Industrialization

Industrialization The Rise of Industry

The Rise of Industry • Main Idea • Following the Civil War, large corporations developed that could consolidate various business functions and produced goods more efficiently. Retail stores began using advertising and mail-order catalogs to attract new customers

Big Business 5.3 • Vocabulary • Corporation • Stock • Economies of scale • Pool • Monopoly • Trust

Big Business 5.3 The Rise of Big Business By 1900 big business dominated the economy of the United States A CORPORATION is an organization owned by many people but treated by law as if it was a single person

Big Business 5.3 STOCKHOLDERS are the people that own the corporation, own shares of ownership called STOCK Issuing stock allows a corporation to raise large sums of money but spreads out the financial risk

Big Business 5.3 The Rise of Big Business From the scale of stock, corporations are able to invest in new technology to increase their efficiency By making goods faster and cheaper, corporations achieve ECONOMIES OF SCALE(The reduction in the cost of a good brought about increased production)

Big Business 5.3 • The Rise of Big Business • All businesses have two kings of cost • FIXED COSTS– What a company has to pay whether it is operating or not, such as: Loans, Mortgages and Taxes • OPERATING COSTS– Costs that occur when a company is in operation: Wages, shipping charges, supplies, utilities, etc…

Big Business 5.3 • The Rise of Big Business • Big corporations typically have an advantage over small manufacturing companies • Big corporations can produce goods cheaper and typically survive in tough economic times by cutting prices to support sales, a luxury smaller businesses (especially those with high operating costs) cannot afford

Big Business 5.3 • The Consolidation of Industry • Competition between corporate leaders caused lower prices for consumers, but it also cut business profits. To stop prices from falling, companies organizedPOOLS (agreements to keep prices at a certain level). • Pools usually did not last long, as soon as one member cut prices, the pool broke apart. By the 1870s, competition had reduced industries to a few large, highly efficient corporations

Big Business 5.3 • ANDREW CARNEGIE, a poor Scottish immigrant, worked his way up from as a boy in a textile factory to the president of the Pennsylvania Railroad. He invested own money in railroad-related businesses and later owned his own business. He opened a steel company in 1875

Big Business 5.3 • Carnegie beganVERTICAL INTERGRATIONof the steel Industry • A vertically integrated company owns all of the different suppliers it depends on for operation • This not only saved money but also made the big company bigger

Big Business 5.3 • The Consolidation of Industry • In the late 1800s, Americans became suspicious of large corporations and feared monopolies • A MONOPOLYoccurs when one company gains control of an entire market.

Big Business 5.3 • The Consolidation of Industry • In 1882, Standard Oil formed the first TRUSTwhich merged businesses without violating laws against other companies. • A trust allows a person to manage another person’s property or company • A HOLDING COMPANYdid not produce anything. Instead, it owned the stock of companies that did produce goods. The holding company controlled all the companies it owned, merging them all into one large enterprise

Big Business 5.3 • Selling the Product • Retailers looked for new ways to market and sell their goods. Advertising changed, with illustrations replacing small-type line ads • The department store changed the idea of shopping by bringing in a huge assortment of products in a large, glamorous building

Big Business 5.3 • Selling the Product • Chain stores, Like Woolworth’s, focused on offering low prices instead of special services or fancy décor • Mail-order catalogs were created to reach rural Americans. Montgomery Wards and Sears & Roebucks were the two largest catalog retailers

Big Business 5.3

Industrialization