Strategic Alignment and Purchasing Efficacy: An Exploratory Analysis of Their Impact on Financial Performance

Abstract

Purchasing and supply management (PSM) has become a discipline of major strategic importance for effectively competing in today's global marketplace. Literature recognizes that the full value‐creation potential of the purchasing function can only be realized if its decisions and activities are aligned with the organization's overall strategic orientation. Despite general agreement on this matter, research and practice lacks knowledge on how exactly such an alignment can be achieved and what performance implications it has. Therefore, this article empirically investigates the alignment–performance link in PSM in a comprehensive manner. Drawing on the theory of production competence, we suggest that the relative fit between business strategy and purchasing strategy, labeled as strategic alignment, and between purchasing strategy and purchasing practices, referred to as purchasing efficacy, is key to achieving superior financial performance. Results from profile deviation analysis on data collected globally from 141 strategic business units (SBUs) with revenues greater than US$S3 billion support our hypotheses. Findings provide clear guidance to managers on how to design their purchasing strategies and practices to achieve maximum alignment and thus to effectively contribute to the SBU's financial success.

Purchasing Organization and Design: A Literature Review

“…The impact of supply management on the firm's performance has frequently been discussed in the past (Chen, Paulraj, and Lado 2004;Bernardes and Zsidisin 2008;Baier, Hartmann, and Moser 2008). However, we note that the performance impact of the purchasing structure has only infrequently been studied thus far.…”

The rationale for responsible supply chain management and stakeholder engagement

“…Avram and Kahne (2008) argued that firms could charge a premium for their CSR-oriented approaches. The sustainable products" market positioning could be improved through the use of social responsibility and responsible supply chain management (Palazzo and Basu, 2007), There are positive implications for certain firms that pursue differentiation strategies (through social and environmentally responsible practices) as a means to signal an image of high product quality and sustainability to consumers (Tate et al, 2010), As a matter of fact, numerous findings reported how socially responsible business practices are actually improving both brand equity and organisational performance (Lai, Chiu, Yang, and Pai, 2010;Castaldo, Perrini, Misani and Tencati, 2009), On the other hand, some other contributions have indicated that there is little evidence on socially responsible firms that pursue niche strategies in narrow markets (Van De Ven and Jeurissen, 2005;Weitzner and Darroch, 2010), It may appear that the supply chain literature has often ignored how niche firms develop their supply chain strategies (Baier et al, 2008;13 Cousins, 2005), Perhaps, it may prove difficult for academia to propose a specific relationship between niche strategy and socially responsible supply chain management. The responsible procurement of materials and products may not necessarily constitute a part of the firms" strategy.…”

“…The engagement with suppliers is stronger and deeper when the firms pursue differentiation strategies (Porter and Kramer, 2006), González-Benito (2007) found that the fit between business strategy and purchasing strategy significantly moderates the relationship between purchasing efficacy (as measured by the fit between purchasing strategy and capabilities, and firm performance), It may appear that focal firms invest in building relationships with suppliers in order to improve their effectiveness and to gain potential collaborative advantages (Hoejmose et al, 2013), Interestingly, Baier, Hartmann and Moser (2008) noticed that innovative firms were emphasising on supplier management, talent management, integration and core processes; as they compared them to low-cost firms that were more focused on information and knowledge management (rather than cross-functional collaboration), Very often, the low-cost producers consider the supply chain as a source of cost savings and invest less in supplier development (Hoejmose et al, 2013),…”

Poverty Reduction Strategies via Public-Private Partnerships

“…Strategic procurement strategies have been recognised as essential in the age of global competitiveness (Baier, Hartmann, & Moser, 2008), yet most procurement research and the extant literature tends to promote the concept that economic gain, through cost reductions, provides suitable impetus for new policies. The contention of this chapter is sharply different: carefully designed strategic procurement policies can promote local sourcing, expanding local customer bases, and increasing market opportunities locally.…”