Procurement & Resource Based View

procurance is An Integral Part of Resource- Based View of An Organization Phuong Duong University College Dublin (12251697) 4112 words rustle Procurement has become an increasingly widespread practice among organizations and is today of strategical importance that attract great interest from scholars in the literature. The primary purpose of the constitution is to contribute with a re suasion of leading studies that analyze procural from the imagination-? based view of the organization. The paper begins by setting out the avocation environment of procurement and then presents the development and propensity of procurement.This is followed by a review of principal works and differences of perspectives of resource-? based view. The next section contains an analysis of the family relationship between procurement and resource-? based theory and discusses empirical works on outsourcing that address outsourcing from the resource-? based view. The studies ar classified into two cate gories those studying the propensity to procure and those studying the relationship between procurement decision and firms sufficeance. Finally, some insights are put together to assess the outsourcing decision influenced by resource-? based view with the im of im break open to a better understanding of outsourcing and its part from the perspective of resource-? based view of an organization. 1. Procurement and the propensity to procure in modern business context Procurement, or in other words, sourcing, for years has become a financial material, but strategically peripheral, corporate function of an organization (Gottfredson et al. , 2005). In the literature, procurement becomes a delineate component and is of major strategic importance to many organizations (Humphreys et al. , 1998, Paulraj et al. , 2006). Recent decades have witnessed signifi assholet changes in acro-? economic trends that direct business environment. These changes have been driven by increased globalization, technology innovation, changing consumer behaviours, and consequently, a shift toward procurement and outsourcing (Giunipero et al. , 2005, Giunipero et al. , 2006, Zheng et al. , 2007). Gottfredson et al. (2005) argued that globalization, accompanied by technological advances, is causing the core of competition to change. These days, the ownership of capabilities of an organization is not as important as its ability to govern and take advantage of critical capabilities, whether or not they are he organizations assets. Procurement is developing so sophisticatedly that even core functions such as engineering, R&D, manufacturing and marketing gutter be outsourced. That, according to Gottfredson et al. (2005), in turn, is changing the way the firms regain about their organizations, their core values and their competitive abilities. The author as well revealed that an emphasis on capability sourcing could result in an organizations better strategic position by reducing costs, stream lining the company, and enhancing grapheme. Critical functions provided by more qualified partners usually allow organizations to mprove their core capabilities that help them take the lead in their industries. With the business world changing everyday, the propensity to procure becomes prominent than ever. Nowadays procurement is not only practiced by companies in the technology industries but also spread to multiple businesses such as supply chain, manufacturing, services and so forth. It is recognized that not passive cost-? foc utilize, but proactive value-? focused procurement strategies are a means of achieving competitive advantage and integral to long-? barrier organizational strategy (Leseure et al. , 2005, Mehra and Inman, 2004,Noonan and Wallace, 2004). In a study of the impact of procurement or acquire on supply integration and performance, Paulraj et al. (2006) also concluded that (1) a more strategic purchasing function leads to better supply integration (2) manager s must breed the importance of purchasing in incorporating buyer-? supplier by focusing on process, relational, information, and cross-? organisational teams (3) strategic procurement can create a win-? win situation for some(prenominal) buyer and supplier. Taking these into account, it is undeniable that there is a tendency to procure or outsource among organizations.To assist with procurement decision making, Gottfredson et al. (2005) developed a sourcing opportunities defend like Figure 1 to help companies judge the relative merits of their outsourcing possibilities. The vertical dimension of the exhibit measures how proprietary a process or function is eyepatch the horizontal axis indicates the degree of commonality, both in spite of appearance and outside the companys industry. The author found that capabilities locating in the upper right attribute of the correspond are potential candidates for procurement. Once capabilities promising impregnable candidates for alterna tive sourcing are discovered, the ompany needs to figure out how to source them. In this stage, cost and quality requirements should be taken into account to detect key capability gaps to be filled and top-? performing competitors or suppliers to partner with. To address these issues, another assessment map has been introduced, again by Gottfredson et al. (2005) as described in the Figure 2 below. Figure 1 What should you outsource? Source Adapted from (Gottfredson et al. , 2005). Figure 2 How strong are your capabilities? Source Adapted from (Gottfredson et al. , 2005) The author explained that the position of capabilities on this grid eterminates suitable goals for an outsourcing relationship. Specifically, functions that fall in the upper left should be outsourced to low-? cost providers disregarding of reduction in quality, while those falling in the lower left require outsourcing partners that can both reduce costs and improve quality. 2. Resource-based view In the opinion of Mol (2003), resource-? based view has today become the domineering perspective of analyzing corporation strategy. However, this concept has been perceived and developed by various scholars in the literature. Porter (1985) suggested a firms competitive position an be analyzed by looking at industry structure and the role of internal decision making was overlooked. This theory contradicts itself with earlier strategic management arguments which highlighted both internal and external components (Skinner, 1969, Ansoff, 1965) and therefore several scholars such as Barney (1991), Amit and Schoemaker (2006), and Peteraf (2006) matte a different perspective and went on developing the resource-? based view based on the researches of Coase (1937) and Wernerfelt (1984). In an effort to stress the significance of managerial election and internal factors, Barney (1991) concluded that he resource-? based view examines the link between a firms characteristics and performance by investigating va ried resources within the firm. By the nature of its activities, procurement management is subject to obtaining inputs from outside partners in the organizations environment (Mol, 2003). According to Wernerfelt (1984), resource-? based approach views the firm as a historically determined collection of assets or resources which are tied semi-? permanently to the firms management. Lockett and Thompson (2001) criticized that resource-? based view is sometimes used to distinguish sequester esources, such as physical capital or brand names, from less tangible assets, such as organizational routines and capabilities. Appropriate resources can be seen as assets utilized as appropriate over a specific period, while dynamic resources may lie in capabilities that form special opportunities over time. The crucial requirements of resource-? based view are that relevant resources, regardless of their nature, are specific to the firm and not easy to be imitated by rivals (Barney, 1991). It was noted by Lockett and Thompson (2001) that resource-? based view is implied in the sense that each firms pportunity set is exclusive and a product of the resources is obtained from its past experience. Therefore, it follows that decisions about the appropriate boundaries of a firms activities should reflect its existing resource bundle. If firms face a similar external environment, in the sense of similar product and factor markets, the resource-? based view suggests that those firms with a similar initial resource endowment should display similar ceteris paribus patterns of behavior and performance. 3. Procurement is an integral part of resourcebased view of an organization Procurement and resource-based iew Procurement, or in many context, usually referred to as outsourcing, is defined as astrategic decision that entails the external spotting of determined non-? strategic activities or business processes necessary for the manufacture of goods or the provision of services by mean s of agreements or contracts with higher capability firms to set out those activities or business processes, with the aim of improving competitive advantage (Espino Rodriguez and Padron Robaina, 2006). According to resource-? based view, resources can be exploited by means of contracts (Barney, 1999, Gainey and Klaas, 2003,Grant, 1991) and this perspective can be used as a framework to help organizations decide which activities should be outsourced and which to perform in-? house. In this regard, one of the dominant frameworks that explain the propensity of procurement is core competences approach (Gilley and Rasheed, 2000, Teng et al. , 2007). Based on this approach, a firm should invest in activities generating core capabilities and outsource the rest (Prahalad, 1990, Hilmer and Quinn, 1994), regarding that the former activities are those providing the firms growth and development (Peteraf, 2006). It is pointed out by Prahalad 1990) that a firm can perform better by focusing on t hose resources generating the core competences. According to the author, short-? term success results from the price and the attributes of the products, while long-? term competitive advantages lie on the core capabilities, which derives from the firms collective learning. Strategic outsourcing, based on resources and capabilities, signifies a deep understanding of the core competences, which assist organizations to build their long-? term competitiveness (Bettis et al. , 1992). Espino Rodriguez and Padron Robaina (2006) concluded that the resource ased view helps to distinguish the core competences and provides knowledge (Hilmer and Quinn, 1994) about which activities to perform with internal resources and which to procure, determining that the possession of some resources and capabilities is what defines what the firm itself will do and what it will obtain from third parties. In order to explain the integral part that procurement plays from resource-? based view, it is important t o look into the framework developed by Grant (1991), in which a firms resources and capabilities are the main considerations in formulating strategies. In this framework or strategy formulation, five stages were established to associate strategy, competitive advantage and resources and capabilities. Among these five stages, the last one refers to identifying the resource gaps which need to be filled and invest in replenishing, augmenting and upgrading the firms resource base where there is a place for procurement. This is demonstrated in Figure 3 as below. Grant (1991) believes that regarding the lack of firms resources and capabilities, the firm needs to decide between developing resources in-? house and outsourcing resources from the third parties. Hence, in order to