Do CAs have competitive advantage?

Hello, folks. It's been quite a while since I made any comment on this forum let alone penning down an article. I was actually working on two of my articles - Buying health insurance and What Employers want. Both are complete but I’m just not able to make time to write them on CCI as they are too long. Will do it soon, hopefully. Ha ha ha. Anyway, I'm delighted to bring out this article which will possibly trigger a fundamental shift in your mindset.

Coming to the point, This question is posed to all of us. One can’t give his/her opinion singularly. This is something which has to discussed about democratically to reach an unanimous decision. So, I'm going to put across my view in this article.

After reading Strategic Management Subject, I've become very engrossed in its concepts. It's in my disposition to delve deeper into the content regardless of the subject matter. No, I'm not going to teach you folks. Just explaining the term “competitive advantage”.

Core Concept:

A company achieves a Competitive advantage through:

a) EITHER charging product offerings at a lower price than rivals for similar products with comparable attributes like quality/product features and performance/service.(Low Cost)

b) OR charging similar price as by the rivals for products with much higher quality and better features and performance. (Better difference)

I hope the definition is crystal clear. In a nutshell, either you’ve to offer product at lower cost or provide better features to achieve competitive advantage. So far so good. Now, I started to think in a more pragmatic way. As in CA context. What if we change the word ‘company’ by CA? I will explain this in two examples.

Let’s take our first example:

A newly qualified CA starts a firm. He renders services in all the traditional areas like tax, Audit and other compliance activities.

How can he achieve competitive advantage?

Only by offering  his services  at a lower cost. Yes, because his rivals (other CA firms) are also providing similar services. So, there will be only one particular CA in the marketplace who is going to thrive in his public practice. It may happen thus Mr. A charges lowest fee for Tax Audit  but Mr. B charges lowest fee for Return filing.

Let’s understand this in an another way:-

Suppose, You have to buy a broom. You went to the mart and asked for the price. It is very logical that you’re going to purchase from that seller who offers you the least price as the product features are similar. Another example which is more relatable is when you’ve to buy veggies from roadside vendors. Got my point.

Now, What is all this? You may be wondering. I'm comparing similar services rendered by a CA in practice to the similar product sold in the market. Do you happen to know what’s that word which links this characteristic of services to products?

It’s called commodification.CA services have been reduced to the status of a commodity because of it’s similar/identical nature.

You can also call this CA shopping informally. Suppose, you want to get your company  financials audited. We all know that you only require CA signature. So the CA who charges  least price is going to be your choice.

Let’s take the next example of a CA in industry.

Suppose you’re a CA (Even if not, eventually you’ll become). Say, you went to participate in campus placement. There one has to fill up a form asking for details like place of articleship, firm name inter alia.

Let’s say you wrote Articleship done in BIG 4 and secured a rank.(I’m not glorifying BIG 4,just an example. If you ask me, I’ll say BIG 4 is a scam-only makes you do tax and audit; back end work)

Coming to the point- What is it? It's a differentiating factor. It makes you distinct from the person  who has done articleship in a mediocre firm and passed with multiple  attempts.

Hence, in industry too the recruiter seeks that CA who has competitive advantage.

So, here the competitive advantage is achieved by differentiating yourself from others with your qualifications, experience and skills set/tool belt-soft and technical. You can’t just state your expected salary only, saying this is the least quote you can afford as if it’s a tender bid. So, here lower cost doesn’t work.

End of the second example.

I hope by now you’ve got the message I was trying to put across. Now you must be in a dilemma, I guess, as you wanted to be a tax consultant or an auditor. IMHO, you may continue be so but you can’t make it your primary service offering.

My only advice for you is  to be current with the developments affecting Accounting and Finance function. Read ET Now app religiously. When I say read I mean everything, segments like Industry, education, services, Jobs, Mutual funds, wealth, consulting. New upcoming areas like cloud computing, Analytics, Big data will become new normal. IT is going to work with accounting hand in hand.

At the end, I would like to mention the quote I recently stumbled upon.

Mark Twain: Whenever you find yourself on the side of the majority, it is time to reform (or pause and reflect).