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The second Industrial Revolution (New industries (Mechanical engineering…
The second Industrial Revolution
Definitions
the US and Germany in the lead (before it was France and Britain in the lead)
Economic implications
the rise of big businesses
modern capitalism
a series of innovations leading to the emergence of new industries and the transformation of the economic landscape in the years 1880-1900
Social implications
the advent of industrial society
urbanisation
New industries
Rubber industry, oil industry, motor industry
Mechanical engineering
textile machinery
agricultural machinery
machine tools
Electrical engineering
didn't exist before, new source of energy
Incandescent bulbs
Dynamos
Food industry
high quantities (mass production mass consumption)
Power industry
never existed before, a new source of energy
tramways
power stations
Textile industry
emergence from the first industrial revolution => artificial fibres
Chemical industry
already existed but the process has changed and new products emerged:
pharmaceuticals
explosives (not only destructive but for building bridges)
artificial dyes
fertilizers (important for agriculture)
Steel industry
emergence from the first industrial revolution
mass production mass consumption
transformation from coal to steel
Aeronautical industry
did not have an impact on business before the interwar period
Growth of large corporation
Economies of scale
mass production
continuous production
metallurgical industry
mass production of steel
semi-finished products to sell to electrical companies
transformation of agricultural products into consuming durables
lower cost of any extra unit produced
Economies of scope
interchangeable parts
cost advantage when using same raw materials or semi-finished materials for different products
machine industry and electrical engineering
backward integration
semi-finished products (steel industry for shipbuilding)
raw materials (coal for iron and steel industries)
buying from companies or by having its own coal fields and by integrating coal companies
the company secures what it needs for producing (raw materials and semi-finished materials)
forward integration
machine tools for steel industry
distribution networks
external growth
mergers in US and Britain
Sherman Antitrust Act 1890: banned combinations but allowed full mergers
internal growth
extension in capacities
investment
Alfred Chandler's contribution
three major works
visible hand
scale and scope
strategy and structure
if the company adopt new strategy of diversification it has to adapt new structure
chandlerian firm
visible hand of managers replaced the invisible hand of markets (dealing of managers within the fields)
centralized and vertical integrated firm
U-form and M-form
Structure follows the strategy
family capitalism, entrepreneurial capitalism and managerial capitalism
limits of Chandler's analysis
persistence of family capitalism
different varieties of experiences in big business development
Winners and losers?
US and Germany winners
catch up effect
specialization
Britain and France losers
Rise of big business
during the 1st industrial revolution, there were big companies but this time they were big from the beginning
what is a large company? (two criteria before 1914)
workforce 5000
share capital 10 million dollars
the modern industrial entreprise
M-form: each division will be like an independent company
U-form: managerial structures so each unit is run by professional managers