STATE OF FLUX
2014 GLOBAL SRM RESEARCH REPORT
ARTICLE 65
This model, based on Porter five forces, illustrates how the relative power of suppliers has increased in the market as a result of customer sourcing strategies.
Figure A. A new competitive dynamic
Potential for new entrants diminished due to scale of solutions required and cost of entry
POTENTIAL ENTRANTS
THREAT OF NEW ENTRANTS
Bargaining power of buyers diminished by dependence and cost / risk of change
THE COMPETITIVE MARKET HAS TO A DEGREE BEEN SACRIFICED IN FAVOUR OF BIGGER, MORE LONGTERM DEALS WITH FEWER SUPPLIERS
BARGAINING POWER OF BUYERS
SUPPLIERS
BUYERS
BARGAINING POWER OF SUPPLIERS
Bargaining power of buyers diminished by dependence and cost / risk of change
Original source: 'Competitive Advantage: Creating & Sustaining Superior Performance', Michael E. Porter, Free Press 1985.
THREAT OF SUBSTITUTE PRODUCTS OR SERVICES
Development: 'the journey to customer
Expertise and technology to create substitutes is in the hands of incumbent suppliers in many cases
SUBSTITUTES
of choice', State of Flux 2014 Global SRM Research Report.
© 2014 State of Flux
Most strategic sourcing processes will include an analysis of how the customer views the supplier within the context of the market and the relative spend. They will also feature an analysis of how the supplier perceived the customer. If the sourcing decision or subsequent action does not mitigate this, the situation illustrated here can extend long into the contract term.
Figure B. Strategic alignment analysis
Customer view of the supplier
Supplier view of the customer
H
H
STRATEGIC
CORE
BOTTLENECK
DEVELOPMENT
D
A C
D
B
B
E
C
E
A
LEVERAGE
EXPLOIT
TRANSACTIONAL
NUISANCE
L
H
L
H
RELATIVE SPEND / PROFIT IMPACT
RELATIVE VALUE OF OUR BUSINESS TO THE SUPPLIER
Customer view
D
A
C
B D
RISK
RISK
B
E
C
E
A
Supplier view
© 2014 State of Flux
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