The outstanding American businessman and philanthropist John Rockefeller still serves as an example to many people in the achievement of goals. Rockefeller was the only most important person who has laid the foundation of the oil industry. The same can be told about his role in the history of industrial development of the USA and the emergence of corporations of modern type. Causing admiration for his genius management and organization among people, at the same time, he was the most hated and despised businessman among the others, somewhat owing to his ruthlessness and success. Thus, more attention should be paid to the tactics Rockefeller applied in his business in order to understand the way he achieved a world-scale success.
John D. Rockefeller was a very rich businessman and made his fortune based on the oil industry. Chernov (1998) called Rockefeller’s life an epitome of the American Dream. Together with his brother William, he established the Standard Oil Company, which further became the first American business trust and was a leader in the oil industry during a long time. Born in New York in a poor family, John Rockefeller became involved in the oil industry in 1863 by investing money in the Cleveland and Ohio refineries. He founded Standard Oil that controlled approximately 90 percent of the U.S. refineries and pipelines by early 1880s (Segall, 2001).
The businessman conducted an active business and social lifestyle. During his life, John Rockefeller contributed above $500 million to beneficent causes, and the greater part of the money was directed to the medical arena. He designated the structure of modern philanthropy essentially. In addition, he is considered one of the richest men in the world’s history; he founded the Rockefeller Institute and Rockefeller University for medical research. The businessman sponsored the University of Chicago Foundation. Moreover, Rockefeller formed the shapes of the modern antitrust and monopoly laws (Chernov, 1998).
Rockefeller was born in 1839 in agricultural at that time state of New York and lived almost the whole century, till 1937. His father, William Rockefeller, traded in the wooden materials and salt, and having moved with the family to Ohio, turned into a doctor selling medicinal herbs and patent preparations. The character of the son, John Rockefeller, was already shown at the earliest age: he was pious, canny, stubborn, accurate, and attentive to details, presented with love to numbers, in particular to those numbers that corresponded to money. The father began to impart early to him and his brothers mercantile skills and views. Mathematics was young Rockefeller’s favorite subject at school. Studying developed his ability to count in mind quickly and precisely, and he achieved a tremendous progress in it (McNeese, 2009).
Before the Civil War started, he decided to be engaged in the trade of grain, clothes and many other essentials. This happened just a few years before the confrontation between North and South. Before the war, Rockefeller’s and his partners businesses were pretty bad. In the market, there was no great demand, and very few people were interested in the delivery of essentials. Nevertheless, it did not depress Rockefeller. The Civil War in the USA brought him the first considerable capital. Essentials became scarce, and the price for them rebounded significantly. After the war, demand began to decrease again (Segall, 2001).
However, Rockefeller decided to get involved into a new branch, oil industry. At that time, the oil fever began. Rockefeller had a sufficient capital to enter this industry. He chose not an oil production but processing, and that became one of the first successful tactical steps. At that time, in their everyday life, people began to use the petroleum-lamp more widely. However, the number of companies extracting oil was increasing, but the amount of oil processors was much less. The price of oil has fallen dramatically soon; however, the price of kerosene, the first product made of oil, remained unchanged. Such situation allowed Rockefeller to expand his production capacities (Boyer, Clark, Halttunen, Kett, & Salisbury, 2009).
As the oil boom progressed, Rockefeller continued to invest profits and borrowed funds in oil processing. He founded one more enterprise. The businessman demanded new markets corresponding to growing opportunities of his company; in 1866, in New York, he organized one more firm for trading on the Atlantic coast and kerosene export. Rockefeller involved his brother William in the business. That year, the company’s sales exceeded two million dollars. The efficiency of work and financial stability of the Rockefeller’s Standard Oil allowed him to achieve discounts concerning tariffs for railway services that, as a result, led to the decrease in transportation costs, and it in turn gave advantage over competitors in matters of prices and profits (McNeese, 2009).
Rockefeller entirely devoted himself to strengthening his business, broadening the business sphere, increasing quality and at the same time controlling expenses carefully. He made first steps towards integration of the process of the deliveries organization and distribution in the company in order to secure all the operations in the rickety, subjected to extremes market, and to strengthen his positions in comparison with competitors. Rockefeller’s firm bought the property land plots where white oak was expanded, which was necessary for production of barrels, bought tanks and warehouses in New York and vessels on Hudson (Segall, 2001). Rockefeller established one principle: to build and hold a strong financial position. By the end of the sixties, the businessman managed to accumulate sufficient financial resources; thus, his company was not depending on bankers, financiers and speculators. The financial capital has not only protected the company from bankruptcy and economic crises from which their competitors suffered, but also allowed to take considerable benefits from difficult economic situations (Risjord, 2005).
John Rockefeller early showed interest in scientific development in the field of oil refining. Due to Rockefeller’s interest in oil processing, soon, there were oils, which initially were not motor ones. In addition, industries began to produce candles of paraffin and many other products, which could be made of oil and used in household. Besides, John Rockefeller interacted actively with transport companies. At the first stage, he received benefits in the form of lower prices for transportation of oil products; it interested him a little since oil producers paid for transportation of crude oil. In addition, Rockefeller’s Standard Oil company produced barrels for oil transportation, and further, Standard Oil had the largest fleet of oil tankers and the largest railway tanks park (Risjord, 2005).
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However, oil transportation by rail was extremely expensive and unprofitable, which was caused by both objective and subjective reasons. The main objective reasons included load of the railroads, long time of delivery, and a high transport tariff. The subjective reasons were the frequent strikes of railroad workers. Therefore, Rockefeller saw huge advantages in pipeline transport. Standard Oil started building pipelines from oil fields to the oil refineries, which allowed cutting an expense of oil transportation and accelerating the process of transportation. As a result, all mentioned strategic steps allowed increasing the company income (McNeese, 2009).
By the end of the sixtieth, when overproduction shook the prices once again, the new industry plunged into depression. The reason was simple: too many wellsites and too much oil. It has been estimated that refining capacity was three times higher than the market needs. The price of such surplus was obvious to Rockefeller; in conditions when the majority of processors lost money, he concentrated efforts on the industry association under his management. The businessman wanted to attract additional capital and simultaneously not to subject to risk his control over business. He managed to make this having turned the association into a joint-stock company (Boyer et al., 2009).
On January 10, 1870, six people and Rockefeller at the head founded the Standard Oil Company. Such name had to underline standard quality of the product on which the consumer could rely completely. At that time, the kerosene, which qualitative characteristics were very various, was sold. Rockefeller possessed a quarter of all shares of the new company, which at that moment controlled the tenth part of all oil processing in the USA (Boyer et al., 2009).
John Rockefeller was distinguished from other rich men by his significant modesty in life. He was called a devil at the office for his workaholism. Besides, Rockefeller was unpretentious in clothes and often wore out his suits to the holes. By rail, he moved in a personal car; however, it was not done with the purpose to show his wealth, but in order to spend time on the way quietly. John Rockefeller turned the train car into the office on the wheels, where he held many negotiations. Rockefeller’s modesty can also be envied because he made almost all the charitable donations anonymously, despite the donation sums (Risjord, 2005).
Taking into account all abovementioned information, it should be noted that the history of the oil business development – from the unused item what oil was at the beginning of the 19th century to the main modern world economic industry – is identified with the history of Standard Oil and the person known as John D. Rockefeller to this day. In 1870, John Rockefeller was already a millionaire. When he was 30 years old, he created his own oil company Standard Oil. John Rockefeller developed the strategic plan for the creation of the uniform oil industry, which helped him to create the oil empire. For example, he took advantages of the competition between various railway companies thus receiving numerous discounts, introduced scientific researches in production, etc.