On the other hand, the makers of complex machines had, almost from the beginning, built extensive marketing orga- nizations and quickly became huge global enterprises. In fact, if the companies in electrical machinery (group 36) and transportation equip- ment (group 37) are added to those in machinery (group 35 ) , they total 58, or one-quarter of all the manufacturing firms in the United States with assets of $20 million or more in 191 7 . Machinery making, thus, was the largest and, in many ways, the most representative big business in early twentieth-century America.
Except for the firearms makers, all the machinery firms in groups 35 and 36 and the majority in group 37 produced goods that required specialized marketing services—demonstration, installation, repair and service, and long-term credit. The firms in groups 35 and 36 include the makers of sewing machines, office machines, agriculture machines, standardized heavy machinery such as pumps, boilers, and elevators, and a wide variety of electricity-producing and -using machines. The pioneering firms are as much in evidence on the 1917 list of machinery makers as they are in the food group. Singer Manufacturing, Remington Typewriter, Burroughs Adding Machine, Deere and Company, Moline Plow, J. I. Case, Babcock and Wilcox, Worthington Pump, Otis Elevator, Mergenthaler Linotype, Westinghouse Electric, and Western Electric, all indicate the continuing permanence and power of the first enterprises to create extensive marketing networks in their industries. Moreover, Fairbanks, now part of Fairbanks Morse, was still the largest firm making scales and similar machines; National Cash Register was still the leader in its industry (both these had assets of $19.6 million, so are not included in the list of the largest 278 ) ; and A. B. Dick still dominated the manufacturing of mimeograph machines. In these industries very few new large competitors had appeared. Although most of the early machinery firms had grown through internal expansion, a few on the list in Appendix A followed the route of legal consolidation, administrative centralization, and then vertical integration. These companies—United Shoe Machinery, American Radiator, and Electric Storage Battery—consolidated and rationalized production facilities and built worldwide marketing forces. The impressive and almost immediate success of United Shoe Machinery and American Radiator in European markets emphasizes the value of such a sales organization for increasing the size and market power of a machinery-making enterprise.21 There were also mergers of already integrated enterprises—more of this type of merger than in any other group. Such mergers included International Harvester, General Electric, Allis-Chalmers (makers of milling and other steam-powered machinery), Niles-Bement-Pond (machine tools), Ingersoll-Rand (mining machinery), Computing-Tabulat- ing-Recording (the forerunners of International Business Machines), and Underwood Typewriter (a merger of Underwood and Wagner Typewriter) . Except in the case of International Harvester, the mergers were usually carried out to obtain complementary lines that might use the same marketing and purchasing organizations. In nearly all of these mergers the personnel of the smaller companies were integrated into the functional departments (production, sales, engineering, or finance) of the larger. As was the case on the railroads, the oldest and largest firm normally provided the basic “core” organization.
In transportation equipment (group 37) the primary route to growth after 1900 was internal expansion. This was particularly true of the new and rapidly expanding automobile industry. These makers of cars, trucks, parts, and accessories grew in much the same way as the pioneering makers of sewing and agricultural machinery. At first they sold through independent distributors. Soon they were relying on franchised dealers to retail their products. The dealers were supported with an elaborate mar- keting organization that advertised, assisted in providing after-sales serv- ices and repair and consumer credit, and assured prompt, scheduled delivery. The first firms to build such extensive sales forces quickly led the industry. In fact, Henry Ford’s well-organized global sales organization provided much of the incessant demand that pushed his engineers into evolving the moving assembly line. By 19 17 Willys, Studebaker, Maxwell, Packard, Pierce Arrow, and White (trucks) had comparable, if smaller, sales departments. So, too, did the subsidiaries of General Motors— Buick, Oldsmobile, Cadillac, Chevrolet, and the parts maker, United Motors. In automobiles, as in sewing, agricultural, and business machinery, growth came from internal expansion. Mergers were few and unsuccessful. They made little attempt to consolidate their already integrated enterprises into a single centralized operating organization. Even the largest, General Motors, became a long-term profit maker only after its massive administrative reorganization in the 1920s.
The older companies listed in group 37 were either shipyards or builders of railroad equipment. Of the latter, Pullman, Baldwin Locomotive, Westinghouse Air Brake, and New York Air Brake had grown large in the late nineteenth century by internal expansion. The others—American Locomotive, American Car and Foundry, Pressed Steel Car, Standard Steel Car, and Railway Steel Spring—were all results of turn-of-the- century mergers. These firms moved from horizontal combination to vertical integration, setting up structures similar to those of competitors who had grown through internal expansion. Their sales departments were much smaller than those of the machinery makers, for they had fewer customers. On the other hand, these sales forces were global. They provided credit, maintenance, and other services that helped American manufacturers sell railway equipment in all parts of the world.
The shipbuilders were one of the few sets of manufacturers listed among the 278 largest enterprises in 1917 that were not integrated. Even though these firms were booming in 1917 because of the critical shortage of ships caused by unrestricted German submarine warfare, they remained single- function firms, usually operating in a single locality.22 After the war they did not enjoy the growth that the integrated automobile, machinery, and fabricating companies did. In fact, they barely managed to stay alive.
Source: Chandler Alfred D. Jr. (1977), The Visible Hand: The Managerial Revolution in American Business, Harvard University Press.