{"id":757,"date":"2015-12-02T23:49:51","date_gmt":"2015-12-03T04:49:51","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/standard-oil-a-company-so-effective-only-the-u-s-government-could-compete-with-it\/"},"modified":"2015-12-02T23:49:51","modified_gmt":"2015-12-03T04:49:51","slug":"standard-oil-a-company-so-effective-only-the-u-s-government-could-compete-with-it","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/standard-oil-a-company-so-effective-only-the-u-s-government-could-compete-with-it\/","title":{"rendered":"Standard Oil \u2013 A Company So Effective, Only the U.S. Government Could Compete with it"},"content":{"rendered":"

Creating and Dominating an Industry<\/strong>
\nWhat started as a pure-play refinery in 1870, Standard Oil (\u201cSO\u201d) became a fully integrated, industrial behemoth with a 90% market share in kerosene refining, and perhaps one of the most effective corporations ever created. In fact, SO was such an effective company, that the U.S. government had to create a new law \u2013 the Sherman Antitrust Act of 1890 \u2013 specifically to combat the market power that SO (the first trust ever created) had built for itself.<\/p>\n

The Value Proposition and Business Model<\/strong>
\nKerosene was the refined version of crude oil that powered the U.S., and many of the developed global economies, for most of the latter half of the 19th century. In the 1860s the process for refining was inefficient and resulted in products of inconsistent quality. As a result, the refining process was expensive, wasteful, and produced low yields. Procurement of inputs was also expensive; crude oil was transported by rail in individually filled wooden barrels that were time consuming to fil, often leaked, and were expensive to produce. Furthermore, given the low yield of refiners, railroads often had to stop at many small refiners to get a full load and thus had to charge higher costs to maintain profitability.<\/p>\n

The inefficiencies in this market provided SO an opportunity to create a product of uniform quality that could be sold to consumers at the lowest possible price.<\/em><\/p>\n

Creating Standard Oil<\/a><\/p>\n

Solving the Problem<\/strong>
\nSO made several key changes to the kerosene production process from improving the refining process itself, to reorganizing the whole value creation chain from raw materials procurement to customer delivery:<\/p>\n