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Unit 11: Purchasing Research
Make-or-buy decisions are particularly important in the development of new products, Notes
affecting the economic viability of the offering as well as the ability of the firm to supply
its market.
11.5 Keywords
Forward Buying: The placement of an inventory purchase order earlier than required in order
to take advantage of a special price offer, or similar.
Fundamental Analysis: Fundamental analysis of a business involves analyzing its financial
statements and health, its management and competitive advantages, and its competitors and
markets.
Hoarding: In economics, hoarding is the practice of buying up and holding resources so that
they can be sold to customers for profit.
Key Reversals: A chart formation that signals a reversal of the current trend. In an uptrend, the
market must open above the previous day’s close, make a new high for the trend and then close
below the previous day’s low.
Make or Buy Decision: A business often confronts the question whether it should perform a
given part of its production process internally — that is, with its own employees and materials
— or contract with another firm to perform the work.
Market Analysis: A market analysis studies the attractiveness and the dynamics of a special
market within a special industry.
Opportunity Cost: The difference in the performance of an actual investment and a desired
investment adjusted for fixed costs and execution costs.
Price Trends: The consistent movement of prices in a certain direction.
Purchasing Executive: Purchase executive is the head of the purchase department.
Quantitative Analysis: A research technique that deals with measurable items such as the value
of assets and the cost of capital.
Speculative Buying: When purchasing is done purely from the point of view of taking advantage
of a speculated rise in price of the commodity it is called speculative buying.
Speculative Inventory: The term “speculative inventory” can mean different things, but in
general, it refers to inventory that a business obtains and holds in anticipation of future demand,
rather than to meet current demand.
Technical Analysis: Analysis of past price changes in the hope of forecasting future price changes.
11.6 Review Questions
1. Define purchasing research.
2. Why do you think is purchasing research important for companies?
3. Explain price forecasting.
4. Mention and discuss the different techniques of price forecasting.
5. Differentiate between fundamental analysis and technical analysis.
6. Explain the concept of forward buying.
7. Discuss make or buy decisions.
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