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Big Firms Adjust to Market Realities by Thinking Small

Increasingly, large firms are learning lessons that small business people have known from time immemorial: Small works.

More and more large corporations are shedding subsidiaries and nonstrategic divisions to focus on core competencies. The trend has shaken up the tech industry, where companies such as Hewlett Packard, eBay, and IBM have spun off or divested and is also seen in other industries, including media, manufacturing, consumer goods, and pharmaceuticals.

As David Gelles wrote in The New York Times, “stock market investors are betting on companies with tightly focused visions. Too many divisions are seen as a distraction for management.” Smaller firms tend to be flexible, nimble, and able to adjust quickly to market dynamics, while the layers of management in large organizations create distance between decision-makers and customers or end-users, causing them to lose touch with their markets.

Downsizing in today’s environment can bring big corporations closer to their end-users. These days, firms face intense pressure from customers to be interactive and provide personalized customer service. Yet managers of large corporations are distant from the front lines and, more often than not, a customer-focused approach developed at top levels doesn’t permeate to the individuals on the ground who are actually charged with keeping customers happy.

Smaller companies are closer to customers and able to provide the old-fashioned customer service they seek. So, while larger companies struggle to think small, entrepreneurs are already reaping the benefits in terms of customer loyalty. Who said big is better?

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