International business project - Ernst and Young

1.Description of the company

1.1. History and evolution

Ernst & Young is one of the largest firms in the world, offering an array of financial services including tax, transaction and advisory services. The company’s roots date back to the 19th century, when Arthur Young and Alwin C Ernst each founded an accounting firm. Arthur Young was born in Glasgow, Scotland but he moved to the US to pursue his career in accounting and in 1906 he formed an accounting firm, Arthur Young & Company, with his brother Stanley. Alwin C Ernst was born in Cleveland, USA. After leaving school he worked as a bookkeeper. Then, in 1903, he and his brother Theodore started Ernst & Ernst, a small public accounting firm. Both firms were also quick to enter the global marketplace. In 1924 Young allied with Broads Paterson & Co and Ernst with Whinney Smith & Whinney. These alliances were the first of many for both firms, which opened offices around the world to service their international clients. The company Ernst&Young was formed in 1989, when the third largest accounting firm at the time, Ernst & Whinney (based in Cleveland, Ohio), merged with the sixth largest firm, Arthur Young (headquartered in New York), forming what, at the time, was the world's largest accounting firm. The company is organized as a partnership rather than a corporation. Today, Ernst&Young is one of the “Big Four” accounting firms in the world, along with Deloitte, KPMG and PricewaterhouseCoopers. Ernst & Young reportedly has in present 152,000 employees globally and global revenues of US$ 24.4 billion (2012). Its headquarters is in London, UK.

1.2. Field of activity

Ernst&Young provides global services in the following four main areas:

- Advisory – Performance Improvement, Risk, IT, Advisory for Financial Services;

- Assurance – Accounting Compliance and Reporting, Financial Accounting Advisory Services, Financial Statement Audit, Fraud Investigation & Dispute Services;

- Tax – Cash Tax Planning, Tax Accounting, Tax Policy, VAT, Customs;

- Transactions – Operational Transactions Services, Restructuring, Transaction Tax, Valuation & Business Modelling.

The company also provides legal services, as a subsidiary of the Tax department.

1.3. Characteristics of MNE and volume of sales

As any Multinational Enterprise, Ernst&Young has the characteristic that its affiliates must be responsive to a number of important environmental forces, including competitors, suppliers, customers, financial institutions and the government. Ernst&Young’s competitors are the same all over the world, meaning: Deloitte, KPMG and PwC. The “Big Four” is present globally and growing. The Big Four are orders of magnitude larger than the next biggest competitors, in terms of employees and revenues. They are the result of consolidation in the public accounting sector and we do not think that any other companies may be considered a threat for Ernst&Young. The company has made efforts to diversify their suppliers, and as for governments, they hire our company to make them more efficient. A second characteristic as a Multinational Enterprise is that Ernst&Young draws on a common pool of resources: assets, patents, trademarks, information and human resources. Being a global company, the information, patents and trademarks are shared between its employees, no matter where their location is. The tangible assets are owned by every country separately while the human resources can somehow be splitted between different countries. For example, an employee from the Ernst&Young UK may come to Romania and work here in Ernst&Young Bucharest. A third characteristic is that it links together the affiliates and business partners with a common strategic vision. Ernst&Young appreciates its people and the importance of quality in their work and delivers “Quality in everything we do”. It is a global organization of 150,000 people sharing their ideals and passion in order to help clients improve their businesses. Volume of sales in the triad: For the fiscal year 2011, Ernst&Young had revenues of US$ 8,981 million in Americas, US$ 10,075 million in Europe and US$ 1,292 millions in Japan, according to Table 1.