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Second, marketing and distribution capabilities had to be of a scale large enough to sell the goods produced by the new processes of production in the volume in which they were made. First, production levels had to be large enough to utilize economies of scale and scope of new technological innovations. The rise of the multiunit, capital-intensive corporation was the result of three investments. The evolution toward machine-based manufacturing and the ensuing complementary innovations in scale and scope of production, distribution, and management of the modern industrial enterprise arose rather gradually, starting in the 1870s (Chandler 1991). To produce at large scale necessarily meant distribution at large scale, ushering in the move toward managerial capitalism. Indeed, the international supply of foreign markets became an increasingly important part of firm strategy.
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Goods were no longer produced with a proximate market in mind. Many problems were associated with the flow of goods, and spilled over into the acquisition of consistent inputs and, equally important, the development of an effective means of distribution. Ultimately, the movement toward the American system caused turmoil throughout the entire system as machine-made parts and large-scale assembly yielded an unprecedented volume of goods. There were many obstacles to overcome, not least the construction of the necessary machinery and the resolution of the inherent conflicts presented by machine-based output to established labor relations and hence to the production system itself (Lazonick 1991). The movement toward this form of production was neither pervasive nor persistent. However, it was the middle of the nineteenth century before widespread implementation of this technological and organizational innovation occurred. There are examples of metal- cutting machines assisting in the rough shaping of parts for final finishing as early as the middle of the eighteenth century.
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The transition to machine-based, vertically integrated, large-scale industrial manufacturing occurred over a long period of time. Glasmeier, in International Encyclopedia of the Social & Behavioral Sciences, 2001 3 The Emergence of Managerial Capitalism and Factories
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