Ansoff Matrix. Source: adapted from Ansoff, 1957

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1 CIPS_Ansoff_Inn_Diff_Matrix_Poster_AW_v3_Layout 1 05/02/ :10 Page 1 Ansoff Matrix Exis ng Markets PROTECT/BUILD PRODUCT DEVELOPMENT New Markets MARKET DEVELOPMENT DIVERSIFICATION Exis ng Products Source: adapted from Ansoff, 1957 New Products The Ansoff Matrix can be used internally to plan sourcing requirements for new or exis ng products and develop the appropriate strategy, or externally to help to understand supplier s strategies. It can be used in conjunc on with Porter s Generic Strategies and SWOT Analysis. The matrix is divided into four key areas: Protect/build This aspect of the Ansoff Matrix concentrates on protec ng and building the company s present posi on, either by amalgama on of current products or by growing the company s market share in an exis ng market Market development This aspect of the Ansoff Matrix concentrates on breaking into new markets with exis ng products when opportuni es within the current market have been exhausted Product development This aspect of the Ansoff Matrix concentrates on delivering new products to an exis ng market, either for the survival of the organisa on or to take advantage of opportuni es that have opened up through a changing market Diversifica on This aspect of the Ansoff Matrix concentrates on moving the company away from its current product por olio and markets, by selling new products into new markets to increase revenue.

CIPS_BATNA_Poster_AW_v3_Layout 1 05/02/2016 11:36 Page 1 Best Alterna ve to a Nego ated Agreement (BATNA) HIGH Nego ated Value Final Nego a on Outcome BATNA Nego a on Event 2 Nego a on Event 1 LOW

2 CIPS_BATNA_Poster_AW_v3_Layout 1 05/02/ :36 Page 1 Best Alterna ve to a Nego ated Agreement (BATNA) HIGH Nego ated Value Final Nego a on Outcome BATNA Nego a on Event 2 Nego a on Event 1 LOW LOW TIME HIGH Source: adapted from Fisher & Ury, The BATNA is seen as an equally good alterna ve to reaching a mutually acceptable agreement and can be used to help plan the nego a on targets. It can be used in conjunc on with the Persuasion Tools Matrix, Conflict Resolu on, Nego a on Process and Zone of Possible Agreement. The BATNA is comparable to the nego ator s fall-back posi on. However, whereas the term fall-back would suggest that the agreement reached may be less than sa sfactory, the BATNA can be seen as an equally good alterna ve to reaching a mutually acceptable se lement.

3 CIPS_Boston_Con_Grp_Matrix_Poster_AW_v3_Layout 1 05/02/ :55 Page 1 Boston Consul ng Group Matrix PROBLEM CHILD STAR Rate of Growth DOG CASH COW Source: Henderson, 1984 The Boston Consul ng Group Matrix was developed in the mid 1980s by the Boston Consul ng Group. It is a means of analysing an organisa on's product range. One dimension of the matrix looks at the product s general level of growth within its market, whilst the second dimension measures the product s market share rela ve to the largest compe tor in the industry. It can be used in conjunc on with Ansoff s Matrix and the Product Life Cycle. The matrix is divided into four key areas: Problem child These are products with low market share in a high growth market. This may mean that the product actually costs the company money and so work needs to be undertaken to maximise their poten al Dog These are products have low market share in low growth markets. These products are in decline and should not be invested in as they will not make a profit Star These are high share products opera ng in high growth markets. Due to the fact that they are in a high growth market they will require significant investment, although the fact that they are in a large market could mean that economies of scale could be sought Cash cow These are products with high market share opera ng in low growth markets. These products are usually established and require li le investment to perform well and make a profit. The profit gained from these products can be transferred to star products.

4 CIPS_Ishikawas_Fshbn_Poster_AW_v3_Layout 1 05/02/ :50 Page 1 Ishikawa s Fishbone Diagram Manpower Methods Machines Materials Money Outcome Measurements Environment Management Maintenance CAUSE EFFECT Example adapted from Dr Karou Ishikawa, 1960s Ishikawa s Fishbone Diagram was developed by Dr Kaoru Ishikawa in the 1960s. It is also known as a cause and effect diagram and is a simple problem-solving tool o en used by quality assurance and con nuous improvement teams. The model is used to explore, iden fy and display the poten al causes of a specific effect. It can be used in conjunc on with the Plan-Do-Check-Act (PDCA) cycle. To iden fy the poten al causes of a problem, the following four step process if normally applied: Step 1 detail the problem in the outcome box Step 2 the main branches or bones of the diagram are used to iden fy the main categories for possible causes of the problem Step 3 determine the poten al causes under each of the heading using facts and data to underpin judgements Step 4 make a record of all the poten al causes and narrow them down to the most likely, indica ng which items should be acted upon and when.

5 CIPS_Kraljic_Matrix_Poster_AW_v4_Layout 1 05/02/ :17 Page 1 Kraljic Matrix BOTTLENECK STRATEGIC Supply Risk ROUTINE LEVERAGE Profit Impact Source: adapted from Kraljic, 1983 The Kraljic Matrix is used to profile a category of expenditure and posi on suppliers. It supports the development and implementa on of a strategic sourcing strategy in order to maximise buying power and minimise supply risks. It helps with spend and market analysis and can be used in conjunc on with the Rela onship Con nuum, Supplier Preferencing and Power Dominance Matrix to support supplier management ac vi es. The two axes of the model are as follows: Profit impact is defined as the strategic importance of purchasing in terms of value added by product line, the percentage of raw materials in the overall costs and their impact on profitability. Supply risk is defined as the complexity of the supply market determined by supply scarcity, pace of technology and/or materials subs tu on, entry barriers, logis cs cost or complexity and monopoly or oligopoly condi ons. The matrix is divided into four key areas: Bo leneck This aspect of the Kraljic Matrix iden fies products that can only be acquired from a limited source of supply or where there is a high degree of supply risk, meaning that suppliers will need to be managed in order to secure delivery. This area of the matrix is typically characterised by bespoke/rolling contracts. Rou ne This aspect of the Kraljic Matrix iden fies products that are easy to acquire and also have a rela vely low impact in the event they are not delivered. The buyer of these products should aim to implement standardised ordering procedures and improve efficiency. This area of the matrix is typically characterised by volume/blanket agreements Strategic This aspect of the Kraljic Matrix iden fies products that are crucial to the firm and are characterised by high value and high supply risk, meaning that suppliers will need to be closely managed. This area of the matrix is typically characterised by strategic partnering rela onships. Leverage This aspect of the Kraljic Matrix iden fies products that are easy to buy and could result in significant cost savings due to high volume/values. This area of the matrix generally has many suppliers with quality that is standardised therefore encouraging frequent tendering.

6 CIPS_Maslows_Hrchy_of_Nds_Poster_AW_v3_Layout 1 05/02/ :31 Page 1 Maslow s Hierarchy of Needs SELF ACTUALISATION ESTEEM LOVE/BELONGING SAFETY PHYSIOLOGICAL Source: adapted from Maslow, 1943 Maslow s Hierarchy of Needs helps managers to iden fy the next level of need in order to mo vate their team, stakeholders or suppliers. The model is usually depicted as a ered range that operates through five levels, star ng with physiological needs through to the top level of self-actualisa on. It can be used in conjunc on with Ac on-centred Leadership or Thomas Kilmann Conflict Mode. Maslow s Hierarchy is divided into five areas: Self-actualisa on This is the highest level of Maslow s Hierarchy of Needs and maintains that once an individual has reached this they will have realised their full poten al in following their personal beliefs and values Esteem needs These needs include self-respect in addi on to gaining the esteem of others Love needs These needs, o en referred to as social needs, are the need for friends, social ac vi es and the giving and receiving of love Safety needs These needs are about safety and security and include predictability and protec on from danger or depriva on Physiological needs These are basic needs that are required, such as food, water and sleep

7 CIPS_PDCA_Cycle_Poster_AW_v3_Layout 1 05/02/ :57 Page 1 Plan-Do-Check-Act (The PDCA Cycle) PLAN P ACT A D DO C CHECK Source: adapted from Fisher & Ury, The Plan-Do-Check-Act Cycle is o en referred to as the Shewhart Cycle as it was developed by scien st Walter A Shewhart. It was made popular by W Edwards Deming in the 1950s and as a result it also known as the the Deming Wheel. The cycle is an itera ve four-step management method used in business for the control and con nuous improvement of processes and products. It can be used in conjunc on with Ishikawa s Fishbone Diagram. The four stages of the model should be undertaken in a systema c order as follows: PLAN changes that will bring about improvement. DO make changes on a small scale to trial them in the first instance. CHECK to see if the changes implemented are working. ACT to ensure that the greatest benefit is gained from the changes.

8 CIPS_Porters_5_Forces_poster_AW_v3_Layout 1 05/02/ :37 Page 1 Porter s Five Forces THREAT OF NEW ENTRANTS BARGAINING POWER OF CUSTOMERS MARKET RIVALRY BARGAINING POWER OF SUPPLIERS THREAT OF SUBSTITUTES Source: adapted from Porter, 1980 Porter s 5 Forces can be used to evaluate the profit poten al of an industry and was originally developed by Michael Porter. The model is a useful tool when carrying out industry analysis and can aid the strategy development process. It can be used in conjunc on with STEEPLE and SWOT Analysis. The matrix is divided into four key areas: Threat of new entrants This element of the model relates to the compe ve pressures exerted by new entrants to a market and the extent to which this can be prevented by the factors that new entrants to the market will need to overcome to be successful, also known as barriers to entry Bargaining power of customers This element of the model looks at where supply exceeds demand from customers, or where the demand is heavily consolidated meaning addi onal pressures will be placed upon the market. This will increase compe on and reduce prices unless the customers bargaining power can be negated Bargaining power of suppliers This element of the model looks at where demand exceeds supply and so the supply-base will have greater bargaining power over buyers, par cularly if there are no alterna ve sources of supply Threat of subs tutes This element of the model relates to alterna ve products and services that increase the compe ve pressure on a market as it provides a greater opportunity for customers to buy alterna ves Market rivalry This element of the model relates to compe on in the market and the fact that it is dependant on the satura on and dynamism of the market.

9 CIPS_Porters_Value_Chain_Poster_AW_v3_Layout 1 05/02/ :49 Page 1 Porter s Value Chain Support Ac vi es FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT PROCUREMENT INBOUND OPERATIONS OUTBOUND MARKETING SERVICE LOGISTICS LOGISTICS AND SALES Primary Ac vi es Source: adapted from Porter, 1985 Porter s Value chain is used as an analysis tool when developing the sourcing strategy to map out a company s strengths and weaknesses and iden fy where the value added and non-value-added ac vi es are within the organisa ons supply chain. It can be used in conjunc on with PCA Strategy Development, SWOT Analysis and the Outsourcing Decision Matrix. The value chain is made up of primary and support ac vi es. Primary ac vi es are those that have a direct impact on the output of the product, whilst support ac vi es are those that improve the primary ac vi es.

10 CIPS_Product_Life_Cycle_Poster_AW_v4_Layout 1 05/02/ :05 Page 1 Product Life Cycle SALES INTRODUCTION GROWTH MATURITY DECLINE Source: adapted from Theodore Levi, 1965 TIME The Product Life Cycle was first used as a term by Theodore Levi in The model proposes that when a new product is launched it goes through several stages based on the idea that all products have a finite life-span, that can vary from years to decades. It can be used in conjunc on with the Ansoff Matrix and Porter s Five Forces of Compe on. The Product Life Cycle is divided into four phases: Introduc on phase This stage is characterised by heavy investment and is the point at which products are launched in to the marketplace. The norm in this phase is for slow sales growth accompanied by some losses. Growth phase During this stage consumers have become aware of the product and have started to buy it. There will be a significant increase in demand and profits, but new compe tors may also be a racted into the same industry. Maturity phase This stage sees decreased demand as the result of a sales plateau. This is o en caused by compe tors taking larger shares of the market and so alterna ve survival strategies need to be developed. The sales plateau could be short-lived or enduring, for example, Pepsi. Decline phase This stage sees a significant reduc on in demand and with that a decline in sales and profits. Whilst lowest cost produc on will s ll be available whilst there is volume, a decision needs to made as to whether the product is s ll viable.

11 CIPS_Risk_Impact_Grid_Poster_AW_v3_Layout 1 05/02/ :09 Page 1 Risk Impact Grid HIGH RED Probability of Occurrence GREEN AMBER LOW LOW Probability of Occurrence HIGH The Risk Impact Grid is used to assess the scale of a risk by evalua ng the combined effect of its poten al impact with the likelihood of it occurring. The grid allows poten al risks to be colour coded red, amber or green so that they are easier to monitor and manage, with priority given to red risks. The key elements of the model are as follows: Probability of occurrence refers to the likelihood of the risk event actually occurring. The more likely the event is to occur, the higher the level of risk Severity of impact refers to the impact of the risk if it does occur. The higher the impact, the higher the level of risk Amber refers to medium risks, i.e. those that either high impact but not very likely or those that are very likely but not necessarily high impact. Amber risks should be monitored closely and managed / mi gated where possible Green refers to low risks, i.e. those that are not very likely to occur and would have a low impact. Green risks can be monitored but may not require ac on to manage or mi gate.

12 CIPS_Stkhldr_Mngmnt_Matrix_Poster_AW_v3_Layout 1 05/02/ :46 Page 1 Stakeholder Management Matrix KEEP SATISFIED KEY PLAYERS Stakeholder power MINIMAL EFFORT KEEP INFORMED Stakeholder interest Source: adapted from Mendelow, 1991 Using the Stakeholder Management Matrix to analyse stakeholders can help with developing the procurement strategy. Establishing key stakeholders to influence is paramount for effec ve leadership and promo on of procurement ac vi es, especially if buy-in for change is required. Related models include the Communica on Process and Ac on Centred Leadership. The four key elements of the matrix are as follows: power low interest The stakeholders in this group require minimal effort in consulta on. power high interest The stakeholders in this group need to be kept informed, mostly as a ma er of courtesy as they have low power. interest high power These stakeholders need to be kept sa sfied because they have high power and could prove resistant is they disagreed with your ac ons. interest high power The stakeholders in this group are the key players who must be considered and consulted at every stage of change because their ac ve support is required to ensure comple on.

13 CIPS_Supplier_Pref_Matrix_Poster_AW_v3_Layout 1 05/02/ :25 Page 1 Supplier Preferencing Matrix A rac veness of Account DEVELOP/NURTURE NUISANCE CORE/PROTECT EXPLOIT Rela ve Value of Account Source: adapted from Steele & Court, 1996 The Supplier Preferencing Matrix can help procurement teams to understand how a supplier might value its account with them. It originated in the mid 1990s and was developed by Paul Steele and Brian Court and proposes from the supplier s perspec ve there is an associa on between the a rac veness of the buyer s account and the revenue genera on. This will in turn affect how the supplier manages the account with the buyer. It can be used in conjunc on with the Boston Consul ng Group and Kraljic matrices. The two axes of the model are as follows: Rela ve value of the account (horizontal axis) represents a measure of poten al revenue A rac veness of Account (the ver cal axis) represents pres ge, future business, etc. The matrix is divided into four key areas: Develop/nuture Accounts in this area of the matrix bring li le in terms of value to a supplier but are very a rac ve in terms of their poten al. O en a great deal of focus is placed on developing this aspect of customer rela onships as they can be seen as the supplier s future Nuisance Organisa ons in this area of the matrix bring li le in terms of value and poten al and so the supplier might be expected to show li le interest or support and to be ac vely making efforts to withdraw Core/protect Accounts in this area of the matrix are both high value and a rac ve. They are seen as core business and the supplier will place emphasis on levels of service in order to defend their posi on, whilst a emp ng to increase business Exploit Organisa ons in this area of the matrix may have a high volume of sales from an account that is not considered to be a rac ve. In this case, the supplier may concentrate on gaining short-term benefits due to the fact that retaining a longer term rela onship if not considered important.

14 CIPS_SWOT_Analysis_Poster_AW_v4_Layout 1 05/02/ :44 Page 1 SWOT Analysis Internal Factors STRENGTHS WEAKNESSES Internal Factors External Factors OPPORTUNITIES THREATS External Factors Source: adapted from Stanford Research Ins tute, c.1965 The SWOT Analysis can be used to iden fy strengths and weaknesses within your own and suppliers organisa ons which helps with strategy development and nego a on planning. It also considers the external environment and highlights poten al risks and threats from compe tors and/or legisla on, for example. It can be used in conjunc on with Ansoff s Matrix, Porter s 5 Forces, PCA Strategy Development, STEEPLE and Ishikawa s Fishbone Diagram. The matrix is divided into four key areas: Strengths these are the posi ve a ributes that an organisa on demonstrates, for example highly skilled staff Weaknesses these are the weaknesses of the organisa on, for example poor internal processes that can hinder progress Opportuni es these are external factors that could provide posi ve opportuni es for the organisa on, for example a supplier who has the ability to offer cost savings Threats these are external factors that present a poten al risk to the organisa on, for example compe tors.

15 CIPS_ZOPA_Poster_AW_v3_Layout 1 05/02/ :33 Page 1 Zone of Possible Agreement (ZOPA) RANGE OF BUYER S OPTIONS ZOPA NEGOTIATION VARIABLE (such as cost, quality or other measure) RANGE OF SUPPLIER S OPTIONS Source: adapted from Harvard Business School. The Zone of Possible Agreement is useful when planning a nego a on as it can help to iden fy various op ons when trying to reach an agreement or mutually acceptable outcome. It is o en associated with the BATNA nego a on approach but can also be used in conjunc on with the Persuasion Tools Matrix, Conflict Resolu on, the Nego a on Process and the Rapport Matrix. The Zone of Possible Agreement helps to iden fy the minimum fall-back posi on for each party and the limits of the ZOPA signify the point at which either party would walk away from the deal. Once both par es have moved into their respec ve zones, beyond the fall-back posi on, then it is more likely that an agreement will be reached.

Diploma in procurement and supply Unit content guide

Diploma in procurement and supply Unit content guide CIPS Group Easton House, Easton on the Hill, Stamford, Lincolnshire, PE9 3NZ, UK T +44 (0)1780 756777 F +44 (0)1780 751610 E info@cips.org CIPS Africa