Size Matters

During MBA, I have learned is that
1. Economies of scale: The bigger you get the cheaper it is to manufacture, you can get better price from your supplier, your distribution and advertizement costs (per unit output) will go down.
2. Innovation: Bigger firms can afford to spend larger amounts in R&D, patents, market research etc. which gives them an edge over smaller firms.
3. Professional management. In Larger firms have more competent mangers, which are there by virtue of their abilities and not their pedigree. Hence they are more rational and better.
4. Large firms can diversify their risks. Hence they have a higher probability of surviving a recession.
5. Their brands and products are well recognized and its hard for a small firm to match their marketing skills.
6. Greater pricing power, ability to modify the policies.
7. They usually have multiple functional strengths and core competency. (Smaller firms have 1 core competency and idea)

If all this are true, then why is that larger firms have not driven out all the smaller firms out of business? What decides that a particular firm has the required critical mass to gallop in the future as a force to be reckoned with, or it’s too small and would perish the corporate wars.

However what I have realized over the years is that giants are dinosaurs who are too clumsy to realize the changing landscape. In fact in the bid to retain at the helm, they would go to any lengths to manipulate the market, stall the growth and progress. Startups are more nimble, creative and arise from the unmet needs of the consumers.

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4 thoughts on “Size Matters

  1. Do you want the viewers to read the pdfs online? If so, you can try with http://www.scribd.com.
    By the way, most of the time, the files are uploaded in a free hosting server, and before downloading the file, I have to wait for few minutes. Instead, if you upload it in your own website, or in a free website like http://skydrive.live.com, then it would be easy to download.

    Regarding the size of the organization,
    If the company grows in size, then the percentage of talented people reduces. When the company is started, almost everybody in the company have talent, and they know exactly what to do. But, as the size of the company grows more and more, the percentage of the talented people reduces, and the lack of communication increases. One stupid manager is enough to collapse the entire project. So, after a stage, the company growth will reduce.

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  2. Size does matter. I guess that’s the reason, much of the population in the developed world is in the services industry (working for a big corporation).

    However there have been many an exceptions, particularly in the software industry which is not very resource(finance, inventories, land etc.) intensive and depends more on the innovation factor (google, hotmail). Even in these cases, they risk being gobbled up by the giants in ealier spurts of growth or if they are resilient enough, to chart their own development course.

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