Ready for the next stage

Domestic consulting companies must cash in on the growing opportunities

Although China is not the largest consulting market in the world, it is certainly the fastest growing and has all the right attributes to take the helm. The nation's rapid economic growth and integration with the global economy have spurred the demand for such kind of services.

The expansion plans charted by several State-owned and private companies in China have also acted as a major catalyst in the growth of the consultancy business. Many of these Chinese companies are now part of the top 500 enterprises in the world. The global recognition has also brought with it the strategic need to revamp internal operations and management practices.

There is also growing demand from Chinese companies for services like internationalization, strategic transformation, information technology, professional management system, professionalism and mechanism transition.

Not surprisingly, the Chinese government has also been an important client for several global consulting companies. The government has started to use the help of consulting services to come up with more adjusted and balanced policies.

With China's reform and opening-up entering its fourth decade, the government is also transforming from a management-oriented government to a more service-oriented one. There are lots of areas for the government to seek help from consulting companies, especially on how to increase efficiency and how to adapt to new opening-up demands.

With such bright prospects, it does not come as a surprise that big consulting firms like BCG, Roland Berger and Accenture have a strong presence in China. These firms have helped bring to China unique concepts, global vision and new techniques.

Multinational consulting firms have also introduced a number of advanced concepts, which have helped Chinese enterprises update their business and management concepts and also keep up to date with international norms and standards.

The multinational consulting firms already have enough experiences in solving the problems relating to business development in markets like North America, Europe, Japan and other developed economies. As their stage of development is still ahead of China, their industry evolution, successful experiences and lessons of failure can provide Chinese enterprises with a broadened vision.

There is no doubt that multinational consulting firms have introduced many advanced management methods into China. This will directly help the progress of Chinese companies and also have a positive effect on macroeconomic development.

Though foreign consulting companies are making great achievements in China, local consulting companies have also been growing. However, because of some factors, Chinese consulting companies still have a long way to catch up with the foreign ones.

There is a huge gap between Chinese and foreign consulting companies in terms of scale. The largest Chinese consulting company has just managed to surpass business of 100 million yuan ($15.7 million, 12.76 million euros). The China business for most of the foreign brands is far higher than this, and much more if one were to include global business.

There is also a big gap in the scale of customers for both sides. Large multinational consulting firms in China have attracted a lot of top-scale clients such as State Grid, PetroChina, Sinopec, China Telecom and many State-owned banks. In contrast, local consulting firms have only some medium- to large-sized clients, but no real heavyweights.

There is also a gap in knowledge resource. Multinational consulting firms have decades or even centuries of development, something that has helped them accumulate considerable knowledge resource, case studies, research and knowledge base for system improvement. It is difficult for local Chinese consulting firms to compete with them in this regard.

There are also gaps in the international network, especially the talent network. Multinational consulting firms that primarily aim to serve the Chinese market can integrate their global talent resources for their clients in China, while the Chinese consulting firms rarely have access to such resources.

There is also considerable difference in the way the two sides carry out prospective study and analysis. Since consultation often involves the guidance for clients to develop and stay ahead of competition, it is important for the consulting firm also to have a forward-looking vision. Domestic consulting firms, however, are grossly inadequate in this regard.

Though domestic consulting firms have started to spring up in China, it still remains a new service industry for many players. Consulting firms with thousands of consultants have emerged, but essentially, their comprehensive strength, such as per capita income and effective profit yields, still lags international consulting firms.

If the Chinese economy continues to maintain rapid growth, the consulting industry will blossom further and some local firms may soon be able to reach the scale of international consulting firms.

The author is president and chief partner of Raise International Group.

(China Daily 07/13/2012 page7)