Summary lecture 3, Global Business History

Lecture 3:

Both the US and the Europe where growing during the 1870-2010. But there are irregularities. During the 2^nd world war, the economy of the Europe did fall.

After the first world war, Germany was in serious economic trouble, resulting in hyperinflation. During the republic it recovered a bit. During the Nazi-government it increased as well, because of investing in steel for example. After that the economy declined.

The economy of the USA, increased during the roaring twenties. Most of them were on credit and during the great depression, this declined. During the 2^nd world war, the economy grow ass well

The UK was a between USA and Germany and had a slow and steady growth.

After the great depression, the unemployment rate increased drastically. In USA decreased because of the new deal. In Germany it declined, because of the Nazi government. The UK was somewhere in between and was not hit by the great depression as much.

During the 20s and the 30s, the trade cost did rise, because governments wanted to protect their own economy. Which resulted in deglobalization (less world trade).

The united states, started to play a more important part in the share of world trade after 1820. The share of Europe declined after 1870.

Overview trends of big businesses:

WW1 stimulated the growth of second industrial revolution industries. There was an expansion during the roaring twenties. As stated before, the great depression interrupts the economic growth. WW2 stimulated the growth of aerospace and electronics. As limited of demands are reached big business goes bigger by expanding scope.

Big business grow more and more, which indicated survival of the biggest

National patterns in differ countries:

US:2/3 of the 52 largest firms were American in 1929 and cars become the largest industry during the 1920s.

Germany: large merger in chemicals and metals

UK: large firms emerge in chemicals, electrical, engineering, rubber, cars and continue in oil and food. Consolidating its position as European leader in big business.

France: develops big firms in cars, electrical engineering, chemicals and oil.

Japan: develops big firms in old industries and food, overtaking UK as world leader in cotton textile exports in 1933.

Contrast between the car industry in US and UK:
 

Two views in the car industry:

1. Weak cooperative US unions vs strong non-cooperatvie UK unions
2. Large domestic US market vs. small domestic UK market, exacerbated by de-globalization and only mitigated by the empire.

Personal capaitalims, owners manage the firm

Managerial capitalism, hierarchies of salaried managers with little or no equity mange the firms. Separation between management and owners

Origin of managerial capaitalism:

Managerial hierarchies were present in medieval partnerships where partners shared profits and losses. The army provided another model. Teams of salaried managers appeared during the 1850s and 1860s to coordinate railway networks and telegraph systems. Managerial hierarchies managed new mass retailing.

Chandler:

Managerial capitalism developed rapid during the 1914 in the USA. By 1939 owners rarely influenced decisions. In the UK the it was delayed; until WW2, UK remained a bastion of family capitalism.

Hannah:
US was sluggish and personal ownership was higher in the US than in France and Germany and it was still behind the UK. In the UK it was rapid, the evolution of managerial control was complete before 1914.

Consequences of managerial capitalism:

Positive= Managerial capitalism meant that managers were drawn from a wider pool and were qualified (professional managers).

Negative= Principal agent problems imply that separation leads to misdirection of managerial effort.

The stock market became dispersed in 1900, UK was leading in this era. Over time people started to invest in the stock market, which was one of the causes of the great depression.

The multi-divisional structure: the firm is separated into several semi-autonomous units/divisions. It can be done by geography, product etc. The central office provides managerial expertise and capital for the divisions and develops overall strategy.

Timeline of M-form=pioneered in 1920s by DuPont (for this example see the slides) and General Motors. Rapid growth after 194, particularly during golden age of capitalism (1950-1973).

Causes of the M-form:

1. Multidivisional strategy
2. As limits of demand are reached, big business goes bigger by expanding scope
3. Initiated process that was going to culiminate in the conglomerate in the post-war years
4. As products rage expands top management can nog longer follow all product lines
5. M forms allow top-management to focus on strategy with division’ managers following day-to-day operations

Forces of the spread of the M-form

1. Power, the M-form upsets existing power structures within the firm, Sales & marketing started to gain, production and owners stand to lose
2. Imitation, as the M-form become the new-norm, firms adopt it regardless of its efficiency.