Carnegie Steel and Vertical Integration

As the U.S. entered a period of economic expansion following the Civil War, mass-produced steel became increasingly in demand.  Railroads expanded westward, urban populations grew, necessitating the introduction of skyscrapers and thus more structurally resilient materials…

Carnegie Steel…became the dominant steel supplier in the U.S. through a vertically-integrated manufacturing process that consistently incorporated the latest technological innovation.

Steel is a commodity product, so successful business is built on low-cost production. Carnegie executed on its business model in two main ways. The first was owning raw material supply. The steel-making process requires three ingredients: iron ore, coal, and lime; and both iron ore and coal had to be refined before use in steel-making.  Second, Carnegie was able to generate unparalleled scale via productivity gains and capacity expansion, creating pricing power…