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Inoka Liyanage, Sri Lanka
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Extensive Bargaining in Procurement Positioning Matrix
What is the most appropriate quadrant in the procurement positioning matrix to which an extensive (hard) bargaining strategy is best suited? Please motivate your point of view.
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Anonymous
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Extensive Bargaining in Kraljic Matrix
Extensive bargaining obviously makes most sense for items with a large impact on profitability. And should be avoided for items with high supply risk in order not to risk too much to achieve some savings, but increasing the risk of non-availability even further.
So in my opinion we are most likely going to see extensive bargaining for Leverage Items, and it's the least likely for Bottleneck Items.
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Jaap de Jonge
Editor, Netherlands
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Tough Bargaining Suited for Leverage Items
@Anonymous: I agree the most appropriate quadrant in the Kraljic Matrix for an extensive (hard) bargaining strategy is the Leverage Items quadrant.
Why?
1. HIGH PROFIT IMPACT: Leverage items significantly affect company costs or profitability, so price reductions directly improve financial performance.
2. LOW SUPPLY RISK: There are many suppliers in the market, standardized products, and low switching costs, giving the buyer strong negotiating power.
3. STRONG BUYER POSITION: Because supply risk is low and competition among suppliers is high, buyers can use competitive bidding, tendering, and price comparisons effectively.
4. OPPORTUNITY FOR COST SAVINGS: Hard bargaining can secure better prices, discounts, and favorable contract terms without risking supply continuity.
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