The technology deployment specialist of the Adelaide District School Board, Christine Clark, needed to make immediate changes to the purchasing system in response to service demands. The current system was not widely accessible or user-friendly, and was creating heavy workloads and the need for overtime. Senior management recognized the advantages of implementing a system that would integrate the data processing of all functions, including human resources, inventory, finance, purchasing, etc., and gave her the mandate to find an integrated system and develop a proposal for its implementation. In addition to finding a system that would meet these criteria, she had to consider the conflicting interests of different users, a new system that had been implemented in the finance department, and the ongoing changes in the organization.
Authors :: Fernando Olivera, James A. Erskine, Michiel R. Leenders
Swot Analysis of "Purchasing Systems" written by Fernando Olivera, James A. Erskine, Michiel R. Leenders includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that System Purchasing facing as an external strategic factors. Some of the topics covered in Purchasing Systems case study are - Strategic Management Strategies, Supply chain and Technology & Operations.
Some of the macro environment factors that can be used to understand the Purchasing Systems casestudy better are - – digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, cloud computing is disrupting traditional business models, increasing transportation and logistics costs, there is increasing trade war between United States & China, there is backlash against globalization, wage bills are increasing,
competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, etc
Introduction to SWOT Analysis of Purchasing Systems
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Purchasing Systems case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the System Purchasing, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which System Purchasing operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Purchasing Systems can be done for the following purposes –
1. Strategic planning using facts provided in Purchasing Systems case study
2. Improving business portfolio management of System Purchasing
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of System Purchasing
Strengths Purchasing Systems | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of System Purchasing in Purchasing Systems Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of System Purchasing in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– System Purchasing has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled System Purchasing to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- System Purchasing is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at System Purchasing is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Purchasing Systems Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– System Purchasing has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. System Purchasing has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For System Purchasing digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. System Purchasing has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Innovation driven organization
– System Purchasing is one of the most innovative firm in sector. Manager in Purchasing Systems Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Operational resilience
– The operational resilience strategy in the Purchasing Systems Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Low bargaining power of suppliers
– Suppliers of System Purchasing in the sector have low bargaining power. Purchasing Systems has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps System Purchasing to manage not only supply disruptions but also source products at highly competitive prices.
Diverse revenue streams
– System Purchasing is present in almost all the verticals within the industry. This has provided firm in Purchasing Systems case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Strong track record of project management
– System Purchasing is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to recruit top talent
– System Purchasing is one of the leading recruiters in the industry. Managers in the Purchasing Systems are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in Technology & Operations industry
– Purchasing Systems firm has clearly differentiated products in the market place. This has enabled System Purchasing to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped System Purchasing to invest into research and development (R&D) and innovation.
Weaknesses Purchasing Systems | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Purchasing Systems are -
High cash cycle compare to competitors
System Purchasing has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Lack of clear differentiation of System Purchasing products
– To increase the profitability and margins on the products, System Purchasing needs to provide more differentiated products than what it is currently offering in the marketplace.
High operating costs
– Compare to the competitors, firm in the HBR case study Purchasing Systems has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract System Purchasing 's lucrative customers.
Capital Spending Reduction
– Even during the low interest decade, System Purchasing has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High bargaining power of channel partners
– Because of the regulatory requirements, Fernando Olivera, James A. Erskine, Michiel R. Leenders suggests that, System Purchasing is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Interest costs
– Compare to the competition, System Purchasing has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Purchasing Systems, it seems that the employees of System Purchasing don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
No frontier risks strategy
– After analyzing the HBR case study Purchasing Systems, it seems that company is thinking about the frontier risks that can impact Technology & Operations strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Purchasing Systems, in the dynamic environment System Purchasing has struggled to respond to the nimble upstart competition. System Purchasing has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, System Purchasing is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Purchasing Systems can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Increasing silos among functional specialists
– The organizational structure of System Purchasing is dominated by functional specialists. It is not different from other players in the Technology & Operations segment. System Purchasing needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help System Purchasing to focus more on services rather than just following the product oriented approach.
Opportunities Purchasing Systems | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Purchasing Systems are -
Low interest rates
– Even though inflation is raising its head in most developed economies, System Purchasing can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, System Purchasing can use these opportunities to build new business models that can help the communities that System Purchasing operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects System Purchasing can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Manufacturing automation
– System Purchasing can use the latest technology developments to improve its manufacturing and designing process in Technology & Operations segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Technology & Operations industry, but it has also influenced the consumer preferences. System Purchasing can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Using analytics as competitive advantage
– System Purchasing has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Purchasing Systems - to build a competitive advantage using analytics. The analytics driven competitive advantage can help System Purchasing to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Creating value in data economy
– The success of analytics program of System Purchasing has opened avenues for new revenue streams for the organization in the industry. This can help System Purchasing to build a more holistic ecosystem as suggested in the Purchasing Systems case study. System Purchasing can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Buying journey improvements
– System Purchasing can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Purchasing Systems suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Leveraging digital technologies
– System Purchasing can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Better consumer reach
– The expansion of the 5G network will help System Purchasing to increase its market reach. System Purchasing will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Technology & Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. System Purchasing can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. System Purchasing can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Loyalty marketing
– System Purchasing has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. System Purchasing can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Purchasing Systems External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Purchasing Systems are -
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of System Purchasing.
Environmental challenges
– System Purchasing needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. System Purchasing can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
Increasing wage structure of System Purchasing
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of System Purchasing.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents System Purchasing with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of System Purchasing business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– System Purchasing has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, System Purchasing needs to keep up with the evolution of technology in the Technology & Operations sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Easy access to finance
– Easy access to finance in Technology & Operations field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. System Purchasing can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, System Purchasing can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Purchasing Systems .
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. System Purchasing needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Purchasing Systems, System Purchasing may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Technology & Operations .
Regulatory challenges
– System Purchasing needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Technology & Operations industry regulations.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for System Purchasing in the Technology & Operations sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that System Purchasing is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Purchasing Systems Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Purchasing Systems needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Purchasing Systems is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Purchasing Systems is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Purchasing Systems is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that System Purchasing needs to make to build a sustainable competitive advantage.