It would be natural to assume that larger companies always have a competitive advantage over their smaller counterparts. This is, however, not always the case. You must consider the individual aspects involved in the businesses' processes of larger companies compared to smaller ones in order to achieve a true accounting of advantages. For example, while a larger entity tends to have more customers than smaller businesses, the costs of doing business often overrides this seeming advantage. Consider each facet of running various sized businesses before deciding what size is most appropriate for your own venture.
The complexity of running a business rises directly with its size. Large companies typically require a large staff in which funds must be spent on wages, training and benefits. Smaller companies have small staffs and do not generally offer the benefits associated with larger businesses. Other costs often incurred by large businesses that are not present or, at least, not as expensive for smaller ones, are accounting fees, building maintenance, security, formal training, large inventory and the need for numerous pieces of costly equipment. These factors can ruin the supposed competitive advantage of the big business. One way in which small businesses do suffer more than the larger businesses is in federal regulation compliance. According to Business News Daily, the costs of compliance are disproportionately greater for small businesses when considering overall impact.
The number of customers of large companies is larger than that of smaller ones. Large businesses spend more on marketing campaigns, can often offer a more varied product or service line and have the ability to handle a larger number of clients. These are obvious advantages, but other factors must be considered aside from sheer numbers of buyers. Customer loyalty is important as well, as this provides repeat business and word-of-mouth referrals. Gaining such loyalty is often easier for the small business, which can provide a more personal customer service experience for clients.
Potential for Loss
Nobody likes to consider the possibility of events causing catastrophic damage to a business, but events can happen that have a huge impact on companies. Natural disasters such as hurricanes, earthquakes and severe storms can significantly damage company buildings regardless of size. Tough economic times such as recessions also can ruin businesses of all dimensions. In cases of total or almost total disaster, the big businesses suffer more proportionally than do the small. The old cliche often proves true that the larger they are, the harder they fall. The fiscal losses are greater and there is a greater number of lost individual jobs. It is also much more difficult to re-establish a large company than a smaller one.
Employee Benefits and Opportunities
Large companies have the competitive advantage over smaller ones in the benefits they provide to their employees. Larger firms have the advantage in being able to offer larger wages and better jobs to employees than smaller companies. A large business often offers health and life insurance, stock options, retirement benefits and many offer employee assistance programs. Smaller companies are generally restricted in what benefits they provide to their employees due to the high cost of premiums and the lack of capital to provide pensions. Large businesses can attract more high-quality individuals due to the opportunities for advancement they provide in which employees can rise within the hierarchy of the company or make lateral moves to positions more appealing to them. Smaller companies rarely have these types of advantages to offer and suffer in the competitive business world due to size.
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