K.S.
I have this problem also, on two fronts.
One is a school-friend of my son's. My son is the smallest in his class, but he pals around (occasionally) with the biggest kid in his class. He gets invited to the kid's parties, but usually gets abused when he's with this kid. (Let's call him "A".) I've tried to broach the subject twice with A's mom. She is in complete denial, seemingly unaware of the bully she's raising. I told my son to just "watch out" for A, and if A does anything wrong, to tell an adult immediately, etc, and not to retaliate physically.
The other is a neighbor kid, who my son plays with regularly. The neighbor kid (Let's call him "M".) is a known-troublemaker. His mom knows it. All the other neighbors know it. With M, I've told my son to "push back". If M starts something, that my son should try words first, but not to let himself get pushed around by M. I've explained M's motivations (that he wants to be "boss", that he thinks he can "get away" with that kind of behavior), and I think my son understands - but since M is not HUGE like A, and M's mom is aware, that he can retaliate a little and stand up for himself - without getting crazy.
Maybe not spectacular advice... but this is the way we're handling it.