Sample Business Analysis on Ernst & Young

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Business analyses are important for many different fields including economics and marketing. This sample business analysis explores professional accounting and service firm Ernst & Young. This analysis was written by an Ultius professional business writer and provides an example of business writing services.

Background information on Ernst & Young

Ernst & Young is one of the largest professional accounting and service firms in the world. With its headquarters in London, England, they have offices in 140 different countries. Their professional services include:

• Assurance
• Auditing
• Technology and security risk
• Enterprise risk management
• Transaction support
• Merger and acquisition
• Actuarial
• Real estate advisory services
• Employee benefit plans
• Taxation
• Entrepreneurial services

In 2011, Forbes magazine ranked them as the eighth-largest private company operating in the United States. They are also a member of the Big Four - the top four companies within their industry. Their position within the Big Four has been solid, and they are not likely to lose that position. They have a long business history and a proven track record for the many services they offer. They have continued to experience growth over recent years, and despite a couple public setbacks, they have continued to thrive.

History of the company

The history of Ernst & Young starts in the late 19th century with two men. According to the history information page of the Ernst & Young corporate website, the company was started by Arthur Young and Alwin Ernst. In 1890, Arthur Young moved to the United States with his brother Stanley and opened the accounting firm, Arthur Young & Company.

Alwin Ernst started an accounting firm with his brother in 1903 called Ernst & Ernst. Each of these accounting firms performed very well, quickly gaining loyal clientele. They were each seen as innovators within their industry and worked to broaden the spectrum of accounting within the business world. Both firms were also quick to join the global marketplace; they each developed business alliances with British firms, which broadened their reach and the scope of their business operations.

Ernst’s firm and Young’s firm continued to grow and expand for decades after their respective deaths. Then in 1989, the two companies merged to create what is now know as Ernst & Young. As one company, they developed one of the largest global accounting and professional firms. Globally, they employee over 167,000 people all working together to improve their business. In recent years, Ernst & Young has proven their ability to perceive by maintaining solid business growth despite major issues in the American economy.

Ernst & Young's business services and trust systems

Ernst & Young offers services in five main areas:

1. Assurance
2. Tax
3. Transactions
4. Advisory
5. Strategic growth markets

Assurance

As a global company, they have worked to create trusted systems that enable them to deliver a high standard of service in all five areas. As the name may suggest, assurance works to provide investors and other stakeholders with critical information regarding the companies they are investing in.

Under assurance, they offer“a robust and clear perspective to audit committees and timely and constructive input to management.”

This is an important service for any public company.

Taxes

The second service they offer is in the area of taxes such as transfer pricing. For businesses, particularly big businesses, having tax properly recorded and filed is essential. As a tax function, Ernst & Young delivers clients with a dependable reporting foundation and a sustainable plan, which will enable the company to fully realize their growth potential.

In addition, to organizing, managing, and filing taxes, they develop tax strategies based on effective and open compliance with all tax codes; this allows the company to maximize their profits while still paying their legally required taxes.

Transactions

They also help companies appear transparent in their tax filing and reporting. This makes it easier to handle an IRS audit. It also helps to promote confidence among investors and stakeholders. Companies that are seen to be hiding things are not widely trusted.

Ernst & Young also help their clients by offering integrated and objective advisory services designed to help corporate management make effective decisions on how to strategically manage their capital and transactions. This service enables companies to make decisions that will ensure their sustained competitive advantage.

Advisory

The fourth service is an advisory function. They will act as advisors, offering a company advice on how to align their marketing strategies with proper tax policies, develop and maintain sustained improvements, while still being able to respond to changes quickly and effectively.

Global strategic growth

The fifth and final service detailed on the Ernst & Young website is providing critical and timely advice guiding companies through our Americas Strategic Growth Markets practice. This is a service unique to US clients, as it would not be needed in other areas of the world.

Being a global business, operating in 140 different countries, means that Ernst & Young has developed extensive procedures on how they conduct business in order to maintain the highest level of quality and maintain the confidence of the business world.

Business analysis of Ernst & Young's reputation and position

Ernst & Young’s position within the accounting and auditing industry is solid. They are part of what is referred to as the Big Four. These are the four largest, global accounting firms. The Big Four consist of:

1. Ernst & Young
2. Deloitte LLP
3. KPMG LLP
4. PricewaterhouseCoopers

A release report indicated that the Big Four experience revenue growth between 1.4 percent and 7.8 percent in 2012. This is impressive considering the recent European financial crisis and level of economic turmoil happening in the world.

• Ernst & Young was third in the Big Four in earnest last year.
• They recorded $24.4 billion in total revenue, which is a 7.8 percent increase from 2011.

Each of the big Four offers multiple services. Similar to those offered by Ernst & Young. According to a report released on November 9, 2012, Ernst & Young had the highest number of local certified public accountants; 54 local CPAs, which is an increase of 17 percent from 2011. Ernst & young provides services for businesses in a wide range of industries. Their focus has been to cater to automotive, energy, chemicals, financial, health, real estate, retail, consumer products, and entertainment industries.

Business focus and clientele

The wide range of industries enables them to maintain a high volume of clients, while still having focus on specific areas. Since there are regulations and codes, which can be applied to each industry, it is important that Ernst & Young stay at the forefront of changes in business regulations and tax codes in order to provide their clients with the best possible services.

Over the past several years, the economy has been described as struggling or down turned. This has increased the difficulty of new entrants in the general market.

Michael Andrew, Global Chairman of KPMG stated in an interview, “The downturn that has affected nearly every part of the global economy has called into question some basic tenants of our economic system.”

Andrew went on in the interview to argue business and corporate reporting needs to be more progressive and forward thinking. He argues that the economy has made it hard for many businesses, and to prevent future issues, businesses need to be better prepared in their planning. However, this has not stopped many new businesses from entering the market in an attempt to succeed amongst failure. Within the general market, there are markets that have struggled and diminished, and there are markets that have continued to demonstrate growth.

Reevaluating Ernst & Young, the Big Four, and the accounting industry

For example, technology companies like as Samsung have continued to grow, despite the economic problems. The entertainment industry has also continued to grow, with new products being released on a daily basis. However, even in growing markets, it has become harder for new entrants to get a competitive advantage over their seasoned competitors. This is also true for the accounting and professional services market, which Ernst & Young is a part of.

The market conditions within the accounting and auditing market are stiff. Competition is high, and it is difficult for new companies to enter the market with any kind of competitive advantage. Ernst & Young have a solid hold on their position in the Big Four. They have the experience and the reputation that enables them to maintain current clients, as well as develop new clients. One factor that specifically affects the accounting and professional services industry is customer confidence.

Ernst & Young are placed in charge of important information and decisions on behalf of their clients. The one factor that gives the Big Four the greatest competitive advantage over others is their years of experience and the reputation they have built within the business industry. While new entrants can attempt to compete in areas of services and price, they can not compete with experience and reputation.

Bibliography

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Bloomberg. "Company Overview of Ernst & Young LLP." Bloomberg Businessweek. http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=97518 (accessed February 27, 2013).

Eigelbach, Kvein. "Big Four accounting firms had strong revenue growth in 2012 - Louisville - Business First." Business News - The Business Journals. http://www.bizjournals.com/louisville/news/2013/01/11/big-four-accounting-firms-had-strong.html (accessed February 27, 2013).

"Ernst &Young global services in four main areas: Assurance, Tax, Transactions and Advisory - Ernst & Young - United States." Home - Ernst & Young - United States. http://www.ey.com/US/en/Services (accessed February 27, 2013).

"Our history - Ernst & Young - Global." Home - Ernst & Young - United States. http://www.ey.com/GL/en/About-us/Our-people-and-culture/Our-history (accessed February 27, 2013).