Porter, Five Forces and Procurement Suites

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A friend asked me the other day if I had ever written a five forces diagram from the perspective of the procurement technology suite market, spanning product areas including spend analytics, sourcing, supplier management, contract lifecycle management, e-procurement, e-invoicing and supplier connectivity. I had not, but I told him I’d take up the challenge and put something together.

Here’s what I came up with:

Five forces diagrams, similar to a 2/2 quadrant or SWOT analysis framework, are helpful in quickly distilling information about a company, market segment or industry.

As Wikipedia observers:

“Porter's five forces analysis is a framework that attempts to analyze the level of competition within an industry and business strategy development … Porter referred to these forces as the micro-environment, to contrast it with the more general term macro environment. They consist of those forces close to a company that affect its ability to serve its customers and make a profit ... Porter's five forces include – three forces from 'horizontal' competition: the threat of substitute products or services, the threat of established rivals, and the threat of new entrants; and two forces from 'vertical' competition: the bargaining power of suppliers and the bargaining power of customers … Porter developed his five forces analysis in reaction to the then-popular SWOT analysis, which he found unrigorous and ad hoc.”

Let me know what you think of the analysis and if it’s helpful — and what you would change. I might do these more often as an exercise to help structure my thoughts on different market segments. I’m also open for revising this initial pass, as well, based on the level of interest and input.

And, in the meantime, let me leave you with one of my favorite quotes from Professor Porter, an idea we all too often forget. Namely that strategy is as much about what we decide not to do, and ruthlessly narrowing our choices, as much as what we decide to ultimately pursue. In his words: "The essence of strategy is that you must set limits on what you're trying to accomplish.”

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First Voice

  1. skuzzanoid:

    I would suggest that retail distributors can further horizontalize through automated replenishment bots, providing for additional leveraging of buyer power within operations management.

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