Abstract
We have seen that, in order to sustain growth, a firm must either create new products, enter existing markets it has previously ignored, or merge. The first two methods are called ‘growth by diversification’, and the third, ‘growth by merger’. These, as we have seen, are related, ‘growth by merger’ often representing no more than a means of overcoming dynamic organizational restraints on growth by diversification. In this chapter we are concerned with the dynamics of growth by diversification. We are concerned, that is, with the relationship between the rate of growth of the productive capacity required if there is to be no trend (in either direction) in the level of capacity utilization. In essence, the problem is one of policy; we are asking how certain variables within the control of the firm, such as price policy, diversification policy, research and development expenditure, and selling expenditure, react on the endogenous variables that feature in the conditions for sustainable growth. How do the policy variables affect the growth rate of the quantum of demand for the firm’ s products; and how do they react on such factors as rate of return, which govern the growth rate of the firm’s supply of capital?
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Notes
Apart from Duesenberry, background reading for the following arguments includes S. Katz and P. Lazarsfeld (1960) Personal Influence (New York), esp. pt I, sec. 2; David Riesman (1950) The Lonely Crowd (New Haven, Conn.), ch. 4; and William Whyte (1957) The Organization Man (New York), ch. 26.
See Katz and Lazarsfeld (1960), pt II, sec. 2, ch. 5.
See A. Kaplan, J. Dirlam and R. Lanzillotti (1958) Pricing in Big Business (Menasha, Ill.), pp. 59–60.
S. Katz and P. Lazarsfeld (1960) Personal Influence (New York), pp. 219 et seq.
See William Whyte (1957) The Power Elite (New York), p. 313.
John Von Neumann and Oscar Morgenstern (1944) The Theory of Games and Economic Behavior (Princeton).
Joe S. Bain (1956) Barriers to New Competition (Cambridge, Mass.).
S. Katz and P. Lazarsfeld (1960) Personal Influence (New York), pt I, sec. 2.
Martin Shubik (1960), pp. 214 et seq.
See R. Luce and H. Raiffa (1958) Games and Decisions (New York), p. 483.
The references were A. Kaplan, J. Dirlam and R. Lanzillotti (1958), pp. 59–60; ‘Introducing and Pricing New Products’, in James C. Early (1962) Pricing for Profit and Growth (New York); ‘The Failure Rate U.S. New Products’ (1957) Printer’s Ink, 2 August, p. 20.
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© 1998 Robin Marris
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Marris, R. (1998). ‘Demand’. In: Managerial Capitalism in Retrospect. Palgrave Macmillan, London. https://doi.org/10.1057/9780230376168_4
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DOI: https://doi.org/10.1057/9780230376168_4
Publisher Name: Palgrave Macmillan, London
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