War and Crisis as Market Entry Window

“WILLIAM SALOMON, FEBRUARY 22, 1994 Certainly at the time we were the largest risk-takers in the business. That wasn’t always necessarily out of choice. It was due to expediency. We didn’t have many people working for the firm who were members of the “right” clubs. Years ago, the old-time firms that became our major competitors had built-in business through family connections and college acquaintances. They were tied in because of who they were, while we were somewhat of a Johnny-come-lately with no Ivy League background and no tennis or other club memberships. We weren’t part of the “in” group in those days . . . So we had to fight our way in. The only way we knew how to fight was to take more risks than somebody else would take”

“We constantly had to illustrate we would pay more or sell cheaper. Our philosophy was taking chances . . . We were a risk-taking firm”

“The 2008 global financial crisis provided Chinese capital with the opportunity to acquire quality assets worldwide. In the automotive industry, there were numerous cross-border acquisitions, such as Nanjing Automobile Group acquiring the British Rover, Shanghai Automotive Group acquiring South Korea’s SsangYong, and BAIC acquiring Sweden’s Saab. The most famous of these was Geely’s acquisition of Volvo.”

“Starting in 2002, Li Shufu had been eyeing Ford’s Volvo. After several twists and turns, he finally achieved his wish eight years later. Li Shufu’s acquisition introduced him and Geely to the world. The changes brought to Geely by this acquisition were evident. Volvo’s three factories, more than 10,000 patents, and complete technology research and development system could feed back into Geely’s tech R&D, forming a balanced product line and complete manufacturing system. The change brought to Li Shufu can be described as “impact.” Volvo’s supply chain, employee training system, safety test center, large-scale testing grounds, and global sales and service network taught Li Shufu to use global business thinking, experiencing the art and wisdom of management in the conflicts and integrations of different cultures.”

“Ivar took the long view. He believed matches were an important staple, like steel or sugar, and that match factories inevitably would be consolidated. He also foresaw that Britain’s abandoning of the gold standard would open up international finance to newcomers, and that the war would not clog shipping lanes as much as people supposed. He thought that if he could manage the match business as well as he had managed construction, he would be able to acquire a monopoly on production. Then, he could raise prices and earn enormous profits. Just as Rockefeller controlled oil and Morgan controlled banking, Kreuger envisioned controlling matches, and thereby joining an élite group of global monopolists.”

“When Swedish lawmakers decided to permit banks to invest in industrial companies for the first time, Ivar struck a deal with Oscar Rydbeck, a rising star at Skandinaviska Kredit A.B., known as “The Swedish Credit Bank.”11 When Rydbeck said he would be willing to take Ivar’s Kreuger & Toll shares as collateral for an investment in a new business, Ivar’s thoughts turned to his family - and to matches. Ivar’s father, Ernst August, had methodically saved enough money to buy stakes in two small match factories from their extended family’s consortium, Mönsterås Matchworks. Ivar’s brother Torsten now managed one of those factories in Kalmar, Ivar’s home town. The match business was highly competitive and not very profitable, but Ivar and the newly liberated Swedish banks agreed there was potential. Ivar saw that the match industry was in the same economic position oil, sugar, and steel had been in a few decades earlier. There were too many owners of too many factories. Competition was driving prices down so far that hardly any profit remained. Ivar knew his family, and the numerous other small factory owners, would never make much money this way. However, if these factories could be consolidated, the owner of a Swedish match monopoly could raise prices and make a fortune. Some factories in Sweden recently had combined, to form the Jönköping-Vulcan trust, but the men running the trust were conservative and slow. Ivar was sure he could dominate them. He began using loans from the Swedish Credit Bank to buy match factories throughout Sweden. During the next eight years, Ivar parlayed a few family match factories into a conglomerate. He modernized factories and expanded overseas sales. Production increased from 90,000 cases in 1914 to double that in 1916; his profits more than tripled.12 He reduced costs by purchasing the companies that made his machines, as well as companies that supplied chlorate acid potash for the tips. The hardball tactics Ivar used to take over competitors must have reminded Lee Higg’s partners of John D. Rockefeller, who used a similar approach to acquire competitors of his company Standard Oil. To get the money for these expansions, Ivar turned to Oscar Rydbeck. The Swedish markets were going through their version of a speculative frenzy during 1914-15, and Ivar was able to raise 5 million kronor from Swedish banks. During the war, when exports to Britain closed, Ivar turned to Russia, where he not only exported matches, but purchased aspen wood (the best wood for matches) and paper mills. After the war, he bought up virtually all of his competitors in Sweden, using more cash borrowed with Rydbeck’s help. He never gave up control. When he consolidated his match companies, he kept a majority of the voting shares.”