Classic David vs. Goliath: Are Big Corporations Driving away Neighborhood Shops - Research Paper Example

ic David vs. Goliath: Are Big Corporations Driving Away Neighborhood Shops? ic David vs. Goliath: Are Big Corporations Driving Away Neighborhood Shops? Introduction Small businesses have been the hallmark of Western society for decades. From the corner drug store to the neighborhood ice cream parlor, countless millions of people have relied on the friendly and personal service that a so called ‘mom and pop’ shop provides them with. Recent years, however, have seen the small business owner suffer due to a trembling economy, rising prices, and the inclusion of big corporations into the mix. Struggling to keep afloat, many have either sold their businesses, had to drastically change their business model, or have gone out of business altogether. While there may be some validity to the notion that large corporations are slowly causing the demise of small businesses, the American public can be seen as partly to blame for this modern day phenomenon as well. Fair Competition Many wonder if competition in the marketplace should be fair, or whether the business mentality in America should be seen as survival of the fittest where the one with the most customers and the biggest revenue wins. The free enterprise system prides itself on giving the consumer a choice. In addition, the system itself is designed to give anyone a chance of making it big, event if that means a large multinational corporation. To stay afloat, small businesses must adapt to the reality the big corporations are here to stay. There is, however, a way to remain competitive and for a small business to retain its place as neighborhood shop. There are current laws guarding against the establishment of monopolies in many Western countries, including the United States, but this does not preclude a given business from becoming so large that is squeezes out smaller competitors unable to keep pace. The reality is such that big businesses have more buying power and are often able to sell goods at a lower price than other businesses of their type, but of a smaller size. The fear, of course, is that once neighborhood shops are driven out of business, then large corporations such as Home Depot and Wal-Mart, will have little incentive to keep their prices low. There is also the feeling across America that the loss of the mom and pop shop will be like losing a part of American culture and its heritage. In order to determine how to save these shops, however, one must first come to a conclusion about what is really causing the small business to become a thing of the past in the first place. While smaller businesses are at a comparative disadvantage, many scholars would argue that they could survive if they simply employ a bit more creativity and ingenuity into their business model (Bickle, 2012). Fair competition can be had between big and small business alike. The entrepreneurial mind is not limited by size. The neighborhood shop owner has the same potential to engage in creative marketing and loyalty programs to attract customers as the big business does. In fact, smaller businesses need far fewer customers to remain a viable player in the business world of a community than a large corporation does. As such, if a small business owner can become a bit more creative and enhance the visibility of their product, while providing a service that is superior to that of the big business down the street, the may be able to retain more than enough customers to keep their doors open. In the end, the business that can attract and retain enough customers to satisfy the goals set forth in its business model can position themselves to survive and weather economic storms. Some could argue that big business is in trouble today as well. Due to the large amount of financial and human capital that must be expended to keep a business such as Home Depot and Wal-Mart afloat, an uncertain economy brings about uncertain times for these companies as well. Recent years have seen the demise of such large retailers as Montgomery Wards and Circuit City, with others such as Sears and K-Mart reporting yearly losses for nearly a decade now. The small business does not often have these same difficulties. So, if they can the weather the storm that comes with a big business, they might be able to survive if they begin to tweak their business model a bit moving forward and make cautious and wise moves that pay off economically. Impacts on Local Communities Large corporations, such as Wal-Mart and Home Depot, can be shown to have a combination of positive, negative, and neutral impacts on the communities in which they are located. Too often, such corporations are portrayed as the villains, and the killers of the mom and pop shop. Many fail to mention the contributions that many of these large businesses make to the communities and states in which they reside. Others will argue, however, that these contributions do not detract from the fact that they are taking a part of American culture away when neighborhood shops are forced to close because they can no longer remain a competitive force in the increasingly cut-throat business of retail. No matter which ‘side’ one takes, various impacts that large corporations made on local communities merit discussion. Economic data alone does not reflect the true impact that large corporations have in various communities across the country. One must look at other root causes as well, and do so on a case-by-case basis (Carden and Courtemanche, 2009, p. 450). In some communities, large businesses are active in public education, civic clubs, and other social service oriented organizations. Large businesses often sponsor school clubs. They will allow their businesses to be used as venues for various fundraising activities and will often spend sizeable amounts of money on advertising to support different school and civic organizations. These are areas where small businesses often simply cannot compete. In addition, large businesses are often involved in community organizations and work behind the scenes politically to get improvements accomplished throughout the cities. In some communities, part of the lure of attracting a large corporation lies in the city agreeing to make certain road improvements and to fix other areas of infrastructure (Carden and Courtemanche, 2009, p. 453). These can all be construed to be positive contributions that large corporations can bring to a community. Some would argue, however, that the extra revenue promised by large corporations upon seeking entry into a local community never actually materializes. The presence of large corporations in a locality does not always equate to an increase in sales tax revenue, but can often be found to detract from the tax base altogether (Hick, Keil, and Spector, 2012, p. 311). The argument here is that large corporations often sell themselves to local communities as being able to increase tax revenue because of the size of their business. Research is indicating otherwise, however, and this is negating the effect of the business in the community. The reality is that there are only so many shoppers in a given area competing for the same goods. Wherever they end up buying their merchandise, the tax revenue generated will be roughly the same. The opposition argues that when large corporations take out the mom and pop shop, not only do people lose their jobs, but there is a chance that the tax revenue once generated will not once again be put back into the community coffers. Large corporations who are socially responsible often create an increase in cultural activities and opportunities in the communities in which they are located (Hicks, Keil, and Spector, 2012, p. 313). The authors of this study point out that communities that attract big business often see an increase in cultural, sports, and other enrichment type activities. Some large businesses work to build sports fields or stadiums, while others are major contributors to cultural and arts centers. In smaller cities, these activities may never have been possible were it not for the contribution of the big business. In the end, the reality may be that the mom and pop may be left out in the dark with the increased competition, but many would argue that the benefits of these enrichments programs to the city or town far outweighs the tragedy of losing a few neighborhood shops along the way. Accusations Against Big Business Big businesses are often accused of actively working behind the scenes to undermine the present of smaller businesses located in the same community. This might take the form of building right next to a similar business, implementing marketing campaigns directed at poaching customer from the mom and pop shops, and ruining the name of small businesses by their participation in various civic organizations. These are serious allegations that are often not proven, yet do seem valid enough in some cases to warrant further discussions. In order to provide for a fair and free market system, certain unwritten rules of business ethics should certainly be followed. Big businesses do not always detract from a smaller companies customer base, rather they can often be noted as adding to it. The reason being is that many consumers lose the desire to visit large businesses and opt to return to a smaller, more intimate location to conduct business (Merriman, Persky, Davis, & Baiman, 2012, p. 323). Large companies often lack that personal touch that many customers have come to expect, and appreciate, from their local small business. While they may lured to the big business for a season because of its flashy design and the ready availability of much more merchandise, they can just as quickly tire of the fact they have a hard time finding what they want amidst the plethora of aisles. These factors alone, if the small business will get creative as discussed previously, can create a return of customers that were previously lost (Merriman, Persky, Davis, & Bailman, 2012, p. 329). Customer loyalty is the key to success in most any business today. Smaller businesses are often frequented by generations of customers and, as such, will typically be able to retain these same customers as long as they remain competitive players in the marketplace (Sobel & Dean, 2008, p. 681). This study points out the reality that big businesses often have great difficulty keeping customers loyal to their store. If a competitor down the street has a glitzier campaign, or begins to offer the same product for just a bit cheaper, there is often little incentive to keep the customer coming back through the doors. Neighborhood mom and shops, however, do not always have this same problem. Many customers personally know the owners. The family has often shopped in the same shop for generations and they would feel weird about taking their business elsewhere. These same people are likely to recommend the shop to their own family, friends, neighbors, and acquaintances. This kind of loyalty is difficult to earn in a business. If a small business does have such customer loyalty, and they are beginning to feel threatened by a large corporation, then they would be wise to harness the power of this loyalty. They might not be able to compete price-wise with the new and larger competitor, and they may not be as glitzy and glamorous, but they can work to retain and keep their current customer base in the midst of uncertain times. It is important to consider various facts and figures before drawing a conclusion that big businesses are the primary culprit for smaller businesses to shutter their operations. By closely examining data and other cultural considerations, one may determine that there are other reasons at play rather than simply assigning blame to one particular entity (Sobel & Dean, 2008, p. 683). Before being so quick to blame on the big business for the demise of the neighborhood shops around us, one must stop to consider other factors as well. The current state of the economy is making it increasingly difficult for any business to remain viable today. The small business is especially at risk because they often have such a small margin to be able to make a sufficient profit to stay afloat. If they lose even a few customers, they may find it difficult to continue. If the public truly wants to keep the mom and pop shop, then they must be willing to remain loyal customers. In addition, the cost of business is simply increasing so rapidly that smaller businesses are struggling to maintain their current customer base without raising prices substantially. This would be happening regardless of whether or not a large company, such was Wal-Mart or Home Depot, were into the equation. The cost of doing business is simply going through the roof and is showing no signs of easing. The larger business, quite frankly, often has a better business model to weather this type of economic situation. They are able to buy in bulk and they have the power of a national chain around them, such that a solidly performing store in one area can help prop up another store in a different community for a season or two if they are encountering difficulty. This is a luxury that the neighborhood mom and pop store simply does not have, causing it to lose its competitive advantage. Conclusion Large corporations may be one factor causing smaller business to close their doors, but they are not the only party to blame. As noted, Bickle (2012) makes some interesting points that, while large corporations obviously have buying power and advertising prowess behind them, smaller retailers can fight back by becoming creative. “Size of the retailer aside, competition among businesses is healthy! It makes all of us think smarter, work harder, and not take our company, customers and employees for granted” (Bickle, 2012, para. 3). It is important that smaller businesses do not just lay down and give up the fight. They can come back stronger than ever, but they will need to be diligent in reshaping their business plan and enlisting the help of loyal customers to stand by their side as they do so. Large corporations continue to take exception to the idea that they are out to kill the small business and to take over the local community. It should also be noted that many studies have been conducted to examine the impact that large corporations have on local communities. Consider Wal-Mart. One recent study examined, in detail, “The impact on the retail sector on the counties in which Wal-Mart is located, as well as in surrounding counties, by examining the number and size of retail outlets by retail category” (Hicks, Keil, & Spector, 2012, p. 311). It was discovered that smaller businesses must weather the initial storm of a big business opening in their area for a minimum of 18 to 36 months before they can begin to regain any type of competitive edge (Hicks, Keil, & Spector, 2012, p. 312). If a smaller business can redevelop their business plan to account for this initial shock to their profit structure for up to 3 years, then they will have a realistic chance of surviving, and even thriving, in a culture of increased competition. There is also some support to the claim that big business is harming the local community. In Chicago, 300 people recently lost their full-time jobs with the opening of a neighborhood Wal-Mart (Merriman, Persky, Davis, & Baiman, 2012). This is the same study that points out there has been no noticeable increase in sales tax revenue with the opening of big businesses. This may very well be the case, and it is unfortunate that anyone lost their jobs, but data simply does not support the claim that these events occurred solely because of the inclusion of a large corporation into the community. There are simply too many other claims, such as those mentioned in this report, that indicate that ‘blame’ must be spread around. It could possibly be that the neighborhood mom and pop is simply disappearing from American culture. Let us hope not, but let us also not cast blame until we know all of the facts and they are supported 100%. Reference Bickle, M. (2012, April 12). Big box retailers vs. local retailers: Survival of the most creative. Forbes. Retrieved March 26 26, 2013 from http://www.forbes.com/sites/prospernow/2012/12/04/big-box-retailers-vs-local-retailers-survival-of-the-most-creative/. Carden, A., & Courtemanche, C. (2009). WalMart, leisure and culture. Contemporary Economic Policy, 27(4), 450-461. Hicks, M., Keil, S., & Spector, L. (2012). Mom-and-pops or big box stores: Some evidence of WalMart impact on retail trade. Economic Development Quarterly, 26(4), 311-320. Merriman, D., Persky, J., Davis, J., & Baiman, R. (2012). The impact of an urban WalMart store on area businesses: The Chicago case. Economic Development Quarterly, 26(4), 321-333. Sobel, R., & Dean, A. (2008). Has WalMart buried mom and pop? The impact of WalMart on self-employment and small establishments in the United States. Economic Inquiry, 46(4), 676-695. Read More