Carnegie Steel and Vertical Integration
Carnegie Steel is an example of a business that nearly became a monopoly during the industrialization of the Gilded Age. A monopoly is a company that has no competitors. This excerpt explains how Carnegie Steel came to be a monopoly.
As the U.S. entered a period of economic expansion following the Civil War, mass-produced steel became increasingly in demand. Railroads expanded westward, urban populations grew, necessitating the introduction of skyscrapers and thus more structurally resilient materials…
Carnegie Steel…became the dominant steel supplier in the U.S. through a vertically-integrated manufacturing process that consistently incorporated the latest technological innovation.
Steel is a commodity product, so successful business is built on low-cost production. Carnegie executed on its business model in two main ways. The first was owning raw material supply. The steel-making process requires three ingredients: iron ore, coal, and lime; and both iron ore and coal had to be refined before use in steel-making. Second, Carnegie was able to generate unparalleled scale via productivity gains and capacity expansion, creating pricing power…
“Carnegie Steel: Building a Modern America.” Harvard Business School, Digital Initiative, 2015.
Question 1
What happened in this period that increased the demand for steel?
Question 2
How might owning the raw materials for steel, such as iron ore and coal, help Carnegie Steel become a monopoly?
Question 3
The excerpt explains that Carnegie Steel was productive, which led to low prices. How might low prices help Carnegie Steel become a monopoly?
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