Big business is not completely vulnerable and that the strength of big companies should be respected. However, the classic business school terms such as sustainable competitive advantage and barriers to entry are be-coming more and more antiquated. As our economy moves away from a manufacturing base to being more service and information based, the traditional advantages inherent in big business have lessened.
Due in part to both technology and changing business practices, it is increasingly easier for a new company to enter an industry and easier for companies to hop across previously well-drawn territory lines. Just look at what has happened in the telecom world. Nearly every major player is struggling to make a profit, while upstarts are stealing market share with prepaid cell phones or voice-over-IP services. The airline industry faces similar struggles. The traditional legacy airlines such as United and USAir are getting hammered by the likes of recent entries Jet Blue and Frontier.
Huge companies used to enjoy the advantages inherent in economies of scale. They produced and sold such a large number of items that they could effectively dissuade upstart competition. Now many consumer product companies are not even making their own products; start-ups can book business with the same contract manufacturers the big boys are using. In addition, consumers are demanding a more customized experience, whether buying a product or a service. A nimble company can sometimes keep up with trends more easily and react faster to demand.
Giant marketing budgets also created a huge advantage, and this still keeps consumer product companies such as Anheuser-Busch and Procter & Gamble on top. However, the 30-second TV spot does not have the impact it used to (partly thanks to a start-up named TiVo), and many smaller players have grabbed market share by using their limited marketing and sales promotion budgets in a more direct fashion. In some cases, good public relations, viral Web campaigns, and search engine ads have vaulted no-name companies and brands into the mainstream seemingly overnight.
Technology has also leveled the playing field for small business. As we see software, hardware and telecommunication solutions now give small business much of the same firepower as big business. In 1990, as president of a small but growing manufacturing company, I looked into buying sales force automation software. The price of this mid-range solution was $30,000 before training and annual support costs. Today, you and I can buy a far superior package at the local office supply retailer for around $300 (before rebate).
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