(Micklethwait, 2003)

The company: a short history of a revolutionary idea

CH.4 - UNITED STATES

 Sears, Roebuck
 In 1840 businesspeople relied on the self-coordinating activities done by the
market, as nobody would have thought that a single organizational could coordinate
demand and production between different states across the continent (United States)
 ‘By the First World War, the giant corporation had become the dominant
business institution in America.’
 Why organizations where able to expand?
 Railroads (thanks to electricity and the steam engine)
o First in Britain, then in the US
o The first to employ large armies of full-time managers
o They catalysed the growth of the New York Stock Exchange, as they required
huge sums of capital
o Collusion of big players (Vanderbilt, JP Morgan, Carnegie)
THE RETAILERS BEFORE THE MANUFACTURERS
 Retailers before the manufacturers (examples at page 65)
o 1850-1860 – wholesalers
o 1870-1880 – mass retailers, department stores
o Thanks to new technologies -> stock turnover (the key to success in distrib.)
 Manufacturing / Production
 (Carnegie)
o Carnegie introduced the “line production”, the first to arrange machines and
workers into a sequence that allowed jobs to be broken down into their component
parts. LINK WITH TRANSACTION COST ANALYSIS? (Williamson)
o Requirement of several layers of management
 (Ford)
o Harnessed the power of the “stopwatch” ideas from Principles of Scientific
Management (Taylor, 1911). Improved the assembly line (with conveyors, rollways,
gravity slides) ‘to assure the regular flow of materials’ to reduce the handling
time between the different processes of production.
UNDER ONE ROOF
 The MERGER ERA: Integration of DISTRIBUTION and MANUFACTURING - TRUSTS
o Duke, B in 1881 (cigarettes – the new bonsack machine which increased
productivity) – then merged with 4 competitors to create American Tobacco Company
in 1890
o Vanderbilt (between 1890 and 1904) reunited almost 50 railways companies in
an umbrella corporation
o Rockefeller (in the 1870s) created a cartel of refineries companies in
Pennsylvania and Ohio – became the Standard Oil Trust
 TRUSTS AND UMBRELLA COMPANIES
in New Jersey, where there was the most liberal incorporation law in the country
 In the New York Stock Exchange, shift from Railways companies to
manufacturing companies
o US STEEL COMPANY (Carnegie)
THE BACKLASH
 Growth of labour unions
o The Homestead strike (against Carnegie’s move of cutting wages)

THE POPULARITY OF THE COMPANY

 Although some hostility, companies grew in popularity. Why?
o They tied up with politics (lobbying)
 The Senate became known as the “Millionaire’s Club”
o Corporate social responsibility and social standing
 Employee welfare programs (Carnegie)
 Profit-sharing plans (International Harvester)
 Philanthropy of the robber barons (business magnates), criticised for
pursuing social ambition instead of genuine well-doing
- Carnegie: libraries, organs
- Wharton: business school in Philadelphia
o They made Americans richer, they improved the standard of life
 Ford with cars (1917)
 Eastman with cameras (1900)
o High barriers of entry, as only other huge companies could confront with the
current leaders

CH. 5 - BRITAIN, GERMANY, JAPAN

BRITAIN

 Led the way in industrialization

 Failed to produce the big industrial firms, why?
o Less pressure to produce corporate giants
o The country’s preference for family firms and personal management
o Prejudice against industrial capitalism
o Personal management remained predominant until the end of the Second World
War, calling on the help of external managers only in extremis. (Although some
exceptions, like Cadbury’s chocolate)
 British business owners had different goals:
o For Americans, companies were an end in itself, ‘to be tended and grown’
o For Britons, ‘companies were a means to a higher end: a civilised existence.
They were there to be harvested’
 In Britain, there were no focus/interest on Successful Business and
Management practices
o Distaste and distance from commercial activities, seen as less valuable than
the classic and natural subjects
o Still in the 1930s there was little interest in management training schemes
for university graduates
 Trade unions born towards the end of 19th century, (Labour Party founded in
1900)
 Britain could still sport some advantages on America:
o Prominent stock market (bigger than US)
o Some successful British company were better than their American counterpart:
 Imperial Tobacco > American Tobacco
 British Petroleum > Exxon
o They achieved so because of free-trade pressure, absent in America at that
time
o The pressure of going public on the stock listing

GERMANY

 Unified only in 1871, but in the following forty years it became Europe’s
leading industrial power
o Siemens: complex electrical equipment
o Leverkusen, Ludwigshafen, Frankfurt: chemical works
o Ruhr, along the Rhine: machinery works and steel mills
 Cooperative management (more tolerant than the UK, there were no anti-
monopoly legislation)
 Differences of Germany vs UK
1. Germany open to collaboration between companies, which was restricted in the
UK
2. Insufficiency of the capital market to power the German industrialization (in
contrast with the highly-developed London Stock Exchange). As a result, national
German banks stepped into companies to propel their growth
3.

JAPAN

 Although some hostility, companies grew in popularity. Why?

o They tied up with politics (lobbying)
 The Senate became known as the “Millionaire’s Club”
o Corporate social responsibility and social standing
 Employee welfare programs (Carnegie)