First of all, it is still true that, in terms of establishments, small and medium size firms dominate the industry. Printing remains America’s largest small manufacturing business with two-thirds of all establishments employing fewer than 10 employees (the very small category in the charts to the right). Additionally, another 14 percent of printers employ 10–19 employees (small printers in the charts). In contrast, only 4 percent of printing plants employ 100 or more. On average, the typical plant is small, with around $3.3 million in annual sales and 20 employees.
The size distribution of “print and related support activity,” or just the commercial printing sector, is very similar to the overall industry size distribution. The proportion of very small and small printers is slightly greater. The typical plant in the commercial printing sector has annual shipments of around $3.0 million and 17 employees.
The “print-related media” sector of the industry tends to have slightly larger plants but still has a preponderance of smaller plants. The typical plant in this sector has annual sales of $3.8 million and 25 employees.
However, from another perspective— sales revenue – small firms are much less dominant. In proportion to total printing shipments, the largest 100 printers capture approximately one-third of total U.S. print sales. The top 10 largest printers account for around 20 percent of total sales.
Why Small Is Beautiful In Printing
As one of America’s oldest manufacturing industries, printing has been around plenty long enough to evolve into an industry of a few large corporate giants similar to automobiles, chemicals, and steel if it was destined to happen.
Why hasn’t this happened? Primarily because, unlike most manufacturing industries, print’s industrial structure is not shaped by economies of scale. Rather than decline over long ranges of output, the printing industry’s long-run cost curve exhibits constant returns to scale with smaller – and medium sized firms having no significant cost disadvantage over larger firms. However, as printers invest in new technology on an ongoing basis, the industry’s long-run cost curve does shift down. This downward shift will not change the basic shape of the long-run cost curve—it will continue to keep its characterization of a fairly long range of constant returns to scale.
Some of the reasons for this lack of economies of scale in the printing industry include:
- Printing utilizes a job –shop manufacturing process than a continuous process, so a small or medium sized printer can generally produce a print job as efficiently as a larger firm.
- Printing is not simply a manufacturing industry but is a hybrid of manufacturing and services such as marketing, database management, marketing services, and others. This mix of printed product and service further reduces the influence of scale economies.
- Many government regulations that add cost to printers do not hit firms with less than 50 employees, providing a significant cost advantage to smaller printers.
- Smaller firms generally are more nimble and can maintain closer relationships with their customers—particularly at the CEO level. They also more entrepreneurial and able to move quickly when the need arises.
- Finally, there is somewhat of an alignment in the marketing of print in that smaller-
And medium sized printers generally market to smaller and medium size customers while larger printers market to larger customers. Further, small and medium size printers typically produce smaller jobs in terms of run size and dollar amount compared to larger printers. This symmetry means that in most, but certainly not all cases, smaller, and medium size printers do not compete directly with large printers.
The bottom line—to stay competitive, printers do not need to keep getting bigger, but they must keep getting better. They need to keep investing in new technology and business processes to drive down their costs. They can do this without getting bigger. And this is why small and medium size firms remain a vital part of the industry.
Source: Sizing up the future can small and medium printers survive/PIASC 2013