Integrated Strategy Development
Corporate level strategy
Business level strategy
Supply management strategy
Commodity strategy
Definition of strategy
Strategy is about choice that deals with:
Where are we now
Where do we want to go
How to get there
Business Level Strategy: Porter’s generic strategy
Refer to lecture notes diagram:
- Cost leadership (broad target, low cost)
- Differentiation (broad target, differentiation)
- Cost focused (narrow target, low cost)
4 Differentiation focus (narrow target, differentiation)
- Integrated
BLS’ Impact on Procurement
- Cost leadership - lower purchase costs
- Differentiation - Involvement of suppliers in product design
- Focus - Location of specialists, niche suppliers
Corporate Level Strategy (CLS): Ansoff’s Matrix
Refer to diagram
A. Market penetration (Existing market, existing product)
B. New Product and Services (Existing market, new products)
C. Market development (New market, existing products)
D. Conglomerate diversification (New market, new products)
CLS’ Impact on Procurement
A. Market penetration - Negotiation of contracts with options to increase
B. Product development - Negotiation of ownership of tools. Timing of deliveries
C. Market development - Partnership sourcing, specifying packing and shipping instructions
D. Diversification - Effect on set-up costs and production runs. Purchasing quantity considerations
VUCA
Volatile
Uncertain
Complex
Ambiguous
Tends to magnify both threats and opportunities
PESTEL (Opportunities and threats)
Political Economic Socio-cultural Technological Environment Legal
Forces Affecting Profitability
- Threat of new entrant
- Power of buyers
- Threat of substitutes
- Power of suppliers
- Competitive rivalry
Factors affecting power of suppliers
Availability of suppliers Ability to pass along price increases Rate of change in key technologies Threat of forward or backward integration Importance of volume to supplier
Factors impacting power of buyers
- No of buyers
- Volume purchased by each buyer
- Buyer switching costs
- Price sensitivity
- Product differences
- Brand identity
- Impact on quality or performance
- Buyer profits
Factors impacting competitive rivalry
- Industry life cycle
- Speed of industry growth
- Capacity utilization
- Exit barriers
- Product differences
- Size of competitors
Factors impacting Threat of New Entrants
- Availability of skilled workers
- Access to resources
- Product life cycles
- Brand equity and customer loyalty
- Government de/regulation
- Scale and experience
Factors impacting threats of substitutes
- Relative performance of substitutes
- Relative price
- Switching costs
- Buyer’s propensity to switch
What are strategic capabilities
SCs are what a company does exceptionally well or very differently from its competitors. Some SCs can provide a competitive advantage
Competitve Advantage VRIO
Valuable
Rare
Inimitable (Difficult to copy)
Organised - Structures (e.g. processes, systems, culture, manpower etc.) to support the SC
Sourcing Strategies
- Sole source
- Single source
- Double source
- Multiple source
