Dr. Claude Black
15th November 2011
The Different Business Practices of Andrew Carnegie & John D. Rockefeller
Two of the most well-known and successful companies of the Industrial Revolution were the Standard Oil Company, and the Carnegie Steel Company. Both were exceedingly successful in virtually removing all competition in their respective fields of business and controlling almost all of the production capacity of their respective products in the United States. Their founders, John D. Rockefeller of the Standard Oil Co., and Andrew Carnegie of the Carnegie Steel Co. conducted business practices that were different from one another in how they dealt with competition as seen in the undercutting or cheap type buyout employed by Carnegie in comparison to the forced buyout by Rockefeller, how they consolidated wealth as seen where Carnegie horizontally integrated other steel mills to grow his wealth while Standard Oil later on in their history vertically integrated, how they managed public relations as seen where Carnegie attempted to suppressed any negative press while Rockefeller would balance it's negative publicity by showing his philanthropic side, and how they treated their workers as seen by how Carnegie disregarded collective bargaining and safety for efficiency while Rockefeller valued worker loyalty through good wages, treated them fairly, and commonly rewarded them with bonuses.
The first immediate difference that is seen between the two men and their business practices is how they dealt with competition. Andrew Carnegie's company would force the other steel mills in the Pennsylvania area to be bought out due to the cheap prices of the Carnegie steel. The other, smaller competitors could not sell their steel for such as low price and still make a profit, and therefore had to allow Carnegie to buyout their mills. In opposite to Carnegie, Rockefeller would sometimes be known to hire thugs, or engage in compacts with other companies to join together to push prices up. In Ida Tarbell's well known expose on Rockefeller, The History of the Standard Oil Company, she quotes John Rockefeller as saying this on one of the schemes he engaged in to remove his competition: “You see," he told them, "this scheme is bound to work. It means an absolute control by us of the oil business. There is no chance for anyone outside. But we are going to give everybody a chance to come in. You are to turn over your refinery to my appraisers, and I will give you Standard Oil Company stock or cash, as you prefer, for the value we put upon it. I advise you to take the stock. It will be for your good." Certain refiners objected. They did not want to sell. They did want to keep and manage their business. Mr. Rockefeller was regretful, but firm. It was useless to resist” (Tarbell 63). This shows how Rockefeller would directly and forcibly remove his competition, whereas Mr. Carnegie would instead send his prices plummeting to prevent competitors from keeping up. Rockefeller's business practices towards competition proved to be very effective, as many companies today still employ the same style of business. Alfred Chandler stated a most concise summary about the continuance of Rockefeller's business practices, “We also see it reflected in the pages of the current business press. The logic that drives the creation and growth of large managerial enterprises is as relevant now as it was when John D. Rockefeller put together Standard Oil” (Chandler 132).
The second difference that is apparent between the two businessmen is how they consolidated their wealth and grew their business. While both companies followed the business model of horizontal integration through buying companies similar to their own, the difference between Rockefeller and Carnegie was that Rockefeller's company later switched to vertical integration. The reason for this was mainly because it was simply a convenience because Standard Oil had...