1. Chapter 5: Industrialization Section 3: Big Business Pages 194 - 199

2. The Rise of Big Business Before the Civil War most companies were owned by a just a few people By 1900, vast complexes of warehouses, factories, and distribution facilities changed the way business operated

3. Corporations Big business cannot exist without corporations An organization owned by many people but treated by law a though it were a person It can own property, pay taxes, make contracts, and sue and be sued People who own corporations are called stockholders because they own a share of the company, or a stock Corporations issue to stock to raise large amounts of money while spreading the risk out

4. Economies of Scale Money raised from the sale of stock can be used to invest in new technology, hire more workers, and purchase their more machines to increase productivity This enables corporations to achieve economies of scale, the cost of manufacturing is decreased by producing goods quickly in large quantities

5. Consolidating Industry Many business owners did not like competition Falling prices only benefit consumers because they cut into profits Companies organized pools, or agreements to keep prices at a certain level Courts and legislatures broke up pools as well as corporations trying to steal market share

6. Andrew Carnegie and Steel Scottish immigrant, at age 12 worked at a textile factory for $1.20 a week Worked his way up in the Pennsylvania Railroad By age 30, was making $50,000 a year Bought shares in iron mills and factories that made rail cars Used his investments to open his first steel company in Pittsburgh in 1875

7. Vertical Integration To make his companies more efficient, Carnegie began vertical integration, where he owned all of the different businesses on which it depends for its operations.

8. Rockefeller and Standard Oil Successful business owners pushed for horizontal integration, combing firms in the same business into one large corporation When oil was discovered in Pennsylvania, John D. Rockefeller built oil refineries By 1870, Standard Oil was the largest refinery in the United States By 1880, Standard Oil controlled 90% of the oil-refining industry in the United States When a single company controls an entire market it becomes a monopoly

9. Trusts In 1882, Standard Oil formed the first trust, a new way of merging businesses that did not violate the law Allows one person to manage another person’s property Standard Oil had stockholders give their stocks to a group of Standard Oil trustees Stockholders received shares in the trust and the trustees could control a group of companies as if they were one company

10. Holding Companies Law chartered in New Jersey in 1889 Allowed corporations chartered in New Jersey to own stock in other businesses without any need for special legislative action, created holding companies A holding company does not produce anything, it owns the stock companies that produces goods and manages the company