Introduction
John D. Rockefeller made one of the most influential decisions of monopolizing the petroleum industry. John D. Rockefeller was born at Richford in New York in 1839. He lived a humble life and while still young, he used to sell candy. Additionally, he could make money by giving the neighbors loans.
At around the age of sixteen years, he was employed as a bookkeeper receiving fifty cents in a day (Gunderman and Gregory 1). In 1859, he collaborated with Maurice B. Clark and started a wholesale business followed by an oil refinery after including Samuel Andrews in the business.
As the demand for oil increased, Rockefeller bought the refinery from his partners after borrowing money. Later, he bought as well as build other oil companies. In 1870, John D. Rockefeller collaborated with his brother and established the Standard Oil Company at Ohio.
Standard Oil Company gave John D. Rockefeller the strength of driving away other owners of refineries by procuring their business premises (Baylor 1). At around 1880, the Standard Oil Company was refining approximately ninety percent of the United States oil.
The company controlled all the oil refining processes and marketing procedures in the United States. As a result, John D. Rockefeller had a strong influence on the quality of oil products produced and the market price. In 1890, John D. Rockefeller retired as the president of the company and Theodore replaced him.
During the reign of Theodore, he initiated antitrust actions, which led to the collapse of Standard Oil Company into other small companies. According to Gunderman and Gregory, John D. Rockefeller survived in the business environment because of monopoly (1).
Monopoly is a Greek word meaning alone or single. Monopoly exists when a particular business enterprise is the only supplier of a specific commodity (Baylor 1). The characteristic of monopoly is absence of competition to produce that commodity and a viable alternative product.
As a result, monopoly has a significant market power and it usually control the prices of commodities. For instance, monopoly can increase the profit margin by producing goods in small quantities and selling them at higher prizes.
Standard Oil Company was a monopoly. John D. Rockefeller used unethical business practices to monopolize Standard Oil Company.
The Six Unethical Practices of John D. Rockefeller
Reducing the Prices of Oil and Its Products
John D. Rockefeller reduced the prices of oil and its products temporarily (Baylor 4). His competitors could not keep up with the reduced prices because they had not planned for the same.
As a result, most of the business people who were dealing with oil and oil products ventured in to other types of enterprises. Those who could not survive in the competitive business environment sold their enterprises to Standard Oil Company.
The lower prices of oil attracted many consumers, hence, Standard Oil Company managed to establish a strong customer base. According to the theory of economics, low prices more often than not reduce the profit margin of a business and can even make it collapse.
John D. Rockefeller was not interested in the profit, but in monopolizing Standard Oil Company by driving away his competitors. He managed to stabilize Standard Oil Company at the expense of the profit. F
or instance, between 1880 and 1890, the price of processing raw oil dropped by one cent while that of refined oil by twenty six cents per gallon (Baylor 3).
By cutting down the prices of oil, John D. Rockefeller did not only win local consumers but also the international traders. Baylor stated that, in order for the Standard Oil Company to compete with the Russian Oil in the Asian and European Countries, John D Rockefeller subsidized the foreign prices of oil (5).
Additionally, he supplied free products in order to establish a universal customer base. For instance, in 1870, Standard Oil Company supplied kerosene lamps to the interior parts of the globe and taught people how to use them.
Procuring the Components Required Making Oil Barrels
John D. Rockefeller purchased the components required to make oil barrels and as a result, his competitors were unable to transport their oil to the consumers (Baylor 3). This is because his competitors could not change the raw oil into refined products that the customers can consume.
Thus, Standard Oil Company was the major supplier of refined oil products and it gained fame all over the world.
With time, Standard Oil Company started producing barrels and selling them at a reduced price in order to attract many consumers (Baylor 3).
For instance, John D Rockefeller was selling a barrel at one point five dollar while external suppliers were distributing at a price of two point five. This difference of one dollar facilitated the monopoly of Standard Oil Company because it attracted many consumers.
Secret Deals with Railroad
The major advantage of Standard Oil Company was its ability to get reduced rates from the railroads. John D. Rockefeller used the fame and prestige of Standard Oil Company to form an alliance with railroads, which gave it rebates in privacy (Baylor 4). Hence, the railroads reduced the shipping charges of Standard Oil Company.
The reduced prices enabled the standard oil company to compete effectively with other business enterprises that were charged high rates for the shipping. Some business enterprises could not cope up with the competition and they allowed the Standard oil to be a monopoly.
John D Rockefeller secured special considerations from railroads via giving them some amounts of oil. For example, John D. Rockefeller used to give railroads sixty carloads of oil every day in favor of shipment from other oil businesses (Baylor 3).
Railroads could carry oil from Standard Oil Company only instead of collecting supplementary products from other oil refinery companies. As a result, Standard Oil Company dominated the market by interfering with the supply chain management of other small refinery companies.
John D. Rockefeller won his railroads consumers by building an oil loading facility next to the train station, renting his oil tanker and taking responsibility for any accident on a property that belonged to railroad (Baylor 4).
This allowed Standard Oil Company outdo Pittsburgh Refineries because they could not receive any discount from railroads. Therefore, standard Oil Company managed to monopolize the market by maintaining reduced prices.
Buying Competitors Secretly
Gunderman and Gregory stated that John D. Rockefeller borrowed money and bought other oil refinery companies in secret (2). He then sent some of the workers from the procured company to find out the business deals of other oil refinery companies.
John D. Rockefeller used the report of the findings to take caution against a competitive business deal. For instance, if an oil company plans to reduce the price of oil products, Standard Oil Company would lower their prices further.
Some competitors that John D. Rockefeller had bought established oil companies and other refineries joined them. The aforementioned business development created competition with the Standard Oil Company.
As a result, John D. Rockefeller secretly hired the managers of the competitors companies and gave them high pay so that they do not produce any oil product (Baylor 2).
The refineries that produced small amount of oil maintained an expensive skeleton team. Standard Oil Company acquired approximately ninety percent of the refining industries.
In order to facilitate monopoly, John D. Rockefeller secretly bought dominating oil refinery companies but did not change their names to standard oil company.
For instance, Baylor stated that John D. Rockefeller bought Creek Oil Company in Pennsylvania but he did not change the name to Standard Oil Company (5). As a result, the workers of Standard Oil Company and Creek Oil worked collaboratively.
The sales of Standard Oil increased because customers who were against the company were still buying the oil because they thought it belonged to Creek Oil Company.
Buying or Creating Other Companies That Sell Oil Related Products
John D Rockefeller created companies that sell oil related products like pipelines as well as engineering firms that operated independently but gave Standard Oil Company rebates.
In 1879, Standard Oil Company became a monopoly in the oil transport industry after John D. Rockefeller created an oil pipeline company (Baylor 3). Although Tidewater Pipe Line Company tried to compete with Standard Oil, it did not succeed.
This is because John D. Rockefeller bought an exclusive chatter to construct its industry where Tidewater Company had planned to build one. As a result, Tidewater Company entered into an agreement with the Standard Oil Company so that they could survive in the competitive business environment.
Since Standard Oil Company had control over the market, it restricted the pipeline business activities of Tidewaters to eleven point five percent and retained the remaining percentage.
Standard Oil Company managed to form secret collaboration with the South Improvement Company. Thus, South Improvement Company proposed the secret cartels of the Standard Oil Company and gave them rebates while raising the charges for the other refineries industries (Baylor 2).
On the other hand, the South Improvement Company used to get rebates from other oil refinery industries as well as information about the prices of their products. John D. Rockefeller would be given the abovementioned information and he was able to regulate the oil prices and underpin his competitors.
Moreover, Standard Oil Company used to ship their barrel on the Standard Oil Company railroad in exchange of a discount of forty cents per barrel. As people became aware of the dirty games of John D. Rockefeller in the oil industry, he had already acquired twenty two out of twenty six of his competitors in Cleveland.
Use of Thugs
John D. Rockefeller used thugs to coerce competitors who could not be persuaded to collaborate with him. Ida Tarbell, an European competitor tried to attack Standard Oil Company by arraigning the impact of John D. Rockefeller on other oil refinery companies.
When John D. Rockefeller realized the mission of Tarbell, he tried to engage him in an agreement. Tarbell refused and John D. Rockefeller send the owners of small refinery companies to destroy his oil pump and well by burning or smashing them (Baylor 3).
The aforementioned tactic ensured that standard Oil Company remained a monopoly.
The Net Worth of John D Rockefeller and Carlos Slim Helú
John D Rockefeller net worth was six hundred and sixty three point four billion dollars as of February (Ash 171). He got his money from oil businesses. He operated standard oil company for twenty seven years before retiring in i897. He is the founder of Rockefeller and Chicago universities.
He was generous and supported tertiary institutions like Harvard, Yale and Columbia.John D. Rockefeller founded the Rockefeller Institute for Medical Research and the Education Board in order to increase the opportunity of people to learn. He was a philanthropist.
Carlos Slim Helú is the richest person in the world with a net worth of sixty nine billion dollars (Ash 171). He gets his money from his telecommunication, retail and mining business enterprises. Some of them include Conglomerate, Telmex and Grupo Carso. He is the chief executive of Telmex.
Every one dollar that each person in Mexico spent, twenty cents belongs to Helú. It is predicted that in the next five year, the net worth of Helú will increase by approximately thirty billion dollars if he maintain the same race.
Conclusion
John D. Rockefeller made one of the most influential decisions of monopolizing the petroleum industry. He used unethical business practices to monopolize the Standard Oil Company.
On the other hand, he was generous and made sure that he donated ten percent of his dues every month. He is the richest man that has ever lived with a net worth of sixty three point four billion dollars as of February.
Works Cited
Ash, Russell. Top Ten of Everything. Oxford: Oxford Publishers, 2006. Print.
Baylor, Christopher. “The Life of John D. Rockefeller.” Education Humanities 3.4 (2001): 1-6. Print.
Gunderman, Richard and Matthews Gregory. “Educating Leaders: Insight fron John D. Rockefeller.” Academic Radiology 1.1 (2012): 1-3. Print.