“Do frogs jump as a result of privatisation?” Impact of privatisation on buyer–supplier relationships

Abstract As the cornerstone of the Conservative Government between 1979 and 1996, privatisation has undoubtedly had an enormous impact on the UK economy. On the whole, privatised companies have improved their performance in an ever increasing competitive environment by focusing on, among other things, a drive to reduce costs through bought-out goods and services. Research into Japanese companies, meanwhile, has highlighted the key role that supplier relationships play in their success. It has stressed the advantages of co-operative over adversarial relationships with suppliers, and evidence shows that an increasing number of Western companies are adopting this practice. This has raised the profile of purchasing in these companies with a change towards `better practice’ and improved management of the supplier base. From this new research a model of Feature and Construct Evaluation and Aggregation (FCEA) has been developed, in the search for a link to support the proposition that privatisation has an influence on purchasing strategies concerning supplier relationships. The research has shown that only a very limited link exists. Whilst Purchasing as an activity has increased in its importance and control, it has not become strategic. Purchasing strategies have not evolved or supported the business strategy as a result of privatisation, nor does privatisation encourage the development of purchasing strategies towards closer relationships with suppliers. This is compounded by the EC Directives that reflect an `open tender’ model of procurement, particularly evident in the emphasis on formal competitive tendering procedures and maintaining an `arms-length’ relationship with suppliers.