Chapter 14Chapter 14IndustrializationIndustrialization

Section 3Section 3

Big BusinessBig Business

The Rise of Big BusinessThe Rise of Big Business

By 1900 big business dominated the By 1900 big business dominated the economyeconomy

Corporation – Corporation – organization owned by organization owned by many people but treated by law as though many people but treated by law as though it was a single person.it was a single person.

Stockholders – Stockholders – people who own the people who own the corporation, own shares called corporation, own shares called stockstock

Issuing stock allows a corporation to raise Issuing stock allows a corporation to raise large sums of money but spreads out the large sums of money but spreads out the financial risk.financial risk.

The Rise of Big BusinessThe Rise of Big Business

From the sale of stock, corporations From the sale of stock, corporations could invest in new technologies to could invest in new technologies to increase their efficiency.increase their efficiency.

By making goods cheaper & quicker, By making goods cheaper & quicker, corporations could achieve corporations could achieve economies of scaleeconomies of scale..

Two kinds of costsTwo kinds of costs

Fixed costs – Fixed costs – costs a company has costs a company has to pay whether it is operating or not.to pay whether it is operating or not.

Examples – loans, mortgage, taxesExamples – loans, mortgage, taxes Operating costs – Operating costs – costs that occur costs that occur

when a company is in operation.when a company is in operation. Examples – wages, shipping charges, Examples – wages, shipping charges,

suppliessupplies

The Consolidation of IndustryThe Consolidation of Industry

Andrew Carnegie – Andrew Carnegie – poor Scottish poor Scottish immigrant, worked immigrant, worked his way up from a his way up from a bobbin boy to bobbin boy to president of president of Pennsylvania RR.Pennsylvania RR.

Andrew CarnegieAndrew Carnegie

Opened a steel company in 1875 and Opened a steel company in 1875 and adapted his steel mills to use the adapted his steel mills to use the Bessemer processBessemer process..

Vertical & Horizontal IntegrationVertical & Horizontal Integration

Vertical – company owns all the Vertical – company owns all the different business it depends on for different business it depends on for its operation.its operation.

This saved money and made the This saved money and made the company bigger.company bigger.

Horizontal – combining many firms Horizontal – combining many firms doing the same type of business into doing the same type of business into one large corporation.one large corporation.

Vertical IntegrationVertical Integration

Horizontal IntegrationHorizontal Integration

MonopolyMonopoly

Occurs when one company gains Occurs when one company gains control of an entire market.control of an entire market.

Many states made it illegal for a Many states made it illegal for a company to own stock in another company to own stock in another company without permission from company without permission from the state legislature.the state legislature.

TrustsTrusts

1882 – Standard Oil formed the first 1882 – Standard Oil formed the first trust, which merged businesses trust, which merged businesses without violating laws against owning without violating laws against owning other companies.other companies.

A trust allows a person to manage A trust allows a person to manage another person’s property.another person’s property.

Holding CompaniesHolding Companies

A holding company did not produce A holding company did not produce anything itself.anything itself.

Instead, it owned the stock of Instead, it owned the stock of companies that did produce goods.companies that did produce goods.

Controlled all the companies it Controlled all the companies it owned, merging them into one large owned, merging them into one large enterprise.enterprise.

Holding CompaniesHolding Companies*Don’t Write**Don’t Write*

1904 – the U.S. had 318 holding 1904 – the U.S. had 318 holding companies.companies.

Together they controlled over 5,300 Together they controlled over 5,300 factories and were worth more than factories and were worth more than $7 billion.$7 billion.

Selling the ProductSelling the Product

Retailers looked for new ways to Retailers looked for new ways to market and sell goods.market and sell goods.

Advertising changed, with Advertising changed, with illustrations replacing small type line illustrations replacing small type line ads.ads.

Selling the ProductSelling the Product

The department store changed the The department store changed the idea of shopping by bringing in a idea of shopping by bringing in a huge assortment of products in a huge assortment of products in a large, glamorous building.large, glamorous building.

The Grand DepotThe Grand Depot

Selling the ProductSelling the Product

Chain stores, like Woolworth’s, Chain stores, like Woolworth’s, focused on offering low prices focused on offering low prices instead of special services or fancy instead of special services or fancy decor.decor.

Woolworth’sWoolworth’s

Selling the ProductSelling the Product

Mail-order catalogs were created to Mail-order catalogs were created to reach rural Americans.reach rural Americans.

Montgomery Ward and Sears, Montgomery Ward and Sears, Roebuck were the two largest Roebuck were the two largest catalog retailers.catalog retailers.

Sears, Roebuck CatalogSears, Roebuck Catalog

End of Section 3End of Section 3

Next: Section 4Next: Section 4

UnionsUnions