Independent thesis Advanced level (professional degree), 20 credits / 30 HE credits
Title: Competition for small audit firms – a qualitative study on possible competitive strategies and how the upcoming changes will influence competition on the audit market
Tutor: Margareta Paulsson
Authors: Per Dahlström and Martin Holmberg
Purpose: The purpose of this study is to develop an understanding how smaller auditing firms use competitive strategies and why. The result aims to work as a support for owners and leaders of audit firms as they make decisions of how to compete in the future. We would also like to explore how smaller audit firms view the change of the mandatory audit, that is, our intentions are also to examine how they think the consequences on the market will be and their view on its affect on the competition of the market.
Methodology: Our methodological approach was characterized by a hermeneutic approach in order to explain and understand why the smaller audit firms do what they do. Our approach is a combination of inductive and deductive as it allows us to develop an understanding of the subject, then gather our empirical data and from that draw valid conclusions. We have done an exploratory study with a focus on case studies, which means that we have examined an area which is relatively unfilled by having interviews with leaders of smaller audit firms in their actual environment. For the qualitative approach, we have used semi-structured interviews as a tool for collection of empirical data.
Theory: The theoretical framework starts with a short description of competition, the audit market, professional service firms and the upcoming change of mandatory audit. The chapter contains the classic competition strategies, price, differentiation and cost leadership, but also an alternative strategy, relationship marketing. It ends with a summary of the theories where it has revealed that professional service firms, which audit firms are a part of, can use the classic competitive strategies but it is the larger firms that has an advantage in all cases. Relationship marketing is instead something that can be an advantage for a smaller professional service firm, because they are more flexible and can supply customer specific services which favors’ good relationships and future revenues.
Conclusions: The usage of classic strategies (price, differentiation and cost leadership), were not applicable to smaller audit firms. Instead they used relationship marketing as a competitive strategy, although not always intentional, because they attracted most new customers by recommendations and good relationships with customers was the most important aspect for them. The change of mandatory audit will intense the competition between the audit firms but it is difficult to say how the market will change because external stakeholders hasn’t yet decided how to react.
Keywords: Competition, price, differentiation, cost leadership, relationship marketing, mandatory audit
2011. , 74 p.