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Strategy and Strategic Procurement

Slide 2.1

5. Intent Focus

1. System Perspective

4. Thinking in Time

Strategy Thinking The Five Elements

2. Intelligent Opportunism

3. Hypothesis Driven

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Strategy and Strategic Procurement

Slide 2.2

Definitions of Strategy
As a plan, strategy is some sort of consciously intended course of action, a guideline (or set of guidelines) to deal with a situation.

As a ploy, strategy is a special maneuver intended to outwit an opponent or competitor. As a pattern, strategy is a stream of actions (demonstrating) consistency in behavior whenever intended or not intended. (See Chapter 2 2.2.1 for more definitions)

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Strategy and Strategic Procurement

Slide 2.3

Eight Characteristics of Strategy


Concerned with long-term direction Trying to achieve some advantage over competitors Concerned with scope of an organisations activities

Matching of resources and activities of an organisation to the environment in which it operates


Building on or stretching resources and competencies May require major resource changes Likely to affect operational decisions Strategies also affected by values and expectations of those who have power
Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Strategy and Strategic Procurement

Slide 2.4

Strategy Development Schools Headings Prescriptive Schools


- How strategies should be formulated

Descriptive Schools

- Representing how strategies are formulated

Configuration School

- Configurations and transformation

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Strategy and Strategic Procurement

Slide 2.5

Strategy Development The 10 Schools Classification

Prescriptive Schools

Design Planning Positioning Entrepreneurial Cognitive Learning Power Configurations Transformation

Descriptive Schools

Configuration School

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Strategy and Strategic Procurement

Slide 2.6

Levels of Organizational Strategy


Corporate Strategy Top Tier
What business should we be in? Deciding grand strategies Determining values Coordinating and managing major resources Deciding business locations and structures Coordinating and integrating unit strategies Developing distinctive competencies Identifying product market niches Monitoring products and markets

Business Strategy Middle Tier

Functional/Operational Strategies

Lower Tier

Ensuring skills and competencies are utilised effectively Integrating activities e.g., purchasing/marketing Providing information and expertise

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Slide 2.7

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Strategy and Strategic Procurement

Slide 2.8

Strategic Analysis and Tools of Scientific Analysis


Definition of Strategic Analysis
Developing a theoretically informed understanding of the environment in which an organization is operating together with an understanding of the organization's interaction with its environment in order to improve organizational efficiency and effectiveness by increasing the organization's capacity to deploy and re-deploy its resources intelligently.

Tools of Scientific Analysis


Environmental scanning Porter analysis Scenario analysis Organisational appraisal Critical success analysis Gap and SWOT analysis

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Strategy and Strategic Procurement

Slide 2.9

Organisational Strategy Impact of Environmental Factors

Sector Impact

Private Public Voluntary Entry barriers Determinants of supplier power New entrants Rivalry Substitution threat Buying power Legal restrictions Refer to changes in: Political Economic Social Technological Environmental Legal environments

Industry Impact

Macro Environmental

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Strategy and Strategic Procurement

Slide 2.10

Internal Scrutiny Essential to Scan:


Resources Money
Physical facilities Human resources IT resources

Culture

(see Figure 2.7)

Value chains and structure (refer Chapters 3 and 4) Critical success factors

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Strategy and Strategic Procurement

Slide 2.11

Strategy Formulation
Vision Statement
Articulates a realistic, credible and positive projection of the future state of an organisation or functions or operations within that operation.

Mission Statement

Answers the questions What is our business?

Objectives Application of SWOT Analysis

Explicit statement of the results the organisation wishes to achieve

Strengths, weaknesses, opportunities and threats analysis

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Strategy and Strategic Procurement

Slide 2.12

Evaluation of Alternative Strategies Four Principles


Consistency The strategy must not present mutually inconsistent policies. The strategy must represent an adaptive response to the external environment and critical changes therein. The strategy must provide for the creation and/or maintenance of a competitive advantage. The strategy must neither overtax available resources nor create insoluble problems.

Consonance

Advantage

Feasibility

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Strategy and Strategic Procurement

Slide 2.13

Krajlic Portfolio Management


First introduced in 1983. Aims to guide managers to recognise the weakness of their organisation and formulate strategies for guarding against supplies disruption. Profit impact defined in terms of:
Volume purchased Percentage of total cost Impact on product quality or business growth

Supply risk assessed in terms of:


Availability Number of suppliers Competitive demand Make or buy opportunities Storage risks Substitution opportunities

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Strategy and Strategic Procurement

Slide 2.14

The Main Stages of Strategy Implementation


Communicate strategic plans to everyone in the organisation Obtain commitment from those concerned Framing polices and procedures Setting operational targets and objectives Assigning responsibilities and commensurate authority

Changing, where necessary, organisational structures


Allocation of resources and agreeing budgets Providing training for employees

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Strategy and Strategic Procurement

Slide 2.15

Post-implementation Evaluation, Control and Review


Evaluation Criteria
Internal consistency Environmental fit Resource fit Communication and implementation Establish performance standards Measure performance Compare actual with planned Take appropriate corrective action

Control Process

Review

General strategy Alternative strategy Alternative methods

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Strategy and Strategic Procurement

Slide 2.16

Strategic Purchasing and Supply Chain Process

CIPS Model Key Points


Organization's vision, mission and values Organization's overall strategy Strategic sourcing analysis

Proactive demand management


Acquisition pre-contract Acquisition post-contract Review contract and/or relationship or end contract and/or relationship

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005