WORKBOOK

WORKBOOK
MODULE 1
UNDERSTANDING THE
CORPORATE ENVIRONMENT
MODULAR LEARNING SYSTEM
IN SUPPLY CHAIN MANAGEMENT
International Trade Centre MLS
Action Points
Page
Preface
Unit 1 Introduction
Learning Check.......................................................................................................... 1
Unit 2 Which Type of Organisation?

2.4-1 About your organisation.................................................................................. 2
2.4-2 About your organisation’s purchasing & supply function ................................ 3
Learning Check.......................................................................................................... 5
Unit 3 Corporate Culture, Mission, Goals and Policies

3.2-1 Indicators of power.......................................................................................... 8
3.2-2 Your corporate culture .................................................................................... 9
3.2-3 The impact of corporate culture on recruiting ............................................... 10
3.3-1 Stakeholders in your organisation ................................................................ 11
3.3-2 Your organisation’s mission and goals: the link to purchasing & supply ...... 12
3.4-1 Your organisation’s corporate policies.......................................................... 14
Learning Check........................................................................................................ 15
Unit 4 Corporate Strategy

4.3-1 The business environment and your enterprise ........................................... 18
4.3-2 Market prospects and risks........................................................................... 19
4.4-1 Your enterprise’s core competences ............................................................ 20
4.4-2 Advantages and disadvantages of a product/service ................................... 21
4.6-1 Determining the offers required to develop a product-market option ........... 22
4.6-2 Estimating the profitability of a product-market option.................................. 23
4.6-3 Determining your PIP ratings........................................................................ 24
4.7-1 Comparing new product-market options....................................................... 25
4.8-1 Identifying the critical path ............................................................................ 26
4.9-1 Implications of corporate strategy for your firm’s purchasing &
supply function ............................................................................................ 27
Learning Check........................................................................................................ 28
Unit 5 The Role and Objectives of the Purchasing & Supply Function
5.2-1 Direct and support functions ......................................................................... 34
5.2-2 The purchasing & supply function in your organisation ................................ 35
5.2-3 Outsourcing................................................................................................... 36
5.3-1 Formulating “good” objectives for purchasing & supply................................ 37
5.3-2 Setting supply objectives in your company................................................... 38
5.3-3 Setting project targets and supply objectives for a major project in
your enterprise ............................................................................................ 39
Module 1: Contents i
MLS International Trade Centre
5.4-1 Ethical purchasing......................................................................................... 40

5.4-2 The need for an environmental purchasing policy in your organisation ....... 42
5.4-3 Converting corporate environmental policy into purchasing &
supply policy ............................................................................................... 43
Learning Check........................................................................................................ 44
Unit 6 Operating the Purchasing & Supply Function within the Organisation
6.2-1 Linking processes and functions................................................................... 48
6.2-2 Your purchasing & supply process ............................................................... 49
6.2-3 Your purchasing & supply process: continued ............................................. 50
6.2-4 Improving processes that interface with suppliers........................................ 52
6.3-1 Matching corporate culture and structure ..................................................... 53
6.4-1 The position of the purchasing & supply function in your organisation ........ 54
6.4-2 The degree of centralisation of purchasing in a small firm (or in
an operating unit ......................................................................................... 55
6.4-3 Relations with other departments ................................................................. 56
6.4-4 Focus of the purchasing department in your organisation............................ 58
6.5-1 What kinds of people a purchasing & supply department needs ................. 59
Learning Check........................................................................................................ 61
ii Module 1: Contents

Unit 1: Learning Check
Following, is a self-assessment exercise that you can use to verify your knowledge of the
concepts covered in this Unit. Answer the following questions without looking back at the
text you have read. Once you have completed this, compare your answers to the text and
to those in the Module Answerbook. Tick the boxes when you have answered correctly.
1. List three of the purchasing & supply function’s major decision-areas that are
particularly influenced by the corporate environment.
2. List the four main dimensions of the corporate environment that influence the
purchasing & supply function
Module 1: Unit 1 1
Action Point
2.4-1
About your organisation
In the following table, indicate the box in which sector your organisation operates
(remember that it could be in more than one sector). Try to give an example of an
organisation operating in your country for each of the remaining boxes.
Private Public Non-profit
SECTORS
Primary:
Extractive
Secondary:
Manufacturing
Tertiary:
Services
2 Module 1: Unit 2
Action Point 2.4-2
About your organisation’s purchasing & supply function
1. How does the sector you belong to influence the way your purchasing & supply is
carried out?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
2. What particular constraints, if any, are there that result from the size of your
organisation (e.g., if in the private sector, from it being an SME, a large local enterprise
or a multinational)?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
3. Estimate the proportion that your organisation spends on the following items, as
compared to its total expenditure on purchase of goods and services:
Capital goods purchases: _______ % (including spares for maintenance, repair

and operation of machinery & equipment)
Operational purchases: _______ % (e.g., materials and supplies)
Purchase of services : _______ %
Other purchases : _______ %
4. Approximately what share of your organisation’s total cost does the purchase of goods
and services account for?
___________ %
Module 1: Unit 2 3
Action Point 2.4-2 (Cont’d)
About your organisation’s purchasing & supply function
5. Bearing this in mind, do you believe that the purchasing & supply function in your
organisation is being given the correct level of importance?
Yes No
♦ Why, or why not?
4 Module 1: Unit 2

1. List three advantages and three disadvantages that generally apply to SMEs, as
compared to larger enterprises.
Advantages
Disadvantages
2. List four factors that often inhibit effective purchasing & supply of SMEs
3. Which are some of the main goals that are generally sought to be achieved
through public procurement legislation and regulations?
Module 1: Unit 2 5
4. List two potential causes of inefficiency in public organisations:
5. In which ways is procurement by non-profit organisations similar to that of:
♦ the private sector
♦ the public sector
6. Arrange the primary, secondary, and tertiary sectors in order of their relative
importance in most of the least developed countries.
♦ Largest sector
♦ Middle-sized sector
♦ Smallest sector
7. In which of these three sectors would you expect the purchase of capital
equipment as a share of total purchases to be the most significant?
8. Which is a problem common to many buyers in the primary (extractive) sector?
9. Which are the two main purchasing & supply concerns in the secondary
(industry) sector?
10. List some of the methods of manufacturing that may have an impact on how
purchasing of the required inputs is undertaken.
6 Module 1: Unit 2
11. Why is it important for a retail buyer to have an understanding of consumer

requirements?
Module 1: Unit 2 7
Action Point 3.2-1
Indicators of power
There are a number of indicators that can be used to suggest whether an individual or a
group has one or more particular types of power. For example, a person would be likely
to occupy a powerful position in the hierarchy if he or she has access to special
privileges, such as a company car. Write down two indicators for each of the following
types of power:
1. Power by position:
_________________________________ __________________________________
_________________________________ __________________________________
_________________________________ __________________________________
_________________________________ __________________________________
_________________________________ __________________________________
2. Power by influence:
_________________________________ __________________________________
_________________________________ __________________________________
_________________________________ __________________________________
_________________________________ __________________________________
_________________________________ __________________________________
3. Power by control of valued resources:

_________________________________ __________________________________
_________________________________ __________________________________
_________________________________ __________________________________
_________________________________ __________________________________
_________________________________ __________________________________
8 Module 1: Unit 3
Action Point
3.2-2
Your corporate culture
How would you classify the culture of your own organisation, i.e., is it power, role, task,
independency or a mixture of these? What reasons would you give for your answer?
Type of culture: ________________________________________________________
Reasons:
Module 1: Unit 3 9
Action Point
3.2-3
The impact of corporate culture on recruiting
Imagine that you are recruiting for the following positions. What type of person do you
think would be most suited to each?
A project manager in a task culture.
An administrative position in a role culture.
A key player in a power culture.
10 Module 1: Unit 3
Action Point 3.3-1
Stakeholders in your organisation
Write down who are all of the stakeholders in your own organisation.
Module 1: Unit 3 11
Action Point 3.3-2
Your organisation’s mission and goals: the link to

purchasing & supply
1. Overall mission and goals of your organisation
If your organisation has an overall mission statement and set goals, write down their
key aspects. Why do you think these aspects are included? Do you think that they
derive from the nature of the organisation (e.g., public vs. private, or power culture vs.
role culture, etc.), or from the influence of major stakeholders, or from some other
factor?
If your organisation doesn’t have statements of its mission and goals, what do you think
these should be? Use what you have learned so far in this Module to answer.
12 Module 1: Unit 3
Action Point
3.3-2 (Cont’d)
2. Mission and goals of your organisation’s purchasing & supply function
If your organisation’s purchasing & supply function has a stated mission and goals,
write down their main features. Indicate the extent to which these are aligned with the
overall mission and goals of your organisation. If they are not, what changes would you
propose?
If your organisation’s purchasing & supply function does not have a stated mission and
goals, imagine and write down which you think these should be, taking account of the
overall mission and goals of your organisation.
Module 1: Unit 3 13
Action Point
3.4-1
Your organisation’s corporate policies
Does your organisation have any published corporate policies? If so, are they aligned
with its mission and goals? Are the policies effective (e.g., are they well understood,
applied, reinforced, relevant, etc.)?
If your organisation doesn’t have any published corporate policies, are there any
“unwritten” policies? What policies do you think are needed? How would you make
them effective?
14 Module 1: Unit 3

1. How would you define corporate culture?
2. True or false: “The effectiveness and efficiency of an organisation will be better if

it has a consistent corporate culture throughout”. Explain your answer.
3. Write down as many of the factors that determine corporate culture as you can.
4. Which are the three sources of power within organisations?
Module 1: Unit 3 15
5. Which type of corporate culture would be likely to be most vulnerable if the chief
executive suddenly left an organisation?
6. Give three situations under which a role culture would be appropriate.
7. List three situations where a task culture is most effective.
8. In which types of organisation are you most likely to find an independency

culture?
9. Two enterprises of similar size, selling similar products into similar markets are
experiencing the same problem. One enterprise adopts a solution that is
evidently successful. The second enterprise copies the solution. Under which
conditions is the solution more likely to work in the second enterprise?
10. In what way are goals different from mission statements?
16 Module 1: Unit 3
11. The expectations of key stakeholders need to be taken into account in mission
statements. List as many possible stakeholder groups as you can.
12. How might you improve the formulation of the goal “To substantially increase
profitability” in order to make it more useful to the organisation?
13. How would you ensure that your organisation's policies are effective?
14. List five examples of possible corporate policies.
Module 1: Unit 3 17
Action Point 4.3-1
The business environment and your enterprise
Select a product or service being sold by your enterprise, or one that you know well, and
list any opportunities or threats coming up in the market or business environment that
you think might affect it.
Opportunities:
Threats:
18 Module 1: Unit 4
Action Point 4.3-2
Market opportunities and risks
Pick one of your firm’s current product-markets (i.e., a product or service sold in a given
market). Alternatively, select a product-market of a company that you know well.
Product-market: ________________________________
a) At which stage is it in the product-market life-cycle, and what makes you believe this?
b) Briefly describe the level of competition that your firm faces in this product-market.
c) From the above, and taking account of other information you may have, indicate which
you think are the main opportunities and risks that this product-market represents for
your firm:
Module 1: Unit 4 19
Action Point 4.4-1
Your enterprise’s core competences
Think of some recent successes that your enterprise (or one that you know well) has had
in selling its products or services in the marketplace. Which do you think are the core
competences behind its success?
20 Module 1: Unit 4
Action Point 4.4-2
Advantages and disadvantages of a product/service
Take one of the products/services offered by your enterprise (or one that you know
well). Compare it to similar products/services offered by its competitors. List below
which you think are the 3 main advantages of the firm's product/service and which are
its 3 main disadvantages.
Use the list of the product/service features that we have reviewed as the basis for your
answers.
Product/service:
________________________________________________________________
Advantages:
1. ______________________________________________________
______________________________________________________
2. ______________________________________________________
______________________________________________________
3. ______________________________________________________
______________________________________________________
Disadvantages:
1. ______________________________________________________
______________________________________________________
2. ______________________________________________________
______________________________________________________
3. ______________________________________________________
______________________________________________________
Module 1: Unit 4 21
Action Point 4.6-1
Determining the offers required to develop a product-

market option
Select a product-market that your firm (or another well-known enterprise) is actively
considering for development. If you know the firm’s sales target for this product-market,
write this down. Then, based on the process described earlier, use the table below to
try to:
♦ Evaluate the firm's current product/service offer and identify three areas where
improvements would be required.
♦ Determine which features and conditions (for these three areas) the company will
need to offer if it is to meet its expected sales targets.
If you do not have all of the necessary information at hand to make realistic estimates
for the company, nevertheless try to go through the process as carefully as possible
using information you believe to be reasonable. When thinking of the features and
conditions needed, you may wish to emphasise those that have a direct implication for
the company's purchasing & supply function.
Product/service: ____________________________ Market: _____________________

Sales target: $ _______________ (over ___ years)
Product/service features & The firm’s current

Target offer
conditions offer/capabilities
22 Module 1: Unit 4
Action Point 4.6-2
Estimating the profitability of a product-market option
Take the same product-market option for the firm that you selected for the previous
Action Point 4.6-1. In the following table, give an estimate of the investment cost and
the cash flows for this product-market over the next three years. (If you do not have
any realistic information at hand, just put in hypothetical figures.)
Product/service: __________________________ Market: _______________________

Investment cost: $ _______________
Period Cash inflows Cash outflows Net cash flow

(sales income) (operating costs) (profit)
Year 1
Year 2
Year 3
Total
Now, based on the above figures, calculate:

a) The Return on Investment (ROI): _______________ x 100 =
b) The Payback Period: =
c) The Net Present Value (NPV), assuming an effective discount rate of 10%.
Present
Period Net cash flow Discount factor
value
Initial investment
Year 1
Year 2
Year 3
Total NPV:
Module 1: Unit 4 23
Action Point 4.6-3
Determining your PIP ratings
Take the product-market option that you considered earlier in Action Point 4.6-2.
Then, based on the process described above, use the table below to try to:
♦ Determine the PIP for the features and/or conditions of the company’s target
offer, in the event that these improvements are not made.
♦ Give a PIP rating (H, M, L or N) to each feature/condition.
If you do not have all of the necessary information at hand to make realistic estimates
for the company, nevertheless try to go through the process as carefully as possible
using information you believe to be reasonable.
Product/service: ___________________________ Market: _____________________

Sales target: $ _______________ (over ___ years)
Potential impact
Product/service Your current
on profit (PIP) if PIP
features & offer/ Target offer
the target offer is rating
conditions capabilities
not met
Total PIP:
24 Module 1: Unit 4
Action Point 4.7-1
Comparing new product-market options
Look at Alpha’s portfolio of product-market options shown in figure 4.7-2, which you
will find repeated below to facilitate your work. Compare the firm’s profitability and PIP
profiles for both its current product-markets and its new options: Then, based on
these two factors:
♦ Put a circle around those options that you consider Alpha should pursue.
♦ Cross out with an those options that you think Alpha should drop from further
consideration.
H
M
PIP
rating
L
N
N L M H
Profitability
Current product-markets
New product-market options
Summarise below the main reasons for your views:

___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
Module 1: Unit 4 25
Action Point 4.8-1
Identifying the critical path
In the figure below, identify the critical path by changing the relevant dotted arrows
into full-lined ones.
5w
3w 2w
2w
2w 2w 3w
4w 5w 1w
4w
3w 1w 2w
26 Module 1: Unit 4
Action Point
4.9-1
Implications of corporate strategy for your firm’s

purchasing & supply function
Try to indicate which are, in your view, the main implications of your firm’s corporate
strategy on its purchasing & supply function. (Alternatively, select a company that you
know well). Try to cover the five dimensions of corporate strategy that we have looked
at earlier in this Unit and which are listed below.
1. “Which products or services to sell”:

_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
2. “Which markets to sell to”:

_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
3. “What conditions to offer”:

_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
4. “How to enter and develop the markets”:

_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
5. “How to operate cost-effectively”:

_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
Module 1: Unit 4 27

1. Which are the five key dimensions of the corporate strategy?
2. Which are the six stages of the corporate strategy-setting process?
3. List three things that should be understood when reviewing the market and
business environment.
28 Module 1: Unit 4
4. Which are the four stages in the product-market life-cycle?
5. Which are the five forces influencing the level of competition in the market as
described by Porter?
6. Give three examples of what might constitute an enterprise’s core competences:
7. List the four main categories of benefits that customers look for in the products or
services that they buy:
Module 1: Unit 4 29
8. When generating product-market options, which are the three main things that an
enterprise must look at regarding how to develop its business?
9. Which of the four product-market options (i.e., increasing market share,

diversifying markets, developing products/services and developing products-
markets) is the least risky and why?
10. Which is the most risky, and why?
11. Which are the three broad categories of possible market position for an
enterprise?
12. List five of the possible ways of entering a new product-market.
30 Module 1: Unit 4
13. List the five steps involved in the analysis stage of the strategy setting process:
14. Give three examples of factors that might cause a firm to screen out identified
product-market options from further analysis:
15. Short-term corporate strategy actions are generally aimed at:
16. Give three examples of short-term actions:
17. Long-term corporate strategy actions are generally aimed at:
18. Give three examples of long-term actions:
Module 1: Unit 4 31
19. Two methods that can be used for determining the profitability of a product-
market option are:
20. Which are two factors that are normally taken into account when comparing
product-market options?
21. Which two additional factors will have to be taken into account when selecting a
product-market?
22. Which are the three areas in which an enterprise can establish priorities in order
to better focus its efforts?
23. A firm can assess the impact of not meeting its product-line offers or its project
targets by considering the effect on its… (complete the sentence)
24. The method used for planning and monitoring the schedule of project
implementation (and thus to prioritise actions on a time-basis) is called:
32 Module 1: Unit 4
25. List three issues that the purchasing & supply function can help to resolve with
regard to a firm’s strategic decisions on which products or services to sell:
26. List one issue regarding the company’s decision on which markets to sell to
where the purchasing & supply function can play an important role:
27. Name three areas in which purchasing & supply can contribute to strategic
decisions on the firm’s conditions of offer of its products and services?
28. List two areas in which the purchasing & supply function can provide inputs to
decisions on the company’s method of market entry:
29. Indicate three of the issues that an enterprise must deal with concerning how to
organise itself and operate cost-effectively:
Module 1: Unit 4 33
Action Point 5.2-1
Direct and Support Functions
List all of the direct and support functions of your enterprise, or of one that you know
well.
Direct functions
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
Support functions
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
34 Module 1: Unit 5
Action Point 5.2-2
The purchasing & supply function in your organisation
Take the purchasing & supply function in your organisation (or in one that you know
well). Indicate below whether it is considered a direct or support function. Give the
reasons for this, and indicate whether or not you agree.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Module 1: Unit 5 35
Action Point 5.2-3
Outsourcing
List below some reasons that might lead an organisation to outsource its transport and
distribution function.
♦ ___________________________________________________________________
___________________________________________________________________
♦ ___________________________________________________________________
___________________________________________________________________
♦ ___________________________________________________________________
___________________________________________________________________
♦ ___________________________________________________________________
___________________________________________________________________
♦ ___________________________________________________________________
___________________________________________________________________
♦ ___________________________________________________________________
___________________________________________________________________
♦ ___________________________________________________________________
___________________________________________________________________
♦ ___________________________________________________________________
___________________________________________________________________
♦ ___________________________________________________________________
___________________________________________________________________
♦ ___________________________________________________________________
___________________________________________________________________
♦ ___________________________________________________________________
___________________________________________________________________
♦ ___________________________________________________________________
___________________________________________________________________
♦ ___________________________________________________________________
___________________________________________________________________
♦ ___________________________________________________________________
___________________________________________________________________
36 Module 1: Unit 5
Action Point 5.3-1
Formulating “good” objectives for purchasing & supply
In the space below, write down three “good” objectives – in different areas – for your
own company’s purchasing & supply function. Check that all of the criteria referred to
above have been met:
1. ___________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
Relevant Ambitious but achievable Specific/clear/measurable
Comparable Compatible
2. ___________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
3. ___________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
Module 1: Unit 5 37
5.3-2
Action Point
Setting supply objectives in your company
Take the company product line that you selected when working on Action Point 4.6-3 in
Unit 4, and record in the relevant spaces below the same information you gave at that
time. Once you have done this, write down the supply objectives that you consider
appropriate for each of the three product/service features or conditions.
Product/service: ________________________________________
3 years’ sales target: $ _________________
The firm's
Product/service
current Target PIP
features & Supply objectives
offer/ offer rating
conditions
capabilities
♦
38 Module 1: Unit 5
Action Point
5.3-3
Setting project targets and supply objectives for a major

project in your enterprise
Consider a project that will involve significant expenditure in your organisation, or
another that you know well. Which is the project?
______________________________________________________________________
In the table below, write down the targets for the main project areas, and determine the
PIP ratings associated with achieving each target (based on estimates of potential loss
of profit if the target is not met). Use the classifications of high (H), moderate (M), low (L)
or negligible (N). Finally, indicate which you think are the main supply objectives that are
relevant to meeting the project targets. If you do not have actual information from the
company to do this, use estimates that you consider to be reasonable or, alternatively,
just create a hypothetical example.
PIP
Areas Required project targets Supply Objectives
rating
Module 1: Unit 5 39
Action Point
5.4-1
Ethical Purchasing
Consider the following cases and comment on the ethical issues. Which aspects of
ethical policy are involved and what would you do in these situations?
1. In the course of a competitive tender, your Director informs you that a contract should
be placed with one of the bidders. You later find out that the Chief Executive of the
supplier organisation is your Director’s cousin.
2. In dealing with a tender, you receive a phone call from the Sales Director of one of the
bidders, who informs you that he has made a mistake when pricing the bid. He has
over-estimated one of the cost items, and would now like to reduce the price of the
offer by $22,000. You notice that this amendment makes the supplier’s bid the most
advantageous.
40 Module 1: Unit 5
3. Your organisation calls a tender whereby all bids submitted have to be received by a
specified date and time. You receive a phone call half an hour before this time expires
from one of the bidders saying that their bid is not ready and requesting another day to
prepare their tender.
4. On conducting a supplier analysis at their premises, you are taken to lunch at a fine
restaurant by the company’s Directors of Operations and of Marketing. They pay the
bill, and as a token of goodwill they also provide you with a box of chocolates and a
taxi back to your office (all paid for).
Module 1: Unit 5 41
Action Point 5.4-2
The need for an environmental purchasing policy in

your organisation
How relevant to your enterprise (or to another that you know well) are the external
factors described in the Coursebook? In each case, describe the extent to which they
suggest a need for the firm to establish or strengthen its environmental purchasing
policy.
1. Trade and environment:
2. Phasing-out of products:
3. Customers’ demands:
42 Module 1: Unit 5
Action Point 5.4-3
Converting corporate environmental policy into purchasing

& supply policy
Suppose an organisation has an environmental policy as follows:
“The organisation will seek to establish and demonstrate good environmental practice
wherever possible”.
If you were responsible for translating this into a more detailed environmental policy for
use by the purchasing & supply function, what sort of policy statements would you
make?
Module 1: Unit 5 43

1. How can a function best be defined?
2. List five of the activities undertaken by the purchasing & supply function.
3. What is the main difference between direct functions and support functions in an
enterprise?
4. List three examples of direct functions in an enterprise.
5. List three examples of support functions in an enterprise.
44 Module 1: Unit 5
6. Which are two of the risks that your company may face if it outsources
capabilities or assets that are critical to its competitive advantage?
7. List four of the factors that influence how the objectives of the purchasing &
supply function are set.
8. List four of the features that would characterise a “good” objective for the
purchasing & supply function in an enterprise.
9. Supply objectives in the context of a company’s product-lines must be aligned

with… (complete the sentence)
10. The priority to be given to such supply objectives will reflect… (complete the
sentence)
11. Supply objectives in the context of a company’s projects must be aligned with…
(complete the sentence)
Module 1: Unit 5 45
12. The priority to be given to such supply objectives will reflect… (complete the
sentence)
13. The two factors that will influence the priority given by purchasing & supply to
supporting other functions and processes in the organisation are:
14. Give two reasons why the purchasing & supply function might develop its own
policies.
15. Give three examples of general policies that the purchasing & supply function
might adopt:
16. List three areas usually covered by a purchasing & supply ethics policy:
17. Under which circumstances should you decline a gift or hospitality offered by a
supplier?
46 Module 1: Unit 5
18. List four ways in which a purchasing & supply ethics policy might cover how
buyers should treat suppliers.
19. Which are the four stages that should be considered when assessing the
environmental credentials of a particular purchase?
20. List six things you would consider when determining if a purchase is
environmentally sound.
21. Once the purchasing & supply function has established its objectives and
policies, the three things that it must do on a priority basis are:
Module 1: Unit 5 47
Action Point 6.2-1
Linking processes and functions
Look at the table below, which gives a simplified example of how the links can be
established between selected processes and functions within an enterprise. The
example we have illustrated here shows one process – the order fulfilment process –
as it might apply in a manufacturing firm. The arrows are the links amongst the various
functions intervening in the process. Try to name the activity corresponding to each of
the numbers shown in the figure. Some activities have already been filled out, as
examples:
1. Sales informs production about a customer's order.

2. __________________________________________________________________
3. __________________________________________________________________
4. P & S receives delivery of the goods from the suppliers and notifies finance and
accounting.
5. __________________________________________________________________
6. __________________________________________________________________
7. During and/or after manufacture, production informs quality assurance that the
finished products are ready for testing.
8. __________________________________________________________________
9. __________________________________________________________________
10. __________________________________________________________________
11. __________________________________________________________________
Processes
Functions Marketing Order

and sales fulfilment
Suppliers
Purchasing 3
& supply 6 4
Production 2 7
Quality
assurance 8
Sales 1
Distribution 9
Customer 11
services
5
10
Finance and
accounting Customers
48 Module 1: Unit 6
Action Point 6.2-2
Your purchasing & supply process
Think of the purchasing & supply process in your organisation, or one that you know
well. Remember the scope of the purchasing & supply function that we covered earlier in
Unit 5. Using the table below, identify three of this function's major sub-processes, which
functions are involved in each of these, what outputs they produce, and who the
customers are.
The Purchasing & supply process

Sub-processes Functions involved Output Direct customers
Module 1: Unit 6 49
Action Point 6.2-3
Your purchasing & supply process: continued
From the three sub-process within your organisation’s purchasing & supply process that
you considered in Action Point 6.2-2, select one that involves various functions.
1. Which process have you selected?
2. Think of how many people are involved. Are there too many? Why or why not?
3. Is there a clear process owner (i.e., is someone in control, who has the necessary
authority and who is fully responsible and accountable for the results of the whole
process)? Who is this person (title, function)? If there is no owner, why not?
50 Module 1: Unit 6
4. Which process have you selected?
5. Think of how many people are involved. Are there too many? Why or why not?
6. Is there a clear process owner (i.e., is someone in control, who has the necessary
authority and who is fully responsible and accountable for the results of the whole
process)? Who is this person (title, function)? If there is no owner, why not?
Module 1: Unit 6 51
Action Point 6.2-4
Improving processes that interface with suppliers
Think about how your purchasing & supply function interfaces with suppliers. Can you
think of any ways that these processes could be improved? What competitive
advantages would these improvements give to your company?
52 Module 1: Unit 6
Action Point 6.3-1
Matching corporate culture and structure
We covered corporate culture in Unit 3. There is a strong link between the culture of an
organisation and its structure. Draw arrows below to show which kind of structure you
think is most likely to reflect each of the different types of culture.
Type of Culture: Type of Structure:
Independency Web
Task Hierarchical
Power Matrix
Role Galaxy of stars
Module 1: Unit 6 53
Action Point 6.4-1
The position of the purchasing & supply function

in your organisation.
Try to answer the following three questions for your company or one that you know well:
1. Approximately what percentage of the company’s total cost is accounted for by

purchased products (including capital goods) and services? ____________ %
2. To what extent do the supply markets for these goods and services pose risks to the
enterprise (e.g., fluctuations in price, availability and quality)?
3. To what extent do suppliers possess certain key expertise or capabilities that the
organisation needs (e.g., component design and development)?
4. Based on your answers to the above three questions, how important would you say that
the purchasing & supply function is to the company, and what position – in your view –
should it occupy within its organisational structure? Which position does it currently
occupy, and is there a gap?
5. If there is a gap, what do you think the enterprise should do to raise the profile of its
purchasing & supply function?
54 Module 1: Unit 6
Action Point 6.4-2
The degree of centralisation of purchasing in a small firm (or

in an operating unit)
Fill in the figures below for your enterprise (or one that you know well) as a whole, if it is
a relatively small one. If the enterprise has various operating units, please consider only
one of those units in your response. Approximate figures will suffice. After you have done
this, please answer the two questions below.
Amount of
Percentage of Types of products Level of purchasing
purchase
Department total purchase and services expertise amongst
expenditure
expenditure purchased staff
managed
%
Purchasing
& supply
Total: 100 %
1. If any parts of the firm's purchases are decentralised (i.e., undertaken outside of the
purchasing department), do you feel on balance that those departments that are
managing most of the purchasing expenditure have sufficient expertise in purchasing &
supply management?
2. Do you feel that any opportunities for leverage with suppliers are being missed because
of decentralisation? Explain
Module 1: Unit 6 55
Action Point 6.4-3
Relations with other departments
In the table below, analyse the relations that your purchasing & supply department has
with the main other departments of your enterprise (or one that you know well). Then
answer the questions on the next page. If the firm does not have a full purchasing &
supply department, indicate which department is principally responsible for the
purchasing & supply function: _____________________________________________.
Culture Nature of No. of people

Purchasing & supply
of the processes in the P&S
Department processes that interrelate
depart- (routine / department
with the department
ment strategic) involved
56 Module 1: Unit 6
Action Point
6.4-3 (Cont'd)
1. Consider the nature of the main processes that the purchasing department is involved in
(i.e., purely internal vs. cross-functional; routine vs. non-routine/project or a mixture of
these). Describe the extent to which the department’s culture matches the nature of its
processes and the cultures of the other departments with which it must work.
2. Is there any way that the structure and/or staffing of the purchasing & supply department
could be changed to better accommodate these cultures?
3. Are there any opportunities to reduce the number of the department’s staff involved in
any of the above processes by re-defining their work roles?
Module 1: Unit 6 57
Action Point 6.4-4
Focus of the purchasing department in your organisation
Which is the focus of the purchasing & supply department in your company (or one that
you know well): by types of purchased items, by product-lines/projects, or both (the
hybrid approach)?
________________________________________________________________
Depending on the department’s focus, answer one of the questions below:
If it focuses on categories of purchased items, does the department adequately service

the needs of the product-lines or projects?
If it focuses on product-lines or projects, is it missing leverage opportunities with

suppliers? Do its buyers have sufficient supply market knowledge to make effective
purchase decisions?
If it uses the hybrid approach, do the two different groups of buyers work effectively
together?
Write down your thoughts on whether you consider that the existing focus is the best
option for the organisation.
58 Module 1: Unit 6
Action Point 6.5-1
What kinds of people a purchasing & supply department

needs
Try to imagine that you are recruiting three staff at different levels for a purchasing &
supply department. Indicate the titles and main responsibilities that the different jobs will
involve and write down some examples of qualifications/attitudes that you consider
essential under each. You should list areas of knowledge or skills needed, as well as
any attitudes and personality traits that you consider important for doing the job.
1. Title and/or main responsibilities:
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
Qualifications/attitudes:
♦ ___________________________________________________________________
♦ ___________________________________________________________________
♦ ___________________________________________________________________
♦ ___________________________________________________________________
♦ ___________________________________________________________________
♦ ___________________________________________________________________
♦ ___________________________________________________________________
♦ ___________________________________________________________________
♦ ___________________________________________________________________
♦ ___________________________________________________________________
2. Title and main responsibilities:

___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
Module 1: Unit 6 59
Action Point
6.5-1 Cont’d
♦ ___________________________________________________________________
♦ ___________________________________________________________________
♦ ___________________________________________________________________
♦ ___________________________________________________________________
♦ ___________________________________________________________________
♦ ___________________________________________________________________
♦ ___________________________________________________________________
♦ ___________________________________________________________________
♦ ___________________________________________________________________
3. Title and main responsibilities:

___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
♦ ___________________________________________________________________
♦ ___________________________________________________________________
♦ ___________________________________________________________________
♦ ___________________________________________________________________
♦ ___________________________________________________________________
♦ ___________________________________________________________________
♦ ___________________________________________________________________
♦ ___________________________________________________________________
♦ ___________________________________________________________________
60 Module 1: Unit 6

1. Suppose you had been asked to carry out a consultancy assignment for an
organisation. Write down the order in which you would analyse the following:
♦ The major processes of an organisation
♦ The structure of the organisation
♦ The functions required by the organisation
2. How would you define a process?
3. Give three examples of major cross-functional processes within an organisation:
4. Which are some of the conditions that will help to ensure that the purchasing &
supply process is as efficient and effective as possible?
Module 1: Unit 6 61
5. List the four types of organisational structure.
6. Which type of structure would you associate with a role culture?
7. List four advantages each of centralisation and de-centralisation in an

organisation:
a) Centralisation:
b) Decentralisation
8. Which five factors influence the organisation of the purchasing & supply
function?
62 Module 1: Unit 6
9. Under which circumstances would you expect the purchasing & supply function
to occupy a top-level position in an organisation?
10. Which are three things that you can do to raise the profile of the purchasing &
supply function in your organisation?
11. Indicate two of the advantages of centralisation and two of the advantages of de-
centralisation of the purchasing function:
a) Centralisation:
b) Decentralisation:
12. List two process interactions that the purchasing & supply department may have
with each of the following departments in an enterprise:
a) Production or other user department:
b) Quality management department:
Module 1: Unit 6 63
13. Which are two issues to consider when deciding how to internally structure the
purchasing department?
14. Which are the three main issues that you have to think of when deciding how to
provide your purchasing & supply department with the resources it needs to
function effectively?
15. Which are some of the features of the traditional approach to the purchasing &
supply function?
16. Which are some of the features of the modern approach to the purchasing &
supply function?
64 Module 1: Unit 6
17. List five attributes that you think are important for a person working in a
purchasing & supply department.
Module 1: Unit 6 65
Street address P: +41 22 730 0111 Postal address
International Trade Centre F: +41 22 733 4439 International Trade Centre
54-56 Rue de Montbrillant E: itcreg@intracen.org Palais des Nations
1202 Geneva, Switzerland www.intracen.org 1211 Geneva 10, Switzerland
The International Trade Centre (ITC) is the joint agency of the World Trade Organization and the United Nations.

WORKBOOK - M1-Understanding The Corporate Environment - Workbook - Sept

Uploaded by

Copyright:

Available Formats

You might also like

WORKBOOK - M1-Understanding The Corporate Environment - Workbook - Sept

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

WORKBOOK - M1-Understanding The Corporate Environment - Workbook - Sept

Uploaded by

Copyright:

Available Formats

Unit 2 Which Type of Organisation?

Unit 3 Corporate Culture, Mission, Goals and Policies

Unit 4 Corporate Strategy

5.4-1 Ethical purchasing......................................................................................... 40

About your organisation

Private Public Non-profit

Action Point 2.4-2

About your organisation’s purchasing & supply function

Capital goods purchases: _______ % (including spares for maintenance, repair

Operational purchases: _______ % (e.g., materials and supplies)

Purchase of services : _______ %

Other purchases : _______ %

Action Point 2.4-2 (Cont’d)

About your organisation’s purchasing & supply function

♦ Why, or why not?

4. List two potential causes of inefficiency in public organisations:

5. In which ways is procurement by non-profit organisations similar to that of:

♦ the private sector

♦ the public sector

8. Which is a problem common to many buyers in the primary (extractive) sector?

11. Why is it important for a retail buyer to have an understanding of consumer

Action Point 3.2-1

3. Power by control of valued resources:

Your corporate culture

Type of culture: ________________________________________________________

The impact of corporate culture on recruiting

A project manager in a task culture.

An administrative position in a role culture.

A key player in a power culture.

Action Point 3.3-1

Stakeholders in your organisation

Action Point 3.3-2

Your organisation’s mission and goals: the link to

1. Overall mission and goals of your organisation

2. Mission and goals of your organisation’s purchasing & supply function

Your organisation’s corporate policies

1. How would you define corporate culture?

2. True or false: “The effectiveness and efficiency of an organisation will be better if

4. Which are the three sources of power within organisations?

6. Give three situations under which a role culture would be appropriate.

7. List three situations where a task culture is most effective.

8. In which types of organisation are you most likely to find an independency

10. In what way are goals different from mission statements?

14. List five examples of possible corporate policies.

Action Point 4.3-1

The business environment and your enterprise

Action Point 4.3-2

Market opportunities and risks

Action Point 4.4-1

Your enterprise’s core competences

Action Point 4.4-2

Advantages and disadvantages of a product/service

Action Point 4.6-1

Determining the offers required to develop a product-

Product/service: ____________________________ Market: _____________________

Product/service features & The firm’s current

Action Point 4.6-2

Product/service: ________ Market: _

Product/service: ____ Market: _

Product/service: _______ Market: _