In defining your fundamental business strategy, put some serious thought into finding out what the intrinsic strengths of small businesses are and comparing them to those of larger ones. Do small businesses have a competitive advantage? How do large companies excel in particular areas?

You should aim to get the most advantage from your intrinsic strengths when developing your strategy and selecting products, services, and markets for your new venture. You also need to minimize the effects of the intrinsic strengths of the larger business as much as possible. The strengths of a larger company cannot be completely overcome, but there is always a possibility of reducing the advantage they enjoy. Additionally, you will become aware of the many obstacles that you may encounter during this process.

In this article, I will discuss the larger companies and identify the areas in which they have an inherent advantage over the smaller companies.

Large companies’ intrinsic strengths

Financial Resources

While the small businesses are the engine which drives the economy, it has been said that the large corporations possess access to financial resources. Financial resources are one of the key competitive advantages of large corporations. Having insufficient financial resources impacts every decision made by a small business. Due to their larger financial resources, large businesses enjoy the following advantages:

1. The economy of scale is achieved faster. By building large factories and manufacturing in large quantities, larger corporations achieve economies of scale. Low production costs usually lead to lower prices as a result of a high production rate and the ability to purchase raw materials in bulk at large quantity discounts. .
2. Full product line. Compared to a small business, a large corporation can offer a much wider range of products. A start-up would require first developing, building, selling, and generating a positive cash flow from one product before resources can be allocated to a second product. Small businesses may have to wait years for this to occur.
3. Investment in product development and market research. In terms of product development and market research, large corporations can perform large research projects. There are well over a hundred million dollars invested in these projects. Typically, large companies are capable of establishing huge sales organizations, like call centers, to support their sales efforts. Small businesses just cannot engage in these activities.

Momentum and Marketing

Corporate giants are better at generating momentum. In this way, larger corporations are better equipped to weather economic downturns, or to recover from bad decisions with minimal disruption. They have an advantage over small businesses because of their ability to weather recessions, bad products, bad acquisitions, etc. Strong marketing is a vital factor for momentum, and developing marketing skills is one of the most challenging, time-consuming, and costly processes for small companies.

Credibility

Imagine selling a product to someone who hasn’t heard of your company to find out the importance of this. If your company operates on a shoestring budget, you will soon discover it is very difficult to convince a tough buyer that your product is backed by a warranty when you do not know whether you will be around next year.

Structure

It takes a lot of money and time for a start-up company to duplicate the services that large corporations provide but actually aren’t visible unless you are working there. Among them are quality control, purchasing, inspection, and publications.

A customer contacted me about the progress of a project during my early years with GMM Creative, my first seven figure agency. I said I would find out and call you back. As much to my astonishment and embarrassment, I learned that project had somehow slipped between marketing and the project team. The system at that time was insufficient, and we desperately needed a better one. It was a major headache.

Large corporations enjoy a number of effective advantages over small businesses, as these benefits combine. In practice, a small business has no choice but to grow into a large one.

A small business’ intrinsic strengths

It may sound impossible for a small business to compete with these large behemoths at this point. The good news is that there are some areas in which a small business can compete with large corporations. It’s hard to identify them, even though they’re important.

Greater Flexibility

It’s the flexibility of a small business and their ability to react much faster to almost any issue that makes them superior to large corporations. This is because there are far fewer layers of management and bureaucracy that communication has to travel through to actually get something accomplished. This is known as red tape. Something small businesses do not have. As a result of no red tape, a small business can respond rapidly to changes in your competitor’s product line or marketing strategy. Customizing your product can also help you better meet your customers’ unique requirements. Because of this, you will be able to make superior decisions in almost every aspect of your business in only a few days, rather than weeks, months, or years.

Determination To Succeed

In the early days of GMM Creative, I was asked what I considered to be the main reason for its success. My answer came after a few moments. We had a burning desire to win. I may not be certain that this was the most important, but it was significant. (Note: GMM Creative went belly up in 2018 as a result of a bad acquisition that we made.) The great resignation is causing many employees at larger companies to become burnt out sooner because of the bureaucracy and red tape. There is a massive exodus of knowledge workers from large companies. It’s not due to pay. This is due to burnout. Many of these workers are either leaving their employers for less demanding jobs, or going out on their own.

More Fun

There is also the intangible characteristic of having more fun when working in a small business. People who work in small businesses often enjoy their jobs. This helps them achieve a better work-life balance. Enjoying what you do increases your motivation to improve. This fun and exciting atmosphere can be the difference between a small business and a large corporation. Corporate culture, bureaucracy, and regulations often prevent large corporations from integrating this entrepreneurial spirit into their operations.

Start-up companies should consider these factors when developing their strategy. There is no question that we should all avoid areas where big corporations have an inherent advantage, and only focus on those in which small businesses excel. Most people do not realize how influential a small business can be. Practically speaking, a large company can only divest and become small again when faced with these challenges. Sadly, this will never happen due to corporate greed.

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