Unit 1: Industrialization, Immigration & The Progressive Movement

2. 
   Andrew Carnegie
   
   1. 
      United States Steel
      
   2. 
      Bought out competitors to get more control over steel industry
      
   3. 
      1901, his mills produced more than all British mills combined
      
   4. 
      Vertical integration – bought businesses in each step of steel making process
      
   5. 
      Video: 5 Facts http://www.tinyurl.com/LammACar (The Men Who Built America: Andrew Carnegie)
      
      
      1. 
         ____________________________________________________________
         
         
      2. 
         ____________________________________________________________
         
         
      3. 
         ____________________________________________________________
         
         
      4. 
         ____________________________________________________________
         
         
      5. 
         ____________________________________________________________
         

3. 
   John D. Rockefeller
   
   1. 
      Standard Oil – nation’s largest oil refiner
      
   2. 
      Horizontal integration – owning all businesses in a certain field
      
      1. 
         Formed a trust – legal arrangement grouping together a number of companies with the same board of directors; made $$$ by getting rid of competition
         
   3. 
      Video: 5 Facts http://www.tinyurl.com/LammJRoc (Rockefeller’s Standard Oil)
      
      
      1. 
         ____________________________________________________________
         
         
      2. 
         ____________________________________________________________
         
         
      3. 
         ____________________________________________________________
         
         
      4. 
         ____________________________________________________________
         
         
      5. 
         ____________________________________________________________
         

It’s smaller than Whole Foods but earns twice as much revenue per square foot. It offers less than 10% the number of different products, instead booking on its customers actually wanting fewer choices to save money. A bag of quinoa is $9.99 at Whole Foods, but $4.99 here. Gluten-free cheese pizza is $7.49 at Whole Foods versus $4.99 here. It harkens back to simpler times while simultaneously staying on the cutting edge of development and social trends. It’s Trader Joe’s and it’s likely coming to your neighborhood sometime soon. (opened in McCandless Crossing on 3/13/15)

When asked for their “secret” they give a curious look. There is no secret to offering customers high quality items at low prices while being served by employees well compensated and cared for by their employer.

On its shelves, 80% of its items bear its name. Trader Joe’s has eliminated the profits of the middle man by controlling its own production and distribution. Instead of another company making the product, then selling it to a distributor who sells to a larger distributor who brokers a deal with a grocer for the highest amount possible, Trader Joe’s produces much of its own inventory and ships directly to its stores. Gone are the middle men and their profits, meaning lower prices for consumers for the high quality goods they want.

Here’s how.

A chip company produces a bag of chips for $1.49. That includes the costs for the chips, bags, employee salaries, taxes, health care, rent payments, electric bills, water bills, advertising costs, etc. They sell the chips to a distributor at a margin of 17%, meaning the distributor pays $1.74 per bag. That distributor sells it to a larger distributor with contracts with Wal Mart, Giant Eagle, etc. at a 19% margin, or $2.07 per bag. Wal Mart and Giant Eagle sell that bag of chips at a profit of 20%, or $2.48. The customer pays 40% more than the cost for the bag of chips. At Trader Joe’s, a 20% profit without the middle men means a comparable bag of chips will cost $1.79, saving the customer $0.69 per bag. Trader Joe’s doesn’t have to pay for the profits of the companies beneath them the way Giant Eagle and Wal Mart do. That allows them to sell high quality items for a cheaper price than does its competitors. Simply stated…it’s working!

1. In the last paragraph, how is the word “margin” used and what is its meaning?
a. It refers to the space outside the main area of something
b. It means to push someone or something aside
c. It refers to an area to which someone would want to go
d. It refers to profits gained after a sale

2. What does this fact contribute to what you read? “At Trader Joe’s, a 20% profit without the middle men means a comparable bag of chips will cost $1.79, saving the customer $0.69 per bag.”

3. Which sentence best supports the author’s intention of educating the public in how Trader Joe’s business model works?

In the Venn Diagram below, identify the primary difference between these two companies, and in the overlap, identify the ONE, BEST SIMILARITY!