On a scratch piece of paper… List what you think are the top 5 wealthiest corporations in America 5. Berkshire Hathaway ($162.5 billion) 4. Conoco-Philips ($169.6 billion) 3. Chevron ($233.9 billion) 2. Exxon Mobil ($449.9 billion) 1. Wal-Mart ($469 billion, $16.999 billion profit)

Rise of Big Businesses

Industrialization + Laissez-Faire = Big Businesses The economic climate of the late 1800’s and early 1900’s allowed for businesses to grow tremendously. This led to the creation of businesses that became larger and more powerful than ever before

Corporations More companies become corporations Owned by stockholders who buy shares, or “stocks”, of the company Allows companies to raise large amounts of money Corporations can produce goods cheaply and efficiently Result: Corporations drive out small businesses Sound familiar?

Andrew Carnegie Rags to riches life story Started his own steel company (eventually became known as US Steel) Retired with a net worth of $298 billion in today’s dollars Gave away all of his money by the time he died Carnegie foundations

Andrew Carnegie Started vertical integration for the steel industry Buying all of the businesses you rely on for operation Carnegie bought coal mines, limestone quarries, iron ore fields, railroad lines, etc Why would he do this? Reduced his company’s costs

Vertical Integration

Vertical Integration Practice Let’s pick a company and apply vertical integration to its business strategy!

JD Rockefeller Owner of Standard Oil Net worth in today’s dollars = $663.4 billion

JD Rockefeller J.D. Rockefeller used horizontal integration Buying up many of the companies engaged in the same type of business (competition) Why would he do this? Less competition = everyone has to buy from you (higher profits) Nearly created a monopoly When a single company controls an entire market (IE. Market for oil) Is this good or bad for consumers? Why?

Horizontal Integration

Horizontal Integration Practice Let’s use the same company and apply horizontal integration!

Why does it matter? Big corporations still have a tremendous amount of power and wealth today Still driving out small businesses Companies have mergers to get as close to a monopoly as they can get Eliminates competition Drives prices up for the things you buy

Quick Review A company that is owned by share holders is called a ________________ What are the benefits of a corporation? When a company buys up all of the companies it relies on to operate, this is called _________________ integration When a company buys up all of the companies that are in the same type of business, this is called _______________ integration When a single company controls an entire market, we call this a ________________ corporation Raise large amounts of cash, cheap and efficient production vertical horizontal monopoly