The companies of today – a brief history

Nokia is a particularly interesting example of a company whose roots are far from its current business model. First established in 1865, the company started as a pulp mill, where wood is broken down into fibre board for use in construction, or further processing into paper. Fast forward just over 100 years and, in 1967, the Nokia Corporation was born. However, electronics were far from the main business focus. Over the next two decades, Nokia was responsible for the manufacture of everything from gas masks to car tyres. It wasn’t until the early 1990s that the Nokia we know today began to take shape, as side businesses were divested, and the focus of business operations was more closely aligned with telecommunications.

The origins of Samsung are similarly far-flung, set up in 1938 as a transporter of goods and shipping essentials across Korea and China. It wasn’t until after the Korean War and the subsequent military coup led by Park Chung Lee in 1961 that Samsung truly took off. Newly imposed fiscal policies focused on developing large domestic corporations through protectionism and cheap financing. This facilitated rapid industrialisation and allowed family-run monopolies (known as chaebols) to form.

Samsung was a major beneficiary of these policies and by the 1970s Samsung had expanded into several markets, including petrochemicals, insurance and textiles. It wasn’t until the end of the decade that they truly began to expand their electronics business and, following a successful revamp of the business model and culture in the 1990s became a global heavyweight in the industry.

As a brief aside, Samsung is a reminder that the impact of policies made decades ago can still be felt today. Allowed to achieve massive economies of scale, Samsung can now afford to price out most domestic competition. In 2022, its revenues were approximately ~14% of the total GDP of South Korea.

There are countless stories behind many of today’s most popular brands, below few other noteworthy examples:

• The soft drink Coca-Cola was invented in 1886 by pharmacist John Stith Pemberton. The first iteration of the drink contained wine. However, following the outlawing of alcohol in Atlanta in 1985, Pemberton eventually substituted the wine with an extract from kola nuts. The concoction of stimulants, cocaine from coca leaves and caffeine from the kola nuts (hence the name Coca-Cola), was originally marketed as a cure for common ailments including headaches.
• The first products marketed and sold by BMW were aircraft engines. It wasn’t until 1928 that BMW took their first steps into the world of automobile manufacturing. Interestingly, it is often cited that the blue and white logo represents the white aeroplane propeller blades rotating against the backdrop of a blue sky. However, this is a myth that originates from a 1929 advert that was promoting a new aircraft engine. The logo references the flag of Bavaria, a state in the south of Germany, where BMW was founded.
• Ferruccio Lamborghini’s first business ventures centred around farming machinery. He purchased his first Ferrari at the age of 42 and went on to own several more. However, he had numerous gripes with the cars. In 1991, he gave a televised interview, in which he explained that he had spoken to Enzo Ferrari directly about his concerns, who dismissed him as a mere tractor manufacturer. He claimed that this was a turning point, stating “This was the point when I finally decided to make a perfect car”. The interaction allegedly spurred Lamborghini on to develop his own-brand grand tourer (GT) luxury offerings.

Businesses are constantly adapting to changing environments, and capitalising on opportunities where they are present. If they do not, they are ultimately outcompeted and doomed to fail. While stories like these are interesting, they serve as pertinent reminders that investors must also carefully consider both a business’s ability and willingness to embrace change when making their forecasts and assumptions.

Adam Fisher, Investment Analyst

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