Does COVID-19 Help Large Corporations and Tech Firms Squeeze out SMEs?


It is clear that COVID-19 is creating winners and losers in the world today, although there seem to be more losers than winners, says Les Nemethy. Online retailers, for example, are massively gaining market share at the expense of physical stores. Shopping plaza outlets and main street retailers are dropping like flies, while Amazon hires hundreds of thousands of workers.

What about the proposition that COVID-19 has given an advantage to large companies and technology firms, and that these have taken market share from smaller enterprises? While there are obviously large companies that have suffered (Carnival Cruise Lines, for example), might the general proposition of larger companies taking market share hold true?

It seems that this kind of trend towards large companies was already the case before COVID: In the United States, between 1995 and 2013, the percentage of employees working for firms with 10,000 or more employees increased from 24% to 28%, according to In Europe, between 2011 and 2017, the share of employment in firms with 250 or more employees rose from 32.8% to 34.8%, according to EU statistical body Eurostat. Might COVID-19 further accelerate this trend?

This article looks at the evidence, cutting transversally across all sectors, for whether large companies are doing better or squeezing out small- and mid-sized enterprises. First, we will look at the macro evidence. Next, we will look at the possible reasons for this. Finally, we will discuss what small companies might do to augment their own market share.

The Macro Evidence

In the United States, it is evident that the Nasdaq NDX (representing large corporations), the DOW Jones DJI (the largest 200 publicly listed companies), and the S&P 500 SPX (increasingly dominated by five high tech stocks) have performed vastly better than the Russell 2000 RUT, which represents the smaller publicly listed companies across America.

In Europe, fortunately for smaller companies, there has be less of a divergence. This may, however, have more to do more with the sector mix of companies in the index.   

The Advantage

According to marketing experts such as, market share among competitors tends to be much more stable in good economic times, when the economy is growing.

A shrinking economy or an economy in crisis is where the sheep tend to be separated from the goats. Stronger companies steal a lead on weaker companies. Market shares tend to change much more rapidly.

So what might be some of the advantages that larger companies have over smaller companies? Several possible advantages are listed below, not necessarily in order of importance:

(a) Larger companies have greater access to capital and technology. The mountains of cash at companies like Apple and Microsoft are legendary. They have also resorted to far more raising of fresh debt and equity, hence are in a much more liquid position. See my recent column on this subject, Corporate Debt Market During COVID-19 Pandemic, in the June 5 issue of the Budapest Business Journal.  

(b) There are usually more diversified, both in terms of products/services as well as geography; should COVID-19 hit a segment particularly hard, large companies may still derive cash flow from other segments.

(c) Large companies have usually invested more in branding than smaller companies, hence typically tend to engender trust. Trust seems to be at a premium during the pandemic. A higher degree of trust may also play a role in helping larger companies hire the best employees.

(d) As a response to COVID-19, supply chains are showing a tendency to become flatter. Larger companies are cutting back on outsourcing, reducing the number of links in the supply chain, which tends to affect smaller firms.

(e) It is often possible to do more online with larger companies, and they often have more automated internal processes, allowing them to attract more clients and serve them with more resilience, according to

(f) The says there seems to be evidence that larger corporations are better able to obtain state assistance.

The SME Response

A small company is like a motorboat, compared to a large multinational, which might be compared to an aircraft carrier. The advantage of the motorboat is that it can turn on a dime, an aircraft carrier might be stable, but is much more difficult to maneuver.

In theory, smaller corporations should take advantage of their ability to be more flexible, creative and responsive. They are in closer touch with local conditions. Many restaurants survived the pandemic by expanding into food delivery, for example, while many of those who failed to evolve went bankrupt. Those small corporations that can identify new opportunities appropriate to the environment, and take advantage of them, will survive and prosper.

Smaller companies would also be well advised to consider examining their capital structure. Is it optimized to respond to the risk of a prolonged pandemic? Is there enough capital for the company to reinvent itself, take advantage of new opportunities, or simply to survive the pandemic? The pandemic, in many ways, accelerates the rate of change in the business world.

Les Nemethy is CEO of Euro-Phoenix (, a Central European corporate finance firm, author of Business Exit Planning ( and a former president of the American Chamber of Commerce in Hungary.

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