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John D. Rockefeller
Transcript of John D. Rockefeller
7 Marketing Functions
Again, they didn't really need promotion because of their far superior market position. They have a fairly negative reputation due to media critics and government aggravation, but even so John worked hard to keep the company running in its best condition.
II. Situation Analysis A. SWOT Analysis
At 16 years old, John started as a bookkeeper and clerk. Buisness wasn't great but he finally managed to get hired by Hewitt & Tuttle. The years of his hard work grew his caution, precision, and resolve. His efforrts even gained attention around town, earning him a lot of respect. In 1859, after he turned 20, John partnered with Maurice Clark to form their own company, Clark & Rockefeller. They were merchants in grain, hay, meats, and miscellaneous goods.
Early Business Career 1855-1863
At the end of the first year, they grossed $450,000, making a profit of $4,400 in 1860 and a profit of $17,000 in 1861. Pretty good for the $2,000 they each put in to start the business.
The commission merchant business was a very competitive market and Clark & Rockefeller's success was mast likely due to Rockefeller's natural business abilities.
Channel Management: Throughout the US and the majority of the world he had storage tanks, canneries, and warehouses constructed, then he built offices in key cities. For inland distribution the Company had motor tank trucks and railway tank cars, and for river navigation it had a fleet of low draft steamers and other vessels.
Introduction to Marketing Final
John D. Rockefeller
Rockefeller main company, Standard Oil, was probably named as such because of his dream of a unified market, and because he wanted his oil to become the standard
Laura Celestia Spelman (1839-1915)
Elizabeth Rockefeller (1866–1906)
Alice Rockefeller (July 14, 1869 – August 20, 1870)
Alta Rockefeller (1871–1962)
Edith Rockefeller (1872–1932)
John Rockefeller Jr. (1874–1960)
John was born on July
8th of 1939 in Richford, New York.His father claimed to be a doctor who could cure cancers, and often traveled abroad leaving John with his mother.
However his religious and disciplined mother
encouraged John to work hard and save money. By the age of 12 he had saved fifty dollars from raising turkeys, and then loaned it out to a farmer at 7% interest, which taught John a valuable lesson.
He learned to "let the money be his servant and not make himself a slave to the money"
John also attended Owego Academy, a high academic school, and excelled at arithmatic (which would greatly help him in his later life).
In 1853, the family moved to Clevelend, Ohio
and John attended high school up to '55. For those years, he learned valuable debating and speaking skills. He then went to Folsom's commercial college for 10 weeks where he was taught about economic customs and penmanship.
During the Civil War business was booming, and as grain prices went up, so did their commisions. Rockefeller never gambled with the company and his precise marketing style mixed with his aggressive expanding throughout Ohio led to great success for the company.
However, by the 1860s, Rockefeller realized that the commission merchant business in Cleveland was going to be limited. He was convinced that railroads were going to overtake the transportation of commodities. This was a disadvantage because Cleveland was positioned as an important Lake Erie port. Rising grain output in the Midwest led to Rockefeller believing that access to water and rail as well as geographic position ment he should switch to collecting and shipping raw materials.
On August 27, 1859, Edwin Drake struck oil near Titusville, Pennsylvania, setting off a frenzied oil boom. Rockefeller, along with several partners invested in a Cleveland oil refinery, creating the Andrews, Clark & Company in 1963. In 1864, Rockefeller married Laura Celestia Spelman they went on to have four daughters (three of whom survived to adulthood) and one son.
He eventually bought out his partners for $72,500 for complete control. Rockefeller worked extremely hard to increase productivity and efficiency, like even buying tracts of white-oak timber for making the barrels as opposed to transporting freshly cut green timber directly to the cooperage shop. In 1866, John brought his brother William into the partnership and they built another refinery in Cleveland which was named the Standard Works. They also opened a New York City office with William Rockefeller in charge, to handle the export business, which eventually became larger than the domestic business.
In 1867, Henry M. Flagler (1830-1913) became a partner, and Rockefeller, Andrews & Flagler was formed. Flagler's wife's uncle also became a silent investor to the company which brought about a lot of expansion. By 1868, Rockefeller, Andrews & Flagler was the largest refiner in the world. They understood that the only way to make profits consistently in oil refining was to make the business as large as possible and to utilize all their waste products. There process was as follows...
They built high-quality, larger, better-planned refineries. They built permanent facilities using the best materials available.
They owned their own cooperage (barrel making) plant, their own white-oak timber and drying facilities, and bought their own hoop iron. Consequently, they cut the cost of a barrel from about $3.00 to less than $1.50.
They manufactured their own sulfuric acid (which was used in the purification process) and devised technology to recover it for re-use.
They owned their own drayage service, consisting of at least 20 wagons in 1868.
They owned their own warehouses in New York City and their own boats on the Hudson and East Rivers to transport their oil.
They were the first to ship oil via tank cars (albeit big wooden tubs mounted in pairs on flat cars -- later to evolve into the modern form of a tank car). And they owned their own fleet of tank cars.
They built huge holding tanks near their refineries for storing crude and refined oil, with the equipment for drawing off the oil from the tank cars into the holding tanks.
Their huge size made it economical to build the necessary physical plant to handle all the "waste" products from the refining of kerosene. They began manufacturing high quality lubricating oil that quickly replaced lard oil as a lubricant for machinery. Gasoline, which many refiners surreptitiously dumped into the Cuyahoga River at night (the river often caught fire), Rockefeller and Flagler used as fuel. They manufactured benzene (used as a cleaning fluid; a solvent for fat, gums, and resin; and to make varnish), paraffin (insoluble in water, used for making candles, waterproofing paper, preservative coatings, etc.), and petrolatum (used as a basis for ointments and as a protective dressing; as a local application in inflammation of mucous membrane; as an intestinal lubricant, etc. -- white petrolatum later marketed under the brand name Vaseline). They shipped naphtha (volatile inflammable liquid used as a solvent in dry cleaning and in wax preparations, varnish and paint making, burning fluid for illumination, and as a fuel for motors) to gas plants and other users.
On January 10, 1870, the Standard Oil Company of Ohio was created by John D. Rockefeller (30%), William Rockefeller (13.34%), Henry Flagler (16.67%), Samuel Andrews (16.67%), Stephen Harkness (13.34%), and O. B. Jennings (brother-in-law of William Rockefeller, 10%). It held about 10% of the oil business at the time of its formation.
In Rockefeller's thought the state of the oil business was chaotic. Because entry costs were so low in both oil drilling and oil refining, the market was full of crude oil with an equally high level of waste. He thought the theory of free competition didn't work well when there was a mix of very large, efficient firms and many medium and small firms. His view was that the weak firms, in their attempts to survive, drove prices down below production costs, hurting even the well-managed firms such as his own.
His solution was very few (or possibly even one) large, vertically integrated firms. So in 1971 he started formulating his plan to consolidate all of the oil firms. He was however interrupted by the South Improvement Scheme which was planned to unite all railroads, coal and oil refineries in order to control rail prices.
What was forgotten, however, was to include the producers in the scheme. Despite efforts to reassure the drillers in the Oil Regions that the scheme would benefit them as well by keeping prices up, the Oil Regions Men revolted and organized a boycott of all the refiners and railroads they suspected of being part of the scheme. Consequently, the scheme collapsed in 1872 before it was ever implemented.
Rockefeller continued his consolidation plan, and by April 1872, Rockefeller had bought up and/or merged with almost all the refineries in Cleveland. The inefficient and poorly constructed refineries were dismantled, while the better-quality ones were upgraded to Rockefeller and Flagler’s standards.
After this, the business exploded and the company bought, sold, fought, and controlled. By 1879, the Standard Oil Company did about 90 percent of the refining in the United States, with almost 70 percent being exported overseas. The business had become so large and so complex that Rockefeller only dealt with major problems and the larger outlines of his affairs. Rockefeller was only 40 years old.
On January 2, 1882 the Standard Oil Trust was formed. The Trust was capitalized quite conservatively at $70,000,000 -- the true value was about $200,000,000 (no stock watering at the Standard). The nine Trustees controlled 23,314 of the 35,000 shares with J.D. Rockefeller holding 9,585 shares. But on March 21, 1892 the Trust was formally dissolved.
But soon, Rockefeller started having mental illness from work and stopped coming to his office in 1896, then he retired in '97. But Rockefeller had a huge fortune and even though he was keen on charity, he could not handle it all. He hired Frederick T. Gates to manage the fortune that peaked in 1912 at almost $900,000,000. He started numerous charities, institutes, and foundations
1. The University of Chicago -- which Rockefeller was largely responsible for creating -- alone received $75,000,000 by 1932.
2. He set up, at the urging of his son, the Rockefeller Institute for Medical Research (now Rockefeller University) and his gifts to it totaled $50,000,000 by the 1930s.
3. He founded the General Education Board in 1903 (later the Rockefeller Foundation). The General Education Board helped to establish high schools throughout the South by providing free professional advice on improving instruction and education. The effort was a cooperative one, and local money was used to build the high schools. In 1919, Rockefeller donated $50,000,000 to the Board to raise academic salaries, which were very low in the wake of WWI.
4. The Rockefeller Foundation was officially established in 1913 and Rockefeller transferred $235,000,000 to it by 1929.
5. In 1909, Rockefeller established the Rockefeller Sanitary Commission which was largely responsible for eradicating hookworm in the South by 1927.
6. When Rockefeller died, on May 23, 1937, his estate totaled only $26,410,837. He had given most of his property to his philanthropies and to his son and other heirs.
By 1911, with public outcry
at a climax, the Supreme Court of the
United States ruled, in Standard Oil Co. of New
Jersey v. United States, that Standard Oil must be
dissolved under the Sherman Antitrust Act and split into
33 companies. Two of these companies were Jersey Standard ("Standard Oil Company of New Jersey"), which eventually
became Exxon, and Socony ("Standard Oil Company of New York"), which eventually became Mobil. The U.S. Supreme Court ruled in 1911 that antitrust law required Standard Oil to be broken into smaller, independent companies. Among the "baby Standards" that still exist are ExxonMobil and Chevron. Some have speculated that if not for that court ruling, Standard Oil could have possibly been worth more than $1 trillion today. Of the 34 "Baby Standards", 11 were given rights to the Standard Oil name,
based on the state they were in. Conoco and Atlantic elected
to use their respective names instead of the Standard
name, and their rights would be claimed by other
companies. Currently, three companies own
those rights in the US: ExxonMobil,
Chevron and BP.
The successor companies from Standard Oil's breakup form the core of today's US oil industry. (Several of these companies were considered among the Seven Sisters who dominated the industry worldwide for much of the 20th century.) They include:
Standard Oil of New Jersey (SONJ) - or Esso (S.O.) – renamed Exxon, now part of ExxonMobil. Standard Trust companies Carter Oil, Imperial Oil (Canada), and Standard of Louisiana were kept as part of Standard Oil of New Jersey after the breakup.
Standard Oil of New York – or Socony, merged with Vacuum – renamed Mobil, now part of ExxonMobil.
Standard Oil of California – or Socal – renamed Chevron, became ChevronTexaco, but returned to Chevron.
Standard Oil of Indiana - or Stanolind, renamed Amoco (American Oil Co.) – now part of BP.
Standard's Atlantic and the independent company Richfield merged to form Atlantic Richfield or ARCO, recently part of BP but has since been sold to a Japanese company. Atlantic operations were spun off and bought by Sunoco.
Standard Oil of Kentucky – or Kyso was acquired by Standard Oil of California - currently Chevron.
Continental Oil Company – or Conoco now part of ConocoPhillips.
Standard Oil of Ohio – or Sohio, acquired by BP in 1987.
The Ohio Oil Company – or The Ohio, and marketed gasoline under the Marathon name. The company is now known as Marathon Petroleum, and was often a rival with the in-state Standard spinoff, Sohio.
Other Standard Oil spin-offs:
Standard Oil of Iowa – pre-1911 – became Standard Oil of California.
Standard Oil of Minnesota – pre-1911 – bought by Standard Oil of Indiana.
Standard Oil of Illinois - pre-1911 - bought by Standard Oil of Indiana.
Standard Oil of Kansas – refining only, eventually bought by Indiana Standard.
Standard Oil of Missouri – pre-1911 – dissolved.
Standard Oil of Louisiana – always owned by Standard Oil of New Jersey (now ExxonMobil).
Standard Oil of Brazil – always owned by Standard Oil of New Jersey (now ExxonMobil).
Other companies divested in the 1911 breakup:
Anglo-American Oil Co. – acquired by Jersey Standard in 1930, now Esso UK.
Buckeye Pipe Line Co.
Borne-Scrymser Co. (chemicals)
Chesebrough Manufacturing (acquired by Unilever)
Crescent Pipeline Co.
Cumberland Pipe Line Co.
Eureka Pipe Line Co.
Galena-Signal Oil Co.
Indiana Pipe Line Co.
National Transit Co.
New York Transit Co.
Northern Pipe Line Co.
Prairie Oil & Gas.
Southern Pipe Line Co.
South Penn Oil Co. – eventually became Pennzoil, now part of Shell.
Southwest Pennsylvania Pipe Line Co.
Swan and Finch.
Union Tank Lines.
Washington Oil Co.
Marketing Information Management: Standard Oil didn't really need to gather information about the customers for a couple of reasons. First of all, everyone needs oil all of the time; and second, they were pretty successful at simply overwhelming the competition and/or buying them out. They might have adjusted production levels during seasons like fall when traffic goes down, but it's not like they could really have a whole lot of unused oil
Market Planning: Kind of the same situation as the previous function. Many people hated Standard Oil for its dominance of the market, its strategies, and just about everything else; so while many people tried suing them, not much could be done to stop or even slow down the behemoth it was becoming. John pretty much tried to make everything as efficient as possible, and in doing so he created an almost self-satisfying company.
Pricing: critics accused Standard Oil of using aggressive pricing to destroy competitors and form a monopoly that threatened consumers. However this was often the doing of John's partners that cared more for profit than the pristine contraption John was building.
Standard Oil's actions and secret transport deals helped its kerosene price to drop from 58 to 26 cents from 1865 to 1870. Competitors disliked the company's business practices, but consumers liked the lower prices. However, after 1900 it did not try to force competitors out of business by underpricing them. Even today there is controversy as to whether or not the company's and trust's actions were overall better or worse on all oil prices, the economy, and the people. That 26 cents is roughly equal to a bit under $4.00 today.
Product/Service Management: New technology wasn't introduced a whole lot in this time period, but John constantly worked on hiring people to upgrade his refineries and other machines. Techniques were also altered to raise efficiency. Plus Standard Oil was very waste efficient as compared to other companies. Standard Oil sold many products and always found ways to integrate them into their wide market space due to John's feverish work ethic, and the company's vast connections (especially the ones in China). They sold beeswax, Vaseline, lamp oil, vegetable oil, kerosene, crude oil, pretty much any derivative of petroleum and probably a ton of other stuff if I could find any. Plus I guess their shares count because they sold a ton of shares and stock to raise money (although that's not really a product or service).
Promotion: Standard Oil didn't really have many means of mass promotion but they hardly needed it. With its vast market majority and competitive prices, Standard Oil was successful at pushing its way into almost any store that could relate to their products, although that sort of just pissed everyone off even more. Back then it was pretty much impossible that you didn't know what Standard Oil was
Selling: As stated previously, John set up many of his own side businesses like growing his own trees for barrels so there were rarely any dealings with manufactures/wholesalers. Now for the third time, its not that hard to sell something that everybody needs, especially when you have a near monopoly. They did sell to some wholesalers and retailers though. And once more, John worked very hard at keeping a well maintained company with communication between companies and the people.
The government said that Standard raised prices to its monopolistic customers but lowered them to hurt competitors, often disguising its illegal actions by using bogus supposedly independent companies it controlled. So we are now incorporation the vocab word "Price Fixing"
To have very few or even one large oil industries so that there would be no mistakes made by smaller companies, and the people could all get the best quality oil at the best prices
To make a presence worldwide, to influence the entire world market, and to gain control of the oil industry. Also to make a large impact on charity.
Have as much money flow as possible while still saving and spending wisely. John also made sure to donate very generous portions of the income on charity
All of their products, especially the petroleum ones, were all very successful.
They did have patents on a few of the smaller items like the beeswax, and they just kept their refining secrets to themselves for the other petroleum products
Like I've said, their pricing was able to be very low because of the vast market percentage they held. Prices were constantly being raised and lowered to overwhelm smaller companies and to gain customers.
They were stationed in Ohio for their major operations, but due to the expanding railroads, and John's deals with the railroad companies, he was able to have not only country-wide distribution, but he had the oil easily shipped across the oceans.
Yes, I know that it's out of order.
Standard Oil of California (Socal) introduced the red / white/ blue chevron logo in 1931. The company expanded, acquiring the rights to Idaho, Utah, and New Mexico from Conoco. Socal acquired the 'Standard' rights in Texas from Waters-Pierce or its purchaser, Sinclair Oil. Idaho and Utah were added to the California Standard territory. Pasotex's operations in New Mexico and Texas were joined to become the wholly-owned subsidiary, Standard Oil of Texas. They expanded into Canada in 1935 as Standard Oil of British Columbia. The three-tiered chevron was used as a logo and by Socal and an identifying name by its extraterritorial arm, Calso (The California Company). They entered a joint venture with Texaco in 1936: Caltex, to market in Australia, the Far East, and in Europe. Monogram Manufacturing Company of Perth Amboy, NJ was purchased in 1945.
Among the other former Standard companies:
Ashland Oil acquired former Standard companies Cumberland Pipe Line Company in 1931 and Southern Pipe Line Company in 1949.
Buckeye Pipe Line Company purchased the Indiana Pipe Line Company in 1942.
Galena-Signal Oil Company merged with Valvoline in 1932.
The Ohio Oil Company renamed Mid-Kansas to Marathon Oil in 1934. In 1935, Lincoln Refining was absorbed into The Ohio, and Marathon followed in 1936. By 1939, the Linco brand was replaced by a red, white and blue Marathon runner logo and brand, abandoning Transcontinental's green and orange for 'Standard' colors. Marathon's lower-profit western assets were sold during WW2 to Tidewater-Associated, becoming Tydol Flying A.
Prairie Oil & Gas purchased Long Oil Company in 1931 before merging with Sinclair.
South Penn Oil Company renamed its Pennzoil gasoline operations in PA, OH, WV and NY to Pennzip in 1936 to allow for wider distribution of its core product, Pennzoil Motor Oil. Eureka Pipe Line Company was purchased by South Penn in the 1947.
Standard Oil of Kansas was acquired by Indiana Standard in 1948.
Vacuum Oil Vacuum merged with Socony in 1931, creating Socony-Vacuum.
Note: the following slides were completely copied off of websites and I claim no ownership or originality to the following paragraphs.
Standard Oil Company of New York (Socony) merged with Vacuum Oil Company in 1931, becoming Socony-Vacuum. The primary gasoline sold by the company was Vacuum's Mobilgas and Socony's pegasus logo was chosen as the symbol. Mobil Sekiyu (Japan) was the first to color the Mobil pegasus red @1933. Expansion fever did not quell with the Vacuum merger, and in 1934 Independent Oil of Altoona, PA and Metro Oil of Jamestown, NY were added to the company. Socony was also the first 'Standard' to lose exclusive rights to the Standard name. Colonial Beacon Oil Company started selling Esso fuel in Socony's territory, but no one noticed till it was too late. I have a 1932 NY map has the phrase "SOCONY IS STANDARD", but by then the damage from Esso / Jersey Standard had been done. In 1933, Socony and Esso formed a joint venture in the Far East - Standard-Vacuum or StanVac. Socony kept merging, purchasing California's Gilmore Oil Company in 1940, its Red Lion brand was not phased out till the end of WW II.
Atlantic Refining declined to exercise its exclusive rights to Standard in Pennsylvania and Delaware, marketing itself as Atlantic in all its markets. It did retain Polarine Motor Oil in its marketing region.
Standard Oil of New Jersey became known as Jersey Standard or "Standard", and marketed their main grade of gas as Esso. Esso became the downstream identity of Jersey Standard in the 1930's with "Standard" above it on the signs out front. Humble was used to market in Texas. Jersey Standard acquired the Colonial Beacon Oil Company in 1931 and used it to market fuel in Socony territory. Socony did not complain when 'Esso fuel' started to show up at Colonial Beacon, and could not protest when the stations were re-branded Esso. In 1933, Socony and Esso formed a joint venture in the Far East - Standard-Vacuum or StanVac. Standard Oil of Louisiana was offically absorbed by Jersey Standard in 1944. Jersey Standard also managed to acquire Arkansas and the rest of Louisiana from Waters-Pierce or its purchaser, Sinclair Oil. From 1935 to 1937, Tidewater Oil and Skelly Oil were Jersey controlled. Other exrtraterritorial arms in the late 1930's and early 1940's ended up including Grizzly, Litening, and Powerine. Grizzly and Litening were re-branded Oval-E from 1946 to 1950, when they were re-re-branded Carter. A common corporate symbol emerged in the early days of Esso, the Tiger that is still used in modern times by Esso and Exxon.
Standard Oil of Ohio (Sohio) acquired Solar Refining Company in 1931. Sohio was on the signs, Standard Oil of Ohio on the buildings. Some Sohio signs even had a banner reading "Standard Oil" below the oval and diamond logo. Canfield Oil was purchased by Sohio, as was it's Wm. Penn brand.
Standard Oil of Kentucky (Kyso) did not change. The signs out front read "Standard Oil Products" or "Standard Oil Company". Esso and Mobiloil products were sold as well as the Crown brands of Gasoline, acting like a jobber (marketer) for Esso / Jersey Standard. The maps dropped "KYSO" in the late 1940's.
Standard Oil of Indiana expanded into Standard-less southern Missouri and purchased distrubtion rights to Oklahoma from H.A. Williamson & Company. Stanolind was the name given to its exclusive products. In 1933, American Oil was purchased by Indiana Standard controlled Pan-Am. Mexican Petroleum and Pan-Am stations along the Atlantic seaboard were rebranded Amoco. while the Pan-Am brand remained in the south central US. Indiana Standard also acquired the rights to Montana, Wyoming, and Colorado from Conoco. There was a strong alliance with Nebraska Standard. The torch was still the corporate logo. The signs out front read "Standard Service".
Sinclair Oil did not exercise any of the rights it acquired from Waters-Pierce to use Standard in its territories. Those were divided between Indiana Standard, Esso, and Socal. Sinclair acquired another former Standard Oil Company, Prairie Oil & Gas Company, in 1932. In 1935, it acquired nearly bankrupt Richfield Oil of New York and operated it as if it was simply a eastern version of its parent, Richfield Oil of California.
Standard Oil of Nebraska was strongly allied with Indiana Standard, which enveloped it and supplied it. It still retained a unique identity and ball-and-bar logo. It was acquired by Indiana Standard in 1939. The bar-and-ball Nebraska Standard signage was replaced with Indiana Standard torch-and-ovals during the late 1940's.
Continental Oil Company (Conoco) did not exercise its rights to market as Standard. Socal and Indiana Standard split the rights to 'Standard' in Conoco's territory. Marland's transcontinental reach made acquisition unnecessary for Conoco. Conoco's biggest claim to fame was the Conoco Travel Bureau, second only to AAA in promoting pleasure travel. In 1950, Conoco pulled back from the US east coast, leasing its refineries and stations to Cities Service (Citgo).
Have an Amazing Summer!