Andrew Carnegie's Vertical Innovation

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Free enterprise has been the cause for the rise and fall of numerous entrepenuers. One man that prospered under this system was Andrew Carnegie.Carnegie rose from the bottom of society to shape the business world through his shrewd business practices and strategies. Only free enterprise provided Carnegie with the freedom he needed to forever impact the business world. Social and economic mobility are elements unique to free enterprise. Both features were essential to Carnegie's rise in the economic world. As the son of poor Scottish immigrants, Carnegie had no family money or connections to rely upon. Due to this Carnegie had to rely on himself to build the economic empire he did. Knowing this, Carnegie took advantage of the mobility…show more content…
One such practice was his use of vertical integration. Vertical integration occurs when a company owns every stage of production. In Carnegie's case, this meant he owned the mines, the steel plants, and the distribution system, which was a railroad.By employing this strategy, Carnegie was able to produce steel at a much lower cost than his competitors, allowing him to sell it for less, thus giving him a major advantage over his competition. This advantage allowed him to dominate the steel industry to the point where he had a near monopoly. He also put a profit sharing plan in place to motivate his workers. Carnegie felt his employees would work harder if they had a stake in the company's profits. This belief led Carnegie to distribute company stock to his employees which would rise and fall in value depending on company performance. To ensure the company would perform better, and that their stocks would produce higher returns, Carnegie's workers had to work harder. Both these practices were revolutionary in the business world at the time they were implemented and couldn't have been implemented without free enterprise, thus making free enterprise essential to Carnegie's
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