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Ch 9 Sec 3: Big Business. corporation – an organization owned by many people but is treated by law as a single person stock – part ownership of a corporation economies of scale – corporations make goods more cheaply because they produce so much
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Ch 9 Sec 3: Big Business corporation – an organization owned by many people but is treated by law as a single person stock – part ownership of a corporation economies of scale – corporations make goods more cheaply because they produce so much fixed costs – money a company pays no matter if it is operating or not (rent and taxes) operating costs – money a company pays that tends to vary depending on production (labor and supplies) pools – competing companies agreeing to keep prices at a level Andrew Carnegie– entrepreneur who made his wealth in the steel industry (Bessemer Process) vertical integration – a company which owns all of the different businesses that it needs for operation Getting to California
Chapter Objectives Section 3: Big Business Analyze how large corporations came to dominate American business. Evaluate how Andrew Carnegie’s innovations transformed the steel industry. Objective: Analyze how large corporations came to dominate American business. Evaluate how Andrew Carnegie’s innovations transformed the steel industry. Intro 4
Guide to Reading Main Idea After the Civil War, big business assumed a more prominent role in American life. Key Terms and Names corporation Andrew Carnegie Bessemer process vertical integration stockholder stock economies of scale fixed costs operating costs pool Objective: Analyze how large corporations came to dominate American business. Evaluate how Andrew Carnegie’s innovations transformed the steel industry. Section 3-1
Guide to Reading (cont.) Section Theme Economic Factors Large national corporations formed in the United States in the mid-1800s and contributed to greater production. Objective: Analyze how large corporations came to dominate American business. Evaluate how Andrew Carnegie’s innovations transformed the steel industry. Section 3-3
Objective: Analyze how large corporations came to dominate American business. Evaluate how Andrew Carnegie’s innovations transformed the steel industry. Section 3-4
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 though it was a single person. (pages 319–320) Objective: Analyze how large corporations came to dominate American business. Evaluate how Andrew Carnegie’s innovations transformed the steel industry. Section 3-5
The Rise of Big Business Stockholders, the people who 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. (pages 319–320) Objective: Analyze how large corporations came to dominate American business. Evaluate how Andrew Carnegie’s innovations transformed the steel industry. Section 3-5
The New York Stock Exchange In 1792 business-people met in New York City to establish a stock exchange–a marketplace for buying and selling stock in companies. At first, the new stock exchange was located under a buttonwood tree on Wall Street. The organization took its present name, the New York Stock Exchange, in 1863. Huge amounts of the capital required for the nation’s industrialization after the Civil War passed through the New York Stock Exchange. As stock trading grew, investors from across the nation needed financial news. In 1882 Henry Charles Dow and Edward D. Jones founded Dow Jones & Company. This new company sent bulletins on the day’s business to Wall Street’s financial houses. The day’s last delivery contained a news sheet, which became The Wall Street Journal in July 1889. Today, The Wall Street Journal has the largest daily circulation of any newspaper in the United States. Objective: Analyze how large corporations came to dominate American business. Evaluate how Andrew Carnegie’s innovations transformed the steel industry. F/F/F 3-Fact
The Green Bay Packers are the only NFL franchise that sells stocks of its team. The fans in Green Bay actually “own” part of the team. Objective: Analyze how large corporations came to dominate American business. Evaluate how Andrew Carnegie’s innovations transformed the steel industry. FYI Contents 3
The Rise of Big Business(cont.) From the sale of stock, corporations could invest in new technologies to increase their efficiency. By making goods quicker and cheaper, these corporations achieved economies of scale. (pages 319–320) Objective: Analyze how large corporations came to dominate American business. Evaluate how Andrew Carnegie’s innovations transformed the steel industry. Section 3-6
The Rise of Big Business(cont.) • All businesses have two kinds of costs. • Fixed and Operating • Fixed costs are the costs a company has to pay whether it is operating or not. Examples of fixed costs would be loans, mortgages, and taxes. (pages 319–320) Objective: Analyze how large corporations came to dominate American business. Evaluate how Andrew Carnegie’s innovations transformed the steel industry. Section 3-6
The Rise of Big Business(cont.) Operating costs are costs that occur when a company is in operation. These costs include wages, shipping charges, and supplies. + = (pages 319–320) Objective: Analyze how large corporations came to dominate American business. Evaluate how Andrew Carnegie’s innovations transformed the steel industry. Section 3-7
The Rise of Big Business(cont.) Big corporations had an advantage over small manufacturing companies. Big corporations could produce more cheaply, and they could continue to operate even in poor economic times by cutting prices to increase sales. Many small businesses with high operating costs were forced out of business. vs. (pages 319–320) Objective: Analyze how large corporations came to dominate American business. Evaluate how Andrew Carnegie’s innovations transformed the steel industry. Section 3-7
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 organized pools–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. (pages 320–322) Objective: Analyze how large corporations came to dominate American business. Evaluate how Andrew Carnegie’s innovations transformed the steel industry. Section 3-9
An oil pool? Today the Organization of Petroleum Exporting Countries (OPEC) tries to maintain stability in the oil industry to ensure profits. This is called a cartel. Since 1970 OPEC has controlled approximately one-third to one-half of the world’s oil supply. Objective: Analyze how large corporations came to dominate American business. Evaluate how Andrew Carnegie’s innovations transformed the steel industry. FYI 3-2b
The Consolidation of Industry (cont.) Andrew Carnegie, a poor Scottish immigrant, worked his way up from a bobbin boy in a textile factory to the president of the Pennsylvania Railroad. He invested much of his money in railroad-related businesses and later owned his own business. He opened a steel company in 1875 and quickly adapted his steel mills to use the Bessemer process. (pages 320–322) Objective: Analyze how large corporations came to dominate American business. Evaluate how Andrew Carnegie’s innovations transformed the steel industry. Section 3-10
The Consolidation of Industry (cont.) Carnegie began vertical integrationof the steel industry. • A vertically integrated company owns all the different businesses it depends on for its operation. • This not only saved money but also made the big company bigger. (pages 320–322) Objective: Analyze how large corporations came to dominate American business. Evaluate how Andrew Carnegie’s innovations transformed the steel industry. Section 3-11
Reviewing Themes Economic Factors What factors allowed corporations to develop in the United States in the late 1800s? General incorporation laws allowed corporations to develop in the United States in the late 1800s. Objective: Analyze how large corporations came to dominate American business. Evaluate how Andrew Carnegie’s innovations transformed the steel industry. Section 3-21
The Rise of Big Business(cont.) Why were large corporations able to thrive when so many small companies were forced out of business? Large corporations were able to produce more goods cheaply and more efficiently. They could continue in poor economic times, and they could negotiate rebates from railroads. Small businesses with high operating costs were unable to compete with large corporations and were forced out of business. (pages 319–320) Objective: Analyze how large corporations came to dominate American business. Evaluate how Andrew Carnegie’s innovations transformed the steel industry. Section 3-8
Objective: Analyze how large corporations came to dominate American business. Evaluate how Andrew Carnegie’s innovations transformed the steel industry. Daily Focus Skills Transparency 3