Chapter 5 continued

1. Chapter 5 continued • How and why firms grow • Geographic Organization of Corporations • Forces of Production & Social Relations • Business Cycles and Regional Landscapes • The State and Economic Geography

2. Options in Spatial Organization of Production Systems: Boeing’s 787

3. Another View of the 787 Production System: Boeing is rethinking parts of it

4. How and Why Firms Grow • Most firms are small, and they stay small • Is this due to a lack of funds, as argued by Warf & Stutz? • Or is it a reflection of their strategy (or lack of it)? • Birch, Ansoff, Chandler

5. Size Distribution of Business Enterprises, U.S., 2005 0.1% of Enterprises account for 62% of Receipts

6. Examples of Concentration Ratios Share in 1992 of Value Added accounted for by the largest companies, United States.

7. Examples of Concentration Ratios Share of value of shipments accounted for by the x-largest companies:

8. Source: Institute of Mergers, Acquisitions and Alliances

9. Source: Institute of Mergers, Acquisitions and Alliances

10. Source: Institute of Mergers, Acquisitions and Alliances

11. The Segmented Economy Dynamics in Firm Populations Averitt’s dual economy model Center firms - large, dominant, complex in organization, powerful resources and influence Peripheral firms - small, simple structures, weak resources, and little influence

12. David Birch’s Thundercloud Big A small cohort become global corporations A few grow huge Size Most fall back after a short period Most Firms stay small forever Many voluntary startups and cessation's each year Small Birth Rates: ~ 10-12% of Existing Population Death Rate: ~ 8-10% of Opening Stock of Businesses

13. A Model of the Segmented Economy by Taylor and Thrift BUSINESS ORGANIZATIONS Large Firms Smaller Firms Multidivisonal Global Leaders Laggards Intermediates Supports Laggards Intermediates Leaders Satisfied Satellites Loyal Opposition Craftsman Lindahl & Beyers test in the producer services Subcontractors Franchises

14. Beyers & Lindahl Test of Segmented Industry In Producer Services High Fliers Leaders Still Growing, Exporters Still Growing, Local Right Industry Satellites & Spin-Offs Intermediates Field Offices Stabilizing Craftsman Proprietor Laggards Satisfied Small Business Steady Cruisers Declining Strugglers

15. U.S. Establishment Dynamics (% Change) Source: U.S. Bureau of the Census Business Dynamics Statistics

16. U.S. Employment Change Source: U.S. Census Bureau Business Dynamics Statistics

17. U.S. Industry Establishment Birth and Death Rates 2005 Source: U.S. Census Bureau Business Dynamics Statistics

18. U.S. 1995 Establishments with Employment Expansions, Contractions, or No Change in Employment Employment Expansion Mean 29.2% Employment Contraction Mean 26.7% No Change in Employment 44.1%

19. 2005 Jobs Births, Deaths, Expansions and Contractions

20. Strategic Directions: Ansoff’s Model Product Present New Market Penetration Product Development Market New Present Market development Diversification New products Related Technology Unrelated Technology Vertical integration (backward/forward) Related diversification Horizontal integration Market New Same In-house Conglomerate diversification Unrelated diversification

21. Strategic Directions: Ansoff’s Model Product Present New Jason’s Granite Company New car models; fashion clothes Market Penetration Product Development Market New Present Market development Microsoft Diversification Starbucks New products Grocers adding deli’s, home delivery Related Technology Unrelated Technology Microsoft: games, Search engines Vertical integration (backward/forward) Related diversification Horizontal integration Market Comcast – cable New Same In-house Airline online travel systems Google – Buying up similar applications Conglomerate diversification Unrelated diversification Alcoa moving into real-estate

22. Diversification Strategies Options are manifold Any cells here are possible

23. A - no change B - all change C - only geog. changes Ansoff’s Box B C New Market geography New A Present Present Product/service technologies Present New Market type 9 Strategies beyond A, B, and C

24. Evidence of Performance: Ansoff’s Box & Producer Services A C 13 NO B Source: Beyers & Lindahl, E&P 1996

25. Strategy & Structure: “structure follows strategy” - Chandler’s model Stage in developmentRelationship between unitsOrganizational structure Stage I Single-owner administration Single product Single function Single plant organization No clear functional differentiation of strategic, administrative, and operating decisions Flows Levels of control Information Materials or products Information - materials or products Decisions and instructions Level I: top management, strategic decisions Level II: control and coordination of level III: administrative decisions Level III: management of day-to-day operations

26. Strategy & Structure: “structure follows strategy” - Chandler’s model Stage in developmentRelationship between unitsOrganizational structure Stage II Functional structure Single product Multifunction Multi plant organization Headquarters Production Marketing Purchasing Flows Levels of control Information Materials or products Information - materials or products Decisions and instructions Level I: top management, strategic decisions Level II: control and coordination of level III: administrative decisions Level III: management of day-to-day operations

27. Strategy & Structure: “structure follows strategy” - Chandler’s model Stage in developmentRelationship between unitsOrganizational structure Multidivisional structure Stage III Headquarters Corporate control functions Multi product Multifunction Multi plant Product A Product B Product C organization Production Production Production Marketing Marketing Marketing Flows Levels of control Information Materials or products Information - materials or products Decisions and instructions Level I: top management, strategic decisions Level II: control and coordination of level III: administrative decisions Level III: management of day-to-day operations

28. Implementing Strategies Strategies Market penetration Market development Product development Diversification Methods of Implementation Internal External Merger and acquisition Collaboration with other firms

29. Internal Interdependence Corporate headquarters  O O O O Operating units O O O O O O O O O           Product-market environment Pooled interdependence (a conglomerate) Sequential interdependence (a vertically integrated enterprise) Reciprocal interdependence (a large single- product enterprise) ?Paul Allen? ?Weyerhauser? ?Boeing?

30. Geography of the (Large) Business Organization Top level decisions and control Day-to-day administration Basic work processes ?Boeing production facilities - production lines? ? Craft-based textile and apparel networks

31. Organizational Structures

32. Number of Headquarters and First-Level Subsidiaries of the World’s Largest 100 Corporations The Corporate Control Structure is Now Global for the Largest Corporations Source: Fortune (1996); Directory of Corporate Affiliations (1997)

33. Economic Geography and Social Relations Capitalist Mode: 1. Capitalists own forces of production 2. Life is configured around goods production and exchange 3. Object of production is accumulation of surplus value by capitalists Uncritical acceptance of elements of capitalist economic system - ownership, profit max, labor market, utility max by consumers, etc. Options? Relations of Production (economic power, class) MODE OF PRODUCTION Forces of Production (physical means, labor power) Alternative modes? Evolution over time

34. Competition and Survival In Space • Reconfiguration of production systems to expand profit • Often leads to geographic shifts in capacity – what Doreen Massey calls “The spatial division of labor” • Some regions become economically stranded • Other regions “prosper” - ? In some cases a “race to the bottom”?

35. The product life cycle model

36. Kondratiev Longwaves

37. The State and Economic Geography • Markets do not provide all output in capitalist economies • State intervention in cases of market failure • Fiscal and monetary policy • Spatial consequences of public sector activity - investment, land, employment, regulation, …..