DuPont

Question 1

Overview

Answer 1

M-Form pioneered by DuPont

Question 2

Cartel/Trust (1872)

Answer 2

after civil war: explosives industry= overcapacity and declining prices

• DuPont formed cartel= GunPowder Trade Association to control price and production

successful

Question 3

Trust Problems

Answer 3

they did not pay attention to costs, to improve processes, to replace inefficient plants, support R&D, efficiently use resources, gauge existing or potential demand

Price and production agreements invited new entrants that (even if economically unviable) had to be bought into by the industry leader if control was to be maintained

Sherman Antitrust Act of 1890

Question 4

Centralization

Answer 4

• 1902 DuPont died
• dissolved powder trust and merged those firms into a single integrated corporation
• economies of scale
• With WWI: increase in profits

Question 5

Diversification after WWI

Answer 5

• transforming itself from single-industry explosives firm to diversified
• fear of becoming over-dependent on government munitions contracts and too easy a target for federal antitrust actions
• diversification failed

Question 6

Five-Man Committee (1919)

Answer 6

• centralized structure works well as long as units are few in number and closely related
• coordination became more complicated so
• decentralized structure centered around 5 products departments

Question 7

Centralization/Decentralization

Answer 7

centralization= economies of scale 
decentralization= economies of scope

Question 8

Trust

Answer 8

• individual shareholders of many separate corporations agree to convey their shares to the trust
• agreement vested these persons with a wide range of powers and duties
• trust agreement permits centralization
• the use of the trust as a means of controlling a variety of holdings