Strategic sourcing for a competitive advantage in the hotel industry

In order to remain competitive in an intensely competitive business environment, many companies have resorted to cost-cutting, lay-offs, restructuring, and increased productivity measures to manage expenses and to increase profits. Senior executives in organizations have realized that on average, 50% or more of an organization’s operating budget is spent on purchased goods and services. Therefore, the decisions made by purchasing professionals can help to determine the financial viability of the organization (Ball, 2005). Firms can increase the so-called “bottom line” by either increasing revenues or by decreasing costs. Under economic conditions of strong competition and uncertainty, it is often difficult to increase revenues. Conversely, the competitive environment can provide an advantage to the organization which has the ability to negotiate lower prices for purchased goods and services. The opportunity to increase income without relying on raising revenues is the essence of strategic sourcing initiatives