Tuesday, April 27, 2010

Accenture Q&A


1. How would you characterize Andersen’s Consulting brand equity in the late 1990s? What factors and decisions contributed to the building of this equity?

Aggressive advertising made Andersen’s Consulting widely known and respected as a leader in empowering other businesses to adopt technological solutions. It was considered “creative, driven, far sighted and innovative’ P355. They invested heavily in advertising and the investment paid off. In addition they employed a public relations firm to influence the opinions of upper level management who would be instrumental in the final decisions to choose Andersen’s Consulting.

I believe that one of their greatest sources of equity was in their educated and research based practices that really did produce superior results for their clients and for themselves. Andersen Consulting was known to be the market leader in management and technology consulting, operational strategy consulting, systems integration and business reengineering- which were considered the toughest challenges of the time. They combined this with metrics to prove those results. While I do think that Arthur Andersen Business Consulting did get an advantage from the association with Andersen Consulting, I do not really think it cost Andersen Consulting much in terms of brand equity. In the BRPI study they ranked first above IBM and McKinsey in brand equity.

2. Compare the characteristics of Accenture’s brand equity to those of Andersen Consulting. Do you think the rebranding and repositioning of the company successfully transferred the equity from the old name to the new one?

Accenture’s brand equity was more far reaching and all encompassing than Andersen Consulting. They had already begun to redefine themselves and their role in the businesses of their customers. It chose to help companies transition into the new economy. Andersen Consulting had an older business perspective that arose out of the detail orientation of accounting. I really do think that they were very successful in the transfer of equity because they have operated intelligently at every step. The leadership of Andersen Consulting knew the company and its strengths well due to their willingness to spend the time and money to research their impact and the perceptions of their clients. It was more than successful with an 11% increase in brand equity after the first year.

3. How much of a competitive threat is IBM? How should Accenture best compete with them?

While IBM remains a huge competitive threat, Accenture must accentuate the factors which differentiate them from IBM. Those factors include a broader expertise in business goal attainment beyond technical expertise. In addition, Accenture has a long history of experience that IBM may not have matched even though they acquired Monday. (Acquisitions are not always able to transfer all the knowledge that they thought they bought.) Below is a comparison of IBM vs. Accenture stock positions.

Factor Accenture IBM

Cheapness (P/E ratio)

17.2 13.2

Growth (5-year growth rate)

20.2% 15.5%

Operations (net margin %)

6.86% 13.65%

Balance Sheet (debt/equity ratio)

.00 1.38

CAPS Rating (scale of 1 to 5 stars)

Round 1: Cheapness
Advantage: IBM. Cheapness is determined by P/E ratio. The lower the better. Be careful of earnings near zero that skew the ratio, one-time gains and losses, and pasts that aren’t indicative of futures (the more dynamic the industry, the more this is true).

Round 2: Growth
Advantage: Accenture. Growth here is the trailing 5-year EPS growth rate. This trailing earnings growth helps put notoriously-optimistic Wall Street projections in perspective.

Round 3: Operations
Advantage: IBM. Net margin percentage shows how efficiently a company turns revenue into profit. The more similar the business models, the more relevant the comparison.

Round 4: Balance sheet
Advantage: Accenture. As with net margins, the debt to capital ratio is most relevant in comparing companies in similar industries. In this battle we give the nod to the lower-debt company, but attention should also be paid to the cost of debt, interest coverage ratios, and the stability of the business (the more stable a company’s operations, the more debt it can safely carry).

Round 5: CAPS rating
Advantage: Accenture. A company’s CAPS rating is our community’s opinion of the stock. Accenture has a slightly greater numerical CAPS rating than IBM (even though they have the same number of stars).

4. Evaluate the effectiveness of Tiger Woods as a spokesman for the company. Is Accenture achieving its objectives with a celebrity spokesman? Should they have dropped him during the scandal?

The corporate descriptor for Accenture is "High performance. Delivered.", which replaced the previous slogan "Innovation. Delivered." in 2004. Tiger consistently delivers performance. Until December 2009, Tiger Woods had been a celebrity spokesperson for the company. “Go on, be a Tiger" and the ancillary statement "We know what it takes to be a Tiger" were effective taglines. The company terminated Woods' six-year sponsorship deal on 13th December 2009 and removed references to Woods from its website. Until now, it has been an ideal partnership with great advantages for Accenture. The man personified the qualities that Accenture claimed for itself. His personality and winning ways were a good fit. Although it is sad that the man’s weaknesses have damaged his family and the business relationship, I think that some companies that stick with him now will eventually be proven to win in the long run. No one condones sleazy antics but we live in a live and let live society. Accenture should have sidelined the ads for a period of time and preserved the relationship because Tiger is Tiger and with his ability, stamina and personality, I predict he will be back and “high performance will be delivered again.” He makes mistakes but his intellect and ability to hire public relations experts will bring him back to peak performance sooner than later. After all have you ever seen him club his way out of a really bad lie? He’s amazing in a tough situation in golf and I predict he will be in life.

1 comment:

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    Brand Consultant Singapore | Brand Marketing Consultant in Singapore