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"Super-size it!" isn't just for fast-food
outlets, where for 39 cents or so you can upgrade to the mega-soft
drink and the diet-bustin' bag of fries. For price tags up to $100
billion, companies all over the world are buying their competitors
and super-sizing themselves. MCI WorldCom buys Sprint, Exxon buys
Mobil, Ford buys both Volvo and Jaguar and so on.
Why?
By super-sizing, larger companies can
increase market share, fill out product lines, cut overhead costs
or enter new markets. With good planning and execution, they will
achieve these goals. But is there room for the little guy in a super-sized
world?
The answer is an emphatic: You bet!
The move toward super-sized companies actually creates more opportunities
for creative entrepreneurs.
For example, big companies speak of
two "ROEs." The first is the traditional Return on Equity - the
profits earned each year as a percent of invested capital. The second
ROE is Return on Effort. Even though a segment of a company's operation
is profitable, it is so small in relation to the whole entity that
management does not want to dedicate the effort needed to supervise
it.
Certain segments of a super-sized company
may not meet one or both of the expected ROEs, and so the larger
company may sell off a profitable segment, often at a bargain price.
Hundreds of successful entrepreneurial
companies are spun-off or sold off from a larger firm. Newly energized
owners and employees, freed from a sometimes suffocating corporate
culture, find new customers, operate leaner and meaner, implement
new ideas and take other actions that create a profitable, fast-growing
company.
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