Nowadays business crossed international borders and there are thousands companies which operate through the whole world overcoming language and cultural barriers. Transnational companies became an everyday occurrence and in order to stay on top they introduce many innovations, techniques and approaches. Accenture is an excellent example of successful international company and is known worldwide. This research is devoted to this company, its history and some important issues related to the company.
Accenture company was established in 1989 as a technology consultant and system integrator, and was named Andersen Consulting. In 1991, company received its first major contract with British Petroleum and this gave impulse to the creation of several research laboratories in America and Europe. Company grew and its profits increased swiftly but in 2001 it had to change the name and promote the new brand. Accenture has coped with this task and the new brand became even more well-known than the previous one. In 2001 Accenture became public and incorporated, and placed its safety stock on New York Stock Exchange. Accenture expanded and improved its services more and more within 16 years of its existence and now it is a global leader-company in the segment of consulting and introducing innovations.
- General description
“Accenture is a global management consulting, technology services and outsourcing company. Committed to delivering innovation, Accenture collaborates with its clients to help them become high-performance businesses and governments” – this is how Accenture describes and claims itself in modern business world. So Accenture is a consulting company which helps its clients to increase overall performance and inculcating new technologies, techniques, approaches and so on. Basically the company divides its activities into three main categories: consulting, technology and outsourcing which contain many subcategories.
Consulting branch includes the following: – change management; – corporate strategy; – customer relationship management; – enterprise performance management; – finance management; – human resource management; – service management; – shareholder value; – supply chain management; – workforce performance. Obviously, Accenture’s consulting services imply consulting in most business issues related to companies’ management: starting from the creation of a company and defining its objectives, mission; developing business plans and strategies; finding and analyzing of potential markets; developing market entering strategies; managing companies’ finances and workforce etc; finishing with companies’ liquidations, bankruptcies, mergers and acquisitions.
Technology branch includes: – enterprise integration; – enterprise solutions; – information management; – infrastructure solutions; – IT strategy and transformation; – Microsoft solutions; – mobile technology solutions; – radio frequency identification; – SAP solutions; – systems integration. In other words Accenture is an intermediary between innovative technologies and companies which need to inculcate these technologies. Innovative technologies can be the following: work stations, automated control system, computer-aided manufacturing, computerization and much more.
Outsourcing branch includes: – application outsourcing (improving software performance and choosing the best software suitable for companies); – business process outsourcing (implies outsourcing of complete business functions); – infrastructure outsourcing (means companies’ informational technologies infrastructure outsourcing).
Describing Accenture’s business activities it is important to list main industries which can receive services from Accenture: airlines, aerospace, defense, governments, financial services and much more (complete list is available at Accenture official website). So the company serves most industries that exist on a continuous basis i.e. the clients collaborate with Accenture within many years because its services invaluable.
Today Accenture operates in 48 countries and 110 cities among which there are the following: Argentina (Buenos-Aires), Australia (Sydney, Brisbane, Melbourne, Canberra), Austria (Wien), Belgium (Brussels), Brazil (Rio de Janeiro and others), Canada (Montreal and others), China (Hong Kong, Shanghai etc), Denmark (Copenhagen), Finland (Helsinki), France (Paris), Germany (Berlin etc), India (Bangalore etc), Italy (Milano, Roma etc), Japan (Tokyo), Portugal (Lisbon), Russia (Moscow), UK (London etc), USA (Arizona, California, Colorado, Florida etc) and so on. So Accenture operates on 5 continents out of 7: Eurasia, South and North Americas, Australia and Africa.
It employs more than 123,000 people all over the world, including 4,100 executives. Its employees hold degrees in different spheres and are good specialists in different industries. These employees have a clear understanding of all processes, issues, technologies, engineering processes and evolutions of the industries and they are the key to success of the company.
In order to deliver their services to the clients Accenture established 5 operational groups: communications and high tech (includes communications, electronics and high tech, media and entertainment), financial services (banking, insurance and capital markets), products (automotive, consumer goods and services, health and life sciences, industrial equipment, retail, transportation and travel services), resources (chemicals, energy, forest products, metals and mining, utilities) and government. Such services classification is necessary because Accenture deals with enormous industries amount. Among Accenture’s client base there are the following famous companies: Best Buy, eBay, Telenor, Barclays, British Petroleum, Telecom Italia, Pfizer and many others.
The company is a very responsible one in the terms of social responsibility. It makes large donations in charity and helps people through the whole world. Accenture endowed millions dollars to help people suffered from hurricanes Katrina and Wilma, Asian Tsunami in 2004 etc. Company contributes to education a lot also. Highest standards of social responsibilities in Accenture company are provided by corporate code of ethics which claims to establish good relationships with people around.
Among the main competitors of Accenture company there may be listed the following word-known companies: IBM Management Consulting, Arthur Andersen, Mercer Management Consulting, PricewaterhouseCoopers Management Consulting, McKinsey & Company etc. As far as the market of management consulting, technology and outsourcing can not be estimated (but obviously it’s extremely large) it’s very difficult to discuss market share of a single company. Accenture serves companies in 48 countries and this indicator proves that this company is a real giant in its sphere which strives to globalization and company uses a good strategy. Company strives to be the best and it is in the top list. So Accenture offer its clients the following: extensive industry expertise, broad services, management expertise, outsourcing, proven team, long-term partnership. These highlights are proven already as Accenture collaborates with many multinational companies for many years and thus Accenture expands in new countries and markets. All this makes company a global one indeed.
- Financial indicators
Accenture shows excellent profits and other financial indicators. It reports $15.56 billion of net revenues in fiscal 2004 year and positive 14 percent growth in net revenues in comparison to the previous period. The most profitable industry group is communications and high tech group ($4 billion), then goes financial services group ($3.4 billion), government ($2.1 billion), products ($3.5 billion) and resources group finishes this list with $2.3 billion net revenues. Depending on geographic location the most profitable regions are South and North Americas. Obviously
Diluted earnings per share equal 16.9%, basic earning per share equals $1.22; operating cash flow equals $1.3 billion; the price per share (equity value) is $29.18, company’s common stock volume is 2,173,600. In the rating of top 100 S&P companies Accenture has enviable indicators: 1st place in return on investment capital (56%), 5th in return on assets (17%) and 6th in return on equity (59%).
Accenture is a global leader in the sphere of management consulting, technologies and innovations, which operates in 48 countries and employs more than hundred thousand people. This company exists for 16 years and many of its clients collaborate with Accenture for 10 years. The company shows a significant growth each year including financial growth and physical (it enters new markets and increases its staff) striving to become even more global than it is now. Accenture hires experts in many industries from different countries which have a clear vision of certain industry and manufacture process. Company offers three basic product categories: consulting, technology and outsourcing. Accenture cooperates with many governments and famous companies as British Petroleum, Telenor, Barclays and others.
Globalization and worldwide developments
Globalization increases in turnover each day and businesses increase their presence in the most distant corners of the world. Multinational companies create workplaces and increase employment rate in countries which often can not provide jobs for the population (developing countries). Such companies increase countries’ GDP, stimulate economies and education. Of course wages offered to the workers from developing countries are much lower than the average wages in the West but these wages are quite competitive and attractive concerning the internal workforce markets of developing countries. So all the sides benefit: company decreases its costs without detriment to the quality and people receive jobs. Global businesses provide economical development for the whole world economy and special countries (e.g. informational technology market in India rapidly developed within the last decade and made India to be one of the world’s IT leaders). Many developing countries try to find out their niche in world’s economy by providing priority directions programs in order to attract foreign investments and create workplaces.
Many companies realize that foreign investments can be much more profitable than domestic and often give great growth opportunities for the investor. Countries are interested in receiving foreign investments because they bring positive economic effects for the recipient. So within the last 20 – 30 years international trade’s and investments’ volume increased a lot and this dynamics endures. Large companies understand that by cooperating efforts, knowledge, technologies and resources with overseas companies they can reach more success and expand their business activities. Such cooperation results in decreasing costs and increasing profits along with overall performance. But international cooperation, investments and trade significantly depend on trade tariffs, barriers and regulations from the side of certain governments and organizations (World Trade Organization, World Customs Organization etc) – so international trade and investment dynamics depends on the international and domestic environment a lot.
Developed countries trade with and invest to developing, especially Asian, countries because Asian market is considered to be one of the most dynamic in the world. Foreign direct investments imply that foreign investors hold more than 10% of the shares and have the voting rights, i.e. they participate in the control and the management of the investment project.
Accenture company is an active foreign direct investor since 2002: it realized and continues realizing 18 foreign direct investment projects. Mainly, Accenture invests in China, Ireland and Philippines economies. Accenture’s investments are closely related to its primary activities and primary include informational technology outsourcing and consulting, and outsourcing complete business functions. In 2004, according to the financial statements of the Accenture company, total investment volume equals $340 million (for comparison in 2003 this indicator was $33 million). Probably, Accenture tends to increase its investment volumes in future. Accenture investments give proven returns on investment capital (56% in 2004) so company provide a thorough selection before investing. In July 2005, company claimed to invest $100 million within next 3 years into development of informational management services.
Political, legal and technological environment
As it was already stated above international investment and trade significantly depend on the environment including political, legal and technological.
Political stability which characterizes the general investment climate in the country: revolutions, corruption, bureaucracy may worsen investment climate. Positive political image of a country is a major important component of attracting foreign direct investment. A good way to attract foreign direct investments is to establish organization which will provide necessary steps to achieve this objective (e.g. “Invest in Denmark”) including description of the environment in the country, regulations, potential investment projects, priority lines and any other information related to the country which can be interest for potential investors.
Legal environment is another major factor for international companies because complex, intricate and imperfect legal systems may prevent the growth of international trade and cooperation and vice versa – transparent, comprehensible, consistent and equitable legislation promote international collaboration.
Technological environment varies from country to country and thus certain technological environments can be suitable (favorable) or not for certain industries or business activities.
Accenture operates on a global basis and thus faces many problems with environments in different countries.
China represents a huge market with potentially excessive demand for consulting services and Accenture invests in China (there is a China Technology and Outsourcing Delivery Center in China, Dalian, opened in 2002, which serves many Chinese, Japan, Canada and US industries; there are also two business process outsourcing delivery centers also). Experts consider that most large Chinese companies will not be able to survive without proper consulting and outsourcing services after entering international markets and in order to support domestic companies Chinese government makes certain activities. These activities include different regulations, limitations and barriers of legal and economical aspects. Of course many barriers prevent some multinational companies from entering Chinese market but at the same time Chinese companies enter some international markets in a very aggressive and impetuous way. Since China entered the WTO its market became open to international countries because most barriers were abolished and now China provides a common protectionism politics which implies supporting major national manufacturers by introducing some entering barriers for overseas companies and increased trading tariffs.
There are certain human resource problems in China faced by Accenture and other companies. The most common problem regards qualified human resources. Chinese departments of Accenture company mostly serve Japanese, Korean and Chinese companies but also American, Canadian and European. Thus the problem of proper English language skills raises. Concerning informational technologies skills there are no problems except for lack of qualified human resources for future projects but now there are still lots of resources available. In order to solve these problems China introduced many educational programs and emphasizes a significance of foreign language studying at the educational institutions. Sometimes companies solve these problems by themselves and for their own costs by providing language courses and technical courses for their employees. Such trainings are quite costly and risky because employees can leave the company and find another job within a country or overseas. In order to minimize the risks and the costs companies create attractive conditions for employees and increase their wages after trial period ends. In addition companies provide facilities and premiums for their employees in order to decrease fluctuation movement of personnel.
China is a developing country but its economy grows enormously. In order to provide economical stability and continuous growth the government has to take certain measures and reforms striving to become a democratic society with market economy. For this reason Chinese legislation, taxes, trading tariffs, trading quotas are subjects for constant changes. Some changes can give positive result and vice versa. Sometimes the government makes wrong steps and thus multinational companies have to limit their presence on Chinese market or leave it.
Europe is a developed and quite stable region where most countries have transparent and fair regulations which allow businesses to operate in market economy conditions. In other words, Europe is a place where success or failure of a company depends on its competitiveness. Political risks in Europe are very little but risk possibility still exists there. European Union expands and this is concerned with significant costs and certain probability of failure. It means that European Union can not sustain further expansion and collapse one day. So investments in the European Union are quite safe but they are not as profitable as in investments in China. In addition certain companies can face problems when making business with individual countries, European Union members, when EU establishes some rules and regulations which are essential for operating on the whole EU territory. For example, in order to provide financial services in the United Kingdom company must be certified by Financial Services Authority (FSA) – such certification is required in other European countries too.
- Technological environment
As it was already stated above technological environment is an important factor in international trade and investments. This environment gives birth to many challenges. In the last two decades internet technologies allowed people to run online commerce. Extensive growth of dot-com companies and electronic payments made electronic business to be very popular, available and comfortable for millions people worldwide. Electronic business means selling goods and services online for electronic money or with the help of online payments via credit cards. The most popular e-businesses are e-retailing and electronic financial services. E-retailing means selling tangible and intangible goods online: customers place their orders online, make online payment and receive commodities. Electronic financial services include control panels for managing bank accounts, making online payments, checking balance and much more.
Accenture contributed into this industry a lot – it developed a universal online tool which helps to establish a dot-com business very quickly and without strong effort. Accenture customers can buy this service online too and then set it up in accordance to their needs. Moreover, Accenture provides solutions for dot-com companies concerning increase of their performance, outsourcing and automation etc. Accenture contributed a lot into the sphere of financial services too. It served many banks, insurance companies and governmental organizations related to financial services.
Cross-cultural communication and negotiation
International companies face diverse cultures’ peculiarities and have to adjust business activities in accordance to certain rules and traditions. Accenture operates in 48 countries which populations speak different languages, have absolutely different mentalities, different traditions and practice different religions. All these differences and peculiarities should be taken into consideration in company’s policies, code of ethics and activities. In order to cope with cross cultural barriers, Accenture hires people directly from the area where it operates. Accenture hires only high qualified and motivated people which have good communication and language skills. For example, many toll free phone numbers are served in Taiwan, China and India and are conducted in English and participants do not feel any obstacles or communication problems. So language skills and abilities are vitally important for Accenture employees but company also pays a lot of attention to other essential skills and knowledge related to the position of employee. As it was described above Accenture provides trainings for its employees in order to provide top quality services for its clients.