Strategic planning in procurement

Businesses today find themselves operating in an environment that is ever-changing. Linguists now say that the only constant is change.

By NYASHA CHIZU

To thrive in an ever-changing environment, one must develop strategies to adapt to the changes. That process of analysing the implications of the changes and modifying the way the organisation reacts to them is commonly referred to as the business strategy.

Strategy is generally the direction and scope of the organisation over a specified period of time which normally will be in the long-term and will be meant to achieve advantage in the changing environment the planned configuration of resources and competences.

Strategy models play an important part in the definition of a strategic plan. Strategic planning generally results in the strategic definition that is achieved through a Strength, Weakness, Opportunity and Threat (SWOT) analysis or the Ansoff model.

The Ansoff matrix assesses the relationship between the products or services and the market. It is also commonly known as the product market expansion grid that gives decision-makers a quick and simple way to think about risk and growth. SWOT, on the other hand, assesses the internal strengths and weaknesses of an organisation, as well as external opportunities and threats to the business at a micro level. Strategic planning also results in strategic analysis that assesses the external environment at a macro level as well as the internal capabilities.

The external environment in strategic analysis is achieved through various models such as the PESTLE and Porters 5 Forces, where the internal capability is mainly reviewed through the use of the Boston matrix.

PESTLE assesses at a macro level the political, economic, social, technological, legal and environmental conditions as they relate to the industry and the business. There are improvements on the PESTLE matrix that we shall not focus on.

Porters 5 Forces analyses the market conditions with respect to the segment rivalry between industry competitors, suppliers bargaining power and customer bargaining power and the threats that are caused by new entrants and that of substitutes.

The Boston matrix is mainly for assessing internal capacity in different way from the strength and weaknesses assessment during a SWOT analysis. It is a portfolio matrix for the categorisation of organisational strategic business units in terms of their revenues at the present moment and projected future levels. It evaluates the strategic position of the business brand portfolio and its potential.

It has four categories based on the industry attractiveness that assesses the growth rate of the industry, as well as competitive position that focuses on the relative market share.

The process of strategic planning starts by the analysis of the external environment and then followed by the assessment of internal capabilities to respond to the external environment.

The two stages assist in the definition of the strategy and also aid in the implementation of the strategy. The knowledge and experience of procurement managers in the development of a business strategy is very important. Regardless of your level of employment, a good understanding of the appropriate business analysis techniques and terminology will assist the employee to effectively contribute to the strategic decision process.

The participation in strategy development could be through meetings, pilot schemes, presentations, analysis of reports and statistics.

Procurement personnel should be experts capable to contribute to the strategic decision-making process by analysing the organisational external environment, assessing internal capabilities, assisting in strategy definitions and assisting in the implementation. This requires that procurement staff sharpen their strategic management skills to be effective.

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