Final answer:
An example of a business that grew too fast is RCA during the 1920s, where speculative stock market practices, credit use for stock purchases, and economic optimism led to overexpansion. Issues included inflated stock prices, mismanagement, and insufficient new investors, causing the stock market crash and contributing to the Great Depression.
Step-by-step explanation:
One iconic example of a business that grew too fast is Radio Corporation of America (RCA) in the 1920s. The primary reasons for this overexpansion were the speculative stock market practices taking place during that time, such as buying on margin and the false sense of a continuously growing economy. This company and others rode the wave of the booming economy, with sales of consumer goods soaring and widespread electrification of America pushing their growth. The stock market's bubble grew on unchecked speculation and the use of credit for stock purchases, which involved borrowing money to buy stocks, intending to sell them for a profit later.
The explosive growth seen in American cities also contributed to an atmosphere of economic optimism. The rapid expansion of corporations, technological advancements, and economic factors such as a growing national market helped fuel this expansion. However, companies like RCA were growing faster than the actual value they provided, with their stock prices inflated by sheer speculation rather than genuine profitability. In the end, when there were not enough new investors to keep buying stocks at the inflated prices, the stock market crashed, leading to the Great Depression.
Adding further intricacy, companies that expanded nationally faced challenges in managing their brand and ensuring consistent products and services. Rapid expansion often led to mismanagement and, sometimes even fraud, as seen with salesmen diluting products to increase margins with less oversight from distant executives. This practice not only hurt consumers but also damaged the reputation of corporations that couldn't control their rapid growth.