Elegant Report

University Degree Business and Administrative studies

KPMG

Q.1 Outline and evaluate the key global and competitive drivers influencing the professional business services sector in which KPMG operates.

Q.4 As a business services firm, how did KPMG seek to achieve competitive advantage? How did KPMG’s strategies evolve in response to changes in the external and internal environment? Briefly recommend a future strategy for KPMG after 2001?

EXECUTIVE SUMMARY

This report defines how KPMG achieved competitive advantage in response to changes in the external and internal environment. The report begins by explaining the brief overview of global diversified commercial service sector with offshore and onshore drivers for service industry. The report then analyze the external environment with SLEPT and Porter five forces analysis.

The report then explains globalization drivers which triggered KPMG to restructure. The report then tells how KPMG achieve competitive advantage with Colin Sharman leadership and by learning from the benchmark companies such as Ernst & Young. It also explains how KPMG establishes best practice. The report then concludes with highlighting the challenges face by KPMG in the future in the service industry.

Finally the report then tells how KPMG can further improve its performance by giving some brief actionable recommendations.

TABLE OF CONTENTS

2.Findings

INTRODUCTION

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.

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. 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: