Competitive Landscape of Management Consulting
Date: 15-09-2007
Source: Datamonitor
A large number and wide range of companies employ the services of management and marketing consultancies. Consultants advise within a wide range of industries, on a wide range of topics and therefore there is a high degree of service differentiation within the market. The leading management and marketing consultancies such as Accenture, Price Waterhouse Cooper and KPMG, are worldwide organisations with exceptionally strong brands.
Reputation is exceptionally important within this market and therefore a good track record is a distinct advantage, which presents a significant barrier to entry of new players. Many larger companies and organisations employ in-house business analysts and marketing teams, which present a significant substitution threat to Management and Marketing Consultancy services.
A large number, and wide range, of companies employ the services of management and marketing consultancies. The market is entirely B2B, and small businesses are less likely to be clients than are medium and large corporations. There is a high level of service differentiation in the market, with leading players offering a wide range of different services and expertise. Buyers typically enter into contracts with consultancies for the duration of specific projects and do not incur switching costs between projects.
However, many consultancy projects have a prolonged duration of months or even years, and switching consultancy within such projects can be costly (for example, longer notice periods may be required, and early termination fees may be incurred). Buyer power in the management and marketing consultancy market is moderate.
Major suppliers to the accountancy firms are suppliers of ICT and office equipment. The major consultancy firms invest substantially in ICT systems, for which they typically have contracts with large technology providers. Changing suppliers can incur significant switching costs, such as the sunk costs of staff training, or the impact of a new supplier's system being incompatible with an existing one.
Employee compensation and training can also be a significant cost for players in this market, as they need to recruit and retain employees with high levels of education, industry knowledge, creativity, and similar qualities.
Overall, supplier power in the management and marketing consultancy market is strong.
The leading management and marketing consultancies, such as Accenture, PriceWaterhouseCooper, Deloitte and KPMG, are worldwide organisations with exceptionally strong brands. Reputation is exceptionally important within this market and therefore a good track record is a distinct advantage, which presents a significant barrier to entry of new players that have not yet developed competitive brand strength. Management and marketing consultancy involves a high degree of specialist and proprietary knowledge.
The wide and deep pool of expertise available to larger and long-established companies provides significant economies of scale: they may be more capable than smaller, newer competitors of dealing with the complex needs of major clients, which allows them to win the more lucrative contracts. Consultancy fees reflect the experience and brand strength of the player, with less established players charging lower rates.
Factors favoring new entrants include the lack of government regulation, and the ease with which clients and suppliers can be accessed. Overall, the likelihood of new entrants to the management and marketing consultancy market is moderate.
Many larger companies and organisations employ in-house business analysts and marketing teams, which present a significant substitution threat to third-party management and marketing consultancy providers. In addition, the business intelligence industry provides ad hoc and off-the-rack analysis, which companies often use to steer their decision-making process. Overall, the threat of substitutes in the management and marketing consultancy market is moderate.
Leading companies in the management and marketing consultancy market are large, multinational organisations, although there is significant fragmentation within the market. Large players tend to diversify away from pure consultancy. For example, Accenture offers services such as systems integration and business process outsourcing as well as management consultancy.
This reduces rivalry by making the larger players less dependent on consultancy revenues. At the smaller end of the spectrum are boutique consultancy firms, which often specialize in a particular industry, or focus upon a key issue such as M&A.
Overall, rivalry in the management and marketing consultancy market is moderate.
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