1. Underline, Star, Highlight Finish Industry Notes One Word Summary
SWBAT peer examine their essays for content and grammar SWBAT identify how the concept of a corporation works.
Agenda
Underline, Star, Highlight
Finish Industry Notes
One Word Summary

2. The Corporation
Why is stock considered by many a good financial opportunity?
Limited Liability- Risk only the amount of the investment
What would companies want to sell stock?
Permits company owners to gather great amounts of cash and undertake huge projects to advance their company

3. An Example
In the mid 1990’s Gillette spent more than $750 million in manufacturing capital and research and development
An additional $300 million was put into marketing
After its announcement Gillette was expected to earn $1.45 a share and $1.73 in 1999, up from the previous year’s $1.24

4. The First Corporations
In the Steel Industry, the central figure was Andrew Carnegie
How did he dominate the steel industry?
Cut costs and prices by striking deals with the RR’s
This enabled him to sell his steel for a cheaper price
Soon began to buy out rivals who could no longer compete

5. More Carnegie
With partner Henry Clay Frick, Carnegie began to purchase businesses associated with the production of steel
Examples being: Iron mines, ovens, mills, shipping and rail lines!!

6. Carnegie Sells!
In 1901 the Carnegie sold his company to J.P. Morgan for $450 million
Morgan merged Carnegie’s company with others to create United States Steel
Became a $1.4 billion dollar enterprise
Controlled 2/3 of the nation’s steel production

7. New Approaches To Management
Division of Responsibility
Hierarchy of Control
Cost-accounting Procedures
Creation of a new breed of business executives – the middle manager

8. Mergers
A merger is a transaction that results in the transfer of ownership and control of a corporation.

9. 3 Types of Mergers Horizontal Vertical Conglomerate
Economists distinguish between three types of mergers:
Horizontal
Vertical
Conglomerate

10. Horizontal mergers
A horizontal merger results in the consolidation of firms that are direct rivals—that is, sell substitutable products within overlapping geographic markets.
Examples: Boeing-McDonnell Douglas; Staples-Office Depot(unconsummated); Chase Manhattan-Chemical Bank; Southern Pacific RR-Sante Fe RR; Pabst-Blatz; LTV-Republic Steel; Konishiroku Photo-Minolta.

11. Vertical Mergers
The merger of firms that have actual or potential buyer-seller relationships
Examples: Time Warner-TBS; Disney-ABC Capitol Cities; Cleveland Cliffs Iron-Detroit Steel; Brown Shoe-Kinney, Ford-Bendix.

12. Conglomerate mergers
Consolidated firms may sell related products, share marketing and distribution channels and perhaps production processes; or they may be wholly unrelated.
Product extension conglomerate mergers involve firms that sell non-competing products use related marketing channels of production processes.
Examples: Cardinal Healthcare-Allegiance; AOL-Time Warner; Phillip Morris-Kraft; Citicorp-Travelers Insurance; Pepsico-Pizza Hut; Proctor & Gamble-Clorox.

13. Definitions
Vertical Integration – taking over all the different business on which a company relies for its primary function (Mine to Market)
Horizontal Integration – combining a number of firms engaged in the same enterprise into a single corporation

14. John Rockefeller By 1870 Rockefeller formed the Standard Oil Company
Which method?
Horizontal

15. I choose Business Ethics
What are your scruples?
I choose Business Ethics