Management Consulting in the US
Providing varied services to diverse downstream markets with unique needs allows management consultants to weather changing economic conditions. Extreme shocks like COVID-19 led to revenue declines, but sometimes clients need consulting services in bad times, which buffers revenue declines and ensur...
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| Format: | Market Research |
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| Language: | eng |
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| Online Access: | Request full text |
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| Summary: | Providing varied services to diverse downstream markets with unique needs allows management consultants to weather changing economic conditions. Extreme shocks like COVID-19 led to revenue declines, but sometimes clients need consulting services in bad times, which buffers revenue declines and ensures low revenue volatility. Bouncing back from COVID-19, industry-wide revenue grew at a CAGR of 3.2% to $366.6 billion over the past five years, growing 0.2% in 2023 alone, after a healthy rebound in 2021.
Technological change in client markets will drive consumers to various consulting services but challenge profit margin growth. Advisory in the age of digital transformation requires employees with unique and expert skill sets. Companies looking to advance sustainability in their businesses, further digital transformation, and take advantage of big data and data analytics while marketing their products in numerous ways expand the need for experts and consultant services. The ability to hire remote workers expands the quality and scope of the labor pool. Still, at the same time, it lessens consultants' negotiating power as other firms can provide services into previously walled-off markets and hire away experts. Consulting firms in densely populated areas will no longer be tethered to locations, allowing companies to move to cities with lower facilities rent costs and find cheaper labor for some tasks, but that is true for all sized firms. Technology offers cost savings and widened markets but increased competition for labor and clients.
While there are low barriers to entry in consulting, with the top 20 firms representing almost one-quarter of industry revenue, small-sized entrants will undoubtedly face stiff competition. As consolidation continues, the entry of niche firms specializing in new technology (IT, VR, AR, and AI) is expected to increase, as these firms can better compete with larger consulting firms. Profit is expected to hold steady as wage increases level off. The anticipated increase in business sentiment and aggregate private investment will boost clients seeking services, and as a result, industry revenue will grow at a CAGR of 0.6% to $378.6 billion over the next five years. |
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