Problem situation and research approach
At the dawn of the 21st century, the context in which companies operate is undergoing radical change. Firms have to compete in markets that are characterized by ever growing international competition, rapid technological evolution, and increasingly demanding customers (Lowson, 2003, p. 541; Monczka & Morgan, 2000, pp. 48–50). As a consequence, firms experience more and more pressure on margins and performance. These developments force managers to focus on core competencies (Prahalad & Hamel, 1990, pp. 79–82) and to cooperate closely with suppliers (Kannan & Tan, 2003, pp. 472–473). As a result of this increased reliance on suppliers and the associated need for expertise in supplier management (Carter, Monczka, & Mosconi, 2005, p. 9; Croom, 2001, pp. 29–37), the purchasing function — which has traditionally only focused on clerical activities such as administering orders and negotiating prices — is developing into a powerful weapon for improving profitability (Das & Narasimhan, 2000, p. 17; Monczka, Trent, & Handfield, 2005, p. 24). In fact, senior executives across the world identify purchasing and supply management (PSM) as “the new front of competitive advantage” (Quinn, 1998, p. 38). Specifically, they argue that the purchasing function can contribute to competitive advantage by selecting and developing suppliers in ways that enhance the firm’s ability to meet its customers’ needs along dimensions such as cost, quality, flexibility, dependability, or innovation (Krause, Pagell, & Curkovic, 2001, pp. 500–503; Watts, Kim, & Hahn, 1992, pp. 4–7). Such contribution, however, critically depends on two factors. First, as widely discussed in literature, the purchasing function must be better integrated into the firm’s strategy- making process if it is to add value in terms of, for example, providing market intelligence or integrating suppliers into new product developments (e.g., Carter & Narasimhan, 1996, p. 24; Narasimhan & Das, 2001, pp. 593–597). Second and less addressed in research, the purchasing function must better coordinate and align its objectives and activities with business strategy (Nollet, Ponce, & Campbell, 2005, pp. 135–136; Watts et al., 1992, pp. 4–7). Only if purchasing strategy and practices support the firm’s overall competitive position can PSM effectively contribute to competitive advantage. But which purchasing strategy and practices best support which business strategy? And what impact does an alignment of these constructs have on company performance? These questions will be addressed in detail in the next chapters.
KeywordsCompetitive Advantage Firm Performance Business Strategy Functional Strategy Manufacturing Strategy
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