Edit: This question attracted way more interest than I hoped for! I will need some time to go through the comments in the next days, thanks for your efforts everyone. One thing I could grasp from the answers already - it seems to be complicated. There is no one fits all answer.
Under capitalism, it seems companies always need to grow bigger. Why can’t they just say, okay, we have 100 employees and produce a nice product for a specific market and that’s fine?
Or is this only a US megacorp thing where they need to grow to satisfy their shareholders?
Let’s ignore that most of the times the small companies get bought by the large ones.
It’s perfectly possible to have a company that is not growing and just stays where it’s at. But then the salaries of the employees won’t be growing either, and often that will lead to the best employees leaving. Which in turn will turn the non-growing into shrinking.
Perhaps you’ve seen a stagnant company and perhaps you have seen a growing company. The one feels like a cemetery while the other feels like a student party. Either can be good or bad depending on what kind of vibe you enjoy.
Note that this is not a feature of capitalism exclusively. Pretty much all systems thrive on growth, it’s more like a law of nature, not something humans created.
Also, capitalism reacts pretty well to downturns: companies shrink or even die completely if they’re not needed anymore. One of the major reasons Capitalism should work better than all the alternatives is that creative destruction. Problem is that governments are afraid of that destruction and usually try to prevent it from happening. I think a better way would be to let companies (including those “too-big-to-die” ones like large banks) die when it’s their time to die, and rather protect the invidiuals from the effects. The longer you support things that should just die the harder the fall will be.