Industry Analysis and Market Forces Quiz

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Questions and Answers

What determines the market structure in Porter's Five Forces model?

Competitive rivalry and substitute products

Buyer power and barriers to entry

Number of competitors and relative quality of products

Threat of new entrants and existing competitors (correct)

What determines the cost structure of the supply chain in Porter's Five Forces model?

Threat of new entrants and existing competitors

Number of competitors and relative quality of products

Suppliers-existing competitors-buyers (correct)

Competitive rivalry and substitute products

What factor can lead to a fragmented market with many small suppliers according to Porter's Five Forces model?

High threat of new entrants and high profitability (correct)

High bargaining power of buyers and low costs down the supply chain

Low number of competitors and low service levels

Low threat of substitutes and low competitive rivalry

What can lead to healthy profits for competitors in a market according to the text?

Few competitors and high quality/service levels Signup and view all the answers

What does the text identify as a barrier to entry in the market?

Funding for assets and shortage of skilled staff Signup and view all the answers

What is identified as a weakness in financial control in the supply chain according to the text?

Little visibility of price and quality information Signup and view all the answers

What factor is driving the move from residential to non-residential care according to the text?

Increasing use of technology Signup and view all the answers

What is a potential future trend that may double prices by 2025 according to the text?

Increasing demand and inflation Signup and view all the answers

What does PEST criteria stand for in the context of the external environment affecting procurement and supply?

Political, Economic, Social, Technological Signup and view all the answers

Which model is used to analyze competitive market forces in the context of procurement and supply?

The Five Forces model Signup and view all the answers

What macro-economic criteria can affect organizations in terms of procurement and supply?

Interest rates, Inflation, Exchange rates, GDP/GNP Signup and view all the answers

What do the implications of political criteria include in the context of procurement and supply?

Stability and instability, Legislation Signup and view all the answers

What do the implications of social criteria include in the context of procurement and supply?

Changing societal preferences, Demographics, Labour and Fair Trade standards Signup and view all the answers

What is the use of the STEEPLED criteria in the context of the external environment affecting procurement and supply?

It includes Social, Technological, Economic, Environmental, Political, Legislation, Ethical, and Demographic criteria Signup and view all the answers

What role do ethical and social criteria play in affecting procurement and supply?

They include ethical codes, employment rights, community benefits, working conditions and standards Signup and view all the answers

What does environmental scanning involve?

Collecting data on supply markets and considering competitors and market trends Signup and view all the answers

What does SWOT analysis evaluate?

Internal strengths and weaknesses, as well as external opportunities and threats Signup and view all the answers

What does PEST/PESTLE analysis examine?

Political, economic, sociological, technological, legal, and environmental factors shaping markets Signup and view all the answers

Why should the interpretation of market information be cautious?

Due to potential biases and outdated data Signup and view all the answers

What can cause significant shifts in supply markets and affect organizational strategy?

Changes in political, economic, sociological, technological, legal, and environmental factors Signup and view all the answers

Which external factors can influence supply markets?

Political factors, such as government policies and trade regulations Signup and view all the answers

What does PESTLE analysis provide a comprehensive view of?

The market and its external influences Signup and view all the answers

Why is understanding external influences crucial for organizations?

External influences may act as inhibitors or influencers for strategy Signup and view all the answers

What is the importance of the big picture provided by PESTLE analysis?

It is important for organizations and their market understanding Signup and view all the answers

What is the focus of procurement and supply practitioners?

Comprehending global changes in supply Signup and view all the answers

What must organisations understand to grow their business?

Influences of the external economy Signup and view all the answers

What does PEST/PESTLE analysis examine in relation to markets?

Political, economic, sociological, technological, legal, and environmental factors shaping markets Signup and view all the answers

Which model is widely used for analyzing market competitiveness?

Porter's Five Forces Signup and view all the answers

What did the uncoupling of the Swiss franc from the euro in 2015 significantly impact?

Competitiveness and growth outlook of Swiss companies Signup and view all the answers

What does the Porter's Five Forces model consist of?

Supplier power, buyer power, new entrants, substitutes, and competitive rivalry Signup and view all the answers

What type of factors does technology analysis include?

Current technology, innovation levels, and barriers to entry for new products or services Signup and view all the answers

Which factors can affect pricing models and demand for an industry's products or services?

Economic factors such as inflation, interest rates, and economic trends Signup and view all the answers

What plays a significant role in an industry's operations according to the text?

The industry's relationships with trading partners and nearby countries Signup and view all the answers

What is crucial for strategic planning according to the text?

Availability of funding and grants for the industry and potential changes over the coming years Signup and view all the answers

What does environmental factors include according to the text?

Geographical and business impact aspects, affecting the industry's operations and product demand Signup and view all the answers

What is a potential disruptor of supply chains according to the text?

Regional conflicts, wars, and terrorism Signup and view all the answers

What does legal factors encompass according to the text?

Internal and external rules, regulations, and policies governing the industry's operations Signup and view all the answers

What influences the industry's market perception and behavior according to the text?

Social factors like demographics, culture, and consumer attitudes Signup and view all the answers

What can impact the industry's stability according to the text?

Regional conflicts, wars, and terrorism Signup and view all the answers

What makes suppliers powerful in a supply chain according to the text?

Few suppliers compared with buyers, with suppliers tending to be large organisations Signup and view all the answers

What is the main factor that determines the power of a group in a supply chain according to the text?

The importance of its products or services to that supply chain Signup and view all the answers

What does power in the sense of market forces refer to according to the text?

The ability to take the major portion of profits in a supply chain Signup and view all the answers

What contributes to the power of suppliers in a supply chain according to the text?

The products or services that are supplied are either unique or differentiated in some way Signup and view all the answers

What can act as a barrier to entry for new market entrants in the insurance market?

Economies of scale such as technical and learning curve Signup and view all the answers

What is a potential impact of buyer dominance in the insurance market?

Lower prices forced by large buyers Signup and view all the answers

What is a characteristic of new market entrants disrupting the insurance market?

Better customer service perception Signup and view all the answers

What is a potential threat to the insurance market from new market entrants like Google and Amazon?

Large existing customer base gaining trust and ease of interaction Signup and view all the answers

What can deter new market entrants in the insurance market due to the required minimum sales quantity?

Relationship between quantity produced and cost per unit Signup and view all the answers

What is a characteristic of vertical integration in the insurance market?

Suppliers entering as buyers Signup and view all the answers

What can impact supplier profitability in the insurance market?

Buyers with large purchase costs finding lower-cost alternatives Signup and view all the answers

What is a potential advantage of new market entrants over traditional insurance companies in the insurance market?

Focus on core competency Signup and view all the answers

What can act as a barrier to entry for new market entrants in the insurance market due to the relationship between quantity produced and cost per unit?

Economies of scale such as technical and learning curve Signup and view all the answers

What can occur when buyers have low switching costs for purchasing standard or undifferentiated products in the insurance market?

Easier supplier changes Signup and view all the answers

What is a potential impact of large existing customer base for new market entrants in the insurance market?

Potential gain of trust and ease of interaction Signup and view all the answers

What is a perceived advantage of retail firms and technology companies over traditional insurance providers in the insurance market?

Better customer service Signup and view all the answers

Which factor can act as a barrier for small- and medium-sized businesses in industries like computers, pharmaceuticals, and airlines?

High capital requirements Signup and view all the answers

What can create customer loyalty and act as a barrier for new entrants in a market?

Product differentiation Signup and view all the answers

What determines the profitability of a market and sets expectations for profit targets for each organization?

Competitive rivalry Signup and view all the answers

What can influence access to distribution channels, like supermarket shelves?

Brand loyalty and product placement Signup and view all the answers

What can result in lower financing costs for larger organizations?

Financial economies of scale Signup and view all the answers

What can impact market structure and profitability?

Signup and view all the answers

What can be a significant cost advantage for early entrants in a market?

Access to the best raw materials and legally enforceable patents Signup and view all the answers

What determines whether a buyer moves to a substitute and acts as a barrier to price increases?

Switching costs Signup and view all the answers

What contributes to intense competitive rivalry in a market?

High fixed costs Signup and view all the answers

What helps in understanding the power dynamics in a supply market and its implications for procurement and supply?

Porter's Five Forces model Signup and view all the answers

What can create barriers to entry for new businesses?

Government policies and regulations Signup and view all the answers

What can impact market structure and profitability?

Signup and view all the answers

What does the law of demand state?

The quantity of an item purchased varies inversely with its price, other factors remaining constant Signup and view all the answers

What is the equilibrium point in the context of supply and demand?

The point where the demand curve and the supply curve intersect Signup and view all the answers

What does excess demand indicate in the market?

Prices will rise until supply and demand are in equilibrium Signup and view all the answers

What does a shift in supply represent?

An increase in the quantity of goods suppliers are willing to sell at each price Signup and view all the answers

What is market capability defined as?

The capability of suppliers to deliver buyer expectations Signup and view all the answers

What does the sourcing strategy need to be according to the text?

Future-proof Signup and view all the answers

What does the analysis of supply risk enable the organization to assess?

The organization's relative bargaining power against its key suppliers Signup and view all the answers

What is the importance of understanding market structure and Porter's Five Forces?

To assess competitive forces and industry attractiveness Signup and view all the answers

What does technology capability encompass?

The ability to develop and adopt new technology to improve performance and deliver new services Signup and view all the answers

What does the ability to use different financial instruments and choose an appropriate one to lower overall costs refer to?

Financial capability Signup and view all the answers

What is the significance of understanding external influences for organizations?

To adapt to changing market conditions Signup and view all the answers

What does the ability to recognize when change is needed and successfully deliver it refer to?

Change management capability Signup and view all the answers

What happens when excess demand occurs in the market?

Prices rise until equilibrium is reached Signup and view all the answers

What does market capability encompass?

Process, improvement, technology, financial, and change management capabilities Signup and view all the answers

What is the focus of procurement in the context of supply risk assessment?

Mapping and analyzing current and potential supply chains and markets Signup and view all the answers

Why is understanding market structure, supply, and demand essential for businesses?

Determining market capability and assessing supply risk Signup and view all the answers

What does excess supply lead to in the market?

Prices fall until equilibrium is achieved Signup and view all the answers

What does market structure refer to in the context of Porter's Five Forces?

The competitive environment in which a firm operates Signup and view all the answers

What does supply risk assessment prompt organizations to do in their sourcing strategy?

Avoid exploitation and ensure breakthrough cost reductions Signup and view all the answers

What represents the agreed-upon price for transacting a trade in the market?

Equilibrium point Signup and view all the answers

What is the relationship between the quantity of a product purchased and its price according to the law of demand?

Inversely proportional Signup and view all the answers

What does the demand curve illustrate in the market?

The relationship between price and the quantity buyers are prepared to purchase Signup and view all the answers

What does the supply curve show in the market?

The relationship between price and the quantity sellers are prepared to sell Signup and view all the answers

What occurs when shifts in either demand or supply happen in the market?

Affecting market equilibrium and prices Signup and view all the answers

What can act as a barrier to price increases in a market?

Switching costs Signup and view all the answers

What can create barriers to entry for new businesses?

Government policies and regulations Signup and view all the answers

What determines the profitability of a market and sets profit targets for organizations?

Competitive rivalry Signup and view all the answers

What can be a prohibitive factor for small- and medium-sized businesses in certain industries?

Capital requirements Signup and view all the answers

What can impact market structure and profitability?

Threat of substitution Signup and view all the answers

What contributes to intense competitive rivalry in a market?

Exit barriers Signup and view all the answers

What can give early entrants significant cost advantages?

Access to the best raw materials Signup and view all the answers

What can be influenced by brand loyalty and product placement?

Access to distribution channels Signup and view all the answers

What helps in understanding the power dynamics in a supply market?

Assessing the Porter's Five Forces model Signup and view all the answers

What results in lower financing costs for larger organizations?

Financial economies of scale Signup and view all the answers

What creates customer loyalty and can be a barrier for new entrants?

Product differentiation Signup and view all the answers

What can act as a disadvantage for new entrants in a market?

High capital requirements Signup and view all the answers

What is the main objective for organizations in the Maturity stage of a product's life cycle?

Make small improvements to meet emerging buyer needs Signup and view all the answers

What group fuels sales growth in the Growth stage of a product's life cycle?

Early adopters Signup and view all the answers

At what stage of a product's life cycle do competitors start to enter the market with their own versions?

Growth Signup and view all the answers

What is the main focus of businesses in the Decline stage of a product's life cycle?

Withdrawing the product from the market Signup and view all the answers

How can businesses mitigate the impact of interest rate fluctuations on working capital and finance costs?

By improving cash management Signup and view all the answers

What can businesses do to manage fluctuating interest rates?

Anticipate market conditions Signup and view all the answers

What impact can higher interest rates have on consumers' spending?

Decrease in disposable income and discretionary spending Signup and view all the answers

How can businesses mitigate the impact of interest rate rises on operations?

Move to fixed-rate mortgages Signup and view all the answers

What impact can inflation have on businesses' borrowing costs and profits?

Increase borrowing costs, reduce profits Signup and view all the answers

What should businesses do during periods of inflation?

Renegotiate contracts Signup and view all the answers

How can government stimulation of the economy impact businesses?

Lead to inflation Signup and view all the answers

What do fluctuating exchange rates impact for businesses involved in import/export?

Cost of goods and competitiveness in international markets Signup and view all the answers

What can fluctuating inflation impact for businesses?

Pricing and consumer purchasing behavior Signup and view all the answers

What should businesses do to minimize the impact of fluctuating interest rates on finance costs?

Improve cash management Signup and view all the answers

What impact can inflation have on businesses' profits and competitiveness in international markets?

Reduce profits and competitiveness Signup and view all the answers

What can businesses anticipate to manage fluctuating interest rates?

Market conditions Signup and view all the answers

What are common reasons for product decline in the product life cycle?

Changes in technology and consumer tastes Signup and view all the answers

What is a characteristic of the decline stage of a product?

Profits can be reasonable due to premium pricing and low promotional costs Signup and view all the answers

What is attributed to the decline of the iPod, once iconic?

Changing consumer preferences Signup and view all the answers

How did the success of iPhones and iPads contribute to the decline of the iPod?

By offering alternative products that fulfilled similar needs Signup and view all the answers

What macro-economic factors affecting organizations are mentioned in the text?

Interest rates, inflation, and exchange rates Signup and view all the answers

How do changes in interest rates impact organizations?

Through borrowing, bank deposits, and customer credit Signup and view all the answers

What do business cycles, measured by GDP, impact?

Whole sectors and individual companies Signup and view all the answers

What do strong economies boost, leading to increased demand for goods and services?

Confidence Signup and view all the answers

What does the product life cycle consist of?

Introduction, growth, maturity, and decline stages Signup and view all the answers

What are examples of macro-economic factors affecting organizations?

Interest rates, inflation, and exchange rates Signup and view all the answers

What do laggards continue to do in the decline stage of a product?

Buy products in the decline stage Signup and view all the answers

What is the impact of changes in technology and consumer tastes on product decline?

They lead to decreased demand for the product Signup and view all the answers

What is the impact of a devaluation of the euro against the US dollar on the cost of importing raw materials from the US?

The cost increases by 0.7 euros Signup and view all the answers

What is the main concern regarding the devaluation of a country's currency in the longer term?

Reduced incentive for businesses to cut costs and increase productivity Signup and view all the answers

What does price elasticity measure in relation to the demand for goods and services?

How demand changes with a change in price Signup and view all the answers

What does a negative price elasticity indicate about a product?

The product is price inelastic Signup and view all the answers

In the context of currency devaluation, which goods and services are most affected by the devaluation?

Price elastic goods and services Signup and view all the answers

What should a country consider when thinking about devaluing its currency to stimulate the economy?

The state of the global economy Signup and view all the answers

How can businesses mitigate the effects of currency movements when importing raw materials?

By using fixed-price contracts Signup and view all the answers

What is the difference between gross domestic product (GDP) and gross national product (GNP)?

The treatment of citizens and businesses in terms of geographic boundaries Signup and view all the answers

What does a larger GDP compared to GNP indicate about a country?

A large number of foreign companies operating in the country Signup and view all the answers

How do governments use GDP as a measure of the state of the economy?

To make decisions on interest rates and money supply Signup and view all the answers

What is the main purpose of investors looking at GDP?

To decide when and where to adjust investment portfolios Signup and view all the answers

What is the impact of a devaluation of a country's currency on businesses?

Increased profits and reduced incentive to cut costs and increase productivity Signup and view all the answers

What determines the impact of currency devaluation on demand for goods and services?

Price elasticity Signup and view all the answers

What helps in understanding the actual consumption spending of households, government spending, and business investment?

GNP Signup and view all the answers

How do businesses mitigate the effects of currency movements for raw material imports?

Using fixed-price contracts Signup and view all the answers

How do global economic conditions, such as a global depression, influence the effectiveness of devaluing a currency to stimulate the economy?

May reduce the effectiveness Signup and view all the answers

What is the difference between GDP and GNP?

How they define citizens and businesses Signup and view all the answers

How do governments use GDP for decision-making?

Interest rates and money supply decisions Signup and view all the answers

How do businesses use GDP for decision-making?

Investment decisions and cash management Signup and view all the answers

What does GNP serve as a measure of?

Supply and demand Signup and view all the answers

Why is China's GDP $300 billion greater than its GNP?

Large number of foreign companies manufacturing in the country Signup and view all the answers

Why is the US's GNP $250 billion greater than its GDP?

Production outside its borders Signup and view all the answers

What does GNP help in understanding?

Actual consumption spending of households, government spending, and business investment Signup and view all the answers

Which of the following is NOT a key characteristic of corporate law?

Shareholders in an incorporated company have unlimited liability Signup and view all the answers

What does securities law primarily cover?

Laws governing the raising of capital on markets and the protection of individual investors Signup and view all the answers

What is the main purpose of foreign exchange management law?

To govern how foreign exchange is accessed for the purpose of doing business with another country Signup and view all the answers

What is the role of a securities commission?

To oversee the workings of a securities market Signup and view all the answers

What does the Plan-Do-Check-Act methodology in business link to?

Continuous improvement culture Signup and view all the answers

What does social capital refer to in the context of business?

Value of workforce knowledge and skills Signup and view all the answers

What is the key focus of Corporate Social Responsibility (CSR) in business?

Ethical behavior and positive impact Signup and view all the answers

What does selecting suppliers based on employment, health, and environmental practices emphasize?

Social responsibility in procurement Signup and view all the answers

What does business ethics primarily guide in a business setting?

Behavior and decision-making Signup and view all the answers

What is the primary impact of larger organizations auditing their suppliers for responsible practices?

Promoting responsible practices in the supply chain Signup and view all the answers

What is the main focus of implementing an ethical approach in business?

Adhering to principles and standards Signup and view all the answers

What does social criteria primarily impact in the context of procurement and supply?

Procurement and supply processes Signup and view all the answers

What does Business Link advise regarding communication with customers?

Open and honest communication Signup and view all the answers

What does Corporate Social Responsibility (CSR) involve contributing to?

Economic development and quality of life Signup and view all the answers

What is the primary impact of business on Corporate Social Responsibility (CSR)?

Customer treatment and supplier selection Signup and view all the answers

What is the main difference between business ethics and legality?

Business ethics may differ from legality Signup and view all the answers

Which organization set a target to reduce emissions to 5% below 1990 levels?

United Nations Framework Convention on Climate Change Signup and view all the answers

What does business law cover?

Formation and conduct of contracts Signup and view all the answers

What do finance laws affecting businesses include?

Tax restrictions and import/export regulations Signup and view all the answers

What do employment laws ensure?

Worker safety and reasonable workplace temperature Signup and view all the answers

What does the United Nations Framework Convention on Climate Change focus on?

Reducing greenhouse gas emissions and adapting to climate change Signup and view all the answers

What do environmental and ethical criteria affect in procurement and supply?

Natural disaster recovery and waste emissions Signup and view all the answers

What do natural risks such as floods, hurricanes, earthquakes, and flash fires impact?

The physical environment in which businesses operate Signup and view all the answers

What does the Paris Agreement involve?

160 participating countries Signup and view all the answers

What do modern businesses need to manage to remain successful?

Their impact on society and the environment Signup and view all the answers

What does the UNFCCC aim to stabilize?

Greenhouse gas concentrations Signup and view all the answers

What is the focus of employment protection laws?

Prohibiting unfair dismissal and requiring formal processes for poor performance Signup and view all the answers

What is the primary concern of climate change concerns?

Carbon emissions Signup and view all the answers

What is the ISO 50001:2011 standard proposed to help businesses with?

Improving energy efficiency and reducing consumption Signup and view all the answers

What does the sustainability of raw materials involve?

Replacing used raw materials, leading to additional costs passed on along the supply chain Signup and view all the answers

What impact does pollution, particularly air and water emissions, have on productivity?

It is linked to lower productivity, with studies showing decreased labor productivity on high pollution days Signup and view all the answers

How can business procurement and supply play a role in reducing world energy consumption?

Through supplier selection and motivation Signup and view all the answers

What is the potential consequence of natural disasters on finances and future revenues for businesses?

Leading to bankruptcy Signup and view all the answers

What did Hurricane Katrina's aftermath lead to for various industries?

Diminished margins Signup and view all the answers

What do waste emissions from manufacturing businesses require?

Proper disposal, with recycling offering benefits such as reduced landfill use and improved corporate image Signup and view all the answers

What is the primary impact of pollution on the environment?

Affecting the environment Signup and view all the answers

What did Hurricane Katrina cause in terms of oil and gas supplies?

Massive flooding and affected oil and gas supplies Signup and view all the answers

What is emphasized by Richard Gurley regarding natural disasters and supply chains?

Assessing the risk of natural disasters to supply chains Signup and view all the answers

What does the proper disposal of waste emissions from manufacturing businesses involve?

Recycling offering benefits such as reduced landfill use and improved corporate image Signup and view all the answers

What is the significance of assessing the risk of natural disasters to supply chains?

It is important for evaluating the impact on vendor facilities and product availability Signup and view all the answers

What can businesses achieve by involving employees in community work?

Motivated employees and easier recruitment Signup and view all the answers

How can businesses benefit from collaborating with the local community?

Gaining favor with local government for contract awards Signup and view all the answers

What impact can a good CSR image have on a publicly quoted organization?

Attract investment from governments Signup and view all the answers

How can procurement practitioners significantly impact the environment?

Minimizing waste and using recycled materials Signup and view all the answers

What can implementing CSR lead to in terms of cost savings?

Cutting out waste Signup and view all the answers

What is a potential consequence of negative publicity related to CSR?

Direct impact on share prices Signup and view all the answers

How can businesses demonstrate their expertise and human face?

Engaging in activities related to their products Signup and view all the answers

What can the growth of CSR's importance to the public be attributed to?

Pressure groups and increasing media coverage Signup and view all the answers

How can businesses gauge attitudes towards CSR?

Treating employees fairly Signup and view all the answers

What can businesses achieve by supporting local charities and sponsoring events?

Increased sales and improved reputation Signup and view all the answers

What can environmental scanning and tools like the PESTLE approach and Michael Porter's Five Forces help businesses analyze?

External environments' impact Signup and view all the answers

What directly impacted BP's share price almost halved?

Negative publicity from the Gulf of Mexico disaster Signup and view all the answers

What can businesses do to gauge attitudes towards Corporate Social Responsibility (CSR)?

Engage with employees and suppliers, treat them fairly, and support their involvement in community activities Signup and view all the answers

What can businesses gain by involving employees in community work?

Increased sales and improved reputation Signup and view all the answers

How can businesses demonstrate their expertise and human face through CSR?

By engaging in activities related to their products Signup and view all the answers

How can procurement practitioners impact the environment?

By minimizing waste and using recycled materials Signup and view all the answers

What are some benefits of a socially responsible approach?

Improved public image and cost savings Signup and view all the answers

How can implementing CSR lead to cost savings?

By cutting out waste and encouraging long-term thinking Signup and view all the answers

How can a good CSR image impact a publicly quoted organization's share price?

It can lead to an increase in share price Signup and view all the answers

What can help businesses analyze and understand the impact of external environments on procurement and supply?

Porter's Five Forces Signup and view all the answers

How did BP's share price demonstrate the direct impact of CSR?

It almost halved due to negative publicity from a disaster Signup and view all the answers

What can businesses use to analyze competitive market forces in the context of procurement and supply?

Porter's Five Forces Signup and view all the answers

How can businesses mitigate the impact of interest rate rises on operations?

By entering into interest rate swap agreements Signup and view all the answers

What can businesses use to understand the actual consumption spending of households, government spending, and business investment?

Gross Domestic Product (GDP) Signup and view all the answers

What are the four key tasks associated with the 'Need' step in the procurement operational cycle?

Identify a need, identify the specification for the goods and services required, check and agree on reasons for ordering, and agree on reasons for ordering Signup and view all the answers

What does the operational cycle in procurement and supply involve?

Identifying requirements, specifying, authorizing, researching suppliers, choosing supplier, and establishing price and terms Signup and view all the answers

What is the focus of this chapter in the context of procurement and supply?

Types of documentation used in procurement and supply Signup and view all the answers

What is the purpose of establishing price and terms in the procurement operational cycle?

To ensure cost-effectiveness and value for money Signup and view all the answers

What is the purpose of a goods received note in the procure to pay process?

To confirm the receipt of goods and match with the purchase order and supplier's invoice Signup and view all the answers

In the case of services, what document does the requisitioner sign off on to confirm satisfactory completion?

Invoice Signup and view all the answers

What specific details must be included in invoices for payment processing?

Unique identification number, company details, customer details, description of items, supply date, invoice date, amount, VAT/sales tax, and legal entity specifics Signup and view all the answers

What is the purpose of the bill of materials (BOM) in procurement?

Listing items needed for product assembly Signup and view all the answers

What is the role of the specification in the procurement process?

Detailing the organization's needs for the supplier and avoiding misinterpretation of requirements Signup and view all the answers

What are the two types of specifications mentioned in the text?

Technical (conformance) and outcome-focused Signup and view all the answers

What is the primary purpose of a delivery note in the procure to pay process?

To list the contents and quantities of shipped goods, signed by the recipient as proof of delivery and possession Signup and view all the answers

What is the three-way matching process in the context of procurement?

Verifying the received items against the purchase order, delivery note, and invoice Signup and view all the answers

What additional procurement documents are mentioned in the text?

Bill of materials (BOM) and specification Signup and view all the answers

What role does the BOM play in the procurement process?

Used by engineering for product design, manufacturing for assembly guidance, and procurement for sourcing items and quantities Signup and view all the answers

What is the significance of the specification in the procurement process?

Avoiding misinterpretation of requirements and detailing the organization's needs for the supplier Signup and view all the answers

Which document is used to inform the procurement department that an item is needed?

Requisition Signup and view all the answers

What is the purpose of a purchase order?

To set clear expectations of what is needed and create a legally binding document Signup and view all the answers

What is the final stage in the procurement process?

Receive the goods or service Signup and view all the answers

What is the starting point for researching available suppliers?

Contract register Signup and view all the answers

What is the main advantage of a computerised procurement system?

Reduces the amount of time procurement staff must spend interacting with those who want to buy something Signup and view all the answers

What is the purpose of a requisition in procurement?

To inform the procurement department of the need for an item Signup and view all the answers

What is the purpose of physically receiving the goods or service in procurement?

To carry out a physical inspection to check the accuracy of the order and that quality is acceptable Signup and view all the answers

What is the purpose of checking the invoice in the procurement process?

To make sure the invoice is checked for accuracy and approve it for payment Signup and view all the answers

What is the purpose of updating all relevant records in procurement?

To ensure all relevant records are updated after the goods or service are received Signup and view all the answers

What is the purpose of a purchase order in procurement?

To set clear expectations of what is needed and create a legally binding document Signup and view all the answers

What is the purpose of a requisition in procurement?

To inform the procurement department of the need for an item Signup and view all the answers

What is the purpose of physically receiving the goods or service in procurement?

To carry out a physical inspection to check the accuracy of the order and that quality is acceptable Signup and view all the answers

What is the purpose of the request for information (RFI) in the procurement process?

To test the supply market and gather information about potential supplier capability. Signup and view all the answers

What is the primary purpose of the request for quotation (RFQ) in the procurement process?

To find the best price available for a known product or service requirement. Signup and view all the answers

What should be included in the documents accompanying a request for quotation (RFQ)?

Description of what is needed, terms and conditions, pricing template, and a statement describing the selection criteria. Signup and view all the answers

What is the main objective of framing questions in the request for information (RFI) stage?

To invite suppliers to challenge the organization's requirements. Signup and view all the answers

What is the purpose of the pre-qualifying questionnaire (PQQ) in the procurement process?

To assess and approve suppliers before sending out the request for quotation (RFQ). Signup and view all the answers

What should be the focus of questions during the request for information (RFI) stage?

Suppliers' understanding and interpretation of the organization's problem. Signup and view all the answers

What is the main purpose of the pricing template accompanying a request for quotation (RFQ)?

To allow for price comparison between suppliers and assess their profit. Signup and view all the answers

What is the primary purpose of the description of what is needed in the request for quotation (RFQ)?

To set out the requirements in a clear and unambiguous way for suppliers. Signup and view all the answers

What is the significance of including the proposed contract in template form with the request for quotation (RFQ)?

To allow suppliers to assess any risk in the contract and factor in other variables. Signup and view all the answers

What is the primary purpose of the statement describing the selection criteria in the request for quotation (RFQ)?

To describe the criteria by which the final selection will be made and the contract awarded. Signup and view all the answers

Study Notes

Industry Analysis and Market Forces

Bureaucracy in trading with a specific country can impact the industry's operations
Availability of funding and grants for the industry and potential changes over the coming years are crucial for strategic planning
Regional conflicts, wars, and terrorism can disrupt supply chains and impact the industry's stability
The industry's relationships with trading partners and nearby countries play a significant role in its operations
Economic factors such as inflation, interest rates, and economic trends can affect pricing models and demand for the industry's products or services
The Swiss franc's uncoupling from the euro in 2015 had a significant impact on Swiss companies' competitiveness and growth outlook
Social factors like demographics, culture, and consumer attitudes influence the industry's market perception and behavior
Technology analysis includes current technology, innovation levels, and barriers to entry for new products or services
Legal factors encompass internal and external rules, regulations, and policies governing the industry's operations
Environmental factors include both geographical and business impact aspects, affecting the industry's operations and product demand
Porter's Five Forces model is a widely used tool for analysing market competitiveness, consisting of supplier power, buyer power, new entrants, substitutes, and competitive rivalry
Each element of the Porter's Five Forces model, such as supplier power, buyer power, and new entrants, has specific factors that determine market competitiveness

Barriers to Entry and Competitive Rivalry in Markets

Larger companies have bigger advertising budgets, giving them an advantage in consumer markets.
Financial economies of scale result in lower financing costs for larger organizations.
Product differentiation creates customer loyalty and can be a barrier for new entrants.
Capital requirements, especially in industries like computers, pharmaceuticals, and airlines, can be huge and prohibitive for small- and medium-sized businesses.
Early entrants may have significant cost advantages, such as access to the best raw materials and legally enforceable patents.
Access to distribution channels, like supermarket shelves, can be influenced by brand loyalty and product placement.
Government policies, regulations, and tariffs can create barriers to entry for new businesses.
Threat of substitution can impact market structure and profitability.
Switching costs and price are key determinants of whether a buyer moves to a substitute, acting as a barrier to price increases.
Competitive rivalry in a market determines its profitability and sets expectations for profit targets for each organization.
Market growth, product differentiation, high fixed costs, and exit barriers contribute to intense competitive rivalry.
Assessing the Porter's Five Forces model helps in understanding the power dynamics in a supply market and its implications for procurement and supply.

Product Life Cycle and Economic Criteria in Procurement and Supply

Changes in technology and consumer tastes are common reasons for product decline
Laggards continue to buy products in the decline stage
Profits in the decline stage can be reasonable due to premium pricing and low promotional costs
The decline of the iPod, once iconic, is attributed to changing consumer preferences
Apple's iPod sales have dwindled, with a 52% decline in 2013
The success of iPhones and iPads contributed to the iPod's decline
The product life cycle consists of introduction, growth, maturity, and decline stages
Macro-economic factors affecting organizations include interest rates, inflation, and exchange rates
Interest rates impact organizations through borrowing, bank deposits, and customer credit
Changes in interest rates are influenced by supply and demand for money
Business cycles, measured by GDP, impact whole sectors and individual companies
Strong economies boost confidence, leading to increased demand for goods and services and potential inflation

Impact of Currency Devaluation and GDP/GNP on the Economy

Currency devaluation can affect the cost of imports and exports, making products cheaper or more expensive in different countries.
A devaluation of the euro against the US dollar can make European products cheaper to buy in the US, even if the price in Europe remains the same.
Devaluation of a country's currency may lead to increased profits for businesses but could reduce the incentive to cut costs and increase productivity.
Price elasticity determines the impact of currency devaluation on demand for goods and services.
Global economic conditions, such as a global depression, can influence the effectiveness of devaluing a currency to stimulate the economy.
Businesses can mitigate the effects of currency movements by using fixed-price contracts for raw material imports.
Economic activity is measured through gross domestic product (GDP) and gross national product (GNP), with differences in how they define citizens and businesses.
China's GDP is $300 billion greater than its GNP due to the large number of foreign companies manufacturing in the country, while the US's GNP is $250 billion greater than its GDP due to production outside its borders.
Governments use GDP to make decisions on interest rates and money supply, which can impact economic growth.
Businesses use GDP to make investment decisions and manage cash, while investors use it to adjust their investment portfolios based on the economy's growth prospects.
GNP serves as a measure of supply and demand, with components including consumption, government spending, investment spending, and net exports.
GNP helps in understanding the actual consumption spending of households, government spending, and business investment, which collectively influence the economy's performance.

Importance of Corporate Social Responsibility in Procurement and Supply

Businesses can gauge attitudes towards CSR by engaging with employees and suppliers, treating them fairly, and supporting their involvement in community activities.
Involving employees in community work can enhance community relations, motivate employees, and develop their interpersonal and team skills.
Collaborating with the local community can benefit businesses through increased sales, improved reputation, and easier recruitment, as well as gaining favor with local government for contract awards.
Businesses can support local charities, sponsor events, and engage in activities related to their products to demonstrate their expertise and human face.
Procurement practitioners can significantly impact the environment by minimizing waste, using recycled materials, and encouraging suppliers to do the same.
The benefits of a socially responsible approach include a more motivated workforce, improved public image, cost savings, long-term thinking, customer engagement, and employee engagement.
The growth of CSR's importance to the public is evident through the emergence of pressure groups and increasing media coverage on the subject.
Implementing CSR can lead to cost savings by cutting out waste and encourages long-term thinking for the sustainability of the organization.
CSR contributes to better customer and employee engagement, as well as creating an acceptable public image, which influences sales.
A good CSR image can positively impact a publicly quoted organization's share price and attract investment from governments to support CSR work.
Environmental scanning and tools like the PESTLE approach and Michael Porter's Five Forces can help businesses analyze and understand their external environments' impact on procurement and supply.
BP's share price almost halved due to negative publicity from the Gulf of Mexico disaster, demonstrating the direct impact of CSR on share prices.

Procure to Pay Process in Procurement

The procurement of services is managed by the department that requested the service, while a copy of the purchase order is sent to the supplier.
For physical goods, suppliers use the purchase order to organize the goods for pick, pack, and dispatch according to the terms of the purchase order.
Upon receiving goods, warehouse staff verify quantities, perform quality control checks, and complete a goods received note for matching with the purchase order and supplier's invoice in a three-way matching process.
After the three-way match, the supplier's invoice is processed and paid according to the payment terms.
In the case of services, the requisitioner signs off on the invoice to confirm satisfactory completion, as opposed to signing off on a delivery note for physical goods.
Delivery notes list the contents and quantities of shipped goods, signed by the recipient as proof of delivery and possession.
Invoices are paid after verifying the received items against the purchase order, delivery note, and invoice through a three-way match.
Invoices must contain specific details, including unique identification number, company details, customer details, description of items, supply date, invoice date, amount, VAT/sales tax, and legal entity specifics.
Additional procurement documents include the bill of materials (BOM) listing items needed for product assembly and the specification detailing the organization's needs for the supplier.
The BOM is used by engineering for product design, manufacturing as assembly guidance, and procurement for sourcing items and quantities.
The specification is a statement of needs provided to the supplier to avoid misinterpretation of requirements and plays a crucial role in the procurement process.
There are two types of specifications: technical (conformance) specifying methods, materials, and suppliers, and outcome-focused specifying desired results and capabilities.

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Description

Test your knowledge of industry analysis and market forces with this quiz. Explore the impact of bureaucracy, funding, regional conflicts, economic factors, social influences, technology, legal regulations, and environmental considerations on industries. Dive into Porter's Five Forces model and understand how supplier power, buyer power, new entrants, substitutes, and competitive rivalry shape market competitiveness.