Centralization vs. De-Centralization of Procurement Research Paper

Introduction

The procurement function of a company is central to its overall performance. Subject to a company’s operating environment and needs, managers have to choose between adopting a centralized or decentralized procurement strategy. Decentralization refers to a procurement plan where individual departments of a business make independent purchases (Ketchen & Craighead, 2020). Comparatively, a centralized plan refers to an alternate arrangement where a central authority procures materials for all departments (Sinha et al., 2020). This study seeks to investigate the merits and demerits of each strategy relative to the vision of Qiddiya, which is a Saudi-based entertainment company with plans to venture into overseas markets.

Background

Qiddiya Development Company is an entertainment firm based in Saudi Arabia. Its business spans across sports, arts, and entertainment sectors. The firm is celebrated as the home of innovation and immersive experiences in the arts and entertainment sectors (Qiddiya Investment Company, 2022a). The company has five main offerings that are presented in duality. For example, sport is juxtaposed against wellness and nature with the environment (Qiddiya Investment Company, 2022a). Parks are also coupled with attractions, while motion is linked with mobility. The last cornerstone of its offerings is represented by arts, and it is juxtaposed against culture.

Qiddiya is important to the social and economic development of Saudi Arabia. It emerged as a constituent plan of Saudi Arabia’s vision 2030 plan, which seeks to make the Kingdom a self-sustaining state by diversifying the economy and reducing its dependence on fossil fuels (Qiddiya Investment Company, 2022b). The five pinnacles of entertainment highlighted above define the bases through which Qiddiya develops its products. For example, it has built family-friendly theme parks for adults with children and sports arenas for adults only (Qiddiya Investment Company, 2022c). The company has equally set up academies for sports/arts, and some of them have been venues for international competitions. These activities are part of a larger list of responsibilities that Qiddiya plays in helping Saudi Arabia to achieve its vision 2030 plan (Qiddiya Investment Company, 2022b). In this framework, Qiddiya fulfills several core tenets of the vision, including promoting economic diversification, increasing expenditure on entertainment, promoting a start-up culture within Saudi Arabia, creating jobs, and contributing to the promotion of healthy lifestyles.

Qiddiya develops entertainment content across a range of areas. However, its target population is young people who are under the age of 35. This market constitutes 67% of the Saudi population and the largest group of consumers for entertainment content (Qiddiya Investment Company, 2022b). Qiddiya was established to provide young people with job opportunities in the entertainment industry. By unlocking opportunities for growth and development, Qiddiya has gained the reputation of being a center for innovation and inspiration (Qiddiya Investment Company, 2022c). Its centrality to the success of Saudi Arabia’s entertainment and arts industry means that the firm is a transformational force in the social and cultural make-up of Saudi Arabia and, by extension, the Middle East.

Quddiya is in the process of establishing subsidiary businesses in emerging markets. It seeks to exploit the potential for new business growth in these regions because of shared customs and values with new audiences around the world (Sinha et al., 2020). My role in the business is an assistant officer to the procurement manager. Collectively, our tasks and roles in the procurement department are responsible for two-thirds of the value of materials procured in the business. Two bulk orders are made per month and 24 in a year via different groups of suppliers – materials and technology suppliers. Therefore, our functions in the procurement department are central to the running of the business.

Qiddiya’s management seeks to recruit employees who have an Information Communications Technology (ICT) background. The company’s management maintains this preference because the firm offers digital entertainment content. The company’s material resource plan is an offshoot of an integrated information management system that is controlled at the company’s headquarters in Riyadh, Saudi Arabia (Qiddiya Investment Company, 2022a). This system centralizes, integrates, and processes information in a timely fashion to help managers make purchases for their departments. The just-in-time model is central to the successful operations of its inventory and cost control department.

The present project seeks to identify an appropriate procurement strategy for Qiddiya to use in its internationalization plan. Assuming that two alternatives of centralization and decentralization are available, selecting the right plan will be important to the organization because the success of its overseas market depends on the implementation of a suitable procurement plan (Ketchen & Craighead, 2020). The current problem in choosing the best strategy stems from the uncertainties associated with adopting one procurement strategy over another.

The current analysis sparks my interest because there has been debate regarding the best procurement strategy to use in today’s volatile business environment. The unpredictable nature of the international market, which has partly been caused by COVID-19 uncertainties, economic volatiles, and geopolitical factors, is likely to affect the selection process (Sinha et al., 2020). It is difficult to implement Qiddiya’s long-term corporate plan of internationalization without addressing these issues. Indeed, the company needs to plan on how to navigate these challenges while maintaining its Middle Eastern success. Therefore, it is important to find the most suitable procurement strategy to adopt because inaction could have significant negative implications on the business’s growth.

The findings of this study will be useful in ensuring the holding firm – Qiddiya Investments Company – leverages the skills and competencies it has in Saudi Arabia on an international stage. Employing a successful procurement plan will be a source of competitive advantage for Qiddiya. For example, it will enable the company to reduce its operational costs across its value chain (Ketchen & Craighead, 2020). The outcome would be the delivery of innovative products for its audience, including improved entertainment quality (McGrath et al., 2021). Therefore, adopting a new procurement system in the organization would enhance the current localized business model to make it globally successful.

Research Objectives

As highlighted in this paper, the aim of this study is to identify the suitability of two procurement strategies for Qiddiya – centralization vs. decentralization. This aim guided the process of developing objectives for this investigation. As shown in the list below, the objectives highlight factors that influence the decision on whether to use a centralized or decentralized procurement strategy.

1. To examine the pros and cons of adopting a centralized procurement strategy at Qiddiya
2. To identify the cons and pros of adopting a decentralized procurement strategy at Qiddiya
3. To select the most appropriate procurement approach to follow based on the merits and demerits of centralization
4. To design a road map to implement the chosen procurement strategy

Justification for Topic Selection

As highlighted in this document, Qiddiya is in the process of expanding its business overseas with plans to set up new subsidiaries in overseas markets. The present study will identify the best procurement strategy to follow in implementing this plan. The insights presented in this document will be useful in positioning Qiddiya’s procurement functions in its broader internationalization strategy. Furthermore, the findings of this analysis will be pivotal in expanding the body of literature on procurement as they relate to international business development. Therefore, companies that seek to expand overseas in the same fashion as Qiddiya intends to do may learn from its experiences.

Current Situation

The current procurement functions of Qiddiya Development Company are centralized. In this arrangement, the company’s main procurement functions are done at the company’s main office in Riyadh, Saudi Arabia. The centralized department has been responsible for making purchases on behalf of all subsidiaries within the firm. This framework concentrates the powers of procurement at the helm of the organizational leadership structure (Qiddiya Investment Company, 2022a). Therefore, other ranks of employees have minimal power in influencing procurement decisions.

The current procurement environment of Qiddiya Development Company is a product of the macro-environmental dynamics affecting the business. Particularly, changes in technology, global uncertainties related to the COVID-19 pandemic, and changing consumer attitudes account for a majority of issues the company’s managers have had to review (Qiddiya Investment Company, 2022a; Qiddiya Investment Company, 2022b). Traditionally, Qiddiya has used a value-based procurement model whereby priorities are defined by the importance of the goods purchased to the business. Key considerations made under this plan have focused on protecting the interests of customers, regulators, and employees (Sinha et al., 2020). Innovation has also been a key driver of change in the firm, and it has bound the interests of the above-mentioned stakeholders.

The consequences of inaction may affect the operations of Qiddiya in varied ways. An increase in the cost of production is likely to be among the first effects observed. This is because an expansion of the company’s subsidiaries into overseas markets is likely to result in additional running costs because of varying legal costs and the price of accommodating differences in business practices (Ketchen & Craighead, 2020). Additionally, the failure of Qiddiya to exploit emerging market opportunities could lead to inefficiencies in the implementation of its internationalization plan. This outcome may suffice due to the lack of synchrony of procurement functions across different market subsidiaries. This problem is likely to increase error rates, thereby compounding the above-mentioned cost concerns.

Changes in technology and consumer preferences are external forces that affect the current procurement functions of Qiddiya. The procurement practices of the entertainment company are also influenced by the firm’s quest to maintain high standards of business ethics. In this regard, it has committed itself to engage in procurement activities to live up to these ideals (Qiddiya Investment Company, 2022b). For example, in line with its business ethical focus, the company has expressed its commitment to avoid suppliers who provide goods and services that have been obtained unethically.

Internal factors affecting Qiddiya’s procurement functions include the company’s culture and uncertainties surrounding its resource management plan. Relative to this statement, the company’s culture aims to promote inclusivity, where everyone feels welcomed and empowered to learn through the power of entertainment (Qiddiya Investment Company, 2022a). All facets of the firm’s procurement functions are designed to promote the physical, financial, and emotional well-being of its employees. An innovative and dynamic attitude that has been nurtured among employees equally enables workers to adapt to the challenges that affect their performance (Omilion-Hodges & Sugg, 2019). Therefore, the duty and roles assigned to employees may change depending on how they fit within the broader corporate vision of the firm.

The Work Undertaken – Research Methodology and Findings

In this section of the analysis, a report of the work done in this review, together with details on the types of studies reviewed, will be highlighted. The analysis is part of a larger review of methodological techniques underpinning this study. Information relating to data collection instruments, including surveys and interviews, will also be documented with justifications for the selection of each technique provided. A sample of the results will also be given, and a brief appraisal of the techniques adopted done.

Report of Work Done

The mixed methods research approach was used to conduct the present research. This technique works by combining qualitative and quantitative elements of analysis into the data collection process (Patten & Newhart, 2017). The mixed-methods technique was chosen for the study because of its exploratory nature. Stated differently, using one technique as opposed to another would have made it difficult to understand all facets of Qiddiya’s procurement strategy because it is expansive and multifaceted. In this regard, it contains both qualitative and quantitative attributes.

Given the multifaceted nature of the data collection process, the process of analyzing information also demands an equally dynamic framework of analysis. Broadly, the process was categorized into two phases, with the first one involving an analysis of primary data and the second one comprising a review of secondary information. Relative to this framework of assessment, quantitative data were analyzed using the Statistical Packages for the Social sciences (SPSS) technique. Particularly, the descriptive analysis method was adopted with inferential analyses performed to understand relationships between variables. The process of analyzing qualitative data occurred using the thematic analysis method. This technique works by identifying recurring themes or patterns of responses from a broader body of interview responses (Stokes, 2017). Six stages are associated with the implementation of this data analysis strategy (Patten & Newhart, 2017). They include familiarization with data, generating codes, generating initial themes, reviewing the themes, defining and naming them, and producing the final report write-up.

Benchmarking was done using the member-check technique. It is associated with the improvement of data reliability and credibility standards and works by verifying findings with the respondents that gave the base information in the first place (Stokes, 2017). The goal of using the member-check technique was to ensure that the information presented in the final write-up accurately represented the views and contextual meaning of the informants (Patten & Newhart, 2017). By securing this goal, areas of inconsistency were identified and corrected to represent the spirit of the informants’ sentiments.

Details of the Types of Studies Done

Surveys: Primary data was collected using surveys as the main method of data collection. This type of information is associated with the collection of non-existent data, and the process may be resource-intensive because the researcher needs to sample the views of many people at once (Stokes, 2017). The surveys were closed-ended and sought to assess the informant’s sentiments regarding various issues relating to Qiddiya’s procurement activities (see appendix 1). Broadly, 107 staff from different departments were randomly recruited to participate in the study. These surveys were administered online and emailed to the researcher after completion. The main challenge associated with the collection of primary data is that the findings may be out of date within a short time (Stokes, 2017). At the same time, researchers claim that field research is often affected by a low response rate when emails or letters are used as correspondence (Patten & Newhart, 2017). Given these limitations of conducting field research, the researcher made extra efforts to follow up on the respondents by reminding them to submit their questionnaires on time using phone calls.

Interviews: Interviews were employed in the current study as an additional source of information to the surveys highlighted above. Interviews were used to gain managerial insight on procurement activities relating to the selected entertainment company. Broadly, 12 senior departmental officers in the company were sampled purposively and interviewed. The number of informants was deemed sufficient for the current review because it is consistent with the views of Stokes (2017), which suggests that interviews can be done with less than 12 respondents. Before taking part in the study, the respondents signed an informed consent form stipulating their agreement to participate in the study – subject to its objectives, guidelines, and approaches, as described in appendix 2. In appendix 3, the interview protocol highlights various “talking points” relating to the adoption of centralized or decentralized procurement plans that were posed to the informants. Key among them was the impact that each of the strategies would have on the overall performance of the business.

Secondary Data: Secondary research is associated with the process of synthesizing existing data. The main sources of materials for these types of studies often come from internal or external organizational processes (Stokes, 2017). For the secondary research part, the researcher collected credible research data from reliable sources of academic information. They included CIPS advanced practitioner models, Chartered Institute of Procurement and Supply (CIPS) knowledge area, and published business journals. Some of the materials were sourced from the Saudi digital library, and procurement practices were benchmarked with those of leading companies in the private sector. Keywords used to obtain the materials included “procurement,” “centralization,” “decentralization,” and “supply-chain.” Only studies published in the past five years were considered for review.

Samples of Questions, Interview Structures, and Answers

As highlighted above, appendices 1 and 3 show the survey and interview questions posed to the respondents. The surveys were administered as questionnaires that were divided into two key sections, with the first one capturing the respondents’ demographic details, while the second part focused on getting their responses regarding ten items relating to the procurement practices of Qiddiya. The interviews explored key themes that emerged from the surveys to gain a deeper insight into the views of the informants. Their answers varied in scope, ranging from arguments that supported, or opposed, the adoption of a centralized or decentralized procurement strategy for the business.

Results of Works Undertaken

The findings generated from this study highlighted differences in perceptions regarding the adoption of a centralized or decentralized procurement strategy for Qiddiya. These variations in opinion were informed by the characteristics of the respondents because managers argued for a centralized procurement plan while lower-ranking procurement officers supported a decentralized one. It could be argued that these differences represent varied views from the top and middle-level employees in the organization. They could indicate different levels of access to important company information or a variation in generational views about procurement because younger workers characterized the pool of survey respondents, while older workers gave the interview findings.

Study and Appraisal of the Research Approach

The credibility and quality of a research project depend on the merits and appropriateness of techniques chosen to develop them. The present study used a blend of both primary and secondary research data. This means that its findings are holistic and provide a firm foundation for the analysis of the research topic (Stokes, 2017). The data collection process was triangulated to the extent that primary data was sourced from two sets of respondents. To recap, the first one was surveys, and the second one was interviews. Given that surveys sampled the views of low-ranking procurement officers and interviews gathered the views of high-ranking officials, the researcher was able to obtain a broader understanding of the main considerations for selecting the best strategy to use for Qiddiya’s global expansion.

Combining the primary and secondary research data sources formed the basis for the triangulation of the research data. This technique is associated with improved credibility and reliability of research findings because it allows researchers to compare the findings of one set of data with another to identify areas of consistency or inconsistency (Patten & Newhart, 2017). Based on the adoption of these measures, it can be assumed that decisions involving the select company’s procurement process were based on the project’s results.

The main strength of the study is the robust nature of its findings because the information was obtained from multiple sources. However, its main weakness is its indicative nature because the recommendations proposed at the end of this investigation merely represent anecdotal proposals for the expansion of the company’s procurement strategy and not the actual strategic direction that will be forged by the business. This statement is made by recognizing the fact that the decision-making process of Qiddiya is pilfered with multiple layers of input, some of which are not discussed in this study. Therefore, the findings of this investigation should be adopted cautiously, and with the understanding that they are only indicative of the best strategic direction Qiddiya should follow. Overall, the study provides a basis for making a reliable change in the organization because it is based on real-life estimates of the company’s procurement operations and plans.

The importance of the current study is based on the development of sound research instruments for data collection that have been used in past analyses. For example, the questionnaire was objective in sampling the views of the informants about a centralized and decentralized procurement strategy, thereby providing a balanced assessment of the general corporate direction Qiddiya should follow. Given that the questionnaires were sent out before conducting interviews, the researcher obtained adequate information regarding the procurement activities of Qiddiya that could be used as useful content for the interviews. Overall, data obtained from the respondents was accurate in the sense that the researcher obtained views about the procurement functions of the entertainment company from employees who were actively involved in the firm’s activities. The triangulated method of data collection also signified that adequate data was collected from the research process, regardless of the technique chosen.

Analysis, Interpretation, and Conclusion

Key trends and themes that emerged from the investigation related to efficiency, cost, timeliness, and alignment with corporate vision as the main considerations for selecting the best procurement strategy to use at Qiddiya Development Company. In other words, the findings derived from the investigation highlighted the four themes as the basis for evaluating the suitability of a centralized or decentralized procurement plans for the select company. To recap, data was obtained from three major sources: interviews, surveys, and secondary research. The survey findings are depicted below.

Survey Findings

As highlighted in the questionnaires sent out to the respondents, the first part of the probe sought to sample the respondents’ demographic profiles. Key attributes captured in this analysis relate to the years working for an international company, location of work, specialty area working in Qiddiya, and educational qualifications. The first demographic variable investigated in the study related to the distribution of the respondents according to assigned workstations. According to figure 5.1 below, 64.5% of the respondents worked for Qiddiya’s subsidiaries, while the rest operated from the holding company.

Table 5.1: Distribution of respondents according to work location

The second demographic variable investigated in the study related to the respondents’ positions at Qiddiya. As highlighted in Table 5.2 below, most of the respondents worked in the company’s finance department, while the second largest group of employees comprised those who worked in the project management section. Both sets of participants accounted for 48.6% and 23.4% of the total number of respondents, respectively.

Table 5.2: Distribution of respondents according to department

The third demographic variable sampled in this study related to the educational qualifications of the workers. As highlighted in Table 5.3 below, most of the participants had a high school education. Those who held an undergraduate degree formed the second highest group of informants, while the smallest group of participants was comprised of those who held a Diploma certification.

Table 5.3: Distribution of respondents according to education qualifications

Employee work experience was the last demographic variable captured in the study. According to Table 5.4 below, most of the participants who took part in the investigation had immense experience working for an international organization because 44% of the employees said they had worked between five and six years in this capacity. Those who had a 3-4 year work experience formed the second largest sample of informants, and they represented 31% of the total sample.

Table 5.4: Experience working with international companies

As highlighted in appendix 1, the second section of the survey sampled the respondents’ views regarding the procurement practices of Qiddiya and the suitability of the decentralized procurement strategy for its overseas operations as a basis for comparing the informants’ views about centralization. According to the 5-Point Likert Scale used to assess the respondent’s sentiments, the strongest views were denoted using numeric code “1” signifying a “strong agreement” with the statements posed, and numeric code 2 used to represent a “strong disagreement” with the same statements. Table 5.5 below shows the descriptive findings that emerged from the survey results, subject to the defining criteria highlighted above.

Table 5.5: Descriptive findings

According to the findings highlighted above, the respondents’ sentiments were assessed by evaluating their means, standards of deviation, skewness, and Kurtosis. The highest mean registered from the responses was “3.” This number means that most of the informants “agreed,” to some extent, that a decentralized procurement strategy would be suitable for Qiddiya. The highest mean score of “3” also refers to the optimum level of disapproval of the statements posed, which depicted “neutrality,” as the highest form of disapproval of the 10 items posed on the questionnaire. Broadly, these findings suggest that the decentralized procurement plan received widespread support from the informants.

The subsequent stage of data analysis sought to find out whether the demographic characteristics of the respondents influenced their views on the positions mentioned above. To this end, an inferential analysis was done using the one-way ANOVA technique. The inferential analysis method was employed to understand the impact that the demographic characteristics of the respondents had on their views on the research topic. In line with this goal, the impact of work positions, departmental positions, work experience, and educational backgrounds of the participants were reviewed and analyzed to understand their influence on the findings. According to Table 5.6 below, the respondents’ work location did not have an impact on their views about the research issue because none of the items appearing in the questionnaire met the significance level threshold of p<0.05.

Table 5.6: Impact of type of organization on findings

The findings highlighted above indicate the composition of the sample group because more informants worked for subsidiaries as opposed to the holding company. Indeed, 69% of the respondents were stationed in subsidiary entities – meaning that, abstractly, the views presented in the study were largely those of independent business entities. The findings highlighted above suggest that the type of organization that the employees worked for did not have a significant impact on the findings presented. Similar to the position highlighted above, the department they worked for did not have a significant impact on the findings as well. This is because, as depicted in Table 5.7 below, none of the items appearing in the questionnaire met the significance level threshold of p<0.05.

Table 5.7: Impact of employee department type on findings

The findings highlighted above are inconsistent with the extant literature, which suggests that employee careers have an impact on workplace attitudes and procedures. Particularly, scholars have mentioned differences in attitudes among “Baby Boomers,” “Millennials,” and Generation X employees (Omilion-Hodges & Sugg, 2019). These groups of people are known to have different careers and views on workplace practices (Omilion-Hodges & Sugg, 2019). Therefore, the findings highlighted above are surprisingly different from this conception.

Understanding the impact of education qualifications on the findings of the study formed the basis of the third level of analysis undertaken in this study. According to the findings highlighted in Table 5.8 below, education qualifications did not have a significant impact on the findings. This is because none of the 10 items appearing in the questionnaire registered a score of p<0.05.

Table 5.8: Impact of education qualifications on findings

The findings depicted above differ from conventional knowledge explaining the impact of education qualifications on workers’ attitudes and behaviors. In the procurement and supplies industry, professional organizations, such as CIPS, have maintained that education qualifications play a moderating role in influencing competence (Hickman, 2018). The findings of this study showed that most of the informants (41.1%) had a high school education, and those who had an undergraduate degree characterized the second most populous group. The large proportion of respondents who had basic education was consistent with the relatively young population of respondents aged between 18 and 25 years who formed the bulk of the informants. Table 5.8 findings demonstrate that their education qualifications did not influence their views on the findings.

The last demographic variable examined in the study was the informants’ work experience. Table 5.9 below shows the inferential findings that emerged from investigating its impact on the respondents’ views. The results suggested that this variable had an insignificant impact on the final analysis because only three out of ten items that appeared in the questionnaire met the significance value of p<0.05. Therefore, unlike the case with the other three demographic variables assessed in this document, work experience appeared to have a mild effect on the respondents’ views but not enough to have a significant impact on the findings.

Table 5.9: Impact of work experience on findings

The findings highlighted above are inconsistent with extant literature, which suggests that work experience has a significant impact on employee behaviors and attitudes (Ketchen & Craighead, 2020). Particularly, given that procurement is an experience-based activity, it was assumed that experience would influence the respondent’s views on the research topic. However, this was not the case because their work history had a negligible impact on the findings. The high number of employees who had less than a year of work experience could have caused this outcome. Therefore, the internal dynamics of the company could explain the difference in outcomes between the findings of the present study and those of other researchers.

Interview Findings

As highlighted in this document, interviews formed the second set of findings for the study. Twelve respondents holding senior positions were interviewed, and they suggested that foundational factors associated with the adoption of procurement plans need to be considered before identifying the best strategy to use. Three respondents mentioned that a combination of plans could be ideal for an organization, subject to the benefits it is likely to enjoy in the process.

This view is consistent with the findings of McGrath et al. (2021), which suggest that a company’s operating region/location or industry is a significant consideration in the determination of the best procurement strategy to use. Additional research shows that the type of organization – whether private or public – can also influence the best strategy to use. Given these considerations, it is important to recognize that Qiddiya has many supporters. Therefore, stakeholders play a critical role in the firm’s decision-making process.

Broadly, in the interview, informants supported or opposed a centralized procurement plan. Those who supported it believed that Qiddiya would enjoy immense benefits from controlling its costs. They believed that uncontrolled costs were a major problem for the business, especially when they had to switch suppliers on short notice. One of the employees was vocal about the need to consolidate all procurement functions in one location because it would give them a complete overview of the business – a process that would help to improve overall spend accountability (McGrath et al., 2021). He also believed that doing so would reduce the number of vendors working with each company subsidiary. If this plan is adopted, it could lead to improved economies of scale and better resource efficiency in supply chain functions (Koster et al., 2017). Therefore, the argument for a centralized procurement strategy was founded on this ground.

By giving reasons for the company to adopt a centralized procurement plan, informants were also asked to clarify why a centralized procurement plan had not been adopted in the firm if there was a compelling case for doing so. The informant answered,

“You see…the problem is not that we do not recognize the benefits of centralized procurement…Uhm… Let me put it this way, I believe there is a significant number of people in the organization who believe that the future is characterized by the use of a blend of both centralized and decentralized procurement strategies.”

Another respondent shared similar views because he believed that a centralized procurement strategy would help to manage costs, thereby approving it for adoption. However, unlike the above-mentioned correspondent, he believed that human factors would moderate the success of the plan. Nonetheless, he was confident that a centralized procurement strategy would help address at least 80% of the current cost concerns of the business, and that would be a good performance according to the business’s financial history.

In another round of questioning, it emerged that a centralized procurement strategy would increase the visibility of Qiddiya. Five of the respondents who argued that procurement, by design, has visibility on multiple business processes shared this view. They were also confident that a centralized procurement plan helps managers to see what is happening across different sides of the business. They were also sure that a centralized procurement strategy would allow parties to synchronize their tasks and business processes in a manner that would be difficult to achieve if a decentralized procurement plan was adopted.

Three respondents also argued for a centralized procurement strategy, with their main contention being that centralized procurement strategies often yield a greater volume of data than decentralized ones. The data could be useful in negotiations because it allows managers to enter into business arrangements with a higher caliber of data that they would not ordinarily have had (Zeng et al., 2018). This feature improves the quality of purchasing decisions made within the organization. This finding is consistent with the views of researchers, such as Zeng et al. (2018) and McGrath et al. (2021), who underscore the important role played by technology in modernizing supply chain processes. They opine that data generation has become easy to perform because of existing software that consolidates information and makes it easy to share.

One of the respondents supported the above view because he believed that a centralized procurement strategy eliminates the number of players involved in the supply chain management process, thereby promoting efficiency. In line with this sentiment, he said,

“Decentralization simplifies the supply chain management process by making it efficient and easy to operate because of an easy recalibration of factors that are pertinent in decision-making.”

Therefore, he believed that it is possible for managers to implement strategic initiatives in the supply-chain management plan without requiring additional resources. Alternatively, some respondents believed that a decentralized procurement strategy would be more beneficial to the organization compared to a centralized one. Seven respondents held this position because of the immense experience in procurement that some subsidiaries of Qiddiya had. One of them said,

“I do not believe that a centralized procurement system is a cure for all because more developed subsidiaries should be allowed to run their activities independently. I mean…some subsidiaries are relatively mature in the sense that they have their unique identities, structures, and systems that should guide any process they participate in.”

The association between a centralized procurement strategy and increased cost savings also emerged as a core theme in the study, but two informants disputed this view. They argued that the centralized planning structure received undue credit for generating cost savings opportunities. However, some business subsidiaries did not benefit from price reductions. One of the respondents said,

“You see…there are some departments that would benefit more from the timely replacement of materials, as opposed to getting the most cost-effective product. A centralized procurement plan does not necessarily cater to such needs. Does it?”

Despite the existence of varied views regarding the limitations of a centralized procurement strategy on the firm, all the interviewees who argued for the adoption of a decentralized procurement plan centered their arguments on a core theme of specialization. They believed that every subsidiary of the company should be allowed to grow and have a mature procurement department that caters to its needs. Therefore, they argued that the need for one centralized procurement office limits their ability to specialize in their core areas of business. In turn, they proposed that specialization should be allowed to thrive in a decentralized procurement system.

“Context” was also a core theme that emerged from the interviews because most of the respondents remarked that the decision to have a centralized or decentralized, procurement plan depended on the context in which businesses operated. Researchers such as Ahmad and Karadas (2021), who advocated for the use of company size as the benchmark for determining the strategic focus of a business, supported this view. To them, procurement is a value adding activity for multinationals, while smaller firms look at it as a “cost-saving measure.” This position was consistent with the opinions of the informants who opposed the use of a centralized procurement plan for Qiddiya because of company size. They argued that the organization had vast operations and a centralized procurement team would not understand the needs of all its subsidiaries. Therefore, they were confident that a decentralized procurement plan would allow each subsidiary to manage its procurement needs, as opposed to seeking approval from a central office.

Overall, the respondents believed that a centralized procurement strategy is part of an evolving supply-chain management strategy where the end goal eventually becomes decentralization. Therefore, it was appropriate for companies that have procurement departments with little experience on the job, but not for more established organizations with mature identities and structures. Relative to this assertion, McGrath et al. (2021) say that companies with developed procurement departments operate like well-oiled machines where resources or people could be deployed to undertake a specialized function promoting efficiency.

Two of the respondents expressed their reservations regarding the adoption of a decentralized procurement strategy on administrative grounds. They argued that a centralized procurement strategy would increase bureaucracy in the management of supply chain activities, thereby negating the progress that would be made in simplifying the company’s processes. It was also argued that a centralized procurement strategy would decrease the efficiency of operations at Qiddiya because the procurement department would have to wait for all parties in the organization to make their orders first before an order is made. This is because the process involved in approving a purchase from a central authority slows the company’s expediency in making decisions (McGrath et al., 2021). Therefore, it becomes difficult to meet the immediate needs of a department when materials are required.

Another question posed to the respondents related to the enforcement of their preferred procurement strategy. Given that nine out of the 12 respondents who took part in the interviews preferred the adoption of a decentralized procurement plan, the views given by them related to the enforcement of this strategy. The informants argued that a centralized procurement strategy was easier to enforce compared to a decentralized one. Their justification was anchored on the belief that there are fewer controls associated with a centralized procurement plan. Conversely, it means that a decentralized plan would be harder to control due to differences in implementation and systems adopted over time. This challenge has been captured in extant literature, which shows that a decentralized procurement plan is harder to manage because of varied systems and procedures surrounding their implementation (Koster et al., 2017). Therefore, the lack of internal controls would make it impossible for a central authority to manage operations. This statement means that a decentralized procurement plan is non-standardized and this structure impedes the implementation of administrative controls.

Secondary Data Findings

The third set of findings generated from this investigation related to a review of secondary literature. Given that the current probe sought to understand the application of a centralized, or decentralized, procurement plan, the literature showed that the former strategy has been traditionally associated with public companies and institutions (Koster et al., 2017). Essentially, these organizations have an inherent responsibility of purchasing goods and services that are suitable for local needs and dynamics (Ketchen & Craighead, 2020). Scholarly literature also suggested that a decentralized procurement strategy works well in business environments where the local supply chain is poorly understood (Ahmad & Karadas, 2021). This way, companies can develop local expertise to navigate the challenges associated with procurement in this uncertain setting. Similarly, it is appropriate to use a decentralized structure in overcoming local cultural barriers that may hinder a business from operating efficiently.

Broadly, the secondary research findings showed three critical areas of probe: governance, cost reduction, and efficiency. Procurement governance frameworks emerged as a core theme because they guide behaviors that would ultimately lead to the realization of project objectives (Ahmad & Karadas, 2021). This statement defines and allocates resources, activities, and communications in companies. In terms of governance and enforcement of policies by the holding company and its subsidiaries, many scholars argued that the governance frameworks adopted today differ from those adopted a few years back because of the complexity that characterizes the modern business environment (Ahmad & Karadas, 2021; Ketchen & Craighead, 2020). Traditional systems were flawed because they lacked information expediency, had high costs, and were inefficient. Modern systems rely on technological advancements to make the purchasing process more expedient.

It was also established that the governance systems adopted at national or regional levels have an impact on how businesses implemented their procurement strategies at the corporate level. The type of organization involved should inform the governance framework adopted because it defines the main stakeholders to be contacted in such plans (Koster et al., 2017). For example, public sector organizations have been criticized for failing to consider the interests of the public when making procurement decisions (Sinha et al., 2020). This problem has reduced the relevance of the policies they have developed so far. Scholars have also mentioned the institutional structure of a company as another important consideration when developing procurement governance strategies (Islam et al., 2020; Safa et al., 2021). Particularly, the degree of centralization, or decentralization, of organizational activities plays a critical role in determining the overall outlook of the procurement design plan.

Several problems have been associated with the process of implementing governance frameworks in different companies. Particularly, corruption emerged as a popular mention among most scholarly works. To address such concerns, an e-procurement strategy was proposed for adoption to mitigate the effects of human factors on procurement effectiveness (Islam et al., 2020; Safa et al., 2021). Some of the main benefits associated with an e-procurement strategy is lower costs, improved efficiency, and an increase in productivity (Sinha et al., 2020). Subject to the above findings, it could be assumed that the procurement strategy adopted by Qiddiya could be improved through automation.

Currently, some of its procurement activities have been automated but the process has not covered all key activities associated with the business. The findings highlighted above suggest that e-procurement could enhance efficiency in the production process. At the same time, this virtual framework of supply chain management could act as a platform for enforcing the governance procedures developed by the holding company to control its subsidiaries (McGrath et al., 2021). Adopting the plan would mean that the procurement functions of subsidiary entities will be synchronized with those of the holding company and standardized to minimize the occurrence of errors and eliminate inconsistencies (McGrath et al., 2021). Therefore, the platform would act as a model for merging the activities of the holding firm and its subsidiaries.

Conclusion

Overall, the insights presented in this document have demonstrated how Qiddiya could manage its procurement function for its holding and subsidiary entities. The findings have also described scenarios where the holding company could maintain control functions over its overseas without compromising on the quality of its products. The procurement strategy for managing the holding company and its subsidiaries comes from the secondary literature review findings highlighted above, which have proposed e-procurement as the desired link. Therefore, while it may be wise to acknowledge some of the limitations of a decentralized procurement plan, as highlighted by some of the respondents, it is equally critical to recognize that times have changed and technology adoption can mitigate some of the mentioned concerns. In line with this focus, the e-procurement strategy emerged as a viable platform for merging the operations of the holding company and its subsidiaries because tasks can be completed in real-time. Overall, this platform is expected to accommodate a hybrid procurement strategy that contains centralization and decentralization elements in the plan.

Recommendations

Based on the insights highlighted in this paper, it is prudent for Qiddiya to adopt a hybrid procurement strategy. Indeed, given the merits and demerits of adopting both centralized and decentralized procurement plans, a hybrid model emerges as the best fit for the firm because its operations are vast and each subsidiary has unique needs that would be better conceptualized internally – within the business unit. Granted, the centralized procurement plan is likely to promote cost-savings and efficiency goals in the organization, but each subsidiary needs to be allowed to prioritize its needs, based on whether they are monetary or time-based. A decentralized procurement plan would allow each subsidiary to design its procurement plan, depending on these two orientations.

Subsidiaries that choose a monetary-based procurement strategy are likely to find that a centralized one would be more suitable for their business plans. Comparatively, subsidiaries that prioritize the expediency of company operations, as opposed to cost-savings advantages, may find that a decentralized procurement plan would be better suited for the business. Therefore, there needs to be an internal audit of the priority needs of each subsidiary to come up with such information. Eventually, the process of identifying priority needs for each subsidiary and aligning them with their appropriate procurement plans would result in a hybrid model. This framework would be responsive to the procurement needs of each subsidiary and enhance the efficiency of overall company operations.

The key to implementing a hybrid procurement model lies in striking equilibrium between the centralization and decentralization needs of the business. Stated differently, there needs to be a centralized planning structure with fillers to the decentralized framework. The centralized procurement plan will require significant management input because teams need to know the procurement needs of other departments as well. This is the only way they can oversee their buying processes because they would not know what to order if they lacked such information. Therefore, in the event that there is no specialized knowledge of the procurement needs of other departments, the adoption of a centralized strategy would be a deterrent to the running of the company’s operations. The impact would be a fragmentation of business processes from an operational standpoint and low departmental buy-in to the overall corporate vision.

Implementation Plan

As highlighted above, a hybrid procurement strategy is proposed for use in the case study. However, benefitting from this plan requires a robust understanding of activities that need to be undertaken during the implementation process. The first step in doing so involves recognizing the importance of the current situation characterizing the procurement environment of Qiddiya. Subject to this objective, the hybrid procurement strategy fits well with the current technology-laden environment that makes it possible to implement e-procurement.

The e-procurement strategy aligns well with the proposed hybrid plan. It can yield significant cost savings and efficiency gains that the current system does not offer (Safa et al., 2021). Particularly, Qiddiya can benefit by up to 15% in efficiency gains if it embraces the decentralized procurement plan (McGrath et al., 2021). Generous estimates indicate that the adoption of the e-procurement strategy could further increase this percentage to 25% (McGrath et al., 2021). Given that up to 75% of multinational companies undertake their procurement functions virtually, it would be safe to assume that Qiddiya can seamlessly integrate the procurement functions of the holding company with its subsidiaries on this platform (Safa et al., 2021). Therefore, the logical conclusion to be derived from this analysis is that significant gains can be made through the adoption of a hybrid procurement plan.

The likely success of implementing the above plan can be contrasted with the performance of other companies that have achieved success through the implementation of a similar plan. For example, compared to past performance, Qiddiya has maintained a poor relationship between the holding firm and its subsidiaries. This problem has been associated with the lack of a standardized procurement model that caters to the interests and needs of each department. Admittedly, the e-procurement platform would provide a new stage for improving this relationship. Given that the challenges affecting the company stem from poor relationships among departmental heads, the e-procurement plan would eliminate the influence of human bias in negotiations because software will be empowered to make purchasing decisions on behalf of the people involved.

Overall, in this paper, the debate regarding the adoption of a centralized or decentralized plan has depended on a contextual understanding of procurement operations for one company. Data was collected from three major sources, including surveys, interviews and secondary research. If the study were to be conducted again, the number of respondents should be increased to get a more representative sample of the views of procurement officers regarding the strategy proposals mentioned. Adopting a larger sample would have improved the credibility and reliability of the data obtained. Additionally, a case study comparison could be done in future research to compare the performance associated with the adoption of Qiddiya’s procurement strategy with other firms that share the same challenge. Doing so would provide a benchmarked understanding of strategy adoption in the procurement department of both companies.

Subject to the above observations, follow-up is required to monitor progress. Stated differently, there needs to be periodic assessments done to establish whether a hybrid procurement model would have a positive impact on the company, or not. The process may involve a quarterly, or annual review of Key Performance Indicators (KPIs) in procurement, such as cost or quality concerns, to find out the impact of the proposed procurement plan. Adopting this approach is likely to highlight gaps in implementation, which could be addressed through policy or strategy changes.

References

Ahmad, A. F., & Karadas, G. (2021). Managers’ perceptions regarding the effect of leadership on organizational performance: Mediating role of green supply chain management practices. SAGE Open, 11(2), 1-19.

Hickman, K. (2018). CIPS position statement. Web.

Islam, M. H., Sarker, M. R., Hossain, M. I., Ali, K., & Noor, K. M. A. (2020). Towards sustainable supply chain management (SSCM): A case of leather industry. Journal of Operations and Strategic Planning, 3(1), 81–98.

Ketchen, D. J., & Craighead, C. W. (2020). Research at the intersection of entrepreneurship, supply chain management, and strategic management: Opportunities highlighted by COVID-19. Journal of Management, 46(8), 1330–1341.

Koster, M., Vos, B., & Schroeder, R. (2017). Management innovation driving sustainable supply management process studies in exemplar MNEs. Business Research Quarterly, 20(4), 240–257.

McGrath, P., McCarthy, L., Marshall, D., & Rehme, J. (2021). Tools and technologies of transparency in sustainable global supply chains. California Management Review, 64(1), 67–89.

Omilion-Hodges, L. M., & Sugg, C. E. (2019). Millennials’ views and expectations regarding the communicative and relational behaviors of leaders: Exploring young adults’ talk about work. Business and Professional Communication Quarterly, 82(1), 74–100.

Patten, M. L., & Newhart, M. (2017). Understanding research methods: An overview of the essentials. Taylor & Francis.

Qiddiya Investment Company. (2022a). What is Qiddiya. Web.

Qiddiya Investment Company. (2022b). Vision 2030. Web.

Qiddiya Investment Company. (2022c). Master plan. Web.

Safa, M., Sharma, N., & Zelbst, P. (2021). Information-driven supply chain during a catastrophic event: COVID-19 pandemic. Journal of Operations and Strategic Planning, 4(1), 27–51.

Sinha, D., Bagodi, V., & Dey, D. (2020). The supply chain disruption framework post COVID-19: A system dynamics model. Foreign Trade Review, 55(4), 511–534.

Stokes, P. (2017). Research methods. Palgrave Macmillan.

Zeng, W., Tse, M. Y., & Tang, M. (2018). Supply chain quality management: An investigation

in the Chinese construction industry. International Journal of Engineering Business Management, 10(1), 1-16.

Appendix

Appendix 1 – Questionnaire

Dear Participant,

Your participation in this study is highly appreciated. We aim to find out the best procurement strategy that Qiddiya Development Company should adopt to support subsidiary companies in its overseas market expansion. The choice is between a centralized and decentralized procurement plan. This survey is structured into two key parts – the first one collects demographic data, while the second section samples your views on distinct research issues. The questions posed below seek to explore these areas in detail. Please, tick on the appropriate boxes as you deem fit.

Part A – Demographic Data

Where is your work location?

• ☐ Holding Company
• ☐ Subsidiary

Which department do you work in?

• ☐ Finance
• ☐ Project Management
• ☐ Software development
• ☐ Accounting
• ☐ Marketing

Please, state your highest education qualification

• ☐ High School
• ☐ Diploma
• ☐ Undergraduate Degree
• ☐ Masters Degree
• ☐ PhD

How long have you worked for an international organization?

• ☐ Less than 1 year
• ☐ 1-2 Years
• ☐ 3-4 Years
• ☐ 5-6 Years
• ☐ More than 6 years

Part B – Procurement Strategies

The organizational context has a significant role to play in determining the best procurement strategy to use

• ☐ Strongly Agree
• ☐ Agree
• ☐ Neither Agree nor Disagree
• ☐ Disagree
• ☐ Strongly Disagree

Employees have the skills and expertise needed to implement a decentralized procurement strategy in the organization

• ☐ Strongly Agree
• ☐ Agree
• ☐ Neither Agree nor Disagree
• ☐ Disagree
• ☐ Strongly Disagree

A decentralized procurement strategy aligns with the organizational culture of the firm

• ☐ Strongly Agree
• ☐ Agree
• ☐ Neither Agree nor Disagree
• ☐ Disagree
• ☐ Strongly Disagree

A decentralized procurement strategy would make the procurement plan more efficient

• ☐ Strongly Agree
• ☐ Agree
• ☐ Neither Agree nor Disagree
• ☐ Disagree
• ☐ Strongly Disagree

A decentralized procurement plan would add more value to the business compared to a centralized one

• ☐ Strongly Agree
• ☐ Agree
• ☐ Neither Agree nor Disagree
• ☐ Disagree
• ☐ Strongly Disagree

A decentralized procurements strategy is better aligned to the vision and mission of the organization, compared to a centralized one

• ☐ Strongly Agree
• ☐ Agree
• ☐ Neither Agree nor Disagree
• ☐ Disagree
• ☐ Strongly Disagree

A decentralized procurement strategy would secure the quality and timely delivery of goods for all business subsidiaries

• ☐ Strongly Agree
• ☐ Agree
• ☐ Neither Agree nor Disagree
• ☐ Disagree
• ☐ Strongly Disagree

It is easier to manage a decentralized procurement plan than a decentralized one

• ☐ Strongly Agree
• ☐ Agree
• ☐ Neither Agree nor Disagree
• ☐ Disagree
• ☐ Strongly Disagree

A decentralized strategic plan would improve strategic relationships with vendors

• ☐ Strongly Agree
• ☐ Agree
• ☐ Neither Agree nor Disagree
• ☐ Disagree
• ☐ Strongly Disagree

A decentralized procurement strategy should be adopted at the firm because it creates flexibility in the execution of procurement plans

• ☐ Strongly Agree
• ☐ Agree
• ☐ Neither Agree nor Disagree
• ☐ Disagree
• ☐ Strongly Disagree

*** End ***

Thank you for participating in the study!

Appendix 2 – Informed Consent Form

You are being invited to take part in a study aimed at investigating the best procurement strategy for Qiddiya to use in expanding its operations abroad. By conducting the study, we aim to identify the best strategy to use between the centralized and decentralized procurement strategies.

We believe that your experience working as an employee of the organization would help us to understand factors that need to be considered in selecting the best procurement strategy to use in the organization. Due to current COVID-19 regulations, the interview will be conducted via a Skype or Zoom interview, which is estimated to take about an hour. The study will be conducted to fulfill academic goals and not to directly influence the company’s decision-making processes.

Your participation in the study will be voluntary – meaning that you are at liberty to take part in it, or not. You are also free to withdraw from the investigation at any time without repercussions. Kindly, also note that the views you present in the interviews will be reported anonymously. Therefore, they will not bear any personal identifiable markers, such as names, ages, or gender.

The pieces of information collected from the interview will be transcribed, and a copy of the same will be stored in a computer and secured with a password that will only be privy to the researcher. After completion of the research investigation, the information collected will be destroyed to protect the privacy of the participants.

Please, sign below to confirm participation.

…………………………………………….

Appendix 3 – Interview Protocol

1. Main Question: What challenges could emerge in the implementation of a decentralized procurement strategy *Hint: What about the challenges that would exist in the event that a centralized procurement plan is adopted?
2. To what extent would automation influence the adoption of a decentralized or centralized procurement strategy?
3. How would a centralized or decentralized procurement strategy affect the efficiency of the procurement business? *Hint: First, start with the decentralized plan and then move to the centralized plan
4. Between the centralized and decentralized procurement plans, which one do you think would add the most value to Qiddiya?
5. What type of enforcement plan would you propose to be adopted for your chosen procurement strategy?
6. Which procurement strategy would improve strategic relationships with vendors?