Growing big is often a liability
Sometimes big isn’t always better
First, at some point, economies of scale “run out”—that is, increasing size no longer creates further efficiencies. A car plant needs to be a certain size to be efficient, but after that, it no longer becomes any more efficient
There is believed to be an inflection point where size in itself becomes a liability
The advantages, if any, are those related to size, power, reputation, and so on — compare the Domino’s chain to the local pizzeria — but are not actually related to the ability to make a better product
This has been proven time and time again that the prerequisites for a great product aren’t specifically restricted to those who have major resources
In fact, often times, a lack of resources encourages some very competitive yet compelling solutions
One is that as the size of the operation increases, “dis-economies” of scale begin to creep in, as economists since Alfred Marshall in the 1920s have suggested. For example, as a firm adds more and more employees, it needs to add more managers, and ever-more complex systems of internal control.
While an unfortunate reality, I’d never heard the term “dis-economies of scale” before. It makes sense as a term though.
In other words, a firm may not actually become more efficient as it gets larger, but may become better at raising prices or keeping out competitors.
There are plenty of large corporations floating around that seems to offer very little in the way of new value and instead just keep milking their previous hits past the point of death
For that reason, oversized, inefficient firms can persist for decades, effectively immunized from the need to improve products or lower prices. Instead, like American domestic airlines, the industry can happily offer a product that continues to get worse and cost more.
At no point, does this scale benefit the consumer, which is usually the defence throw up against even the slightest whiff of an antitrust case.
Quote sources: The Curse of Bigness by Tim Wu