Industrial Revolution Business Evolution and Concentration

Traditional Company Characteristics

The characteristics of traditional companies during the consolidation phase of the Industrial Revolution included being run by their owners, partners specializing in management, few clerks, a lack of separation of functions between departments, traditional funding mechanisms (financing), and double-entry bookkeeping.

Impact of Railways and Telecommunications

From an economic perspective, the development of railways and telecommunications resulted in several benefits for companies in general:

• Provided industry and commerce with secure, fast, and regular communications.
• Reduced transport and marketing costs.
• Created safe, integrated markets.
• Contributed to the income growth of the countries in which they were built.

The Rise of Big Business (1870-1940)

Between 1870 and 1940, large companies organized to control the market through the development of business integration and concentration (the emergence of "big business"). This involved:

• Vertical integration: (Forward and backward) within the same company, vertically integrating activities such as obtaining raw materials, manufacturing tools and components, assembly of finished products, and distribution or marketing.
• Horizontal integration: Of different companies in specific industrial sectors (mining, steel, chemicals, textiles, transportation) taking the form of cartels, trusts, holding companies, and mergers, leading to an increasing level of cohesion.

Business Concentration in Germany

Business concentration in Germany (1870–1940) followed a dual market strategy: cooperation in domestic markets and competition in international markets. Key features included:

• Vertical integration and horizontal diversification.
• An internal production system based on flexible production (medium to high quality, batch production) rather than standardization.
• Growth strategies based on investment policies and technological advantages.
• A solid system for training skilled manpower.
• State-backed cartelization where cartels fixed prices and market shares.

After World War I, Interessengemeinschaft (IG) interest associations, consortia-oriented Konzerns, and profit-sharing arrangements emerged. Since 1925, these evolved into full mergers that enabled organizational changes, where a handful of corporations controlled many others through portfolios.

Factors in Shipping Specialization

Several factors explain the specialization of shipping:

• Increased market size.
• Technological changes (such as steam power).
• Increased capital requirements.
• External economies of scale (brokerage, insurance, and consignment).
• Greater provision of public goods, such as information on traffic and ships.