In his book, The Visible Hand: The Managerial Revolution in American Business, Alfred Chandler contributes significant insights to the world of business and defense management in the American management historic perspective. Chandler seeks to bring new knowledge of management by linking the traditional and modern managerial systems, which is of great significance to the growth and development of business and defense systems.
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The book also has important implications on the readers’ side, especially in providing information on how important business functions located in small business enterprises can be utilized in the formation of multiunit enterprises, which in various ways can also be applied in a nation’s defense sector, as illustrated by the author’s idea that defense and business have similar managerial functions.
The book’s historical perspectives are also essential to the important government organs in assessing whether important government operations should be outsourced. Hence, the author intends to use the American historical perspectives of business and economics in relation to capitalism to advise the readers on the importance of history in the decision-making process in various sectors of governance in the US. This paper gives a critical analysis of Chandler’s book, The Visible Hand: The Managerial Revolution in American Business.
The book’s historical lessons give advice and assistance to the government in exploring the benefits and risks that defense sector will incur by outsourcing some activities to smaller security firms. In addition, the book helps in determining whether the government should internalize such activities by taking business angles in which some activities push businesses into expanding their sizes and scope of their corporate structures.
The author compares the government’s defense sector with business enterprises and finds that the two can be managed in nearly the same way as their managerial activities have common historical evolutions in a capitalist nation.
According to author’s ideology, small activities that affect business enterprise management, as well as defense management, have been challenging to managers as they have high hidden costs. Hence, Chandler (1997, 6-7) advises managers to consider the option of internalizing such activities in ways that will result in growth of business enterprises rather than outsourcing them to small companies that are in the same business line.
Although outsourcing is done to reduce costs, while attaining high productivity, the author argues that failure to outsource gave rise to the modern business enterprises through history of business evolution in the United States. Hence, the growth of modern enterprises into future giant enterprises can be achieved by failing to outsource business activities that if retained will enable the business to increase its size and corporate structure.
In business managerial, Chandler argues that the creation of managerial hierarchies was a key ingredient to the success of business management in the United States. The idea of business managers’ professionalism enabled many enterprises to achieve successful internalization of small activities that helped them to become large American companies that they are today.
Also, the author argues that professional managers are of great benefit to the business enterprises as they improve productivity and lower production costs, and thus business evolution cannot be achieved without professional business managers.
The author examines the evolution and growth of the American business enterprises in the period between 1840 and 1920, in relation to coordination and administrative developments (Chandler 1977, 20). Some of those developments gave notable rise to growth and evolution of business enterprises that include communication, financial administration, and transportation, all of which are relevant in production and distribution of goods and services.
Through the historical evolution of some business activities in that period, a notable growth of business enterprises was experienced in the US, whose managerial activities had advanced more as compared to their counterparts before the evolution. The author points out that development of key business activities gives rise to advanced business enterprises in the end.
In addition to his attention on managerial evolution, Chandler notes that the change in production and distribution activities in the industries after the development of department stores and chain stores, as characterized by mass production and distribution, was started due to available large market and storage facilities. Chandler’s insights shed light on the desegregation of production and distribution in industries via mergers and acquisitions.
This book gives insights to managers on the relevance of retaining small activities rather than outsourcing coupled with aiming at acquiring small companies within the same operation line. Chandler achieves the above idea by giving historical examples where numerous challenges, which faced supply chain management, were solved through acquisition of smaller companies, and hence forming larger corporate enterprises.
In conclusion, understanding of the “visible hand” of management makes managerial activities of modern business enterprises executable as it considers the evolution of the modern American business enterprise in relation to managerial activities and decisions that made business growth and development achievable. Hence, the problems facing the majority of American business enterprises and the defense sector can easily be solved by considering the decisions made in the historical evolution by enterprises under the same conditions.
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Chandler, Alfred. 1977. The Visible Hand: The Managerial Revolution in American Business. Cambridge: Harvard University Press.