EP113 Does size protect your business? How?

I saw Luigi Mangione hired the hugely impressive Karen Friedman to represent him in his alleged murder of a healthcare CEO. One imagines a tough lawyer will be able to ask searching questions and know the laws and statutes to obtain a smaller sentence. That got me thinking about when size shields your business.

Size can protect your business in several ways, particularly by creating advantages that smaller competitors may struggle to replicate. Here’s how:

1. Economies of Scale

• What it means: Larger businesses can spread their fixed costs (like manufacturing, marketing, and administrative expenses) across a higher volume of products or services, reducing the cost per unit.
• How it protects: This allows bigger businesses to offer lower prices or achieve higher margins, making it difficult for smaller players to compete effectively on cost.

2. Market Power and Influence

• What it means: Size gives larger businesses the ability to negotiate better terms with suppliers, distributors, and even customers.
• How it protects: By leveraging their size, big businesses can access better pricing, more favorable contracts, and greater shelf space, making it harder for smaller competitors to gain traction.

3. Brand Recognition and Trust

• What it means: Larger businesses often have strong brand equity and customer trust that comes with size, longevity, and marketing resources.
• How it protects: Consumers are more likely to choose familiar, trusted brands over smaller or unknown ones, giving big companies a competitive edge.
• A clear advantage to Friedman. Her brand will inspire fear in the District Attorney.

4. Access to Capital

• What it means: Larger businesses have better access to financing options, such as loans, lines of credit, or equity markets.
• How it protects: This capital allows big businesses to invest in new technologies, expand operations, and weather economic downturns more effectively than smaller firms.
• The old adage ‘Don’t touch what you can’t pay for.’ comes into play. To afford her, Mangione must have significant financial resources and that allows Friedman to get a larger and also more expensive support team.

5. Diversification of Risk

• What it means: Bigger companies often operate in multiple markets or product categories.
• How it protects: If one part of the business faces a decline, other areas can help cushion losses. This diversification makes them more resilient to industry-specific challenges.

6. Network Effects

• What it means: In some industries (e.g., social media, e-commerce, or logistics), the value of a service increases as more users or customers join.
• How it protects: Larger businesses benefit from these network effects, making it difficult for smaller competitors to gain critical mass.

7. Barriers to Entry

• What it means: Big businesses can use their size to create high barriers to entry through significant investments in technology, infrastructure, or intellectual property.
• How it protects: These barriers prevent new competitors from entering the market easily or replicating their offerings.
• This can manifest as preventing others coming into the market, but also with a larger, more expensive support team, Friedman has access to better legal support herself and can defend more aggressively. This support is a barrier to entry for the prosecution.

8. Stronger Workforce and Expertise

• What it means: Larger organizations can attract top talent and invest in employee training and development.
• How it protects: A highly skilled workforce increases innovation and operational efficiency, keeping competitors at bay.

9. Technology and Innovation

• What it means: Bigger companies have the resources to invest heavily in research, development, and new technology.
• How it protects: They can stay ahead of competitors by offering better products, services, or processes, which smaller businesses may not afford.

10. Resilience During Crises

• What it means: Larger businesses usually have more financial reserves, diversified revenue streams, and operational scale to withstand economic downturns.
• How it protects: While smaller businesses might fail under pressure, big companies can sustain operations, adapt, and come out stronger.

Summary:

Size protects your business by providing cost advantages, market leverage, brand trust, and resilience in times of competition or crisis. While being big does not guarantee success, it creates a strong defensive position and numerous offensive advantages against smaller players in the market.