Kraljic Globalisation, Competitiveness and Supply Management
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Kraljic Globalisation, Competitiveness and Supply Management

Kraljic Globalisation, Competitiveness and Supply Management

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Kraljic Globalisation, Competitiveness and Supply Management Kraljic Globalisation, Competitiveness and Supply Management Presentation Transcript

  • GLOBALISATION,COMPETITIVENESS ANDSUPPLY MANAGEMENT “NEVI” Zwolle, March 9, 2011 Dr. Peter Kraljič
  • Three Ingoing Questions I. Why be competitive: To survive, to win or to win-win? II. Who should be competitive: Individuals, Corporations, Countries? III. How to define competitiveness: Performance vs. Sustainability or both?Dr. Peter Kraljič Globalisation and Competitiveness
  • Three Ingoing Theses I. “Panta Rei”: The whole world in process of constant – and oft abrupt - change II. Competitiveness: “Condition sine qua non” for success in globalised world III. Business as unusual: New challenges also for supply managementDr. Peter Kraljič Globalisation and Competitiveness
  • “Panta Rei”: Three major events overlast 20 years Crash of Communism and Disappearance of SSSR / Comecon September 11 leading to a futile war against terrorism Crash of Financial Capitalism and Erosion of belief in the free market forces Underlying these events are some fundamental changes across several dimensions Dr. Peter Kraljič Globalisation and Competitiveness
  • “Panta Rei”: Fundamental changes anddevelopments across severaldimensions… Politics: new power centres in BRIC countries Economy: progress and impact of globalisation Technology: exponential revolution Natural resources: growing scarcity Environment: global “hot house” effects Demography: long life and aging effects Culture: deepening tensions Cross-Crescent – Star of David Social: growing gap between rich and poor Education: new skills / LLL Values: new expectations but also erosion of ethics / greed … Leading to new scenarios, opportunities and challenges Dr. Peter Kraljič Globalisation and Competitiveness
  • Economy: Entry into globalised,post-industrial knowledge driven era 1. New rules and success factors of globalisation (e.g. distinctive skills, global brands, talent management and development) 2. New scenarios with “end-game” character (e.g. Boeing vs. Airbus, Iron Ore Trio) 3. New global winners big multis, increasingly also from BRIC (e.g. TATA, Petrobras) global sliver dominators (e.g. Novo, BU, SAP) 4. New employment structures / trends - only 15 – 20 % industrial jobs sustainable (USA 20%, D 25%, SI 35%) - shifts between high and low cost countries - Future of agricultural jobs (CHI 40%, IND 48%, BU 19%) Dr. Peter Kraljič Globalisation and Competitiveness
  • Multiple impact of globalisation 1. New opportunities access to new markets, customers and suppliers (e.g. Philips, TATA - Nano) technological leapfrogging (e.g. China) global process optimisation (e.g. Toyota) global talent pool (e.g. McKinsey) 2. New challenges consolidation / concentration / takeovers constant change (e.g. delocalisation, downsizing) commoditisation of products (e.g. stainless) new transparency / expectations of “share-” and “stakeholders” Dr. Peter Kraljič Globalisation and Competitiveness
  • Multiple impact of globalisation 3. New risks fluctuations and volatility of demand in financial and raw materials markets (e.g. currencies, rare earths) brain drain object vs. subject – risks, even on country level (e.g. ACS/HOCHTIEF, Croatia, Hungary, Iceland) global domino effects of financial crash (e.g. subprime – Lehman – bailouts) leading to global crisis of real economy Dr. Peter Kraljič Globalisation and Competitiveness
  • Multiple impact of globalisation 4. The impact of this crash was rather dramatic in Financial terms – cost of rescue, unemployment e.g. Spain 20% and market cap losses / debts explosion Psychological terms – loss of trust into the system coupled with growing fears of the populations The impact varies of course from country to country and region to region Dr. Peter Kraljič Globalisation and Competitiveness
  • Globalisations is however only onekey dimension 1. Future developments / trends are a mix of several dimensions e.g. environment protection not viable without technology (changes) 2. Impact can vary regionally and time-wise e.g. demography / aging population (EU vs. US) 3. Some changes also global, both short and long term e.g. financial crisis vs. global warming 4. Dealing with global changes, opportunities and challenges calls for competitiveness and sustainability across several decision levels Dr. Peter Kraljič Globalisation and Competitiveness
  • II. Competitiveness and sustainability inglobalised world have to be ensured acrosssix interrelated decision levels 1. Giga level = global impact 2. Mega level = major economic areas 3. Macro level = individual countries 4. Mezzo level = clusters (regions and/or sectors) 5. Micro level = corporations (incl. SME’s) 6. Nano level = individual units / people Dr. Peter Kraljič Globalisation and Competitiveness
  • 1. Giga level is so far not regulated /managed Opportunities created through globalisation, technology revolution and institutions such as WTO or IMF and exploited by global corporations with adequate strategies Risks resulting from failures of existing powers / institutions UNO: failure in Darfur, Congo USA: eroding hyper-power position Mega risks due to the lack of global concepts / coherence hot-house effect: Kyoto protocol financial crisis / recession: G-20 efforts “yet financial markets” - exploding again risk of currency war Resource bottlenecks (arable land, water,…) Dr. Peter Kraljič Globalisation and Competitiveness
  • 2. Mega level: competition vs. co-operation ofdifferent, often unstable economic areas USA / NAFTA as (still) leading economic power EU so far not successful in reaching Lisbon strategy objectives Transformation site Russia / EE / SEE Oil rich Middle East “War theatre” Japan and Pacific Rim Growing powers China and India Mercosur with Brasil Resource rich Oceania (Australia. Indonesia) Forgotten continent Africa (with China interest) Dr. Peter Kraljič Globalisation and Competitiveness
  • EU competitiveness so far not ensured, due todivergent national interests Objective: #1 economic area correct, yet implementation failing (e.g. R&D, investments, Maastricht-criteria) Positive achievement: economic zone achieved in terms of goods and capital flows Negative effects due to national divergences - Euro zone is not EU - personal mobility of labour not ensured (e.g. Germany, Austria) - economic divergence / interests (e.g. agro-cultural subsidies, “patriotisme economique”) - political differences (e.g. Iraq, Kosovo, EU / NATO expansion) - lack of leaders / role models Facit: A lot of progress, yet still a way to go. Dr. Peter Kraljič Globalisation and Competitiveness
  • 3. Macro level: competitiveness is not aquestion of size Country competitiveness is an indicator not only of actual performance, but also of future growth, sustainability and progress of society Two major international analyses with over 300 criteria - IMD: 58 countries - WEF: 139 countries Both analyses show over time similar results - USA as a rule mostly No. 1 rank overall, now droping - Among top 10 countries as a rule some smaller countries from Europe and Asia (e.g. Austria, Switzerland, Denmark, The Netherlands, Sweden, Finland, Hong Kong, Singapore, Malaysia) BRIC and CEE countries with exception of China mostly in the middle or lagging Dr. Peter Kraljič Globalisation and Competitiveness
  • Global Competitiveness Ranking 2009/10 Top 10 BRIC CEE countries*1. Singapore (3) 18. China (20) 29. Czech Republic (29)2. Hong-Kong (2) 31. India (30) 32. Poland (44)3. USA (1) 38. Brazil (40) 34. Estonia (35)4. Switzerland (4) 51. Russia (51) 42. Hungary (45)5. Australia (7) 43. Lithuania (31)6. Sweden (6) 49. Slovakia (33)7. Canada (8) 52. Slovenia (32)8. Taiwan (23) 53. Bulgaria (38)9. Norway (11) 54. Romania (54)10. Malasya (18) 56. Croatia (53) 57. Ukraine (56)______________________________________________________________Source: IMD 2009/10, BASE; 58 countries Dr. Peter Kraljič Globalisation and Competitiveness
  • Global Competitiveness Ranking 2010/11 Top 10 BRIC CEE countries*1. Switzerland (last year 1) 27. China (29) 33. Estonia (35)2. Sweden (4) 51. India (49) 36. Czech Republic (31)3. Singapore (3) 58. Brasil (58) 39. Poland (48)4. USA (2) 63. Russia (63) 45. Slovenia (37)5. Germany (7) 47. Lithuania (53)6. Japan (8) 49. Montenegro (62)7. Finland (6) 52. Hungary (58)8. The Netherlands (10) 60. Slovakia (47)9. Denmark (5) 70. Latvia (66)10. Canada (9) 71. Bulgaria (76) 77. Croatia (72) 79. Macedonia (84) 88. Albania (96) 89. Ukraine (82) 96. Serbia (93)Source: WEF base, 139 countries 102. BiH (109) Dr. Peter Kraljič Globalisation and Competitiveness
  • 3. Macro level: Importance of HR and coherentactions Both analyses also confirm the importance of human resources in the context of interplay education, innovation, productivity and values - USA and Switzerland mostly leading in area of science, research and innovation - Scandinavian countries and Singapore often ahead in areas of education, technology and values - China, India and Singapore with gains in productivity Both analyses confirm also that competitiveness is not a question of country size, but rather a result of coherent actions on political, educational and corporate levels Dr. Peter Kraljič Globalisation and Competitiveness
  • 4. Mezzo level is often neglected, despite itsoften growing importance Globalisation leads to concentration and often to deep and radical change of individual sectors - example China: steel, textile exports, solar energy, ICE Regions are competing - also within individual countries – for (F)DI and often show significant differences regarding growth and value creation - examples: France (ldF–rest), Germany (ABL–NBL), Italy (North vs. South) Clusters play an increasing role at the interface macro-micro level and lead to important growth and job creation effects (e.g. Wolfsburg) Dr. Peter Kraljič Globalisation and Competitiveness
  • 5. Micro level remains decisive for sustainableprogress of states and regions Growth and value creation of each country depends upon an adequate mix of globally competitive companies, also from smaller and now BRIC countries - big MNC as growth engines (e.g. Nokia, Arla, Maersk, Nestlé, Severstal, Embraer) - midsize companies as leaders of global slivers (e.g. Novo, VA- Tech, Böhler-Uddeholm) - Hidden Champions: SME’s and start ups as drivers of innovation and job creation (e.g. Silicon valley, North Italy, Slovenia - Kolektor, Seaway) “Conditio sine qua non” is not the size of domestic market but global competitiveness based upon coherent vision / strategy and constant change optimizing four key corporate levers Dr. Peter Kraljič Globalisation and Competitiveness
  • Four elements of coherent vision / concept 1. Strategy: clear and sustainable competitive advantage Base for advantage: example steel sector - 1 S = structural advantage (Bao, Severstal, Tata) - 2 S = scale & scope (Arcelor Mital, BHP, CVRD) - 3 S = specialisation, speed, skills (BU, Acerinox, SMS) Vision and flexibility - plan for events / discontinuity - what if scenarios (e.g. supply vs. customer markets) - constant change as only stable factor (GE) - sustainability / ecology / CSR Dr. Peter Kraljič Globalisation and Competitiveness
  • Four elements of coherent vision / concept 2. Organisation: optimisation and coherence of organisational elements and levers New “7S” paradigm = invisible organisation, focused on people - formal context: 30 % of performance - mental and social context: 70 % of performance - above threshold of shared values and trust - stars vs. happy underperformers Basic structure (e.g. Functional, Divisional, Regional,…) Networks, not boxes (McKinsey) Value chain optimisation / integration Delegation, motivation, interaction - Nucor: workers as owners / entrepreneurs Dr. Peter Kraljič Globalisation and Competitiveness
  • Four elements of coherent vision / concept 3. Operations: ensure “CI” distinctiveness Continuous Innovation and Innovativeness (e.g. BOSCH, J&J) Continuous Improvement (Toyota, VA Stahl) Customer Intimacy and Relationship (CRM, SCM, SRM) Competitive Information (benchmaking) and in times of crisis Cash flow, cost and Inventories optimisation Dr. Peter Kraljič Globalisation and Competitiveness
  • Four elements of coherent vision / concept 4. Human resources management as core corporate function and competence Top talent = key corporate resource Ex-ante ties to strategy and needed skills - cross-functional - multi-national HRM - innovation connected to training / LLL - recruiting and retaining top talent - evaluation / motivation / renumeration - development: leaders, not only managers Dr. Peter Kraljič Globalisation and Competitiveness
  • 6. Last but not least: Nano= individual andeducational level Demands of knowledge driven economy coupled with globalisation effects lead to new challenges - winning war for talent - reducing brain drain risk - managing delocalisation / outsourcing - dealing with polarisation of high vs. low value added jobs Europe needs additional investments and new concepts - beyond Pisa / Bologna - constant knowledge upgrading - motivating youth for jobs with future potential (e.g. engineering, sciences) - concepts / mentality of LLL - training and reskilling Goal: ensuring “cutting edge” skills / know how Dr. Peter Kraljič Globalisation and Competitiveness
  • 7. HR-Quadriga:Future competitiveness of Europe viaeducation, innovation, productivity and values Mega region not (yet) in No. 1 position Hardly any structural advantages Few corporations beyond established multinationals - able to compete globally on scale & scope level Best chance in 3-S area, driven by education, innovation, productivity and knowledge management and embedded in adequate organisational culture and value system Dr. Peter Kraljič Globalisation and Competitiveness
  • III. Business as unusual *: newchallenges also for supply management 1. Crisis in three acts Financial: 50.000 Mio $ impact Economic: world BNP down 5% Social: 15 Mio jobs destroyed * Source: S. Garelli, IMD Dr. Peter Kraljič Globalisation and Competitiveness
  • III. Business as unusual: new challengesalso for supply management 2. Future recovery unclear V - form: Germany W - form: USA U - form: Europe L - form: Japan Issue: overcapacities? Dr. Peter Kraljič Globalisation and Competitiveness
  • III. Business as unusual: new challengesalso for supply management 3. Two types of Economy Replacement Economy Driven by “dramatic innovation” (e.g. phones) Typical for developed countries First Buy Economy Driven by need / new purchasing power Typical for emerging markets Dr. Peter Kraljič Globalisation and Competitiveness
  • III. Business as unusual: new challengesalso for supply management 4. New pillars of growth Emerging markets → new middle class Emerging “less poors” → new business models (e.g. Nano/TATA) Clean technologies → sustainability Growing life expectation → wellness / HC Dr. Peter Kraljič Globalisation and Competitiveness
  • III. Business as unusual: new challengesalso for supply management 5. Growing commodity prices: example 1999-2009 - Nickel +94% - Copper +269% - Corn +104% - Sugar +270% - Gas +108% - Gold +308% - Oil +202% - Lead +378% Dr. Peter Kraljič Globalisation and Competitiveness
  • III. Business as unusual: new challengesalso for supply management 6. Driven by China’s and India’s appetite China’s world consumption share Al: 19% Coal: 31% Cu: 20% Cement: 47% Steel: 27% China’s & India’s oil consumption 2009: 11,5% 2030: 45% Dr. Peter Kraljič Globalisation and Competitiveness
  • III. Business as unusual: new challengesalso for supply management 7. As consequence, business models and focus have to be restructured and/or adapted 1980’ies: working better → Reengineering 1990’ies: working cheaper → Outsourcing 2000: working elsewhere → Globalisation 2010: working simpler → Competitiveness Dr. Peter Kraljič Globalisation and Competitiveness
  • III. Business as unusual: new challengesalso for supply management 8. Supply management key for future competitiveness Controlling 50 – 80% of corporate spends Need to avoid future supply bottlenecks Responsible to develop sustainable supply strategies Considering Mega-trends Understanding competitiveness criteria Developing correct supplier relations Dr. Peter Kraljič Globalisation and Competitiveness
  • Examples of competitiveness criteria:Supply focus (primary)Local suppliers Local suppliers Cluster Degree of Buyer’s quantity quality development customer sophistication orientation1. J 1. A 1. I 1. J 1. J3. D 2. CH 2. J 2. A 2. CH6. CH 3. D 3. Taiwan 3. CH 3. S8. A 4. J 4. CH 4. S 7. China11. USA 5. S 5. Sing. 18. Sing. 9. NL12. NL 8. NL 19. NL 22. USA 10. Sing.19. China 14. USA 41. F 28. NL 14. USA22. CZ 17. CZ 34. LIT 18. D 54. China 35. F 25. A 26. FSource: IMD/WEF 36. CZ Dr. Peter Kraljič Globalisation and Competitiveness
  • Examples of competitiveness criteria:Supply focus (secondary) Capacity for Utility patents Unique Production Ethical innovation (per mio pop.) competitive process behavious of advantage sophistication firms1. D 1. Taiwan 1. J 1. J 1. S2. J 2. J 2. CH 2. D 2. NZ3. S 3. USA 3. D 3. CH 3. SF4. CH 4. Israel 4. SF 4. S 4. Sing.5. SF 5. Korea 5. S 5. SF 5. DK6. USA 8. S 8. NL 6. NL 9. NL14. Taiwan 11. Sing. 14. Sing. 11. USA 11. A17. Sing. 27. SI 29. SI 14. Sing. 33. EST22. SI 35. CZ 82. I Dr. Peter Kraljič Globalisation and Competitiveness
  • III. Business as unusual: new challengesalso for supply management 9. International companies already restructuring their supply function: example: EIPM survey 2010 87 participants 9 finalists - Delphi - Kone - Schindler - Henkel - Michelin - ST-micro - Janssen - Nokia - Volvo Dr. Peter Kraljič Globalisation and Competitiveness
  • III. Business as unusual: new challengesalso for supply management 10. Some key observations 8/9 companies transformed and upgraded their procurement organization in the last 5 years All are considered as strategic and have regular performance reviews at top level CEO/EXCOM Clear Vision and Mission statements are in place All are global and have strategic sourcing teams Category procurement with x-functional teams is the norm Everywhere TCO metrics, few on value creation through whole cupply chain Supplier segmentation drives specific SRM activities, including collaboration and joint development (still rare) CSR increasingly on key priority lists Most often customer feedback is collected informally Source: EIPM Dr. Peter Kraljič Globalisation and Competitiveness
  • III. Business as unusual: new challengesalso for supply management 11. The survey used EFQM – excellence module approach focusing upon… Key enablers: leadership, strategy, people, partnership, processes Key results/impact: value creation, SRM, innovation, CSR, people development …showing predominantly above average ratings Dr. Peter Kraljič Globalisation and Competitiveness
  • Enablers Below Average Good Outstanding averageLeadership 2 1 3 3Strategy 2 / 7 /People 1 1 7 /Partnerships 1 2 4 2Processes 2 3 4 /Source: EIPM - 2010Dr. Peter Kraljič Globalisation and Competitiveness
  • Results Below Average Good Outstanding averageValue creation 1 2 4 2SRM / 2 4 3Innovation 2 2 5 /CSR 2 5 / 2People 1 4 3 1developmentSource: EIPM - 2010Dr. Peter Kraljič Globalisation and Competitiveness
  • III. Business as unusual: new challengesalso for supply management 12. More importantly, all finalists apply a number of best practices showing both Coherence of approaches in areas of SRM, CRM and innovation but also Variety of approaches in areas of value creation and people development …demonstrating thus how to handle the supply management function of the future. Dr. Peter Kraljič Globalisation and Competitiveness
  • Examples of best practices:Coherence of approaches - Global SRM – process SRM - Supplier segmentation - Supplier surveys / evaluation - State of art initiatives CSR - Sustainable excellence concept / targets - Ethics - based - EHS - criteria - Code of conduct compliance - Co-development / partnerships with suppliers INNOVATION - X-functional product innovation - Mega-trends / innovation-gate based concepts Dr. Peter Kraljič Globalisation and Competitiveness
  • Examples of best practices:Variety of approaches - Supply performance targets linked to corporateVALUE objectivesCREATION - Joint TCO-projects and improvement targets - Common X-functional sourcing objectives - Contribution to top-line-growth-concept - Factory margin improvement concept - KAM-concept - Talent management programPEOPLE - Corporate purchasing university / campusDEVELOPMENT - Structured T & D – programs - Global competency / skills moduls and assessments - PDP linked to personal business plans and KPI – cascadesB. KUX - Sourcing excellence awards / perception surveys Dr. Peter Kraljič Globalisation and Competitiveness
  • FAZIT1. In a volatile globalized world competitiveness is becoming a “conditio sine qua non” for success, not only on corporate, but also on individual or country / society level2. To meet the future opportunities and challenges it will take a more holistic approach to competitiveness, understanding and acting upon necessary levers across several interrelated levels, from nano to giga. Dr. Peter Kraljič Globalisation and Competitiveness
  • FAZIT3. On corporate level, beyond classical levers of competitiveness, the HR-Quadriga: education, innovativeness, productivity and values will be of increasing importance for sustainable competitive performance / position4. In this context supply management function must play a key interface role for both suppliers and other corporate functions in terms of overall value chain optimisation5. Supply managers have already achieved a lot, but even more has to be done to make our corporations and individuals truly competitive in a global sense. Dr. Peter Kraljič Globalisation and Competitiveness