About ''strategy'' and ''strategies'' in supply management

ARTICLE IN PRESS
Journal of Purchasing & Supply Management 11 (2005) 129–140
www.elsevier.com/locate/pursup
About ‘‘strategy’’ and ‘‘strategies’’ in supply management
Jean Nolleta,, Silvia Poncea, Manon Campbellb
a
Operations Management Department, HEC Montréal, 3000 chemin de la Côte-Sainte-Catherine, Montréal, Qué., Canada H3T 2A7
b
Indirect Procurement, Imperial Tobacco, Canada, Ltd., 3711 Saint-Antoine Street West, Montréal, Qué., Canada H4C 3P6
Received 24 April 2005; received in revised form 29 July 2005; accepted 7 October 2005
Abstract
This article addresses the context and content of a generic supply strategy and discusses its strategy-making process. Building mostly
on fundamental strategic management theories, the authors explain the role of supply strategy in its managerial context. In so doing,
some light is shed on the meaning and use of the terms ‘‘strategy’’ and ‘‘strategies’’. Also, a practical conceptual framework for supply
strategy formulation is provided. The generic checklist, built by segmenting supply management decisions, is intended to guide supply
professionals in addressing strategic issues to create value to customers, avoiding confusion and optimising resource allocation.
r 2005 Elsevier Ltd. All rights reserved.
Keywords: Supply strategy; Strategy-making process; Strategy concept
1. Introduction
Classical frameworks guiding strategic thinking and
strategy-making have not taken into account Supply
Management at the same level as the Marketing, Finance
or Production functions. Moreover, after decades of
intellectual reasoning on strategy, research and practice,
the concept of strategy is still misleading. It is argued that
in an uncertain world, a strategy is too rigid to help dealing
with change, that the formulation process is time and
resource consuming, and that actually some top managers
do not even know what a competitive strategy looks like.
Some academics and practitioners have openly indicated
their disappointment with strategy, and strategic planning
indeed, whereas many organisations have simply abandoned it. Such a thought would have been considered
foolish a few decades ago.
Interestingly, at the same time these discussions about
the potential failure of—and the misunderstanding
about—strategy and strategic planning have been going
on, the strategic character of supply management has
largely been recognised. A wide consensus has been
Corresponding author. Tel.: +1 514 340 6279; fax: +1 514 340 6834.
E-mail addresses: Jean.Nollet@hec.ca (J. Nollet), Silvia.Ponce@hec.ca
(S. Ponce), Manon.Campbell@videotron.ca (M. Campbell).
1478-4092/$ - see front matter r 2005 Elsevier Ltd. All rights reserved.
doi:10.1016/j.pursup.2005.10.007
reached on this matter and high-performance organisations
know that resources must be allocated to develop a sound
supply strategy (Carter et al., 2000; Anonymous, 1998;
Hadeler and Evans, 1994; Doyle, 1990).
How can this apparent contradiction take place and how
is it possible to explain its misleading effect on strategy? In
other words, what is the meaning of strategy, particularly
when applied to supply management, and what is the place
supply strategy occupies in the strategy-making process of a
firm? And finally, what are the differences between ‘‘strategy’’
and ‘‘strategies’’ in supply management? The objective of the
analysis presented in this article is to discuss these issues and
to elaborate an answer to these questions.
We begin this article by addressing the concept of
strategy (Section 2) and generic approaches to strategymaking (Section 3), in order to make the fundamentals of
our subsequent discussion on strategy in supply management explicit. In Section 2, we position the discussions at a
managerial (or corporate) level to elicit the impacts on the
definition of a supply ‘‘strategy’’ y and ‘‘strategies’’. In
Section 3, by identifying and analysing three basic
approaches to strategy-making, our purpose is to characterise the actual organisational and decisional dynamics
of supply management.
In Section 4, we briefly review the evolution of strategic
thinking in supply management. In Section 5, we propose a
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conceptual framework, and the confusion surrounding
‘‘strategy’’ and ‘‘strategies’’ is specifically addressed.
Finally, in Section 6, practical questions are identified to
guide supply managers in getting maximum value out of
the supply strategy formulation process.
2. The concept of strategy
The excessive use—and even abuse—of the term strategy
has created much confusion among practitioners, misled
managerial decisions and actions, and fragmented academia. Worst, some managers have radically discarded it or
use it without taking advantage fully of what a strategy is
supposed to provide to organisations. A consultant in
strategic management has expressed his concern this way:
‘‘Put ‘strategy’ or ‘strategic’ next to something and it
sounds really important. So we have IT ‘strategy’,
manufacturing ‘strategy’, ‘strategic’ human resource managementy The word ‘strategy’ is overused, misused and
misunderstood.’’ (Kenny, 2003, p. 43). Notwithstanding,
the question ‘‘What is strategy?’’, and the efforts in defining
the term and understanding its dynamics have been a
recurrent topic of discussion among academics since the
mid-1960s!
To understand the controversies the concept of strategy
arises, four critical issues should be highlighted: First,
shortcomings are attributed to pragmatic definitions
provided by the classics (Ansoff, 1965, 1969, 1988;
Andrews, 1971, 1987), also called ‘‘the design school of
thought in strategic management’’. A fundamental reproach is that the rational and purposeful patterns of
decisions and actions promoted in strategy-making do not
allow for consideration of the environmental incertitude or
the managers’ own characteristics (Turner, 1997).
Second, the intrinsic complexity of strategic thinking,
strategy formulation and implementation processes, make
it difficult to grasp the dynamic nature of the concept. For
example, according to Evered (1983), strategy is a
continuous process by which goals are determined,
resources are allocated, and a pattern of cohesive actions
is promoted by the organisation in developing competitive
advantages. However, to Ansoff (1988), ‘‘Strategy is one of
several sets of decision-making rules for guidance of
organisational behaviour. For example: (1) Yardsticks by
which the present and future performance of the firm is
measuredy (2) Rules for developing the firm’s relationship
with its external environmenty (3) Rules for establishing
the internal relations and processesy (4) Rules by which
the firm conducts its day-to-day businessy’’ (p. 78).
Andrews (1987) has also dealt with the notions of time
and the fact that a strategy could be very specific; he has
argued: ‘‘As its meaning has dispersed throughout recent
usage, the word strategy still retains a close connection to a
conscious purpose and implies a time dimension reaching
into the future. At its simplest, a strategy can be a very
specific plan of action directed at a specific result within a
specific period of time.’’ (p. xi). Mintzberg (1987), in turn,
although agreeing on the dynamic nature of strategy, has
argued that an eclectic definition stemming from multiple
meanings of strategy should be accepted because a strategy
is a plan, a ploy, a pattern, a position, a perspective.
Mintzberg (1994a) has also characterised different kinds of
strategy-making processes, highlighting that a ‘‘realised
strategy’’ is ‘‘deliberate’’ and ‘‘emergent’’. Consequently,
managerial profiles, managers’ styles and commitment or
people’s cognitive frameworks play critical and determinant roles.
To solve the dualism on the subjective and objective
nature of strategy, Knights and Mueller (2004) have
proposed to approach strategy as a never-ending project,
as a mechanism for reconciling numerous stakeholders’
demands and participation. Nevertheless, Parnell and
Lester (2003) have reported that managers perceive
strategy either as an art or as a science. Whether it is one
or the other, or a combination, might well be influenced by
personality. Effectively, according to McCarthy (2003),
strategy is personality-driven and the vision, instinct and
imagination of entrepreneurs, rather than purely rational
variables, drive strategy.
Actually, Ansoff, in his revised work, The New
Corporate Strategy, recognised these facts, and stated in
the foreword: ‘‘The past 30 years of experience have shown
that strategic planning works poorly, if it works at all,
when it is confined to analytic decision-making, without
recognition of the enormous influence which the firm’s
leadership, power structure, and organisational dynamics
exert on both decisions and implementation’’ (Ansoff,
1988, p. v).
Third, while strategy is ingrained in competitiveness and
is performance driven, the achievement of goals and
strategic objectives does not necessarily warrant firm
success. The challenges extend far beyond simply achieving
the goals. On this matter, Michael Porter, one of the most
fervent defenders of strategy, has acknowledged that in a
constantly changing business environment, it is difficult to
come up with an appropriate strategy. According to this
author, strategy is about making deliberate choices and
trade-offs intended to provide continuity as well as a long
term sustained direction to organisations. ‘‘It’s about
deliberately choosing to be different’’, not to be confounded with operational effectiveness, i.e. ‘‘things that
you really shouldn’t have to make choices on’’ (see
Hammonds, 2001, p. 153). To Porter (1990, p. 41),
‘‘strategy guides the way a firm performs individual
activities and organises its entire value chain’’; he has also
argued that industry competitiveness analysis is critical and
that firm success, or failure, ‘‘is perhaps the central
question in strategy’’ (Porter, 1991, p. 95).
Yet, a very different perspective has been proposed by
Hamel and Prahalad (1995). Challenging Porter’s strategic
framework, the authors have sustained that understanding
industry structure through traditional competitive analysis
is not helpful in discovering the ‘‘why’’ of competitiveness.
Hamel and Prahalad have stated that the prerequisite for
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industry leadership is building ‘‘core competencies’’ to
restructure and transform industries. It follows that the
meaning of competitiveness and organisational characteristics should be equally important as the meaning of
strategy. On this basis, Hamel and Prahalad have
distinguished between the more ‘‘standard’’ strategic
planning approach and a crafting strategic ‘‘architecture’’
approach. These two approaches both have—or should
have—an impact on the way a supply strategy is devised. In
any case, the identification of these approaches contributes
to grasp the implicit dimensions of the concept of strategy
per se.
Fourth, as the business environment has become more
and more dynamic, networked and complex, so does
strategy; in fact, strategy has also intrinsically become a
change process. McCarthy (2003) has even argued that
strategy formation process is crisis-driven. A literature
review shows that recent publications have addressed the
issue in a variety of interesting ways, either highlighting its
complexity or being prone to its simplification through the
adoption of best practices. Ambrosini and Bowman (2003),
e.g. have reported evidence on agreement and disagreement
between executives about corporate strategy revealing a
lack of clarity—not to say ambiguity—, and probably
uncertainty in conveying strategies throughout the organisation. Beinhocker and Kaplan (2002), instead, have
addressed the mismatch between time, efforts engaged
and disappointing results in strategic planning, arguing in
favour of two new goals. The first one is ‘‘to make sure that
decision makers understand the business, its strategy and
the assumptions behind its strategy’’ (p. 49). The second is
to increase innovativeness. Along the same line of concern,
and for knowledge-intensive companies, Rylander and
Peppard (2003) have suggested the necessity of bridging
vision and value-based strategy to intellectual capital and
organisational identity; consequently, the implementation
process should be better understood as an ‘‘embodying’’
process of strategy.
Recent studies largely support previous ones, such as
Govindarajan’s (1989) and White et al.’s (1994), sustaining
that managerial characteristics are critical in contributing
to strategy and performance. Yet, recent developments,
although recognising the importance of strategy formulation, are more directed to implementation and deployment
issues (Norton, 2002). In fact, Norton and Russell (2004)
have sustained a best practice approach to strategy
execution, where strategic management is challenged to
become a ‘‘core competency’’ in organisations.
In summary, management literature provides evidence
showing that notwithstanding more than four decades of
contributions, theoretical and practical debates on strategy
are still going on. Years of inquire, research and practice,
have led to acknowledge that the concept of strategy,
including individuals’ involvement, challenges practitioners
and academia.
It has recently been said that the perception of the
strategic nature of supply depends on the ‘‘firm’s strategic
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goals and priorities’’ (Cousins, 2005, p. 403). Then, it
should not be surprising that a clear definition and
formulation of a supply strategy might present a number
of challenges. Among them, the necessity to first make
explicit the concept of strategy at the firm level to be able to
determine the strategic role a supply strategy could fulfill.
In order to help address the specific issue of supply
strategy and strategies, we are proposing, in the next
section, a classification of strategy-making approaches
based on the field of business strategy. This will make more
evident some of the implications for a supply strategy
formulation, to be discussed in Sections 4 and 5.
3. Generic approaches to strategy-making
Many studies have addressed managers’ characteristics,
and their implications on formulation, implementation and
deployment of strategies and generic strategies (for
instance, Masch, 2004; Mintzberg, 1999, 1987; Herbert
and Deresky, 1987). Strategy-making processes go from
intuitive decision-making to very sophisticated and rational
ones but, in all cases, strategy-making processes are people
dependant. Thus, since the very inception of the practice of
strategy, in the mid-fifties, two extremes approaches to
strategy formulation have been observed: the formal and
explicit one and the informal one. Ansoff (1969) described
them as follows: ‘‘Most successful firms pursue their
business in a coherent and consistent manner. A study of
such firms will usually reveal distinctive and individual
patterns of strategy, even though the process of strategy
formulation may not be explicit or recorded in company
documents. Since the middle fifties, a significant trend in
business firms has been towards explicit and formal
strategy formulation.’’ (p. 7)
In addition to these two approaches, a third one has
taken place, emerging notably in the 1980s, with the
concept of ‘‘world class’’ and based on the adoption of best
practices (Voss, 1995). It follows that three generic
approaches to strategy-making in organisations are elicited. As summarised in Table 1, the first one is the
experience-based and intuitive approach, which is mostly
informal. The second one is the rational, formal and
systematic, structured process-based approach. The third
one is the best practices-driven approach.
In principle, these approaches underlie three lines of
thought and action concerning strategy-making. The first
and the second approach are best understood through
Mintzberg’s arguments in explaining why strategic planning failed. According to Mintzberg, strategic planning ‘‘is
not the same as strategic thinking. Planning is
about analysis and thinking is about synthesis. The
outcome of strategic thinking is an integrated perspective.’’
(Mintzberg, 1994b, p. 107). By applying Mintzberg’s
conceptualisations, the first approach in Table 1 basically
corresponds to ‘‘strategic thinking’’. It describes the
natural and intuitive entrepreneurial action that cannot
be excluded from strategy-making because it is the very
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Table 1
Generic approaches to strategy-making
Approaches and characteristics
Experience-based and intuitive
Rational, formal and systematic;
structured process-based
Best practices driven
Main theoretical line of thought
and action
Process school; entrepreneurial and
emergent
Design schools; purposeful and
codified
Operations efficiency oriented
Description
Flexible; strong leadership
Formal; planned; communicable;
validation and coherence potential
Know how; measurable objectives
Main drawbacks
Risky; individual dependency
(entrepreneur)
Time consuming; procedural;
consolidation needed
Fragmented; requires efforts for
integration
source of differentiation. The second approach matches the
rational way to strategy-making mainly supported by the
design school. Still, this approach is equally relevant
because it allows for concretising the strategic exercise
into plans; it is intended to codify and make strategy
explicit and communicable. Therefore, both approaches
are complementary and co-existent rather than exclusive.
And in practice, they should compensate each other to
neutralise their respective drawbacks.
The third one in turn, the best practice-driven approach,
has in some measure been singled out by Porter (Hammonds, 2001) as well as by Hamel and Prahalad (1995),
who have argued that operational effectiveness (in fact,
‘‘efficiency’’ in Operations Management terminology) is
not strategy-making. Notwithstanding, Norton (2002) and
Norton and Russell (2004), among others, have demonstrated the contribution of some best practices, such as the
balanced scorecard, in formalising a strategy and working
on measurable and integrative efforts in strategy-making.
As such, best practices should be understood and adopted
as supporting tools rather than drivers in strategy-making.
On the other hand, the process of strategy-making
comprises: (1) A theoretical formulation of the strategy; (2)
the application or implementation of the formulated
strategy, and (3) the realisation or deployment of the
formulated strategy, the action. Thus, if the dynamics of
strategy-making is understood as a whole process, the three
approaches elicit three dimensions of the same whole. It
appears then that theoretical developments, in looking for
a better understanding of strategy and strategy-making,
have analytically fragmented the context, content and
processes involved, whereas practitioners deal with strategy
in an integrated and systemic environment. The underlying
fragmentation of partial approaches to strategy and
strategy-making (condemned to fail) appears to be the
root-cause. Disappointing results in strategy-making
(Atkinson, 2004; Beinhocker and Kaplan, 2002; Mintzberg,
1994b) are most probably associated and even explained by
a dysfunctional integration of its components, in other
words, people, processes, and/or means. More research is
needed on this subject but, meanwhile, we can ask
ourselves: could integration be contemplated in such a
huge process as strategy-making?
According to literature and some practitioners, the
rational answer is that integration happens throughout a
hierarchical decisions pattern in strategy-making. As a
point of departure for strategy-making in companies, the
classical design school of thought has clearly distinguished
two levels: corporate and exploitation strategies (Andrews,
in Anonymous, 1995; Andrews, 1987). Corporate strategy
sets hard goals—profitability, growth, product, market,
financial performance—, and soft goals—management
style, commitment, employee policies, community, environmental, societal and ethical responsibilities. According
to many authors (McCarthy, 2003; Hill, 2000; Hamel and
Prahalad, 1995; Porter, 1990; Andrews, 1987), orientations
in value creation to customers, definition of competitive
advantage, core competencies and risk considerations are
also included.
Following corporate strategy, strategic planning normally applies to individual business units—business strategy, according to Andrews (1987)—; the relative
importance of functions stems at this second level,
although functional strategies constitute by themselves a
third level. It is not uncommon to find marketing and
manufacturing strategies frameworks conceptualised, developed and implemented by companies under the umbrella of individual business units (White et al., 2003; Hill,
2000; Skinner, 1978); supply strategy indeed took some
time to get recognised (Watts et al., 1992). In any case, the
integration of strategies takes into consideration three
different levels of strategy, necessarily following a rational
and systematic approach in strategy-making.
It should be noted that, on one hand, in the supply
management field, with the exception of the conceptual
framework developed by Watts et al. (1992), surprisingly
few other authors (Cousins, 2005; Morgan and Monczka,
2003; Cavinato, 1999; Cox and Lamming, 1997; Cox, 1996;
Ellram and Carr, 1994; Rajagopal and Bernard, 1993) have
discussed about the link between supply strategy and the
strategy of the firm. On the other hand, in the management
field, supply management decisions are most of the time
embedded in corporate, business or other functional
strategies, these three fundamental levels in strategymaking being well accepted (Andrews, 1987). Considering
that the strategic nature of supply appears to be delimited
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J. Nollet et al. / Journal of Purchasing & Supply Management 11 (2005) 129–140
by the strategy of the firm (Cousins, 2005), the strategymaking approach and its integration dynamics should be
determinant in recognising the role of a supply strategy.
Thus, in order to understand the underlying hierarchical
integration dynamics, a more specific discussion of the role
of supply strategy is presented in the next section.
4. Supply management and strategy
Except for Porter’s value chain model and his industry
competitive analysis framework (Porter, 1990), classical
managerial contributions have not explicitly discussed the
supply function, or procurement, or supply strategy.
Besides, conceptual frameworks appear generally detrimental to supply management functional strategy. For
example, in analysing Porter’s generic strategies (differentiation strategy and cost leadership strategy), Govindarajan (1989) has explained that differentiation requires
strong marketing and R&D skills, whereas low cost
requires efficiencies in buying, production, strong manufacturing and finance/accounting skills. Evidently, this kind
of analysis does not enhance the full potential of a supply
strategy in its contribution to a firm’s competitiveness by
differentiation; it rather limits the contribution to cost
reductions.
On the other side, specific developments, notably in
global network modelling, have indicated that ‘‘global
133
sourcing and distribution are included in global production
strategy’’ (Starr, 1984, p. 17), thus reinforcing the
subordinated place traditionally attributed to supply
management by operations and manufacturing strategy
classical frameworks (for instance, Hill, 1985, 2000; Hayes
and Wheelwright, 1984; Skinner, 1978).
Despite the aforementioned limitations, strategic concern for supply and procurement emerged in supply
management more than 30 years ago, as discussed in the
following sub-section.
4.1. Evolution of strategic thinking in supply management
In 1990, Doyle pointed out to the increasing attention
paid by executives to procurement strategies. However,
there have been important contributions to the development of strategic thinking in supply management (see
Fig. 1, for landmarks in this area). By 1992, Watts et al.,
emulating Skinner’s previous seminal work on manufacturing strategy (Manufacturing—missing link in corporate
strategy, Skinner, 1969), made the link between purchasing, corporate competitive strategy and other functional
strategies explicit. At about the same time, Monczka et al.
(1993) were among the first to highlight the key role of
procurement and supply in world-class firms. ‘‘World-class
supply management’’ and ‘‘world-class supplier’’ are
expressions that have now become common in indicating
Fig. 1. Evolution of the thinking about the strategic role of supply.
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the development of superior supply capabilities and
performance (Frazelle, 1998).
The increased attention by executives referred to by
Doyle (1990) had to come progressively from efforts by
many contributors, notably from the academic side.
Actually, Rajagopal and Bernard (1993, p. 13) have
established that purchasing strategy achieved a certain
level of ‘‘recognition and interest in the mid-1970s’’.
According to Ramsay (2001, p. 40), the title of ‘‘father’’
of purchasing’s potential contribution to sustainable
competitive advantage ‘‘line of research’’ comes to David
Farmer. Ramsay states that in a series of articles published
since 1976, Farmer made a strong ‘‘attempt to raise the
purchasing’s strategic profile’’ (Ramsay, 2001, p. 40).
Ellram and Carr (1994) also point out in the same
direction, establishing that the important shift observed
on purchasing strategic issues and role took place between
the mid-1970s and the early 1990s. During that period,
purchasing went from a perceived passive role to independency and later, from a perceived supportive role to a
recognised function.
It should also be pointed out that in 1978, the Harvard
Business Review published Corey’s seminal work about the
strategic decision of procurement centralisation. The same
year Corey published his book Procurement management:
strategy, organisation, and decision-making. Under the
heading of Procurement strategy models, Corey wrote: ‘‘A
strategy is a plan of action designed to achieve given goals
and objectivesy Procurement strategies vary so greatly
from one purchasing situation to anothery Thus, every
strategy has to be tailoredy However, all procurement
strategies seem to be variations and modifications of
the three basic modelsy, i.e. cost-based negotiations,
market-price-based negotiations, and competitive bidding.’’
(Corey, 1978b, p. 2).
Near the mid-1990s, a difference between ‘‘purchasing
strategy’’ and ‘‘strategic function’’ was made. Ellram and
Carr (1994) argued that the first ‘‘refers to specific actions’’
to support purchasing function objectives (p. 17) whereas
the second refers to key decisions and participation in the
‘‘firm’s strategic planning processes’’ (p. 17). The same
authors identified three distinct types of purchasing
‘‘strategy’’:
(1) ‘‘specific ‘‘strategies’’ employed by the purchasing
function;
(2) purchasing’s role in supporting the ‘‘strategies’’ of
other functions and those of the firm as a whole; and,
(3) the utilisation of purchasing as a ‘‘strategic’’ function of
the firm’’ (p. 10).
Practically at the same time, Hadeler and Evans (1994)
argued that, in capturing value in supply management and
sourcing, an effective ‘‘strategy’’ must be developed and
implemented. These authors also identified partnering,
supplier relationships and strategic alliances with suppliers
as strategies to focus and improve efficiency in procure-
ment management. It is then clear that over time, the terms
‘‘strategy’’ and its plural ‘‘strategies’’ became gradually
used more and more, notably by applying it to procurement strategies (Paliwoda and Bonaccorsi, 1994; Saarinen
and Vepsalainen, 1994; Spekman, 1985; Corey, 1978a, b).
And, the strategic thinking in supply management gave
quickly place to a greater involvement in strategy.
4.2. Evolution of the concern about supply strategy
By the end of the 1990s, authors were more concerned
with supply strategy content and context. Carr and
Smeltzer (1997) presented one of the first efforts in
operationalising ‘‘strategic purchasing’’. To this end, these
authors empirically developed four indicators (and 16
underlying variables, although all not inclusive) that
correlate to the level of strategic purchasing. These factors
are: status (how the function is perceived inside the firm),
knowledge and skills (knowledge of supplier markets,
analytical skill and purchasing performance measurement),
risk (willingness to take advantage of new opportunities,
foresight) and resources (including access to information).
Soon after, networks promoted probably one of the first
efforts in defining the concept of supply strategy (Harland
et al., 1999). Although descriptive in nature, Harland
et al.’s definition helps in improving the understanding of
sourcing context and highlights the new role of supply in
the business context of the 21st century. Interestingly, Carr
and Smeltzer (1999) found practically at the same time that
strategic purchasing is positively related to four supply
management variables: supplier responsiveness, supplier
communication, changes in the supplier market and the
firm’s performance.
It should also be noted that by the mid-1980s, Burt
(1984) introduced the notion of ‘‘proactive procurement’’,
considered a major contribution by pioneering pro-activeness in management. This notion was integrated to valuedriven approach and supply management by the mid1990s. Cox (1996) and Cox and Lamming (1997), in
particular, have argued in favour of a prescriptive
approach to supply management, asking for a dramatic
change to take place in the way firms managed supply. In
so doing, firms should recognise that for achieving a
sustainable and profitable advantage, supply management
professionals have to ‘‘constantly assess the relative utility
of a range of collaborative and competitive external—and
internal—contractual relationships’’ (Cox and Lamming,
1997, p. 62).
The dawn of the 21st century found purchasing and
supply management already of ‘‘major strategic importance’’ (Humphreys et al., 2000, p. 85). Indeed, new venues
and activities have enhanced both the strategic role of
suppliers, for instance in innovation (Croom, 2001), and
the strategic role of supply management professionals
(Ellram et al., 2002). Knowledge and skills developed
during the last ten and even fifteen years have made
possible the adoption and integration of best practices in
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Table 2
From ‘‘strategy’’ to ‘‘strategies’’
From ‘‘strategy’’y
to y
‘‘strategies’’
Type of strategy
Corporate strategy
Business strategy
Functional strategies, e.g. marketing
strategy, manufacturing strategy,
supply strategy
Scope
Systemic; holistic
Analytical; subordinated
In supply management, e.g. service
acquisition strategies, supplier
selection strategies, outsourcing
strategies, and so on
Analytical; fragmented
General definition
A framework for business. Broad
orientations; choices, product/market;
soft and hard objectives
A plan
A particular way of doing
Characteristics
Long term; provides continuity,
integrity
Medium term; integration and
coherence required
Very specific
Most relevant schools of
thought and key authors
Design/planning school
Ansoff (1965, 1969, 1988)
Andrews (1971, 1987)
Process school
Mintzberg (1999, 1994, 1987)
Industrial competitiveness
Porter (1996, 1991, 1990)
Supply strategy
Carr and Smeltzer (1997, 1999)
Cox (1996)
Cox and Lamming (1997)
Leenders et al. (2005)
Operations strategy
Hill (2000)
Hayes and Wheelwright (1984)
Skinner (1978)
Embedded in the previous column
Core competencies (resource-based
view of the firm)
Hamel and Prahalad (1995)
(for a more complete review, see Hart,
1995; and Ramsay, 2001)
Marketing strategy
Wind and Robertson (1983)
supply management (Ellram et al., 2002). Among them,
and probably the most interesting from the standpoint of
practicing the profession, is scanning leading-edge technologies and supplier market information. The advent of
business intelligence has opened new areas to supply
management to contribute to corporate success. Actually,
Cavinato (1999) envisioned a higher level of involvement
than supply strategic management named ‘‘knowledgebased business’’, where the function is involved in
strategically linking the firm to suppliers and networks
knowledge. But to reach this higher level, it is also
compulsory for supply management professionals to
master the strategy-making process and its implications.
In Section 3, we have argued that three levels have
become well accepted in strategy-making: corporate
strategy, business strategy, and functional strategies. In
order to integrate the contributions already discussed and
to illustrate their implications on strategic supply management, these three levels are described in Table 2 in terms of
scope, characteristics and schools of thought. Corporate
and business strategies, by their systemic and holistic scope,
are both characterised in the first column. Functional
strategies are found in the second column and, specific
issues or ‘‘ways of doing’’ in supply management, are
succinctly illustrated in the third column.
Main characteristics—fourth row in Table 2—show that
corporate and business strategies are directed towards the
long term, being intended to provide continuity and
integrity to the whole company. Functional strategies are
medium term plans; at this second level, broader definitions
of strategy should be translated into concrete and specific
actions. And, from functional strategies, a variety of ways
of accomplishing strategic tasks are devised; these ways—a
third level in supply management—being commonly
described as ‘‘strategies’’, probably to highlight their
impact and contribution to the performance of the firm.
Most relevant schools of thought and key authors are
indicated in Table 2 (last row), to show how we have built
explanations for supply strategy on four of the most
fundamental strategic management theories: the design/
planning school, the process school, the industrial competitiveness and the resource-based view of the firm. In so
doing, our objective is to make explicit the meaning of
‘‘strategy’’ and ‘‘strategies’’ in their applications to supply
management. This is why, in the next section, we discuss
how a supply strategy is formulated and implemented.
5. Supply strategy-making
The concept of strategy in supply management takes
form, in practice, through a strategy-making process.
Supply strategy is necessarily framed and should be crafted
following corporate and business strategies as well as
consolidated with other functional strategies. Therefore, at
least seven hierarchical steps should be performed to
formulate and implement a sound supply strategy, as
indicated in Fig. 2. Due to its subordination to corporate
and business strategies, and the necessity of functional
coherence and consolidation, this process should be
understood as a two-way process, i.e. it should go from
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Suppliers/Partners ---------------------------FIRM--------------------------- Partners/Customers
1. Strategy of the Firm
7. Implementation
Corporate Strategy
Business Strategy
2. Top-Down
6. Down-Top
cascade
consolidation
3. Functional strategies
Supply strategy
Operations strategy
Marketing strategy
5. Functional integration
4. Content:
Procurement
strategies, others
4. Content:
….
4. Content:
….
Fig. 2. A hierarchical decisional framework for strategy-making.
the general to the particular and then, from the particular
to the general, as illustrated in Fig. 2. This systematic and
rational process is not always completely followed in
practice; two reasons are advanced. Firstly, is the
embeddeness of supply in manufacturing and operations,
as explained in strategy classical frameworks, which have
incorporated supply management as an element of the
structure, at the same level as technology, processes and
facilities (Hill, 2000; Hayes and Wheelwright, 1984;
Skinner, 1978). Secondly, is the weak consolidation and
communication among functions, notably between marketing and production (embedding supply), as pointed out by
Hill (2000).
The hierarchical integration of the strategy-making
process, in Fig. 2, comprises steps 1–3, i.e. strategy
formulation of the firm, top-down cascade (strategic
objectives) and, functional strategies formulation, as
already discussed in Section 3. New issues in supply
management—i.e. globalisation, suppliers networks development, supplier relationship management, supply chain
management, scanning leading-edge technologies and
supplier market information, and e-commerce (Carter et
al., 2000; Cavinato, 1999; Cox and Lamming, 1997)—have
also placed new demands on the function and consequently, on professional supply managers. These new
demands need to be analysed, to determine its strategic
content, as well as the relevance to position them as
‘‘strategies’’ or ‘‘strategy’’. In all cases, it is critical to
realise that the way managers perceive competitiveness is
determinant. On this matter, Cousins (2005) has observed:
‘‘if a firm adopts a cost focused approach to its competitive
position it will unlikely consider supply as a strategic
process, because its competitive priority is to reduce
costyWhereas if a firm sees itself as a differentiator in
the market place, it is likely to take a more strategic view of
supply; supply will be seen as a source of competitive
advantage through inter-organisation collaboration management’’(p. 422).
As for steps 5–7 and in order to confirm the proposed
hierarchical decision framework to strategy-making in
supply management, empirical research is needed. These
steps comprise functional integration of strategic plans,
down-top consolidation and implementation of strategies.
Based on literature review and field observations, we focus
on step 4, of Fig. 2, i.e. supply strategy content, in the
following sub-section.
5.1. Supply strategy content
After Corey’s procurement strategy models (see Section
4.1), one of the earliest documented attempts to strategymaking in supply management has identified four procurement strategies: a team-oriented value analysis approach,
just-in-time and materials requirement planning techniques, total quality management and make-or-buy analysis
(Sutton, 1989).
By 1990, Doyle (1990), providing a more detailed
description of a procurement strategy, summarised five
critical components or ‘‘five disciplines’’, as follows: quality
improvement (variance reduction), velocity (concept-tocustomer cycle time improvement), all-in-cost (total-cost
purchasing practices), technology (access and active
monitoring) and risk reduction (an activity-managed
program approach).
More recently, in 1998, Carlos E. Mazzorin, Ford’s vice
president of purchasing for automotive operations, described key components of Ford’s supply strategy in terms
of cost control, quality improvement, and supplier development (Anonymous, 1998).
Other cases analysed point out, in general, to the same
components but traditionally, supply management has not
been deemed to be (externally) customer oriented. Yet, the
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consensual value approach promoted in the field as well as
‘‘pull strategies’’ being common place, suggest more and
more that customisation and service value to customers are
key drivers to strategy-making for the function. In order to
contribute effectively to build and sustain competitive
advantage and capabilities, supply management needs to
direct its efforts to provide the most value for each
individual customer throughout the value chain. Knowing
the customer is not an exclusive marketing task anymore.
Actually, collaborative management and product cycle
management involving cross-functionality (Rink and Fox,
2003) suggest that people, processes and means have to be
managed in such a way that supply will make intelligent use
of tangible and intangible resources, even intuition,
imagination and innovation stemming from supply and
procurement professionals.
It is also important to understand that under a value
perspective, not all purchasing decisions and supply
activities are strategic in nature. Indeed, some strategic
supply organisational decisions are not always of its
domain of responsibility. To illustrate our arguments, let
us consider, e.g. the outsourcing of purchasing or procurement. A recent survey of procurement directors, from
companies in 14 countries (US and European) indicates
that 22 per cent of companies (of a total of 219), outsource
some purchasing areas whereas more than a half of UK
companies and 64 per cent in France are likely to outsource
procurement by 2006 (Arminas, 2003). The nature of the
outsourcing decision directly threatens supply management; it is of course strategic for any company because of
its impact on supply capabilities (Morgan and Monczka,
2003). But at a corporation and business unit level, the
decision may even be discussed at what could be considered
a tactical level. The same could happen with partnership
and supply chain management decisions affecting company
performance. Therefore, it comes up to supply professionals to proactively frame and align supply decisions to
the firm strategy as well as to creatively devise supply
management contribution and strategic content. How is it
possible to do this? We advance key elements in the
following sub-section.
5.2. Conceptual framework for supply strategy formulation
To be even more explicit, supply strategy is composed of
a series of plans, consolidated in a master plan for
coherence and integrity, thus ensuring and demonstrating
its contribution to corporate and business strategic
objectives. As suggested in Table 3, a supply strategy
should start by segmenting decisions and focusing according to a company’s characteristics, management style and
culture.
A generic framework for supply strategy content is
proposed in Table 3. Although systematic research in this
area is needed, the tool constitutes a checklist which could
be used at least as a starting point. In the left column, key
elements of corporate and business unit strategies are
137
described. In the right column, based on Leenders et al.
(2005) and others authors such as Carr and Smeltzer (1997,
1999), Cox (1996), Cox and Lamming (1997), a segmented
list of the main elements of a supply strategy is provided.
This segmentation is based on the nature and scope of
supply decisions. Although all supply decisions are
important, some of them will be more critical to organisational performance, according to their impact on value
creation to customers.
A sound supply strategy should correspond to the goals
associated with higher-level strategies, as well in its
formulation, as in its implementation and deployment.
The proposed framework establishes three levels of action
for supply management and specific contributions to the
competitiveness of the firm (through strategic concern and
scope), to efficiency and effectiveness (through tactical and
operational concern and scope). Supply professionals are
then expected to ensure the realisation of the full potential
of supply ‘‘strategy’’ and ‘‘strategies’’ enhancing supply
management’s contribution, its functional consolidation as
well as the fulfilment of its specific strategic objectives.
6. Implications for supply managers
To reach integration and ensuring the right approach
throughout the challenging first stages of strategy-making,
supply managers should be aware of the risks involved. We
would like to emphasise three main implications for supply
managers, since they are not as obvious and easy to put
into practise, as one might be tempted to think:
(1) Find out corporate and/or business strategy and
understand it (them); you will be able to align the
supply ‘‘strategy’’ and demonstrate how supply management can respond to organisational goals and
objectives.
(2) Communicate business demands placed on supply by
the business strategy, as you understand them; you will
promote knowledge exchanges, thus creating a sense of
oneness that will empower the responsiveness of the
supply organisation to business changes.
(3) Systematically evaluate the effective contribution of the
supply ‘‘strategy’’ to corporate and/or business strategy; you will be aware of improvements to perform,
and are more likely to know when to make them.
7. Conclusions
The contribution of supply management and supply
‘‘strategy’’ to corporate strategy goals and objectives is no
longer a matter of discussion: it has become a reality.
Supply management is now called upon to develop sound
supply ‘‘strategies’’ intended to create value to customers
and bring out innovation. On the other hand, in a dynamic,
networked and changing business environment, supply
management has no choice but to be responsive, proactive
and innovative in building competitive capabilities.
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Table 3
A generic framework for a supply strategy
Firm strategy
Corporate/Business
Decisions/Objectives
Supply strategy
Function
Decisions/Objectives
Specific contribution/Performance indicators
Competitiveness (Business goals) What, Why?
Strategic concern and scope
Sourcing (global) decisions/strategies
Supplier selection strategies
Outsourcing decisions
Insourcing decisions
Partnerships and supply chain management
Technology adoption and investments
Competitive intelligence
Innovation and product life cycle management
Effective contribution to corporate value and goals;
definition and design of performance measurement
system (indicators)
Organisational (Means) How to?
Tactical concern and scope
Benchmarking and research
Processes and procedures definition
Sourcing (make-or-buy) analysis
Value-added analysis
Price determination
Supplier base management
Supplier certification programs
Supplier quality assurance programs
Project management
Budgeting and reporting
Insurances, legal aspects,
Contract management
Risk management
Operational concern and scope
Quality
Volume
Cost/Price
Service/delivery
Flexibility
Innovation
Centralisation/decentralisation/Outsourcing
purchasing or procurement
Results/performance (Effectiveness/efficiency)
Do it/Implementation
The main contribution of this article has been to make
explicit the meaning and relevance of ‘‘strategy’’ and
‘‘strategies’’ in supply management, to help the function in
fulfilling its role and accomplishing its objectives in the 21st
century environment. Moreover, the derivation of a
conceptual framework that exploits complementarity
among fundamental strategy-making approaches, and the
generic framework to identify critical strategic elements,
constitute basic tools to help formulate a supply strategy
and which should facilitate its implementation and its
deployment. Case studies and surveys to validate the
generic framework for supply strategy derived from
literature review and practical experiences are contemplated for future research.
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