Purchasing and supply management capabilities in Finnish medium-sized enterprises

Purchasing and supply management (PSM) has become increasingly important for companies to survive in current highly competitive market. Increased outsourcing has extended the role of PSM, making external resource management and supplier relationships critical success factors in business. However, the recent research has mainly concentrated on large enterprises. Therefore the PSM issues related to medium-sized enterprises represent a significant research area. The thesis aims to explore the status and role of PSM in Finnish medium-sized firms, understand how strategic companies consider PSM to be, clarify what are the competence requirements for PSM professionals, and increase the understanding of PSM capabilities needed from the points view of individual competence and organisational capabilities. The study uses data that was collected in 2007 from purchasing executives at the director/CEO level representing a sample of 94 Finnish firms. 54 % of the respondent enterprises had a supply strategy. The total supply cost was on average 60 % of firms' turnover. Centralisation of PSM and outsourcing of logistics will increase in Finnish medium-sized enterprises. The findings point out that Finnish medium-sized enterprises had strategical features of PSM. However, Finnish firms have not concentrated on making strategies that relate to PSM. The elements that explain the existence of a supply strategy could be found in this study. It can be concluded from this study that there is an advantageous base for the development of strategic PSM, because nearly all the enterprises were of the opinion that PSM capabilities have an effect on business success. When reviewing the organisational capabilities, the five most important development elements were supplier relationships, both operational and strategic processes, time management, and personnel's competence. Training in internationalisation, strategic management, and communication could help to improve competences of PSM personnel.

Tietoteknisten palveluiden tuottaminen strategisena kumppanuutena - case Rajavartiolaitos

Tutkimuksen tarkoituksena on selvittää laajennettujen transaktiokustannustarkastelun avulla tietoteknisten palveluiden hankintaa strategisena kumppanuutena. Tutkimus kuvaa empiirisen esimerkkitapauksen kautta ulkoistuksen kokonaisvaikuttavuutta eli kumppanuuden hyötyjä ja haittoja asiakkaan kannalta tilanteessa, jossa julkisen sektorin tehtävien uudelleenorganisoinnissa ei ole käytettävissä tehokkaita markkinoita. Kumppanuuden kokonaisvaikuttavuuden elementtien merkitys asiakkaalle on asiakkaan ja palveluntuottajan näkökulmista erilaisia. Asiakas pitää transaktiokustannuksia ja byrokratiahyötyjä tärkeinä. Toimittaja taas koros-taa transaktiohyötyjä ja byrokratiakustannuksia.

Theoretical background for market emergence framework : Case: Electricity Distribution Industry

Both the competitive environment and the internal structure of an industrial organization are typically included in the processes which describe the strategic management processes of the firm, but less attention has been paid to the interdependence between these views. Therefore, this research focuses on explaining the particular conditions of an industry change, which lead managers to realign the firm in respect of its environment for generating competitive advantage. The research question that directs the development of the theoretical framework is: Why do firms outsource some of their functions? The three general stages of the analysis are related to the following research topics: (i) understanding forces that shape the industry, (ii) estimating the impacts of transforming customer preferences, rivalry, and changing capability bases on the relevance of existing assets and activities, and emergence of new business models, and (iii) developing optional structures for future value chains and understanding general boundaries for market emergence. The defined research setting contributes to the managerial research questions “Why do firms reorganize their value chains?”, “Why and how are decisions made?” Combining Transaction Cost Economics (TCE) and Resource-Based View (RBV) within an integrated framework makes it possible to evaluate the two dimensions of a company’s resources, namely the strategic value and transferability. The final decision of restructuring will be made based on an analysis of the actual business potential of the outsourcing, where benefits and risks are evaluated. The firm focuses on the risk of opportunism, hold-up problems, pricing, and opportunities to reach a complete contract, and finally on the direct benefits and risks for financial performance. The supplier analyzes the business potential of an activity outside the specific customer, the amount of customer-specific investments, the service provider’s competitive position, abilities to revenue gains in generic segments, and long-term dependence on the customer.

Coopetitive advantage – How firms create and appropriate value by collaborating with their competitors

Collaboration between competing firms (coopetition) has emerged as an important issue forn business practice in many industries. Extant literature has examined coopetition on many levels of analysis, but lacks clarity in distinguishing it explicitly from cooperation between noncompeting organizations. Because of this, the performance implications of coopetition from the perspective of an individual firm are still ambiguous – some research suggests positive results whereas other studies suggest detrimental outcomes. The aim in this dissertation is to narrow these gaps by exploring how firms create and appropriate value through collaboration with their competitors. The dissertation is divided into two parts. The first part comprises an overview of the relevant literature, as well as the conclusions of the whole study, and the second part includes six research publications. Both qualitative and quantitative methodologies are utilized. The results suggest that coopetition embodies the distinctive logic of value creation and appropriation from the perspective of an individual firm, and thus differs in terms of performance implications from cooperation between non-competitors. The distinction comes from the fact that competitors have somewhat similar understanding, capabilities and interest related to certain markets, which is potentially both challenging and beneficial in terms of the individual firm’s competitiveness. It appears from the findings that there are distinctive firm-external and firm-specific factors affecting the success of a coopetition strategy. This study makes three main contributions. First, on the conceptual level it shows the distinction between coopetition and cooperation between non-rivals as a collaborative inter-organizational relationship. Secondly, it sets out a framework and propositions that enhance understanding of how value is created and appropriated in coopetition from the perspective of an individual firm. Thirdly, it offers empirical evidence of how coopetition affects firms’ innovation and market performance, and identifies the focal internal and external factors involved. In general terms, the thesis adds to our knowledge of how a firm can successfully utilize a coopetition strategy in its pursuit of improved performance.

Outsourcing process in pharmaceutical product development

The aim of this study was to create an outsourcing process for pharmaceutical product development. This study focuses on two main questions. The first question is “What is the outsourcing process model?” In the second phase key success factors of the outsourcing process are identified. As a result of the literature reviews, a general outsourcing process was created. Transaction cost economics and resource based view were used to derived a theoretical framework to the process by combining the existing processes presented in the literature. The model of process is considered used to the outsourcing broadly. The general outsourcing process was then developed further with the key factors that affect the success of pharmaceutical product development and the interviews of pharmaceutical outsourcing experts. The result of the research was the process consists of seven phases with key activities and expected outputs for each of the phases. In addition, the strategic decision-making framework for outsourcing decision in pharmaceutical product development is giving as well as the tools for selecting supplier and preparing structured contract. This study also gives some recommendations for managing the outsourcing process.

Analysis of electricity distribution network operation business models and capitalization of control room functions with DMS

Electricity distribution network operation (NO) models are challenged as they are expected to continue to undergo changes during the coming decades in the fairly developed and regulated Nordic electricity market. Network asset managers are to adapt to competitive technoeconomical business models regarding the operation of increasingly intelligent distribution networks. Factors driving the changes for new business models within network operation include: increased investments in distributed automation (DA), regulative frameworks for annual profit limits and quality through outage cost, increasing end-customer demands, climatic changes and increasing use of data system tools, such as Distribution Management System (DMS). The doctoral thesis addresses the questions a) whether there exist conditions and qualifications for competitive markets within electricity distribution network operation and b) if so, identification of limitations and required business mechanisms. This doctoral thesis aims to provide an analytical business framework, primarily for electric utilities, for evaluation and development purposes of dedicated network operation models to meet future market dynamics within network operation. In the thesis, the generic build-up of a business model has been addressed through the use of the strategicbusiness hierarchy levels of mission, vision and strategy for definition of the strategic direction of the business followed by the planning, management and process execution levels of enterprisestrategy execution. Research questions within electricity distribution network operation are addressed at the specified hierarchy levels. The results of the research represent interdisciplinary findings in the areas of electrical engineering and production economics. The main scientific contributions include further development of the extended transaction cost economics (TCE) for government decisions within electricity networks and validation of the usability of the methodology for the electricity distribution industry. Moreover, DMS benefit evaluations in the thesis based on the outage cost calculations propose theoretical maximum benefits of DMS applications equalling roughly 25% of the annual outage costs and 10% of the respective operative costs in the case electric utility. Hence, the annual measurable theoretical benefits from the use of DMS applications are considerable. The theoretical results in the thesis are generally validated by surveys and questionnaires.

Julkisen sektorin tietointensiivisen palvelutoiminnan make, buy or partner -työkalu

Tämän pro gradu tutkielman tarkoitus on rakentaa Make, buy or partner työkalu julkisen sektorin tietointensiivisten palveluiden ulkoistuksiin liittyviin päätöksentekotilanteisiin. Tutkielman teoreettinen viitekehys muodostetaan transaktiokustannusteoriasta johdetusta Make, buy or partner analyysista, jota täydennetään palvelutuotannon kontekstiin sopivaksi palvelun ja tiedon erityisluonteilla. Näin ollen saadaan kokonaisvaltaisempi näkemys työkalun pohjaksi. Tutkielman empiirinen osuus suoritetaan kvalitatiivisena tapaustutkimuksena julkisen sektorin organisaatiossa. Teorian ja empirian valossa muodostetaan kohdeorganisaatiolle työkalu ulkoistamisen päätöksenteon tueksi. Työkalun ansiosta kohdeorganisaatio pystyy tekemään laadukkaampia ja pitkäjänteisempiä päätöksiä.

Customer Driven Service Development – Technology-based Care and Services for the Elderly

The objective of this master’s thesis was to examine technology-based smart home devices and services. Topic was approached through basic theories, transaction cost theory and resource-based view in order to build basis for this thesis. Conceptual framework was discussed by means of networks, value networks and service systems which provide a useful framework for service development. The needs of the elderly living at home were discussed in order to find out which technology-based services could be used to satisfy the needs. Segmentation and need data collected previously during proactive home visits was exploited and additionally a survey targeted to experts and professionals of social and health care sector was done to verify the needs. Finally, the results of the survey were analyzed using quality function deployment method to figure out the most important and suitable service offerings for the elderly. As a conclusion of analysis, social media and monitoring services are the most useful technology-based services. However, traditional home services will still maintain their necessity too.

Analysis on firm innovation boundaries

Innovation has been widely recognized as an important driver of firm competitiveness, and the firm’s internal research and development (R&D) activities are often considered to have a critical role in innovation activities. Internal R&D is, however, not the source of innovation as firms may tap into knowledge necessary for innovation also through various types of sourcing agreements or by collaborating with other organizations. The objective of this study is to analyze the way firms go about organizing efficiently their innovation boundaries. Within this context, the analysis is focused, firstly, on the relation between innovation boundaries and firm innovation performance and, secondly, on the factors explaining innovation boundary organization. The innovation literature recognizes that the sources of innovation depend on the nature of technology but does not offer a sufficient tool for analyzing innovation boundary options and their efficiency. Thus, this study suggests incorporating insights from transaction cost economics (TCE) complemented with dynamic governance costs and benefits into the analysis. The thesis consists of two parts. The first part introduces the background of the study, research objectives, an overview of the empirical studies, and the general conclusions of the study. The second part is formed of five publications. The overall results firstly indicate that although the relation between firm innovation boundary options is partly industry sector-specific, the firm level search strategies and knowledge transfer capabilities are important for innovation performance independently of the sector. Secondly, the results show that the attributes suggested by TCE alone do not offer a sufficient explanation of innovation boundary selection, especially under conditions of high levels of (radical) uncertainty. Based on the results, the dynamic governance cost and benefit framework complements the static TCE when firm innovation boundaries are scrutinized.

Smart homes as service platforms. Research report of ÄLYKOP sub-project “Competitive advantage from customer value”

In this report, we summarize results of our part of the ÄLYKOP-project on customer value creation in the intersection of the health care, ICT, forest and energy industries. The research directs to describe how industry transformation and convergence create new possibilities, business opportunities and even new industries.The report consists of findings which are presented former in academic publications. The publication discusses on customer value, service provision and resource basis of the novel concepts through multiple theorethical frameworks. The report is divided into three maim sections which are theoretical background, discussion on health care industry and evaluations regarding novel smart home concepts. Transaction cost economics and Resource- Based view on the firm provides the theoretical basis to analyze the prescribed phenomena. The health care industry analysis describes the most important changes in the demand conditions of health care services, and explores the features that are likely to open new business opportunities for a solution provider. The third part of the report on the smart home business provides illustrations few potential concepts that can be considered to provide solutions to economical problems which arise from aging of population. The results provide several recommendations for the smart home platform developers in public and private sectors. By the analysis, public organizations dominate service provision and private markets are emergent state at present. We argue that public-private partnerships are nececssary for creating key suppliers. Indeed, paying attion on appropriate regulation, service specifications and technology standards would foster diffusion of new services. The dynamics of the service provision networks is driven by need for new capabiltities which are required for adapting business concepts to new competitive situation. Finally, the smart home framework revealed links between conventionally distant business areas such as health care and energy distribution. The platform integrates functionalities different for purposes which however apply same resource basis.

The impact of a new partnership outsourcing arrangement: a routine-based case study in detail engineering

This thesis investigated the contemporary phenomenon of detail engineering outsourcing. The case organization had pursued a new outsourcing approach with a trusted partner. The goal of this empirical study was to examine the impact of the consequential partnership outsourcing arrangement. Particularly, the beneficence of the arrangement was evaluated based on the underlying organizational routine and the long-term economic implications of its performance outcome. The case study was needed, as the unit will likely have to rely on such distance outsourcing arrangements more and more in the future, and understanding on the impact of such operations is needed. The main findings revealed that the new outsourcing arrangement is not currently a very attractive strategic option for organizing production. The benefits which stem from the emerged, unique engineering project routine are not significant enough to make the arrangement an advantageous one, especially since increasing partnering costs are being met. This conclusion was drawn via the extended transaction cost view. Benchmarking was done in reliance to an old arrangement from which the new pursuit was a departure from. The case study then enlightened the engineering unit on the impact of its strategic maneuver by combining the routines-theory framework with contemporary methods of governance structure evaluation. Through this, it was shown that greater efforts are needed to make the new outsourcing approach a more beneficial one. However, the studied arrangement was seen to inhold potential for better results. The findings can be used to capitalize on this.

Barriers of ESCO Service Business in Finland

The purpose of this study is to determine what are the key barriers hampering ESCO service business success in Finland. Research approach for this study is qualitative. Data was collected using Delphi method with two questionnaire rounds. Internet based tool was applied in carrying out questionnaires. Respondents of the questionnaires were ESCO service experts and researchers, and people working for ESCO service providers. Characteristics of ESCO service and ESCO project implementation are analyzed by using transaction costs theory of service business. In terms of ESCO service in Finland, uncertainty and asset specificity are relevant dimensions of TCE. General uncertainty in world’s economy hinders demand for ESCO service, and asset specificity of ESCO contracts induces slight problems for project financiers. Also bounded rationalism and opportunism are present in Finnish ESCO business. The most significant barriers of success of ESCO service in Finland are problems in legislative and political frameworks, and in customers’ investment processes. ESCO service providers should move more strongly towards service dominant business logic and improve understanding of customer needs. Political barriers are unsuitable procurement processes, unclear and unpredictable laws, and lack of compelling factors in subsidy system. Investment process hurdles are caused by customers’ lack of interest to change course of action. These are things in which ESCOs can have influence in.

Sähköisen markkinoinnin markkinointisuunnitelma metallialan pk-yrityksen kansainvälistymiseen Venäjälle

Suuri osa ihmisten tiedon etsinnästä painottuu internetiin ja siellä käytettäviin hakukoneisiin. Myös yritykset ovat tiedostaneet sähköisen markkinoinnin roolin omassa kansainvälisessä näkyvyydessään. Pienyritysten kansainvälistymisessä sähköisellä markkinoinnilla voidaan parantaa markkinatiedon etsintää, asiakkaiden tavoitettavuutta ja markkinointiviestinnän kohdennettavuutta eri käyttäjäryhmille. Sähköinen markkinointi ei kuitenkaan poista kulttuurisidonnaisia epävarmuuksia, ja sen laadukas toteuttaminen vaatii perehtymistä. Tutkimuksen tavoitteena on selvittää Case-yritykselle sähköisen markkinoinnin potentiaaliset hyödyntämisvaihtoehdot kansainvälistymisprosessissa Venäjälle ja suunnitella resursseihin nähden toteutettava sähköisen markkinoinnin markkinointisuunnitelma. Monimenetelmätekniikalla toteutetussa tutkimuksessa tietolähteenä käytetään asiantuntijahaastatteluja sekä datarekistereitä. Teoriapohjana tarkastellaan pk-yrityksien tiedon vaiheittaista oppimista, verkoston roolia sekä ulkoistamispäätöksen tukena käytettyjä transaktiokustannuksia. Sähköisen markkinoinnin kehitys on ollut Venäjällä kovaa viimeisen kahden vuoden aikana. Tästä syystä venäläisten yritysten sähköisen markkinoinnin taso on osittain korkeampaa kuin suomalaisten. Sähköisellä markkinoinnilla tavoittaa erityisesti kaupungeissa asuvat ihmiset, mutta kaupunkien ulkopuolella verkkotekniikka on vielä osittain alkeellisella tasolla. Vientimuotojen vertailussa transaktiokustannusten avulla nousi esille suoran viennin malli, jossa jälleenmyyjän etsimisen avuksi kehitetään sähköisen markkinoinnin osaamista. Paikallisella jälleenmyyjällä nähdään olevan etuja sähköisen markkinoinnin, paikallistuntemuksen ja kulttuurillisten erityispiirteiden tuntemuksessa.