Sharp jumps in the price of oil and gas caused by the US Gulf Coast hurricanes of 2005 delivered huge profits to ExxonMobil and other major oil companies, in some cases helping them report record quarterly earnings. But even beyond the oil patch many other companies, in a broad set of industries, also generated massive earnings. Indeed, a growing number of companies, such as Citigroup, General Electric, IBM, Microsoft, Toyota Motor, and Wal-Mart Stores, now earn around $10 billion or more annually.
The emergence of such mega-institutions1 and the ways in which they are developing their extraordinary scale and scope represent a basic structural change in the landscape of business. Although the average mega-institution doubled its revenues from 1984 to 2004, by far the most striking increase has come in these companies' net income and market capitalization, which jumped three- and sixfold, respectively, during that period (Exhibit 1).2
In today's global marketplace, mega-institutions face few external limits on their size and profitability: for instance, Citigroup—the world's largest financial institution, with $250 billion in market value and nearly 300,000 employees—holds only 5 percent of the global financial-services market. Straightforward projections, based on the experience of the past 20 years,...