Chapter 14 Industrialization Section 3 Big Business

The Rise of Big Business By 1900 big business dominated the economy By 1900 big business dominated the economy Corporation – organization owned by many people but treated by law as though it was a single person. Corporation – organization owned by many people but treated by law as though it was a single person. Stockholders – people who own the corporation, own shares called stock Stockholders – people who own the corporation, own shares called stock Issuing stock allows a corporation to raise large sums of money but spreads out the financial risk. Issuing stock allows a corporation to raise large sums of money but spreads out the financial risk.

The Rise of Big Business From the sale of stock, corporations could invest in new technologies to increase their efficiency. From the sale of stock, corporations could invest in new technologies to increase their efficiency. By making goods cheaper & quicker, corporations could achieve economies of scale. By making goods cheaper & quicker, corporations could achieve economies of scale.

Two kinds of costs Fixed costs – costs a company has to pay whether it is operating or not. Fixed costs – costs a company has to pay whether it is operating or not. Examples – loans, mortgage, taxes Examples – loans, mortgage, taxes Operating costs – costs that occur when a company is in operation. Operating costs – costs that occur when a company is in operation. Examples – wages, shipping charges, supplies Examples – wages, shipping charges, supplies

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

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

Vertical & Horizontal Integration Vertical – company owns all the different business it depends on for its operation. Vertical – company owns all the different business it depends on for its operation. This saved money and made the company bigger. This saved money and made the company bigger. Horizontal – combining many firms doing the same type of business into one large corporation. Horizontal – combining many firms doing the same type of business into one large corporation.

Vertical Integration

Horizontal Integration

Monopoly Occurs when one company gains control of an entire market. Occurs when one company gains control of an entire market. Many states made it illegal for a company to own stock in another company without permission from the state legislature. Many states made it illegal for a company to own stock in another company without permission from the state legislature.

Trusts 1882 – Standard Oil formed the first trust, which merged businesses without violating laws against owning other companies – Standard Oil formed the first trust, which merged businesses without violating laws against owning other companies. A trust allows a person to manage another person’s property. A trust allows a person to manage another person’s property.

Holding Companies A holding company did not produce anything itself. A holding company did not produce anything itself. Instead, it owned the stock of companies that did produce goods. Instead, it owned the stock of companies that did produce goods. Controlled all the companies it owned, merging them into one large enterprise. Controlled all the companies it owned, merging them into one large enterprise.

Holding Companies *Don’t Write* 1904 – the U.S. had 318 holding companies – the U.S. had 318 holding companies. Together they controlled over 5,300 factories and were worth more than $7 billion. Together they controlled over 5,300 factories and were worth more than $7 billion.

Selling the Product Retailers looked for new ways to market and sell goods. Retailers looked for new ways to market and sell goods. Advertising changed, with illustrations replacing small type line ads. Advertising changed, with illustrations replacing small type line ads.

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

The Grand Depot

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

Woolworth’s

Selling the Product Mail-order catalogs were created to reach rural Americans. Mail-order catalogs were created to reach rural Americans. Montgomery Ward and Sears, Roebuck were the two largest catalog retailers. Montgomery Ward and Sears, Roebuck were the two largest catalog retailers.

Sears, Roebuck Catalog

End of Section 3 Next: Section 4 Unions