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The Growth of Big Business

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Presentation on theme: "The Growth of Big Business"— Presentation transcript:

1 The Growth of Big Business
Chapter 13 Section2 The Growth of Big Business

2 Social Darwinism Survival of the fittest
Believed in little government interference The best will thrive The unfit will be weeded out Everyone would benefit The theory of evolution applied to society

3 How did the theory of social Darwinism affect the government’s relationship to big business?
It encouraged government to take a hands-off approach to big business Promoted a belief that society should not interfere with peoples success

4 Oligopoly Occurs when to cost of starting a certain type of business is high A market structure which is dominated by only a few large, profitable firms Modern examples: cereals, cars, appliances

5 Monopoly When a business gains complete control of a product or service To achieve this, a company must buy competitors, or drive them out of business

6 Cartel A loose association of businesses that make the same product
Members of cartels agree to limit the supply of their product in order to keep prices high

7 Andrew Carnegie Founded first plants to use Bessemer Process to produce steel Founded Carnegie Steel in 1889 Became very wealthy

8 Gospel of Wealth A personal philosophy of Andrew Carnegie
Became a movement of the early 20th century People should be free to make as much money as they want, but give it away after they make it

9 Gospel of Wealth Carnegie donated money to build 3,000 libraries
Supported art and research institutes Set up a fund to study how to abolish war Had given away $350 million by the time he died in 1919

10 Vertical Consolidation
Business tactic of Andrew Carnegie Gaining control of the many different businesses that make up all phases of a product’s development

11 Economies of Scale As production increases, the cost of each item produced is lower Vertical Consolidation allowed Carnegie to maintain low production costs Allowing him to cut his prices put less wealthy competitors at a disadvantage

12 John D. Rockefeller Founded Standard Oil in 1870
Used questionable business tactics Gave $500,000 to charity Helped found the University of Chicago

13 Horizontal Consolidation
Business tactic of Rockefeller Bringing together many firms in the same business (taking over your competitors) Allowed Rockefeller to control an extremely high percentage of the oil industry

14 How did methods such as vertical and horizontal consolidation, and factors such as economies of scale help companies dominate their markets? Through horizontal consolidation, companies purchased competing companies Through vertical consolidation and economies of scale, companies lowered production costs so much that other companies could not compete

15 Trust Different firms in the same business (oil for example) being run as one company by a board of trustees Rockefeller was able to combine 40 oil businesses into his trust

16 Sherman Antitrust Act Outlawed any combination of companies that restrained interstate trade or commerce The law was rarely enforced by pro-business courts

17 Why did the Sherman Antitrust Act seek to stop big business from forming trusts?
Trusts threatened fair competition in industry Trusts may cause prices to rise due to lack of competition

18 What were some features of the new big businesses?
Large amounts of capital Wider geographic span Broader range of operations (they make more than one thing) Revised role of ownership (business too big for an owner to run, so they hired managers) New methods of management (in order to keep track of all the was being produced and spent)

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