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4 Reasons Why You Love To Hate Big Businesses

It seems big companies can't catch a break. A recent Harris poll suggests that consumers don't trust a lot of big businesses and less than 20% of people trust companies in the banking, pharmaceutical and health insurance industries. The movement to buy local is arguably one factor, but large corporations and their actions may have brought about some negative attitudes. Listed below are just a few issues that some consumers hold against big businesses:

SEE: A History of U.S. Monopolies

Poor Net Job Creators

In terms of numbers, the vast majority of businesses in the United States are considered small businesses, with fewer than 500 employees and annual revenues less than $5 million. These small businesses employ approximately 67% of the total private sector workforce and create almost all new jobs. The underlying driver of these statistics is not so much the size of the company, but the newness of it. New, growing companies (which tend to be small at first) hire more employees over time as they grow. Large, established companies are in the business of making money for their shareholders. Most are focused on making more profits more efficiently. A common way to accomplish that is downsizing and increasing prices - two practices generally unpopular with consumers.

The Power to Affect Legislation
Large companies have deep pockets. Frequently, that means that they can have full-time lobbyists on the payroll making sure that any pending legislation is favorable to their industry and their company. Large corporations can have a huge impact on the law and on elected government officials who rely on their money at election time. Sometimes, corporations can even enter government agencies. An example of this is the Food and Drug Administration's second-in-command, Michael Taylor, a former Monsanto executive. This kind of coziness between big business and the government makes people mistrustful.

Crushing Small Businesses
In industries where economy of scale makes a huge difference in profit margins, big businesses can, and do, squeeze smaller ones out of the market. This can happen through predatory pricing strategies, exclusive distributorship arrangements and even through lobbying local and state governments to increase the barriers to entry in the industry. Big businesses are the Goliath to the small business David. In the U.S. business world, David rarely wins.

Taking Profits out of the Economy
A corporation's main goal is to provide a profit to its shareholders. In a small company's growth cycle, profits are often plowed back into company coffers to fund expansion, but a large, mature company siphons profits off to pay dividends to shareholders. Most shareholders retain those dividends in investment portfolios rather than spend them, so they don't have a stimulative effect on the economy. Local communities often do not benefit from having large corporations operate in their area, especially when top management is helicoptered in from elsewhere. Consumer sentiment can turn especially negative when large corporations receive government grants and loans to prop up operations.

The Bottom Line
Large corporations have a reputation for being untrustworthy and a drag on the economy. Some of this reputation has been earned fair and square; however, many big companies try to soften their image to appear more local and community-oriented, but jaded consumers are difficult to convince.



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