The Nielsen Norman Group, usually called NN Group, is a consulting firm in the field of Information technology firm offering Interface and user experience services to firms related to any industry. This American-based group was founded in the year 1998 and having the headquarters in Fremont, California. The firm is known for user research work, design methods, and best practices. It is catered to world-known organizations like Google, National Geographic, Visa, PayPal, eBay, Sony, Verizon, and many more as their clients (NNgroup, 2020). Keeping in view the consulting industry of the US, porter’s five forces analysis can be a valuable tool for sustaining potential ways to tackle threats and deliver value.
Competitive Rivalry in the Market
The competitive rivalry in information technology consultancy is high because of the increased demand in developing or producing new methods and gateways to benefit the business in the best possible way. As a consequence of this behavior, many firms and institutions have stepped in to cater to the ever-changing technological needs in contemporary business. NN group is trying to get the lead in the marketplace. The major competitors of the firm are Afterviolet, Design Science, and Telecentrex. North America is the largest market, and the strongest player controls the majority of the market share. The United States dominates the market economy. IT consulting services hold a market size of 476.1 billion US dollars (Ibis, 2020). As more individuals and firms gain access to the internet, they will need more help with IT systems. Therefore, such demand for evaluating technologies for the growth of firms makes the competition more complex.
Threat of Substitutes
The threat of having substitutes is considered moderate in context to the IT consulting industry because the economies of the world are slowing down, and there is more demand in increasing the efficiency of firms. The Technology consultant area is the most critical need of companies in the present era, and there are many firms available in the industry with a different range of solutions. Also, the consumers can choose from various consultants available for taking the project and improving performance or can lead to switching cost factor in case of failure (Blut et al, 2016). However, most of the nature of products and services are merely the same, including technical, advisory, and infrastructure improvement plans. Therefore, the threat of substitutes in the IT consulting industry is moderate.
The Threat of New Entrants
Fresh entrants inside the IT consultant industry are relatively low. Therefore, it is tough for a new firm to go into the market and compete on an equal balance with the established big firms. In reality, a new competitor will encounter several significant challenges like a proven work record of working and improving the firms, a knowledgeable and skilled force who can tackle the big deals of the firms (Raj et al, 2020). Although the capital is not required at a massive level in this context as the work is based on more mental abilities and skills. Another significant hurdle is to get customer attraction and loyalty which the existing firms already pull in the market (Lofstrom, Bates and Parker, 2014). Hence, making the entry threat low in the industry.
Bargaining Power of Buyers
The Bargaining power of consumers is considered high in the IT consulting industry because of the firms available in the market and their capability to handle the nature and size of work as each firm has something different to offer. Consumers can negotiate for better customer service and consulting choices; otherwise, they have a range of options to choose from and benefit from switching costs (Chen, 2016). Nowadays, many businesses and firms have developed in-house experienced professionals to look for improvements unless a significant change is needed. (Fabri and Klapper, 2016). Observing such a method, the buyer negotiates with increased severity and negotiation to obtain the best possible conditions.
Bargaining Power of Suppliers
The Bargaining power of suppliers is considered moderate in the IT consulting industry as several software suppliers sell licensed software. Although these suppliers supply bulk licenses to the consultancy firms upon the demand, they are still able to charge a premium for the software they deliver. Other suppliers in the industry could be in term of skilled graduates or experienced consultants with adequate skills to handle the pressure and tasks. However, the increasing number of consumers in the industry helps in balancing the supplier’s role (Obal, 2014). Thus, in context to the consulting industry, the bargaining power of suppliers is moderate.
References:
Blut, M., Evanschitzky, H., Backhaus, C., Rudd, J. and Marck, M., 2016. Securing business-to-business relationships: the impact of switching costs. Industrial Marketing Management, 52, pp.82-90.
Chen, J., 2016. How do switching costs affect market concentration and prices in network industries?. The Journal of Industrial Economics, 64(2), pp.226-254.
Ibis, 2020. IBISWorld – Industry Market Research, Reports, and Statistics. [online] Ibisworld.com. Available at: https://www.ibisworld.com/industry-statistics/market-size/it-consulting-united-states/.
NNgroup, 2021. Usability and UX Consulting Services | Nielsen Norman Group. [online] Nielsen Norman Group. Available at: <https://www.nngroup.com/consulting/> [Accessed 6 May 2021].
Obal, M.W., 2014. Analyzing the roles of buyers, suppliers, and employees on the adoption of disruptive technology (Doctoral dissertation, Temple University. Libraries).
Raj, A., Dwivedi, G., Sharma, A., de Sousa Jabbour, A.B.L. and Rajak, S., 2020. Barriers to the adoption of industry 4.0 technologies in the manufacturing sector: An inter-country comparative perspective. International Journal of Production Economics, 224, p.107546.