Historically, as according to the research of BГclunk (2003), the Swedish Management Consultancy (MS) market has been characterized by heterogeneity and saturation. BCГ¶rail&BoJler (2008) suggests that this could be ascribed to the fact that Swede’s local market is small, as is its population, relative to the existing global markets. According to BГclunk (2003) there was a shift in the market landscape in 2001, when the Classical American styled consultancies together with the Big Five accounting houses took over the market.
In terms of market share 82% was from then n controlled by the previously mentioned actors, only 18% by smaller, local, actors (a seismic shift in opposite contrast to the market share distribution during the 1980 ‘s). According to Consulting (AAA), currently the market share sizes are as evidenced by the pie chart on the right. However, the scope of this paper is limited to management consultancies. As M&A is also highly relevant for the field, we have included the Top 5 players in M&A in Table 1 (Consulting, Bibb). However, we will be focusing on Management Consultancies primarily in our analysis.
Above is a table 2 presenting the top 12 players in the MS industry that we could find relevant figures on (mainly from Consulting. SE, a trusted source in the industry and, for example, utilized by BГclunk in his dissertation). Boston Consulting Group, Celebrant, and Capering are excluded in the above analysis since relevant figures were not attainable and/or disclosed for those companies. The sample should however be big enough and cover enough of the total market to be relevant and valid for an analysis and subsequent assessments and recommendations to be made.
These numbers are then utilized, in companion with other assessments made by the authors, in our industry attractiveness analysis (presented further below) as according to Gamble et al (2012). We have incorporated a Porter’s Five Forces analysis of the Swedish Management Consultancy market as a secondary source to deduce implications from. The analysis, conducted by BCГ¶rail (2008) is incorporated since their fundamental analysis is relevant and applicable still today.
Their study is conducted in 2008, before the global financial meltdown, but our review of their data, analysis, and conclusions show that their results are, on the whole, still to be considered as relevant and valid. We outline their Five Force’s analysis below, continue with our industry attractiveness assessment, review the industries key success factors in the light of factors driving change and derive our conclusions based on this with our final recommendations for the different industry actors. Porter’sFiveForcesAnalysis: Three out of sinew entrant factors are relevant for the MS industry.
Service differentiation is the first and implies creating a strong brand image and an explicit identity in the MS industry, which also implies significant costs for new entrants. The second and third factors are related to this industry and are “Cost disadvantages independent of size” and “Access to distribution channels”. These emphasize the importance of having good relationships and that it can lead to access to distribution a market unless the new entrant already has some kind of relationship or network in Sweden.
MS firms normally get their clients through referrals from their previous clients, which takes time to build. Suppliers MS firms are the actual consultants, ho have the power to impact the quality of services. The MS industry is knowledge oriented, thus losing a consultant equals losing knowledge. Therefore it is crucial for firms to make the position of a consultant attractive with high salaries and other benefits. It is also important to ensure retention of clients by having competitive contracts, which forbids the consultant to bring clients from the firm when quitting.
Six out of seven factors from Porter can provide buyers (clients) with good bargaining power. First, loyal customers are those who buy a large volume of services. Their loyalty is vital for recession times. Second, the services can easily be done by other actors which also implies that replacements easily can occur. Third, service is essential in the MS industry, which sets the buyers expectations high when the service implies a big cost for them. Fourth, when buyers have low profits they cannot afford high price purchases. Fifth, if the quality is more important than cost reducing.
Sixth, if the buyer have own production of the service. Two things to consider in the MS industry regarding substitute products are:l) What are the demanded services from clients? Is our firm able to provide it? ) There is a risk that several consultancies can offer the same service with the same quality and value which enables a tender process between consultancies and companies. There are six factors to consider argumentatively between already existing actors: 1 . There are many actors with similar services. 2. Services are not differentiated nor is there a switch in the costs. 3.
Lower the prices when demand is low due to high fixed costs. 4. Overcapacity can lead to price reductions. 5. High exit barriers in the MS industry. 6. Head-to-head fights with competitiveness, instead of trying to circumvent them (BCГ¶rail, 008). Antidisestablishmentarianism: The graph to the left depicts the results of our industry attractiveness analysis. We used secondary sources to weight and assess each construct, as according to Gamble et al (2012). These secondary sources included web pages of respective company, annual reports, newspaper articles, Consulting. SE.
We plotted the graph, as you can see, with the Y axis referring to Industry Attractiveness and X axis as referring to Competitive strength. Given the fact that the industry is essentially the same, although entailing different fields (such as, for example, IT strategy or Organizational Development) the spread is rather small in scope for that variable. There is a difference between the companies Condo and Logical and the rest of the market. This is basically due to the fact that they are active in business controlling and to a lesser extent in Logistics and HER-consulting which can be seen as small market segments.
The companies differ much more regarding competitive strength. Consultancies specializing in M were excluded from this analysis, as were Management Consultancies of smaller scope (our analysis covers 80% of the total market in terms of turn-over). As we can see, the Big 4 accounting houses are fairly close to each other, suggesting a need for greater differentiation. Their accounting operations are highly standardized. Their management consultancy operations, however, are slightly more differentiated. Pain and McKinney occupy a position Accentuate even more so, which might be due to their dominant market share.
Connect and PA Consulting are smaller in terms of turn-over and highly niches, the latter with a high profit margin (14%, to compare with an industry of 8%, according to Consulting. SE [Consulting, AAA]). Key Success Factors: According to Swedish IBM S Strategy Consultant Salsa Ashier(2012), the Key Success Factors on the Swedish market are Personal Relationships, Client Satisfaction, a Strong Brand, and Knowledge Management. The factors driving change in the industry, again according to Ashier (2012), are developments in Technology and general Economical trends, as well as implications from the process of Globalization.
We outline below how these interact and how they can be expected to develop in the near future. Personal relationships are of great importance for firms operating in the management consulting industry. The relationship between the consultant and the client is mainly based on mutual trust, which implies that there “must be a fit between consultants and clients when it comes to including models of consultancy, client expectations, consultant capabilities and consultant type” (Applicable& Steed, 2004).
Successful personal relationships are thus dependent on multiple factors, implying that the consultant also must be qualified in adjusting his/her approach toward different clients. The industry is also characterized by being a highly male sector where the employee mobility is very high. A reason can be found in the stressful atmosphere in the industry. The average age as a management consulting employee (and contractor) in the I-J and USA is respectively 33. 9 (43. 7) and 30. 0 (45. 8). The mobility implies a high amount of people with different opinions that can contribute to more knowledge. (Donnelly, 2009).
The generic problem in the management consulting industry regarding personal relationships is the ability to maintain and improve existing relationships, but also to develop new personal relationships. Customer relationship management (CRM) is of rater importance nowadays due to the economy since the number of cases had dropped firms need to keep already existing clients content (Ashier, 2012). Essential here are practices such as CRM, employer branding, internal branding, organizational culture. These significantly affect the long-term strategic health of companies in this particular service sector.
The influential American site default. Com, a website observing the consulting industry, consistently ranks McKinney, Pain, and Boston Consulting Group as the most prestigious and most attractive employers in the field (Default. Mom, 2012) and these companies can therefore be expected to master one of the factors deemed important to attract top talent (which in turn ensures credibility and legitimacy for the company in the eyes of existing and potential clients). Internal branding has also been found to increase the degree to which employees deliver on the brand promise of the company (Wilson, 2009).
Creating, spreading and re-using knowledge is the core task of a consultancy company. Therefore, there is an increased attention in knowledge management starting from the ass’s. How can we define the domain? Knowledge management is alee, leverage, and share an organization’s intellectual assets to enhance its performance and competitiveness. It is based on two critical activities: (1) capture and documentation of individual explicit and tacit knowledge, and (2) its dissemination within the organization. ” The creation of knowledge is mainly acquired by having networks and relationships, a continuous process. Objectifications. Com, 2012; Homework. Com, 2012) The fact that the industry is to be considered a service industry and that we are dealing with a BIB industry gives rise to a number of implications for brand and branding. Service marketing differs from product marketing as the product is intangible as opposed to tangible. A challenge due to this is to prove the value of the services provided to clients. Concreting and quantifying the hard-to-measure outcomes of implementation consultancy advice is often key (Rosaries& Van deer Granite, 2012).
FactorsDrivingChangein the Industry: Technology has provided the industry with business systems that are helpful for a number of purposes. Client relationship is a key success factor in the management consulting industry affected by the technology. Computer business intelligence yester can be applied for measuring satisfaction and evaluate (follow-ups) the outcome of projects thus improve them (Ramble, 2012). Information technology is also an important tool that enables the implementation of knowledge management.
As a result, IT-practices become important not only for the companies that act as customers of the consultancy companies (IT solutions are a growing trend), but for the consultancies themselves as well. Big Data(ABA-Anamosa, 2012: Else 2012) is “the next big thing” currently impacting the field, as most other fields and domains, in every way and will be essential in the coming years. Strategy consultancies that also have, or are sprung from, divisions specialized in computer technology, such as MM, will potentially have a competitive edge in the near future due to this.
Increased global information arbitrage, driven by Globalization processes and the increasing integration of Information Technology in society alike, also poses challenges to the consultancies in terms of their competitive advantage being eroded both in terms of decreasing knowledge inequalities but also the threat hackers pose to the secrecy of corporate intellectual property (both being threats to company brands). Globalization as led to a standardization of services and similarities in customer preferences. These are the trends, although in the European market there are many internal differences and obstacles.
For instance, if a multinational consultancy company wants to enter a country, a large amount of localized knowledge is needed. Another example is the high regulatory environment of Sweden which makes it difficult for the implementation of effective, innovative or creative solutions. Another factor significant for Sweden particularly is the big market share for the public sector relative the private sector (Ashier, 2012). Economical trends affect the service management industry as it does many other industries.
Ashier (2012) noted that even if the number of clients as such is not down due to the 2008 recession and subsequent negative economic environment, the number of consulting requests from the clients is, on the other hand, down (Ashier, 2012). As companies face declining included. However, such an economic environment also pose an opportunity, and reports suggest that the industry has seized it as shifts have been observed towards consultancy regarding cost-cutting, performance- and productivity-increases (MAC, 012;Telegraph, 2012).
The industry globally thus has managed to stay relevant to clients in the post-recession economy. We do not see any reason to suspect that Sweden differs in this respect, and Consulting reports that the Swedish MS industry has had a hard time achieving, on industry average, double digit profit margins, hovering at the moment around 8%. Unlike accounting consultants and business lawyer consultancies, the former is usually found to have an average industry profit margin between 14% and 17% while the latter currently achieves an average industry profit margin of 25%.
Consulting has also polled 350 consultants, among them consultants in Management Consulting, and they all show great confidence in the prospect for growth the coming year, both as far as revenue and profit margins go. An environment characterized by a weak economy is cited as the number one threat to this growth, followed by fears of not being able to recruit competent human capital to a satisfying extent (Conscientiousness’s). Industry-level Recommendations: Mistreatment is very expensive Souse, 2004).
The negative marginal effect is probably even greater in the management consultancy industry since personal traits ND competencies are more important and the misapplication of knowledge is costlier, due to the size of accounts per employee. Employee competence is often tacit and progressive in nature and thus less tangible and measurable in the recruitment process, opening for mistakes on the part of the recruiter. Keeping with the specialization of labor even among consultancies, we suggest that management consultants keep bringing in other consultancies specialized in recruitment to handle their recruitment services.
This can help to mitigate potential biases (Baseman& Moore, 2009) stemming from having only an inside view of the organization. An outsider brings not only expertise and fresh ideas but also a perspective that is detached and potentially more objective. A greater diversity of employees, e. G. More women and older people, should also generate higher efficiency (as evidenced by Amman&Korabik, 2010) as the need to understand, and handle, the many effects stemming from increased cultural complexities and diversity will increase as Globalization intensifies.
Dresses (1982) points to the fact that algorithms can only reach a level of competence resembling competent, rule-based, behavior, which is far room the capabilities of understanding of human expertise. Consultancies implementing knowledge management and standardization, in large part driven by computer science and information technology, need to count this as a possible threat. However, a reasonable level of standardization suggests there is an opportunity for downsizing and cost-cutting and optimizing the utilization of one of the scarcest goods in this industry: human capital.
Both for the purpose of developing the knowledge edge and base, and for securing recruitment (a top concern), consultancies should try to establish and/or deepen their ties with universities since these are producers of both knowledge through research and of graduates through formal training. Establishing special master tracks, contributing recruiting and systematically consulting Pad’s, providing grants and scholarships, and generally involving and embedding the firm in partnerships and other types of relationships with universities as a key knowledge hub will probably, in our opinion, be even more common and important in the future.
Partnering with private universities could be a way to keep the knowledge produced as a result of those legislations as proprietary (public universities are subject to publishing their results openly). The Swedish IT consulting branch in general has suffered from globalization. In order to be able to compete in price and competence, consultancy firms have to hire competent personnel from low labor cost countries (such as India). Solids, 2012) This might probably be more applicable to more standard IT processes (such as coding), but as standardization enters IT strategy as well, we can probably expect the same process to occur in that branch as well. This needs to be guarded against. Drawing from theory and empire of Business Network Theory (Foreseen, 2008) regarding FAD, our recommendation to any foreign new entrant is to establish relationships with actors that are already present and possess knowledge regarding the specific culture and business landscape of Sweden.
We have particularly identified the business lawyer consultancies as possible partners in order to break into the Swedish market as these are highly relevant in today’s business landscape characterized by M&A to a high degree (in cooperation with Investment Banks). Company-levelRecommendations: As IBM S&T, according to Ashier(2012), are in every area of business in the MS industry, we suggest that they expand their operation in what we call “logistics” (incorporating supply chain management, logistics, and operational management) in Table 2.
As we can see this business is relatively small in Sweden and has few actors. However, if we extrapolate the growth rate for this business from Europe in general (Efface, 2008) we can see that this business can be expected to grow (especially as convergence in growth rates can be expected due to Globalization). The cost of expanding this business in Sweden, by for example importing and implementing international best practices, can be expected to be lower and an opportunity for IBM as they already have operations in this business.
Especially Condo, third biggest actor in that sector, is not competitively very strong (as evidenced by our industry attractiveness analysis), and could thus be a good target for competition. Consultancies with a technological competitive edge, such as Accentuate and MM, should move aggressively into Big Data(ABA-Anamosa, 2012: Else 2012), by being in the forefront in this field they can extend and defend their competitive advantage. Big Data is also relevant for decision-making, but Dresses’ (1982) findings of the superiority of human expertise should be adhered to here as well.