Question

You will need to thoroughly understand the environment into which you are considering expanding.  One of the first tests of a company’s strategy is, “how well does it fit considering the company’s “situation”? The company’s situation is largely composed of its external environment (industry and competitive environment in which it operates) and internal environment (company’s resources and organizational capabilities).

1. For the external portion of the assignment, you will conduct a PESTEL Analysis for an "Accounting firm" to evaluate the external environment

1. Political factors
2. Economic conditions
3. Technological factors
4. Sociocultural factors
5. Environmental forces
6. Legal and regulatory factors

2. Then list the major resources and capabilities of your Accounting company and identify whether your resources meet the VRIN criteria:

1. Is the resource or capability competitively valuable?
2. Is the resource or capability rare—something rivals lack?
3. Is the resource or capability inimitable or hard to copy?
4. Is the resource or capability vulnerable to substitution from different types of resources and capabilities?

3. Finally, you will conduct a SWOT analysis for your Accounting company identifying the key strengths, weaknesses, threats and opportunities.

Answer 1

Accounting Firm: KPMG

1. PESTEL Analysis of KPMG

PESTEL Analysis: It is a tool used to analyse and observe the macro-environmental factors. PESTEL stands for Political, Environmental, Social Technological and Environmental. The following is a PESTEL analysis of KPMG.

PESTEL Analysis: It is a tool used to analyse and observe the macro-environmental factors. PESTEL stands for Political, Environmental, Social Technological and Environmental. The following is a PESTEL analysis of KPMG.

            Political:

• The political stability of a country, whether the government will stay in power or not.
• The nature of the government and what is allowed and not allowed in the country. The laws of the country will be influenced by the beliefs and values of the government. For example, what goods are allowed and what aren’t.
• The possibilities of wars and strikes. This will depend on the relations of the country with other countries and the nature of the government.
• What kind of taxation policies does the government adopt, is a question to ask.
• Whether the government discriminates between foreign accounting companies and local companies.

            Economic conditions:

• The gdp of the country, whether it shows any signs of prosperity or not
• The borrowing conditions and factors, for example the interest rate and the trends related to it.
• The stability of the currency, whether the country has a stable currency or not, as it affects
• The unemployment rates, whether it is high or low. The availability of jobs will depend upon this.
• The efficiency of the financial markets and how easily capital can be raise

Social factors:

• Whether there are enough young people in the country or not. It is really important that the country has enough young and educated people, so that it can invest in talent.
• How many scandals have taken place and what is the impact.

            Technological factors:

• Whether there is scope for implementing new innovations to make the services better.
• Whether the cyber and internet laws are strong enough, so that the organization do not have to worry over cyber security related issues.
• The role of technology in consulting and advisory services.

            Legal:

• Auditing malpractices are taken very seriously in some countries.
• The impact of Data Protection rules and regulations in some countries.

            Environmental:

• The extent to which sustainability reporting has a role in the company.

2. SWOT Analysis: It is a tool used to identify the internal strengths and weaknesses of an organization as well as the opportunities and threats that exists in the external environment. The following is the SWOT Analysis of KPMG:

Strengths	Weaknesses
A big four organization Specialist in audit and tax advisory related services. A symbol of quality and trust among businesses. Operates in various industries and countries and so revenue comes from multiple industries and countries	Bad reputation due to some of the scandals that happened in companies where KMPG was appointed as the auditor. Does not take work from small clients The services can be expensive when compared to smaller organizations.
Opportunities	Threats
The demand for technology related services is high Opportunities in different related segments More opportunities in emerging markets.	Competition from other big four companies Some countries prefer lower organization due to the scandals associated with big four companies Many local companies are providing excellent services for a much cheaper rate

3. VRIN Analysis: According to this analysis, the business is a pool of different resources. What differentiates a business from another is the way it uses these resources. The resources may consist of capabilities, processes, assets information and a lot more. The resources can give a company a competitive advantage. It focuses on 4 elements and they are:

Valuable resources: Those which adds value to an organization.

Rare resources: This resource which are available in the hands of a select few or not.

Imitable resources: The resources which can be easily imitable or not.

Non-imitable resources: Resources which cannot be easily substituted or replaced.

The following are the capabilities and resources of KPMG:

Valuable:

Marketing skills

Market research

International experience

Rare:

Product portfolio

Progressive technology

Inimitable:

Cost control

Innovation

Resource and development              

Taxation services

Audit and Assurance

Human Resources

Non-imitable:

Brand recognition:

Brand equity