Business Exposed

chapter

3

The urge to conquer

How big is your yam? (not that it matters)

W

hy are so many executives so preoccupied with the

size of their company? As if bigger is always better. It

especially annoys me when it is used as an excuse for

acquisitions. “This take-over will immediately make us the largest

company in the industry”. So? What is your point?

I am sure being the biggest can have certain advantages, but that

doesn’t mean that bigger (let alone being the “biggest”) is always

automatically better. If you can explain to me why more scale is

better, OK, but until then, I remain skeptical.

Of course company size is often associated with (nancial)

success. For example, the rms that always feature on “the most

admired companies” lists are usually behemoths such as Toyota,

Dell, Intel, Wal-Mart, and Pzer. Several of them became big

through acquisitions.

And I am sure a company worth $10 billion attracts quite a

bit more attention (for instance in the business press) and

admiration than any of the 10 companies that they acquired

that were worth a mere $1 billion. But that doesn’t mean that

our $10 billion behemoth generates more prots than the 10

smaller ones would have made together. It wouldn’t have been

as eye-catching to have 10 small ones instead of one biggie, but

it just might have made more sense (and money). Importantly,

managers who opt for a strategy of increasing size reverse cause

and effect; although success will likely make you bigger, striving