Hoden Oil Company grew through a strategy of merging other mining companies. Success in mining led to high profits, which led to high dividends, which caused the capital to increase and made possible mergers through the issue of stock, with an expansion of the scale of business as the end result. When Hoden Oil achieved mergers with refining and wholesale companies in a process known as daigodo (amalgamation), it became one of the leaders of the Japanese oil industry, on a scale rivalling Nippon Oil Company. Soon, however, its production rate of crude oil began to reach a ceiling, signalling that its growth strategy was coming to an end. However, the company continued to pursue the strategy of mergers, expansion and capital increase, until in 1909 the discovery of falsified accounts brought disaster. The next year saw the beginning of reforms known as naibu seiri. Professional managers were introduced and, most important, the growth strategy was changed to one based on gradual advances through technical innovations in mining.
