The Internationalization Process of McKinsey and Company Essay Example
The Internationalization Process of McKinsey and Company Essay Example

The Internationalization Process of McKinsey and Company Essay Example

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  • Pages: 12 (3162 words)
  • Published: February 6, 2018
  • Type: Case Study
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McKinney started as a small consultancy firm not only advising inefficient companies but also helping healthy enterprises in reorientation. Due to fast-growing the company soon decided o expand and start working globally. In the sass the internationalization process started successfully.

Nowadays McKinney is one of the best known and well-established companies in its industry. When choosing a new market the company considers a lot of factors carefully.

McKinney already has a lot of experience in entering new markets and establishing new offices therefore it is not surprising that the process of internationalization is usually completed successfully. Due to globalization and increasing demand of Portuguese companies in the consulting sector - McKinney decided it was time to title in Portugal as well.

McKinney is following a -?one firmly concept and adapting their established offices in new geogra

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phical areas successfully.

The company's structure of the functions is hybrid - some functions are regulated globally others regionally or even locally - depending on the different needs of the employees. The most important department is the HER department - as Muckiness's main recourse is know-how. All in all it seems that McKinney is adapting international strategy very well.

3 Introduction

McKinney was founded by James O. McKinney as a small firm in America in the cases.

At the beginning, the company provided financial and budgeting services but it soon extended its service to consultancy on organization and management.

McKinney was not only selling his service to inefficient companies but also to healthy ones in regard to offices in the US. In order to provide the best service possible the company believed then - and they still do now in a -?on

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firmly concept - in other words remaining one single organization rather than lose offices. In the sass's - after the WI - the company successfully opened its first office in Europe.

Only two years after the opening in London the London Times acknowledged McKinney as a well-established enterprise in the I-J.

Soon the company started expanding its international presence. New offices were opened in the Netherlands, Germany, Italy, France, Switzerland, Canada, and Australia in the sasss. Nowadays McKinney is present in all continents with around 100 offices (see figure 1) all over the world thereof 47 are located in Europe and the Middle East. Another interesting fact is the McKinney Quarterly release, a Journal presenting innovative work on management theory - worldwide around 50,000 customers receive the Journal.

This report will focus on the internationalization of McKinney in Portugal 4 Definition of the Industry In this report our main focus is on the management consulting area which is growing continuously.

Over the century this industry kept growing and is nowadays not only limited to the corporate world but is also being used in other industry as the public sector or non-profit organizations. Three major types of consulting companies have to be distinguished: 1. Large consulting firms offering different services e. G. Information technology or strategic consulting (MM, Accentuate) .

Large consulting firms specializing in management consulting but are working in a large variety of industries (McKinney & Company, Boston Consulting Group) 3.

Boutique firms - small companies focusing on one industry and service Consultants are experts in their profession or branches who are hired to help identify a problems reason(s) as well as help the company find the

best possible solution. In other cases, they might help an enterprise in restructuring. Characteristics of the Consulting Market This paragraph portrays the structural characteristics of the market.

In order to analyze the market of strategic consulting the Porter's Five Forces model will be applied.

Michael Porter developed five forces that are essential in determining the power of the most significant competition factors a company has to face in a certain industry. The stronger the factors, the harder it is for a company to succeed. The first of these powers is called the bargaining power of suppliers. Suppliers provide a company with the resources that are essential in order to produce knowledge.

Hence the supplier here cannot be really considered a specific company UT rather the market of talent in general. Talented candidates could threaten to apply at another company.

McKinney can consider this power to be relatively low as it is among the industry leaders; hence applicants aspire to work with this company. Porter also mentions the bargaining power of customers. This power is considered to be high if buyers are concentrated, meaning there are only few buyers with a significant market share.

One extreme would be a hundred suppliers and only one buyer; in this case the buyer is able to set the market price. On the other hand, errs are week if they incur high switching costs, e. G.

If products/services are highly customized. Concluding, as McKinney offers highly specialized 5 consulting services and finds a unique strategy for each customer it is also not threatened by a high bargaining power from this side. Next to these powers, there is also the threat of new entrants.

The more barriers there are to enter a certain market, the lower the threat.

Payne (1986) mentions in his paper that the consulting industry is in its growth stage, management consulting services are expanding and hence more competitors are entering the market. Even though consulting is an appealing industry, it has a very big barrier to entry, that must be considered, in the consulting field reputation is imperative, this difficult entrance because new firms will find it hard to compete with the existing firms. Fourthly Porter focuses on the threat of substitute products, which in his model refers to products in other industries.

A threat exists when a products demand is affected by a price change of a substitute product. The only substitutes considerable are companies that develop an in-house strategy and consulting department. Also, tragic alliances offer insights in alternative maybe superior ways of doing business.

Another option is, to not invest in consultancy at all and save costs. In general, however, there are no valuable substitutes for unique and personal advice. Hence the threat can be evaluated as moderate. The final force is the one of competitive rivalry.

Rivalry is measured by such factors as industry concentration, e. G. The concentration ratio (CAR). The number implies the market share held by the four largest companies in the industry. A high number indicates high concentration which in turn stands for low competition.

The consulting industry consists of a high number of small firms and a low number of large firms. Forbes ranks McKinney as the top of the biggest and most successful consulting companies. Below an extract with the top four: 1 . McKinney & Company

2. The Boston Consulting Group 3.

Pain & Company 4.

Bozo & Company as the market leader is in an excellent position to beat its competitors. Muckiness Competitive Advantage One major part of the interview with Ra;l Glam De Oliver focused on the advantages McKinney possesses within its industry and in how far they contribute ND is essential to the company's international success. As mentioned above the most important success factors in the consulting industry are the employees and their valuable knowledge.

Hence a knowledge-based company differentiates itself via their quality of talent. 6 Mr..

Glam De Oliver explained that McKinney offers not only a highly talented employees but further continuously monitors their professional development by investing heavily in new learning experiences as well as on-the-Job coaching in a rich work experience.

In his work Payne (1986) refers to Porter who said that McKinney is extinctive from other companies as they look at each individual case in a unique way that guarantees optimal service. The company is further known for its problem-solving skills and the marketing of their people, not general applicable concepts.

This however is the case at many of its competitors and hence leads to a competitive advantage. McKinney claims to operate with the highest professional standards, in literally every aspect of its operations. So ultimately their consultants, the impact the company aspires to have on its clients and the way these are served are subject to outstanding acquirement. On an international scale McKinney serves a top client base, which can be considered as only the best and most sophisticated companies.

Being in contact with the leading industry professionals provides McKinney with various insights into new

fields of business and broadens the company's valuable knowledge. It further stimulates global information exchange throughout the company. Factors for Internationalization In order to answer this question the book provides the reader with a framework that lists all the factors in international business operations. It says that globalization of a many depends on two interrelated aspects: the company's objectives, such as sales expansions, resource acquisition as well as risk minimization, and the means which it wants to achieve them.

Further, the company's objectives have a bilateral relationship with physical/social as well as competitive factors. Indeed during the interview, it became clear that McKinney had expanded to Europe already in its early years and since then expanded very rapidly to cover all continents internationalization was growth, as there was a very broad market with excellent companies in Europe to be served.

The means by which this could be achieved were the reallocation and the export of Human Resources, some partners willing to relocate and lead the build-up of the overseas activities. The same motivations were behind every expansion move, e. . In the ass McKinney pursued very important investments to accelerate practices it's in China - again because the company recognized the enormous long-term potential of that economy.

A second, less obvious reason for continuous internationalization was that McKinney recognized the need of a global presence to be able to provide the most competitive revise in the world. Internationalization gives us the best professionals, the best tools and the best experiences at global scale. Scale in this activity is also critical because some clients are themselves global, and require services to be provided everywhere in the world.

Factors

for Location Choice The country selection for purposes of internationalization is a factor to be analysed with extreme attention.

The following scheme demonstrates how the Location-Decision Process should be: In order to choose Portugal as a country to entry, McKinney had to analyses all the arrest opportunities and risks. The most prominent opportunities are sales expansion, and possibly low costs, it's important to notice, once again, that McKinney is a service provider, so their costs consist mostly in labor costs, and Portuguese wages have been among the lower in Europe for a long time now.

As it's said above, the urge McKinney feels to be international is partly due to its activities' requisitions. The firm is successful in all major economies throughout the world, and their clients are some of the best and more sophisticated companies, which are themselves operating worldwide. Portugal is a relevant economy in the world, and manly in Europe, many multinationals are well established in Portugal, and those multinationals are about the Portuguese market conditions, in all sectors. This task has become hard to perform while not having offices and staff in the region, being that one of the major incentives to establish in Portugal.

The differences between Portugal and Muckiness's already known countries are very small, and of little importance. The following scheme has an analysis of the main attributes creating differences with a template of a CAGE Distance Framework. Note that the comparisons were made mainly between Portugal and Europe, instead of USA the home country of McKinney. The reason for this is that by the time McKinney entered Portugal, it was already very well established in Europe, so it

was easier to control and to adapt to having a similar country already in mind.

Mode of Entry Evolution Muckiness's exchanges with Portugal started by a simple exporting strategy, and later, in 1985 they've finally made the direct investment in wholly owned operations. On this matter Muckiness's evolution was very well performed in accordance with the incremental internationalization point of view: 9 In Muckiness case, exportation had two factors contributing for this no longer be a feasible solution, the lack of domestic capacity and the services need of substantial alteration for the demand to be met.

The globalization of the clients and increasing demand from Portugal companies lead to a high necessity for deeper and more accurate knowledge about the market conditions, this made an urge to have expert staff conducting Portuguese operations. By assuming a no collaborative foreign equity arrangement, that is, wholly-owned operation, McKinney had the chance to aka complete control over its investments, becoming a more global company, having a full supervision of its vital resources, such as capital and management know and ultimately it has the freedom to pursue its global strategy without the interference of other parties.

On the other hand, this method of entry has the clear drawback of becoming a risk the company will carry itself when exposed to a different environment, and also it does not allow to spread and reduce the entry costs. Factors of success in the internationalization process With internationalization and after globalization McKinney achieved enormous Roth; it was able to cover all the relevant economies and offer best services to all companies including ones that operate on a global scale.

The firm becomes

the elite of global management consulting firm, dominating the market, with global coverage and best resources. McKinney holds the highest market share among the firms globally McKinney & Company is one of the world's top management consulting firms. With roughly 100 offices in 60 countries around the globe, it serves three of the worlds five largest companies and about two-thirds of the FORTUNE 1000. The company advises report enterprises, as well as government agencies, institutions, and foundations on a number of business practices.

They include business technology, corporate finance, marketing and sales, operations, organization, 10 risk, and strategy. Muckiness's consulting services focus on more than a dozen different industries, from automotive and banking to pharmaceuticals and telecommunications.

McKinney has 17000 employees in the year 2011 they had 7 billion dollars revenue and.  McKinney were working and doing projects in Portugal since asses with teams from Paris, which was an important base in Europe in that time.

The office was opened in 1985. It happened because one of the partners based in Madrid was Portuguese, so he was interested in the country and eventually came here to lead the build-up of the Practice.

One factor for success in internationalization is the fact that McKinney always use the same "partner-based model" - every new cell is exactly the same as the previous ones, same standards, same values, and same firm.

In a way, the internationalization of McKinney is a case of "massive cell replication", in the ass's it became clear it could work and from then on it has been proven time and again country after country always in the same way (partner-led). The fact that it is the

largest firm worldwide provides a self-reinforcing effect that attracts the best people and the best clients.

Internationalization policies McKinney started the internationalization process successfully in the sasss. Today the company is operating globally and is one of the best-known and well-established consultancy firms worldwide. As McKinney is following a -?one firmly concept the basis for opening a new international office were already built - the different strategies only needed to be adapted for Portugal in 1985 when entering the market. When choosing a potential new market McKinney considers its economic relevance.

The market either has to be home of some companies of relevant size or the public enterprises make use of Muckiness's services.

Noticeable is the structure of functions at McKinney which is hybrid. Some of the most important functions are IT, Learning, HER (professional development), Research and Visual Aid. On the one hand we have IT which is regulated globally and on the other hand the research 11 department which is arranged regionally. McKinney coordinates learning programs globally but there are also some local programs.

One of the most important departments when operating internationally is human resources. This is the place where the company decides what kind of enterprise they want to be.

The key positions in a newly accessed market need to be appointed to the right persons. We are able to distinguish between three different approaches in staffing policy: Ethnocentric approach The key positions are entirely appointed to home country managers who know the company and understand the business; they are familiar with the strategies and opinions of the headquarters. As the manager is only familiar with -?his] way this might lead to miscommunication

and serious issues might arise between the managers and the local employees.

Polytechnic approach The key positions are entirely appointed to host country managers who know the ultra and the way of business of the host country but lack any knowledge of the company and opinions of the headquarters.

This might lead to serious issues between the headquarter and the subsidiaries Geocentric approach The key positions are appointed to the most talented and fitting persons regardless of their nationality. Following this approach the disadvantages of the tenth- undo polytechnic approach are eliminated and the manager should be able to cope with most of the issues ahead of him. Suitable candidates for the Job.

It is important to know that the HER department is jugulated globally, regionally and locally. As the company has been an internationally operating enterprise for a long time it is hard to describe which impact the entering in the Portugal market had on the organization and its departments. Redefinition/adaptation of the company's policies As said before McKinney is already a well-established and international acting enterprise.

It replicate the cells instead of introducing new policies or adapting the existing ones. 12 The organization of international business Organization Structure McKinney has a super flat structure.

The offices have partners that are all peers; the office is led by an Office Manager, who is first among equals; these teams of partners are very independent and mutually accountable. This basic cell is replicated everywhere in the world, typically by countries. In very large countries they may have more than one office.

In the US they have 5 large offices, each of them with a few locations but the concept

is the same. Offices in one region are typically coordinated geographically like in Europe. The functions (strategy, operations, marketing, corporate finance, technology, organization and risk) are also structured at the regional level.

Adapted from an interview with Glam Ra;l De Oliver a partner-director of McKinney & Company and office manager in Lisbon) McKinney has more than 100 offices in 60 countries. Offices in Chicago, Los Angels, and San Francisco were established in the sass.

The first international office was opened in London in 1959. Other offices in the Netherlands, Germany, Italy, France, and Switzerland were opened in the sass. The firm also has offices across Asia, Australia, Africa, Canada, South America, and the Middle East. This flat structure of Muckiness's is a typical geographical division, visioning horizontal fermentation.

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