Particularly favorable conditions for the development of strategic management as a science appeared in the 1960s when the final refusal of the theory of organizations from universal administration principles occurred, and firms began to be interpreted as open systems. Alfred Chandler was a founder of his own business theory and honorary professor of business history at Harvard University (Whittington, 2008).
He formulated his own definition of a strategy, which still has not lost its meaning. According to this scholar, strategy is the definition of the main long-term goals of the company and the development of the directions of actions and distribution resources necessary to achieve these goals (Teece, 2010). In his works, Chandler talks about the need to create a multi-diamond structure in enterprises in which a company’s production units are operating responsibly, and the general strategic management is conducted by the primary office of the company, its headquarters apartment.
Alfred Chandler is the first person who gave the interpretation to the word “strategy” and separated it from the concept of “structure”. The historian determined that the strategy is to plan and develop the growth of the organization. The strategy defined which technologies will be used to achieve the objectives of the company and also influenced the environment in which this company operated. The environment identified the structure. Therefore, the key postulate in which Chandler believed was that the strategy determines the structure. Such a vision of the management theory served as a foundation for many notable pieces of research (Jarzabkowski et al., 2019).
The main aspects of Chandler’s theory were the following ones. First, it is a comparison of the advantages and disadvantages of organizational structures, such as linear-staff, functional, holding and divisional. Second, it is the definition of the strategic process as a union of administrative and business began in terms of corporate development management. Third, it is the idea of decentralization of systems (in the 1960-1970s, large firms carried out diversification, and Chandler realized that such a strategy requires decentralization of management (Whittington, 2008).
For the US, such an approach was considerably suitable – as well as for companies from other developed countries – due to the realization of the necessity to simplify complex production processes. Even nowadays, a plethora of recognized organizations follows the principles provided by Chandler. They implement the best practices of work breakdown structures in order to delegate particular roles and tasks so that processes could be optimized appropriately (Jia et al., 2017).
The concept of strategic management that was formulated by Chandler contained a disadvantage inherent to the initial stage of the new area of scientific knowledge. The crucial flaw – from the modern perspective – was a pronounced applied character (the main expertise is given in the form of cases, i.e., examples of practical use) and conceptual inhomogeneity.
In the Chandler works, there are many examples from real life that might significantly support the proposed models, but there is little attention to the methodology of new scientific control, there is no systematization and classification of attributes, there is no structuring of species-strategic management, depending on the level of decision-making, the stage of the company’s life cycle, and the degree of competitive struggle. The mentioned points indicate the prospects of further studies, notions, and findings. The management theory – after Chandler’s significant ideas regarding decentralization and strategy – was founded on his vision of the appropriacy of task distribution.
References
Jarzabkowski, P., Le, J., & Balogun, J. (2019). The social practice of coevolving strategy and structure to realize mandated radical change. Academy of Management Journal, 62(3). Web.
Jia, F., Orzes, G., Sartor, M., & Nassimbeni, G. (2017). Global sourcing strategy and structure: towards a conceptual framework. International Journal of Operations & Production Management, 37(7), 840–864.
Teece, D. J. (2010). Alfred Chandler and “capabilities” theories of strategy and management. Industrial and Corporate Change, 19(2), 297–316.
Whittington, R. (2008). Alfred Chandler, founder of strategy: Lost tradition and renewed inspiration. The Business History Review, 82(2), 267–277.