Bloga ierakstu latviski skat. šeit.

We continue to explore supplier strategies in the public sector.

In our previous post we explored the Conveyor strategy, which focused largely on repetition, quantity and standardization.

The next strategy lies on the other side of the spectrum.
‍

Strategy #2: Focus strategy

This strategy is heavily focused on quality.
Suppliers using the focus strategy would carefully choose the projects they spend their resources on - but when they do, they go all-in.

This strategy is characterized by:

• Low number of tenders bid
• High % of bid tenders are won (e.g. 50+%)
• High level of Buyer engagement before tendering

We call this the focus strategy, as suppliers are highly focused on the specifics of a project, tender and the customer, and are willing to invest substantial time in convincing Buyers to choose them, both in the pre-tender and tendering stage, and will fight fiercely with competitors to protect these projects.

Typically, this strategy is employed in industries with

• high differentiation between suppliers, their products and services
• high informational asymmetry between Buyers and suppliers
• low-medium Buyer price sensitivity (price is not as important as quality)

An example would be a supplier offering highly specialized analytical instrumentation for laboratories. The procurement of such products requires expertise, and knowledgeable suppliers would try to offer their expertise in an attempt to improve their chances to win the tender.

This could be done by consulting the customer in the pre-tender phase regarding the setup and requirements of the analytical system, which could include lock-out specifications to exclude potential competitors in the upcoming tender.
‍

Advantages of focus strategy‍

1. Good margins

By focusing on a select few projects, suppliers employing a focus strategy can both improve their chances to win the tender and their potential margins, by staying ahead of the competition.

2. Understanding customers well

The focus on customer needs lets the supplier to understand the customer very well, which can give a competitive advantage in other projects.
‍

Disadvantages of focus strategy

1. High cost of sales activities
Convincing Buyers, analyzing their needs and preparing custom offers takes up a lot of resources from the supplier, and knowledgeable sales managers are not cheap.

2. Unpredictable results
As suppliers using a focus strategy choose to work only on a handful of projects, there is a risk involved around the small quantity of projects - if most of them fail, the company can have a difficult financial year.
‍

Countering the focus strategy

If a competitor is using the focus strategy and seems to win tenders, with customers being on their side despite their high prices, you will need to use their weaknesses against them. Your best bets will be based around price and tender competition.

The following tactics could be used:

1. Matching the quality at a reasonable price

Your focus competitor will likely have convinced the Buyer regarding the benefits of their offer. However, if you can convince the Buyer that your offer has the same quality, it is likely your price will be better than your competitor’s.

2. Use competition laws in your favor

Limiting competition in EU tenders by exclusive requirements or qualification criteria must have valid reasons, and you may use formal communication or complaints to the customer regarding tender requirements or tender results to win this project. However, this typically can damage customer relations in the short term.

Conclusion

The focus strategy is a sound strategy for industries with high know-how, and can result in lucrative margin projects. However, if competitors access the customer, they can provide an offer with the same quality at a lower price.

‍

Try Sorsera at app.sorsera.com