- We have already discussed the fact that not all businesses in Zimbabwe are the same
- We have also looked at the fact that there are various methods we can use to measure the size of a given business
- These methods include: looking at the number of employees, turnover, and capital employed among others
- There are some businesses that can be considered big by any measure. The list of large businesses in Zimbabwe includes some of the most well-known household brands like Econet, Nyaradzo, Old Mutual, ZESA, Unilever, NetOne, TelOne etc
- These businesses often have advantages that they enjoy that are they get because of their size
Advantages of Large businesses
- Economies of scale: Large businesses can benefit from lower production costs per unit by spreading fixed costs over a larger number of units produced.
- This is a major advantage that allows large businesses to almost always out-compete their smaller rivals
- Economies of scale are probably the reason why most businesses have growth as one of their main objectives
- Examples of economies of scale include:
- Bulk purchasing: Large businesses can purchase raw materials, supplies and other inputs in bulk, which allows them to negotiate lower prices from suppliers. A large business is likely to be able to negotiate or arm-twist suppliers into offering it discounts as it buys large amounts of goods or services.
- Specialist division of labour: Large businesses can benefit from the division of labour and specialization of tasks, leading to improved efficiency and reduced costs.
- Technological advantages: Large businesses can invest in new technologies and equipment that increase efficiency, leading to lower production costs.
- Marketing and advertising: Large businesses can spread the cost of marketing and advertising over a larger number of units, reducing the cost per unit.
- Financial economies: Large businesses can benefit from lower borrowing costs, due to their size and established reputation, which enables them to access capital more cheaply.
- Network effects: Large businesses can leverage their size to create network effects that increase efficiency and reduce costs, such as through the creation of shared services or joint ventures.
- Standardization: Large businesses can benefit from the standardization of processes and systems, which improves efficiency and reduces costs.
- Financial resources: Large businesses typically have access to more financial resources than smaller businesses, allowing them to invest in research and development, marketing and advertising, and other growth-oriented initiatives.
- Market power: With larger market share, large businesses can exert more control over suppliers, prices and distribution channels, thereby increasing their bargaining power.
- Diversification: Large businesses often have the resources to diversify into multiple product lines and markets, which helps to reduce risk and increase resilience.
- Access to talent: With a larger pool of resources, large businesses are often better positioned to attract and retain high-quality employees, thereby improving their overall competitiveness.
- Brand recognition: Large businesses have well-established brand recognition and a proven track record, which can help attract customers, employees and investors.
- Political influence: Large businesses often have greater political influence, allowing them to shape government policies and regulations that affect their operations and industry.
Disadvantages of Large businesses in Zimbabwe
- It’s not all smooth sailing, however, operating a large business in Zimbabwe has its disadvantages too
- There are also several disadvantages to running a large business in Zimbabwe, which include:
- Diseconomies of scale: Remember how we said large businesses enjoy economies of scale? Diseconomies of scale are the downside of being large.
- These are the disadvantages and problems that a business suffers as it grows large in size
- These diseconomies of scale can offset the benefits of increased size and may even put a business at a competitive disadvantage compared to smaller, more agile businesses. It is important for businesses of all sizes to consider their own strengths and weaknesses and to choose a business model that is appropriate for their goals and circumstances.
- Management difficulties: As a business grows, it may become more difficult to manage effectively, leading to issues with coordination and communication among departments and employees.
- Decreased flexibility: Large businesses may have a more rigid organizational structure, making it harder to respond quickly to changes in the market or to new opportunities.
- Increased costs: Despite the benefits of economies of scale, large businesses may also face higher costs for things like employee benefits, insurance, and legal compliance.
- Decreased innovation: With a larger organizational structure and more bureaucratic processes, large businesses may be less innovative and less able to adapt to new technologies or market trends.
- Decreased customer service: Large businesses may struggle to provide personalized customer service, as they become more focused on efficiency and cost-cutting measures.
- Employee motivation: With a larger workforce, it may be harder to maintain employee morale and motivation, especially if employees feel that they are just a small cog in a large machine.
- Decreased entrepreneurial spirit: As a business grows, there may be a decrease in the entrepreneurial spirit that originally drove its success, as the focus shifts towards maintaining existing operations and maximizing efficiency.
- Bureaucracy: Large businesses often become bogged down by bureaucratic processes and internal politics, which can slow down decision-making and stifle innovation.
- Rigidity: With a larger organizational structure, large businesses may be less flexible and less able to respond quickly to changes in the market or external environment.
- Higher costs: Despite the advantages of economies of scale, large businesses may also face higher costs for things such as utilities, insurance, and rent.
- Competition from smaller businesses: Smaller, nimbler businesses may be able to respond more quickly to changes in the market and offer more personalized service, which can be a disadvantage for large businesses.
- Overhead costs: Large businesses may have higher overhead costs, including salaries for management and administrative staff, which can cut into profit margins.
- Employee relations: With a larger workforce, large businesses may face challenges in maintaining employee morale and motivation, as well as in managing employee relations.
- Complexity: Large businesses may be more complex and harder to manage, with multiple layers of management and decision-making. This can result in slow decision-making and difficulty in achieving consensus.
- Overall, while large businesses may have some advantages in terms of financial resources, market power, and brand recognition, they also face a number of significant challenges that smaller businesses do not. It is important for businesses of all sizes to assess their own strengths and weaknesses and to choose a business model that is appropriate for their goals and circumstances.
