Industrialization and Captains of Industry

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How did Rockefeller set out to acquire control of the oil industry?

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The main way in which John D. Rockefeller tried to take control of the oil industry was through driving down costs in his own company.  He would then use his lower costs to drive his competitors out of business.

Rockefeller’s main tactic was to make sure that his costs were as low as possible.  He did this in two main ways.  One thing that he did was to push suppliers and other companies that he bought from to give him the lowest possible prices. For example, he demanded that railroads carry his oil for less than they charged other companies.  Because he shipped a lot of oil, they wanted his business and complied.  A second thing that he did was to try to find every possible way to lower the cost of producing oil.  One famous example of this has to do with making barrels to hold the oil.  Rockefeller’s company made its own barrels.  He is said to have visited the barrel-making plant one day and to have asked why 40 rivets were being used in each barrel.  He was told that that was how it had always been done.  He had them try it with 38, which did not work.  But 39 rivets were enough to hold the barrel together.  This means that Rockefeller was willing to push to reduce costs so much that he would even go to the bother of determining the absolute minimum number of rivets that could be used in every barrel.

Once Rockefeller had lowered his costs, he could also lower his prices.  When he lowered his prices, he drove his competitors out of business.  In this way, he took more control over the oil industry.

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