Rethinking Procurement in the Era of Globalization Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

The role of procurement in global business has changed dramatically over the last 25 years, that of simply buying goods and services for the control of an integrated set of management functions. It brings new challenges and opportunities for procurement. Periphery and the increased emphasis on specialization and fragmentation of production improve strategic procurement decisions. Increasingly, procurement decisions are intertwined with the strategic management as a whole. In this paper, we discuss the changes in procurement in terms of economy of transaction costs. They separate the transaction costs in the "soft" and "hard" costs, and the difference between the internal and external factors that affect these costs. When making purchasing decisions, they argue, managers should consider the full range of cost elements. In addition to the traditional transaction costs, such as transport costs and tariffs, leaders should recognize elements such as cultural and legal differences, regulation, social preferences, and environmental problems, political stability and risks associated with unethical behavior of business. The authors argue that, knowing the risks and opportunities of different exposures is a critical management competencies. Although management decisions take place in various parts of the company, purchasing managers need to keep a close eye on the impact of the various costs and flag problems as they arise. Purchasing, hence the need to be more closely linked to the strategic decisions of the company. This broader view is a significant increase in the total cost of ownership concepts in purchasing decisions. Global search creates many new opportunities to create value, which is a well-run company should learn to use to their advantage. "Hide
by Frank AG den oil, Kees Linse A. Source: MIT Sloan Management Review 7 pages. Publication Date: 01 Oct 2008. Prod. #: SMR297-PDF-ENG