Structural Changes In The Management Consultancy Industry

While turnover in the management consultancy depends heavily on economic conditions, some structural changes occur independently of business conditions. In the 1960s and 1970s, the market for management consultancy services was a sellers' market. The power of the clients was small, whereas many of the management consultants - typically academics from technical universities and business schools - relied on their academic background to introduce new management techniques such as strategic planning. These services were in great demand among the senior executives in manufacturing firms that were gradually entering the international markets.

This situation has, however, changed completely. The market, especially in Europe and the United States, has tended to become a buyers' market. Most managers and members of boards of directors already have an academic background that frequently includes business management training and experience. This means that many more demands are placed on the management consultants; they can, practically speaking, no longer rely merely on the presentation of sheets for overhead projectors based on concepts extracted from the most recent management literature, which the clients may also have read. The consequence is, among other things, that many assignments require teamwork and access to a much wider spectrum of skills and experience. One significant implication of this is that much more pressure is exerted on management consultancy firms to upgrade and specialize their staff. Upgrading the individual consultants is a very important - but also very difficult - task to accomplish in most management consultancy firms. At the same time, new markets or market segments for management advice will emerge. To mention one example, health care and health management systems emerged in the 1990s as an important market for management consultancy firms today, although it hardly existed 10 years before. Such new markets will demand from the firms in this industry more specialized, sophisticated and in-depth knowledge, and those management consultancy firms that are able to meet these new requirements for skills and experience by means of sharing experience across borders seem likely to have a distinct competitive advantage.

Structurally, such tendencies would imply that the largest firms in the industry will continue to grow even larger. At the same time, small firms will have good chances for expanding their business thanks to niche strategies and/or relatively low fee rates. In this scenario, however, the medium-sized companies will be squeezed in the competition. The large management consultancy companies will continue to expand their international activities whereas the small, niche-oriented ones will in most cases keep their national market perspective.

Reference : “THE TRADABILITY OF CONSULTING SERVICES AND ITS IMPLICATIONS FOR DEVELOPING COUNTRIES", UNITED NATIONS, N.Y. and Geneva, 2002: pgs.71-72,

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