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Porter’s five forces have always inspired management professionals while strategizing and planning for their businesses.
Gone are the days when procurement was restricted to transactional tasks of purchasing. It has now assumed the role of being a strategic function that contributes to the overall business objectives. So it’s no surprise that Porter’s five forces can find application in procurement too.
As HBR observed when introducing an updated version of Porter’s work in 2008, the original paper “started a revolution in the strategy field.” Emphasizing such concepts as neutralizing supplier power, supply-side economies of scale, reducing switching costs, obtaining preferential access to best raw-materials sources, standardizing parts and so forth, Porter helped to unleash a strategic reinvention of procurement. The transformation was led by some of the world’s most disciplined and innovative companies — GE, IBM, Intel, Motorola, Honda, to name just a few — and propagated worldwide by some of the biggest players in management consulting.
The above info-graphic helps us study how procurement can counter Porter’s five forces while
- Analyzing supply markets.
- Spotting, driving, evaluating and exploiting supplier innovation.
- Discovering and developing new suppliers.
- Improving supplier performance.
- Negotiating and writing creative contracts.
- Collaborating with suppliers to change or manipulate industry competitive structures in mutually beneficial ways.
And many other opportunities to influence global business competitiveness from within the procurement and supply management functions.
To revisit Porters’ original work in detail and study its application for procurement, click the download button below to access the whitepaper- “Revisit Porter’s Five Forces to Unleash Procurement Innovation”
