Understanding PricewaterhouseCoopers' Strategic Resources - Essay Example

? Corporate Strategy Introduction PricewaterhouseCoopers (PwC) came into existence through the merger of 'Price Waterhouse' and 'Coopers & Labrand' in 1998. The merger was in itself a big strategic move to broaden coverage in key markets, and strengthen client service capabilities. PwC currently, operates in over 158 countries employing over 169,000 persons. PwC PricewaterhouseCoopers International Limited (PwCIL) is an umbrella name under which different firms operate as a separate legal entity using brand name PwC. The paper attempts to examine the role strategic resources and capabilities play in the success or failure of PwC. Understanding PwC Strategic Resources Tallman (2009) argues that resources and capabilities are the sources of internal strengths and weaknesses for a firm because its profitability, growth, and success largely depend upon unique strategic resources that it possesses. Thus, strategic resources need to be unique to create competitive advantage over competition. Moreover, strategic resources play a much vital role in the success or failure of the organization, especially when the organization is a services company. Organization’s capabilities such as managerial abilities, learning proficiencies, fast delivery and ability to find proper solutions to the issues are some of the factors that play a key role in formulating strategic choices. PwC is purely a services company active in the numerous fields such as audit and assurance that include internal audit, financial statement audit, corporate reporting, IFRS reporting, risk assurance, actuarial insurance, capital markets, corporate treasury solution; consultation services that include services in finance, operations, technology, risk, people and change; deals that include mergers and acquisition tax, corporate finance, business recovery services, transaction services, valuation and strategy; family business services; and human resource services that include talent management, human capital measurement & benchmarking, social security, and many more. A vast human talent pool that PwC has developed over the years is a major driving force in growth of the organization and making the organization one of the most coveted auditing and consulting firm in the world (PwC, 2013). Tackling Today's Challenges – A Capability Perspective Ever since the concept of globalisation has made rapid strides the firms have been facing an increasing challenge to build competitive advantage in the market place. Under the changed scenarios, the firms have been compelled to make strategic collaborations or partnerships; mergers or acquisition to enhance synergy in their operations and reduce their overall costs. In the most dynamic and ever-changing world, organisations need to show enough resilience and adjust to the new situations quickly. Tallman (2009) emphasises that dynamic capabilities of the firm help resolve emerging issues more effectively. PwC is an auditing cum consulting services firm of a long standing. Overtime, the company has acquired numerous capabilities and strategic concepts that have put the company into the forefront in the global audit and consulting business worldwide. The key strength of PwC is a capacity to tackle today's challenges based on depth and breadth of its capabilities. The company serves to the largest of the multinational corporations to small and medium-sized enterprises. The company's clients are from the different geographical areas working in their own business environment to meet their objectives. It would be interesting to explore how PwC has been successfully accomplishing various tasks through the following example. Enterprise Architecture– A True Capability Assessment In 2012, International Data Corporation (IDC), a market research firm, conducted vendor assessment of the enterprise architecture (EA) practices of large consulting firms. The assessment took into consideration qualitative and quantitative aspects of the services provided based on certain assigned criteria. IDC analysts framed standard characteristics for measurements through interviews and surveys with market leaders, participants, and users. The scores were based on user surveys and interviews, input received from the IDC experts with regard to each market (IDC, 2012). It will be most appropriate to understand the term 'Enterprise Architecture' before proceeding ahead to understand the result analysis. According to IDC, “Enterprise architecture is the organizing logic for business processes and IT infrastructure reflecting the integration and standardization requirements of the company's operating model. The operating model is the desired state of business process integration and business process standardization for delivering goods and services to customers” (IDC, 2012). In simple terms, EA describes about the organizational capability to deliver what customer needs. The Enterprise Architecture framework is segregated into four classes: business architecture, application architecture, data architecture, and infrastructure architecture. Business architecture encompasses governance; organization structure; risk and compliance; business process design and remodeling. Application architecture framework is made of custom application development; application integration; application consolidation and cloud architecture. Data architecture consists of business analytics; data management; enterprise performance management; and enterprise content management. Infrastructure architecture takes into account security; database; storage; networks; mobility; and server (IDC, 2012). As defined by the analyst Gard Little, enterprise architecture has gained prominence for its stability in view of enabling technologies such as cloud services. IDC's finding for PwC can be described in the ensuing paragraph (IDC, 2012). The following Schematic describes how PwC fared among its major contenders. Source: http://idcdocserv.com/233918e_pwc PwC responds quickly and effectively to the client needs across regions and sectors using local resources, technology experts and through its large network of EAs. The firm's EA practitioners exhibit excellent business skills across a wide range of business functions to cater to the needs of its clients. The areas covered are CRM, ERP, change management, cloud services, security, and information management. PwC strengths are many and varied that include capability to leverage resources globally employing proven tools and methodologies. Clients look for innovative solutions and completion of the project within given schedule and that is the stronghold of PwC (IDC, 2012). As reported by IDC, vendors that are positioned in the upper right quadrant have excellent capabilities along with the appropriate set of strategic initiatives to grow in the given business environment. The size of the circles represent vendor market share. The plus sign with PwC indicates that the company has shown positive growth rate in 2012 over the previous year. The position along the strategy axis (x-axis) is an indication of vendor's future strategy that will be necessary to meet the customer needs in next 3-5 years. The strategy category includes customer segmentation, go-to-market plans for the future. This also assesses whether a supplier's strategies in terms of procurement, spending, and delivery are aligned with customers’ future requirements over a period of 3-5 years. A position toward the right of center, as seen in case of PwC, indicates that the company is able to differentiate itself from other players of the market. Focusing on Emerging Economies– A Strategic Move Post 2008 financial crisis and recession across Europe and Americas has hit PwC too. Limited IPO, merger and acquisition activities among corporate clients has threatened the huge retrenchment across big consulting firms; KPMG has already announced that up to 3 percent of its UK workforce could be out-of-job if there is no improvement in the economy. It is commendable that so far PwC has not been forced to think about retrenchment plans though the company has agreed that conditions have deteriorated. Powell also puts his point straight on competition that it is fierce and each job that is earned comes only after a huge reduction in price. The firm so far has been able to relocate and reassign the work across different areas (Crump, 2012). Crump (2012) critically evaluates the big plans of PwC as the company seems to believe that the next round of battle in the consultancy business will not be contested in Europe or the US. In an apprehension made out it is believed that number of Chinese firms will openly challenge the position of leading accounting and consulting firms in the near future and in order to counter the act, PwC is in the process of investing huge sums to the tune of ?620m in developing its businesses in emerging markets over the next several years. In a strategic move, PwC has been shifting its focus to BRIC (Brazil, Russia, India, China) countries where the main growth of business is likely to come from. As per the last financial year revenue estimates, One-fifth of the revenue of PwC is generated from the emerging markets and the same is likely to double up by 2017. As declared by Powell, chairman and senior partner of PwC, growth prospects in Africa are also huge and the company is making all out efforts to exploit those emerging opportunities. Gaining and maintaining competitive edge is a necessity for survival and growth of any organization; diversity and inclusion are some of the key aspects to gain competitive advantage. PwC fully recognises this fact and that is why it has embedded diversity and inclusion in its approach towards people and that can be gauged from the fact that PwC's 900 partners are women and that is one of the best tally among the top audit firms. Recruiting and retention is certainly an important aspect of human management but transforming culture of the organisation to make it market-focused and people-focused is much more crucial. PwC has been also helping its clients in gaining competitive edge by formulating strategies that incorporate aspects of diversity, inclusion and culture. Adding Value to Client Organisation It is pertinent to note that PwC has been successfully catering to the clients’ diverse needs for last several decades. PwC is known for its leadership position in many of the management services functions adding value to client’s organisation. The company has been recognised for its efforts by the Association of Management Consulting Firms (AMCF) awards. These awards are dedicated for the outstanding contribution in various disciplines and PwC has been chosen in at least four categories showing excellent contribution adding significant value to the client organization (AMCF, 2013). Change Management: That is one of the most crucial strategic areas in Human resource management. PwC worked closely with Adecco, a provider of staffing solution, and helped them improve work processes. PWC was involved after two large acquisitions by Adecco to bring about a continuous and sustainable improvement in cultural and behavioral change of people for improved results. Customer Engagement: This is an important long-term marketing strategy. ING Private Banking, the Netherlands engaged PwC to improve services to its clients. PwC created service model that helped ING in providing 24/7 daily banking services to the customers through local staff and portfolio managers. This also included wealth planning services delivered to the clients through a new facility of Private Banking and that was highly admired by bank's clients. Corporate Responsibility: Sustainability is not only a corporate responsibility but also an important corporate strategy for social outcomes (Roome, 1998). Working for PUMA, PwC created one of the most sustainable companies of the world by designing and developing the world's first ever environmental profit and loss account. This helped PUMA to address environment concerns in its operations (AMCF, 2013). Operational Performance: Operational efficiency brings cost reduction and increase profitability of the organization. PwC partnering with Pizza Hut, Inc., developed and streamlined all operational issues to meet customer expectations. This resulted into significant cost savings for the Pizza Hut apart from improved customer satisfaction. Apart from the above category achievements, PwC was also adjudged a finalist in the Strategic Operating Model Design category and in the Growth Strategies category (AMCF, 2013). Auditing Failures – A Poor Resource Utilisation Norris (2013) from ‘The New York Times’ reports that the Public Company Accounting Oversight Board (PCAOB), the regulatory authority for auditing firms in the US, has rebuked PwC for its failures to locate financial irregularities while auditing accounts of the companies during 2008 and 2009. According to the report, the quality control system at PwC failed to give assurance that its audit work met applicable standards. The report further said that auditors did not apply required professional skepticism for the management acts during those years. As per regulatory board, audit deficiencies are not isolated technical weaknesses but shows lack of quality control system in place. PwC management on its reply said they were "related to some of the most complex, judgmental and evolving areas of auditing” (Norris, 2013); however, the company did show its commitment to improve its work. Banking collapse across Europe and Americas has caused a lot of blemish on the audit firms and audit firms are largely considered responsible for not reporting the financial irregularities in time that subsequently led to the large scale financial failure. Powell of PwC considers the financial collapse a systemic failure for which one party cannot be made responsible; however, he is positive towards the future because of several measures taken by regulatory authorities in recent years (Crump, 2012). It is also true that PwC is not the only company that has been rebuked for the audit lapses; in fact, other similar large companies too have been accused of similar lapses. Nevertheless, this is certainly an area where PwC needs to focus its resources to improve its auditing services to not only satisfy regulatory authorities but also entire investment world for investors heavily depend on audit reports to know about health of the companies. If the company fails to address the issue satisfactorily then the company’s reputation as well as its business can get impacted immensely. Conclusion Thus, it is sufficiently clear from the above study that strategic resources and capabilities can play a vital role in firm’s success or failure. Strategic resources when properly streamlined to face emerging challenges can create competitive edge in the market place and bring success to the firm and failure to do so could be disastrous in this dynamic business world. Bibliography AMCF (2013). Association of Management Consulting Firms Announces Winners Of The 2013 Amcf Awards. [Online] Available from http://amcf.org/2013-awards-press-release.pdf (Accessed 14 March 2013) Crump, R (2012). Interview: PwC chairman and senior partner Ian Powell. [Online ] Available from http://www.accountancyage.com/aa/interview/2229149/interview-pwc-chairman- and-senior-partner-ian-powell (Accessed 14 March 2013) IDC MarketScape (2012). Competitive Analysis. [Online ] Available from http://idcdocserv.com/233918e_pwc (Accessed 14 March 2013) Norris, F. (2013). Regulator Expresses Doubts about an Auditor’s Procedures. The New York Times. [Online ] Available from http://www.nytimes.com/2013/03/08/business/pwcs- audit-procedures-rebuked-by-regulator.html?partner=rss&emc=rss&_r=0 (Accessed 14 March 2013) PwC (2013). Our Services. [Online ] Available from http://www.pwc.com/gx/en/audit services/index.jhtml (Accessed 14 March 2013) Roome, N. (1998). Sustainability strategies for Industry. Island Press. Washington, DC Tallman, S. (2009). Global Strategy. John Wiley & Sons, Ltd. UK. Read More