The next decade will be very different from the previous one in many respects. Over the next few years, law firms will have to adapt to a new economic and legal environment, and to a permanent shift in Europe’s position within the global economy. In this context of a transforming market, it has become more important than ever for law firms to design and build creative strategies. However, to do so, law firms must begin by gaining an in-depth knowledge of their environment, which will allow them to:
- Build development and organizational strategies;
- Assess clients’ expectations as precisely as possible;
- Understand the main current market issues.
Knowledge of their environment will help law firms to understand and foresee the needs of their clients, as well as the main trends within these clients’ industries. Anticipating clients’ future expectations will allow law firms to develop new service lines, either directly or through strategic alliances and partnerships. Additionally, studying the legal market and understanding the strategies implemented by their competitors are prerequisites for law firms if they wish to succeed in their market. In order to illustrate this observation, this article will look at several recent trends in the French economy and identify the useful lessons law firms can learn from them in order to better tend to their clients’ needs. It will also give examples of ways in which law firms can monitor their competitors and their market.
Noteworthy new trends in the French economy:
In spite of a difficult economic situation and a low growth rate in recent years, France has many economic assets and retains a strong competitive advantage in several key areas, such as the luxury sector, the aviation, aerospace and defense industries, and the agriculture and food industry. It is also of note that 40 of the 500 largest companies worldwide are French. Well aware of these assets, the French government has been trying to boost several industries and sectors which it expects to be the most promising in the next few decades. It has also identified small and medium-sized companies as strong vectors for French economic growth.
Governmental focus on small and medium-sized companies and on international exports:
A salient trend in the current French economic environment is the effort being made by the French government to promote the growth and international development of small and medium-sized companies (“SMEs”). With the continuing rise of the Internet and e-commerce and the development of emerging markets, it is becoming easier and of more interest than ever for small and medium-sized companies to expand internationally. In 2012, the only French SMEs that managed to retain a significant growth rate were those operating on an international level: on average, their turnover rose by 3.9%. However, many French SMEs remain exclusively national, meaning they do not export their products or services. The current French government has therefore made the internationalization of SMEs one of its main economic priorities.
Additionally, as it is eager to achieve a better fit between French exports and international demand, the government has identified four priority sectors for international commerce: agriculture/ food, h ealth and well -being (pharmaceuticals, cosmetics, and medical equipment), communication (software, IT …) and urbanization (construction, energy efficiency and transportation).
Importance of the IT sector and the digital economy:
The IT industry is currently one of the most promising sectors in the French economy. For instance, over 38 million French people use the Internet, with French nationals spending an average of 65 hours online every month. Similarly, the turnover generated by “mcommerce” (cell phone shopping) increased by 120% in the first quarter of 2013. The increasingly rapid evolution of hardware (smartphones, computers, tablets …) and electronics and the rise in computer services are some of the developments which seem to indicate that the internet / digital economy sector will remain one of the most dynamic in the years to come.
The explosive rise of computer performance, the continuing growth of high speed and mobile networks, and the generalization of the cloud and big data are challenging the status quo in every industry. Not a single sector will remain unchanged by this digital revolution.
Rise of the social economy sector:
France is home to over 1 million nonprofit organizations (associations, corporate foundations, mutual insurance companies, co-ops, federations and unions, etc.), 20% of which have paid employees. These organizations operate in a wide variety of sectors: culture, sports, health and welfare institutions, etc. The social economy sector continues to grow in France, and today represents 10% of GDP and approximately 10% of jobs nationwide. In spite of the economic crisis, this sector has grown by 2% every year since 2008, while the private sector growth rate has stagnated or even declined.
What useful lessons can law firms operating in France learn from these trends?
The increasingly crucial role of SMEs in the French economy brings its own set of challenges and opportunities for law firms. In order to support small- and medium-sized companies in their development, law firms must identify the skills these companies will need in the years to come. The services law firms can offer these SMEs may range from facilitating the transfer of family-owned businesses and accompanying corporate restructuring operations, to helping companies adapt to the digital era, or assisting companies which are only active in France that wish to expand internationally, which may require knowledge of export incentives offered by the State in order to assist clients to make the right choices.
Firms should also strive to anticipate the sectors of the economy which will be the next to boom, based on the government’s strategic choices as well as their own specializations and assets. This means monitoring economic changes in the market and understanding its long-term developments.
Additionally, law firms should not only consider the effects of the digital revolution on their clients’ industries, but also on their own “business models”, by asking themselves relevant questions, such as: “what consequences will the digital revolution entail for our international development?” Such considerations will allow law firms to reap the benefits and seize the opportunities offered by this new digital era.
The importance of legal market intelligence:
Whatever the importance of the wider macroeconomic context, a law firm can accelerate its development by improving its knowledge of its own environment, i.e. its competitors. This will allow firms to compare their organization with that of other law firms in order to streamline. Knowing one’s environment involves learning about the services lines developed by competitors, understanding them, and then analyzing what works and what doesn’t. Law firms should also look at the innovations put in place by competitors.
What are the tools law firms can use to monitor the economy and their own environment?
In order to understand the trends affecting the economic market and their own environment and competitors, law firms are able to choose from a wide array of tools, ranging from market analysis to benchmarking, studies based on international and national legal and economic press, rankings, press reviews, Google Alerts, etc. Using these tools on a regular basis can help law firms to keep track of the changes in their market. This type of knowledge will provide them with a much needed competitive advantage in today’s demanding environment.