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Cup Moscow >> Eng >> 3rd Place >> BusinessStorm (1st Round Case)
 

Cup Moscow >> Eng >> 3rd Place >> BusinessStorm (1st Round Case)

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    Cup Moscow >> Eng >> 3rd Place >> BusinessStorm (1st Round Case) Cup Moscow >> Eng >> 3rd Place >> BusinessStorm (1st Round Case) Presentation Transcript

    • BS BusinessStorm Strategy Consultants Accenture in Russia: A Strategy Moscow, 2010
    • BS BusinessStorm Strategy Consultants Accenture: strategic marketsThe PURPOSE: enter Russian consulting market and grow to a $100 million management consulting business in terms of revenue by 2020 (for Accenture global strategy, see Appendix 1). Operating groups and Industry groups (Appendix 2) Communications Health and Public Financial services Products Resources and High Tech Service This market Public institutions of contracted by 40- this segment are 60%, so the banks Boom on financed by the Slight increase to theOpportuni and other financial The market of Russian government not Pre-crisis level.ties institutions Products dropped. enough. It still the mostin IT- market desperately need The pre-crisis Services of private Lucrative market.Russia advice about how growth rates are companies will(Appendix to overcome the impossible to reach. hardly be paid well.3) crisis. Accenture has a strong information According to the Public and This segment technology and Resourses Market is global strategy of Health service is the provided Accenture systems focus. one of the strategic Accenture it can least profitable group with the higher A good directions of help reinvent the in Accenture’s revenue than theWhat opportunity to Accenture. industry activity. other groups.Accenture enter the Russiancan offer under-penetrated IT Market It is better for Accenture to concentrate in development in the groups of Communications and High Tech, Financial Services and Resources.
    • BS BusinessStorm Strategy Consultants Segmentation of the Russian consulting world (for features of the matrix, see Appendix 4) Specialized «West» Specialized «West» BIG FOUR: consulting firms, delivering consulting firms, •PricewaterhouseCoopers services to international delivering services to •Deloitte&TouchePrice of the order, thousands dollars clients, performing on Russian clients : •Ernst&Young More than 50 Russian market: •McKinsey&CoWard •KPMG A.T. Kearney, The Boston •Howell International Period of time, years Consulting Group, Carana Corporation, Arthur D. Little, Roland Berger, Bain 60 Russian Boutique firms Specialized Russian Diversified Russian From 10 to 20 • PRO-INVEST CONSULTING organizations: organizations: • Consulting department of • Rus-audit • BDO Nicoil Bank •IBS •Business Systems Development • National agency of assessment • NP Consult •Top-audit and consulting • Group INEC • Finexpertiza 15 Less than 10 Small regional Russian Small Specialized Small Diversified consulting Russian consulting Russian organizations organizations organizations 0 20 100 150 1200 Number of staff
    • BS BusinessStorm Strategy Consultants Russian market entry strategy  Russian consulting market has contracted because of the In near future - crisis by 17% (Appendix 5) no space for one  The market is inflexibly segmented more consulting company  In Russia in 50% of cases personal contacts help to be Its better to break hired as a consulting company (tender is used only in the into the Russian rest 50% of cases) market not by  Successful Russian companies work in the market for more themselves, but than 10 years, so they have valuable client databases. It through a successful will be hard for a "newcomer" to entice away the consulting company, prospective clients who has already  The peculiarities of Russian way of doing business are gained its market known only to the companies who have enough experience share, client in this field, and are not obvious for a "newcomer" database and expertise Alliance, merger or acquisition? Acquisition, because Accentures purpose is to work on the Russian market under their brand name
    • BS BusinessStorm Strategy Consultants Choosing a potential target company As a target company we should consider the companies, which are in the second line in the matrix of market. The companies that are leading players could be viewed as complex systems, they will be reluctant to reduce their market share. The rest of the companies are quite small in their size, thus they will never help Accenture to enter the Russian market.  For entry criteria BDO-Russia Business Systems Top-audit Finexpertiza see Appendix 6 Development Major clients LUKOIL, MTS, RF Ministry of Mosenergo, Transneft, Mechel, Rosneft, RF Sberbank Finance, Russian Russian Post Ministry of Defence Railways, ТNК-BP Major industries Energy, Public Energy, resources, Metallurgy, communications administration, communications resources, public and high-tech, transport, administration financial sector resources Revenue from 2 563 160 1759522 1 523 605 1452668 consulting, 2009 (thousands of roubles) Estimated revenue from 3 308 882 2 580 790 2 085 416 2 049 850 consulting per year by Only BDO will pass 2020 (thousands of the $100M mark roubles) (Appendix 7) ( 3 bln.rub.)
    • BS BusinessStorm Strategy Consultants Acquisition of BDO-Russia (the consulting department) Why BDO? See Appendix 8 Step 1: Business valuation B2b service companies are usually valuated as 5-7 EBITDA, but as we are short of information we will assess BDO’s consulting business as it often done for consulting companies – value ~ annual turnover. I.e. BDO’s consulting department value ~ RUR2309,08M (~$74,486M) as the average revenues for the past 3 years and the prognosed revenue for 2010. As the average profitability for the consulting companies in Russia is 20-23%, the payback period will be about only 5 years (Appendix 9). Step 2: Financing Acquisitions are usually financed by business loans. Accenture can apply for loan in its servicing bank or for a specific acquisition loan, e.g. from the Kennedy Funding, Inc. (Appendix 10) that offers a loan for 12-21% per annum up to 10 years. Step 3: Post-acquisition strategy To expand the activities in 3 strategic sectors: Communications and High Tech, Financial Services and Resources. To combine and improve the services and corporate ethics of the Accenture and the former BDO consulting department. To preserve the links with all BDO clients and attract new.
    • BS BusinessStorm Strategy Consultants Appendixes
    • BS BusinessStorm Strategy Consultants Appendix 1. Accenture Global Strategy • Growth in the core business - significant opportunities and headroom for growth in core management consulting business across all service lines:  Customer Relationship Management  Finance & Performance Management  Process & Innovation Performance  Risk Management  Increasing shareholder value  Supply Chain Management  Talent & Organization Performance • Growth through new initiatives and businesses • Growth through geographic expansion in strategic growth markets of Brazil, India, China, Russia, Mexico and South Korea. Back to presentation
    • BS BusinessStorm Strategy Consultants Appendix 2. Accenture Operating Groups, 2010 Please see next slide
    • BS BusinessStorm Strategy Consultants All the operating groups perform successfully  Accenture strategic areas will depend only on its opportunities in Russia The structure of sources of net revenues of Accenture in 2010 Communications & High 18% 21% Tech Financial Services Health & Public Services 23% Products 21% Resources 17% Back to presentation
    • BS BusinessStorm Strategy Consultants Appendix 3. Top-400 clients of consulting in Russia – potential Accenture clients? Top-10 clients: % of sales Gazprom 4% Communications & High LUKOIL 11% Tech Rosneft 1% Financial Services Russian Raliways 46% Health & Public Services TNK-BP Transneft Products Surgutneftegas 38% Resources Norilsk Nickel The biggest share of sales is in Vimpelcom Financial Services Rosenergoatom concern % of quantity 5% Communications & High 17% 10% 7 of 10 – Resources & Energy 2% Tech Financial Services 2 of 10 – Products Health & Public Services (transportation services) Products 1 of 10 – Communications & Resources 66% High-Tech Source: case materials Back to presentation
    • BS BusinessStorm Strategy Consultants Appendix 4. Features of the matrix 1. In the matrix companies compete with each other only across the line. 2. The higher the company on vertical position, the older the company is. However, the opposite approval is wrong. 3. The higher the company on vertical position, the more its services cost. Back to presentation
    • BS BusinessStorm Strategy Consultants Appendix 5. Russian consulting market trends Russian consulting market in Russian consulting market has huge terms of revenue growth potential The main reasons of growth of Russian 70 62,69 consulting market during «financial crisis»: 60 54,23 49,4 52,21 • Investors, bankers, lawyers require 50 thorough analysis bln. rub. 40 35,3 • The scale of governmental economic 30 24 support through the state banks 20 10 • Investors desire to minimize the costs 0 2004 2005 2006 2007 2008 2009 Please see next slide For Accenture entering Russian market is really prospective
    • BS BusinessStorm Strategy Consultants The Survey of the Russian market of consulting in terms of its branches in 2009-2010 Strategic management: demand increased Operations management: significantly up to 94,4% demand grew rapidly Management consulting is the most prospective Human resources sphere in the IT: management: Russian consulting demand decreased sharply demand dropped market to 11,7 % dramatically to 46%Accenture should lay specialstress on developing Marketing:management consulting in demand declinedRussia dramatically to 51 % Back to presentation Source: RA Expert
    • BS BusinessStorm Strategy Consultants Appendix 6. Choosing a potential target company Criterias:  From Top-30 Russian consulting companies (other companies have too little market share, do not generate enough revenue and/or do not have enough expertise )  Only management consulting (dont consider IT-consulting, tax consulting etc.)  Persistent growth of revenue in 2003-2009 Sources of information:  Top-100 consulting companies (ratings by Kommersant.Money and Expert, published in 2004-2010)  Official websites of the "potential targets" Please see next slide
    • BS BusinessStorm Strategy Consultants The largest consulting groups in Russia in 2009* Sales from Audit and consulting consulting, 2009 Annual increase 2009 2008 Headquarters groups (thousands of in sales (%) roubles) PricewaterhouseCoop 5 3 Moscow 3 209 548 −8,1 ers Moscow 6 − KPMG 2 762 538 2,7 Moscow 8 7 BDO-Russia 2 563 60 6,7 Energy Consulting 10 11 Moscow 2 168 910 30,5 Group Business Systems 13 9 Moscow 1 759 522 −3,2 Development 14 12 Intercom-Audit Moscow 1 630 633 5 15 18 RSM Top-Audit Moscow 1 523 605 12,2 16 13 Finexpertiza Moscow 1 452 668 7 21 − RUFAUDIT Moscow 926 753 − 22 23 Rosexpertiza Moscow 901 806 16 Back to presentation * Source: RA Expert
    • BS BusinessStorm Strategy Consultants Appendix 7. Estimation of the revenue in 2020 Step 1. Historical analysis 3 000 000 Revenue (thousands of roubles) Revenue in 2003-2009 2 500 000 2 000 000 BDO-Russia 1 500 000 Business Systems Development Finexpertiza 1 000 000 Top-audit 500 000 0 2003 2004 2005 2006 2007 2008 2009 Step 2. Prognostication 3500000 3 308 882 Revenue (thousands of roubles ) For approximation logarithmic 3000000 $100M 2 580 790 BDO-Russia trend is optimal: 2500000 2 085 416 Business Systems 2000000  reliability of approximation 2 049 850 Development coefficient R2 is 0,83 – 0,89 for all 4 1500000 Finexpertiza companies 1000000 Top-audit  it provides conservative estimation 500000 0 of future revenue based on a life-cycle 2004 2006 2008 2010 2012 2014 2016 2018 2020 of a company concept Back to presentation
    • BS BusinessStorm Strategy Consultants Appendix 8. The advantages of the BDO-Russia’s acqusition For the clients, the BDO brand means a unified approach and consistent quality in any country in which BDO Network has a presence. BDO is a network of independent companies, and not an integrated structure like McKinsey or BCG. Consequently, Accenture can acquire BDO-Russia nearly whithout affecting the interests of BDO in other countries The company has been known on the Russian market since 1989 under the Unicon brand. A huge database of loyal and sound clients - more than 50% of the clients are on the Top- 100 list of the Russian business. First Russian company whose audit opinions are accepted by regulators at three stock exchanges — New York, London and Frankfurt Unique 20 year experience in serving fast-growing Russian companies, including those using international reporting standards, companies of strategic importance, major banks, the state authorities and government corporations Industry specific service offerings and tailored solutions Experience in all prospective sectors: resources & energy (ROSATOM, MOSENERGO, Gazprom, LUKOIL, etc.), communications and high-tech (MTS, Central telegraph, CTC Media, Sony Ericsson, Gazprom-Media Holding), financial sector (Alfa-bank, VTB Bank, Sberbank and others).  BDO-Russia has huge growth potential  By acquiring BDO-Russia Accenture will achieve its purpose - $100M by 2020 Back to presentation
    • BS BusinessStorm Strategy Consultants Appendix 9. Assessment of BDO’s value and payback period According to the data* the revenues of BDO-Russias consulting department were as follows:  2007 – RUR1902,863M  2008 – RUR2393,979M  2009 – RUR2563,160M  Prognosis for 2010 – RUR2376,311M The average revenue ~ RUR2309,08M The net profit doesn’t differ significantly from the net cash flow (due to the low amount of fixed assets and expenses on depreciation/amortisation), so we can assume that NCF ~ Net profit. As the initial expenses of Accenture to acquire BDO ~ annual revenues and in consulting the average return on sales (that equals net profit divided by revenues) is 20-23% the payback period is the inverse function of company’s return on sales. PBP ~ 1/(20-23%) ~ 4,3-5 years Back to presentation * Source: RA Expert
    • BS BusinessStorm Strategy Consultants Appendix 10. Kennedy Funding, Inc Today, Kennedy Funding is actively seeking new funding opportunities throughout the world. With free enterprise on the rise everywhere, they hope to fill an important role in helping companies of all sizes to achieve their goals. The program has been providing lightning-fast service and creative funding solutions throughout North America since 1987, and internationally since 1996.Term - Flexible loan term from 1 to 10 years. Prepayment - No prepayment penalties. Use of Proceeds - Loans are made for business purposes only. Loan to Value - Loan amounts can be up to 50- 85% of the disposition value of the collateral, based on the estimated cash sale price given a 180 day marketing time. Rates - Rates vary from 12-21% per annum, interest only, depending upon collateral and loan structure. Size of Loan - From $1 Million to $100+ Million nationally. Must be at least $5 Million for international loans. Collateral - Real estate and other fixed or liquid Back to presentation assets.
    • BS BusinessStorm Strategy Consultants Thank You!Our team:Ann Nazarova,Natalia Ulyanova,Ayuna Danzanova,Olga PivovarovaFinance University underthe Government of theRussian Federation