Professional Documents
Culture Documents
The story of James Buchanan Duke provides a revealing example of the rise of a
powerful modern industrial corporation. Duke's achievements basically rested on his
appreciation of the potential of a cigarette-making machine invented by James
Bonsack. Patented in 1882, the Bonsack machine produced, through a continuous
process method, 70,000 cigarettes a day even in its experimental stage. The most
efficient hand worker could only produce 3,000 a day. Soon the Bonsack machine was
spewing out a daily quota of 120,000 cigarettes. In the early 1880s, 15 such machines
could supply the entire world demand.
As a newcomer, Duke was searching for a way to break into the market. The Bonsack
machine looked like a good bet. In 1884, shortly after a sharp reduction in taxes on
cigarettes permitted a major price cut to consumers, Duke installed two Bonsack
machines. He soon realized that they lived up to the inventor's claim. With such
machines, each producing 120,000 cigarettes a day, he could easily saturate the
American market. To test the world market, Duke had already sent a close associate,
Richard M. Wright, on a 19-month tour overseas. At the same time Duke himself
developed machinery to package the first mass-produced tobacco product-packages
that announced the brand and its virtues. In June 1885, Duke made his final move. He
signed a contract with Bonsack to use the machine exclusively to make all his
cigarettes, high quality as well as cheap, in return for a lower leasing charge.
Duke's gamble paid off. Output soared. Selling became the challenge. Even before he
had made his basic contract with Bonsack, Duke built a factory in New York, the
nation's largest urban market, and set up his administrative offices there. He
immediately intensified a national advertising campaign. Not only did Duke rely on
advertising agencies, but his own staff distributed vast quantities of Cards, circulars,
and handbills-all proclaiming the virtues of his brands.
He then began to build extensive sales and buying organizations. Duke followed up the
contacts Wright had made on his trip abroad by signing marketing agreements with
wholesalers and dealers in all parts of the globe. At the same time, he and one or two
other associates established a network of sales offices in the larger American cities.
These offices, headed by a salaried manager, became responsible for both the
marketing and distributing of the product. The office kept an eye on local advertising.
Its salesmen regularly visited tobacco, grocery, drug, and other jobbers and a few large
retailers, to obtain orders. Duke's local sales managers worked closely with New York
headquarters to assure the effective scheduling of the high-volume flow of cigarettes
to jobbers and to a few large retailers.
At the same time that Duke and his close associates were building their sales
organization, they were creating an extensive purchasing network in the bright leaf
tobacco region of the southeastern United States. Tobacco, after its annual harvest,
was normally dried and cured before being sold to manufacturers. The timing of the
process varied from several months to two or three years, according to the leaf and the
quality desired. Because the supply of cured tobacco depended both on the size of the
crop and the availability of curing facilities, prices fluctuated widely. By building its own
buying, storing, and curing facilities, Duke's company was able to purchase directly
from the farmers, usually at auctions, and so reduce transaction costs and
uncertainties. What counted more was that the company was assured of a steady
supply of cured tobacco into its factories in Durham and New York.
By combining mass production with mass distribution, Duke was able to maintain low
prices and reap high profits. By 1889, Duke's sales topped $4.5 mil- lion, and his profits
came to around $400,000 despite heavy advertising costs. To compete, other cigarette
manufacturers had little choice but to follow Duke's strategy. They quickly turned to
machine production and began to build and enlarge their sales and purchasing
organizations. As packages of cigarettes were priced in 50 increments-5¢ for the
standard package and 104 to 25¢ for the better brands-there was little room for price
cutting, particularly in the all-important cheaper brands. The manufacturers
concentrated on advertising instead. In 1889, Duke's advertising cost rose to $800,000
a year. Here his high volume and resulting cash flow gave him an advantage, for he had
a larger cash surplus than the others to spend on advertising. But the cost of these
sales campaigns reduced profits.
The desire to control this competition caused Duke and his four competitors to merge
in 1890, forming the American Tobacco Company. The oligopoly of cigarettes had
become a monopoly. For a brief time, the constituent companies continued to operate
independently; but after 1893, their functional activities were consolidated into the
Duke manufacturing, sales, and leaf (purchasing) departments. As had been the case
with railroads and would be again in manufacturing, the largest of the early enterprises
became the core organization for continuing growth. The enlarged, centralized,
departmentalized company, operating from its New York corporate central office,
proved extraordinarily profitable even during the economically depressed years of the
1990s. Profits from cigarettes al- lowed Duke to install new methods of production and
distribution in other branches of the tobacco trade. By 1900, the American Tobacco
Company had come to dominate the industry completely, except for the making of
cigars.
As Richard Tennant, the most careful student of the modern American tobacco
industry, points out: "The struggle for the cigar industry was the one case in which the
Trust's methods met with complete defeat." Despite the strongest of marketing efforts,
including the creation of an expensive nationwide retailing organization (United Cigar
Stores Company with nearly 400 retail stores), and de- spite the most destructive of
price wars, American Tobacco never obtained more than 14 percent of the nation's
cigar trade.
Duke's mistake was his failure to appreciate fully that the American Tobacco Company
could use little of its existing organization to make and sell cigars. The processes of
both production and distribution were different. Plug, smoking tobacco, and snuff all
used high-volume continuous processes of manufacturing and packaging. Their leaf
came from the same areas in the southeastern United States, and they were sold to
much the same markets and through much the same jobbers as cigarettes. Cigars, on
the other hand, were produced by skilled work men in small batches. Their leaf came
from Cuba, Puerto Rico, and scattered areas in the northeastern United States. It was
cured quite differently from other types of tobacco. Finally, cigars traditionally had
been sold by their makers in small lots to retailers. Like wines, the many different
brands had distinctive tastes and flavors. Each appealed to a different type of customer.
Cigars were not a product that could be mass produced and mass distributed, nor
could the raw materials be purchased in bulk. Since these processes did not lend
themselves to high-volume throughput, administrative coordination did not reduce
costs and so raise barriers to entry. Neither massive advertising nor effective
organization could bring the dominance of a single firm in the cigar business.
The history of the match industry closely parallels that of the cigarette industry
except that the development of fully automated machinery for mass production came
more slowly as did packaging and branding. After the Civil War, machines began to
replace hand production. By the early 1870s, four machine-using firms accounted for
80 percent of the industry's output. Each had its own specialized machinery, and each
concentrated on a single regional market. After a brief period of competition for the
national market, these four combined in 1881 to form the Diamond Match Company.
The leading entrepreneurs in the new firm, E. B. Beecher, William Swift, and Ohio
Columbus Barber, then agreed on the strategy of improving the basic machinery by
combining the best attributes of the different machines used by the erstwhile
competitors. The result was, in the words of the firm's historian, "The beginning of the
modern continuous, automatic match machine that revolutionized the match industry."
At the same time the company developed comparable machines for the manufacture
of paperboard and strawboard boxes. By the early 1890s, 75 workers could produce
two million filled matchboxes a day, an output equivalent to that of 500 workers prior
to the introduction of the new machines. Production was then consolidated in large
plants. In 1880, there were over 30 match factories. By 1900, production was
concentrated in one giant plant at Barberville, Ohio, and three smaller ones. By then,
Barber, Beecher, and Swift had built a sales organization that, like Duke's, was
responsible for establishing and maintaining contact with wholesalers for local
advertising and for coordinating the flow of packages to the jobbers and often the
retailers. Its buying organization began to purchase its wood paper and chlorate of
potash directly from producers; the latter material buyers obtained entirely from
Europe. Soon the company had its own sawing and woodworking mills in Wisconsin
and New England. In the 1890s, it began to construct the largest match factory in the
world in Liverpool. By the end of the decade, it had plants in Germany, Canada, Peru,
and Brazil.
These new continuous-process plants had more immediate impact on the structure of
the oatmeal than the flour industry. For a while at least, the demand for flour was high
enough and the costs reduced enough by the new machinery that the "new process"
millers had little difficulty in disposing of their output by selling in bulk to wholesalers.
On the other hand, the demand for oatmeal was more limited. A new market had to be
found if the great volume of output from the new machines was to be sold. As a result,
the modern breakfast cereal industry was invented.
The pioneer in developing this product was Crowell, the builder of the first continuous-
process mill. While Ferdinand Schumaker, the largest producer, continued to market in
the accepted way of selling in bulk through wholesalers, Crowell packaged and then
advertised his brand, Quaker Oats, nationally as a breakfast cereal-a product that was
even newer to American tastes than the cigarette. In advertising Quaker Oats, Crowell's
staff used, in the manner of Duke, box-top premiums and prizes and added
testimonials, scientific endorsements, and the like. The company set up sales offices in
the United States and abroad. Its managers were expected, as were Duke's, not only to
maintain contact with jobbers but also to schedule flows from the factory to the
jobbers. At the same time Crowell built a buying organization that soon came to
include "fieldmen" who purchased directly from the farmers in the grain-growing states
and buyers who had seats on the Minneapolis and Chicago grain exchanges.
The first enterprises to utilize fully the "automatic-line" canning factory were
those that developed a product line which permitted more than seasonal operations.
The most successful of these were H. J. Heinz and Company of Pittsburgh and the
Campbell Soup Company of Camden, New Jersey. In 1880, Henry John Heinz, a small
processor of pickles, relishes, sauces, and similar products for the local Pittsburgh
market, was still recovering from his bankruptcy in 1876. In the early 1880s, he
adopted new continuous canning and bottling processes, built a network of sales
offices to sell in the national market, extensively advertised his many brands, and
created a large buying and storing organization to assure a steady flow of vegetables
and other foodstuffs into his factories. By 1888, Heinz had become one of Pittsburgh's
most substantial citizens and was completing one of the largest factories in that
industrial center. The company has remained to this day one of the largest food
processors in the country.
Less is known about the beginning and growth of the Campbell Soup Company; but it
appeared at almost the same time and became large in the same way. It has long
remained one of the major business enterprises in the Philadelphia area, and the
Dorrance family, who had joined with Joseph Campbell to found and operate the firm,
has remained one of the city's wealthiest clans.
Other processors who used the large continuous canning plants were those who
produced condensed canned milk and canned meats. In 1882, two of the smaller meat
packers, Libby, McNeil & Libby and Wilson & Company, began volume production of
canned meats in Chicago. At the same time the pioneer in the condensing of milk, the
Borden Milk Company, greatly enlarged its operations and expanded and rationalized
its marketing and purchasing organizations. It did so partly because of the expanding
market but also because foreign enterprises had moved across the sea to exploit the
American trade.
In that decade, both the Anglo-Swiss Condensed Milk Company (a forerunner of
Nestlé) and the Helvetia Milk Condensing Company (the precursor of two American
firms, the Pet Milk Company, and the Carnation Milk Company) set up plants and sales
organizations in the United States.
Where canning remained seasonal, as was the case for most vegetables, fruit, and fish
products, the large canning company did not appear. Instead, canneries came to
receive their cans and canning equipment from two large can making companies,
American Can and Continental Can. American Can. whose first president was Edward
Norton, the inventor of the "automatic-line" process, resulted from a merger in 1901.
Continental Can was formed in 1906. Only those companies which had early in their
history developed products that could be produced year-round continued to remain
large and dominant firms. As late as the 1950s, the largest users of cans still included
Campbell Soup, H. J. Heinz, Carnation, Borden's. Pet Milk, and Libby, McNeil & Libby. All
but the last have made, and some still are making, their own cans.
Thus, during a very short period in the 1880s, new processes of production and
distribution had transformed the organization of a number of major Ameri can
industries-tobacco, matches, grain milling, canning, soap, and photography These
changes were revolutionary, and they were permanent. The enterprises that pioneered
in adopting and integrating the new ways of mass production and mass distribution
quickly became nationally known. By 1900, they were house hold words. Almost a
century later the names of American Tobacco, Diamond Match, Quaker Oats, Pillsbury
Flour, Campbell Soup, Heinz, Borden's, Carnation, Libby, Procter & Gamble, and
Eastman Kodak are still well known.
While the mass producers of semiperishable packaged products continued to use the
wholesaler to handle the physical distribution of their goods, even after they had taken
over that middleman's advertising and scheduling functions, the makers of more
perishable products, such as meat and beer, in most cases by-passed the wholesaler
altogether. The market for perishable products expanded as the railroad and telegraph
networks grew. As early as the 1850s, crude refrigerator cars were used to bring milk,
butter, and meat to urban markets. In the 1870s, when the direct movement of cars
over long distances became possible, western meat packers began to ship fresh meat
to the eastern cities. Then, in 1881, the modern refrigerated car made its appearance.
Gustavus F. Swift hired Andrew J. Chase, a leading refrigeration engineer, to design a
car to carry Swift's dressed beef from Chicago to Boston. Again, the 1880s were the
crucial decade.
The refrigerator car, however, was not the reason why Swift became the innovator in
high-volume, year-round production of perishable products. He became the first
modern meat packer because he was the first to appreciate the need for a distribution
network to store meat and deliver it to the retailers. He was the first to build an
integrated enterprise to coordinate the high-volume flow of meat from the purchasing
of cattle through the slaughtering or disassembling processes and through distribution
to the retailer and ultimate consumer.
When Gustavus Swift, a New England wholesale butcher, moved to Chicago in 1875,
nearly all meat went East "on the hoof." Western cattle were shipped alive by rail in
cattle cars to local wholesalers who did the butchering and made de liveries to
retailers. The economies of slaughtering in the West and shipping the dressed meat
East were obvious. Sixty percent of an animal was inedible, and cattle lost weight and
often died on the trip east. Moreover, the concentration of butchering in Chicago and
other western cities permitted a high-volume, continuous operation, which not only
lowered unit cost but also made possible fuller use of by-products.
To carry out his strategy, Swift, who had begun eastern shipments in 1878, not only
concentrated on improving the refrigerated car but began to build a network of branch
houses, first in the Northeast and then after 1881 in the rest of the country. Each house
included refrigerated storage space, a sales office, and a sales staff to sell and deliver
the meat to the retail butchers. grocers, and other food shops. Swift soon
supplemented this distributing and marketing network with "peddler car routes,"
which distributed dressed meat in small lots by refrigerator car to small towns and
villages.
In executing his plan, Swift met with the most determined opposition. Rail roads,
startled by the prospect of losing their livestock business, which was an even greater
producer of revenue than grain on the route from the West to the East, refused to
build refrigerated cars. When Swift began to construct his own, the Eastern Trunk Line
Association refused to carry them. Only by using the Grand Trunk, then outside of the
association, was Swift able to bring his cars East. At the same time he had to combat
boycotts by local wholesalers who, in 1886, formed the National Butchers' Protective
Association to fight "te Trust." These butchers attempted to exploit a prejudice against
eating fresh meat that had been killed days or even weeks before more than a
thousand miles away.
Nevertheless, high quality at low prices soon won out. Though Swift did rely on
advertising to counter prejudice against his product, it was clearly the prices and
quality made possible by high-volume operations and the speed and careful scheduling
of product flow that won the market. Once the market was assured, Swift had to
expand his production facilities to keep up with demand. He increased his speed of
throughput by subdividing the processes of butchering and by using moving
"disassembly" lines. In the 1880s and early 1890s, Swift & Company built new packing
plants in six cities along the cattle frontier. The company then bought into adjoining
stockyards where men from its purchasing department became experts in buying cattle
in volume.
Other packers realized that if they were to compete with Swift in the national market,
they must quickly follow his lead. By the end of 1882, Philip D. Armour of Chicago and
George H. Hammond of Detroit were beginning to build comparable networks of
branch houses and to compete with Swift for the best locations along the railroad lines.
Nelson Morris of Chicago and the two Cudahy brothers of Omaha constructed similar
networks in the mid-1880s. The oligopoly was rounded out when the New York firm of
Swartschild and Sulzberger completed a comparable integrated national enterprise in
the early 1890s. Except for Hammond, who died in 1886, all these entrepreneurs
quickly enlarged their processing facilities, built new packing plants in other western
cities, bought into the stock yards, and expanded their fleet of refrigerated cars. Well
before the end of the 80s, a small number of very large integrated meat-packing firms
dominated the dressed-meat business, and they continued to do so until well into the
20th century.
Improved transportation also encouraged several brewers to enter the national market.
In the 1880s, a new pneumatic malting process increased speed and improved control
in the process of brewing beer. At the same time the development of temperature-
controlled tank cars made it possible to distribute their product nationally. In the
1870s, brewers sold only within a relatively small radius of their plant, relying on
traveling salesmen to sell the product by the barrel to wholesalers. In the 1880s, Pabst,
Schlitz, and Blatz of Milwaukee, Lamp and Anheuser of St. Louis (the able Adolphus
Busch took over Anhcuser in 1880), and Moelin of Cincinnati all began to build a
nationwide distributing network and to use advertising agencies to reach the national
market. For example, in early 1879, Pabst had only one branch, in nearby Chicago. That
year a second was set up in Kansas City. Between 1881 and 1894, the company built 30
more branches in every part of the country. Although Pabst used wholesalers in some
cities, an increasing pro portion of sales came to be made through company offices
that stored, distributed, marketed, and advertised the Pabst product. In 1887, Pabst
went one step further by moving into retailing through purchasing saloons and then
renting them to op erators. In the same years, Pabst and the other national brewers
expanded their purchasing organizations, using them to buy high-quality malt, barley,
rice, hops, and other materials in large quantities with precise specifications. They also
set up barrel-making plants and purchased timberlands. By the 1890s, these integrated
enterprises were, like the meat packers, among the largest businesses in the land.
The other type of manufacturers to by-pass the wholesalers were the makers of
recently invented machines which were produced in volume through the fabricating
and assembling of interchangeable parts. The sales of these mass-produced machines
required marketing services which the existing wholesalers and retailers had difficulty
in providing. The history of the production and distribution of sewing machines, the
first of this type of machinery to be developed, indicates the nature of these marketing
needs. By 1851, sewing machines had been perfected so that they could be sold
commercially; but manufacturers were not able to make them in quantity until the
legal battle over patents was settled in 1854 and a patent pool formed. The winner of
the court trials, Elias Howe, insisted that the pooled patents be released to 24
manufacturers. Nevertheless, the industry became dominated within a very short time
by the three firms that first built marketing organizations- Wheeler & Wilson Co.,
Grover and Baker, and I. M. Singer Company. These manufacturers at first relied on full-
time but independent agents who, though receiving a small salary, were paid primarily
on a commission basis and were solely responsible for marketing activities within their
territories. The manufacturers quickly learned that these agents had little technical
knowledge of the machines. They were unable to demonstrate them properly or to
service and re pair them. Nor were the agents able to provide credit needed if
customers were to pay for these relatively expensive goods in installments.
As an alternative, Grover and Baker set up a company-owned and -operated store or
branch office to provide such services. By 1856, Grover and Baker had already
established such branch offices, as they were called, in 10 cities. In that year Isaac
Merritt Singer decided to follow suit. So, almost immediately, did Wheeler & Wilson. By
1859, Singer had opened 14 branches, each with a female demonstrator, a mechanic to
repair and service, and a salesman or canvasser to sell the machine, as well as a
manager who supervised the others and handled collections and credits. Nevertheless,
because finding and training personnel took time, these three enterprises continued to
rely heavily on commission agents to market their goods. The swift selection of these
agents and the building of branch stores made it possible for these three firms to
dominate the industry. By 1860, they produced three fourths of the industry's output,
with Wheeler & Wilson manufacturing 85,000 machines in that year and the other two
55,000 apiece.
After 1860, Singer moved more aggressively than the other two in replacing regional
distributors with branch stores supervised by full-time, salaried regional agents.
Edward Clark, Singer's partner and the business brains of the partnership, had become
even more convinced as time passed of the value of relying on his own sales force. The
independent agents had difficulty in supplying the necessary marketing services, and
they failed to maintain inventories properly. They waited until their stocks were low
and then telegraphed large orders, requesting immediate delivery. They seemed to be
always either understocked or over stocked. Moreover, the agents were frustratingly
slow in returning payments made on the machines to the central office.
Therefore, Clark was constantly on the lookout for men he could hire as salaried
"general agents" or regional managers of geographical districts to supervise existing
branch stores and to set up new ones. Where such men could not be found, Clark
continued to rely on independent agents; but he insisted that these dealers set up
branch offices similar to those in a company-managed district.
When Clark became president in 1876, a year after Singer's death, he decided to
eliminate the independent agencies altogether at home and abroad. Singer's central
offices in New York and London had as yet little control over the branch stores of the
independent distributors and, in fact, relatively little control over their own salaried
agents. Little effort had been made to sell in any systematic or standardized way. Little
uniformity existed in sales, accounting. credit policies and procedures. The techniques
of administrative coordination had not yet been perfected. Moreover, in 1877, the last
patents of the 1856 pool were to expire. After that year Singer would have to compete
at home, at it had long done abroad, without patent protection.
Working closely with George Ross McKenzie, a Scotsman who helped to build Singer's
overseas sales organization and who succeeded him as president, Clark gradually
reorganized and rationalized Singer's marketing and distribution network. First, he
completed the replacement of the independent distributors with regional offices
manned by salaried executives. Then he installed everywhere similar branch offices
with teams of canvassers as well as repairmen and accountants. Such offices had
proven particularly successful in Great Britain, an area where Singer had never enjoyed
patent protection. The network made possible aggressive marketing, reliable service
and repair, and careful supervision of cred its and collections; it also assured a steady
cash flow from the field to the headquarters in London, Hamburg, and New York.
In the period immediately after 1878, Clark and McKenzie perfected the procedures
and methods needed to supervise and evaluate this branch office network. In the
United States. 15 different regional "general agencies" reported to the central office in
New York. In Europe and the other parts of the world, branches were supervised by 26
regional sales offices. The managers in charge of those in North ern and Central Europe
reported to headquarters in Hamburg. Those in the rest of Europe, Africa, and the Near
East reported to London, while those in Latin America, Canada, and the Far East were
supervised by the central New York office.
Increased demand in these years caused Singer to expand and systematize its
purchasing operations. By the 1890s, the company had obtained its own timber lands,
an iron mill, and some transportation facilities. These purchases were also paid for
from the ample cash flow provided by sale of the machines. Indeed, the company often
had a surplus, which it invested in railroad and government bonds and even in other
manufacturing firms. Both insiders and outsiders credited Singer's business success to
its marketing organization and abilities.
Organization also appears to have been a critical element in the success of the leading
manufacturer of the most complex agricultural machine, the mechanical reaper.
According to a grandson, who wrote a detailed history of the family enterprise, Cyrus
McCormick came to lead the field because he "had at his back the best business
organization." During the 1850s, the rapid expansion of the rail roads and the telegraph
permitted the inventors of reapers, harvesters, and other agricultural machinery to
build sizable factories for the first time. In marketing their products, McCormick and his
competitors, Obed Hussey, John H. Manny, and Lewis Miller, relied, like the sewing
machine makers, on territorial agents or distributors. The agents received a small
salary, usually $2 a week, plus a 5-10 percent commission. Fully responsible for all sales
activities in their districts, they hired subagents or dealers who made the actual sales,
handled service and repair, granted credit, and supervised collections. McCormick
differed from his competitors in that he kept a closer surveillance over his distributors
through a team of "traveling agents" and through constant correspondence.
The coming of the depression of the 1870s caused McCormick to centralize his sales
organization, which had by that time come to include close to 50 distributing agencies.
At about the same time that Clark and McKenzie began to phase out the independent
distributors at Singer, McCormick decided to replace his regional agents with offices
manned by salaried managers and employees. The sub agents, who were formerly
hired and supervised by the agent, now became franchised dealers. These dealers,
usually local livery men, storekeepers, and the like, signed a contract with the company
directly. The contract stipulated a dealer's du ties in the selling of machines, spare
parts, wire, and later, twine for binding. It normally pledged the dealer to handle only
McCormick reapers and harvesters but permitted him to market other types of
implements made by other manufacturers.
The primary task of the regional office manager was to keep a close watch on the
dealers. He also supervised customer credit and collection and handled local
advertising. That office had a number of salesmen who assisted the dealers and often
made sales on their own account. Finally, the regional office included trained
mechanics who assembled the machines when they arrived from the factory,
demonstrated their operations, and serviced them when needed. During the harvest
season, the factory would normally curtail production and send out skilled men to the
branches to assist in the servicing. (In the mid-1880s, the company employed 140 such
"field experts.") By creating a regional office network, McCormick pioneered in forming
a sales organization to back up franchise dealers, who did the retailing, much as Singer
had innovated in developing its network of company owned and -operated branch
retail stores. In the 1880s and 1890s, McCormick began to extend its sales overseas to
the wheat-growing regions of Europe, Australia, and New Zealand. For foreign
marketing, however, it relied, until the late 1890s, on local independent distributors.
In the late 1870s and 1880s, other manufacturers of harvestors and other relatively
costly agricultural machinery began to build or expand marketing organizations similar
to those of the McCormick company. Walter A. Wood & Co., D. M. Osborne & Co.,
William Deering & Co., producing the new Appleby Twine Binder, and Warder, Bushnell
& Glessner Co., makers of the Champion line, all created national branch office
networks. So did the J. I. Case Threshing Company, Inc. and the three leading makers of
modern steel plows-John Deere & Company, the Moline Plow Company, both of
Moline, Illinois, and the Emerson Brantingham Company of Rockford, Illinois. The three
plow makers quickly moved to making other less complex implements, including drills,
wagons, mowers, and spreaders, in order to use their sales organizations more fully. All
of these firms, like McCormick, began in the 1890s to integrate backward, obtaining
hemp and timberlands and, in some cases, even mines.
The integration of mass production and mass distribution of newly invented office
machines followed much the same pattern as sewing and agricultural machinery.
Scales, letter presses, typewriters, cash registers, adding machines, mimeograph
machines, calculators- all required the building of a large marketing organization if the
product was to be manufactured in volume. And so, the first firms in the field
continued long to be the dominant ones.
The experience of the first mass producer of the earliest business machines, E. & T.
Fairbanks of St. Johnsbury, Vermont, paralleled McCormick's. Fairbanks, a
manufacturer of weighing scales essential to the shipment and sale of goods, began in
the 1850s to sell through regional agencies. Like McCormick, "itinerant agents"
supervised closely their activities. After the Civil War, the firm built a network of
regional branch offices with salaried managers, "scales experts," and canvassers to sell
machines, provide consumer credit and continuing service, and also to assure steady
flow of goods to and cash from the customers. To make full use of its marketing
organization, the company quickly began to develop a full line, selling letter and waybill
presses, warehouse trucks, and "money drawers," the predecessors of the cash
register.
The pioneering firms in the manufacturing of typewriters and cash registers, which set
up their sales forces in the 1880s, relied more heavily on canvassers and small Singer-
like branch offices than did Fairbanks. John H. Patterson attributed the swift growth of
his innovative enterprise, National Cash Register, after 1884-and with it the expansion
of the industry as a whole-to the strength of his canvassing force, the training and
competence of his salesmen, and the ability of his marketing organization to provide
credit and service.
In 1873, the inventor of the typewriter, Christopher L. Sholes, came to the Remingtons
and asked them to manufacture his typewriter at their Illion plant. This time they
moved more slowly, selling the product at first through E. & T. Fairbanks. When, in
1881, the typewriter proved a commercial success, the Remingtons hired a small team
to build a sales force. Because these men concentrated on the home market, they
asked Singer to sell their products abroad. When the Singer company refused, they
began to set up their own marketing organization overseas. In 1886, difficulties in the
gun business, as well as other activities, brought the Remington Arms Company into
bankruptcy. Those men who were developing the typewriter sales organization then
bought out the company's typewriter interests and set up a new firm, Remington
Typewriter Company. Soon their enterprise was as successful as Singer or National Cash
Register. A number of rivals appeared, but only the Underwood Company and the
Wagner Typewriter Company, which built similar sales organizations, succeeded in
becoming significant competitors.
Moreover, financing involved large sums, often requiring extensive credit, which
smaller, nonintegrated producers were unable to provide. Thompson Houston and
Edison Electric and, to a lesser extent, Westinghouse began to finance new local central
power stations in order to build the market for their machinery.