Unit 5: Rise of Big Business NOTES: WEEK 2(4.3)
Methods used by Businessmen Rise of Big Businesses Methods used by Businessmen Contributing Factors Key People Vertical Integration Horizontal integration Business Climate Capitalism Social Darwinism B. Change in Business Structure Formation of Corporations Trusts & Monopolies
Notes: Rise of BIG BUSINESS What encouraged the development of Big Business? Contributing Factors A. Business Climate Capitalism Social Darwinism B. Change in Business Structure Formation of Corporations Trusts & Monopolies
(1) Business Climate (a) Capitalism With laissez-faire capitalism competition determines prices and wages Therefore: believed government regulation would destroy self-reliance, reduce profits, and harm the economy.
(b) Social Darwinism Many believed that inequalities were part of the natural order. Charles Darwin believed species compete for survival in a natural selection process. In Society: stronger people or businesses, and nations would prosper, and weaker ones would fail in a “survival of the fittest.”
(2) Change in Business Structure (a) Formation of Corporations Corporations : organization owned by people (treated as individual) that can own property, pay taxes, make contracts and can sue/be sued
(b) Trusts and Monopolies Some companies merged and turned their shares of a company over to a board of trustees who ran the group of companies as a single entity. Sometimes a trust gained a monopoly: having complete control of an industry. ** With no competition, prices could be raised or lowered at will.
Discussion Question Why did businesses form monopolies, trusts, and holding companies? eliminate competition Holding company: company that has a controlling interest in one or more companies through having some ownership in the company (through stocks)
Methods Used by Business Men to Build business Vertical integration: company owns all the different businesses of which it depends on for production
Horizontal integration – combining many firms engaged in the same type of business into one large corporation
KEY PEOPLE Andrew Carnegie – Carnegie Steel Industry John D. Rockefeller – Standard Oil Company (created a monopoly to control prices and practices of oil refineries) J.P Morgan – bought Carnegie Steel, controlled banking, railroads, and other corporations
Money, Money, Money Wealthiest Americans today: Net Worth Bill Gates (#1) = $66,000,000,000 Warren Buffet (#2) = $46, 000,000,000 Oprah Winfrey ( #151) = $2.7 billion Mark Zuckerberg (#16) = $14 billion John D. Rockefeller’s NET WORTH IN 2012 DOLLARS EQUALED:…. $340,000,000,000