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How five great businesses were started

Central to creating your own successful business are a strong idea, a workable business model and a concrete business plan. However, some of the most successful global businesses started out as something very different from what they’ve become, proving that the flexibility to adapt to changing market conditions can be just as important.


From cheese slicers to one of the world’s largest IT suppliers:  IBM

Founded: 1911
Headquarters: Armonk, New York
Original business: Manufacturing industrial machinery such as commercial scales, meat and cheese slicers and time clocks
Current business: Manufacturing computer hardware and software; IT services and consultancy
Revenue: $81.74 bn ¹
Share price: $150.15*

IBM (International Business Machines) began life in the early 1900s manufacturing industrial machinery to serve a variety of businesses and didn’t introduce its first computer system until 1964. Almost 20 years later, in 1981, the IBM PC was launched and fast became the industry standard in personal computing. Today the company continues to manufacture IT equipment, while also offering a broad range of IT services.

Fact: “I think there is a world market for maybe five computers.” This remark, widely attributed to former IBM CEO Thomas J. Watson in 1943 is now understood to be a myth. (The Economist 1973)


From the humble noodle: Samsung

Founded: 1938
Headquarters: Seoul, South Korea
Original business: Trading in local produce
Current business: Manufacturing a wide range of consumer electronics, medical equipment
and telecommunications equipment
Revenue: $305 bn²
Share price: $556*

While most of us are familiar with at least one or two Samsung products, you might not be aware of the company’s humble beginnings as a trading business dealing mostly in locally grown produce and noodles. In fact, it wasn’t until the late 1960s that the company diversified into the electronics industry. Currently, the company continues manufacturing a wide array of electrical goods while working with Microsoft to develop products compatible with Windows 10.

Fact: In 1995 Samsung Chairman Lee Kun Hee together with his board of directors, frustrated by the quality of the company’s products, physically destroyed more than $50 million worth of hardware in front of an audience of 2000 employees. (www.androidauthority.com 2 March 2016)


From textiles to stock trading: Berkshire Hathaway

Founded: 1839
Headquarters: Omaha, Nebraska
Original business: Textile manufacturing
Current business: Wholly owns or has stakes in businesses in the food and drink industry, retail, financial services, publishing, utilities and aviation sectors as well as in textiles 
Revenue: $210.8 bn³ 
Share price: $211,660*

Following a general decline in the textile industry in the aftermath of World War I, Berkshire Hathaway was forced to close seven of its fifteen plants in the space of one year. Having bought a controlling share in the company, Warren Buffet diversified into insurance and a variety of other investments, building a business which currently boasts the highest stock price on the New York Stock Exchange. The conglomerate now wholly owns eight companies, including Fruit of the Loom, FlightSafety International and Dairy Queen, as well as holding a stake in seven others, including The Coca Cola Company, Mars Incorporated and American Express. Buffet is now one of the richest men in the world and is often referred to as the ‘Oracle of Omaha’ due to his foresight and business savvy.

Fact: Warren Buffet and right hand man Charlie Munger attribute their success to reading. “I just sit in my office and read all day, “ said Buffet in The Week. “my job is essentially just corralling more and more and more facts and information, and occasionally seeing whether that leads to some action.” (www.smarteranalyst.com 25 June 2015)


Filling shopping baskets with creative agencies: WPP

Founded: 1971
Location: London
Original business: Manufacturing shopping baskets
Current business: Advertising
Revenue: £1.22 bn4
Share price: £1637*

It’s doubtful anyone would expect a company manufacturing wire shopping baskets to become a worldwide advertising powerhouse, but that’s exactly what happened to WWP plc. (Wire and Plastic Products plc). In 1985 CEO Martin Sorrell was searching for a listed company through which to build a multi-national marketing agency and bought a controlling stake in WWP. Following a number of advertising acquisitions throughout the ‘80s and ‘90s, WWP agreed to acquire the United States-based agency Young & Rubicam in 2000, resulting in it becoming the largest advertising company in the world.

Fact: When challenged about his remuneration in 2016, CEO Sir Martin Sorrell replied: “I’m not embarrassed about the growth of the company from two people in one room in Lincoln’s Inn Fields in 1985 to 190,000 people in 112 countries and a leadership position in our industry…a world leader that’s 50% bigger than its next competitor.” (The Guardian 28 April 2016)


When the freebie becomes the product: Wrigley

Founded: 1891 
Headquarters: Chicago, Illinois
Original business: Manufacturing soap and baking powder
Current business: Manufacturing chewing gum
Revenue: $5.4x bn5

As far as marketing ideas go, giving away free chewing gum with baking powder might seem like an odd approach, but this ploy ended up paying dividends for The William Wrigley Jr. Company. During 1882 the free gift quickly became more popular than the baking soda and led to the company becoming the largest manufacturer of chewing gum in the world. With 140 factories around the globe and products being sold in over 180 counties, it’s no wonder Mars Incorporated was willing to hand over $23 billion to acquire the company in 20086.

Fact: Over 28 million people in the UK regularly chew gum and on average they chew 125 pieces of gum a year. (www.wrigley.com)


As these examples show  successful businesses don’t always start in the most traditional way. If this has inspired you to start your own business consider getting professional advice.

Sources:

1 IBM tops Q4 expectations but guidance misses’ cnbc.com, 19/01/16
2 Samsung announces Q4 2015 earning guidance; Y-o-Y profits grow’, gsmarena.com,09/01/16
3 Berkshire Hathaway Q4 Earnings Impress, Revenues up Y/Y’. zacks.com, 29/02/16
4 Wpp.com, December 2015
5As of 2007. The company was acquired by Mars Inc. in 2008.
6 Mars to buy Wrigley’s for $23 billion’, New York Times, 28/04/08
* Share prices were correct as at 12/04/2016. Prices in dollars are for companies listed on the New York Stock Exchange; those in pounds sterling are for companies listed on the London Stock Exchange.

Important information

This article has been provided to Lloyds Bank by external/third party contributors and contains their views as of May 2016 and should not be relied upon as fact and could be proved wrong. The information and opinions may not be accurate after this date. The views expressed may not reflect the views of Lloyds Bank plc.

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