Is big business driving small business to bankruptcy is a question that has been asked by many small business owners but remains unrequited. In a business world, most of these small firms have to compete hard with these big companies for survival. The level of competitiveness of big conglomerates in a business community is so alarming for small businesses who have to tussle hard in capturing a market share. Market share is not the only one these little businesses have to strive. These big companies can even change the standards of doing business in an area and put these small companies out of reach hence they have to strive extremely hard in upgrading themselves to rise above the new standards set by these big companies (Berger & Udell, 1998). Thus, this study tries to answer the big question, if large enterprises are driving small business to bankruptcy?
Large enterprises are for sure driving small companies to bankruptcy. They do through employing strategic business tactics that are way above reach to these little companies. For example, Sporting Goods Industry is big chain stores driving specialty stores out of business. This Sporting Goods Industry has succeeded in driving these small companies out business through employing the following strategic business approaches;
Since this chain store opened its branches in different locations, it attracted the best pool of employees working in these specialty companies. The Chain Store hired many people who were professional and had sufficient skills and expertise to drive sales of these small firms high (Shuman, 2007). Since this Sports Good Industry chain has more funds to employ and remunerate well its employees, these little enterprises stand no chance to compete over competent professional working in them thus may shrink their business over the lack of qualified staff to work in them. Unqualified employees hired by these small firms lead to not achieving the objectives and goals of these little businesses who operate with high costs that eat their profits return margins that are so little.
Crowding Out Competition
Big companies afford to offer lesser prices of commodities than small ones. Most of these big companies can afford to provide reduced prices with an anticipation of selling more goods. Despite reducing the prices of their products, by selling more commodities compensates the reduced profit margin hence remain to be in operational. At the same time, since these big companies buy in bulk, they are often given discounts off a purchase from their suppliers hence can afford to lower prices which are not the case with small companies. They big companies also can be able to flood the market with great advertisements that help to capture more consumers who have been purchasing goods and services from these small firms (Shuman, 2007). Thus, with this strategy of crowding out the competition, small companies stands no chance to compete with big business thus may lead them to wind up their businesses.
Most of these big firms provide their personnel with the modern surrounding of working areas that small companies are unable to provide. Starting with the latest technology, ergonomically computer keyboards and worker friendly lighting attracts competent employees. Safety equipment and air conditioning might be abundant in these big businesses. Although small companies might provide the above conditions that meet government standards, some of the best expertise in the business world may feel that big companies offer the same terms beyond what is seen to be the minimum requirements hence they will leave these small companies for green pastures in these big companies. Thus, with high employee turnout being witnessed in these small companies, their stableness to compete with these big firms is just a dream. They lose out on good employees and working conditions to these big firms. And other factors such as technology transfer on offer by big business also aids in sending these small businesses to bankruptcy.
What Will the Consumer Lose by Not Having Specialty Stores Around?
The small companies or specialty stores that are being driven out of business as seen in the case of Sports Goods Industries chain that has driven them out of business is so adverse on the consumers. The customer's goods are monopolized. The consumers have no that freedom of choice of buying from different suppliers of choice (Berger & Udell, 1998).
All in all, big companies are the reason why these small companies are going to bankruptcy. They can as well be blamed by small firms for dismissal company performance witnessed in small business. The government and relevant authorities have to come up with appropriate policies and regulation to curb this sad affair of driving small business out of business.
Berger, A. N., & Udell, G. F. (1998). The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle. Journal of banking & finance, 22(6), 613-673.
Shuman, M. H. (2007). The small-mart revolution: How local businesses are beating the global competition. Berrett-Koehler Publishers.
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