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“The Rise of Big Business”

“The Rise of Big Business”. Industrialization in the United States 1860s – 1900s. Cornelius Vanderbilt . John D. Rockefeller. Andrew Carnegie. J. P. Morgan. Thomas Edison . Samuel Gompers. The BIG Picture!.

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“The Rise of Big Business”

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  1. “The Rise of Big Business” Industrialization in the United States 1860s – 1900s

  2. Cornelius Vanderbilt John D. Rockefeller Andrew Carnegie J. P. Morgan Thomas Edison Samuel Gompers

  3. The BIG Picture! • Businessmen such as Carnegie, Rockefeller, Ford and Morgan developed new methods to expand business! • New business methods, help from the gov’t and “Captains of Industry” begin to take control of the U.S. economy...

  4. New Business Methods: Advertising • Mail-Order Catalogs… • Montgomery Ward, Chicago • Sears & Roebuck, 1890s • Rural consumers. • Department Stores… • 1862, A.T. Stewart, NYC • Shopping becomes a pastime! • Urban consumers.

  5. New Business Methods: Rise of Corporations! • Rise of corporations fueled the rise of “big business…” • Small businesses could not compete! Shut down in “hard times”

  6. New Business Methods: Rise of Corporations! • Corporation: organization owned by many people but treated by law as though it were a person. • Stockholders buy stock… • Raise money, spread the risk! (vs. partnership, proprietorship) • Created Economies of Scale… • Could produce goods more efficiently, which allowed to the rise of “big business” • Produce more goods @ cheaper price, continue to operate in harsh economic times, drive out small competition!

  7. New Business Methods: Help from the Gov’t • Santa Clara County v. Southern Pacific Railroad Company • SCOTUS, 14th Amendment and Corporations… • Received protection just as individuals would!

  8. New Business Methods: “Pooling” • Competition created problems; low prices for consumers!!! • Railroad pools: • associations of competing railroads “for the purpose of a proper division of the traffic at competitive points and the maintenance of equitable rates that may be agreed upon.” • Interstate Commerce Act, 1887

  9. New Business Methods: BIG Business! • By 1870s, competing businesses were merging together, creating “big business” • Mergers, Consolidation of Industry • Creation of Trusts • Holding Companies • Example of consolidation: • 1870, Rockefeller’s Standard Oil Company owned 2% of the country’s crude oil… • By 1880 – it controlled 90% of U.S. crude oil!

  10. How did it do so???

  11. Monopolies: Single company achieves control of an entire market! Many states begin outlawing… Trusts: Legal maneuver allowing trustee to control several companies & run them as one. Holding Companies: Produce no actual product. Controls several companies, merging into one large enterprise! 3 New Business Practices

  12. 1. Monopolies

  13. VERTICAL INTEGRATION

  14. HORIZONTAL INTEGRATION

  15. Trusts

  16. New Business Methods: Trusts • … by creating Trusts! • Stocks would be traded in for trust certificates. • “Super-Corporation” created from many small corporations! • Standard Oil, 1882 – first TRUST!

  17. New Business Methods: Investment Banking • J.P. Morgan • Buy large blocks of stock from companies looking to sell… (discounted) • Re-sell the stock for profit! • These investment bankers became interested in holding companies and trusts… • United States Steel, 1901

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