Strategic Response to Turbulent Environment

Introduction

Background

Objectives of Industrial Analysis is to

* To diagnose the forces affecting competition in an industry and their underlying causes

* Identification of a firms strengths and weaknesses relative to the industry

* Formulation of competitive strategy of the firm that can either take offensive or defensive action in order to create a defendable position against the competitive forces.

The framework for analyzing industry competition can be used in setting diversification strategy of a firm in a given industry. The ultimate goal result of an industry analysis is to match strategy to industry environmental conditions facing the industry through identification of opportunities and threats posed by the environment of the industry; identify characteristics and attractiveness of the industry and with this information make develop strategies for the survival of the firm through competitive advantage.

Consultancy

Broadly, consulting can be explained as the infusion of specialized knowledge, expertise or technical skill necessary to accelerate strategic goals. It involves provision of any advice, help, information, or an undertaking of a specialized activity or task to either facilitate, solve an existing problem or avoid possible problems or both for some consideration or for free.

Normally a client engages the services of a specialist to undertake assignments or to advise on his/her area of specialty. Typically, consultants are used when there exists a knowledge gap such as an unusual problem arises within the firm and the existing management has little knowledge of its nature and implications. An outsider can analyze the issue objectively and explain how similar difficulties have been dealt with in other organizations.

There are as many fields of consultancy as there are bodies of knowledge. However, for the purpose of this analysis we intend to concentrate on the consultancy industry in the light of business management practice which covers feasibility studies, project reviews, evaluations, research and development, project implementation, due diligence, market surveys, business valuations, salary reviews, financial restructuring, privatization, business re-engineering, auditing, business management, corporate finance, training, insolvency/receivership, recruitment, human resource aspects, leadership, change management, knowledge management and tax planning.

Introduction Of Consultancy Industry

Consultancy is a knowledge-based industry. The industry is comprised of independent consultancies, small practices and big firms.

The independent consultants constitute one-person consultancies who are commonly sub-contracted by the large consultancies. Although large proportion of the independent consultants run full-fledged consultancies calling on their counterparts from time to time in the event of a big job, independent consultants are specialists in their unique fields and often carry out consultancy on a part-time or assignment basis.

The small practices constitute an average of the 10-15 person units. They obtain their market contacts through associations and sub-contract to associate consultants on a needs basis. They carry out 20% worth of the consultancy work in the country. In this category we have included the NGO's who carry out a large amount of consultancy work and the smaller firms such as KHI, Manpower Development etc.

The big five firms that offer business consultancy services are Arthur Andersen, operating in 78 countries with a staff of 58,000; Deloitte Touche Tohmatsu , in 132 countries with over 82,000 employees; Ernst and Young International in 132 countries with over 85,000 employees;

PriceWaterhouseCoopers in 152 countries with over 140,000 employees and KPMG. In Kenya the big five through their local representatives dominate 50% of the market. However individuals and other firms are growing and capturing the remaining 50%.

Source:

Particularly so due to the lack of entry barriers to the industry. Further analysis of this is captured in the section on the dominant economic factors.

Among the five multi-nationals, PWC takes on corporate, financial and consultancy services. This differentiation makes it a large industry driver in the market. Ernst and Young and Arthur Anderson carry out mainly Finance and Consultancy services. A large proportion of the work undertaken by Delloite and Touche and KPMG is corporate in nature.

Consultancy Industry in the context of Kenya's Economic Environment (1983-2001)

In order for us to address the consultancy industry we would like to present a brief background on the Kenyan economic growth, the context within which the industry operates. The performance of the economy over the last 17 years can be divided into two phases, which overlap:

1. Pre- liberalization phase (1983-1989) characterized by price controls, strong unilateral political control and contractual politics, external support brought about because of the cold war, rapid population growth, growth in the labor force was absorbed with the government being the largest employer in the earliest stages of this phase.

2. Structural adjustment and liberalization phase (1990-2001) characterized by corporate removal of all controls in the economy, political liberalization; multi-party system, a decline in and an increase in conditionality as with the end of the cold war, other economies have experienced marked growth and improved status in the international community e.g Tanzania and Uganda.

The 1990's liberalization of the economy and slow growth of the same has depressed the market for consultancy services, particularly with government's role as the major player economy being severely curtailed due to lack of funding.

There were opportunities arising from growth of the Nairobi Stock Exchange to revamp the economy with the intention of expanding business opportunities, interest from foreign investors, relaxation on banking regulations, improvement in the credit facilities and increase in the number of micro finance institutions.

Social sensitivity issues such as gender, human rights, HIV/AIDS awareness etc. increased need the fund raising activities to draw the attention