INTRODUCTION
Professional service firms (PSF) are businesses or organisations who provide expert commercial knowledge in a specific area. They include accountancy firms, management consulting and law firms. Internationalisation has allowed them to expand globally and become multinational. “Law is local, so I don’t have to worry about globalisation affecting me or my practice.” With globalisation transforming the way businesses and organisations connect with their clients and provide services on an international level, there is the added pressure for smaller businesses to compete. It has given law firms the opportunity to enter international markets, as well as grow and expand their clientele. Globalisation has worked well for top tier law firms, such as Dentons and DLA Piper, as they are able to reach clients internationally, therefore, market themselves and expand their territories. This is mainly due to their cross-border relationships, networks and successful mergers. On the other hand, having a local would allow domestic firms to improve the services that they provide to their local clients, which has worked well for Scottish firms such as Lindsays LLP. However, with current trends as well as societal and economic changes, this raises a question for the necessity to businesses and firms to become international.
By assessing global and local strategies, I will determine which is best suited for Scottish law firms. The current competitive nature of Scotland’s legal sector poses a risk to local firms. It is possible that they will be overtaken by English or international firm mergers. Notwithstanding this issue, Scotland’s independent ‘identity’ and strong economy opens doors for local firms to access a variety of clients without going overseas.
WHAT IS GLOBALISATION?
In order to form a comparison between global and local firms, the term globalisation must be understood. Essentially it is the “process of enabling professional service firms to operate internationally.” The advancement of technology and communication aided the process of operating on an international scale and at a rapid rate. It has allowed businesses to enter new emerging markets, such as Africa and Asia, and for these markets to thrive and expand. But what does this mean for law firms? Even though each country having their own laws and regulations, combining experiential knowledge from both global and local firms strengthens its position. Entering markets can be created through collaborating with other firms in various jurisdictions. Globalisation does not only concern firms expanding out, it includes domestic firms attracting clients through their jurisdictional dominance and the image of the country in which they operate.
SCOTLAND’S LEGAL SECTOR
Internationalisation within the legal sector has provided a wider market for law firms and allowed emerging markets to gain access to the best legal advice. This can happen through various methods with the most common being mergers and acquisitions. Law firms have adapted when expanding overseas, especially US law firms entering the European market. But, before law firms can become global, they must first establish their reputation in their domestic area. In order for a law firm to grow or become dominant in its jurisdiction, they should understand and anticipate client needs. Friedman identifies a category in which local firms will not be affected by globalisation. He suggests that having a specialism in a specific area reduces the possibility of being replaced. This can be applied to having local knowledge or a firms position in a legal sector. In Scotland this would refer to its growth sectors such as technology, renewable energy and property.
The legal sector is constantly changing and is highly competitive, especially in Scotland. It is important for law firms to align with client needs and demands, but there are various opportunities presented to law firms who remain in their jurisdiction. Local law firms possess complete autonomy over their work and can focus on strengthening their identity within their jurisdiction before expanding overseas. The majority of Scottish cities have seen an increase across technology, finance, oil and gas sectors and are attracting overseas investment. Furthermore, with regards to Brexit, Scottish law firms must take advantage of its globalisation effect. Many argue that Brexit will open the doors to businesses looking to enter the Scottish market. Law firms top talent add value to Scottish firms as they have local knowledge and sufficient experience within Scotland. Additionally, Terry highlights that law firms who remain local, reach clients who have global needs outside their own jurisdiction by joining international networks. He suggests that non-global law firms should seize the opportunity that globalisation offers. Scotland is growing from external investments and this has allowed it to engage in entrepreneurial activities with other countries regarding Scotland’s growing markets through networks. Lindsays which is a full service Scottish firm is part of the Law Exchange International network. As a non-global law firm, the network has allowed it to provide services to clients who may have an interest in Scotland or are looking to expand. This has demonstrated that the firm can successfully operate internationally without physically doing so.
Hong’s article examined the possibility that a country’s image affects consumers view of the organisation. Applying this hypothesis to law firms, it can be argued that if a country has a poor image it will make them less attractive to clients and create an obstacle regarding global expansion. Scotland has a strong independent identity, creating a positive image towards Scottish businesses within or outside its jurisdiction. Investors and potential clients rely on the firms country of origin image to determine the firms quality. Thus, claiming that it is a country’s reputation and economic stance which attracts companies and clients. It further mentions that there is an amelioration in the work law firms produce if their domestic market is seen positively to foreign countries. To expand overseas, firms must build on their experience and reputation as solely relying on clients to gain revenue is not enough. With this limitation there is competition between law firms to attract top clients. This pressure can take its toll of local firms causing them to drown in a sea of competition. However, by establishing a niche or speciality, they can reduce the competition from global law firms, and remain local.
All is not lost for local law firms as remaining independent brings many advantages. Law firms who do not globalise differentiate themselves by becoming practices that cater to all regardless of the nation’s low population. Thornton’s LLP is an example of a large Scottish full-service firm and it is continuously growing across Scotland through mergers. Additionally, as large Scottish law firms (e.g. Brodies LLP) are still smaller than England largest law firm (e.g. Allen & Overy), there exists the need to expand Scotland’s jurisdiction. Yet, the type of clients local firm have may help determine whether it going global or merging with a global firm is necessary. Traditional Scottish firms, such as Anderson Strathern, have diverse private clients and they are usually not the target for global firms, thus removing the need to compete. In this regards, it can be said that internationalisation negatively would affect Scottish law firms with a large commercial client base such as Brodies.
Finally, international clients with multinational cultural and ethnic issues can be represented by law firms who are attentive to these issues. Smaller law firms tend to offer a more personal approach due to their size and ability to give their full attention to each clients. This can be done by either providing bilingual services or serving a niche market. Therefore, this allows law firms to know there clients and provide a personal, yet professional service. This will allow local Scottish firms to keep their identity and benefit from Scotland’s progressive and flourishing image.
WIDER UK APPROACH
It is often said that American law firms are the big players within the legal industry. But, from an international perspective, UK law firms are much bigger as they are found in more international jurisdictions. This is specifically targeted towards, the ‘Magic Circle’ UK law firms which are found in over 30 countries around the world. With Scotland’s exports playing a significant role in Scotland’s increasing economy, there has been an rise in cross border activity due to established trade relationships. Slaughter and May have developed and strengthened their relationships with local independent firms across the UK through their delivery of integrated services instead of merging firms. Magic circle firms in England are an example of the current legal market and where it is headed as they have shown great strength in establishing global identity.
Mergers and acquisitions are very common as it allows firms to enter the international market however, other ways have proved to be just as successful and to an extent cost-effective. Legal service support centres across the nation have provided great assistance and reduced the number of city firms across the UK. Ashurts LLP opened over one hundred centres across the UK and in 2010 Addleshaw Goddard LLP opened a few as well. This has removed the need for outsourcing overseas and has kept costs low. Furthermore, it has facilitated communication between firms, thus, expanding a firm nationally is less expensive than doing so internationally, especially if legal centres are used. Nonetheless, local firms may avoid merging with English firms due to their client base and the local knowledge they have, and would instead provide cross collaboration between English firms giving them a variety of cases to deal with and broadening their experience and ability to work and learn from others.
WHY DO FIRMS BECOME INTERNATIONAL?
Global expansion is challenging, especially for local firms due to their size and resources. The transition from local to global can be difficult as it places various challenges on the law firms, making it challenging for some law firms to succeed overseas or to even initiate the expansion.
However, this does not prevent many law firms going international and this is due to various factors. Firstly, the firm may already have clients who have extended their business overseas, such as franchises, who still require their services overseas. Many professional service firms provide face to face interaction or are easily accessible to their client. By creating an international presence, firms can establish offices abroad or collaborate with other law firms to fulfil client demands. In doing so they gain experience in providing legal services in a multi-jurisdictional setting. Secondly, internationalisation allows professional service firms, especially law firms to have access to a wider market and to not be restricted within their home jurisdictions. Various aspects of larger law firms must be considered to establish if their services will attract clients. These include the type of legal advice, corporate image and ranking, as well as their reputation. UK law firms have been described as entrepreneurial and creative which has helped facilitate the expansion of various legal services in new jurisdictions. Therefore, making it easier to build on their reputation and relationships with clients.
In order to internationalise effectively, firms must be strategic in their decisions when entering national and international markets. Having local knowledge of the jurisdiction in which a business will operate is imperative. It is common for law firms to hire highly experienced individuals in the industry as possessing local knowledge can aid in the development of global strategies, but this can be limited. Dentons LLP is a clear example of a global law firm as it currently operates in over seventy countries world-wide through its verein structure , but has also merged with various local law firms. In 2017, Scottish law firm Maclay, Murray and Spens merged with Dentons and opened offices in Glasgow and Edinburgh. This strategic move immersed Dentons into the heart of Scotland’s economic markets as both cities are business and technology hubs. This merge has proved to be successful for Dentons and is an ideal way for other law firms to expand outside their jurisdiction. Merging with other law firms challenges internal integration. In order for a newly merged firm to start gaining revenue they must leverage their knowledge and reputation to establish relationships and networks within their new jurisdiction.
Moreover, an obvious challenge to internationalisation is the obdurate language barrier. Communication is a significant part of the legal industry and it is important for it to be clear in order to carry out work effectively. A firm that is lacking linguistically, underperforms when working with others in a foreign country. Having proficiency in a foreign countries increases coordination and can aid in creating strong relationships with other firms and businesses. Thus, for local law firms to consider expanding internationally, they must ensure that they are linguistically strong in the jurisdiction in which they are planning to operate in. As previously mentioned, law firms must have the local knowledge to operate in their new jurisdiction. Hiring local top talent solves both the communication barriers and provides the knowledge required to thrive.
The internationalisation of law firms over the years has shown great profitability and growth in regards to global expansion. This is evident with large US and Australian law firms entering the European and sometimes Asian jurisdictions. Their expansion is mainly due to new opportunities within new emerging markets. The US is particularly appealing to new businesses due to the freedom to contract across all states without restriction. Beaverstock suggested that the advantages of being close to clients is increased accessibility and representation. His claim suggested that internationalisation creates a first stop for clients to access top-tier legal advice. This has been seen within big law firms such as Dentons, Clifford Chance and Linklaters LLP as they have a multitude of law firms across the globe demonstrating accessibility. Therefore, aiding them in becoming go-to firms for clients, especially as they are expanding at a rapid rate. On the whole, it is not necessary for firms to expand to different locations as it can be expensive and there are other strategies available to reach international clients. Thus establishing a dominant position within the global sphere will not only attract clients, but also top talent and various opportunities.
INTERNATIONAL MARKETS
The Canadian legal market has seen a lot of changes over the years due to mergers and internationalisation. Despite having little competition from international law firms within their jurisdiction, they have continued to be successful. It has, however, been difficult for international law firms to enter the Canadian markets due to their legal specialities and particular sectors. Although Canada is large in size, it has very limited markets in which international law firms can extend their practices, but this differs to what Scotland offers. Over the past few years in Scotland, law firms have merged with much larger international firms and this has proved to be successful especially within the Scottish market. A recent example is Maclay Murray and Spens merging with Dentons. It is important to balance both global and local aspirations. Although global law firms, gain more opportunities due to the wider market, local law firms maintain autonomy over their work and can operate independently. This can be an issue for global firms as they do not have this level of consistency, therefore, if there is an issue with one, they all share liability.
FINAL THOUGHTS ON GLOBALISATION
In conclusion, both remaining local or globalisation has its advantages. On the one hand, Scottish firms remaining local strengthens their identity as Scotland’s position economically creates a positive image, regardless of Brexit. Nevertheless, the Scottish market is still too small and this new global law firms and mergers can overconcentrate the legal market. A method for local firms to use would be to create networks to give them access to clients overseas. Furthermore, specialising in a niche area will reduce their competition created by global firms in the same jurisdiction which is demonstrated in Anderson Strathern’s model of having key local knowledge and clients in areas which global law firms such as Dentons are not targeting. On the other hand, strategic mergers with national provide mid-sized law firms with the opportunity to compete with international law firms. However, there is emphasis on firms becoming niche to have a competitive advantage within the international market. But considering the current competitive environment for law firms in Scotland, it may wise for firms to strengthen their international connections and create networks to facilitate cross border collaboration. This will allow them to reach more international clients and strengthen its position in the legal rankings. Overall, it is still possible for Scottish law firms to remain local though international expansion should be considered for the long-term as law firms will be easily accessible to clients overseas.
1.12.2018