Size isn't everything

Size matters, but it isn't everything. As national merchant groups have grown, mainly through acquisition, they've achieved vast economies of scale and huge buying muscle. Some of the proceeds may filter down to branch level to support their marketing and improve their performance. But on a one-to-one basis, regional chains and smaller independents have little to fear on their own turf. Indeed the advantage is often the other way where independents often run rings around national chains. But if the nationals keep on acquiring won't it get to the point where their buying muscle and prices mean they can grab any sales they want? Are there limits to market consolidation? Can you get too big for your environment, in effect the sum of all the customers, competitors, and suppliers in the market? There are parallels in animal evolution.

Natural selection is blind to the future. So it is possible for a species to evolve itself to extinction by adopting a strategy that works in the short term, but not in the long. Recent research, published in Science magazine, to explain the extinction of many carnivores confirmed an old idea called Cope's Rule.

Excluding special circumstances, such as the evolution of dwarf animals on isolated islands, the rule is that small animals evolve into large ones, but not vice versa. This makes sense. Size brings security from predation, success in competition for mates (at least if you are male) and a lower surface area to volume ratio (which reduces heat loss). The downside is that big animals have to eat more than small ones.

If you are a carnivore the easiest way to eat more is to specialise in larger prey. But the problem is that large prey are rarer than small ones, so specialising in them leaves you vulnerable to relatively small ecological changes. If your preferred food supply vanishes you may not, as a smaller species would, have any suitable alternatives. And extinction thus beckons. Research suggests that in Earth's history the average lifetime of large carnivore species was 6 million years, against 11 million years for smaller less specialised species. Smaller species are better able to survive the changing environment than their larger predators.

By overspecialising and concentrating on size, rather than market intelligence and performance, many merchants have missed potentially attractive growth markets while their nimbler, more market aware competitors have seized new opportunities.

Cope's rule suggests that big creatures can't evolve back to small ones. But in business you can regain the focus and responsiveness you once had - or avoid losing it in the first place - with effective research and better marketing.