Global diversified cservice sector

Global diversified commercial service sector consists of management consultancy (14.8%), accountancy (17.9%), security services (24.8%), legal services (34.8%) and contact services (7.7%). In 2003, the global diversified commercial services sector was valued at $839.7 billion, by 2008; the sector is forecast to have reached a value of $1.06 trillion, having grown at a CAGR of 4.7% since 2003. North America dominates the global services sector with 55.8% market share with Europe 32.40%, Asia-pacific 8.70% and Rest of the world 3.10%. The largest sector in the sector is Deloitte Touche Tohmatsu with a share of 1.8%, with PricewaterhouseCoopers 1.7% share, Accenture 1.6% share, Ernst & Young 1.6% share, KPMG 1.4% share and remaining other companies with 91.80% share. 1

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A survey conducted by Deloitte Touche Tohmatsu says that more financial services companies across the globe are choosing to go offshore. The banks and other institutions setting up shop in India or Southeast Asia have increased to 70% compared to 26 % in 2003. But according to the study by Deloitte Touche Tohmatsu the companies have yet to exploit cost savings and efficiency potential. Figure-1 shows some of the on-shore and offshore drivers. Source 2003, 2004 & 2005 Annual Deloitte Touche Tohmatsu Global offshore Surveys (Figure-1)

Figure-2 shows the performance of the global financial services industry on offshore governance issues such as security, disaster recovery, customer privacy, and 3rd party accountability and fraud detection & prevention. Source 2003, 2004 & 2005 Annual Deloitte Touche Tohmatsu Global offshore Surveys (Figure-2) This report will analyze the changes KPMG has undergone in 1990’s with a expectations to meet expectations of global client. KPMG is a global network of professional services firms providing audit, tax and advisory services, with operations in 148 countries and have around 6,500 partners, 70,000 client service professionals, and 17,000 administration and support staff working around the world.

In the late 1990s, expectations from global clients and international opportunities for development were prompting a signal of greater level of global strategy in KPMG. After Colin Sharman’s took over in 1997, the new chairman perceived the needs to develop such new strategy. In the 1997 KPMG had practices in 156 countries throughout the world; more then their competitor. The change was required as the competitors sought growth internationally and lack of growth likely means losing market share and will also affect the ability of the firm to attract talented people.

The external factor which triggered for change in KPMG can be seen in the SLEPT & Porter five forces analysis.2 Porter five forces analysis shows that there is intense competition within the top five companies and also substitute available for buyers in terms of small to medium size firm were the biggest threat for KPMG. The company’s top competitors going internationally with mergers and acquisitions, increased government regulations and change clients further triggered KPMG to grow internationally. Some of the internal factors which triggered for a change in KPMG are as follows:

As companies become more global in terms of scope and scale of operation, they face new challenges, dealing with a multiplicity of regulatory authorities, fiscal regimes, local cultures and operating conditions, etc. The main challenges of KPMG’s international strategy were to develop a coherent approach to deliver services worldwide under the circumstances that there were so many existing and potential clients. Secondly, the major potential growth opportunities were in areas that KPMG do not have well-established practices, such as Eastern Europe, Asia Pacific. The growth rate of KPMG worldwide was not satisfactory. Colin Sharman saw that overall strategic vision and mission of the company must be based upon the resources and competences of the organization and the extent of service industry and market globalization.


Yip (1992) frame work for assessing the extent of, and potential for, industry globalization can been seen in terms of KPMG. Collin Sharman saw that globalization was a source of growth for KPMG. With technology, political and regulatory environments changing radically, clients look to consultancy firms to provide the skills and knowledge to give them a competitive edge in their global markets.

By 1997, KPMG undertook some global initiative such as the Project Globe, in order to achieve a consistent international approach in management consulting and to speed up the international development of higher added value consulting projects. Audit 2000 was dedicated to develop a risk-focus audit by integrating elements of strategic analysis into the auditing process. The Global Tax Vision was seeking to provide a consistent international dimension on the tax practice.

Thus the major change programme concluded by Colin Sharman was creating a new management structure, move to industry based focus for service delivery to clients, development of specialists. This change was only possible by making clear what the international centre of KPMG was responsible for. ervice companies like KPMG need to continuously benchmark companies and develop their strategy according to environmental changes. However following possible recommendation can be helpful for KPMG.

1. Managing change and risk using scenarios and other strategic planning tools such as K-world and EDI (Electronic data interchange). 2. Acquiring of Cisco 20% stake can be beneficial for KPMG in terms of information and technology. KPMG can take the advantage technical expertise in Cisco and can further develop its knowledge management system. 3. Learning of Tacit knowledge from partners in order to understand different culture and changing market. This can be done through workshop with partners, clients and K-world.

4. Offshoring of some services to countries with low labour cost can lead to cost effectiveness. Services like back office can be transferred to low cost countries. 5. Cultivating leadership qualities most in demand on the global stage. This can be done continuously by KPMG by organizing workshop and sending people to training programs. 6. KPMG with strong knowledge management system and new technology support from Cisco can further help in managing & creating virtual teams which can lead to cost effectiveness.