Appropriate Policies for Professional Service Firms - Term Paper Example

Managing the Professional Practice Executive Summary In the present scenario, it is essential for Professional Service Firms (PSFs) to formulate appropriate policies along with strategies in order to enhance their growth as well as development in the worldwide market segments. Correspondingly, two options were identified for the management consultancy firm in this study, which emphasised organic growth and acquisition to ensure their rapid growth globally. Accordingly, this report elaborates on three combinations of these strategic growth options that the PSF can avail, i.e. using either organic growth approach, or the acquisition more, or apply both in combination. Contextually, strengths along with weaknesses of the strategic options are discussed in this report, which revealed that rather than applying either of the two stated strategic options, it would be more profitable for the PSF to apply both in combination. However, it is essential that the company officials identify and take requisite preventive measures to counter the challenges presented by the combined application of the two strategic options of organic growth and acquisition. Table of Contents Executive Summary 1 1.0.Introduction 3 2.0.Objectives of the Report 4 3.0.Assessing the Strengths and Weaknesses of Each Option 4 3.1.Strengths and Weaknesses of Organic Growth 5 3.2.Strengths and Weaknesses of Acquisition 6 4.0.Assessing the Extent and Degree of Difficulty of Each Option in Implementation over the Next 10 Years 7 4.1.Difficulty in the Implementation of Organic Growth over the Next 10 years 8 4.1.1.Market Competition 8 4.1.2.Changing Preferences of Clients or Customers 9 4.1.3.Adoption of Contemporary Technology 9 4.2.Difficulty in the Implementation of Acquisition over the Next 10 years 10 4.2.1.Management Practices and Workplace Culture 10 4.2.2.Identifying Appropriate Location 11 4.2.3.International Standards and Governance 11 5.0.Analysing the Combined Implications and Recommend a Strategic Course of Action for the PSF for the Period 12 5.1.Strategic Course of Action for the PSF 14 6.0.Conclusion 14 References 16 1.0. Introduction In the modern era, the Professional Service Firms (PSFs) comprise different sectors including accountancy, property services, legal services and Information Technology (IT) services along with management consultancy. It is worth mentioning in this context that to meet the challenges of modern day societies, professionals are required to be strategic in their approaches due to changing and competitive business environment (Empson, 2013). In this regard, the professionals of the PSF to be studied in this paper, which is a management consultancy firm, has been assigned with the task of ensuring that business operations of the client companies are conducted appropriately and in accordance with their business objectives. The management consultancy firm acts as a professional consultant possessing experience along with knowledge in order to assist its client companies to enhance their practices, with the application of effective portfolio management techniques as well as project management activities (Project Management Institute, Inc, 2010). The PSF has been identified to significantly help in the growth of the business operations of its client companies to a significant extent by adopting either the strategic option of organic growth or business acquisition. 2.0. Objectives of the Report The report emphasizes the strengths and the weaknesses of each strategic option available to the PSF, which is a management consultancy firm, i.e. organic growth and/or acquisition in order to deliver rationalised suggestions to its management. Accordingly, the difficulty of each of the two options in its implementation over the next 10 years have been discussed in this report so as to recommend the PSF in a more accurate and reliable manner. 3.0. Assessing the Strengths and Weaknesses of Each Option Business growth is usually measured in terms of profit margin, sales and asset valuation. In this regard, professionals in the management consultancy firm can formulate as well as implemented the strategic option of organic growth, which can in turn help developing the business in a more sustainable manner, with the assistance of internal organisational factors. Organic growth might be utilised by the PSF so as to ensure that it is able to enhance their internal competiveness through the development of in-house competencies and innovative along with differentiated products and/or services (Harvard Business School, 2009). Similarly, it was also identified that the PSF commonly uses strategic alliances through the modes of acquisition or merger with the intention of obtaining competitive advantages. Acquisition/merger is in general referred as a procedure of taking over the business operations of an existing firm with the aim of attaining larger market share and greater control on the industry and assist businesses to grow as well as develop rapidly and immensely (Alvarez & Marsal Holdings, LLC., 2014). 3.1. Strengths and Weaknesses of Organic Growth The implementation of organic growth in the management consultancy firm will assist in developing common business practices along with strategies in accordance with which, business operations shall possible be conducted in an enhanced manner. Moreover, organic growth aims at improving the performances as well as growth prospects of the PSF from different metrics, which commonly entail financial, supply chain, logistics, customer satisfaction and product quality (Salvato & et. al., 2007). Subsequently, organic growth adopted by the PSF might facilitate its growth through customer centricity. It might also develop the service firm ability to provide unique quality products and/or services to worldwide clients. This particular strategic option will also facilitate the firm in building its marketing channels along with brand image in the global market segments. Organic growth will ascertain in developing organisational efficiencies of the PSF in a cost effective way, through the utilisation of internal factors strategically (Kennedy, n.d.). Organic growth might assist the management of the PSF in having a better corporate control, retaining workplace culture as well as core values (Smyth, 2011; Jimmy, 2008). On the other hand, there are certain weaknesses that are associated with organic growth as the continuous development of the PSF internally is based on the decisions along with strategies developed by the management. In this regard, the management is required to make adequate plans in relation to setting up business operations in accordance with growth plans in the field of hiring as well as recruiting human resources, investment and workplace environment, which is referred to as Penrose Effect. Penrose Effect implies that management, when implementing organic growth, is focused on ‘productive opportunity set’ along with cost adjustments while minimising emphasis to other external factors. In this regard, the progress of growth plan is limited (Lockett & et. al., 2009). Organic growth is also identified to assist service organisations to develop at a slower pace. Moreover, in organic growth, expertise and experiences are regarded as pivotal factors to be considered to attain maximum benefits through the strategic option. Respectively, new managers are to be recruited, which might adversely affect the business growth aspects substantially, as the new recruited managers are likely to have inadequate business information (Smyth, 2011; Jimmy, 2008). 3.2. Strengths and Weaknesses of Acquisition Strategic alliances that include acquisition have assisted businesses in conducting operations in a collaborative manner. Acquisition of firms has also assisted in obtaining the desired growth rate successfully as compared to organic growth. Therefore, the PSF, with the assistance of acquisition as a prospective strategic option, shall be facilitated with the opportunity to enter and perform effectively in new market segments. The acquisition may also aid in possessing expertise and competent employees to conduct business operations successfully in accordance with the desired growth plan. It also shall aid the firm in possessing efficient Research and Development (R&D) facilities with the assistance of which, innovative products and/or services can be offered to worldwide customers (Isoraite, 2009). Acquisition might facilitate the firm in obtaining additional branded products and/or service lines. The firm might also be provided with the opportunity of improving customer base and market share. Moreover, the firm will be able to develop an effective supplier chain and accordingly, it might accomplish economies of scale advantages within a specified period. Contextually, with the strategic option of acquisition, the firm might develop a synergy to conduct operations in a productive manner, along with better risk management approach. In this respect, the management of the firm needs to be availed with various benefits, including tax advantages and knowledge transfer among others (Smyth, 2011; Jimmy, 2008). There are certain weaknesses that might adversely affect the business functions of the firm leading to inefficient growth. The strategic option of acquisition is identified to be time consuming along with complex, which might affect the growth rate and progress of the firm substantially. Additionally, poor implementation of strategies will also adversely influence the growth plan to a significant extent. The management might also face the challenge of managing business operations of the acquired firm due to distance problem, cultural differences along with language barriers (Smyth, 2011; Jimmy, 2008; Kennedy, n.d.). 4.0. Assessing the Extent and Degree of Difficulty of Each Option in Implementation over the Next 10 Years The present global scenario reflects changing trends in business and market conditions due to globalisation, advancement in the technological field, liberations and labour as well as investment movement. Undoubtedly, the factors have changed the market as well as business conditions in the most apparent manner. In the current scenario, business firms, including the PSFs, follow different trends that include innovative procurement techniques, development of societal aspects, market power, competitive forces and social capital among others to sustain and competitive grow in the present environment. In this regard, the PSF, i.e. the management consultancy firm is required to adopt effective along with differentiation strategies with the intention of ensuring that business operations are conducted successfully (Smyth, 2011). Presently, the strategic options of organic growth and acquisition are often challenged during their implementation process owing to various obstacles in the form of opportunity management, billing, administrative efficiency and workforce management. In this context, management of the PSF has to face challenges for inappropriate business process, which is further observed to be affecting client satisfaction to a substantial extent. Moreover, the management consultancy firm is observed to remain under the pressure of increased billing procedures leading to time under-utilisation. Subsequently, the challenges are accountable for inefficient performances and growth opportunities (Epicor Software Corporation, 2005). 4.1. Difficulty in the Implementation of Organic Growth over the Next 10 years management consultancy firm is seemed to face many challenges and difficulties in implementing the strategic option of organic growth in the present as well as future contexts, due to different factors commonly including market competition, changing preferences of clients and adoption of contemporary technologies (Salvato & et. al., 2007). These probable difficulties that can be faced by the PSF when implementing the strategic option of organic growth are discussed in details hereunder. 4.1.1. Market Competition The degree of market competition has certainly intensified in the current scenario, due to increased number of entrants and similar sized market players and marketing channels aided with rapid technology advancements. Increased globalisation and liberalised trade policies have likewise augmented the number of multinational firms in the recent era. The globalisation factor has also assisted in developing the marketing channels and number of suppliers within the global context (Smyth, 2011). In this regard, in order to implement the strategic option of organic growth, the management consultancy firm will have to face difficulties in formulating appropriate strategies relating to price, marketing channels and suppliers. Additionally, the difficulties are quite likely to intensify in future due to increased market restrictions and government intervention (Rico, 2008). 4.1.2. Changing Preferences of Clients or Customers The management consultancy firm faces ample challenges in identifying the preferences of customers, which further changes due to the introduction of better innovative along with competitive products and/or services by other business operators. In this regard, adequate challenges shall be faced by the PSF to comprehend the behaviour as well as requirements of worldwide customers successfully. Subsequently, in future, the preferences of customers are likely to change drastically due to the introduction of identical and economically profitable products and/or services. In this respect, management consultancy firm, owing to the lack of appropriate information, shall have to face significant problems to meet the satisfaction level desired by the global customers (Lockett & et. al., 2009; Rico, 2008). 4.1.3. Adoption of Contemporary Technology In the present scenario, providing better innovative as well as technologically advanced products and/or services, the management consultancy firm can be facilitated with the opportunity of conducting business operations in a better competitive and differentiated manner. Presently and in future contexts both, technology will be considered as an important factor on the basis of which, products and/or services can be efficiently differentiated. Additionally, the employees are required to be adequately trained with the aim of ensuring that they are competent enough to perform their operations successfully in the presently transforming business scenario. In this regard, the implementation process of organic growth is required to be based on innovation and technological advancement, which may prove complex and quite time-consuming for the company (Lockett & et. al., 2009; Rico, 2008). 4.2. Difficulty in the Implementation of Acquisition over the Next 10 years The management consultancy firm has been observed as using acquisition in the form of their most potential strategic option, with the aim of ensuring that business operations are conducted in a competitive and profitable manner. Acquisition is used immensely in the present scenario owing to better opportunity of expanding business operations and competition to expand market share. However, there are certain difficulties faced by the management consultancy firm in implementing the strategic option of acquisition, as it is influenced by various factors including international standards along with governance, workforce culture and management practices. The factors are detailed hereunder. 4.2.1. Management Practices and Workplace Culture The strategic option of acquisition is often considered to pose different challenges in its implementation process, principally owing to differences in the management practices of management consultancy firms. It is owing to this reason that the management consultancy firm, which focus on acquiring cross-border services, often have to face the difficult of implementing management principles along with practices in the acquired firms due to cultural differences as well as divergences in their management practices. In this regard, the integration process amid the two firms might prove ineffective, resulting in the failure of the overall acquisition process. Additionally, the PSF might face the difficulty of implementing acquisition strategy in the present and future context due to cultural differences and language barriers (Robert & et. al., 2012). 4.2.2. Identifying Appropriate Location The management team of the management consultancy firm might also have to face significant challenges in identifying suitable locations for implementing the strategic option of acquisition to gain success in realising the business objectives. In the coming decade, the worldwide market segments is projected to be immensely competitive due to increased number of business rivals and identical products and/or services offering similar economic benefits to the customers to incur minimum opportunity costs. In this regard, the management of the PSF might not be able to identify a particular appropriate location having better growth opportunities with minimum competitive obstructions, which might further complicate the implementation of the strategic option of acquisition (Robert & et. al., 2012). 4.2.3. International Standards and Governance management consultancy firms in different geographic locations are required to conduct their business operations in accordance with international standards along with governance. In this regard, the internal standards practiced in different countries needs to be based on certain specific rules along with regulations, which differ at the international context largely. The international standards, along with governance standards further have complicated the implementation procedures of acquisition due to complex self-regulation policies applied within the countries, raising risks for the PSF to flourish with the use of this mechanism (Kennie & Price, 2012). 5.0. Analysing the Combined Implications and Recommend a Strategic Course of Action for the PSF for the Period The management consultancy firm has recently been observed to implement both organic growth and acquisition strategic options with the intention of ascertaining better growth as well as development in the worldwide market segments. In the present competitive business and market conditions, the PSF is required to implement their growth plan with the assistance of both the strategic options in combination, i.e. merging the concept of organic growth with that of acquisition. The combination of the two strategic options is quite likely to facilitate the PSF in devising appropriate plans in accordance with which, firms will be able to perform effectively by utilising internal along with external capabilities. The strategic options that include organic growth and acquisition are deemed to be interrelated in their approaches. In this regard, the implementation of the two strategic options might facilitate service organisations in obtaining adequate resources, including human resources, advanced technology and competent management teams. Subsequently, with proper planning, the PSF will be facilitated with the opportunity of providing innovative as well as competitive products and/or services in accordance with the preferences of global clients or customers (Herbert & Walker, 2007). Moreover, with the assistance of both the strategic options, the management consultancy firm shall be able to improve its market share and develop marketing channels, supplier ends and R&D facilities to a substantial extent. In this respect, with the adoption of both the strategic options, the PSF can build its potentialities to grow the businesses with better capabilities in a more sustainable and productive manner. The combination of the two approaches shall also prove beneficial to ensure that service organisations are provided with the opportunity of diversifying their products ranges through product development strategies in an efficient manner. In this regard, the combined efforts of both the strategic options might yield better growth prospects to the PSF, making its more competent to deal with the challenges of the future decade. However, it is essential to note that the combination of the two strategic options should be made in an organised manner in order to ensure that both the approaches are implemented systematically with the aim of accomplishing growth successfully (Herbert & Walker, 2007). It is noteworthy in this context that complexities might arise in the business processes, which can again affect the business operations of the PSF by hindering its organisational values, objectives along with goals. The combination of both the strategic options might also adversely affect the business operations of the PSF due to improper integration of business resources, strategies and core objectives, generating wastes of assets in the organisational process (Collins & Kim, 2012). 5.1. Strategic Course of Action for the PSF 6.0. Conclusion The management consultancy firm, in order to improve their growth objectives, are accordingly required to focus on two important strategic options including organic growth and acquisition. Conceptually stating, organic growth option is the procedure of utilising internal resources including human resources, financial resources and products diversification. Organic growth can facilitate the PSF in developing in-house competencies along with innovation. In the case of organic growth, the pace of development rate is however observed to be slow that might raise obstacles for the productive development of the PSF on a continuous basis. On the other hand, acquisition, as the second strategic option, is conceptualised as a process of absorbing another existing company with the aim of ensuring better growth in the short run through larger market share along with assuring a competitive development in the long run. One of the major limitations of this strategic option that might hinder the success potentials of the PSF is that acquisition is identified as a time consuming along with complex process. As observed through this report, the implantation of the strategic options in the next coming years will become more complicated due to increased number of business rivals, identical products and/or services and changing customer’s preferences. In this respect, it is suggestible that the PSF should adopt acquisition with the aim of ensuring that business organisations develop sustainably in the worldwide market segments. Additionally, in the present rapidly changing business scenario, the PSF with the assistance of acquisition will facilitate in enhancing business performances rapidly. References Alvarez & Marsal Holdings, LLC., 2014. Financial Services Deal Activity Poised For Growth in 2014, According to New Alvarez & Marsal Report. Who We Serve. 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