1. Chapter 5 Industrialization
Section 3
Big Business

2. The Raise of Big Business
Corperation
An organization owned by many people but treated by law as though it was one person
It can buy property, pay taxes, sue and be sued

3. Corporation
The people who owned the corporation are called stock holders
Because they own shares of ownership called stock
Stock is money or capital invested or available for investing or trading

4. Corporation stock
With the money raised from stock, corperations could invest new technologies, hire large work force, purchase new machines, and improve the overall efficiency of the company
This allowed them to achieve economy of scale.

5. Economy of sale
The cost of manufacturing goods is decreased by producing goods quickly in large quatities

6. Fix Cost and Operating Cost
All businesses have two types of cost
Fix cost are a cost that a company has to pay whether or not it is operating
Loans, taxes, mortgages
Operating costs are costs that occur when the company is running
Paying wages, shipping, buying supplies and raw material

7. Big corporations Had advantages
They could produce more goods cheaply and efficiently
Could continue operating in poor economic times by cutting prices to increase sales rather than shutting down
Small companies found it difficult to compete and were forced out of business

8. Sole proprietorship Disadvantages Advantage Difficult to raise money
Limited opportunity to grow
High operating cost
Unlimited liability
Advantage
Easy start up
Low fixed cost
because facilities are usually small and inexpensive to maintain

9. Andrew Carnegie Born in Scotland Very poor
Worked many jobs and always strived do his best
Bought industries that serviced the railroad companies
Iron mill, coal mines, lime quarries

10. The rise of big business
Use of new technologies
Advantages of economies of scale
The process of vertical and horizontal intergration

11. Vertical Integration
The combining of companies that supply equipment and supplies needed for a particular industry

12. Carnegie and Vertical Intergration
Carnegie bought business that supplied his shipping facilities which supplied his steel mills

13. Horizontal Intergration
One company buy up the competition becoming a monopoly

14. John D. Rockefeller Owned Standard Oil
He controlled 90% of the oil refining in the US

15. Monopoly
A monopoly is when a single company achieves control of the entire market

16. Fear
Americans feared monopolies because they could charge any amount for its products because it has no competition

17. Trust A new way of merging businesses
A legal arrangement that allows one person to manage another's property

18. Holding Company
A company whose primary business is owning a controlling share of stock in other companies
They do not produce anything itself
It manages the companies it owns effectively merging them into one enterprise

19. J.P. Morgan Wealthy/Shrewd Business Man
Made his fortune in banking, and financing railroads

20. J.P. Morgan
Bought out Andrew Carnegie's Steel Company and merged it with other steel companies to create the United States Steel Company.
Worth $1.4 Billion in 1904

21. Department Stores
Provided goods and services in one large building

22. Chain Stores Group of outlets owned by the same company
Focused on offering low prices

23. Page 199
1, 2, and 4