Question

Items A-H are a few features of Big Business based on Chapter 1 of Porter's The Rise of Big Business. Please select 3 of these and briefly describe the features

A. Large scale enterprise with much capital

1. Small enterprise with ease of entry supporting the ideal of econ gain within the reach of all (“land of opportunity”)

B. Operating v. fixed capital and costs

1. Small manuf with operating costs> fixed costs therefore not too expensive to slow or stop production

2.Sci/tech innovation leads to higher operating and fixed capital (and therefore the associated costs);

expensive to slow or cease production

C. Competitive environment, barriers to entry

D. Ownership v. control

1.Small enterprise with owner-entrepreneur and social connection (i.e., family) between small

number of owners of a firm

2.Corporation separates ownership and control due to large capital stock involved (i.e., ‘need’ more

owners); corporation has ‘life of its own’

E.Greater geographical dispersion of enterprise units

1.“As cartoons indicated, this new spatial dimension of business was deeply disturbing to

Americans accustomed to the older order of local, small, single-

site enterprises” (p. 18).

F. Greater specialization and integration

1.different functions and tasks of production/distribution done by a number of firms

2.With BB, functions are vertically integrated within one enterprise, moving away from previous

pattern of narrow firm specialization

G. Change in admin/management networks

1.Necessary response to coordinate functions and manage risk

2. A problem to address: “storage, summary, and retrieval of massive amounts of data”

3. More impersonal management as further threat to ethos of individualism

H. Management v worker division

1.Need to exercise greater control over increasingly complex, geographically dispersed, and interrelated production processes

Answer 1

A.Large scale enterprise with much capital

Most manufacturing sectors excpet textile and iron furnaces were very small in size and did not deploy expensive machinery.Since the entry costs were quite low,it was very easy to enter into business even for the average American citizen.Although the business failures were seen often,it did not stop the flourish of new business.Due to the low entry barriers leading to lower entry costs made the people believe that it was a land of opportunity.

The capital costs of large enterprises was much higher than the antebellum manufacturers.The cost of buildings and machinery costs and other infrastructure costs was enormous.For instance,the investment required for the creation of US Steel was a billion dollars,which is impossible to raise from a single individual/investor,thus requiring money from many people.

B.Operating v Fixed capital and costs

1.For small manufactures the operating costs were much higher and in most cases exceeded the expense of physical plant and land(fixed capital).The fixed costs of these manufacturers were also relatively low compared to their operating costs and the operating capital(working capital).Thus in case a recession or depression stuck,it was easy for them wind up operations and shut down/slow down operations in extreme cases.

2.The large enterprises employed science and complex technologies for mass production of goods inorder to reduce the cost per unit.This meant that they increase their scale of operations by building more manufacturing plants,refineries,blast furnaces,warehouses,distribution centres etc.Thus these firms had very high fixed costs compared to their predecessors.Also due to complex interconnections between various units ,it became very difficult to plan and coordinate their slow down in production.The large enterprises also feared the loss of market share to their competitors if they slowed down their production and hence were very hesitant to take this step.

C.Competition and entry barriers

After the entry of large enterprises,the entry barries became many leading to high entry costs.Thus there were very players in the market that controlled an entire industry.Due to the high entry costs,the small manufacturers could not enter the business and hence were wiped out of the industry.

Large enterpries dominated and controlled the industry and thus the competition was very low because the number of these players were small.