In the business world, companies use many different tactics to try to beat out the competition. When the competition is between a big business and a newcomer to the industry, the fight might not exactly be fair. Here are five tactics that big businesses use to beat their competitors on a regular basis.
cc licensed flickr photo shared by Patrick Hoesly
One of the tactics that many big businesses use to hurt their competitors is to spend thousands or millions of dollars on lobbying. By lobbying, they can influence or essentially buy the votes of political figures and members of Congress. When a company utilizes lobbying, it can sometimes get legislation passed that is favorable to its business model. This type of legislation may then hurt the chances of smaller companies and promote its own cause. There are countless examples of big companies that spend millions of dollars on lobbying to get the laws passed that they want. For example, a recent statistic showed that there were over 3,000 lobbyists from the financial sector for each member of Congress.
2. Corporate Welfare
Many big businesses also know how to get corporate welfare and knock out their competitors. Big companies can spend millions of dollars on lawyers and other experts that know how to get subsidies and other forms of corporate welfare from the government. These subsidies make it possible for a business to get millions or billions of taxpayer dollars that they can add to their bottom lines. When a small company is trying to go up against a big company that has large amounts of money coming from the government, it can be very hard to compete.
3. Price Wars
Some big businesses use price wars to try to beat their smaller competitors. Most small businesses cannot compete on price with bigger companies. This is because bigger companies can sometimes negotiate better deals and buy more in bulk. This leads to lower costs and lower prices overall. In some cases, really big companies can even sell at a loss in order to get people to buy other products. When a smaller company is focusing only on selling the product that a big company is selling at a loss, it is impossible to compete over the long-term. For example, a big box home improvement store might sell carpet and installation at a loss so that consumers will buy all the other things that they need for their house in the store too. This hurts small flooring retailers because they can’t compete with the prices since they don’t have anywhere else to make up the difference.
4. Spend More on Advertising
In some cases, big businesses will try to spend more money on marketing and advertising to beat their competitors. They have millions of dollars to spend on their advertising budgets while smaller companies do not have as much money. This makes it difficult for smaller companies to keep up with the bigger ones in the industry when they don’t have as much money to spend on advertising.
5. Merging With Other Companies
Sometimes, big businesses will merge with other companies to form situations where it is almost impossible for the little guy to succeed. A large supplier might go around buying out smaller businesses and competing directly with the small companies. For example, a company that bottles soda might go around and buy out vending companies in an area. Then it can bid on vending contracts with big companies and compete against other small vending operations. The small vending companies cannot compete with the same company that is selling them soda, so they lose their chance to win contracts.
Rodney Small is a business administrator and guest author at BusinessMBA.org, where he contributed a guide to the best online MBA programs available.