Business Model Hall of Fame
jakarta: Rockfeller saw the benefits of consolidation. At the time, he witnessed the oil business (refineries) being terribly unprofitable. They often went bankrupt and failed. But he figured out that by reducing competition through consolidation, he would be able to gain market share and expand margins. One of the ways he did this was by cutting a deal with the railroad companies, that way his oil could be transported at costs lower than the competition.Other interesting things he did -
Horizontal integration: buying up refineries in every state
Vertical integration: acquiring pipelines, home delivery systems, etc
Free: in some cases Rockefeller gave away things for free or below cost. In China they had never used kerosene lamps, so Rockefeller gave away the lamps for free in order to get the Chinese to start using them and eventually buy Standard Oil's kerosene
-He also would undercut competitors in the refinery biz (sometimes below cost) in order to drive them out of business and force them to sell their refineries to him.How is any of this useful?Some people argue that Bill Gates is an iteration of Rockefeller's monopolist approach to business. By creating standards (Windows as the go to OS for PCs) he would be able to get consumers to use MSFT's related products - Office, Internet Explorer, etc.There is a great book called Titan by Ron Chernow where you can read an excellent account of how Rockefeller rose from being a lowly accountant to founding and operating Standard Oil.