When America's industrial growth boomed, only the large businesses could afford the factories, machinery, and labor.

Railroad

The railroad industry was a perfect example

A large enterprise with enormous costs.

This led to new idea in management - departmental mangers responsible for part of the operation.

Merger Movement

The best way companies could survive bad economic times, like the depression of the 1870s, was to merge companies - combining several competing firms under a single head.

Best example of merging was John D. Rockefeller

In the 1860s he started a kerosene business that became Standard Oil in Ohio.

There were hundreds of oil refineries in Ohio and Pennsylvania.

By 1870 his company, Standard Oil, had gobbled up all in Ohio.

By 1882 his company owned most throughout the country.

Rockefeller could demand rail shipping rates of 10 cents a barrel while the few competitors were asking 35 because he dominate the market.

Horizontal and Vertical Integration

Horizontal - like Rockefeller: merging all the competing companies in one area of business into one

Vertical - controlling all aspects of production form raw materials to final delivery of the product

Andrew Carnegie had the most success with vertical

bought up coal mines and iron ore deposits for his steel mills, then bough railroads and ships to transport raw materials and ship products to market.

He owned every aspect of the steel industry.