The world market for accountancy has beco-me polarised around six firms, American or Anglo-American in origin, operating worldwide. Does this mean that the number will inevitably reduce to five, to four and ultimately to one?
Or that the same sort of polarisation will inevitably happen investment banking, law publishing, telecommunications and aviation?
The answer to these questions is an unequivocal no. Similar trends will emerge in some of the industries although not all. But if they do emerge, they will have quite different origins and rationale.
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Analogies are useful in understanding how businesses evolve. But their validity depends on identifying specific common features of the industries compared, not on handwaving generalisations about historic inevit-ability. What people mean by gloablisation differs from industry to industry.
There is an important difference between globalisation as it is for Boeing, which produces for the world market from a single Seattle location, and globalisation as it is for Ernst & Young, which attaches an international brand to output which of necessi-ty is a locally produced product.
Investment banks are similar to Boeing, and hotel chains similar to Ernst & Young. The model of centralised production is driven by economies of scale, and the model of international branding by the doubts and hesitations of customers who need to buy worldwide in unfamiliar environments.
That is why there are no local manufacturers of jumbo jets but since hesitant cross-border purchasers of accountancy and hotel rooms are only a part of the market there are many successful small local accountants and hoteliers.
And even these analogies need to be unpicked carefully. There are economies of scale in access to capital markets, which is why that side of the investment banking business is becoming more concentrated and globalised.
But investment banks also act as financial consultants, and there are no scale economies in that. So smaller boutiques will continue to thrive: large and small investment banks will just do different things.
Nor does the removal of trade barriers necessarily lead to bigger firms only to industries based on competitive advantage rather than national preference. The growth of international trade and competition in the automobile industry benefited BMW and Honda as it damaged General Motors and Ford.
In telecommunications and aviation, the restrictions that once aligned the boundaries of companies with the boundaries of nations are fast disappearing.
But it is not obvious what follows from that. The rise of Southwest Airlines and Easy Jet, of Kallback and Orange, may be more significant pointers to the ways these industries will evolve than BTs threatened relationship with MCI in Concert. Or the Star Alliance, the new association of United Airlines with Lufthansa and others. Presumably the Alliances advertising agency intended no irony when it demonstrated that, in order to display the logos of all the participating companies, an aircraft would have to be so long and unwieldy that it could never hope to leave the ground.
How industry structures evolve depends, therefore, on specifics of technology and conditions of supply and demand. Audit the product that remains the direct and indirect key to the profitability of accounting firms is a very particular commodity.
No one really wants to buy it. It is not even like washing-up liquid, which no one really wants to buy but everyone knows they need. You buy Audit only because others require it of you, and so your incentive is to buy the minimum that satisfies the requirements.
The only other similar commodity that comes to mind is motor insurance, and even then most people want the insurance. (There are also people who want the certificate that allows them to drive but do not care about insurance, and in the sixties companies such as Fire Auto and Marine and Vehicle and General made a profitable business out of serving them untill they were forced to close.)
It is this need for certification that explains why accountancy is characterised by tiers of almost indistinguishable firms. You can choose between Price and Young, Peat and Touche, Deloitte and Waterhouse, confident that each of them can do the job and feeling no need to have more than the job done.
And since audit is a function placed by the corporate head office, you want to entrust it to a single firm with global reach: preferably one with a principal office in London or New York, the cities with the largest concentrations of corporate head offices.
But there is no other industry where that particular combination of factors applies. Insurance broking probably comes closest. Even law an industry obsessed by the accounting analogy is in reality very different.
The distinction between the best and the good matters far more in law than in audit. And while there are some areas of legal practice such as multinational acquisitions where a single centrally controlled process is necessary, there are rather more areas of law where this is not true.
Law, therefore, will remain less international and less concentrated than accountancy. Leading law firms are more differentiated from each other than accountancy firms and their profitability is based not on size but on specialist skills.
The most lucrative legal services businesses tiny, measured by their share of the world legal services market are the chambers of the leading commercial barristers.
Ambitious managers are so anxious to believe that everything is becoming larger and more international that everything is assumed to point in that direction.
Yet if the changes in technology that increase scale economies in investment banking and aviation lead to greater concentration, it can hardly be true that the changes in technology that reduce scale economies in publishing and telecommunications have the same effect.
The point is not that there are no valid generalisations about business, but rather that there are no valid generalisations about business that are independent of facts about different industries.