Classic Business School BS 👌

Not sure you know but... I did an MBA 😏. This means that, by definition, I'm really smart..right ?

Contrary to popular belief, I'm actually not. In fact, I'm quite a simple minded fellow.

However, as demonstrated below, there are some quite easy to use frameworks that can be adopted in order to undertake an industry analysis. This can be done to understand your competitive surroundings, your company's target market or an industry you're looking to invest in.

Below is Mint Crowd's analysis of the interim management space: (UK - 2018)

1) Competitive Rivalry: High

Despite the increased barriers to entry for new comers (see ‘threat of new entrants’ section), the growth in market share in this area has meant that investors are continuing to pour money into this space (Venture Giants, 2018), in line with the rise in the gig-economy and management consulting space (Consulting UK, 2017).

There are a number of established players in this space with strong brands, relationships and reputations that hold a large portion of the market share. Within this, the few business that have invested in the internal talent and technology resources to facilitate the fastest delivery of candidates have yielded the highest margins in the junior – medium space, whilst businesses that can provide the most streamlined and ‘true-to-the-brief’ services have yielded the highest margins at the senior end of the market (Consultancy UK, 2018).

Companies that have invested in technology have reduced break-even points, facilitating a change in pricing if required.

2) Supplier Power: Medium

In the context of freelance management consulting recruitment, suppliers are candidates who use the platform of recruitment businesses to source their projects.

The power of candidates to negotiate in this space is well balanced with the power of the recruitment business. Whilst the candidates themselves are in high demand and often-times difficult to find, the recruitment businesses hold the relationships with the top clients and source the most attractive projects.

This becomes more complex when considering the increased competitive rivalry. This drives recruitment businesses themselves to bring down their margins in order to attract more candidates, improving the supplier power.

3) Customer Power: Medium

The customers in this space have varying power depending on their employer brand recognition, budgets and strategies. Businesses that are well known with high budgets and who have the pick of many candidates are in a strong position to negotiate and are typically difficult clients to break into. Businesses with a limited brand recognition have lower bargaining powers and subsequently tend to pay higher margins in order to bring in the top freelance talent.

On top of this, growing trends towards the need to bring in top freelance talent to compete (Upwork, 2018) means that companies wishing to tap into top talent need to pay as much as their competitors in order to gain access to this service.

Similar to the previous section, where recruitment businesses bring down their margins to seize market share, they significantly increase the power of customers to negotiate.

4) Threat of Substitutes: High

In the context of freelance management consulting recruitment space, substitutes services are management consulting businesses themselves. Given the increased competition in the management consulting space, many businesses are starting to work on smaller projects in order to gain access to clients and meet sales targets (Hinge Marketing, 2018). This means that the types of projects traditionally undertaken by freelancers are being picked up by consulting businesses themselves, who can typically provide a better overall service.

5) Threat of new Entrants: Medium

Whilst this has traditionally been high in the recruitment space, given the low barriers to entry, the increased requirement to invest in technology tools to attract the best candidates, generate the warmest leads and streamline the placement process (Bullhorn, 2018) has changed this. This need for upfront capital has increased the barriers to entry for new businesses, however businesses that have invested in technology tools and found a business model that allows for cost leadership (Porter, 1978) have found it increasingly easy to claim the market share of established players, decreasing the importance of strong relationships at the middle – junior end of the market.

Summary

Key themes of note throughout this analysis suggest that the driving force of competition and transformation in the sector is the adoption of technology tools and investment in talent. Some established players that have not invested in technology are at risk of losing their client base and access to top candidates, whilst the businesses that have adopted technology tools are claiming vast swathes of hitherto inaccessible market share and have been able to lower their break-even point, thus having more flexibility with their pricing. Further themes driving change in the industry could be the rise in demand for freelancers, causing changing preferences in the majority of customers.

There has also been a shift in the industry towards a more transactional, pricing and service led model at the middle end of the market, which has de-emphasised the importance of client and candidate relationships.

The power of customers and suppliers has not hugely changed over recent years and does not appear likely to do so, but businesses must be aware of the threat of substitute consulting which is becoming increasingly high, given the increased competition in that space.

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