1. Pg. 188 Graphic Organizer
Nationwide Rail Network

2. Chapter 5.3
Big Business

3. The Rise of Big Business
A new business model emerges
The CORPORATION
Sole Proprietorship
Partnership
Corporation
Who Owns the Business?
One person – typically the manager
2+ people own & run it
Any investor, run by managers
How is $ raised?
Owners savings and loans
More people = more $
Sell stock
Advantages
Easy to start, low costs
Partners work together, low costs
Limited liability, unlimited life
Disadvantages
Tough $, little growth, unlimited liability
Partners work together, unlimited liability
High fixed costs

4. Cont…. Economies of scale Corporations increase efficiency
How much does a new medicine cost per pill?
How much did it cost for the first pill?
Corporations increase efficiency
Costs, production, prices

5. Consolidating Industry
Andrew Carnegie and Steel (or is it Steal?)
A real self made man
THE BESSEMER PROCESS
Vertical Integration
Think of stairs – one step at a time to the goal
Integrated Steel Company
Steel Mill
Rail Transit
coal
Iron Ore

6. Cont…. Rockefeller & Standard Oil Horizontal Integration
Same stairs but focus on one step
Rockefeller created Standard Oil
Used it to create a monopoly in the oil industry
Oil Refinery
Standard Oil
Oil Refinery
Oil Refinery

7. New Business Organizations
Aren’t Monopolies Illegal
Trust
Trustees manage the stock so the owners don’t break the law
Holding Company
A company that doesn’t make anything
It owns other companies that make stuff
Investment Banking
Banks help sell stock
Company needs quick cash, gives bank a “deal” on stock, bank sell stock for a profit.