Giant business corporation succumbing to a hostile...


April 27, 1993

IS THE giant business corporation succumbing to a hostile environment, like the dinosaur? Could very well be, according to the Economist of London. "Corporate giants once walked tall and proud, bestriding the globe, champions of this century's miraculous economic growth . . . But these are troubling times for the world's biggest companies." The weekly points to the woes of giants like General Motors, IBM and Britain's Philips as prime examples.

"The humbling of big firms has only just begun," the Economist direly forecasts. Factors that were supposed a decade ago to give major corporations a competitive advantage over middle-sized and small companies actually have worked to their disadvantage, the news weekly believes. Among them are lower trade barriers, automation, computers, freer capital movements and a homogenization of consumer tastes around the world.

"Far from presenting the world's biggest companies with new opportunities, falling trade barriers are opening them to attack," the Economist observes. "Another blow to big firms is that the use of computers, confounding most forecasts, is narrowing economies of scale in manufacturing and distribution, not expanding them."

Similarly, small companies now get the same access to capital markets as the giants. Consumer tastes are getting similar around the world, but they are also getting more fickle with greater choices. This, the Economist notes, undermines the established brands that provided the marketing muscle for the giants.

The solution? Some of the giants are cutting themselves down to size, the Economist points out. Those that don't, it says, may have to "consider that most dreaded of corporate taboos: the break-up."

But there's good news in all this gloom, the weekly believes. Consumers will be better off without the market dominance of the giants.

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