Lesson 3: Big Business

Big Business

Open Ended

Warm-Up Activity

In 1901, J.P. Morgan created the first-ever billion-dollar company - U.S. Steel Corporation. This groundbreaking achievement marked a new era in American business history, as Morgan merged Carnegie Steel with other major steel companies to form this massive enterprise worth $1.4 billion.

Imagine Being a Billionaire in 1901

Let's look at this intriguing question: What would you do with a billion dollars today? Write your answer in 2 to 3 sentences.

Lesson Objectives

At the end of this lesson;

●I will be able to analyze the growth of corporations and their impact on the American economy.

●I will be able to evaluate the economic principles and practices that
drove the rise of big business.

Discussion Question

Alright class, let's imagine you're starting your own company in the late 1800s.

I need three volunteers to come to the front.

Volunteer 1: You control all the steel production in the country.
Volunteer 2: You own all the railroads.
Volunteer 3: You have all the money!

Now, the rest of you are small business owners, farmers, and workers just
trying to make a living. How do you think these three people might impact your
lives?

The Rise of Big Business

By 1900, corporations revolutionized the American economy through

vast factory complexes and distribution networks. These

organizations, owned by stockholders through shares, could raise

substantial capital to invest in new technologies and large workforces.

This structure enabled economies of scale, allowing companies to

produce goods more efficiently and at lower costs, particularly

benefiting them during economic downturns.

John D. Rockefeller

Key Business Leaders

Andrew Carnegie

Scottish immigrant who rose from textile factory
worker to Pennsylvania Railroad superintendent
under Thomas Scott's mentorship.

Revolutionized steel production using Bessemer
process and implemented vertical integration by
acquiring mines, quarries, and transportation.

John D. Rockefeller revolutionized the oil industry through his

strategic use of horizontal integration. Through Standard Oil, he

systematically acquired competing oil refineries, creating a

powerful monopoly. His business acumen led to controlling

approximately 90% of U.S. oil refining by 1880, demonstrating

how horizontal integration could dominate an entire industry.

This unprecedented market control eventually led to discussions

about monopoly regulation in American business.

Vertical and Horizontal Integration

​Vertical Integration

​Horizontal Integration

Multiple Choice

Which of the following BEST describes Andrew Carnegie's approach to business growth?

• Prioritizing innovation in management techniques over technological advancements.

• Focusing on a single stage of production to maximize efficiency. 

• Controlling all aspects of the steel production process from raw materials to transportation.

• Building alliances with competitors to establish market dominance.

Multiple Choice

Based on the information provided, what can be inferred about Andrew Carnegie's views on wealth and industry?

• He believed that wealth should be primarily used for philanthropic endeavors.

• He recognized the interconnectedness of various industries and the importance of controlling resources and transportation.

• He prioritized technological innovation above all other aspects of business.

• He was primarily motivated by a desire to improve the lives of industrial workers.  

Open Ended

Highlight one similarity and one difference between Andrew Carnegie and John D Rockerfeller

Business Organizations and Trusts

Fear of Monopolies

Formation of Trusts

●Americans feared monopolies could control
product prices

●Large corporations could manipulate
politicians and laws

●Supporters argued competition kept prices
low

●States banned companies from owning other
stocks

●Standard Oil created first trust in 1882

●Trusts became new way to merge businesses

Holding Companies

In 1889, New Jersey's new incorporation law allowed corporations to

own stock in other businesses, without directly engaging in

production. This legal framework facilitated the creation of holding

companies, which manage and control other companies by owning

their stock. These entities effectively merge different companies into

one large enterprise, enhancing control and strategic management

while bypassing the need for physical production.

Open Ended

How did New Jersey's 1889 incorporation law contribute to the development of holding companies, and what advantage did this structure offer to businesses during the late 19th century?

Example Scenario: The Transportation Tycoon

●Entrepreneur: Thomas, a former railroad worker.

●Business Idea: Expanding a small regional railroad network into a transcontinental transportation system.

●Resources: Experience in railroad operations, some existing rail lines, and connections with investors.

Questions:

1.What type of business structure would be most advantageous for this entrepreneur (e.g., corporation,
partnership, etc.)? Justify your answer.

Answer: Structure: Corporation – crucial for attracting investment for large-scale railroad expansion.

2.What business practices (e.g., vertical integration, horizontal integration, trusts) could this entrepreneur use
to grow their business and maximize profits? Explain how these practices would benefit the business.

Answer:Practices: Horizontal integration (consolidating smaller railroads), potentially forming alliances or trusts
with other railroad companies.

3.What potential challenges or ethical considerations might arise from the chosen business practices?

Answer:Challenges: Securing land rights, dealing with government regulations (or lack thereof), competition from
other transportation businesses.

Open Ended

1. Task: Analyze the scenario and answer the questions that follow:

   1. What type of business structure would be most advantageous for this entrepreneur (e.g., corporation, partnership, etc.)? Justify your answer.

   2. What business practices (e.g., vertical integration, horizontal integration, trusts) could this entrepreneur use to grow their business and maximize profits? Explain how these practices would benefit the business.

   3. What potential challenges or ethical considerations might arise from the chosen business practices?

      Scenario 1: "The Steel King"

      Entrepreneur: John, an ambitious engineer.

      Business Idea: Building a large-scale steel production company.

      Resources: Access to iron ore deposits, a small factory, and some initial investment capital.

Individual Activity

Google Form

​ Complete the Google Form Assigned to you on Google Classroom

Closing

1. What was the first modern big business enterprise in the United States?

2. How did the corporation law changes in the mid-19th century affect business formation?

3. What was the "great merger movement" and when did it occur?

4. Who was Andrew Carnegie and what was his contribution to American business?

5. What role did the New Jersey incorporation law of 1889 play in business development?

6. How did J.P. Morgan contribute to the formation of large-scale monopolies?

7. What was the purpose of a holding company in the late 19th century?

8. How did the factory system change the nature of manufacturing in the early 19th century?

9. What was the significance of the Standard Oil Trust in American business history?

10. How did the rise of big businesses impact retail in the late 19th century?

Final Assessment

Quizizz

Complete the question in the Quizizz assigned to you in Google Classroom.