What Made Standard Oil A Horizontal Integration Monopoly?

What Made Standard Oil A Horizontal Integration Monopoly
What made Standard Oil a horizontal integration monopoly? It owned ninety percent of US oil refineries. In which business did Andrew Carnegie create a monopoly?

Was Standard Oil horizontal integration?

This article is about the oil company that was dissolved in 1911. For successor companies with similar names, see Standard Oil (disambiguation),

Standard Oil Company, Inc.

  • Corporation (1872)
  • Business trust (1882–1892)
  • New Jersey Holding Company (1899–1911)
Industry Oil and gas
Founded January 10, 1870
  • John D. Rockefeller, Co-founder & chairman
  • Stephen V. Harkness, Co-founder & initial investor
  • Henry M. Flagler, Co-founder & senior executive
  • William A. Rockefeller, Co-founder, senior executive & New York Representative
  • Samuel Andrews, Co-founder, chemist & inaugural chief of refining operations
Defunct 1911 ; 112 years ago
Fate Split into 43 different companies ; Standard Oil of New Jersey (then the controlling entity) later became ExxonMobil
Successor 43 successor entities
  • Cleveland, Ohio (1870–1885)
  • New York City, New York (1885–1911)
Key people
  • John D. Archbold, vice president
  • Charles Pratt, senior executive
  • Henry H. Rogers, senior executive
  • Oliver H. Payne, senior executive
  • Daniel O’Day, senior executive
  • Jabez A. Bostwick, senior executive & first treasurer
  • William G. Warden, senior executive
  • Jacob Vandergrift, senior executive
  • Fuel
  • lubricant
  • petrochemicals
Number of employees 60,000 (1909)

Standard Oil Company, Inc., was an American oil production, transportation, refining, and marketing company that operated from 1870 to 1911. At its height, Standard Oil was the largest petroleum company in the world, and its success made its co-founder and chairman, John D.

Rockefeller, among the wealthiest Americans of all time and among the richest people in modern history, Its history as one of the world’s first and largest multinational corporations ended in 1911, when the U.S. Supreme Court ruled that it was an illegal monopoly, The company was founded in 1863 by Rockefeller and Henry Flagler, and was incorporated in 1870.

Standard Oil dominated the oil products market initially through horizontal integration in the refining sector, then, in later years vertical integration ; the company was an innovator in the development of the business trust, The Standard Oil trust streamlined production and logistics, lowered costs, and undercut competitors.

  • Trust-busting ” critics accused it of using aggressive pricing to destroy competitors and form a monopoly that threatened other businesses.
  • Rockefeller ran the company as its chairman, until his retirement in 1897.
  • He remained the major shareholder, and in 1911, with the dissolution of the trust into 43 smaller companies, Rockefeller became the richest person in modern history, as the initial income of these individual enterprises proved to be much bigger than that of a single larger company.

Standard Oil of New Jersey, the entity controlling Standard Oil at the time of the breakup, has since continued on and today is known as ExxonMobil, the largest investor-owned oil company in the world. Many other companies across multiple sectors are either direct descendants of Standard Oil (such as Chevron and Marathon Oil ) or have acquired a Standard Oil descendant (such as BP and Unilever ).

What was horizontal integration in oil industry?

What Is the Basic Difference Between Horizontal and Vertical Integration? – Horizontal integration is an expansion strategy that involves the acquisition of another company in the same business line. Vertical integration is an expansion strategy where a company takes control over one or more stages in the production or distribution of its products.

Who made his fortune in the oil industry he utilized horizontal integration to create a monopoly?

The Bessemer Process – When William Kelly and Henry Bessemer perfected a process to convert iron to steel cheaply and efficiently, the industry was soon to blossom. Carnegie became a tycoon because of shrewd business tactics. Rockefeller often bought other oil companies to eliminate competition.

  1. This is a process known as horizontal integration,
  2. Carnegie also created a vertical combination, an idea first implemented by Gustavus Swift,
  3. He bought railroad companies and iron mines.
  4. If he owned the rails and the mines, he could reduce his costs and produce cheaper steel.
  5. Carnegie was a good judge of talent.

His assistant, Henry Clay Frick, helped manage the Carnegie Steel Company on its way to success. Carnegie also wanted productive workers. He wanted them to feel that they had a vested interest in company prosperity so he initiated a profit-sharing plan.

Why did Rockefeller apply horizontal integration to the oil industry?

J. Pierpont Morgan – Unlike Carnegie and Rockefeller, J.P. Morgan was no rags-to-riches hero. He was born to wealth and became much wealthier as an investment banker, making wise financial decisions in support of the hard-working entrepreneurs building their fortunes.

  • Morgan’s father was a London banker, and Morgan the son moved to New York in 1857 to look after the family’s business interests there.
  • Once in America, he separated from the London bank and created the J.
  • Pierpont Morgan and Company financial firm.
  • The firm bought and sold stock in growing companies, investing the family’s wealth in those that showed great promise, turning an enormous profit as a result.

Investments from firms such as his were the key to the success stories of up-and-coming businessmen like Carnegie and Rockefeller. In return for his investment, Morgan and other investment bankers demanded seats on the companies’ boards, which gave them even greater control over policies and decisions than just investment alone.

There were many critics of Morgan and these other bankers, particularly among members of a U.S. congressional subcommittee who investigated the control that financiers maintained over key industries in the country. The subcommittee referred to Morgan’s enterprise as a form of “money trust” that was even more powerful than the trusts operated by Rockefeller and others.

Morgan argued that his firm, and others like it, brought stability and organization to a hypercompetitive capitalist economy, and likened his role to a kind of public service. Ultimately, Morgan’s most notable investment, and greatest consolidation, was in the steel industry, when he bought out Andrew Carnegie in 1901.

Initially, Carnegie was reluctant to sell, but after repeated badgering by Morgan, Carnegie named his price: an outrageously inflated sum of $500 million. Morgan agreed without hesitation, and then consolidated Carnegie’s holdings with several smaller steel firms to create the U.S. Steel Corporation.U.S.

Steel was subsequently capitalized at $1.4 billion. It was the country’s first billion-dollar firm. Lauded by admirers for the efficiency and modernization he brought to investment banking practices, as well as for his philanthropy and support of the arts, Morgan was also criticized by reformers who subsequently blamed his (and other bankers’) efforts for contributing to the artificial bubble of prosperity that eventually burst in the Great Depression of the 1930s.

  • What none could doubt was that Morgan’s financial aptitude and savvy business dealings kept him in good stead.
  • A subsequent U.S.
  • Congressional committee, in 1912, reported that his firm held 341 directorships in 112 corporations that controlled over $22 billion in assets.
  • In comparison, that amount of wealth was greater than the assessed value of all the land in the United States west of the Mississippi River.

As the three tycoons profiled in this section illustrate, the end of the nineteenth century was a period in history that offered tremendous financial rewards to those who had the right combination of skill, ambition, and luck. Whether self-made millionaires like Carnegie or Rockefeller, or born to wealth like Morgan, these men were the lynchpins that turned inventors’ ideas into industrial growth.

  • Steel production, in particular, but also oil refining techniques and countless other inventions, changed how industries in the country could operate, allowing them to grow in scale and scope like never before.
  • It is also critical to note how these different men managed their businesses and ambition.

Where Carnegie felt strongly that it was the job of the wealthy to give back in their lifetime to the greater community, his fellow tycoons did not necessarily agree. Although he contributed to many philanthropic efforts, Rockefeller’s financial success was built on the backs of ruined and bankrupt companies, and he came to be condemned by progressive reformers who questioned the impact on the working class as well as the dangers of consolidating too much power and wealth into one individual’s hands.

Morgan sought wealth strictly through the investment in, and subsequent purchase of, others’ hard work. Along the way, the models of management they adopted—horizontal and vertical integration, trusts, holding companies, and investment brokerages—became commonplace in American businesses. Very quickly, large business enterprises fell under the control of fewer and fewer individuals and trusts.

In sum, their ruthlessness, their ambition, their generosity, and their management made up the workings of America’s industrial age. Which of the following “robber barons” was notable for the exploitative way he made his fortune in railroads? Jay Gould Cornelius Vanderbilt Andrew Carnegie J.

  1. Pierpont Morgan A Which of the following does not represent one of the management strategies that John D.
  2. Rockefeller used in building his empire? horizontal integration vertical integration social Darwinism the holding company model C Why was Rockefeller’s use of horizontal integration such an effective business tool at this time? Were his choices legal? Why or why not? Horizontal integration enabled Rockefeller to gain tremendous control over the oil industry and use that power to influence vendors and competitors.
You might be interested:  What Are The Raw Materials For Photosynthesis?

For example, he could pressure railroads into giving him lower rates because of the volume of his products. He undercut competitors, forcing them to set their prices so low that they could barely stay in business—at which point he could buy them out. Through horizontal integration, he was able to create a virtual monopoly and set the terms for business.

  1. While his business model of a holding company was technically legal, it held as much power as a monopoly and did not allow for other businesses to grow and compete.
  2. What differentiated a “robber baron” from other “captains of industry” in late nineteenth-century America? “Captains of industry” (such as Carnegie or Rockefeller) are noted for their new business models, entrepreneurial approaches, and, to varying degrees, philanthropic efforts, all of which transformed late nineteenth-century America.

“Robber barons” (such as Gould) are noted for their self-centered drive for profit at the expense of workers and the general public, who seldom benefitted to any great degree. The terms, however, remain a gray area, as one could characterize the ruthless business practices of Rockefeller, or some of Carnegie’s tactics with regard to workers’ efforts to organize, as similar to the methods of robber barons.

Was Standard Oil a vertical or horizontal monopoly?

Explanation of Horizontal Integration – Horizontal integration’s control over one process during production means that a company has established a dominance in the manufacturing, selling and distribution, or even the production of raw materials. If a company owns every bit of a production process then it is known as a horizontal monopoly.

How did Standard Oil use horizontal integration?

Rockefeller used horizontal integration to build the Standard Oil empire by making agreements with railroads. Rockefeller’s business was big enough that he could negotiate favorable rates for transporting oil because he was transporting a lot of oil and the railroads wanted his business.

What led to horizontal integration?

Advantages – Companies engage in horizontal integration to benefit from synergies, There may be economies of scale or cost synergies in marketing; research and development (R&D); production; and distribution. Or there may be economies of scale, which make the simultaneous manufacturing of different products more cost-effective than manufacturing them on their own.

  • Procter & Gamble’s 2005 acquisition of Gillette is a good example of a horizontal merger that realized economies of scope.
  • Because both companies produced hundreds of hygiene-related products from razors to toothpaste, the merger reduced the marketing and product development costs per product.
  • Synergies can also be realized by combining products or markets.

Horizontal integration is often driven by marketing imperatives. Diversifying product offerings may provide cross-selling opportunities and increase each business’ market. A retail business that sells clothes may decide to also offer accessories or it might merge with a similar business in another country to gain a foothold there and avoid having to build a distribution network from scratch.

Why was horizontal integration created?

Horizontal Integration Explained – Horizontal integration facility is the strategy that many organizations follow in order to survive and expand at the same industry level. Horizontal integrations are a common practice in corporate finance. All companies are trying to become market leaders, and sometimes when the interests of 2 companies align, and horizontal integration benefits help them achieve those interests.

  1. Together, the merged entity will have a total asset that is much more than their assets individually.
  2. Such kind of integration may result in monopoly power among the integrated companies if they are able to grab a vast market share.
  3. To prevent this, rules and regulations should be in place.
  4. However, the government keeps a check on mergers.

It has the power to impose Antitrust laws, disallowing the merger if it perceives that it would lead to situations that are against the public interest. As a result, horizontal mergers are most common among companies in a mature cycle stage, increasing market share and efficiency.

How did Standard Oil vertically integrate?

History –

Oil industry vertical integration was pioneered by John D. Rockefeller in the late 19th century to create Standard Oil. This company controlled 85 percent of the U.S. oil industry until 1911, when it was broken up into smaller companies under antitrust legislation and a ruling by the U.S. Supreme Court. Other U.S. oil corporations pursued vertical integration on a smaller scale after this breakup. Vertical integration accelerated in the 1970s and 1980s and mega-mergers in the 1990s and 2000s created major corporations like ConocoPhillips and ExxonMobil. Since the mid-2000s, U.S. companies have begun to break these corporations into smaller units.

Who made Standard Oil into a monopoly?

The Standard Oil Monopoly – Shortly before the Civil War, Rockefeller and a partner established a shipping company in Cleveland, Ohio. The company made much money during the war. In 1863, he and his partner invested in another business that refined crude oil from Pennsylvania into kerosene for illuminating lamps,

  1. By 1870, Rockefeller and new partners were operating two oil refineries in Cleveland, then the major oil refining center of the country.
  2. The partners incorporated (under a charter issued by the state of Ohio) and called their business the Standard Oil Company.
  3. To give Standard Oil an edge over its competitors, Rockefeller secretly arranged for discounted shipping rates from railroads,

The railroads carried crude oil to Standard’s refineries in Cleveland and kerosene to the big city markets. Many argued that as “common carriers” railroads should not discriminate in their shipping charges. But small businesses and farmers were often forced to pay higher rates than big shippers like Standard Oil.

The oil industry in the late 1800s often experienced sudden booms and busts, which led to wildly fluctuating prices and price wars among the refiners. More than anything else, Rockefeller wanted to control the unpredictable oil market to make his profits more dependable. In 1871, Rockefeller helped form a secret alliance of railroads and refiners.

They planned to control freight rates and oil prices by cooperating with one another. The deal collapsed when the railroads backed out. But before this happened, Rockefeller used the threat of this deal to intimidate more than 20 Cleveland refiners to sell out to Standard Oil at bargain prices.

  1. When the so-called “Cleveland Massacre” ended in March 1872, Standard controlled 25 percent of the U.S.
  2. Oil industry.
  3. Rockefeller saw Standard Oil’s takeover of the Cleveland refiners as inevitable.
  4. He said it illustrated “the battle of the new idea of cooperation against competition.” In his mind, large industrial combinations, more commonly known as monopolies, would replace individualism and competition in business.

Rockefeller planned to buy out as many other oil refineries as he could. To do this, he often used hardball tactics. In 1874, Standard started acquiring new oil pipeline networks. This enabled the company to cut off the flow of crude oil to refineries Rockefeller wanted to buy.

When a rival company attempted to build a competing pipeline across Pennsylvania, Standard Oil bought up land along the way to block it. Rockefeller also resorted to outright bribery of Pennsylvania legislators. In the end, Rockefeller made a deal with the other company, which gave Standard Oil ownership of nearly all the oil pipelines in the nation.

By 1880, Standard Oil owned or controlled 90 percent of the U.S. oil refining business, making it the first great industrial monopoly in the world. But in achieving this position, Standard violated its Ohio charter, which prohibited the company from doing business outside the state.

Rockefeller and his associates decided to move Standard Oil from Cleveland to New York City and to form a new type of business organization called a “trust.” Under the new arrangement (done in secret), nine men, including Rockefeller, held “in trust” stock in Standard Oil of Ohio and 40 other companies that it wholly or partly owned.

The trustees directed the management of the entire enterprise and distributed dividends (profits) to all stockholders. When the Standard Oil Trust was formed in 1882, it produced most of the world’s lamp kerosene, owned 4,000 miles of pipelines, and employed 100,000 workers.

Rockefeller often paid above-average wages to his employees, but he strongly opposed any attempt by them to join labor unions. Rockefeller himself owned one-third of Standard Oil’s stock, worth about $20 million. During the 1880s, Standard Oil divided the United States into 11 districts for selling kerosene and other oil products.

To stimulate demand, the company sold or even gave away cheap lamps and stoves. It also created phony companies that appeared to compete with Standard Oil, their real owner. When independent companies tried to compete, Standard Oil quickly cut prices-sometimes below cost-to drive them out of business.

You might be interested:  What Channel Is Not Included In The Default Channels Report?

Who created the Standard Oil monopoly?

What Made Standard Oil A Horizontal Integration Monopoly J.D. Rockefeller.1908. George Grantham Bain Collection, Library of Congress Prints and Photographs Division. John D. Rockefeller formed the Standard Oil Company on January 10, 1870 with his business partners and brother. The success of this business empire made Rockefeller one of the world’s first billionaires and a celebrated philanthropist.

  • He garnered both admirers and critics during his lifetime and after his death.
  • Wall Street idolized his money-making abilities, muckrake journalists exposed his unethical business practices, and his charitable causes created a legacy of generosity.
  • John Davison Rockefeller was born on July 8, 1839 to William Avery Rockefeller and Eliza Davison in Richford, New York.

His family later moved near Cleveland, Ohio, where he attended Cleveland’s Central High School before dropping out and starting his first job as an assistant bookkeeper, earning 50 cents per day. With the money he saved from his first job and a loan from his entrepreneurial, snake-oil salesman father, he opened his first business — a commodities brokerage — in 1859.

  • Around the same time in nearby Titusville, Pennsylvania, Edwin Drake and the Seneca Oil Company completed the first drilled oil well.
  • A discovery of large underground oil reservoirs, made accessible with new drilling technology, created a boom of oil companies in Pennsylvania and Ohio.
  • In 1870, Rockefeller joined in the oil business, along with his brother William, Samuel Andrews, Henry M.

Flagler, and Stephen V. Harkness. Their business, the Standard Oil Company of Ohio, focused on oil refining, which had less variable costs than oil exploration and drilling. Rockefeller’s contemporaries often commented on his fixation with cost-saving and waste-reduction, but in order to be the best, he also invested in research and development.

  • Standard Oil brought as much labor in-house as they could and focused on finding markets for refinery by-products.
  • After knowingly buying fields in Ohio containing sour oil, Rockefeller relied on his research and development team to create a way to remove the oil impurities, which they eventually did, allowing him to cash in on oil no one else wanted.

Rockefeller’s lack of opulence was also evident in his home life. He had married Laura Celestia “Cettie” Spelman in 1864, and together they raised their children, Bessie, Alice (who died as an infant), Alta, Edith and John Jr., in a devoutly Baptist household. What Made Standard Oil A Horizontal Integration Monopoly : Nursery Rhymes for Infant Industries, No.15: ‘O’ is the Oil Trust, a modern Bill Sikes; he defies the police, and does just as he likes, c1901. Library of Congress Prints and Photographs Division. While free-market capitalism led to the creation of numerous oil companies, it also, to Rockefeller, created unpredictable chaos in the industry, with oil refiners undercutting each other on prices, creating wide fluctuations.

In order to remove this “marketplace inefficiency,” Rockefeller began acquiring competing oil refineries. Within the first three months of 1872, he had bought out, shut down or bankrupted 22 of his 26 Cleveland competitors. Unsympathetic to goodwill pricing, he offered a “fair market price” for refineries that were losing money with outdated equipment.

However, as muckrake journalists later pointed out, the refineries were losing money because of Standard Oil’s monopoly. Its very size meant that Standard Oil, unlike other refineries, could negotiate a railroad discount by promising 60 carloads of oil daily, which appealed to railroad owners wanting to maintain a high and steady volume.

  • These train rebates helped Standard Oil keep transportation costs low; other refineries could not compete.
  • Oil and railroad tycoons proposed a deal to fix transportation costs, called the Southern Improvement Company, but public outcry quickly stopped further negotiations.
  • In 1882, Standard Oil Trust created a network of Standard Oil companies throughout the country, led by a board of trustees, where Rockefeller owned over one third of the certificates.

By the late 1880s, Standard Oil controlled 90% of American refineries. This control of the market, along with the Southern Improvement Company scandal, caught the attention of politicians, who started passing anti-trust laws and prohibiting train rebates.

  1. Rockefeller had a strict no-talking-to-the-press rule, which did nothing to combat the widely popular, scathing critique of Standard Oil External by journalist Ida Tarbell,
  2. Rockefeller eventually retired from daily operations in 1895, at the age of 56, but stayed in a figurehead role as president.
  3. In 1911, the Supreme Court found Standard Oil in violation of the Sherman Antitrust Act,

As a result, Standard Oil was split into 34 independent companies, although over time these corporate descendants regrew into large integrated oil companies that still dominate the market, such as ExxonMobil. The Supreme Court case also hadn’t slowed Rockefeller’s wealth: newspaper headlines from 1916 announced he was the world’s first billionaire.

According to Forbes External, Rockefeller’s total assets in 1937 equaled 1.5% of America’s total economic output for that same year, making him one of the wealthiest people in the world to this day (in comparison, Bill Gates’ wealth in 2018 would be 0.45% of 2018 GDP). He was often approached about donating his money to various causes.

His publicist Ivy Lee, hired after the anti-trust case, “cultivated the notion of a benign old man giving away dimes and preoccupied with charity,” according to one biographer. Rockefeller and his family established the Rockefeller Foundation External in 1913, which supported public health causes through a large endowment.

Who built the Standard Oil monopoly?

Does Standard Oil still exist? – Standard Oil, in full Standard Oil Company and Trust, American company and corporate trust that from 1870 to 1911 was the industrial empire of John D. Rockefeller and associates, controlling almost all oil production, processing, marketing, and transportation in the United States,

Learn the history behind Byron Benson’s building the world’s first oil pipeline (1879), defeating John D. Rockefeller and the Standard Oil Company See all videos for this article The company’s origins date to 1863, when Rockefeller joined Maurice B. Clark and Samuel Andrews in a Cleveland, Ohio, oil-refining business.

In 1865 Rockefeller bought out Clark, and two years later he invited Henry M. Flagler to join as a partner in the venture. By 1870 the firm of Rockefeller, Andrews, and Flagler was operating the largest refineries in Cleveland, and these and related facilities became the property of the new Standard Oil Company, incorporated in Ohio in 1870.

  1. By 1880, through elimination of competitors, mergers with other firms, and use of favourable railroad rebates, it controlled the refining of 90 to 95 percent of all oil produced in the United States.
  2. In 1882 the Standard Oil Company and affiliated companies that were engaged in producing, refining, and marketing oil were combined in the Standard Oil Trust, created by the Standard Oil Trust Agreement signed by nine trustees, including Rockefeller.

By the agreement, companies could be purchased, created, dissolved, merged, or divided; eventually, the trustees governed some 40 corporations, of which 14 were wholly owned. Founded in 1882, Standard Oil of New Jersey was one component of the trust; by design the Standard Oil Trust embraced a maze of legal structures, which made its workings virtually impervious to public investigation and understanding.

  1. As Ida Tarbell wrote in her History of the Standard Oil Company (1904), “You could argue its existence from its effects, but you could not prove it.” In 1892 the Ohio Supreme Court ordered the trust dissolved, but it effectively continued to operate from headquarters in New York City,
  2. In 1899, however, the company renamed its New Jersey firm Standard Oil Company (New Jersey) and incorporated it as a holding company,

All assets and interests formerly grouped in the trust were transferred to the New Jersey company. Although consolidation did advance the large-scale production and distribution of oil products, many critics believed that the resulting concentration of economic power was becoming excessive.

In 1906 the U.S. government brought suit against Standard Oil Company (New Jersey) under the Sherman Antitrust Act of 1890; in 1911 the New Jersey company was ordered to divest itself of its major holdings—33 companies in all. In 1911, after dissolution of the Standard Oil empire, eight companies retained “Standard Oil” in their names, but by the late 20th century the name had almost passed into history.

In 1931 Standard Oil Company of New York merged with Vacuum Oil Company (another trust company) to form Socony-Vacuum, which in 1966 became Mobil Oil Corporation, Standard Oil (Indiana) absorbed Standard Oil of Nebraska in 1939 and Standard Oil of Kansas in 1948 and was renamed Amoco Corporation in 1985.

Standard Oil of California acquired Standard Oil of Kentucky in 1961 and was renamed Chevron Corporation in 1984. Standard Oil Company (New Jersey) changed its name to Exxon Corporation in 1972. British Petroleum Company PLC completed the purchase of Standard Oil Company (Ohio) in 1987, and in 1998 British Petroleum (renamed BP ) merged with Amoco.

You might be interested:  Explain What Distinguishes A Stroke From A Heart Attack?

Exxon and Mobil merged in 1999, and Chevron merged with Texaco in 2001. Get a Britannica Premium subscription and gain access to exclusive content. Subscribe Now Other companies that once were part of the trust included Atlantic Richfield Company, Buckeye Pipe Line Company (Ohio), Chesebrough-Pond’s Inc., Pennzoil Company, and Union Tank Car Company (New Jersey).

How was Rockefeller able to build his monopoly across the oil?

How was Rockefeller able to build his monopoly across the oil industry? He bought up oil refineries, cut costs, and reinvested his profits in other refineries. How much did the government regulate business practices during the Gilded Age? It barely regulated businesses at all.

How did John D. Rockefeller become so powerful in the oil industry?

Rockefeller gained much of his wealth by controlling oil refineries across the country. At Rockefeller’s refineries, crude oil would be turned into kerosene and then sold to the American public at affordable prices. Kerosene lighting greatly transformed homes and businesses across the country.

Who was John D. Rockefeller and how did he use horizontal integration?

Rockefeller and Standard Oil – Oil was another lucrative business during the Gilded Age. Although there was very little need for oil prior to the Civil War, demand surged during the machine age of the 1880 s, 1890 s, and early 1900 s. Seemingly everything required oil during this era: factory machines, ships, and, later, automobiles.

The biggest names in the oil industry were John D. Rockefeller and his Standard Oil Company —in fact, they were the only names in the industry. Whereas Carnegie employed vertical integration to create his steel empire, Rockefeller used horizontal integration, essentially buying out all the other oil companies so that he had no competition left.

In doing so, Rockefeller created one of America’s first monopolies, or trusts, that cornered the market of a single product.

How did Standard Oil use both horizontal and vertical integration?

Integrator How they do it: Standard Oil Company’s successful, but illegal, integrator strategy ultimately lead to its demise. In a landmark case, the U.S. Supreme Court dismantled it in 1911, as it was ruled to be an illegal monopoly. Standard Oil dominated the oil products market initially through horizontal integration in the refining sector, then, in later years vertical integration alongside the value chain, streamlining production and logistics, lowering costs, and undercutting competitors.

Who established a horizontal monopoly over oil production in America?

The Natural Monopoly – The oil industry was prone to what is called a natural monopoly because of the rarity of the products that it produced. John D. Rockefeller, the founder and chair of Standard Oil, and his partners took advantage of both the rarity of oil and the revenue produced from it to set up a monopoly.

  • The business practices and questionable tactics that Rockefeller used to create Standard Oil would make the Enron crowd blush.
  • But the finished product was not nearly as damaging to the economy or the environment as the industry was before Rockefeller monopolized it.
  • In the early days of the oil industry, many competing oil companies were eager to find a source and drilled indiscriminately, pumping waste products into rivers or straight out on the ground rather than troubling with proper disposal.

They cut costs by using shoddy pipelines that were prone to leakage. By the time Standard Oil had cornered 90% of oil production and distribution in the U.S., it had learned how to make money off of even its industrial waste, with Vaseline being one of the new products that were developed.

The benefits of having a monopoly like Standard Oil in the country were only evident after it had built a nationwide infrastructure for oil distribution in order to avoid dependence on trains and their notoriously fluctuating costs. The size of Standard Oil allowed it to undertake projects that smaller competitors could never have embarked upon.

In that sense, it was as beneficial as state-regulated utilities for developing the U.S. into an industrial nation. Despite the eventual breakup of Standard Oil in 1911, the government realized that a monopoly could build up a reliable infrastructure and deliver low-cost service to a broader base of consumers than competing firms.

What ended Standard Oil monopoly?

What Made Standard Oil A Horizontal Integration Monopoly “Standard Oil interests are now said to be seeking control of the turpentine industry.” June 9, 1907. New-York Tribune (New York, NY), Image 17. Chronicling America: Historic American Newspapers. At the beginning of the 20th century Standard Oil Co. was one of the world’s largest and most powerful corporations and its chairman, John D.

  • Rockefeller, was the first billionaire.
  • While people were divided about whether monopolies were good for society, exposés by the muckraker Ida Tarbell detailing the company’s strong-arm practices against rivals, railroad companies and others eventually turned public opinion against it.
  • In 1911 the U.S.

Supreme Court ruled that Standard Oil Trust be dissolved under the Sherman Antitrust Act and split into 34 companies. Read more about it! The information in this guide focuses on primary source materials found in the digitized historic newspapers from the digital collection Chronicling America,

What is an example of horizontal integration?

Facebook and Instagram – One of the most definitive examples of horizontal integration was the acquisition of Instagram by Facebook (now Meta) in 2012 for a reported $1 billion. Both companies operated in the same industry (social media) and shared similar production stages in their photo-sharing services.

What did Ida Tarbell do to expose the Standard Oil Company?

Tarbell Exposes The Standard Oil Company – Tarbell never wrote the biography of Roland but she did write biographies of Napoleon Bonaparte and Abraham Lincoln—published shortly after her return to the United States in 1894. She also accepted an offer from McClure to work for his new venture, McClure’s Magazine, where she undertook her most famous work, her expose of John D.

Rockefeller’s Standard Oil Company. Her study of Rockefeller’s practices as he built Standard Oil into one of the world’s largest business monopolies took many years to complete. McClure’s Magazine published it in 19 installments. Her work was a sensation and the installments became a two-volume book entitled, The History of the Standard Oil Company, published in 1904.

Tarbell meticulously documented the aggressive techniques Standard Oil employed to outmaneuver and, where necessary, roll over whoever got in its way. A short while later, President Theodore Roosevelt used the phrase “muckraker” (from John Bunyan’s The Pilgrim’s Progress ) in a speech in reference to Tarbell, Upton Sinclair, Lincoln Steffens, and other journalists writing critically about the tremendous power of big business.

  1. Tarbell actually objected to the term, for she felt it belittled work she believed to be of historical importance.
  2. The centerfold of Puck magazine, February 21, 1906, “The Crusaders” by C. Hassman.
  3. Comic illustration shows a large group of politicians and journalists as knights on a crusade against graft and corruption, including Ida Tarbell – One result largely attributable to Tarbell’s work was a Supreme Court decision in 1911 that found Standard Oil in violation of the Sherman Antitrust Act.

The Court found that Standard was an illegal monopoly and ordered it broken into 34 separate companies. Bloodied, Rockefeller and Standard were hardly defeated. Rockefeller maintained huge holdings in all 34 companies and the breakup actually proved enormously profitable.

Which oil tycoon used horizontal integration?

John D. Rockefeller was the oil tycoon who used horizontal integration to decrease costs and increase profits. Horizontal integration is a form of business monopoly in which someone, like Rockefeller, would buy out his competitors or run them out of business by slashing his own rates and waiting for them to fail.

Was Standard Oil a vertical monopoly?

History –

Oil industry vertical integration was pioneered by John D. Rockefeller in the late 19th century to create Standard Oil. This company controlled 85 percent of the U.S. oil industry until 1911, when it was broken up into smaller companies under antitrust legislation and a ruling by the U.S. Supreme Court. Other U.S. oil corporations pursued vertical integration on a smaller scale after this breakup. Vertical integration accelerated in the 1970s and 1980s and mega-mergers in the 1990s and 2000s created major corporations like ConocoPhillips and ExxonMobil. Since the mid-2000s, U.S. companies have begun to break these corporations into smaller units.

What is an example of a horizontal integration?

What Is the Difference Between Horizontal Integration and Vertical Integration? – Horizontal integration is the strategy of acquiring other companies that reside along a similar area of the supply chain. For example, a manufacturer may acquiring a competing manufacturing firm to better enhance its process, labor force, and equipment.

How did Standard Oil expand vertically?

Standard began to expand its control of the oil industry by expanding beyond its traditional refining business into all stages of oil and gas production. Acquired pipelines, railroad tank cars, terminal facilities and barrel manufacturing factories.

Was the core business that made Standard Oil a horizontally integrated monopoly?

Answer: Refining Oil is the correct answer.