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.