I have just joined Deloitte & Touche USA LLP pvt. ltd. It is my first job. I am quite excited about it.
I observed some facts about Deloitte. I had read somewhere in wikipedia that economies of scale benefit manufacturing entities more than service ones. My scant knowledge about Deloitte and its competitors doesnot support that view. In auditing, the Big 4 (PwC,Deloitte, E&Y and KPMG) account for over 70% of auditing business in USA. All 4 firms have over a hundred thousand employees and revenues in excess of $ 20 billion.So, econoimies of scale probably works even better in services( atleast in some services) than in manufacturing .
Why is it so? Some bottlenecks that would inhibit productivity are certainly present. These are-
1- More bureaucracy
2- Greater costs of standardization
3- Repetition
I observed some facts about Deloitte. I had read somewhere in wikipedia that economies of scale benefit manufacturing entities more than service ones. My scant knowledge about Deloitte and its competitors doesnot support that view. In auditing, the Big 4 (PwC,Deloitte, E&Y and KPMG) account for over 70% of auditing business in USA. All 4 firms have over a hundred thousand employees and revenues in excess of $ 20 billion.So, econoimies of scale probably works even better in services( atleast in some services) than in manufacturing .
Why is it so? Some bottlenecks that would inhibit productivity are certainly present. These are-
1- More bureaucracy
2- Greater costs of standardization
3- Repetition
4- Greater communication costs and greater chances of miscommunication
So, what are the positives. In manufacturing capital costs promote economies of scale. A machine costing $ 1 million can be 100 times more productive than one costing $100000 million. Hence, economies of scale comes into play. Thsi is however, not applicable,for a professional services firm like Deloitte. Here the means of production(value-addition) is the individual human being and hence, agglomeration is not possible.
The question comes into mind-what are the positives of large professional service firms?
I believe the answers are-
So, what are the positives. In manufacturing capital costs promote economies of scale. A machine costing $ 1 million can be 100 times more productive than one costing $100000 million. Hence, economies of scale comes into play. Thsi is however, not applicable,for a professional services firm like Deloitte. Here the means of production(value-addition) is the individual human being and hence, agglomeration is not possible.
The question comes into mind-what are the positives of large professional service firms?
I believe the answers are-
- They have huge data bases. Data is the back-bone of auditing and consulting business and a huge data base is certainly a great help.
- The large firms have excellent relationships with large clients. The clientsbelieve that that the large firms are better equipped to protect their confidential data. More importantly, the large firms have much better access to the firm's past data and this can help them in their present duties
- These firms have more in-house experts. This might lower the costs of skill transfer.
- They are able to offer a larger basket of services.
- Prospects of fast career growth and become partners
More experience, will certainly help me to better understand the impact of above-stated reasons and uncover new ones.
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