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Organisation- and Process Consulting

Evaluation of the Industry Attractiveness Through the Prism of the Porter’s Five Forces Model

Written by Milan Kölling

Grade 1.0

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Term Paper


Business Administration>Management




Term Paper: Evaluation of the attractiveness of the German organization and process consulting industry In the following, the defined theoretical framework concepts apply to GOPCI. Therefore, the detailed criteria at the end of the previous paragraph are evaluated for GOPCI. The analysis is performed in the same order as before. The knowledge gained from the interviews conducted with GOPCI was used at certain points of the analysis. They are labeled as "Respondent A, Respondent B" and so on. More information about them is attached in Appendix 2. As a short introduction to GOPCI, there are a few things to know. According to BDU (2018), GOPCI generates the largest portion of the entire consulting industry's revenue. Customer segmentation is not easy to identify (Appendix 2, Respondent F), because roughly every company is composed of organizations and processes. Nevertheless, Respondent B pointed out that a large part of the income comes from the production and chemical industries. 3.1 In the theoretical part of the threat summary of new entrants in the German organization and process consulting industry, Porter (2008) mentioned several factors that determine the height of entry barriers. In GOPCI, the necessity of investment into GOPCI is not given. Everyone who feels capable has the opportunity to enter the market without any capital requirements (Appendix 2, Interviewee E). Unless the customer provides the data directly, access to the data is usually unrestricted (Appendix 2, Respondent F). Otherwise, every consulting company has the same access to the data. In addition, the German government does not restrict new entrants to GOPCI. Therefore, it is assumed that even graduates can set up their own consulting company without facing legal issues (Appendix 2, Interviewee E). Nevertheless, the scale of the project often determines the demand for consultants of a certain size who have the financial and personnel capabilities or capabilities to manage these projects (Appendix 2, Interviewee C). This limits the growth opportunities of small consulting firms, and it also relativeizes the ability to jeopardize the status of existing consulting firms (Appendix 2, Interviewee B). Regarding these arguments, it can be said that the threat of new entrants to GOPCI is high, but it does not necessarily endanger large consulting companies. 3.2 The bargaining power of customers in the German organization and process consulting industry According to interviews, most of the customers of medium or large size (Appendix 2, Interviewee C) are calculated based on annual income. Due to financial reasons, not every company can afford to request organizational and process consulting fees (Appendix 2, Interviewee C). 3.3 The bargaining power of suppliers in the German organization and process consulting industry When it comes to the bargaining power of GOPCI suppliers, it must be said that suppliers in the consulting industry are not as typical as logistics providers. The only supplier worth mentioning is the supplier of IT systems. Moreover, there are suppliers such as accountants and employees who work for consulting, but they do not supply goods. They create value by completing or working for consultants. Obviously, consultants have a strong dependence on their employees, but this power cannot be considered fundamental to assessing GOPCI's attractiveness at this point. 3.4 The threat of alternative services in the German organization and process consulting industry Considering the different types of alternatives to GOPCI, one will determine that there are only a few alternatives. First, the company can use internal consulting instead of external consulting. Nonetheless, companies that perform internal consulting often rely on external consultants (Appendix 2, Interviewee B). The aforementioned “cost-effective trade-off” (Porter, 2008, p. 31) may be attractive to customers if they refer to public consulting companies subsidized by the German government (Appendix 2, Interviewee E). Otherwise, the "price-performance trade-off" between one consulting company and another in GOPCI will be similar. Another argument is that the switching cost of alternatives is very low for customers. Regarding GOPCI, the conversion cost depends on the type of substitute. To some extent, organizations and process consulting companies can choose to use artificial intelligence. Artificial intelligence is not very popular in this area, but it will grow in process optimization and standardization (Appendix 2, Respondent A). In summary, the threat of GOPCI alternative services can be said to be low, but it is recommended to participate in technological development. 3.5 Competition between existing competitors in the German organization and process consulting industry As GOPCI is the largest consulting industry in Germany (BDU, 2018), there are both large and small consulting companies. The Big Four (KPMG, PricewaterhouseCoopers, Ernst & Young, and Deloitte) are distributed in different industries, such as operations consulting, strategy consulting and human resources consulting. They are not focused on a particular industry (Appendix 2, Interviewee A). Read Less