The owners of the companies transferred their authority to full- time paid managers. There were also other developments during this period like the administrative hierarchies, dependable energy sources, transportation infrastructures like the railway and sophisticated accounting systems. To benefit from these industrial developments, Chandler argued that entrepreneurs had to make three forms of interrelated investment. The first investment was in technology itself in terms of quality machines that would enable the company produce many goods efficiently. The second was investment in management, and the third was investment in marketing and distribution networks.
The market remained the generator of goods and services, but business empires took over the functioning of controlling products and services through existing processes of distribution and production. They also allocated funds for future production and distribution. Modern enterprises became the most powerful organizations in America’s economy. The managers also became the most influential decision makers leading to managerial capitalism. Administrative coordination resulted in improvements in productivity, lower costs, and higher gains than coordination by market techniques. The structure of administrative coordination as described by Chandler was hierarchical, and authority flowed from the top to the bottom. Upper-level managers in charge of planning, purchasing inputs, planning new products and market expansions and finally setting the corporate strategy, held the top positions. The middle managers held the second place in charge of the daily operations. Making sure inputs are at the right place at the right time, making sure that production runs smoothly, coordinating processes through which output moved to distribution network.
Managing the individual stores, finally monitoring local demand conditions and reporting to the upper-level