Royal BAM's Market Strategy Using Porter's Five Model and Kraljic Matrix

The assignment discusses the Kraljic Matrix, a strategic positioning tool used to analyze the supply chain management of Royal BAM group. It highlights the five forces that affect the market: supplier's force, buyer's force, threat of new entrants, threat of substitutes, and competitors' force. The Kraljic model is used to identify the strategies for each product or service, including exploit, balance, and diversify. The assignment also discusses the steps involved in the purchasing process, such as portfolio analysis, supply risk determination, and implementation of a purchasing strategy. Finally, it concludes that the Kraljic model helps Royal BAM group to effectively fulfill its services, save costs, and maximize profits.

INTRODUCTION:-
Royal BAM is considered as the top European construction organization which deals in all parts
of the construction process. BAM is involved in delivery buildings and infrastructures. It
develops, designs, builds, finance, operates and maintains the infrastructure. In this assignment,
we analyze the Royal Bam positioning with the help of four tools of Kraljic Positioning.
Functioning of the Royal BAM is very complex that resists changing confronted with the risks
linked with the procurement of projects. This assignment explains the application of Kraljic
matrix on Royal BAM a construction organization, identifying the required adaptations of the
tool. Kraljic positioning matrix contains following tools-
 Classification of Purchase
 Analysis of Market
 Strategic positioning
 Planning of Action
All these tools will be used for analyzing the positioning of BAM group in the market.
Classification of purchase:-
As it can be seen from figure 1, the Kraljic matrix divides the product as bottleneck, strategic,
non-critical and leverage. The dimensions used by the BAM for the classification are supplied
risk and profit impact. BAM organization follows a working method with four phase
classification namely plotting bargain power between the buyer and different suppliers, setting
up new business plans and finally strategic positioning of products which are identified in the
classification phase. BAM organization follows these working methods because they are flexible
in nature and helps the organization in gaining competitive advantage in the market. For example

De Haan et al. used classification approach of Kraljic Matrix in a natural rubber industry, which
helped him in measuring the risk and price for profit impact (Padhi, 2012). BAM used the
strategic quadrant analytics techniques which supports the organization in taking supply
decisions.
This model includes the following approaches of purchasing for every quadrant:-
STRATEGIC ITEMS:-
In this approach, those items are included which require high attention from purchasing
managers. For the BAM organization construction design is considered as a strategic item
because it requires huge attention of management because on the basis of design whole plan is
constructed.
LEVERAGE ITEMS:-
For the BAM organization facilities management is considered as a leverage item because in
this the management of the organization should utilize its whole effort to manage affairs of the
business.
BOTTLENECK ITEMS:-
Construction facilities is considered bottleneck items for the BAM organization because it is a
combination of various approaches and functions.
NON – CRITICAL ITEMS:-
Acquisition of resources is considered as a non- critical items because for this management don’t
have to concern more.

BAM organization uses the classification approach of the Kraljic Matrix provide various service
to their customers. One of them is site representatives. By using the classification approach in
site representatives, they will effectively demonstrate sound judgment and or coordinate the
whole service by performing all the duties.
Main tasks Procurement Decision level
Strategic items
(design)
 Prepare
blueprint
 Site review
 Highly
experienced
 Good
knowledge
Top level
(project manager)
Bottleneck items
(Construction
 Focuses on
CSBA
 Conduct
market
Middle Management

facilities) activities analysis.
 Proper
construction
plan
Leverage items
(Facilities
management)
 Procurement
and contact
management
 Space
management
 Utilities and
communicatio
n
infrastructure.
 Identification
of demands.
 Good market
data
 Knowledge
about
competitor
strategy.
High level
department
Non-critical items
(Acquisition of
resources)
 Maintain
healthy
relation with
suppliers
 Multiple
supplier should
be there
 Identify
available
material
 Demands of
the
departments.
Lowe level
(store manager)

Analysis of market:-
Market analysis is done for investigating the potential market for the Royal Bam group. In the
construction industry, a large number of competitors are available. If the BAM group wants to
gain a competitive advantage in the market, then Kraljic matrix can help the organization in
gaining the competitive advantage. A market analysis helps the Royal BAM in effectively
demonstrate their services to their customers in a suitable manner. BAM provide service of
construction management to their customers. By following the Kraljic Model BAM organization
can conduct effective construction management because market analysis provides the
information about all strategies of the competitors which helps the BAM in formulating effective
construction plan. Through using Kraljic Model, the BAM can also improve their services to
different customers, which ultimately build customer satisfaction. For example in the
classification approach of the Kraljic model, different services are divided into different
segments, this will help in managing and keep track on the overall performance of the
organization. Market analysis is used to analyze the market strategy used by a company.
Following porters five model is used to analyze the market:
1. Supplier’s force:
The supply forces are defined as the force of suppliers on the prices, availability
of product and services, cost and others. The supplier's force is low in
construction services because the suppliers are limited. For the Royal Bam
organization suppliers are few, due to which it face difficulty while delivering
their services.
2. Buyer’s force:

It is defined as the force of buyers on the prices, choice of product and services.
The buyer's force construction services are low because the suppliers have
monopoly over the supply of needed construction products.
3. Threat of New Entrants:
It is defined as the force of new entrants which creates a threat for the existing
players in a market. The new entrant's threat is low in construction services
because the risk is also very high, so the new entrants don't to prefer enter into
this market.
4. Threat of substitute:
It is defined as the force of substitutes which affects the demand and supply of
goods and services. It changes the mindset of consumers and forces them to
change their opinion. The threat of substitute is low in construction organizations
because it is the expensive and high risky.
5. Competitors force: It is defined as the force of new entrants which creates a threat
for the existing players in a market. The competitors in construction organizations
are very high because the suppliers are unlimited in a market.
Strategic Positioning:-
Strategic positioning is an important tool of the Kraljic Matrix. BAM organization should divide
all its services and products by using purchasing portfolio matrix. Strategic positioning helps the
BAM in providing strong infrastructure design to their existing customers. The design of an
infrastructure contains various elements. By strategic positioning all these elements are divided
in a significant manner which will lead the BAM in designing the effective and attractive

infrastructure design BAM can manage its services offered to different customers. Strategic
positioning can be done as per following figure:-
Action plans:-
If the Royal BAM group develops the action plan as per the strategic positioning approach of
Kraljic Matrix it will help the organization in improving its brand image. All this helps in
enhancing its customers as well as revenue of the organization. The action plan is prepared while
following every process. Through proper action plan, BAM organization can effectively fulfill

all its services and can easily compete in the market by providing effective design and structure
of the infrastructures.
All these strategies mentioned in figure describe in the following manner:-
 EXPLOIT: - If the Royal Bam organization wants to secure good prices on its products
and services then it should develop high buying powers of customers, by doing this it can
avoid all supply risk which is involved in all these items. Organization also able to
develop "spot purchases" of different individual batches of all the items, if any of an
individual supplier offers the organization a best deal for their products.
 BALANCE: - Royal Bam Group should choose a middle way between the
diversification approach and approach of exploitation.
 DIVERSIFY: - If the Royal Bam Group wants to continue their functions without any
stoppage than the firm should have multiple suppliers or multiple services.
Steps for purchasing process:-
Peter Kraljic recommends the following steps of purchasing process which should be adopted by
every organization. Royal Bam should follow all the steps for position effectively itself in the
market. These steps are following:-
 Organization should prepare its portfolio analysis.
 It should determine the criteria for supply risk or for-profit impact.
 It should properly develop the detailed portfolio analysis.
 Organization should fill all steps in the matrix.
 Measure and discuss the result.
 Developing strategy of purchasing portfolio.

 Implement and monitor all strategy.
CONCLUSION:-
The Kraljic model helps the BAM in effectively fulfilling and delivering all its services to their
target customers. Using the Kraljic model by the BAM groups will help in improving its work
performance through which organization can save any extra cost incurred by the organization
and can easily maximize its profit. Kraljic model helps the organization in determining which
actions should be taken to achieve a better positioning in the market. For each part of the model,
the organization should develop a different strategy. This strategy concluded whether a product
is placed in the right quadrant or not. All these helps the BAM group in building its good image
in the market and can deliver quality products to satisfy their customers and can easily win their
confidence.

REFERENCES:-
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