Competing with leviathan

Middle-market firms, especially those below $50 million in annual revenue, may feel overwhelmed by the challenge of competing with very large competitors, often multinational firms, that seemingly have unlimited resources available to thwart all competition.

But — not so fast — a middle-market company can hold its own against the leviathans of industry. After all, many have done so successfully for a very long time, often seeing large competitors come and go.

At the same time, just because your company has been in business for generations does not guarantee its future survival, as it is not immune to competition from large players trying to eat your lunch, or nimble startups, for that matter. Understanding how to compete with the behemoths is therefore a must.

Study the weaknesses

To start with, while large companies have multiple advantages by way of resources and capabilities, they also suffer from major weaknesses.

Many large firms, especially market leaders, are complacent, an endemic problem that tends to plague firms that have been at the top for a long time and think they have the market (or a significant portion thereof) to themselves. These firms are vulnerable not only to disruptors that come up with a better mousetrap, but also to established players that up the ante on quality and can offer consistent and reliable supply, distribution and, in particular, service.

Second, as a result of their size, reach and creeping bureaucratization, large firms tend to move more slowly, befitting the metaphor of turning around a big tanker, and aggravating their complacency and low innovation syndromes.

These shortcomings are apparent especially during market or technological change, when the consistent performance of a middle-market firm may come in handy. For example, research conducted at the National Center for the Middle Market shows that middle-market companies are less likely to shed employees during a recession, so their customers are more likely to be dealing with the same people during a time of crisis.

Many big companies suffer from a third weakness: A short-term focus caused by their need to meet Wall Street expectations. This can cause them to focus on cost at the expense of market development, and can give a strong local champion an edge.

Be proactive

Still, such advantages are not useful unless exploited. Indeed, rather than counting on their built-in advantages, niche position or market inertia, middle-market firms must be proactive. They should continuously monitor and scan for changes in the business environment, including those that seem not to directly impact them.

In today’s dynamic and increasingly global business environment, any shift may bring in new competitors, but also new opportunities. Middle-market firms should not only take advantage of the weaknesses of larger competitors, but also leverage their own advantages in terms of flexibility, fast decision-making, intimate knowledge of their market and long-term relationships with customers and suppliers.

 

Oded Shenkar is the Academic director of the National Center for the Middle Market, the leading source for knowledge, leadership and research on midsize companies, based at the Fisher College of Business, in collaboration with The Ohio State University. Oded is the Ford Motor Co. chair in Global Business Management and a professor of management and human resources at the Fisher College of Business.