7A - Procurement & Business Strategy

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Questions and Answers

What is the primary reason for a performance-based partnership with suppliers of strategic products?

To obtain the best deal in the short term

To reduce logistics complexity

To ensure a secure supply of critical components (correct)

To reduce the number of suppliers

Which of the following products is an example of a bottleneck product?

Office supplies

Cleaning materials

Steel plate

Catalytic products for the chemical industry (correct)

What is the primary goal of category management and e-procurement for routine products?

To reduce the number of suppliers

To ensure a secure supply of critical components

To obtain the best deal in the short term

To reduce logistics complexity and improve operational efficiency (correct)

What is a characteristic of leverage products?

Can be obtained from various suppliers at standard quality grades Signup and view all the answers

Which of the following strategies is associated with routine products?

Systems contracting + e-commerce solutions Signup and view all the answers

What is a characteristic of strategic products?

Are critical for the production process and have a high strategic value Signup and view all the answers

What is the long-term strategy of many American and European companies focused on?

Selective growth through a combination of enhancing the core activity of the company and new business development Signup and view all the answers

What was the major concern of companies after World War 2?

Securing supply for production Signup and view all the answers

What is a benefit gained from purchasing supplies externally?

Economies of scale Signup and view all the answers

What is the traditional focus of procurement?

Cost reduction through excellent negotiating tactics Signup and view all the answers

What activities did companies outsource or subcontract when enhancing their core activities?

Manufacturing, IT, and logistics Signup and view all the answers

What theory does procurement play a strategic role in?

Strategic planning and marketing theories Signup and view all the answers

What is the primary focus of the resource-based view of the firm?

The management of a firm’s internal resources and capabilities Signup and view all the answers

Which of the following is NOT a factor in the purchasing portfolio analysis?

Marketing mix Signup and view all the answers

What is the main idea behind the resource dependency theory?

Business success is primarily achieved through deploying a company’s external and internal resources Signup and view all the answers

What is the primary goal of strategic management and thinning over time?

To strive for purchasing excellence Signup and view all the answers

Which of the following is a factor in the bargaining power of suppliers?

All of the above Signup and view all the answers

What is the main idea behind innovation strategy and competence management?

Innovation leads to profitability Signup and view all the answers

What is the primary focus of competitive strategy?

The five forces that shape competition in an industry Signup and view all the answers

Which of the following is a component of human capital?

Employees Signup and view all the answers

What is the main idea behind the growth-share matrix?

Stars, Cash Cows, Dogs, and Question Marks Signup and view all the answers

What is the primary goal of integrated, aligned, and global purchasing and supply chain strategies?

To establish globally integrated and aligned purchasing and supply chain strategies Signup and view all the answers

Study Notes

The Changing International Business Context

Many American and European companies focus on "selective growth" as their long-term strategy.
This involves a combination of enhancing the core activity of the company and new business development and innovation.

The Strategic Role of Procurement

Outsourcing and subcontracting activities have increased the interdependence between companies and their suppliers.
Benefits of purchasing supplies externally include economies of scale, learning effects, and lower costs.
Traditionally, procurement focuses on cost reduction through excellent negotiating tactics and competitive contracting.

Procurement's Role in Strategic Management Theory

After World War 2, companies focused on securing supply for production rather than marketing.
The growth-share matrix categorizes products into four quadrants: stars, cash cows, dogs, and question marks.
Competitive strategy involves analyzing the five forces that shape competition in an industry.

Innovation Strategy and Competence Management

Innovation leads to profitability.
The resource-based view of the firm attributes differences in competitive performance to the management of internal resources.
Successful companies utilize their resources (human capital, financial resources, technology, and knowledge) better and more effectively.
The resource dependency theory emphasizes the importance of deploying external and internal resources to achieve business success.

From Internal to External Resource Management

The resource-based view of the firm focuses on managing internal resources and capabilities.
The resource dependency theory emphasizes the firm's dependence on external parties, such as suppliers.

Strategic Management and Thinning over Time

Strategic planning and marketing were dominant in the 1960-70s.
Competitive strategies were dominant in the 1970-80s.
Innovation strategies were dominant in the 1980-90s.
Competency-based strategies were dominant in the 1990-00s.
Resource strategies were dominant in the 2000-10s.

Purchasing Excellence and Strategic Management Processes

A continuous loop of strategic management processes involves insourcing/outsourcing, developing commodity strategies, establishing a world-class supply base, and integrating suppliers into new products and processes.

Purchasing Portfolio Analysis

Purchasing turnover and the supplier base are analyzed based on two variables: purchasing's impact on the bottom line and supply risk.
Strategic products have a high purchasing value and strategic value to the company's core product.
Leverage products are bought at large volumes and have substitutes available.
Bottleneck products have a limited value in terms of money and may be obtained from only one supplier.
Routine products have a small value per item and have many alternative suppliers.

Basic Characteristics of the Four Supplier Strategies

Partnership: working closely together, commitment, and long-term relationship.
Competitive bidding: best deal, short-term focus, and adversarial relationship.
Secure supply: securing short and long-term supply and reducing supply risk.
Category management and e-procurement: reducing logistic complexity, improving operational efficiency, and reducing the number of suppliers.

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Description

This quiz covers the strategic role of procurement in international business, its impact on company growth, and how to develop procurement excellence. Learn how procurement supports business strategy and contributes to long-term success.