Global Management & Marketing Consultancy Market

Global Management & Marketing Consultancy Market: Value Chain Analysis- ML00027-053

Global Management & Marketing Consultancy Market

Value Chain Analysis

ML00027-053


Table of Contents

2

Complete Value Chain: Overview

Complete Value Chain: Overview (cont’d)

Resource and Inputs: Overview

Resource and Inputs: Analysis

Resource and Inputs: Burning Issue – Budget Uncertainty

Consultancies: Overview

Consultancies: Analysis

Consultancies: Burning Issue – Digital Consulting

Clients: Overview

Clients: Analysis

Clients: Burning Issue – Populist Backlash

Appendix


Complete Value Chain: Overview

3

The global management & marketing consultancy market consists of three distinct stages: resource and inputs, consultancies, and clients.

Resource and Inputs

Skilled and experienced employees

Specialist software

Business frameworks/ philosophy

Management theories

Consultancies

Professional Services

Specialist consultancies

Big Four Accountancy firms

Advertising agencies

Clients

Large corporate

SMEs

Governments


Complete Value Chain: Overview(cont’d)

4

The global management & marketing consultancy market consists of three distinct stages: resource and inputs, consultancies, and clients. This market is characterized by some degree of integration, although this can be considered circular, as clients generate the demand for consultancy services.

Resource and Inputs

Skilled and experienced employees

IBM

Oracle

Austrian School

Six Sigma

Consultancies

The Boston Consulting Group

IBM

KPMG International

McKinsey & Company

Deloitte

Clients

Microsoft

National Health Service

Daimler AG

US Department of Defense

Wal-Mart


Resource and Inputs: Overview

5

Resource inputs is characterized by creative, software, and recruitment inputs. Consultants may be brought in to provide specialist functions.

Resource Inputs

Ideological

Universities Philosophers,

Economists, etc.

Schools of thought

Think Tanks

Software

Specialist Software

Data analytics

Recruitment


Resource Inputs: Analysis

6

Resource inputs can sometimes forward integrate, with theorists or software companies offering consultancy services.

• For consultancies, there is generally a philosophical framework or economic framework behind their solutions. The

provision of this can come from a variety of educational researchers, such as universities, policy and research

institutes.

• Some frameworks of economics are decades, if not centuries old, although there is ongoing research in this area.

Institutions can be education public sector resources, such as universities, or think tanks which are generally privately

funded. There can also be scope for particular authors or theorists, such as Michael Porter.

• Consultancy firms tend to invest heavily in ICT systems and after sale updates. The providers usually offer technical

help and maintenance services as part of their supply contract. The sophisticated enterprise resource planning systems

are tailored to customers’ needs but may require a long term contract. Signing into such a contract increases supplier

power significantly. In some cases, providers of specialist software have forward integrated in order to consult on the

software- the most prominent example is IBM’s Global Services.

• The other significant input is labor, with consultants being experienced individuals with specialist knowledge. Many

SME-sized consultancies will be a former employee going freelance. In the larger firms, this can also translate to

graduates who have spent several years studying relevant fields and disciplines, including specific fields of economics

for business management.


Resource Inputs: Burning Issue

7

Higher education funding looks increasingly chaotic and precarious in the Anglosphere.

For the advancement of both management theory and developing the appropriate recruits for consultancies, universities and

education funding is crucial. The chaotic nature of the Trump administration has seen universities struggle to plan competently.

A $1.3tn spending bill, for the remainder of the 2018 fiscal year endured a government shutdown in January 2018, and planned

cuts to the Department of Education of $3.6bn became a $3.9bn increase in the signed bill. Furthermore, the U.S President’s

fiscal year 2019 budget proposed further cuts to programs critical to colleges and universities. Cuts include the elimination of the

public service loan forgiveness program and elimination of Americorps, the National Endowment for the Arts and the National

Endowment for the Humanities. Budget turmoil dramatically complicates government planning. Agencies don’t know how much

money they have to work with, so they don’t know what initiatives they should expand or contract or initiate.

In the UK, higher education has seen increasingly

strained industrial relations as the government

increasingly shifts the costs on to the student.

Increasing corporatization of the sector, seeing

universities as firms competing for student

demand, has led to funding black holes and both

staff and student unrest. In addition to this,

uncertainty surrounding Brexit has caused much

uproar within the higher education system.


Consultancies: Overview

8

Consultancies can specialize in one particular discipline or offer multiple services to clients. They can also take several forms, from specialist SMEs to large diversified professional service companies.

Consultancies

Services Offered

Operations Management

ICT

Corporate Strategy

HR Management

Project Management

Company Types

Big Four Accounting

SME Specialists

Professional Services

IT firms forward integrating

Advertising Agencies


Consultancies: Analysis

9

Consultancies are concentrated in developed economies, and the largest wield considerable brand power.

• The leading management and marketing consultancies are multinational companies with exceptionally strong brand

images. The consulting market is dominated by a number of globally familiar names, including the likes of the Big Four

(Deloitte, EY, KPMG and PwC), as well as BCG and IBM. Despite this, smaller firms with more specialist services are

able to successfully compete within the market.

• The vast majority of firms in the industry are small, non-employing firms that service small geographic markets or niche

industries. This is largely a result of the industry's low barriers to entry, as there are few capital requirements or regulatory

issues outside of gaining relevant industry knowledge.

• There are significant similarities between management and marketing consultancies; many employ similar methods, and

depend on similar IT infrastructure, for example.

• The majority of demand for consultancy services is based in the US, which accounted for 50.4% of the markets total

value in 2018. Demand is concentrated in mature economies, although emerging markets also present opportunities for

growth.

• There is some degree of integration with other stages. For instance, while IBM provides specialist software, it also offers

consultancy services. In terms of backwards integrating, some large firms may set up internal departments employing

business or marketing analysts to achieve efficiencies.

• However, running such a department can be very costly, and only well established companies with a clear need for these

services are likely to invest the resources in them.


Consultancies: Burning Issue

10

Digitalization is increasingly an area of focus for consultancies, with acquisition of design firms and a rush to capitalize on Big Data.

Digitalization is a major trend within the consultancy market ,with one study by Waymark Tech finding that the usage of the

term “digital transformation” increased by 513% between 2014 and 2017 amongst eight major companies in this market

including Deloitte, EY, KPMG, McKinsey & Company, and PwC. This can refer to a number of practices, but is increasingly

referring to automation, robotics, and Big Data. As more and more industries incorporate robotics into their operational

processes, consultants will have to increasingly adapt to new technologies in order to remain relevant in the market. There has

been a scramble for acquisitions, with PWC acquiring BGT, a digital creative consultancy in 2013, McKinsey purchasing Agiliti

in 2014 and Lunar in 2015, and the Big Four accounting firms also acquiring design firms.

The advent of Big Data has also seen consulting firms being

hired to clean and combine datasets into dashboards and

infographics that can provide real-time analyses to

management teams. Digitization has also entered marketing

consultancy, with a vast number of channels and metrics

requiring digitalized consultancies to execute a holistic

campaign. This trend is likely to accelerate as technologies

develop and clients demand faster and more tangible

results.


Clients: Overview

11

Clients for consultancy services span a wide variety of functions of goods and services, including governments.

Clients

Products

Automotive Manufacturers

FMCG Companies

Consumer Electronics

Manufacturers Pharmaceuticals

Services

Financial Services

Telecoms

Retailers Travel Services

Governments

This stage is somewhat cyclical, as companies are

also instigators of this value chain- consultants are needed to achieve

efficiency and compete.

Increasingly austere governments have seen

consultancy firms brought in to achieve backroom savings or project management.


Clients: Analysis

12

Many companies use consultancies to promote their offerings but spending is dominated by large, multinationals in both.

• Buyers of management and marketing consultancy services can range from small to large companies, operating across

a wide range of markets and industries.

• In general, third party consultancy services are fairly dispensable, which also reduces buyer power, although they

occasionally (and irregularly) become highly important to customers, such as when the existing management structure

of a firm proves inadequate to accommodate a large change process. As such, spending on consultancies is highly

cyclical with wider economic performance.

• Integration in this part of the chain is somewhat cyclical, as clients generate the demand for change, seeking

efficiencies or an organizational change in order to better deliver shareholder value or commercial viability.

Furthermore, clients may integrate backwards by establishing an in-house department of business and marketing

analysts. In the case of SMEs, this may just be one or two members of staff. For large firms the costs may outweigh the

benefits of in-house production, while SMEs may not achieve as much due to staffing constraints.

• There are increasing cases where governments are bringing management consultants into the public sector in order to

achieve efficiencies or effect change. The National Health Service, the UK’s public health provider, attracted headlines

due to its spending on management consultants. Booz Allen Hamilton was also deeply integrated into the US

government, having employed Edward Snowden in a contract for the National Security Agency (NSA). It also has other

contracts with the Department for Homeland Security and the Internal Revenue Service.


Clients: Burning Issue

13

Governments are facing increasingly populist reactions to the managerialism of employing consultancy firms.

Government services is a growing market for consultancy firms, but

there is increasing backlash to austere economic policies. The NHS,

the UK public health provider, has been saddled with real term

budget decreases since 2010 and faced challenges of an ageing

population and a depleted skilled workforce due to a hostile

migration environment.

Management consultancies have been brought in by trusts in order to achieve efficiencies, but result in increased spending on

bureaucracy and management in a bid to achieve targets. A study led by Bristol University evaluated 120 NHS trusts and

suggested that the more they spend on management consultants, the less efficient they became. The study found that the

average trust spends GBP1.2m a year on management consultants; equivalent to the salary of 35 senior nurses, and does not

include central NHS functions. In the UK, the NHS has become a contentious political issue, with the Labour Party currently in

opposition promising to end years of real pay cuts for the sector and end private involvement in the NHS. The UK is not alone,

with the proposition of single payer healthcare also popular in the US. Any expenditure on consulting is often perceived as taking

vital funding away from front-line services which citizens have paid for through taxation. In the first half of 2017, the perilous

state of play for the NHS was summed up, when it was targeted by the global WannaCry cyberattack. As a matter of cost-cutting,

reports made as early as December 2016 said that 90% of NHS trusts still used the obsolete Windows XP, for which Microsoft

had stopped providing security updates in April 2014. This key weakness was exploited by the WannaCry ransomware, and led to

the compromising of patient data, as well as the cancellation of operations, as the Health Service ground to a temporary halt.


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