What makes a market attractive?
Wednesday 1st Nov, 2017
Though we’re reluctant to admit it, you could buy 9.7 million data points about the global consulting market from us, and still be missing something.
You’d have enough detail to be able to talk, with some authority, about how the size of the market for strategy consulting in the energy and resources sector in Venezuela compares with the market for HR & change management consulting in the telecoms sector in Rwanda (which is obviously the comparison most people want to make these days), but if we asked you which of those sounded like the more attractive market, we guess you’d be hard pushed to come up with an answer.
You’d have information about growth rates, of course, and that’s an important part of what makes a market attractive. But beyond that, is beauty simply in the eye of the beholder?
To some extent it must be. However fast the strategy market in the Venezuelan energy and resources sector is growing (3.5% last year, incidentally) that’s going to sound more appealing to some firms than others. But we think we can be a bit more scientific than that. When we compile our Market Attractiveness Index–which ranks geographical markets according to their attractiveness over the next 12 months–we take three other things into consideration, alongside growth.
Talent: How easy is it to find and retain the talent you need in the market? For the time being at least (we’re working on it) this is the most subjective of all of our measures. But broadly speaking mature and low-growth markets are easier than immature and high-growth markets, because they have more highly-qualified people who are under-utilised. So, right now the Benelux region is pretty attractive, while Africa is a serious challenge.
Average revenue per consultant: How much money is the average consultant bringing in for their firm? We have to take account of the different structure of markets in making this assessment, to stop a dominant service line (like strategy) distorting the picture, but by this measure you need look no further than the DACH region (Germany, Switzerland, Austria) and should probably think hard before deciding to invest in India.
Propensity to buy consulting: How embedded is consulting in the minds of clients? We measure this by looking at the size of a market relative to GDP, and it tells us that nowhere do clients show a greater propensity for picking up the phone to consultants than they do in Australia. By contrast, you’re going to have to work incredibly hard to convince clients in Russia that she should be using consultants in anything but the most exceptional circumstances.
We score each market against each of those criteria (including looking at the growth forecast for the next 12 months) and then combine those to give us an overall score, and a sense of how attractive markets are relative to each other. We know it’s not a perfect assessment of attractiveness, but we think it’s pretty decent. Are we missing something? Please feel free to use this as the moment to declare your undying love for the risk consulting market in the American financial services sector, but if you can compose yourself for long enough to provide a dispassionate assessment of what makes it so attractive, that would be especially welcome.