04 Handout 1 - Chandler’s Model of Strategy Development

Chandler defined an industrial enterprise as "a large private profit-orientated business firm involved in the handling of goods in some or all of the successive processes from the procurement of raw materials to the sale to the ultimate customer."

• True

• False

He observed that, as companies grew in turnover, employee numbers, geographical areas served, number of products sold or manufactured, etc., there was the possibility of an administration crisis before appropriate structures were developed.

• Chandler

• Greiner

• Mintzberg

• Goold and Campbell

Chandler concluded that new strategies created new administrative needs but that executives could administer "both old and new activities with the same personnel, using the same channels of communication and authority. Such administration must, however, become increasingly inefficient."

• True

• False

Chandler's research indicated that the solution to complex growth on several dimensions (general office, each division's central office, headquarters for the divisional departments, and the field units) was through a multi-divisional structure.

• True

• False

Answer explanation

Chandler's research indicated that the solution to complex growth on several dimensions (expansion by volume, geographical dispersion, vertical integration) was through a multi-divisional structure.

The generic multi-divisional structure described by Chandler has an expansion by volume, geographical dispersion, vertical integration.

• True

• False

Answer explanation

The generic multi-divisional structure described by Chandler has a general office, each division's central office, headquarters for the divisional departments, and the field units.

It is responsible for planning, coordinating, and appraising the activities of the quasi-autonomous divisions.

• General office or headquarters (HQ’s)

• Division’s central office

• Divisional departmental HQ’s

• Field units

It administers several functional departments.

• General office or headquarters (HQ’s)

• Division’s central office

• Divisional departmental HQ’s

• Field units

It is responsible for the administration of the field offices.

• General office or headquarters (HQ’s)

• Division’s central office

• Divisional departmental HQ’s

• Field units

It executes the functions of sales offices, plants, and other administrative tasks necessary for the day-to-day operation of a firm.

• General office or headquarters (HQ’s)

• Division’s central office

• Divisional departmental HQ’s

• Field units

It is the domain of the company executives.

• Administrative work

• Functional work