[manachar]

I often think of markets in pseudo-evolutionary terms. The types and sizes of companies that survive are those that fit the environmental pressures.

One common trend in evolution is toward gigantism in places of intense competition. Whales, for example, may be as large as they are to avoid having to compete or be eaten by smaller animals. Being bigger means they eat more, leaving fewer resources for competitors.

It can be quite the winning strategy.

At least so long as the environment can provide enough stability to feed such large organisms in the manner in which they are evolved to exploit.

For companies, being large means you can always buy the competition or make sure the barrier to entry is too high for competition (thinner profit margins, "free" services, regulatory capture, etc.).

It works, and quite well. These large corporations can withstand enormous financial shocks, and if they can't, they get purchased by those that can.

For most mature markets this generally seems to shake out to most of the product area being divided between two or three big players and a host of smaller companies at the edges.

Oddly enough, when things are stable being large may be a winning strategy, but it is also very fragile and if the whole system gets disrupted, can be the first to fail when things change too much.