In the early part of this century was a time when industry was booming with growth around the installation of major railroads. With this growth came the transatlantic cable, the telegraph, and a whole lot of steel. Steel would be needed in the construction of these new transportation systems and communications were now possible between businesses and industries. (Wren, 2005)
This paper will first discuss the development of the steel industry. Next, it will examine steel, and in the impact it had on the transportation industry. Finally, it will discuss systematic management practices of this time and how they gave birth to the scientific approach that is still in use today.
The steel industry was needed for almost everything. Alfred D Chandler Jr. could see the potential market value early on.
According to Wren:
Chandler traced the history of various firms and delineated four phases in the history of the large U.S. enterprise:
1. The initial expansion and accumulation of resources
2. The rationalization of the use of resources
3. The expansion into new markets and lines to help assure the full use of resources;
4. The development of a new structure that rationalized the renewal of growth.
For many companies, the phases started and ended at different times, depending on the state of technology and the firm’s ability to react and capitalize on market opportunities. Chandler further noted two facets of industrial growth:
1. Horizontal growth from 1879 to 1893- which occurred when producers of similar fields combined through mergers, pools, or trusts to gain economies of scale, and
2. Vertical growth from 1898 to 1904- which occurred when firms moved backward or forward in terms of the production, acquisition of raw material sources or suppliers, which enable them to control their market.
Chandler understood that company’s needed to have a minimum efficient scale. By keeping track of costs he could lower prices and gain a competitive advantage over his rivals. (p. 96-97)
However it was Andrew Carnegie who realized that the development of steel needed to be improved. He would later adopt England’s method of iron production through subjecting it to a shot of hot air in a special furnace which would be much faster than the old pudding iron. This method also lowered costs from $100.00 to $12.00 a ton. (Wren, 1976/2005) Carnegie would go on to later combine England’s new steel production methods with Daniel McCallum management theories of systematically managing large organizations such as railroads. (American Experience, 1999)
Railroads were the first big business in the United States. Daniel McCallum developed a means to organize and manage this early mass transport. By separating and identifying each job and job description and later hiring specifically to fill each position Daniel McCallum organized a hierarchy of management and subordinates. He then saw...