We received several requests to expand on the Corporate Bullying article we wrote last week, so this is the response. The dynamics between large and smaller stakeholders are often tense. As the disparity in power and resources grows, an alarming phenomenon has emerged: external corporate bullying. This form of bullying, where powerful corporations use their influence to dominate and intimidate smaller entities, poses significant threats to the fabric of the business ecosystem. It undermines the viability of small businesses, disrupts local communities, and casts a long shadow over the ethical practices of the corporate giants involved. Understanding the intricacies and repercussions of such behaviour is crucial, and it’s our responsibility to act against it, fostering a fair and equitable marketplace for all.

Defining External Corporate Bullying

External corporate bullying occurs when a large corporation, leveraging its significant power, resources, and influence, dominates, intimidates, or forces smaller stakeholders—such as small businesses, suppliers, local communities, or even governments—into submission. This behaviour often involves unfair practices, manipulation, coercion, and, at times, legal or financial threats, making it difficult for the smaller entities to operate independently or defend their interests.

Repercussions on Various Stakeholders

1. Small Businesses and Suppliers: Financial Strain: Smaller companies may be forced into unfavourable contracts, resulting in reduced profit margins or financial losses. An example is the power imbalance between supermarkets and small suppliers. For instance, the UK’s Tesco has been criticised for delayed payments to small suppliers, causing significant financial strain. Market Exit: Persistent bullying can drive small businesses out of the market. Small bookstores’ inability to compete with Amazon’s pricing and distribution tactics is a stark example. Innovation Stifling: Innovative small businesses may be discouraged from entering markets dominated by bullying corporates, leading to reduced diversity and innovation in those sectors.
2. Local Communities: Economic Impact: Communities can suffer economically when local businesses close due to pressure from more giant corporations. Walmart, for example, has faced criticism for pushing out local retailers in small towns across America. Social Disruption: Corporate bullying can lead to job losses and economic decline in local areas, affecting the social fabric and increasing unemployment and poverty.
3. Employees: Job Insecurity: Employees of small businesses or suppliers may face job insecurity due to the instability caused by corporate bullying. This can lead to reduced morale and productivity. Exploitative Practices: Workers may experience exploitative practices as smaller companies struggle to cut costs and meet the demands of more giant corporations.

Negative Repercussions for Big Corporates

1. Reputation Damage:

o   Engaging in bullying tactics can severely damage a corporation’s reputation. Public backlash and negative media coverage can erode consumer trust and loyalty. For instance, Uber faced significant backlash over its aggressive tactics against regulators and competitors, damaging its brand image.

2. Legal Consequences:

o   Corporations engaging in bullying may face legal action from regulators or affected parties. The European Union fined Google €4.34 billion(over R 86 billion) for abusing its market dominance, which had financial repercussions and tarnished its reputation.

3. Financial Losses:

The cost of litigation, fines, and settlements can be substantial. A damaged reputation can also lead to customer loss and decreased sales, affecting the corporation’s bottom line.

4. Employee Morale and Talent Attraction:

A company known for bullying tactics may need help attracting and retaining talent. Employees may feel ashamed or demoralised working for such a company, leading to high turnover rates and increased recruitment costs.

Real-Life Examples

1. Walmart has been accused of using its market power to force suppliers to accept lower prices and longer payment terms. This has led to financial difficulties for many small suppliers and contributed to the closure of local businesses that could not compete.
2. Amazon: Amazon’s dominance in the retail market has led to accusations of bullying smaller vendors. The company has been criticised for undercutting prices and copying popular products sold by third-party sellers on its platform, driving them out of business.
3. Coca-Cola: Coca-Cola has faced allegations of exploiting water resources in developing countries, leaving local communities with inadequate water supplies. Coca-Cola was accused of depleting groundwater and polluting local water sources in India, leading to protests and legal battles.

Conclusion

External corporate bullying is a significant issue with far-reaching consequences for all stakeholders. While it can temporarily benefit large corporations through increased market control and profits, the long-term repercussions can be severe, ranging from damaged reputations to legal penalties and financial losses. Regulators, consumers, and corporations must recognise and address these behaviours to ensure a fair and sustainable business environment.

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Thabang Chiloane can be reached at thabang@tc74.co.za.