Essay About Rise Of The Modern Business Enterprise And Single Market

The Rise of the Modern Business Enterprise: the Case of Citibank
Essay title: The Rise of the Modern Business Enterprise: the Case of Citibank
The Rise of the Modern Business Enterprise: The
Case of Citibank
Thomas F. Huertas
Citibank, N.,4.
A case study examines the singular in order to illuminate the
general. Although the subject of the case may be interesting and
important in its own right, the cases purpose is to test broader
hypotheses, not statistically, but qualitatively. The rich detail of
a case study can suggest nuances to propositions derived from
more sweeping surveys. In this article the propositions to be illuminated
concern the rise of the modern business enterprise, and
the case shedding light is the history of Citibank [4].
THE RISE OF THE MODERN BUSINESS ENTERPRISE
“The modern business enterprise is an economic institution
that owns and operates a multi-unit system and relies on a multilevel
managerial hierarchy to administer it [5, pp. 203-4].” When,
why, and where did this form of business arise, and what were its
consequences for the firms themselves, the industries in which
these firms operated, and the economy at large7 These are the
BUSINESS AND ECONOMIC HISTORY, Second Series, Volume Fourteen, 1985.
Copyright (c) 1985 by the Board of Trustees of the University of Illinois. Library of
Congress Catalog No. 85-072859.
questions that business historians, notably Alfred Chandler [3],
have posed and answered.
When the modern business enterprise emerged is clear. It arose
during the years 1870 to 1920. Before the earlier date, firms were
simple proprietorships, serving a single market with a single
product from a single location. Markets, not managers, coordinated
the flow of inputs to the firm and of output to the
consumer.
Then came the railroad or, more precisely, the completion of a
national railway system in the 1870s. This was important for two
reasons. First, it created a potential national market for a far
wider range of goods. This broadened the opportunities open to
firms from the county to the country. Second, the railroad
pointed the way to how the enterprising firm might take advantage
of the new opportunities offered by a national market.
Partly in order to keep trains from running into one another,
railroads developed a managerial hierarchy that delegated responsibility
for day-to-day operations to salaried managers. Such organizations
permitted railroads to carry a rapidly growing volume
of traffic at a lower unit cost.
Lower cost is the reason why the modern business enterprise
triumphed. Specifically, managerial hierarchies lowered costs
through routinizing transactions among the different stages of
production and distribution. The integration of production, purchasing,
and marketing permitted firms to reduce the cost of information
about markets and suppliers, to push goods through the
production process faster, and to use resources more intensively.
Further cost reductions came in raising capital. The steadier cash
flow achieved by the modern business enterprise reduced the risk
of securities issued by the corporation, enabling it to