Why we like big corporations

Nissan Qashqai

Firstly it is important to understand that big corporations are actually quite rare in the real world. According to the FSB:
“There were an estimated 5.2 million businesses in the UK which employed 25.2 million people, and had a combined turnover of more than £3,500 billion. Small firms accounted for 99.3 per cent of all private sector businesses in the UK, 47.8 per cent of private sector employment and 33.2 per cent of private sector turnover. Small and medium sized businesses employed 15.2 million people and had a combined turnover of £1.6 trillion. Of all businesses, 62 per cent (3.3 million) were sole proprietorships, 29 per cent (1.5 million) were companies and nine per cent (460,000) partnerships.”

We live in a world driven mainly by markets looking after customers, this is why we are so amazingly prosperous. So for any business to grow it has to deliver exceptional goods and/or services to its customers. And for a company to become really big there have to be sound economic reasons (unless government cronyism is involved). Here are some of those reasons:

  • Complexity. A big supermarket stocks approximately 25,000 product lines. It must maintain a relationship with all the suppliers, keep the correct stock levels, ensure everything is fresh, distribute to scattered stores, adapt to customer demands and so much more, all for every single product line. This is incredibly complex but must be done very efficiently so as to compete with the other supermarkets (government could never do this). Only very large organisations can it. So if you value great diversity and low prices when you go shopping then you like big corporations.
  • Risk. Modern pharmaceuticals have added 20 years to our average life expectancy. Many reading this are only alive because of these drugs. From the initial identification of a potential drug molecule to it coming to market takes 10 to 11 years. During the development process 9,999 out of 10,000 candidate molecules will fail in some way. The ones that succeed and make it to market will cost $1.3 to $1.8 billion in order to make that journey. Then most that reach it make a loss. For the big pharma companies this is very high stakes gambling. Only the occasional blockbuster drug paying for all the other ones. Other industries are the same. Most recorded music, most movies and most video games make a loss. Only big corporations can absorb big risks. So if you value living 20 years longer then you like big corporations.
  • Scale. Look around you now and you will see iron in very many things, your computer, your car, your furniture, your domestic appliances, your building etc. It is everywhere. If we relied on small mines to produce it then the cost of all these would be astronomical. Luckily for us it comes from a small number of super mines in Australia and Brazil, so is very cheap. Carajas mine in Northern Brazil is the world’s biggest, holding 7.27 billion tonnes of reserves. It produced 106.7 million tonnes iron ore in 2012 and is undergoing a $19.6bn expansion project. So if you value being able to afford to buy things then you like big corporations.
  • Research and development. Nearly everything you buy and use becomes better year after year. You car becomes safer, more economic and more reliable due to advances in technology. This takes incredible investment that only the biggest corporations can afford. In 2014 on R&D Volkswagen spent $13.5bn, Samsung $13.4bn, Intel $10.6bn, Microsoft $10.4bn, Roche $10bn, Novartis $9.9bn and so on. Immense sums invested. So if you like better products and services then you like big corporations.
  • Investment. Your smart phone, clothes, domestic appliances and much else are made in other countries. It costs very little to bring them here because of immense investment in huge and efficient container ships like the Maersk Triple E that I have written about before. Each of these carries 18,270 20 foot containers and costs $190 million to build. Maersk are taking delivery of 20 of them. So if you like to pay less for everything then you like big corporations.
  • Efficiency. Often all the above economic reasons come together to deliver incredible, amazing results. How long do you think that it takes to manufacture a complete car? In 1909 it took 303 man hours, by 1929 the time had been reduced to 92 man hours, now the Nissan plant in Sunderland assembles a Qashqai in 8 man hours. This incredible increase in efficiency applies to nearly everything we buy and use. So if you like living in the modern world you like big corporations.

As you can see it is a no brainer. Big corporations do an amazing, fantastic job for every one of us. They do remarkable things that only they can do. And they do it all for the benefit of their customers. Which means you.

But there is more. All big Western corporations engage in something called Corporate Social Responsibility (CSR). Businesses monitor and ensure active compliance with the spirit of the law, ethical standards and international norms. Usually this goes beyond compliance and involves actions that appear to further some social good, beyond the interests of the firm and that which is required by law. CSR aims to embrace responsibility for corporate actions and to encourage a positive impact on the environment, customers, employees and communities. Big corporations work very hard to be good citizens. But for some reason the left wing media doesn’t publicise this.

So there you have it. We would be in incredible trouble without big corporations. They achieve what no government could possibly ever do. And they are an immense benefit to humanity.

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