Hide a Dagger Behind a Smile: Use the 36 Ancient Chinese Strategies to Seize the Competitive Edge by Kaihan Krippendorf

Author:Kaihan Krippendorf [Krippendorf, Kaihan]
Language: eng
Format: mobi
Tags: ebook, book
Publisher: F+W Media, Inc.
Published: 2007-12-31T14:00:00+00:00

The Seaman Who Predicted the Ground Would Shift

How does the son of a working-class welder emerge as one of the world’s richest billionaires? He sees something others do not; he sees that the battleground is about to shift.

John Fredriksen began his career with an unremarkable first job as a trainee in an Oslo ship-brokering company. He continued to work in the shipping business, becoming one of many obscure private tanker owners. In the 1990s, however, he saw that the world of tankers was about to experience a shift.

Private tanker owners such as Fredriksen had been hurting because of overbuilding in the 1970s. Oil companies exploited the resulting oversupply by pitting ship owners against each other (see the stratagem Kill with a borrowed knife) to drive down rates to levels that barely covered costs.

But Fredriksen predicted that many of the tankers built in the 1970s would soon wear out. Tanker supply was about to shrink and this shrinking would shift power away from oil companies toward tanker owners. As he said, “The world has to get crude somewhere, and OPEC is the place. We saw that.”60

He also saw that oil companies were starting to look for environmentally safe shipping options. These two shifts revealed a new future in which oil companies would be bidding for the few tanker owners that owned newer, environmentally safe tankers.

In accordance with Sun Tzu’s ancient principle that one should seize the battleground first, and when common industry wisdom was to avoid the tanker business, Fredriksen began buying tankers. In 1996 he took over a Swedish shipping company called Frontline for $55 million. Over the next three years he continued acquiring tankers, focusing particularly on buying the more expensive but environmentally friendly double-hull tankers.

Fredriksen made another strategic decision that positioned him well for a battleground shift. Instead of entangling his company in long-term contracts, he focused on the “spot market”—the market for shipping oil on short notice. The spot market had two advantages: It offered higher margins, and it gave Fredriksen the flexibility to raise prices with the market.

In 1999 Fredriksen’s prediction came true. The battleground shifted when an aging tanker spilled 70,000 barrels of fuel oil off the coast of Brittany. Headlines warning of a major ecological threat drew public attention to the risks single-hull tankers posed to the environment, which in turn sent big oil companies into a frenzy. To avoid such environmental, economic, and public relations disasters, they began looking for double-hull ships to ship their product. They increasingly found themselves negotiating with Fredriksen.

Frontline now commands nearly 25 percent of the world’s supertanker spot market. This means that if a company wants to ship oil quickly, there is a one in four chance they will ship it with Frontline. With such bargaining leverage, Fredriksen turned the tables on oil companies. At one time, big oil companies could negotiate tanker owners down to break-even pricing. Now that they need Frontline, they are willing to pay.

In the ten years ending in 2005, Frontline has decisively beaten its competition.

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