INDUSTRY ANALYSIS

United Kingdom Accountancy Industry



United Kingdom Accountancy Industry

Introduction

I have chosen the Accountancy Industry of United Kingdom. UK has one of the largest accountancy industries in the whole of Europe as per its market share. It has 22.8% market share of the entire European market. As of 2011, the industry was valued at a phenomenal value of £19.5 Million and it is forecasted to have fantastic future prospects. The major offering of the accountancy market consists of preparing and analyzing of financial statements and also auditing of accountancy records. Accountancy professional also provide advisory services to their clients.

The market is dominated by four companies often depicted as the “Big 4” firms. The Big 4 firms consist of PwC, Deloitte, Ernst & Young, and KPMG. However, the smaller firms also have a strong presence, and they have a significant share of the market as well. However, the presence of the Big 4 cannot and must not be overlooked as they have a global presence and exist in every corner of the world (MarketLine, 2012).

Structure

The structure of any industry is done with the help of the Porter's five forces model. The five forces consist of the threat of the new entrants into the market, the bargaining power of both the customers as well the supplier, the threat posed by the substitute products, and the degree of competition within the industry (Porter, M. E. (2008). All these five forces have an integral part to play in the UK accountancy industry.

New entrants into the market

The UK accountancy industry has no barriers to entry, plus there are no barriers to exit as well. The characteristic that their entry could be easily done into this industry, is due to the fact that no substantial amount of investment is needed for this type of business. Anyone who has the required qualifications and experience can start his own firm.

However, it must be taken into account that entrance into the high end of the industry meaning that you try to cater to bigger companies, for instance the FTSE 100 companies, would be really difficult. Because this end of the industry is dominated by the Big 4 companies, as they have both the required expertise and resources for such complex tasks.

There are a number of reasons why the prospect of the entrance is seen so bright. The low costs prevalent in the accountancy industry seem to attract a lot of potential firms. The fact that the market is offering high growth rates is also an element that the potential entrants take into consideration as by 2016; it is likely that the UK accountancy industry would reach a phenomenal value of £24.5 Million, which would be an increase of 26.1% since 2011. Thus, such factors force the entrants to take the initiative of entry.

Threat posed by substitutes

The fact that there are no basic substitutes for the component of services and products being offered by accountants, nevertheless such firms whose offering is entirely consisting of accountancy services do face some ...