Big Business 5-3

Corporation Organization owned by many people but treated as one person

Stock Shares of a corporation Sold to raise money and spread the financial risk

Economies of Scale Corporations make goods cheaply by making a lot Fixed Costs Operating Costs

Pools Corporations worked together to fix prices Often fell apart

Andrew Carnegie Born in Scotland, immigrated in 1848 Entered Steel Industry in 1873 By 1899, Carnegie Steel was making more steel than all of Great Britain

Bessemer Process New process for making steel Could be made quickly and cheaply

Carnegie’s Strategies Vertical Integration Bought up all of his suppliers Owned mines, railroads, quarries, etc.

Carnegie’s Strategies,cont’d. Horizontal integration Combined similar companies into one large corporation Bought up competitors = +

Monopoly One company controls a market Sets prices and production levels

John D. Rockefeller Owner of Standard Oil First trust Stockholders in many companies give their stock to the trustee He runs all of the companies as one The stockholders are given stock in the trust

J.P. Morgan Formed the first holding company: U.S. Steel Does not produce goods, but owns stock in companies that do and runs them as one company Morgan bought out Carnegie for $500 million

Too Much Stuff American companies were overproducing, they need to sell more products Created Advertising Industry

New Markets Department Stores Chain Stores Catalogs