Top 10 Strategies Corporations use Against Small Business
Time and again we have heard the story: a small business is doing well then a huge corporation moves in and takes over their trade. Does it have to be this way? Is there some way the little guy can win against their giant adversaries? Daniel L. Lowery, entrepreneur and author of "Battling The Corporate Giants: The Ultimate David and Goliath Story" says the answer is "Yes! Yes! Yes!" He describes in his book some of the corporate world's favorite strategies for eliminating smaller opponents as well as the countermeasures for overcoming them.
1) Fighting attritional battles-a common practice of giant corporations is to start a price war to drive down profits. With more capital, they can afford a loss for longer than their smaller competitors. Incorrect Response-when smaller businesses cut prices it actually helps the corporation because their greater resources eventually insure they'll win. Correct Response-avoid the attritional battle by selling different items, bundling equivalent products with other merchandise and setting diverse price structures.
2) Building a superstructure- Wal-Mart, Office Max and Home Depot build gargantuan superstores known as category killers because they are designed to remove all competition for that type of business. Incorrect Response-trying to carry as much inventory as a huge chain store plays into their strengths. Correct Response-modern entrepreneurs can compete with superstores by finding areas where they are weak. Small businesses should have specialized products and services that the chain stores don't have. Such as catering to children, the affluent or certain ethnic and regional groups to name just a few.
3) Monopolizing Resources-you think the Sherman and Clayton Anti-trust Acts ended monopoly practices? Think again! Prosecutions at the anti-trust division of the justice department are at an all time low. Wal-Mart, Microsoft and other corporations routinely violate anti-trust law because the fines are so low. Even if legal action is taken, it can take years to see any results. Incorrect Response-in today's business climate seeking anti-trust relief is mostly a waste of time. Correct Response-find a substitute for the product that is being monopolized. For instance, an independent, movie theatre owner was forced to pay exorbitant prices for first run movies from the motion picture companies. Instead of accepting these inflated charges he substituted classic movies for newly released films. By doing so, he bypassed the big studio's monopoly.
4) Hijacking employees-corporations will often raid smaller businesses for their employees. Incorrect Response-to enter bidding war to keep your valuable employees. Correct Response-have new hires sign a non-competitive clause that prohibits them from working at rival firms. Treat existing employees so well they won't want to leave.
5) Arbitration-although it is made to sound great, arbitration takes all the teeth out pursuing legal action for business disputes. It is also costly to initiate. Thereby making it useless for settling small matters. Incorrect Response-assuming arbitration is a fair way to resolve business conflicts. Correct Response-don't sign agreements with arbitration clauses. If you do, have it modified as close to a court proceeding as possible. Especially focus on getting complete discovery.
6) Playing a one-sided game-considering opening a franchise? While they're repeatedly touted as the safest way to own a business, consider this: a) The franchise agreements are all written in favor of the franchiser. b) There are sometimes hundreds of restrictions in advertising, hiring personnel, product line and many other areas. c) Franchisers promise the franchisee a certain territory, but constantly violate this agreement. d) Working with a franchise combines the worst of self-employment and having an autocratic boss, i.e. long hours with little pay and a lot of rules. Incorrect Response-signing one-sided agreements and then trying to work the mega-corporations afterwards. Correct Response-avoid playing the corporations game. Play your game instead with your own rules. If you are tempted to become a franchisee at least get the federally mandated Uniform Franchise Offering Circular. This gives you a record of the franchiser history and is an excellent indicator of your probability of success. Also, check with Dun & Bradstreet and the FTC web site http://www.ftc.gov/bcp/menu-fran.htm.
7) Changing the rules-just when you learn the old rules, corporations will create new ones that highly favor them. Corporations will use political influence to get exemptions from the minimum wage, safety regulations, pension obligations and others. Incorrect Response-complaining to the corporation about their injustice. Correct response-expose their inconsistency to the public. Their hypocrisy often causes them to rescind their rules.
8) Policies-a slight variation on the rule change strategy. Corporations act as though their policies are law and then expect everyone to follow their one-side decrees. The "aggressive" accounting policies that led to the recent corporate scandals are a good example of this. Incorrect Response-accepting the unfair policies as law. Correct Response-recognize policies aren't law. Make corporations follow your contract and the law, not their policies
9) Definition game-corporations will suddenly re-interpret a word or phrase in a contract to give themselves an unfair advantage. Incorrect Response-accepting the alterations of words. Correct Response-make sure all contracts are clearly written. Legally challenge all revised definitions.
10) What's yours is mine-corporations frequently conduct bogus audits, withhold paychecks and tie up other funds with their franchisees, partners and contractors. Then they negotiate their return for their benefit. Incorrect Response-fighting a drawn out court battle. Correct Response-let your adversary know their pursuits will lead to undesired outcomes such as bad publicity, increased taxes or counter suits.
You can learn more of these corporate strategies as well as the small business countermeasures in "Battling The Corporate Giants: The Ultimate David and Goliath Story" available at www.american-book.com. The author, Daniel L. Lowery has over 17 years experience in sales. He has spent the last 11 years operating a cellular phone franchise in southern California. His experience competing and working with giant corporations gave him the inspiration for this book: a work truly written from the trenches of corporate warfare.
Back to Article List