. This plan offers an outline of how the set objectives will be achieved. In this three-step process of strategy formulation, the organizations or individuals come up with a determination of where they are, where they would wish to go, and the necessary steps to get where they wish to be. Therefore, with the guidance of these three questions/determinations, a perfect strategic plan can be developed. Nevertheless, the process may be clearer today than Chandler had it in his thesis.
M-Forms in Management
Alfred D. Chandler refers to an M-Form, which he describes as a corporate alliance of some geographic groups or products, which are semi-independent. These groups or products are in a central command that supervises the corporate methodology and coordinates interdependencies. During this era, each of these organizations implemented the M-form differently. In this regard, Chandler tried to express the need to have some restructuring of the strategic plan, and embrace a strategic shift, as a result of the advancement in the technologies and market changes; it is a result of the development of communication and transportation industries that the M-Form emerged. This improvement made it possible to efficiently run the strategic management practice across space and time. Therefore, it becomes straightforward to have the adequate resources, allocated and managed for various tasks. It is after this that a chain of command is established efficiently, or even better structures. If the organization is run as a group, multiple individuals or teams are given responsibility for specific processes or tasks (Edna, B. & Jake, B. 2008, 87). The manager has to be keen to oversee all the functions or operations, despite the assignment to some groups or individuals. The output or results of the tasks are monitored, benchmarked and compared with the best practices in the market. Evaluation of the process’ efficiency and efficacy, variances control with the implementation of the necessary adjustment to the processes, when a need arises, becomes quite easy with proper coordination of the M-Form.
Alfred D. Chandler’s corporate strategy description stated that it is the practice of the long-term goals and objectives’ determination. He added that the practice also entails the prompt adoption of courses of action, which come with an associated allocation of resources that are necessary to achieve the set goals and objectives. In Chandler’s definition of structure, he termed it as the organization design through which the administration of a strategy is done. He further pointed out that indeed the variation in a company’s strategy caused bigger upcoming issues in running the administrative tasks. These problems require solutions that lead to a new or a refashioned structure to have a successful implementation of the new strategy. It is in this case that the new organizational forms’ necessity arose to have new and flexible strategies in place. In this case, the structure follows the strategy slogan by Chandler. His thesis offers an argument that the new organizational forms are simply a strategy derivative with detailed elaboration and definitions offered.
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The Addition by Other Authors
Igor Ansoff (1995) added more weight on Chandler’s thesis by putting in various additional strategic concepts. He also came up with some inventions of a completely new vocabulary. Igor had a feeling that it was possible for the management to put into use these strategies, and, systematically, end up with a collection of the coming challenges and opportunities (Ansoff 1995, p. 230). In 1965, Ansoff came up with a publication entitled Corporate Strategy, where he vividly elaborated and developed the gap analysis that even in today’s management practices is still in use. Here, the major emphasis was on the fact that we are ought to know our current position and determine the future we would need to get into. After the identification of the present and future, he talked of coming up with a plan of what he called “gap reducing actions.” By so doing, there is no doubt that structure has to follow strategy.
Peter Drucker has been a prolific strategy theorist, and he has also done a publication of many books in the field of management (Drucker 2015, p. 210). He has also been on the field for more than 50 years with success stories behind him. However, he backed up Chandler’s philosophy of structure follow strategy. He has also made some achievements in the history of strategic management, but two of them are the most fundamental. In the first case, he added lots of weight on why the strategic objectives are of vital importance. He compared a ship without a rider to an organization that has no clear objectives laid down. In 1954, he critically offered an analysis and developed a management theory, basing his arguments on the objectives, his theory evolved after laying a foundation to what he later termed as the MBO (theory of management by objectives). Peter predicted the possibility of coming into being of what he termed as the “knowledge worker.” He also elaborated knowledge worker’s presence effects in the management and its consequences. He expressed the knowledge work, as something, which was non-hierarchical. However, he noted that when the task is meant to be performed in teams should have one team leader, who is in charge of the entire group, as a temporary leader. The objectives are of great importance, when it comes to laying down the strategies.
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The modern advancement and logistics revolution may not work in this regard. Despite Chandler’s emphasis that the company’s structure, direction, and focus is a result of a company having a long-term coordination. The connection of strategy and structure worked perfectly in his addition to the management literature. This can be attributed to the fact that the efforts to have a restructure in the already set strategy come due to the impact of changes in the strategy. A company has to follow the procedure of first coming up with a reviewed strategy and then settle on the implementation of a different structure.
Chandler may have foreseen the new technology and market trends. These two are core to any organization. The modern operation in the companies calls for there to have well-advanced technology systems in place, for the tasks mechanization to deliver the advantages that come with it (Silver 2003, p. 64). This calls for a review of the laid strategy. As a result, the review merits the organization’s restructuring. It is worth noting that the evolution or emergence of new organizational structure, therefore, occurs neither in isolation, nor by accident. In this case, Alfred D. Chandler’s thesis of the ‘structure follows strategy’ becomes a reality.
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It is a fact that doing management professionally is highly essential to increase the success scale of the strategy’s implementation efforts. Additionally, there are chances of having the administration devoted to a constant attention, making it possible to develop a corresponding management form. In this case, Chandler’s thesis holds great meaning. With his ‘structure follows strategy,’ he managed to show business history’s relevance, and made it a segment of many universities’ educational programs. It is the simple definition of strategy that McKinsey & Company transformation and (re)structuring into a strategy consultancy firm happened (Koller, Goedhart & Wessels 2005, p. 21). In fact, today almost every educational institution quotes him, when learners are being taken through a strategic management course and become professionals. Additionally, it is upon this thesis that a strategy was established, as an important subject for organizations.
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However, the thesis may be inadequate in some way. One is the aspect of it being oversimplified. It is not true that the structure and strategy are one-dimensional. The review by Mintzberg contrasted that Chandler’s thesis of the structure follows may be termed as constraining strategic change (Mintzberg 2014, p. 54). Additionally, Pettigrew offered a view of that it cannot be correct regarding structure and strategy, as equal to each other. In his conclusion, Rumelt (2017, p. 28) talked of fashion as something that has the influence on structure. These arguments are in great contrast to Chandler’s work, they criticize some elements of the thesis, which could have been right.
The market structure’s changes influence a firm's strategy and structure to a great extent. In Chandler’s statement, he talked of a ‘fit-to-market’ between a given organization’s market structure and its form to bring down the internal coordination costs. It also offers a better alignment between the tactical customers’ needs and the firm’s product portfolio. There exists a secondary relationship between the ‘fit-to-market’ and the ‘fit-to-strategy’ in a situation, where the required strategic changes are not inhibited. The ‘fit-to-market’ component in any firm is represented by commercial management and its bonus schemes, and, to a great extent, defends the present status quo.
Chandler’s case studies never regarded the legitimate leadership, as a key element in an efficient process of company’s reorganization. Instead, he emphasized on the requirement for leadership in making a shift to the M-Form. In this case, one could see that the thesis bases never covered a broad empirical study. Diversification strategy and organization’s growth covered to discuss the strategy and structure relationship were for the large organizations, which is not always the case. He left behind the fact that the environment may turn turbulent, thus necessitating the incorporation of new forms and strategies. Therefore, the conclusion may not be final, and it calls for further studies, putting into consideration a broad spectrum of the case study.
Chandler’s thesis of strategy follows the structure that was well serving in the 60’s, but we have to accept the reality that with the logistics revolution, his view may not hold grounds in the modern world. The M-Forms played a great role in the achievement of the organizations’ goals through the efficient management. However, the forms may have left out some important aspects of leadership in strategic management, therefore, authors seem to have different views on this argument. Based on the discussion above, there is an adequate evidence to show the need to hold a different view of Chandler’s thesis.
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