1. The Rise of BIG BUSINESS

2. 1 st Industrial Revolution (Pre-Civil War) Most business were family-owned Produced goods for local or regional markets.

3. A textile factory producing children’s clothing in Baltimore, MD

4. Transcontinental Railroad

5. Effects of Transcontinental R.R. System Created a nationwide market for goods. –What effect would this have on businesses? Allowed business to locate farther west. –How did this result in the economic growth of the United States? Americans begin settling the West West & East become interdependent

6. Rapid Economic Growth After the Civil War Output of goods rises 7% per year after the Civil War. 1865: U.S. produces $2 Billion in goods 1900: U.S. produces $13 Billion in goods –U.S. most productive nation in world by 1900!

7. American economy depended on ENTREPRENEURS People who take risks to create new businesses using their’s (and others) money and talents

8. America’s Economic System Encouraged Entrepreneurial Spirit and Led to Growth What system of economics do we have in the U.S.? CAPITALISM

9. What is Capitalism? Most industries are run by private businesses. –Government does not control production/sale of goods. Businesses run by private individuals –Government does not control businesses Prices of goods determined by competition –Government does not regulate prices

10. How Competition Determines Prices The Jones Hat Co. produces & sells derby hats for $50 per hat The Connolly Hat Co. starts up and produces hats cheaper & sells derby hats for $39.99 per hat. WHAT EFFECT WILL THIS HAVE ON THE JONES HAT COMPANY?

11. Competition Regulates Prices To stay competitive, Jones Hat Company must lower prices.

12. REMEMBER COMPETITION REGULATES PRICES! Modern day example: Cell Phone Companies

13. Costs of Basic Cell Phone Plans (Competition Regulates Prices!)

14. THINK! Why are food prices high at the Student Union?

15. Laissez-Fair? HANDS OFF! Government does not interfere in businesses Allows competition to regulate prices Think: Why should government take a “laissez-fair” approach to business?

16. Business Structures The way businesses were owned & organized 1.Proprietorship & Partnerships Business completely run by one person or two people. Typically smaller businesses One/Two people completely responsible for businesses

17. Business Structures 2. Corporation Company that is owned by stockholders (people who buy a share (%) of a business). –Stockholders elect a Board who makes major business decisions –Board hires officers to run day-to-day operations. –Show on Board

18. Why Businesses Incorporate Allows the business to raise more money to expand (stocks) Owners not responsible for debt or failure of business Stockholders only liable for their share Business not dependent on one person & can continue after the founder is gone

19. 3. Trusts & Monopolies Trust – Merging of competing companies to create larger & more productive company. Monopoly – When a trust gained complete control over an industry. Business Structures

20. Trust

21. Bought smaller oil companies Controlled 90% of all U.S. oil by 1879

22. 2 Ways Businesses Got BIG 1.Vertical Integration 2.Horizontal Integration

23. VERTICALVERTICAL INTEGRATIONINTEGRATION

24. HORIZONTAL INTEGRATION

25. The Industrial Tycoons (The Robber Baron’s, Captains of Industry) Entrepreneurs who grew industrial empires & accumulated tremendous wealth (often using questionable practices)

26. Andrew Carnegie Immigrated to U.S. from Scotland at 12 Worked as a “telegraph boy” for a Pittsburgh railroad Began investing in his 20’s/30’s and gained wealth 1870’s: Invested in steel

27. Carnegie Steel Company Adopted & improved the Bessemer process Carnegie’s philosophy: –1. Constant innovation (new technology to reduce operating costs) –2. Always sell product cheaper than competitors –3. Retain profits to take advantage of opportunities (buying competitors).

28. Dominated through VERTICAL INTEGRATION Carnegie integrated every phase of steel production Owned iron ore mines in Minnesota Ships to transport iron ore Railroads transported raw materials in and finished steel out Carnegie’s Vertical Integration: 1.Improved efficiency 2.Controlled the quality of his product at every stage of production 3.Lowered costs by reducing “middle-man” fees and supply costs

29. Steel: Stronger & More Shapeable

30. Carnegie’s Wealth 1900: Carnegie Steel produced ¼ of all steel produced in the United States. 1900: Carnegie Steel Co. made a profit of nearly $42 Million Carnegie sold his share of Carnegie Steel Co. to J.P. Morgan for $400 Million

31. Carnegie the Philanthropist After 1900, Carnegie spent the rest of his life giving his money away to worthy causes. Gave away $350,695,653 to worthy causes before his death. Gave away his last $30 million after his death

32. Philanthropy Funded the construction of 3,000 libraries throughout the world Funded the construction of universities Funded the construction of Carnegie Hall in NYC

33. Other Tycoons John D. Rockefeller Founder of Standard Oil Company Grew by Vertical & Horizontal Integration Bought competitors until he controlled 90% of U.S. oil

34. Broken up under Sherman Anti-Trust Act in 1911 in 34 companies

35. Other Tycoons Cornelius Vanderbilt Railroad Tracks George Pullman Designed RR Cars (Sleeping Car) J.P. Morgan Financier, Corporate Consolidator

36. Akron Connection Akron becomes “Rubber Capital of the World” during 2 nd Industrial Revolution 19001898

38. Firestone Park

39. Stan Hywet Home of Frank Seiberling