Credited for building America and leading through its industrial times are two of the wealthiest men America has ever seen. Finding a niche in the market and profiting largely is just one factor in what makes John D Rockefeller and Andrew Carnegie so great. Both entreupreuners and later philanthropists were amazing figures in history each shaping America with their oil and steel companies. Known as Robber Barrons since they were famous for creating monopolies and eliminating any competitors in their industry. John D. Rockefeller considered one of the most wealthiest person in history was accredited for making his money in the oil industry. Founder of the Standard Oil company he was known for being the largest tycoon in the oil industry beating his competitors and proving his skill in demoliting competition. Andrew Carnegie was a Scottish American industrialist and he amassed a great fortune in the steel industry exploiting his business Carnegie Steel Company and having a knack for taking over the markets.
You are watching: Which steel tycoon used vertical integration to increase profits?
One similarity between Carnegie and Rockefeller is that they started their careers as hard working individuals willing to do any work available to make money. They were both poor and worked their way up the ladder to become industry leaders. This proved to be the best of them as their ethics and ability to be alive during the industrial time led them to find markets where there needed to be change. Rockefeller started his career selling candy, raising reekers and doing odd jobs for neighbors. He started making money at a young age to pay for his expenses and help his family any way he can. He founded his business Standard Oil Company in 1870 by borrowing money from family, investors and personal savings when he was interested in the oil markets
Carnegie started his career by immigrating to the U.S from Scotland and also quickly began working at different jobs to provide money for his poor family. He slowly saved up his money and began his career by making investments in various products that needed improvement. One idea involved railroad expansion and increased trip duration. Carnegie created comfier sleeping carts and enjoyable seats so passengers would not complain from discomfort of long train rides. As his investments paid off he began to diversify and expand his portfolio. He then began to see the oppertunity in steel and how the industrial period changed the way in creating bridges and buildings which led to a largely need for steel supplies. Carnegie moved to New York and there began to open his Carnegie Steel Corporation in 1892 expanding and innovating steel production for quality manufacturing. Both started with nothing and with wise investment decisions started their companies.
One difference between them is their tactics for increasing their takeover in their industries of business. Rockefeller used a tactic known as horizontal integration while Carnegie used vertical integration. Horizontal integration was when a company looked to acquire a similar company in the industry to increase its size diverisy its products achieve economic scale reduce competition and gain access to newer consumers and markets. Vertical integration is when a company acquires another company that operates in the same industry to strengthen its supply chain, reduce promotion costs, and capture all profits by its access to new distribution channels.Difference between vertical and horizontal integration business tactics. Rockefeller used horizontal integration and Carnegie used vertical integration to expand both businesses.
Carnegie used vertical integration by owning US STEEL. He was able to foresee the demand for steel and the opportunities it can bring to America. To control much of the steel industry as he could Carnegie began buying out as many suppliers as he could by being in partnerships with various companies and slowly increasing his stake as a shareholder by buying out different investors eventually controlling majority of the company. This usually occurred when the business was having a tough time and was in need of money. Carnegie began controlling all the steps to make the final production of steel so he didn’t need to go through anyone to help him make his steel and in return reducing expenses. He controlled the raw materials and the transportation systems of the steel business which included coal fields, iron mines, railroad lines, and ore freighters. Eventually creating a monopoly in the steel industry because of his practices. Carnegie at his peak was worth around $310 billion.
This video shows the exact way both tycoons built America with their business tactics. Rockefellers and Carnegies horizontal and vertical integration led them to eliminate small business startups and join the Robber Barrons club with other tycoons including J.P Morgan and Charles Schwab.
Rockefeller’s business practice of horizontal integration began to increase his share on all major oil products. One man began single handedly controlling mostly all oil in America and dominated anyone in the industry discouraging others to open related oil business. He had the whole creation of oil under his control from refinery, products, and delivery. This allowed him to control the prices of oil and eliminating competitors of his. Rockefeller played dirty to get ahead and believed in primitive savagery where only the fittest should survive. He also believed in laissez-faire where the government should stay out of his industry and let the people control the markets which is what led him to control 96% of all oil in America. He began to rival refineries and developed companies to specifically distribute his products effectively by transporting, producing, and marketing his products all by himself without paying other companies to do any work for him. He controlled everything in the process of making oil which led him to rely on only himself. He then started buying out his competitors to control the large marketshare of the oil industry. These methods in controlling the oil industry allowed Rockefeller to create a monopoly on the oil industry which began raking him billions a year in profits. At his peak he was worth about $400 billion.
Another similarity between both individuals is their ruthless activity in their business. Rockefeller was always killing his competitors business by opening near them and lowering prices so low that he was essentially losing money. With prices this low eventually the competing store had no customers and went bankrupt. After they closed down he racked up the price of oil sky high since anyone who wanted oil had to buy only from him since he controlled all of the oil supply.
Carnegie was ruthless in that he dealt with his employees poorly. He gave them nothing but a cold lack of diplomacy. He encouraged rivalry among his workers because he knew he would get a a better profit from them the more they compete. This rivalry caused workers not to talk to each other and competing causing Carnegie to increase his wealth as workers tired themselves to make the boss richer. Carnegie often cut his employers wages even though he donated mostly all his money to the poor later in life.
Another similarity between both individuals is their philanthrophy activity. After Carnegie sold his company to J.P Morgan for $480 million he began to focus on the public and started funding libraries, institutions and charities. Some famous ones are Carnegie Hall, Carnegie library, Carnegie Institution for Science, Carnegie Mellon University and more. His twelve figure fortune turned way smaller as he gave nearly all his money away. He believed in “Gospel of Wealth” which meant that wealthy people were morally obligated to give their money back to society. Rockefeller has also given large amounts of contributions to various projects in dollar amount but nowhere near the donations of Carnegie. Some famous contributions he made was Rockefeller University, Rockefeller center, Rockefeller Foundation, University of Chicago and more. Rockefeller although donated a lot he kept the majority of his money in investments.
Overall you can see the big tycoons of the oil and steel industry obtaining fortunes in the hundred billion dollars. With Rockefeller ability to put all his time energy into his company to further his success and Carnegie abilities to maximize a persons abilities through competition both of them proved to destroy competition and rise quickly. Their stories are remarkable since both leaders started with absolutely nothing and alone conquered an industry that was learned by their mistakes and successes. Whether it be through their tactics of creating monopolies or eventually donating fortunes, history will never forget the many contributions both Rockefeller and Carnegie presented and the way they built America with their companies.
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