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Accenture plans to expand into the Russian management consulting market. Key aspects of the strategy include: 1) Entering oil/gas and financial services industries initially due to their attractiveness and ability to utilize Accenture's strengths. 2) Developing practices gradually based on demand from entered industries. 3) Building relationships initially with offices of Accenture's international partners in Russia and conducting active sales. 4) Differentiating from competitors by leveraging Accenture's global scale, research capabilities, and focus on implementation.
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- 1. Dmitry Chechulin Eugenia Slivko Serafima Krasnonosova Victoria Meos Accenture expansion to Russian market of management consulting Moscow 2010
- 2. Summary and key figures 1. The market penetration strategy is to be realized through step-by-step entering to the number of industries depending on their attractiveness as revenue generation and the ability to utilize Accenture competitive advantages. 2. The most important to be entered at the moment of market entry are Oil&Gas and Financial services. 3. The relationship building process on Russian market should be started with contacting the offices of Accenture global clients in Russia. 4. The most important actions to be done to supplement Accenture competitive advantages at the moment of market entry are: 1. Create local research team 2. Headhunt 2 partners from competing consultancies 5. The initial investments on office opening will account for $3,5 mln 6. The overall strategy implementation will bring $106 mln as revenue in 2020
- 3. Industries and practices development milestones. Sales strategy. 2011 2013 2015 2017 2019 1 Industries to Telecom Pharma&Health Oil&Gas Transport Energy&Utilities Mining&Metals IT enter (App.1) Finance&Banking Trade FMCG Manufacturing 2 Practices to • Process & • Customer • Supply Chain • Talent & Innovation Relationship Management Organization develop Management • Finance & Management • Strategy • Risk Management performance Performance Management • Accenture • Active sales start • Increase the share of strategic and • Achieve the 3 Sales strategy international using developed long operational projects return rate of partners research group • Continuing the active sales policy clients at Russian offices to define targets through organization of large about 70-80% industrial conferences to attract projects manage-ment end sell services • Relationship building via • Major clients share in revenues implementation of lesser and accounts for 40-50% mid-sized operational projects Key strategy points: •Overall industry entrance strategy is to start the relationship building with major clients in the most revenue&profits generating and the most growing business fields to ensure the steady flow of returning clients since 2014-2015 (App. 2) •As it is not able to bring the whole AMC practice to Russia at one moment different practices are to be developed gradually according to demand from industries entered. To be able to lend services of practices yet not developed in Russia the certain amount experts from other AMC offices are to come to Russia on project basis. •The key strategy of sales is to build relationships with the offices of Accenture international partners in Russia and start active sales (industries analysis -> market players analysis -> recommendations&services presentation to chosen companies)
- 4. Differentiation from competitors. Competitive advantages comparison. Booz McK Bain BCG ATK Development and enforcement of advantages Attract strong IT practice experts from Strong IT practice European offices to ensure successful start in financial sector projects. Operation consulting Perform operation consulting as first Russian superiority projects to build up an image of “implementation” consultancy and start Focus on relationship building. implementation Create Russian branch of Accenture Institute of Research power High performance along with market entry. Diverse glocal Two Russian partners from top consultancies practice (200 offices) should be headhunted at 1st stage of market entry to acquire a local business understanding and contacts. - Equivalent strength of competitor - Accenture outperforms the competitor - The competitor doesn't possess such power Accenture main competitive advantages in comparison with main rivals (App.3) powers show that the unique combinations of Accenture strengths will allow it successfully compete for the major clients on the market.
- 5. Personnel structure. Recruitment strategy. Engagement principles. 1 Strategy of personnel development (App.6) 2 Personnel recruiting sources (App.4) 160 8 P A R 140 4 • During first 6 T N months 2011 two E R Partners from P 120 7 Accenture world R 18 I office come to N C 3 Russia. By the end I 100 15 2011 two Partner, P A L two Managers and M 80 two Consultants A 6 from top companies N (specialized in A 2 G 60 10 120 energy and finance E 5 sectors) will be R 1 90 acquired. C 40 7 O 4 N 1 54 • During 10 years S U 4 Accenture Russia L 20 36 T R 24 will have average A 4 N E project team T S Back 0 2 Manager + 2 Research department E A office: 2010 2012 2014 2016 2018 2020 Consultants R HR, IT Back office C H 3 Recruitment methods (App.5) 4 Engagement strategy This diagram represent the average percentage of time spend on the Project by each group. 5
- 6. Financials aspects of strategy implementation Key assumptions Total revenue and total costs (App.7-9) - We assume that 2 types of project will be carried out (50% of projects are strategy, 50% - operation) by year, $ $106 $120 Strategy project Operation project $94 $82 $100 Average duration, $66 $80 2-3 6-9 months Million $ middle of 2012 is $52 break-even point $42 $60 Price per month $ 250 - 350k $ 200-300k $28 $40 1 manager+ 2 1 manager + 4 $19 $18 $21 $23 Team $11 $12 $15 consultants consultants $9 $8 $20 $2 $6 $4 $0 $3 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Initial investments Total costs $3 420 250 Total costs Total revenue 1. Personnel $2 898 440 1.1. Salaries of consulting staff $2 266 000 1.2. Salaries of support staff and Revenue (operation and strategic researchers $312 000 projects) by year, $ 1.3. Recruitment (career fairs, finding of support staff via recruitment agencies) $21 600 $120.00 Million $ 1.4. Education and training, retreats $119 540 $100.00 1.5. Medical assurance $31 300 $27.00 $24.00 $80.00 1.6. Other Benefits $148 000 $21.00 2. Office $521 360 $13.20$16.80 $70.00$78.75 $60.00 Office capacity, people 26 $10.80 $61.25 $7.20 $40.00 Office sq. 400 $4.80 $49.00 2.1. Office rental $260 000 $38.50 $20.00 $0.60 $2.40 $14.00 $21.00$31.50 2.2. Cleaning $7 200 $7.00 $- 2.3. Office maintainance $48 000 $1.50 2.4. Equipment $200 000 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2.5. Consumables $6 160 Revenue, operation projects Revenue, strategic projects 3. Support services (taxi, copycenter) $7 360
- 7. Appendixes
- 8. App.1. Comparative industry attractiveness analysis Av. rev. Av. profits Competition Growth Accenture best Need in consulting Average by comp by comp. level rate practices Oil&Gas - Accenture Global Energy Board - Extensive research - Complication of extraction - Global markets entry - End-to-end solutions - Increase of efficiency importance Energy - Strong utilities practice -Strong need in modernization and innovations -Not optimal org.structure is common Mining -Thought leadership in mining (strong R&D) -Companies still haven’t recovered from losses of economic downturn -Powerful relationship with world -High capitalized business equals high major miners costs of decisions made Manufacturing -Extensive research on performance issues -Highly cyclical business -Constant need in performance - Global Delivery Network improvement FMCG - High potential of modern IT systems utilizing for sufficient -Simultaneous rationalizing of operations increase in effectiveness in channel -Fast market – need for innovation management and client relations - Majors have their own consulting Trade -End-to-end services offering for Trade enterprises -Highly volatile environment - Constant need for performance optimization Finance -Work experience with top banks - Connection with IT best practice -Expected strong growth - Expectations of the “rules” change - Alnova Financial Solutions Pharma & - ICD-10 solution -High potential of development - Lack of large clients in Russia Health - Government support of change in the industry Telecom & -Network outsourcing services - Constant new technologies development results in issues of R&D media - Software-as-a-service (SaaS) model investments choice and modernization Development -Building materials practice - Intelligent infrastructure solutions -Severe crisis impact on developers - High importance of cost optimization Transport -“Port in a Box” solution - IT integration services - Significant growth opportunities due to globalization development IT N/A -Provision of access to specialized soft -Crucial role of time in the market strategy -R&D transform services - Innovation process importance Metals - Industry thought leadership -Knowledge retention - Business complexity increase due to globalization processes Source: Expert-400 rating, accenture.com, SmartCom analysis
- 9. App.2. Expert 400 industry analysis № of Net profit 2009 Net profit 2009, Rev 2009 by Industry companies in Rev 2009 mln RUB Growth rate, % Rev 2009, $mln by company, mln mln RUB company, $mln Expert 400 RUB Oil&Gas 13 8 428 846,0 -6,6 265 726,6 1 605 391,2 20 440,5 123 491,6 Finance 41 3 049 189,9 26,7 96 128,5 115 950,6 2 344,6 2 828,1 Trade 80 2932716,2 6,4 92456,9 79279,5 1 155,7 991,0 Metals 22 2449835,8 -25,0 77233,1 77349 3 510,6 3 515,9 Transport 26 2 218 520,2 1,2 69 940,9 175 693,7 2 690,0 6 757,5 Energy 25 1 758 924,6 14,0 55 451,5 30 940,5 2 218,1 1 237,6 Manufacturing 49 1 540 827,2 -22,1 48 575,9 -41 164,0 991,3 -840,1 Development 48 1 196 273,8 8,8 37 713,4 -2 054,2 785,7 -42,8 FMCG 33 1 045 913,6 11,5 32 973,6 64 405,4 999,2 1 951,7 TMT 12 965 951,3 0,4 30 452,4 125 528,1 2 537,7 10 460,7 Mining 9 413 844,4 9,8 13 046,7 52 755,1 1 449,6 5 861,7 IT 8 170 188,4 -17,4 5 365,3 н.д. 670,7 N/A Pharma 1 24 095,4 68,1 759,6 6 836,4 759,6 6 836,4 1st to enter: •Oil&Gas industry should be entered right from the start as it has the highest potential of organizational improvement revenue generation •Finance sector also is of key importance as strong growth is expected Further development of industries practice depends on the development potential of each one of them. The smallest (in terms of major and mid-sized companies operating) and the less growing are to be entered later when company has enough personnel power to handle projects in less margin generating spheres.
- 10. App.3. Accenture competitive advantages in comparison with main competitors Key competative advantages Companies A.T. Kearney Bain BCG Booz McKinsey IT technologies combined with the have some IT Technologies understanding of client needs increase (internet-bank model) efficiency of the company End-to-end practices and innovative well known for operational a lot of operational have operational have operational have technologies allow to reach 1st place in work, especially sourcing consulting in Russia consulting (40% of consulting operational operation consulting business) consulting Special focus on implementation of implementation practice is focused on more theory the strategy provide client with an present, but not a key factor implementation than opportunity to reduce costs of the recently implementatio project. n Consulting solutions prove to be unique track trends in a range of have Strategy institute heavy emphasis a knowledge and up-to-date for every project due to industries (a think tank to apply on research factory (more great attention to research. insights from different theoretical) academic disciplines to the strategic challenges) Presence of company in 200 offices big presence in Europe big presence over the offices in present in over the world permit to deliver (especially Southeast Europe), world, also in Asia, Europe, more many highest value to client through diversity but not so diverse globally Australia interested in countries and cooperative international work India secrecy and a lot of people with vast clear industry came first Other key advantages over confidentiality experience in different expertise Accenture sectors not so structured lack of system lack of Other key disadvantages approach creativity size
- 11. App.4. Recruiting strategy by the periods • PARTNER • PRINCIPAL • Such proportion of recruiting source is • Such proportion of recruiting source is averaged for 10 averaged for 10 years years • During first year Partners are transferred • There is no principal in first year from Accenture world office (2) and from top • When new service line is developing Principal from consulting companies (2) Accenture world office is transferred • Further, all Partners are grown up inside • Further, all Principals are grown up inside Accenture Russia Accenture Russia • MANAGER • CONSULTANT • Such proportion of recruiting source is • During first year the Company will acquire 2 Consultants from top averaged for 10 years consulting companies • During first year 2 Managers acquired • Further, most import source for Consultant recruitment will from top consulting companies business case competition, organized by the Company in autumn • Further, the most part of Managers will be annually c grow up inside the Company (70%). When • The Company determinate the pool of universities in Russia, new service line will be launched - Managers which will provide graduates with different specializations (physics, will be transferred from Accenture world economics, math, biology and etc) office (approximately 25% ) • Moreover, the Company will attract middle managers from industry sectors (12%). • RESEARCHER •During first 2 years the Company will acquire Researchers from top consulting companies (95% of all employed Researchers) and from Accenture world office (5%) • Further, 100% researches will be recruited due to web-sites and newspaper articles
- 12. App.5. Career development in Accenture Russia • PARTNER • PRINCIPAL • Opportunity to growth • Opportunity to develop professionally services provided by Accenture • Opportunity to develop in Russia services provided by Accenture • Opportunity to operate in the in Russia growing market • Opportunity to operate in the growing market • MANAGER • CONSULTANT • Opportunity to growth • Opportunity to be promoted professionally annually • Opportunity to receive • Opportunity to operate in the c experience in the growing market growing market • Opportunity to develop • Opportunity of secondment at Accenture services in Russia Accenture world office
- 13. App.6 Personnel by years Percentage of personnel groups in Total staff per year 182 200 2020 will be… 164 144 120 150 Partners 4,4% 97 Principals 4,3% 83 100 Managers 10,1% 60 Consultants (strategy) 47 8,2% 32 Total stuff per year 26 50 Consultants (operation) 57,7% Researchers 4,4% Support staff 10,8% 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total Other Consultants Consultants Support Total staff consulting Partners Principals Managers Researchers staff (strategy) (operation) staff staff Quantity per x x x x 1 1 2 4 x x project Utilization x x x x 0,30 0,70 1,00 1,00 x x 2020 182 154 28 8 8 18 15 105 8 20 2019 164 138 26 8 7 16 13 93 7 19 2018 144 121 23 7 6 14 12 82 6 17 2017 120 98 22 7 5 11 9 65 6 16 2016 97 78 19 6 4 9 7 51 5 14 Year 2015 83 65 18 6 3 7 6 42 5 13 2014 60 44 16 5 2 5 4 28 4 12 2013 47 31 16 5 1 3 3 19 4 12 2012 32 17 15 4 1 2 1 9 3 12 2011 26 11 15 4 0 2 1 4 3 12
- 14. App.7. Cost structure for 2011 - 2020 Year 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 $22 870 $20 877 $18 117 $12 178 $10 606 $3 863 $3 420 Total costs $15 340 455 $7 758 968 $5 889 998 096 903 670 476 497 470 250 $21 399 $19 422 $16 993 $11 408 $9 847 $3 460 $2 898 1. Personnel $14 236 490 $7 019 668 $5 474 868 444 696 257 227 931 940 440 1.1. Salaries of consulting $19 597 $17 740 $15 522 $10 333 $8 847 $2 926 $2 266 $12 922 000 $6 258 000 $4 772 000 staff 500 000 500 000 000 000 000 1.2. Salaries of support staff $495 132 $464 352 $432 564 $409 632 $374 568 $361 464 $326 400 $326 400 $312 000 $312 000 and researchers 1.3. Recruitment (career fairs, finding of support staff via $39 913 $36 835 $33 656 $31 363 $27 857 $26 546 $23 040 $23 040 $21 600 $21 600 recruitment agencies) 1.4. Education and training, $989 778 $896 287 $784 776 $654 293 $524 141 $449 579 $319 428 $245 128 $152 540 $119 540 retreats 1.5. Medical assurance $261 121 $234 222 $205 760 $170 202 $136 661 $116 342 $82 800 $63 300 $40 800 $31 300 1.6. Other Benefits $16 000 $51 000 $14 000 $49 000 $12 000 $47 000 $10 000 $45 000 $8 000 $148 000 2. Office $1 468 853 $1 453 407 $1 123 063 $1 102 615 $769 350 $757 665 $738 400 $414 680 $402 080 $521 360 Office capacity, people 200 200 150 150 100 100 100 50 50 50 Office sq. 1600 1600 1200 1200 800 800 800 400 400 400 2.1. Office rental $1 040 000 $1 040 000 $780 000 $780 000 $520 000 $520 000 $520 000 $260 000 $260 000 $260 000 2.2. Cleaning $24 000 $24 000 $18 000 $18 000 $12 000 $12 000 $12 000 $7 200 $7 200 $7 200 2.3. Office maintainance $192 000 $192 000 $144 000 $144 000 $96 000 $96 000 $96 000 $48 000 $48 000 $48 000 2.4. Equipment $169 181 $158 148 $146 474 $131 868 $118 107 $109 761 $96 000 $88 200 $79 200 $200 000 2.5. Consumables $43 672 $39 259 $34 589 $28 747 $23 243 $19 904 $14 400 $11 280 $7 680 $6 160 3. Support services (taxi, $186 300 $165 600 $144 900 $115 920 $91 080 $74 520 $49 680 $33 120 $16 560 $7 360 copycenter) 4. Client acquisition costs (Industry-specific Management Consulting Conferences , $600 000 $600 000 $600 000 $600 000 $600 000 $400 000 $400 000 $400 000 $0 $0 entertainment events for clients, etc) 5. Social responsibilities $100 000 $100 000 $100 000 $100 000 $100 000 $100 000 - - - -
- 15. App.8. Costs dynamics Peronnel Office $1,453$1,469 $1,600 $21,399 $25,000 $19,423 $1,400 $16,993 $20,000 $1,103$1,123 $1,200 $14,236 Thousands $ Thousands $ $15,000 $1,000 $11,408 $738 $758 $769 $9,848 $800 $7,020 $10,000 $600 $5,475 $415 $521 $400 $5,000 $402 $3,461 $200 $2,898 $0 $0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Personnel Office Support services Client acquisition $186 $200 $600 $600 $600 $600 $600 $700 $166 $145 $600 $150 $500 $116 $400 $400 Thousands $ Thousands $ $400 $91 $400 $75 $100 $300 $50 $50 $200 $33 $100 $17 $7 $0 $0 $0 $0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Support services Client acquisition costs
- 16. App. 9. Number of projects, Accenture need to achieve strategic goal of $100 000 000 in 2020 To achieve strategic goal in 2020 Accenture should perform: - 45 projects on strategic development and - 45 projects on operations (process implementation, etc) Strategy projects Process Implementation projects Year Total Revenue Revenue, strategic Quantity of Average Average Average price Revenue, operation Quantity of Average price per duration, mon duration, projects projects per month projects projects month ths months 2020 $ 105 750 000 $ 27 000 000 45 $ 300 000 2 $ 78 750 000 45 $ 250 000 7 2019 $ 94 000 000 $ 24 000 000 40 $ 300 000 2 $ 70 000 000 40 $ 250 000 7 2018 $ 82 250 000 $ 21 000 000 35 $ 300 000 2 $ 61 250 000 35 $ 250 000 7 2017 $ 65 800 000 $ 16 800 000 28 $ 300 000 2 $ 49 000 000 28 $ 250 000 7 2016 $ 51 700 000 $ 13 200 000 22 $ 300 000 2 $ 38 500 000 22 $ 250 000 7 2015 $ 42 300 000 $ 10 800 000 18 $ 300 000 2 $ 31 500 000 18 $ 250 000 7 2014 $ 28 200 000 $ 7 200 000 12 $ 300 000 2 $ 21 000 000 12 $ 250 000 7 2013 $ 18 800 000 $ 4 800 000 8 $ 300 000 2 $ 14 000 000 8 $ 250 000 7 2012 $ 9 400 000 $ 2 400 000 4 $ 300 000 2 $ 7 000 000 4 $ 250 000 7 2011 $ 2 100 000 $ 600 000 1 $ 300 000 2 $ 1 500 000 1 $ 250 000 6