美帝管理咨询行业报告2011 Management Consulting in+the US Industry Report

1 2 2 2 3 5 5 6 9 WWW.IBISWORLD.COM Management Consulting in the US September 2011 Help wanted: Businesses will seek consultants advice on restructuring as the economy recovers IBISWorld Industry Report 54161 Management Consulting in the US September 2011 Caitlin Moldvay 2 About this Industry Industry Definition Main Activities Similar Industries Additional Resources 4 Industry at a Glance 5 Industry Performance Executive Summary Key External Drivers Current Performance Industry Outlook 11 Industry Life Cycle 16 International Trade 17 Business Locations 19 Competitive Landscape 19 Market Share Concentration 19 Key Success Factors 20 Cost Structure Benchmarks 21 Basis of Competition 22 Barriers to Entry 23 Industry Globalization 24 Major Companies 24 Accenture Ltd. 25 McKinsey & Company 31 Regulation & Policy 31 Industry Assistance 32 Key Statistics 32 Industry Data 32 Annual Change 32 Key Ratios 33 Jargon & Glossary 26 Marsh & McLennan Companies Inc. 13 Products & Markets 13 Supply Chain 13 Products & Services 14 Demand Determinants 15 Major Markets 29 Operating Conditions 29 Capital Intensity 30 Technology & Systems 30 Revenue Volatility | 1-800-330-3772 | 2 WWW.IBISWORLD.COM About this Industry Management Consulting in the US September 2011 Industry Definition Main Activities Management consultants provide advice and assistance to businesses and other organizations on management issues such as: strategic and organizational planning； financial The primary activities of this industry are planning and budgeting； marketing objectives and policies； human resource policies, practices and planning； production scheduling； and control planning. Actuarial, benefit and compensation consulting services Administrative and general management consulting services Human resources consulting services Marketing consulting services Process, physical distribution and logistics consulting services The major products and services in this industry are Corporate strategy Financial advisory Human resources and benefits IT strategy Marketing and sales Organizational design Process and operations management Similar Industries 54121c Accounting Services in the US Accounting firms provide financial and associated management services. 54121d Tax Preparation Services in the US Accounting firms provide financial and associated management services. 54133 Engineering Services in the US Consulting engineers help oversee the planning and designing of construction and industrial operations. 54151 IT Consulting in the US IT consultants help plan and design computer systems. This industry is being increasingly linked with management consulting. 54182 Public Relations Firms in the US PR firms are brought in to ensure that a clients image and perception among customers and competitors is positive. 54191 Market Research in the US Market research is conducted when a firm wishes to know more about the market in which they operate. 61143 Business Coaching in the US This is an education-based industry adjunct to management consulting, whereby staff develop skills necessary for effective and efficient implementation. 3 WWW.IBISWORLD.COM About this Industry Management Consulting in the US September 2011 Additional Resources For additional information on this industry Consulting Magazine Institute of Management Consultants Top Consultants Consultant-News US Census Bureau IBISWorld writes over 700 US industry reports that are updated up to four times a year. To see all reports, go to %change %change 4 and SOURCE: WWW.IBISWORLD.COM WWW.IBISWORLD.COM Industry at a Glance Management Consulting in 2011 Management Consulting in the US September 2011 Key Statistics Snapshot Revenue Annual Growth 06-11 $165.5bn 0.7% Annual Growth 11-16 4.2% Profit Wages Businesses $14.7bn $78.5bn 354,956 Market Share Accenture Ltd. 3.3% McKinsey & Company 2.4% Revenue vs. employment growth 15 10 5 Corporate prot 30 20 10 Marsh & McLennan Companies Inc. 1.4% 0 5 10 Year 03 05 07 09 11 13 15 17 0 10 20 Year 05 07 09 11 13 15 17 Revenue Employment SOURCE: WWW.IBISWORLD.COM p. 24 Key External Drivers Corporate profit Business outsourcing External competition Government consumption and investment Products and services segmentation (2011) 6% 2% Financial Marketing advisory and sales 11% Organizational design Process31%operations management Number of businesses 16% Human resources and benets p. 5 17% IT strategy 17% Corporate strategy SOURCE: WWW.IBISWORLD.COM Industry Structure Life Cycle Stage Revenue Volatility Capital Intensity Industry Assistance Concentration Level Mature Medium Low None Low Regulation Level Technology Change Barriers to Entry Industry Globalization Competition Level Light Low Low Medium High FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 32 5 Summary WWW.IBISWORLD.COM Management Consulting in the US September 2011 Industry Performance Executive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage Executive The Management Consulting industry is composed of companies that provide advice and assistance to organizations on management issues ranging from strategic and organizational planning to financial and budget planning. While management consulting is a relatively new industry, major industry firms are among the most respected businesses in the world, and their advice is routinely sought by the corporate and governmental sectors. With many companies facing post-recession changes, demand for consultants will strengthen In the five y ears to 2011, industry revenue has increased at an average annual rate of 0.7% to $165.5 billion. Compared with the industrys overall growth during the past 10 years, this five-y ear rate is somewhat sluggish, reflecting the extent of the recent economic downturn. The recessions effect on industry revenue in 2008 and 2009 caused sales to plummet by 4.3% and 3.0%, respectively, as many projects were deferred or canceled. In addition to decreasing revenue, firms laid off employees, causing industry employment to fall by 7.5% in 2008 and 4.0% in 2009. Prior to 2008 and 2009, the Management Consulting industry was countercyclical to overall economic movements since companies often rely on consultants to improve their business strategies and services. The recession upended this pattern by causing nearly every industry to reduce its consulting budget. Furthermore, the recession decreased industry revenue because the cost of services was revaluated in the wake of declining corporate profit. As the economy returns to growth and demand for consulting services rises again, industry revenue is expected to grow 2.4% in 2011. Improved demand will also reduce pricing pressures, causing profit to increase to 8.9% during the y ear, up from 5.9% in 2009. In the five y ears to 2016, industry revenue is projected to increase at an annual average rate of 4.2% to $203.6 billion. In the aftermath of the recession, many industries will face continued restructuring, increased regulation and changes in the consumer landscape over the next five y ears. Their new needs will likely be excellent news for specialist management consultants as they are increasingly tapped for advice. Key External Drivers Corporate profit In general, firms are more willing to use management consultants when the economy is flourishing because increased corporate profit enables businesses to invest in these services. Therefore, growth in corporate profit benefits demand for the industry. This driver is expected to increase during 2011, which is a potential opportunity for the industry. Business outsourcing When businesses outsource more consulting work, industry revenue will increase. However, some corporations have internal consulting divisions, so they are unlikely to outsource. This driver is expected to increase slowly during 2011. External competition This industry faces competition from other industries, such as the IT Consulting industry (IBISWorld report 54151). When competition from other consulting industries rises, demand for management consultants falls. This driver is expected to %change %change 6 WWW.IBISWORLD.COM Industry Performance Management Consulting in the US September 2011 Key External Drivers continued increase slowly during 2011, which is a potential threat to the industry. Government consumption and investment The industry is sensitive to the economys growth because government funds available for consultancies are generally directly related to the budgetary situation of government departments. However, there has been some flexibility with government budgets recently, Corporate prot 30 20 particularly in the defense and security areas. This driver is expected to increase slowly during 2011. Number of businesses General growth in the number of businesses and their need for consulting affects the demand for this industrys services. As the number of businesses increases, demand for management consulting typically rises as well. This driver is expected to increase slowly during 2011. Government consumption and investment 3 2 10 1 0 10 0 20 Year 05 07 09 11 13 15 17 1 Year 04 06 08 10 12 14 16 SOURCE: WWW.IBISWORLD.COM Current Performance The need for effective management of staff, strategy, processes, administration and organization rarely wanes, regardless of economic conditions. As such, the Management Consulting industry often moves against economic cycles because companies rely on consultants to improve their businesses strategy and services. During a boom, businesses use consultants to maximize profit and increase market share. On the other hand, poor economic conditions tend to increase demand because clients hope to shield themselves and their companies from the adverse effects of a downturn. Unfortunately for management consultants, this trend changed during the recent recession, which affected nearly every industry. In 2008 and 2009, industry revenue declined by 4.3% and 3.0%, respectively. As a result, the industry has experienced only marginal growth in the five y ears to 2011, with revenue estimated to increase at an annual average rate of 0.7%, totaling $165.5 billion. During the recession, only defense and security consulting continued to grow, largely due to the countercyclical nature of these industries. Some nonprofit 7 WWW.IBISWORLD.COM Industry Performance Management Consulting in the US September 2011 Current Performance continued firms also turned to management consultants to improve operations； however, a large portion of this work was performed on a pro-bono basis, making the effect on industry revenue relatively insignificant. In-demand specialties With the US economy slowly pulling itself out of the recession, demand for management consulting has primarily come from large firms seeking to cut costs and protect profit margins. The banking and finance sector is the Management Consulting industrys largest customer. However, this market was hit hardest by Wall Streets collapse, and many firms have been frugal in employing outside assistance, a factor that has contributed to slow industry growth in 2010 and 2011. Revenue is expected to increase 2.4% in 2011. Despite this slow growth, countercyclical work has helped mitigate losses that other industries have recently experienced. For example, consulting firms with expertise in restructuring performed well in the recessionary environment. As the recession caused more firms to The recession brought about a revaluation of the cost of services and negatively affected revenue go bankrupt, corporations that entered Chapter 11 bankruptcy had a chance to restructure their debt with creditors. Consequently, they tapped management-consulting firms that specialize in this area. Furthermore, industry operators that specialize in human resources have performed strongly because of the large number of lay offs that occurred during and following the recession. Such firms helped companies reduce the cost of labor by deciding on the ty pe and size of lay offs. Internal consulting groups Many multinational corporations have set up their own corporate consulting groups since 2005. These management consultants are hired internally through the corporation or from external sources. Such internal consulting groups are formed around practice areas that include organizational development and strategic consulting and implementation of new business proposals. The development of internal consulting groups contains several advantages for an organization, including more in-depth knowledge about the corporations strategic objectives. Unlike outside management consultants who focus on a variety of different companies, internal management consultants can better tailor their knowledge and services to the organization. Also, internal consultants are able to keep sensitive information private, and the cost of internal management consulting is often cheaper than third parties. Some third-party consultants have been criticized for their cost and the solutions that they provide. Management consultants have also been charged with the overuse of jargon and stating the obvious during their engagements. Others were accused of offering standardized solutions when marketing customized solutions to a clients problem. Moreover, some industry firms have increasingly moved away from the model of engaging one client per 8 WWW.IBISWORLD.COM Industry Performance Management Consulting in the US September 2011 Internal consulting groups continued Employment and wages slow industry at a time, which can pose a conflict of interest to some clients. Consulting firms have tried to engage more clients at the same time to boost revenue because of increased competition in the industry. Despite these common criticisms, many organizations continue to hire management-consulting firms because the benefits ty pically outweigh the cost. As the economy slowed and companies revenue dried up, many consulting firms reduced staff numbers. In 2011, IBISWorld estimates the industry employs about 1.0 million people, representing a five-year average annual decline of 1.1%. This trend is due to falling demand and changing requirements from clients over the period. Because of decreased demand for services, management consultant firms could do with fewer employees. Senior employees were laid off, and the number of incoming junior employees was limited. Employee numbers increased in 2006 and 2007 when the economy was still strong, and many management- consulting companies experienced record revenue because there was more demand for work during that period. As the economy has begun to improve, demand for the industry increased in 2010 and 2011. Consequently, marginal employment growth is expected in 2011. Educational requirements for entry- level jobs in this field vary between private industry and government. Most employers in private industry generally seek individuals with masters degrees in business administration or a related discipline. Some employers also require additional years of experience in the field However, the recession in 2008 and 2009 brought about a revaluation of the cost of the industrys services and negatively affected overall revenue. The resulting price-based competition placed downward pressure on profit margins for some operators. Still, improving demand has increased profit margins once again. IBISWorld estimates profit will represent 8.9% in 2011, up from 5.9% from 2009. Firms have reduced staff numbers due to falling demand and changing requirements from clients of industry in which the worker plans to consult. Some will hire workers with a bachelors degree as a research analyst or associate. Research analysts usually need to pursue a masters degree in order to advance to a consulting position. Most government agencies hire people with bachelors degrees and no pertinent work experience for entry-level management analy st positions. Wages have decreased as a proportion of industry revenue over the past five y ears, falling from 48.8% in 2006 to an estimated 47.4% in 2011. The decline in wages is largely attributable to the industrys employment condition. As demand for consulting services decreased, employers reduced staff count as well as the wages paid to each employee. Nevertheless, the average wage for a worker in the industry is estimated to be $7 5,624, which is considerably higher than the average US salary . %change 9 WWW.IBISWORLD.COM Industry Performance Management Consulting in the US September 2011 Industry Outlook Consolidation and integration As the economy recovers and corporations require management consultants advice again, industry revenue is forecast to improve, growing 3.8% in 2012. In the wake of the recession, many industries faced restructuring, increased regulation or change in consumer landscape. Over the next five y ears, this result will be excellent news for specialist management consultants as they are increasingly called upon for advice. As such, industry revenue is projected to increase at an average annual rate of 4.2% over the five y ears to 2016 to $203.6 billion. Even as the economy improves, corporations that suffered during the recession will require turnaround advice from management consultants. Corporate needs, along with increasing revenue from traditional management consulting work, such as providing advice on growth and improving the efficiency of a company, will further stimulate industry growth. At the same time, Over the five y ears to 2016, increasing competition will cause more management-consulting firms to acquire smaller consulting firms that specialize in niche markets. Similarly, large consulting firms will purchase smaller firms as a means of growth and to offer a one-stop shop model for clients. Large management-consulting firms will also use acquisition as a way to specialize in several different industries so that they are able to attract more clients. Major management consulting firms will look overseas for expansion opportunities and purchase medium-size firms internationally to accelerate their revenue growth. Industry revenue 15 10 5 0 5 Year 03 05 07 09 11 13 15 17 SOURCE: WWW.IBISWORLD.COM clients will likely continue to demand increasing value for the funds spent on consulting. They will require recommendations that are realistic and practical and the projected results will, or at least can, occur. In this regard, clients will increasingly demand consultants to assist them in the implementation and monitoring phases of the project. However, there will always be opportunities for smaller, niche firms to enter the industry due to low barriers to entry . In the five years to 2016, the number of firms operating in this industry is projected to increase by 0.3% annually to 359,945. The industry is forecast to have an increasingly technological focus as information technology (IT) becomes more important to the effective operation of business. The likely offshoot of this is a growing overlap between management consulting firms and IT consulting firms. The division between these groups service offerings is likely to blur, making it more difficult to determine exactly how the major players are generating revenue. 10 WWW.IBISWORLD.COM Industry Performance Management Consulting in the US September 2011 Healthier profit levels High-salaried employment opportunities Historically, the industry has been highly profitable, and its bottom line is projected to improve over the five y ears to 2016. As large consulting firms offer increasingly integrated services, providing advice to a variety of industries, they also benefit from operational efficiencies. This means that While the industry experienced turbulence in employment growth over the past five y ears, more employees will be hired in the five y ears to 2016. Large consulting firms will once again open their doors to new college graduates looking to break into the industry as the economy improves. Consulting firms, like some service industries, tend to hire a significant number of people when times are good and then lay people off when the economy falls. As such, the industry is forecast to employ more than 1.2 million people in 2016, representing annual growth of the firms resources and fixed costs will be spread throughout a larger organizational structure. As employees specialize in specific industry practices, management-consulting firms will become even more efficient. Given these trends, IBISWorld projects that profit margins will represent 12.5% by 2016. Firms will open up to college graduates looking to break into the industry 3.5% in the five y ears to 2016. Industry wages are projected to increase at an average of 3.4% annually in the five y ears to 2016. However, wages as a proportion of revenue are expected to decline once again, falling from 47.4% in 2011 to 45.6% in 2016. As a result, the average wage per worker is anticipated to be about $75,000. % Growth of profit/GDP Shake-out 11 30 25 15 10 0 5 Services WWW.IBISWORLD.COM Industry Performance Management Consulting in the US September 2011 Life Cycle Stage Increased price-based competition will stem from industry consolidation Industry consolidation is increasing There is widespread acceptance and adoption of the services being offered, limiting growth in new markets Maturity Company consolidation； level of economic importance stable Quality Growth High growth in economic importance； weaker companies close down； developed technology and markets Key Features of a Mature Industry Revenue grows at same pace as economy Company numbers stabilize； M&A stage Established technology & processes Total market acceptance of product & brand Rationalization of low margin products & brands 20 Quantity Growth Many new companies； minor growth in economic importance； substantial technology change 5 Management Consulting Accounting Shake-out Computer Stores Engineering Services Tax Preparation Services Office Supply Stores Decline Crash or Grow? Potential Hidden Gems Future Industries Time Wasters Hobby Industries 10 10 5 0 5 10 15 20 25 30 % Growth of establishments SOURCE: WWW.IBISWORLD.COM 12 WWW.IBISWORLD.COM Industry Performance Management Consulting in the US September 2011 Industry Life Cycle This industry is Mature The Management Consulting industry is currently in the mature stage of its life cy cle. Over the ten y ears to 2016, industry value-added (IVA), which represents the industrys contribution to the overall economy, is projected to grow 2.5% annually . This is roughly in line with GDP growth over the same period. Like many industries, the Management Consulting industrys growth has been slowed by the recent recession. Furthermore, more corporations are keeping consulting service in-house and hiring fewer management consultants. As a result, the industrys growth is expected to remain below levels experienced in the past. The benefits of management consultants on human resources and management strategy are becoming increasingly accepted by the business community. Some businesses view outside management consultants as a necessity when providing impartial advice. Although consultants have been increasingly taken in-house, businesses are still hiring outside management consultants to improve their bottom lines. There are few new markets to enter into without developing innovative business strategies or services because the industry is well-established and has been widely adopted by much of the economy. Clients are increasingly looking for consultancies that offer end-to-end business solutions. This means a consulting firm that is involved in every step of the process from advisory to execution to assessment. The industry also has an increasing level of competition resulting from more specialized firms in areas such as IT, finance and business planning consulting in other NAICS classified industries. Competition levels are increasing and clients are demanding more thorough evaluation and implementation of the recommended actions. Strategic alliances are being formed between major management consulting firms and more specialized firms in order to maintain both a full and expanded service to clients. Moreover, larger firms are also acquiring smaller firms in order to expand to specific niche markets. 13 22 52 62 92 44312 45321 53112 11% and WWW.IBISWORLD.COM Products & Markets Supply Chain | Products & Services | Demand Determinants Major Markets | International Trade | Business Locations Management Consulting in the US September 2011 Supply Chain Products & Services KEY BUYING INDUSTRIES Utilities in the US Utilities companies use this industry for process consulting. Finance and Insurance in the US The Finance and Insurance sector requires consultancy services for general, actuarial and compensation consulting. Healthcare and Social Assistance in the US The Healthcare and Social Assistance sector uses this industry for administrative and general management consulting services. Public Administration in the US The Public Administration sector uses a wide range of services offered by this industry. KEY SELLING INDUSTRIES Computer Stores in the US Computer stores supply computer hardware and software to consulting firms. Office Supply Stores in the US Consulting firms purchase office equipment and stationery from office supply stores. Commercial Leasing in the US The Commercial Leasing industry provides office space to consulting firms. Products and services segmentation (2011) 6% 2% Financial Marketing advisory and sales O rganizational design 16% Human resources and benets Process31%operations management Total $165.5bn 17% IT strategy 17% Corporate strategy SOURCE: WWW.IBISWORLD.COM Ty pically, the work of management consulting firms involves reorganizing a company to change the way it operates. This may involve providing advice on coping with change, making a fresh and independent review of a companys overall strategy, or looking at parts of a company that are performing below expectations. It can include providing advice to a client considering a turnaround plan, seeking new market opportunities, or considering mergers and acquisitions. For some areas, management consulting firms are in direct competition with consulting groups in other industries that specialize in these areas (e.g. the IT Consulting industry). 14 WWW.IBISWORLD.COM Products & Markets Management Consulting in the US September 2011 Products & Services continued Demand Determinants However, many clients have recognized that review of an organizations structure and technology are part of an integrated process. As a result, some firms (particularly Accenture) have broadened into management and IT consultancies, offering a variety of services across both fields. Larger clients have increasingly requested that management consultancy firms assist in implementation of recommendations and to also carry some of the risk. Part of this process involves a success fee basis of remuneration, with payments staggered over time. This particularly applies to cost reduction-, productivity- and profit-driven initiatives. Strategic alliances between industry operators and other specialist consultancy firms In short, the demand for the industrys services is closely linked to the availability of budgetary resources and other discretionary expenditure by governments and business clients. As such, business confidence, corporate profit and government investment are important factors that strongly affect the growth of this industry. The demand for management consulting services is strongly linked to the economic cycle. It is particularly sensitive to business and government activity levels in areas such as mergers, acquisitions, financial planning, feasibility studies, human resources and strategic planning and corporate profit. The hiring of consultants by governments, particularly at the federal and state level, has increasingly become a political issue, in terms of actual expenditure and the value obtained from these assignments. Management consultants must prove that the value of their services is worth the money that is spent because the federal government has a rigid budget. have also occurred as firms try to offer a broader range of services to clients without increasing overhead costs. The largest product group in this industry is process and operations management, followed by corporate strategy. Most management consulting firms specialize in the implementation of new growth opportunities for corporations. Management consulting firms will review the clients organization and suggest strategies to improve the companys operations. Human resources is also becoming an increasingly large part of management consulting. Because of the recession, more corporations will seek the advice of human resource consultants in regard to the hiring and lay off processes. Unfortunately for industry operators, expenditure on consultancy services by governments and businesses tends to be one of the first areas to be reduced when the level of business confidence and economic growth decreases. Slow economic growth leads to a tightening of the overall budgetary and financial resources. In some instances, however, management consulting can be a countercyclical industry, whereby consulting companies are hired to improve a companys performance during a downturn. Revenue in the consulting business is also affected by global economic conditions, including changes in clients particular industries and markets. Revenue fluctuations are also subject to the introduction of new products, including competing services, and the effect of government policies and regulations. For firms with international operations, fluctuations in foreign exchange rates can also affect revenue. 15 Financial services WWW.IBISWORLD.COM Products & Markets Management Consulting in the US September 2011 Major Markets Major market segmentation (2011) 9% Healthcare companies 9% Government entities 9% Energy and utilities companies 10% Telecommunications companies 22% companies 19% O ther Total $165.5bn 11% Manufacturing companies 11% Consumer products companies SOURCE: WWW.IBISWORLD.COM About 90.0% of the industrys total revenue is derived from the corporate sector. Financial services, manufacturing, consumer products, telecommunications, energy, utilities and healthcare are all major clients of the management consulting industry. The remaining 10% of industry revenue comes from government agencies and nonprofit groups. All of these industries tend to be experience rapid and significant change, largely from the clients external environment. As a result, businesses in these markets tend to require ongoing advice due to changes in technology, consumers needs and government regulations. Financial service providers are the industrys largest consumer, accounting for around 22.0% of the industrys revenue. This market uses a variety of services, from strategic planning to organizational restructuring. Major international banks employ management consultants to streamline operations and maintain profit levels. According to the Consulting Times, the share of revenue spent by firms in the financial services sector on outsourced consulting services increased significantly between mid- 1990s to the mid-2000s. While many businesses have since reduced their spending as a result of the recession, this market has also undergone a significant amount of restructuring, which has mitigated losses for many operators. The consumer products and manufacturing markets have a greater interest in branding and logistics development, as sales and shipping are significant factors in these fields. The prospect of a Chinese economy exhibiting double-digit growth for over the next decade is leading to a rush by many consumer goods manufacturers to enter the Chinese market. Management consulting firms are being hired to assist in the transition to Asian markets, as well as to establish cost-cutting regimes in order to maintain competitiveness. The healthcare market, which is primarily composed of hospital management and pharmaceutical companies, uses the industrys logistics and public relations services. Healthcare science and technology are rapidly expanding frontiers, even as economic and financial pressures reduce profit margins, intensify competition and constrain the funds available for investment. This changing environment is encouraging healthcare companies to hire management consultants to aid in improving cost, 16 WWW.IBISWORLD.COM Products & Markets Management Consulting in the US September 2011 Major Markets continued International Trade while maintaining standards in treating ill patients. Telecommunications is a rapidly changing field, which is strongly influenced by technological change. Currently, the introduction of voice over internet protocol (VoIP), the ability to conduct conversations over the internet without the associated costs of telephones, is looming as a notable threat to traditional telecommunications. Traditional telecommunications companies are employing outside Trade does not occur in this industry due to the service-based nature of activities provided by the Management Consulting industry. However, globalization has made maintaining international presence more prevalent consultants to assist in developing this new technology for profit. Firms in the Management Consulting industry serve nearly every other industry in one way or another. Many management consultants specialize in serving very specific segments of the market in order to differentiate their services. Consequently, a significant portion of industry revenue is generated in other industries. IBISWorld estimates that other markets generate 19.0% of industry revenue. and important among larger companies who service multinational corporations. Just as some American agencies have set up shop abroad, some firms operating in the United States are from abroad. 17 0.1 ID CO 2.0 AZ ND ME 0.1 Mid- Great Lakes NY 3 8.4 MI PA 6 4.6 7 3.0 IN 8.4 0.5 1.5 SC 1.4 0.5 GA 0.2 AL 5.0 0.5 FL 5.1 WWW.IBISWORLD.COM Products & Markets Business Locations 2011 West AK 0.1 Management Consulting in the US September 2011 New England WA 1.3 OR 0.6 West NV 0.7 CA 12.7 MT Rocky Mountains 0.1 WY 0.0 UT 0.6 1.4 NM 0.2 0.1 MN 2.0 SDPlains 0.0 IA 0.3 NE 0.2 KS 0.5 OK 0.4 Southwest TX 6.9 WI 0.9 LA 0.4 Atlantic 1 2 3.2 OH 9 8 IL 1.1 WV VA 0.1 KY MO NC 1.5 TN AR Southeast MS 0.1 4.9 5 4 West HI 0.1 Additional States (as marked on map) Revenue (%) 1 VT 0.1 2 NH 0.2 3 MA 4.9 4 RI 0.2 Less than 3% 3% to less than 10% 5 CT 2.6 6 NJ 4.7 7 DE 0.2 8 MD 2.7 9 DC 2.2 10% to less than 20% 20% or more SOURCE: WWW.IBISWORLD.COM % % RockyMountains GreatLakes Mid-Atlantic NewEngland Southeast Sou hwest Plains West RockyMountains GreatLakes Mid-Atlantic NewEngland Southeast Sou hwest Plains West 18 WWW.IBISWORLD.COM Products & Markets Management Consulting in the US September 2011 Business Locations Revenue vs. population 30 20 10 0 Revenue Population In general, industry establishments are evenly spread around the United States and generally match the distribution of the US population. However, industry data highlights several anomalies. For instance, the Mid-Atlantic has a greater percentage of industry establishments than its population. The primary location for industry establishments is in New Y ork and Washington DC. Firms in this industry establish their operations in these areas in order to capitalize on a close proximity to both big business and the federal government. A significant amount of the work completed in the Mid-Atlantic is provided to high-value Revenue vs. establishments 30 20 10 0 Revenue Establishments SOURCE: WWW.IBISWORLD.COM clients. Consequently, revenue per establishment in this region is higher than the national average. Regions with a disproportionately small number of industry establishments on a per capita basis include the Great Lakes and Southwest regions. The likely reason for this is the low level of business penetration in the Great Lakes (with the exception of Chicago and Detroit) and Southwest. The primary exception in the Southwest region is Texas, which tends to be more urban and corporate than the more rural and agrarian Southwest region as a whole. 19 WWW.IBISWORLD.COM Management Consulting in the US September 2011 Competitive Landscape Market Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalization Market Share Concentration Level Concentration in this industry is Low Key Success Factors IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are: In 2011, the four largest firms are estimated to account for just 8.1% of the US market. The Management Consulting industry is highly fragmented despite the presence of some widely recognized, big-name companies. This is largely due to the abundance of independent contractors in the industry and the proliferation of boutique consulting firms. IBISWorld estimates that 90.5% of firms with a pay roll have fewer than ten employ ees compared with 87 .7% in 2000. Moreover, only 1.4% of industry operators have more than 100 employees. Competition is fierce among the highly concentrated major industry players, with a small number of key firms commanding large levels of revenue among the top end of the industry . The vast majority of industry players compete against one another for the remaining revenue in a considerably less concentrated business environment. This revenue is generally being derived from local governments and smaller Ability to compete on tender Most consultancy tasks are subject to competition, so competitiveness on price and service offerings is crucial. Effective quality control The effectiveness of consulting activities is often easily measured, making it simple for clients to assess the value of consulting services. Well developed internal processes Given the generally labor-intensive nature of the industry, operators need to ensure that appropriate cost- and time-management systems are in place on a project basis so that these can be closely monitored. Enterprises by employment size (2011) No. of employees Share of enterprises (%) 0-4 82.3 5-9 8.1 10-19 4.6 20-99 3.5 100-499 0.9 500+ 0.6 SOURCE: US CENSUS BUREAU COUNTY BUSINESS PATTERNS companies, as opposed to state and federal governments and large, international firms. The industry is in the midst of a shift in concentration levels. The severity of the recession has forced the layoffs of many highly qualified workers in a number of industries. In lieu of finding more work, which is difficult in such times, many are turning to consulting as independent contractors. This has increased the proportion of small firms, despite the efforts of the larger companies to consolidate. Access to highly skilled workforce Often, consulting contracts are entered into on the basis of the consultant possessing specialized knowledge that relates to clients operations. Without this skill base, the consulting firm has little bargaining power. Access to niche markets Firms can be more successful if they have specialized skills or services and can serve a niche market. Having good working relationships with subcontracting building trade specialists Subcontractors are used to ensure that quality output can be guaranteed on time and budget. Many skilled consultants operate as independent contractors. 20 0 4.0 Industry Profit 2.7 Average Costs Profit WWW.IBISWORLD.COM Competitive Landscape Management Consulting in the US September 2011 Cost Structure Benchmarks The cost structure of firms in the Management Consulting industry varies based on a variety of factors, including firm size and markets served. For example, firms that serve large, multinational corporations tend to have higher profit margins due to the relatively high-value of work. EBIT Profit margins in this industry have historically been high, with figures between 10% and 13% of revenue being the norm. The industry has established a reputation of being highly qualified and exclusive, particularly among major play ers, allowing firms to charge considerable fees for the services of their staff. Following the recession, however, consultancies were forced to lower fees to retain valuable relationships as reticent clients looked everywhere to cut costs. As a result, profit margins fell to about 5.9% of the industrys revenue in 2009. In spite of this, the profit level for the industry has started to increase as the economy continues to recover. Consequently, IBISWorld estimates that profit margins will increase to 8.9% of industry revenue in 2011. Over the next five y ears, profit margins are expected to continue increasing as demand boosts industry revenue. IBISWorld estimates that profit margins will increase to 12.5% by 2016. Wages Labor costs make up the largest proportion of a management consulting firms expenses. In 2011, IBISWorld estimates that wages will represent 47.4% of total industry revenue, indicating that the industry is extremely labor intensive. Not only is staff expected to hold qualifications in business or another related degree, but the onus is on companies and staff to remain informed and proficient in a variety of fields or to specialize in a specific field, such as the transportation industry. This requires further tertiary education and postgraduate studies. For larger companies, effective itinerary and task management, employment of part-time workers and maximum use of labor-saving technology can lead to more efficient management of labor costs. Skilled consultants are increasingly opting to act as independent contractors, at the same time that the industry is consolidating. Major consultancies often have access to a wide variety of skilled staff. However, mid-tier operators are often forced to bring in such contractors when a contract calls for their skills. Subcontracting costs, which represent 17.0% of industry revenue, have been regularly rising over recent y ears. In particular, the recent recession has led to an influx of independent skilled operators. Profit Rent Utilities Depreciation Other Wages Purchases Industry Costs and Average Sector Costs Costs 8.9 3.0 30.6 (2011) 2.0 of all Industries 9.3 4.8 2.5 24.7 in sector (2011) 47.4 45.4 100% 4.1 10.6 SOURCE: WWW.IBISWORLD.COM 21 WWW.IBISWORLD.COM Competitive Landscape Management Consulting in the US September 2011 Cost Structure Benchmarks continued Basis of Competition Level & Trend Competition in this industry is High and the trend is Increasing Other costs Depreciation, at 2% of industry revenue, is a reflection of the low levels of capital required. Apart from standard business computing equipment, there is little need for capital expenditure. Additionally, rent costs are generally low at 4% of revenue. Many management consulting firms travel to the clients site to operate. As a result, they are less inclined to pay a large Competition within this industry is generally based on having the proper mix of knowledge, skills, expertise and people to match and meet the clients budget and expectations. Many larger and some medium-sized established firms operate solely on this premise and seek to generate a significant amount of repeat business over time. Internal competition Management consulting firms compete on a variety of factors. Although the largest firm accounts for less than 5.0% of industry revenue, the industrys largest firms tend to have a greater capacity and an international reach. As a result, these firms can serve clients on a global basis and win high-value contracts. Competition can also be price-based and tends to emerge during periods of slow economic growth, when expenditure by the corporate and government sectors declines. The large number of small consultancy firms also ensures that price-based competition for certain projects will be present. Many of these smaller firms undertake consultancies on the basis of generating cash flow only , rather than taking into account the actual costs involved in completing any assignment. Others view it as a method of establishing a hold within a particular consulting area, against other more established firms. expense for office space. Industry operators also incur a variety of other costs, including advertising, sales and other marketing costs, along with administrative expense. These costs comprise around 13.6% of revenue. These expenses have increased over the past five y ears, largely because of rising advertising and restructuring expenditures due to heightened competition during the recession. Small- and medium-sized firms can also have the advantage of being able to provide quality outcomes with lower overhead costs compared to the larger and more established management consultancy firms. Industry operators also compete based on reputation. Over time, a management consultancy will develop a reputation for through the success or failure of programs and strategies implemented upon their recommendation. It is this reputation that is the biggest selling point for management consultancies, particularly large industry players. Management consulting firms also compete for niche specialties. Players tend to promote themselves on their expertise in specific areas of management or a variety of industries in which they possess specialists. The Boston Consulting Group, for example, provides a list of experts on their websites and the field of expertise they consult in. A reputation for excellence in a specific field can be a major selling point. External competition As a result of this push to train specialist consultants in a variety of fields, competition has recently increased from firms in other industries, especially in the IT, finance and human resource areas. For example, the services provided by the IT Consulting industry (NAICS 54151) 22 WWW.IBISWORLD.COM Competitive Landscape Management Consulting in the US September 2011 Basis of Competition continued Barriers to Entry Level & Trend Barriers to Entry in this industry are Low and Steady have increasingly overlapped with this industry, as IT has become more relevant to management, production and logistics strategy. Indeed, there is a growing terminology, “managed services,” that The industry has little to no regulation, is highly fragmented, has minimal startup costs and does not face any kind of taxation impediment. The only significant barrier to entry is the specialist knowledge in any given field in which an industry entrant chooses to consult. It can be safely assumed, however, that the vast majority of new play ers possess some specialized knowledge in the area they consult in or else they would have no motivation to enter the industry. Knowledge can only be considered a barrier to entry for those attempting to provide generalized advice on a variety of issues. Developing a network of clients who can provide regular flow of work can represent a significant barrier to entry. While this can come with time, it often requires a preexisting reputation or relationships. Additionally, it is important to be part of business associations and strategic alliances in order to bring in new customers. New entrants to this industry may not have the goodwill and relationships compared to an established management consulting firms. While the industrys largest players possess significant market power and cost savings, this does not necessarily act as a barrier to new entrants. The encapsulates this merger of advisory and implementation services. In fact, Accenture is considered one of the largest play ers in both the management consulting and IT consulting sectors. Barriers to Entry checklist Level Competition High Concentration Low Life Cycle Stage Mature Capital Intensity Low Technology Change Low Regulation & Policy Light Industry Assistance None SOURCE: WWW.IBISWORLD.COM large firms tend to target big-name clients, and offer services across a wide variety of industries and activities. New entrants, by contrast, tend to be highly specialized in a certain skill set. This means that smaller entrants rarely compete with the big names. Indeed, these new entrants are often independent contractors, and conversely can rely on the big firms for occasional subcontracting. The operations of smaller firms tend to be focused on a geographic region or niche specialty. On the other hand, larger firms have a higher capacity due to a worldwide network of offices and can provide services on a global basis. In general, firms entering the industry cannot expect to compete with these operators, particularly for high-value clients. 23 WWW.IBISWORLD.COM Competitive Landscape Management Consulting in the US September 2011 Industry Globalization Level & Trend Globalization in this industry is Medium and the trend is Increasing The largest industry players have expanded globally by establishing branch offices in Europe and the Asia Pacific and Middle East regions. Increasing connectivity between developed and developing economies is allowing large industry players to broaden their international approach, conducting consulting projects across international borders and increasing industry globalization. As a result of further growth opportunities, the overall level of industry globalization is projected to continue increasing gradually. Industry clients demand a high level of customization of services and personal attention, minimizing the ability of firms to offer internationally homogeneous services. Client firms often require advice tailored to the business culture of the geographic region in which they operate. Larger firms in this industry will establish more offices around the world in order to build a global management consulting brand. 24 WWW.IBISWORLD.COM Major Companies Accenture Ltd. | McKinsey & Company Marsh & McLennan Companies Inc. | Other Companies Management Consulting in the US September 2011 Major players (Market share) McKinsey & Company 2.4% 92.9% Other Marsh & McLennan Companies Inc. 1.4% Accenture Ltd. 3.3% SOURCE: WWW.IBISWORLD.COM Player Performance Accenture Ltd. Market share: 3.3% Accenture is one of the worlds leading management consulting, technology services and outsourcing organizations. Accenture has 204,000 employees and operations in 53 countries. The company grew from the collapse of Arthur Anderson Consulting in the wake of the Enron scandal. Since the spinoff, Accenture is increasingly focused on providing management and IT consulting services to its clients. The company specializes in more than 35 different industries and services major clients around the world. The management consulting group provides services such as strategic and corporate development advice. In 2010, the company generated $23.1 billion One of the major differentiation areas of Accenture is its strategic global delivery model. This model allows the company to draw on the benefit of using people and resources from around the world. Because Accenture is a global company, its easy for one office to communicate with another. Moreover, the global network allows Accenture professionals working at client sites across the globe to deliver solutions to their local geographic area. Accenture has expanded its operations in recent years to rapidly-developing economies such as India, China and the Philippines. Currently, about a third of its workforce is located offshore, which is higher compared to its competitors in the industry. Its organizational structure includes divisions based on client industry types and employee workforces. Accentures business is structured around five operating groups, which together comprise 19 industry groups serving clients in major industries around the Accenture Ltd. (US consulting segment) financial performance Year* 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11* Revenue ($ million) 4,194.4 4,633.8 4,802.5 4,521.1 4,772.2 5,406.9 (% change) 6.6 10.5 3.6 -5.9 5.6 13.3 Net Income ($ million) 224.0 268.5 321.0 310.2 368.0 432.0 (% change) 3.5 19.9 19.6 -3.4 18.6 17.4 *Year end August； *Estimate SOURCE: ANNUAL REPORT AND IBISWORLD 25 WWW.IBISWORLD.COM Major Companies Management Consulting in the US September 2011 Player Performance continued Player Performance McKinsey & Company Market share: 2.4% world. Industry divisions, referred to as operating groups, include consumer goods and services (e.g. consumer packaged goods or industrial equipment), communications high technology and media (CHT), financial services (e.g. banking, insurance), resources (e.g. utilities, chemicals, energy ) and government. Accentures US consulting revenue is expected to increase at an average annualized rate of 5.2% in the five y ears to 2011. Consulting generated around 57.4% of the companys revenue in 2010 and the United States accounted for 36% of revenue during the y ear. In 2007, Accenture announced its plans to expand its management consulting McKinsey was founded in 1926 in New Y ork. In 1959 it opened its London office and quickly expanded into other countries. Currently, it has around 8,500 consultants in 90 offices across over 50 countries. The company specializes in management consulting to a number of specific industries including the finance, media and entertainment and consumer goods sectors. It also provides strategic advice to clients in areas such as IT, technology, pricing, corporate finance, marketing, leadership and organizational structure and processes. The companys clients represent more than 90 of the 100 leading global corporations. Since 1996, the company has been a top employer for new MBA graduates. Geographically based offices act as the main organizing cells, but the firm maintains cross-geographical practices around industry sectors and management areas. Associates are invited to join the partnership through an evaluation and election process, and shareholders who reach a certain age are obliged to sell back their shares according to a set formula. McKinsey is formed as a business by hiring consultants from other companies. This was one of the primary reasons why the company was able to grow its management consulting division between 2007 and 2008. Furthermore, in addition to organic growth, Accenture acquired the assets of several providers of management consulting services, in order to expand its service provisions. Nevertheless, the companys revenue declined during 2008 and 2009 due to the fall in demand caused by the global recession. In 2011, revenue growth is expected to stabilize due to rising corporate profits, which has generated renewed demand for management consulting. McKinsey & Company (US segment) financial performance* Revenue Year ($ million) (% change) 2006 2,010 N/A 2007 2,312 15.0 2008 3,175 37.3 2009 3,492 10.0 2010* 3,650 4.5 2011* 4,010 9.9 *Estimate SOURCE: IBISWORLD corporation, but functions as a partnership. The managing director is elected for a three-year term by the firms directors, serving a maximum of three y ears. A number of committees at a strategic level are charged with the development of policies and making critical decisions. McKinsey is a privately-owned company so access to financial data is limited. IBISWorld estimates revenue for 26 WWW.IBISWORLD.COM Major Companies Management Consulting in the US September 2011 Player Performance continued Player Performance Marsh & McLennan Companies Inc. Market share: 1.4% the company in 2011 is about $4 billion in the United States. Its global revenues are estimated at $7.6 billion. The figures presented are based on revenue growth derived from Forbes list of Americas Largest Private Companies. In the five years to 2011, McKinseys revenue is Marsh & McLennan is a global conglomerate, providing advice and services in the areas of insurance, consulting and risk management. The management consulting part of the company is serviced by Mercer Consulting, Oliver Wy man Group and Kroll. The company operates from 22 offices in the Americas, Europe and Asia regions and has 51,000 employees throughout 100 countries. The company generated $10.55 billion in revenue in 2010. The US market accounts for approximately 44.6% of Marshs total revenue. Mercer Consulting was founded as a consulting group that specializes in leadership and design of organizational change. Some of its largest clients include Bristol-My ers Squibb, Corning and the New Y ork Times Company. Mercer Management Consulting is involved with business design and has more than 25 y ears experience. Mercer Human estimated to have increased at an average annualized rate of 14.8%. In spite of such strong growth, the companys growth has slowed in recent years because a slowing US economy has led to reticence on the part of corporate clients to invest heavily in consulting projects. Resources consulting is involved with workforce effectiveness issues. Oliver Wy man Group has approximately 4,000 professionals based in 22 countries. The firm specializes by industry and functional area, allowing clients to benefit from expertise in strategy, operations, risk management and organizational transformation. Additionally, Oliver Wy man also provides brand consulting and economic consulting advice to a range of clients from around the world. Mercer and Oliver Wy man combined have increasingly become major players in the Management Consulting industry. Approximately 45.8% of the companys revenue is generated through consulting services offered by Mercer and Oliver Wyman Group. Marsh and McLennans Kroll group does not generate as much profit as the other segments but plays an important part of Marsh and McLennans business strategy. Marsh & McLennan Companies Inc. financial performance Year 2006 2007 2008 2009 2010 2011* Revenue ($ million) 1,981.0 2,180.7 2,241.6 2,079.7 2,157.6 2,366.9 (% change) 3.9 10.1 2.8 -7.2 3.7 9.7 Operating income ($ million) 235.2 291.6 258.6 182.7 57.6 172.2 (% change) 145.0 24.0 -11.3 -29.4 -68.5 199.0 *Estimate SOURCE: ANNUAL REPORT AND IBISWORLD 27 WWW.IBISWORLD.COM Major Companies Management Consulting in the US September 2011 Player Performance continued Other Companies Because the company is widely diversified across a range of management consulting services, revenue did not slow down significantly over the past five years. In the five y ears to 2011, IBISWorld estimates that Marshs US consulting revenue has risen at an average annualized rate of 3.6% to $2.3 billion. The company was able to While there is significant consolidation in the industry for larger players, no one company controls more than 5.0% of the industrys revenue. Many of the industrys operators are independent management consultants. The majority of these firms account for a very small portion of market share, so even firms with a 1.0% market share represent significant players. Even though larger firms have been acquiring smaller firms, the industry remains highly fragmented and continues to be very competitive. The following are some of the bigger companies in the industry. Boston Consulting Group Estimated market share: 1.0% The Boston Consulting Group (BCG) is a global management consulting firm with more than 7 0 offices in over 40 countries. The firm prides itself on an employ ee- focused culture and is recognized as one of the best consulting companies to work for in Fortune magazine. The company was formed in 1963 when Bruce Henderson became the head of a new management consulting division of the Boston Safe Deposit and Trust Company . BCG works with some of the worlds largest and most innovative companies. The majority of BCG clients rank among the 500 largest corporations in North America, Asia, Europe and Australia. BCG also advises mid-sized companies, nonprofit organizations and government agencies. Worldwide, the firm also works buck an industry -wide trend of poor growth in 2008. Another one of the greatest growths in revenue for the company is Mercers human resources consulting. It is expected that this segment will continue to grow as companies require more advice from consulting firms regarding the hiring and termination of employees. on a pro bono basis for worthy organizations and efforts. Boston Consulting has been one of the industrys star performers over recent years. Its estimated that the company generated over $2.9 billion in revenue in 2011. BCG reported growth of over 13% per y ear, between 2006 and 2009. The majority of growth over recent years has been the result of aggressive expansion into expanding markets such as China and India. Unexpectedly low economic growth in those countries in 2008 and 2009, however, has resulted in a slowdown in growth for BCG in the medium term. Bain and Company Estimated market share: Less than 1.0% Bain and Company is a management consulting firm based in Boston, Massachusetts. The firm was originally founded by three partners from the Boston Consulting Group by Bill Bain. In its early y ears, unlike other management consulting firms, Bain would only work under one client per industry in order to avoid potential conflict of interest. In order to grow, the company later lifted the one client per industry policy. As such, the firm grew by more than 25.0% a y ear subsequently. It is estimated that the company generated around $1.3 billion in 2011. One of the marketing strategies that Bain is known for is presenting its potential client with the performance 28 WWW.IBISWORLD.COM Major Companies Management Consulting in the US September 2011 Other Companies continued of its previous clients. One way to accomplish this is through the stock price appreciation. Bain suggests that their clients stock price outperformed the S&P index by four times in the last 30 y ears. Capital Intensive Labor Intensive 29 Computer Stores Office Supply Stores Preparation Services WWW.IBISWORLD.COM Management Consulting in the US September 2011 Operating Conditions Capital Intensity | Technology & Systems | Revenue Volatility Regulation & Policy | Industry Assistance Capital Intensity Level The level of capital intensity is Low The capital intensity of the Management Consulting industry is moderately low, as depreciation represents just 2.0% of revenue. Capital spending focuses on purchasing computer programs, networking and computer hardware that is required to operate consultancies in the current technological environment. This is particularly true for large firms that have branch offices in several nations. The communication and transference of information between offices for those firms are considered essential. Management consulting services have a low level of capital intensity. In 2011, IBISWorld estimates that for every dollar spent on wages, industry operators will spend just $0.04 on Capital intensity Capital units per labor unit 0.5 0.4 0.3 0.2 0.1 0.0 Economy Professional, Management Scientic and Consulting Technical Services Dotted line shows a high level of capital intensity SOURCE: WWW.IBISWORLD.COM capital investment. The majority of industry work is analy tical and does not necessarily benefit from computer Tools of the Trade: Growth Strategies for Success New Age Economy Recreation, Personal Services, Health and Education. Firms benefit from personal wealth so stable macroeconomic conditions are imperative. Brand awareness and niche labor skills are key to product differentiation. Engineering Management ConsultingServices Accounting Services Traditional Service Economy Wholesale and Retail. Reliant Tax on labor rather than capital to sell goods. Functions cannot be outsourced therefore firms must use new technology or improve staff training to increase revenue growth. Change in Share of the Economy Investment Economy Information, Communications, Mining, Finance and Real Estate. To increase revenue firms need superior debt management, a stable macroeconomic environment and a sound investment plan. Old Economy Agriculture and Manufacturing. Traded goods can be produced using cheap labor abroad. To expand firms must merge or acquire others to exploit economies of scale, or specialize in niche, high-value products. SOURCE: WWW.IBISWORLD.COM 30 WWW.IBISWORLD.COM Operating Conditions Management Consulting in the US September 2011 Capital Intensity continued Technology & Systems Level The level of Technology Change is Low Revenue Volatility Level The level of Volatility is Medium technology. That said, the capital intensity level of the industry has been rising gradually over the last decade with the introduction of greater reliance on computers and internet technology. In 2011, labor costs account for around 47.4% of industry revenue and the average industry wage is expected to reach $75,624 per person. Labor costs are representative of the high level of education and experience required by most management consultants. Beyond this, a substantial The industry is labor intensive and heavily dependent on an educated, professional individual or team, as opposed to any technological innovation. Technology in this industry primarily refers to computing and online innovations, allowing greater speed and connectivity between offices of a firm and between consultants and their clients. The main uses of technology in this industry revolve around office equipment and communication technology, including mobile communications and e-mail. Telecommunications are particularly important for firms that have operations internationally because large documents can be transmitted The industry has a moderate level of revenue volatility. In the five years to 2011, year-on-year revenue changes averaged 3.9%. During that time, the industry has experienced grown by as much as 6.5% in 2007 and decreased by as much as 4.3% in 2008. This industry is closely linked to the economic cycle as the economy affects the available funds for consultancies from the public and private sectors. In some cases, funds spent on consultancies are viewed as being chunk of industry revenue is dedicated to outsourcing to specialized consultants for niche projects, which further increases the industrys reliance on labor. The consultation process is very personalized and many consultants are highly sought after. Additionally, contracts can be won or lost if a certain expert enters or departs a company. Sourcing clients can also be very expensive and a prolonged process that requires a well-developed network of contacts. instantly to clients and colleagues around the world. A significant cost also relates to the purchase of information, database and library materials, including accessing online services. It is also necessary to have a website. Some major firms have invested in a global intranet system that places reports, techniques and knowledge gained from consultancy work, which may be of use to employees in similar circumstances. Web design is a burgeoning area and consultants sites are increasingly sophisticated, often used as a forum for delivering content to clients and potential clients as a free service. discretionary and can quite often be deferred. The industry has traditionally been considered a luxury expense by firms and is often one of the first expenses cut in times of economic hardship. Many consultancies employ expert consultants over a variety of fields and industries which can minimize the impact if any given sector suffers a slowdown. Some businesses use management consultancies when revenue and profit are high, but equally employ their Revenue volatility* (%) 31 10 1 0.1 WWW.IBISWORLD.COM Operating Conditions Management Consulting in the US September 2011 Revenue Volatility continued services during slower periods in an effort to reverse negative conditions. This factor has historically mitigated declines for firms during periods of slow economic growth and reduced revenue volatility. However, the recent recession proved that this is not alway s true as the industrys revenue decreased significantly during the recession. In addition to a decline in demand, industry revenue decreased as a result of price competition. A higher level of revenue volatility implies greater industry risk. Volatility can negatively affect long-term Volatility vs Growth 1000 Hazardous Rollercoaster strategic decisions, such as the time frame for capital investment. When a firm makes poor investment decisions it may face underutilized capacity if demand suddenly falls, or capacity constraints if it rises quickly. 100 Management Consulting Stagnant Blue Chip 30 10 10 30 50 70 Five year annualized revenue growth (%) * Axis is in logarithmic scale SOURCE: WWW.IBISWORLD.COM Regulation & Policy Level & Trend The level of Regulation is Light and the trend is Steady Industry Assistance Level & Trend The level of Industry Assistance is None and the trend is Steady This industry is subject to a light and steady level of regulation. The industry is not regulated or licensed. The Association of Management Consulting Firms (AMCF) in the main professional body. The AMCF provides professional development opportunities, industry research, legislative monitoring and The industry obtains no special assistance or protection from government and is a totally open and highly competitive industry. referrals, and other services to its members. Since the mid-1980s, it has undertaken an annual survey of the management consultancy industry and publishes operating ratios and financials for total and individual firms that participate. Members are also required to observe a code of professional conduct. 32 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - WWW.IBISWORLD.COM Key Statistics Management Consulting in the US September 2011 Industry Data Revenue ($m) Industry Value Added Establish- ($m) ments Enterprises Employment Exports Imports Wages ($m) Domestic Demand Corporate Profit ($b) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 130,211.4 129,074.5 138,297.1 152,806.7 159,577.4 169,979.9 162,722.7 157,855.3 161,558.5 165,512.0 171,821.6 180,069.0 187,631.9 197,576.4 203,622.4 77,784.5 76,138.5 81,580.7 91,724.6 95,113.6 98,864.4 92,401.9 87,297.4 92,878.1 96,557.0 105,020.8 104,821.6 110,780.5 115,575.7 122,337.3 339,603 348,128 334,054 359,256 382,518 388,584 385,829 372,306 377,369 380,310 394,992 413,002 421,645 433,282 456,246 334,584 342,524 327,857 353,235 375,986 375,916 375,050 361,180 350,829 354,956 357,962 355,821 354,692 356,726 359,945 962,231 971,086 986,086 1,041,437 1,097,267 1,140,060 1,054,556 1,012,673 1,030,217 1,038,245 1,070,657 1,102,066 1,144,214 1,183,761 1,231,218 66,065.5 64,521.8 69,134.0 77,207.9 77,879.3 80,336.6 76,943.3 74,826.8 76,722.2 78,516.2 81,996.7 79,611.9 84,512.0 86,927.1 92,812.1 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 1,061.6 1,164.8 1,444.0 1,632.3 1,745.3 1,625.8 1,404.2 1,338.8 1,378.0 1,413.0 1,524.9 1,595.2 1,643.9 1,693.3 1,761.2 Sector Rank Economy Rank 4/35 43/706 3/35 20/706 4/35 20/705 4/35 21/705 3/35 27/706 N/A N/A N/A N/A 4/35 14/706 N/A N/A N/A N/A Annual Change Revenue (%) Industry Value Added (%) Establish- ments (%) Enterprises Employment (%) (%) Exports (%) Imports (%) Wages (%) Domestic Demand (%) Corporate Profit (%) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Sector Rank Economy Rank -0.9 7.1 10.5 4.4 6.5 -4.3 -3.0 2.3 2.4 3.8 4.8 4.2 5.3 3.1 16/35 371/706 -2.1 7.1 12.4 3.7 3.9 -6.5 -5.5 6.4 4.0 8.8 -0.2 5.7 4.3 5.9 13/35 271/706 2.5 -4.0 7.5 6.5 1.6 -0.7 -3.5 1.4 0.8 3.9 4.6 2.1 2.8 5.3 23/35 305/705 2.4 -4.3 7.7 6.4 0.0 -0.2 -3.7 -2.9 1.2 0.8 -0.6 -0.3 0.6 0.9 13/35 204/705 0.9 1.5 5.6 5.4