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How Did Andrew Carnegie's Use Of Vertical Integration

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Industries developed new methods to increase efficiency levels—as well as profits. Andrew Carnegie, owner of the Carnegie Steel Company, pioneered the use of vertical integration.
Under this system, Carnegie bought out companies that provided raw materials and services that he needed. Iron, for example, is a main component of steel. Workers also needed a large amount of coal to heat the furnaces used in the Bessemer process.
Instead of buying iron and coal from other suppliers, Carnegie simply bought the suppliers. This allowed him to pay less to manufacture steel and increase his profits. To ship his steel at a lower cost, he purchased railroads.
Vertical integration: a system of related businesses in which a parent company owns its suppliers …show more content…

Strategically Carnegie would charge them a lot more than he is paying them but at a price where they can afford which means more money for him and less money for its competition. This means he not only be saving money and getting more money for buying his suppliers but now his competition would have to go to his supplier which would cost a lot more therefore having to sell their products at at a higher price than Carnegie's. People will go to Carnegie since his steel is a lot cheaper meaning driving away his competitions. He bought the railroads which will be used to ship his steel allover the country meaning he now can pay them at a way lower price than if the railroads weren’t. By doing those simple two things he is saving so much money meaning he is making so much money and driving away his competitions meaning a lot more

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