The macro environment analysis

Porters Five forces:

Threat of new entrants: Moderate New entrants: new consultancies

Every industry that shows a great potential for profit will attract other
companies who want to gain the surplus that exists. There are always new
entrants that can threaten the firms position and competitive advantage in
the industry. The more barriers there are for entering the market, the less of
a threat new entrant will be.
Barriers to entry: Moderate

Product/service differentiation
This focuses on fostering the brand name and creating an identity in the
industry, which will entail great costs for the new entrant. This is what most
consultancies thrive on. A good brand name is important for their credibility
and their business. To gain new customers is not cheap and consultancies
work very hard at keeping a good reputation around their name. The type of
services they provide has also an affect on their success on the market. It is
crucial for service companies to distinguish their services from others even
though it is the same type of service. They need to show what their service
provide and what the client gain from hiring them. Deloitte was able to
create differentiation by being a one-stop shop for all consulting needs. In
areas where they did not have good market penetration, they acquired firms
in order to better compete.

Lack of client relationships

These firms set up barriers through client relationships that new entrants are
unlikely able to duplicate. Even the most experienced consultants, creating
their own firm, will lack the resources and proprietary information that large
firms have built up over many years with a diverse clientele. As a result,
new entrants are forced to grow by taking on smaller customers.
Conversely, firms such as Deloitte are often able to increase revenues not
through how they can impact a specific client, but rather their breadth of
past clients. Reputation, in this field, is of the utmost importance. While costs
are not high to enter the consulting field, industry knowledge is the biggest
commodity.

Threat of substitute products - Low

Threat of substitute products - No substitute; professional services
(especially auditing) are required by law. Except when smaller firms offer the
same services at cheaper prices, which is not a major threat.
Bargaining power of suppliers Consultants (in our case the suppliers
are the consultants), and their power is high
Without suppliers, the company has nothing to offer whether it is a product
or service. Suppliers in management consultancies are the consultants
themselves which can have an impact on the quality of products or services.
First, the quality of the supplier is important for both image and quality of the
service. Management consultancies strive to recruit the top talents for their
business. This can sometimes be a problem if the supply of such people is
slim. Second, it is tempting for most consultants to work at a firm and then
leave it to start their own business or join a company that they met through
work. Management consulting is all about the knowledge base and
experience that exists in the company in order to do their job properly. If
their consultants leave the company, they loose that knowledge and
experience. A challenge to retaining talent is the long hours and travel often
required of consultants. It is difficult to retain these individuals for the life of
their career. Deloitte has continually attempted to balance the work-life ratio
in order to keep employees from moving on. At Deloitte, it is rare that a
practitioner will move to a different firm. It is far more likely that they leave
to take a position with a former client. Deloitte, and its competitors, must
compete not only within themselves for hiring new talent (such as MBAs), but
with various companies, as well. They need to make the job attractive and
strict enough that the people will not leave it, such as having good benefits
and a strict leaving policy where the consultant cannot bring his or her
clients with them when they leave. Firms with good reputations have robust
recruiting practices, enabling them to obtain the best talent. Supply for new
talent is rarely short for these firms. However, as discussed earlier, retaining
this talent can be an uphill battle. Firms such as Deloitte place a large
emphasis on training. In addition, continuing education hours are required,
as are networking events and firm development.
Bargaining power of buyers Moderate

To obtain the best in professional services, there are very few options to
choose from. However, given the fact that their services do not vary much,
regardless of which companies are offering them, customers can switch in
their attempt of finding the best price/quality ratio.
Rivalry among competitors
Stiff competition from existing industry players, the industry is highly
competitive especially among the 'Big Four' accountancy firms.
Highly competitive industry

PEST Analysis
Political factors:
Regulations governing Deloitte's activities differ from country to country and
these are updated from time to time. These include employment laws, tax
policies and competition laws. As an international organization, this affects
the firms operations because Deloitte has to ensure that all its operations
including strategies and values are in line with the laws in the several
countries it operates in. For examples, in most countries, the law requires
that accounting firms to be locally owned and independent. This has affected
how Deloitte is structured. Deloitte offers services such as tax advisory and
assurance services which are a very sensitive part of business. They should
be treated with utmost care to avoid severe penalties. These regulations are
changed or updated from time to time; therefore, Deloitte has to ensure they
are always in compliance with the law.
Economic factors
The global recession cuts across the several countries Deloitte operates in;
this has generally affected the firms operations and flow of income. The

industry, professional services, is a highly competitive one with other

members of the Big Four striving to be the market leader and several other
firms seeking growth in the same industry. Also, the rise in unemployment as
a result of the global recession has made it difficult to obtain employees with
the necessary skills and experience required in the firm.
Socio-cultural factors

There are several ethics that govern how people and organizations operate.
These ethics differ from country to country. Deloitte believes in excellence
and integrity. This could be difficult to uphold because in certain countries.
For example, bribery has become generally accepted in some African
countries even though they know it is wrong. Deloitte employees could get
involved in this, which would affect their ability to judge fairly, be excellent
and uphold integrity. Also, Due to the highly professional services the
organization offers, it requires several highly skilled employees. Finding such
individuals and retaining them is not an easy task, especially when other
companies keep trying to win them over; offering them better employment
packages.
Technological factors
Some countries are not as technologically advanced as others. This can slow
down Deloitte's operations in some of these countries. For example, internet
connection is not as stable and fast in Nigeria as it is in Romania.
Fluctuations and temporary breakdown of internet service can have adverse
effects on the company's activities. A team in Nigeria might not be able to
meet up the deadline of making a certain presentation, if there is no internet
service needed to carry out research and development on that topic. New
inventions, changes and advancement in technology provide a path for
Deloitte to improve its operations and stay ahead of the competition.
Computers, software, phones, internet, intranet etc are important resources
to the firm. But keeping up with the rapid changes in technology is almost
impossible.

Porters Diamond

Value chain analysis

What is Deloittes value chain?

Deloitte doesnt have the typical value chain, the kind with raw materials and
finished goods for sale. They are a professional services firm and their value
chain revolves around people. So were do their people come from? They get
many of their hires from campuses all over the world but they also take on
experienced people from the marketplace too. Their knowledge and
expertise are used to serve their clients with excellence. They give valuable
insights on matters important to the capital markets public policy and even
their own industry. Their people are their business. This is why Deloitte
develops and enhances their skills. They do this by providing their people
with extensive coaching and learning and development opportunities. But
they also encourage their people to focus on life outside of work too because
if their people are satisfied it ultimately leads to better service for their
clients. Even though they dont manufacture anything it is still important that
they manage their own inputs and outputs like business travel, energy used
in the working space, materials and waste. So as you can see each part of
their value chain revolves around their people and it is only through their
people that they can create real value for the firm.