1. Chapter 12 Section 3 BIG Business By: Ashlee Kuan, Laura Guebert, and Katelyn Fix

2. The Rise of Big Business ● Corporation- An organization that is authorized by law to carry on an activity but treated as though it were a single person ● Stockholders- owned corporations because they own shares of stock ● Stock- money or capital invested or available for investment or trading ● - allows a corp. to raise large amounts of money for big projects while spreading financial risk

3. The Rise of Big Business ● Economies of Scale- the cost of manufacturing decreased by producing goods quickly in large quantities ● Fixed Costs- costs a company has to pay, whether or not the company is operating (loans, mortgages etc.) ● Operating Costs- costs that occur when running a company (paying wages, shipping costs etc.)

4. The Rise of Big Business The Difference between BIG business and small business ● Corporations have high fixed cost and low operating costs ● Small business have low fixed cost and high operating costs

5. Consolidating Industry ● Pools- agreements to keep prices at a certain level - didn't last long because of people cutting prices to steal market share - American courts and legislatures thought they interfered with competition and property rights - companies who formed pools had no legal protection and couldn't enforce agreements in court

6. Consolidating Industry Andrew Carnegie - later became president of Pennsylvania Railroad, then promoted to superintendent - began investing in companies associated with the railroad industry (iron mills, sleeping cars, etc.) - later quit his job to concentrate on his own investments - opened a steel company in Pittsburgh in 1875 and began using vertical integration4

7. Consolidating Industry Andrew Carnegie ● Vertical Integration- the combining of companies that supply equipment and services needed for a particular industry - vertically integrated companies OWN different businesses they depend on for operation

8. Consolidating Industry Rockefeller and Standard Oil ● Horizontal Integration- combining firms in the same business into one large corporation ● John D. Rockefeller - BUILT oil refineries when oil was discovered in Pennsylvania - Rockefeller's company, Standard Oil, became nation's largest oil refiner - By 1880, his company controlled 90% of the oil- refining industry in the U.S. ● Monopoly- total control of a type of industry by one person or one company

9. Consolidating Industry New Business Organization ● Trust- legal arrangement that allows one person to manage another person's property - Trustee- person who manages property ● New Jersey established a new incorporation law allowing corporations chartered in NJ to own stock in other businesses without any need for special legislative action. ● Many companies used the law to create the holding company. ● Holding Company- owns the stock of companies that produce goods rather producing anything themselves

10. Consolidating Industry New Business Organization J.P. Morgan ● Began his career working for his father's banking company in N.Y. ● Specialized in helping companies issue stock ● bought out Andrew Carnegie in 1901, then merged Carnegie Steel with other large steel companies into the holding company, United States Steel Company

11. Consolidating Industry Selling the Product ● N.W. Ayer and Son- first advertising company, began creating large illustrated ads instead of small print line ads previously used in newspapers ● Department stores ● Mail-order catalogs