Carnegie and the steel industry: vertical integration

When Carnegie started his steel company he started with a very little mount of money so in order to pay less to manufacture the steel and increase his profits, Carnegie bought out companies that provided raw materials like iron, which is one of the main components of steel. He bought out coal companies as well because it was needed to heat the furnaces that were used in the Bessemer process. Not only did he buy products to produce his steel, but he also bought railroads so he could ship his steel at a much lower cost.

He was able to beat out competitors by producing his tell cheap and efficient that everyone chose to buy form him and not anyone else.

McDonald’s uses a backwards-vertical integration because the company expands its operations into industries that produce inputs to the McDonald’s products. Their second- tier suppliers like ink, paper and cardboard link to their first-tier suppliers that are packaging suppliers. Their second-tier suppliers that are farmers link to their first- tier suppliers that fruit vegetable, and cheese suppliers.

Water and sugar are also second-trier suppliers that link to their first-trier supplier, which is Coke. This makes their business more profitable by buying their suppliers instead of buying from suppliers, this saves the money and time by not always having to buy expensive products from suppliers because they own what they need and they don’t have to compete with other businesses to get what they need. Since they have vertical integration they are hard to compete with because they provide more consistency.

McDonald’s adapts vertical integration in most countries usually to comply with legal and cultural expectations.

There are positive and negative affects that vertical integration has on our society. It differs from the state of technology in the industries involved, and corresponding with the stages of the industry lifestyle. Vertical integration affects our society positively by putting our local companies in a better position against foreign competition by giving local companies a higher chance of being bought by a company hat needs its supplies.

Vertical integration can also affect the society negatively by creating a monopoly market structure. This complicates things because a single business, can grow to become the entire industry. This also can lead too lack of innovation because the market can be restricted because of high costs or economic, social, or political obstructions. Businesses could create a monopoly Just like the government did with electricity, Saudi Rabbi’s government did by having sole intro over the oil industry, and Pfizer did by getting a patent for Vicarage.