Lecture 7: History of American Business
The Rise of Big Business: Morgan, Stanley, and
ABOUT THE MIDTERM:
There will be a Short Answer Section and ID section. The short answer part will be on its own
piece of paper. NEED A BLUE BOOK for ID’s. Short answer sections will have a right and
wrong answer. Short answer – multiple choice possibly, or put a series of terms in chronological
order. Should know that cotton gin occurs before nullification crisis. ID questions – will have a
list of terms or people to choose from. You need to identify the term, who or what it is, and why
it is important or relevant in terms of this course. Not just a Wikipedia definition.
The managerial system allowed railroads to cope with the challenge of size. Today we will be
looking at industries that followed the rail industry – oil, steel, and banking.
Where we are going:
1) Characteristics of Big Business
2) How to Get Big – national markets, vertical integration, horizontal integration
3) How to pay for it: Financial Services, JP Morgan
(Here Waterhouse asked the classed what thoughts came to mind when the term “big business”
was mentioned. Some said: Corporations, Monopolies, lobbyists, crossing state and national
borders, economies of scale.)
Characteristics of big business?
big business is rooted in Railroads, Manufacturing, and Banking.
Big Business is also a sort a
fulfillment of the corporate model
. Capital costs are very
large, meaning the businesses are capital intensive. In 1901, a corporation called US Steel
was created. Its market capitalization was $1billion!
(required complex management). Complexity leads to
management restructuring, separation of ownership and control.
Geographic scope of
s. Earlier, manufacturing was fairly localized and even
trade across ocean was relatively localized. By the end of 19
century, though, these
companies have offices in many different places – connected by railroads and telegraphs.
For instance, GE had sales offices in 23 cities 10 years after it was founded in (1890?).