An Age of Big BusinessAn Age of Big Business

Chapter 19, Section 3Chapter 19, Section 3

Pgs. 567-571Pgs. 567-571

CorporationCorporation

A company that sells shares of its business A company that sells shares of its business to the public.to the public.

StockStock

A share in a business.A share in a business.

ShareholderShareholder

Someone who Someone who owns shares owns shares (stock) in a (stock) in a business.business.

DividendDividend

If the business is doing well, a shareholder If the business is doing well, a shareholder earns cash payments from the earns cash payments from the

corporation’s profits. These payments are corporation’s profits. These payments are known as dividends.known as dividends.

Horizontal IntegrationHorizontal Integration

Combining competing firms into one Combining competing firms into one corporation. corporation.

Rockefeller did this by acquiring most of the Rockefeller did this by acquiring most of the oil refineries in Cleveland and other cities.oil refineries in Cleveland and other cities.

TrustTrust

A group of companies managed by the A group of companies managed by the same board of directorssame board of directors

MonopolyMonopoly

Almost total control Almost total control by a single by a single producer.producer.

Vertical IntegrationVertical Integration

Acquiring companies that provide the Acquiring companies that provide the equipment and services your company equipment and services your company

needs.needs.

Carnegie bought iron and coal mines, Carnegie bought iron and coal mines, warehouses, ore ships, and railroads to warehouses, ore ships, and railroads to

gain control of steel.gain control of steel.

PhilanthropyPhilanthropy

The use of money to The use of money to benefit the benefit the community. community.

Philanthropists gave Philanthropists gave money to found money to found

schools, universities, schools, universities, libraries, etc.libraries, etc.

Carnegie Hall in NYCCarnegie Hall in NYC

MergersMergers

The combining of companiesThe combining of companies

Edwin L. DrakeEdwin L. Drake Drake believed he Drake believed he

could find oil by could find oil by digging a well.digging a well.

In 1859 he tested In 1859 he tested his belief in his belief in Titusville, Titusville, Pennsylvania and Pennsylvania and struck oil.struck oil.

This led to the This led to the creation of the creation of the petroleum industry.petroleum industry.

Drake (right) in front Drake (right) in front of the historic Drake of the historic Drake well.well.

Factors of ProductionFactors of Production

Land – all natural resourcesLand – all natural resourcesLabor – workers need to turn raw Labor – workers need to turn raw

materials into goodsmaterials into goodsCapital – the equipment, buildings, Capital – the equipment, buildings,

machinery, tools and money needed to machinery, tools and money needed to produce goodsproduce goods

Raising CapitalRaising Capital

One way a company could raise capital One way a company could raise capital was by was by becoming a corporationbecoming a corporation..

A corporation is a company that sells A corporation is a company that sells shares, or stock, of its business to the shares, or stock, of its business to the public.public.

People could buy and sell stocks in special People could buy and sell stocks in special markets known as markets known as stock exchangesstock exchanges..

John D. RockefellerJohn D. Rockefeller

In 1870 Rockefeller organized the In 1870 Rockefeller organized the Standard Oil Company of Ohio and set out Standard Oil Company of Ohio and set out to dominate the oil industry.to dominate the oil industry.

Rockefeller used horizontal integration to Rockefeller used horizontal integration to create his empire. create his empire. He lowered his prices to drive his competitors He lowered his prices to drive his competitors

out of business. out of business. He pressured customers not to deal with rival He pressured customers not to deal with rival

oil companies. oil companies. He persuaded the railroads to grant him He persuaded the railroads to grant him

rebates in exchange for his business.rebates in exchange for his business.

Creating a TrustCreating a Trust

Rockefeller wanted to gain controlling Rockefeller wanted to gain controlling interest in these other oil companies so interest in these other oil companies so that he could gain the right to manage that he could gain the right to manage them.them.

This allowed him to create a monopoly of This allowed him to create a monopoly of the oil industry.the oil industry.

The Steel BusinessThe Steel Business

Two new methods of making steel Two new methods of making steel changed the industry.changed the industry.Bessemer processBessemer processOpen-hearth processOpen-hearth process

With these new methods, mills could With these new methods, mills could produce steel at affordable prices and in produce steel at affordable prices and in large quantities.large quantities.

Pittsburgh, Pennsylvania became the steel Pittsburgh, Pennsylvania became the steel capital of the United States.capital of the United States.

Andrew CarnegieAndrew Carnegie

Carnegie used vertical integration to become Carnegie used vertical integration to become powerful. powerful.

He acquired companies that provided the He acquired companies that provided the equipment and services he needed.equipment and services he needed. Bought iron and coal mines, warehouses, ore ships, and Bought iron and coal mines, warehouses, ore ships, and

railroadsrailroads

In 1901 he sold his steel company to banker J. In 1901 he sold his steel company to banker J. Pierpont Morgan.Pierpont Morgan.

Morgan formed the United States Steel Corporation Morgan formed the United States Steel Corporation which was the world’s first billion-dollar corporation.which was the world’s first billion-dollar corporation.

PhilanthropyPhilanthropy

Philanthropists founded schools, Philanthropists founded schools, universities, and other civic institutions universities, and other civic institutions across the United States.across the United States.

Carnegie built Carnegie Hall in NYC, the Carnegie built Carnegie Hall in NYC, the Carnegie Foundation for the Advancement Carnegie Foundation for the Advancement of Teaching, and more than 2,000 of Teaching, and more than 2,000 libraries.libraries.

Rockefeller established the University of Rockefeller established the University of Chicago and New York’s Rockefeller Chicago and New York’s Rockefeller Institute for Medical Research.Institute for Medical Research.

Lack of CompetitionLack of Competition

Many Americans admired the efficiencies Many Americans admired the efficiencies that large businesses provided.that large businesses provided.

BUT a lack of competition hurt consumersBUT a lack of competition hurt consumersWithout competition, corporations had no Without competition, corporations had no

reason to keep their prices low or to improve reason to keep their prices low or to improve their goods and services.their goods and services.

Sherman Antitrust ActSherman Antitrust Act

Congress passed the Sherman Antitrust Congress passed the Sherman Antitrust Act in 1890.Act in 1890.

The law sought “to protect trade and The law sought “to protect trade and commerce against unlawful restraint and commerce against unlawful restraint and monopoly”.monopoly”.

The act was too vague and did little to The act was too vague and did little to curb the power of big business.curb the power of big business.