Business success stories always inspire us. There are various types : the rags to riches story, the ones involving outsmarting and outmaneuvering competition, the exceptional in execution story, the stories involving how one went bust before springing back up – all of them are quite inspiring and at the same time fun to re-visit. The ones that tops the list for me are the ones who outmaneuvered and outsmarted the biggies in a head on competition. Compiling a list of few of the most amazing stories:
The Dow Story
Herbert Dow founded Dow Chemical in Midland, Michigan when he invented a way to produce bromine cheaply. He sold the chemical for industrial purposes all over the US for 36 cents per pound at the turn of the 20th century. He couldn’t go overseas, however, because the international market was controlled by a giant German chemical cartel that sold it at a fixed price of 49 cents per pound. It was understood that the Germans would stay out of the US market so long as Dow and the other American suppliers stayed within its borders.
Eventually Dow’s business was in trouble and he had to expand. He took his bromine to England and easily beat the cartel’s fixed price of 49 cents per pound. Things were okay for a while until a German visitor came to Michigan and threatened Dow that he had to cease and desist. Dow didn’t like being told what to do and told the cartel to get lost.
Shortly thereafter German bromine started appearing for sale in the US for 15 cents per pound, way below Dow’s price. The cartel flooded the US market, offering the chemical way below their own costs, intending to drive Dow out of business. But Dow outsmarted them. He stopped selling in the US market entirely and instead arranged for someone to secretly start buying up all the German bromine he could get his hands on. Dow repackaged it as his own product, shipped it to Europe, and made it widely available (even in Germany) at 27 cents per pound. The Germans were wondering 1) why wasn’t Dow out of business and 2) why was there suddenly such demand for bromine in the US??
The cartel lowered its price to 12 cents and then 10 cents. Dow just kept buying more and more, gaining huge market share in Europe. Finally the Germans caught on and had to lower their prices at home. Dow had broken the German chemical monopoly and expanded his business greatly. And customers got a wider range of places to buy bromine at lower prices.
Dow went on to do the same trick to the German dye and magnesium monopolies. This is now the textbook way to deal with predatory price cutting.
Rafael Tudela’s Business Empire:
Rafel Tudela is a Venezuelan oil and shipping businessman. He is the quintessential street-smart executive.
He has built a billion-dollar business from scratch in less than twenty years. He seldom deals in written contracts because his word is his bond. He has always made his own breaks. And his principal business, which is oil speculation, relies on his constant process of seeing opportunities where no one else does and taking advantage of them.
In other words, Rafael Tudela is a genius at taking the edge. One of the best illustrations of this –of how he has the facts, knows what people want, and figures out a way to give it to them- is the story of how he got in the oil business in the first place.
In the mid 1960s, Tudela owned a glass manufacturing company in Caracas, but, a petroleum engineer by training, he longed to be in the oil business. When he learned from a business associate that Argentina was about to be in the market for a $20 million dollar supply of butane gas, he went there to see if he could secure the contract. “If I could get the contract,” he told me, “then I`d start to worry about where I`d get the butane.”
When he – a glass manufacturer operating alone with no previous connections or experience in the oil business – got to Argentina, he discovered his competition was formidable: British Petroleum and Shell
But feeling around a little bit he also discovered something else: Argentina had an oversupply of beef which they were desperately trying to sell. By knowing this one fact –his first “edge,” so to speak- he
became at least an equal to Shell and BP. “If you will buy $20 million of butane from me,” he told the Argentine government, “I will buy $20 million of beef from you.” Argentina gave him the contract contingent upon his buying the beef.
Tudela then flew to Spain, where a major shipyard was about to close down from lack of work. It was a political hot potato and an extremely sensitive issue for the Spanish government. “If you will buy $20 million of beef from me,” he told them, “I will build a $20 million supertanker in your shipyard.” The Spanish were ecstatic and delivered a message to Argentina through their ambassador there that Rafael Tudela`s $20 million of beef should be sent directly to Spain. Once again he had found the edge and taken it.
Tudela`s final stop was in Philadelphia at the Sun Oil Company. “If you will charter my $20 million supertanker, which is being built in Spain,” he told them, “I will buy $20 million of butane gas from you.”
Sun Oil agreed, and Rafael Tudela fulfilled his desire to get in the gas and oil business.
Excerpt from the book: “What they don’t teach you at Harvard Business School.”
Dell computer used to outsource the manufacturing of their motherboards to a Taiwanese company.
Then, one day that little company presented Dell with a new offer: they could start assembling whole computers for Dell. For Dell, this meant higher profitability: they’d have the same revenue, but with a lower cost base. For some reason the Taiwanese didn’t seem to care as much about profitability, only cash. But that’s probably because they’re still a bit backwards in Asia and don’t have any Harvard Business School-educated MBAs to teach them otherwise.
Anyway, that arrangement worked out well. One day the company came back to Dell with a new offer: they could take over Dell’s entire supply chain. For Dell, that meant even lower costs, and so even better profitability. After that arrangement was put into practice the company came back to Dell and offered to start designing computers for them. Brilliant! Dell could now focus on its core competency,branding, and let the Taiwanese do all the unglamorous work of actually building the damn things.
After that arrangement was put into practice the company took another trip to the US, but this time they didn’t visit Dell. They went to Best Buy, and offered them PCs that were as good as Dell’s but at a significant discount.
Softsoap and it’s acquisition by Colgate
“Back in the 1970s, liquid hand soap was sold by one guy: Robert Taylor, and his small company Minnetonka. It was his invention, and he knew he was on to something big. Test audiences loved the product and, despite barely having enough resources to do so, Minnetonka decided to go all in and make a push to take the product nationwide.
There was only one problem: Nothing he was selling could be patented. The concept of liquid soap wasn’t new, and simple pumps had been around since the dawn of civilization. As a result, Taylor knew several huge soap manufacturers were ready to happily steal his idea the very moment it looked like it could succeed on a large scale. Armed with superior resources and the ability to quickly R&D an imitation product, the industry giants were ready to crush tiny Minnetonka.
Taylor, however, was ready for this. Before any other company had the chance, Taylor decided to go shopping one day and bought a few plastic pumps. And by a few we mean FUCKING ALL OF THEM. There were only two companies nationwide manufacturing those little pumps, and Taylor ponied up $12 million — more than the total net worth of his company at the time — and ordered 100 million of them, effectively buying every single pump these two companies would be able to manufacture for the next year or two.
Anyway, without the part required to dispense the soap, there was nothing the major companies could do but sit and watch Taylor slowly own the entire market. His product would become known as SoftSoap, Two years after his little stunt, Colgate-Palmolive would be forced to just buy SoftSoap from Taylor for $61 million.”
Reference : http://en.wikipedia.org/wiki/Softsoap
~Inspired by this thread on Quora
Latest posts by Amarnath Vannarath (see all)
- What Are the Ingredients of a great SaaS Business? - February 21, 2019
- Using Data & Analytic Tools to Better Understand Your Users – Measuring the Right Metrics - January 29, 2019
- Understanding Cohort Analysis - January 23, 2019