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Unit 10: Purchasing in the Domestic and Foreign Marketplace

 The importance of the linkage between the purchasing function and the other functions Notes
within a firm is becoming more evident with each passing year.

 Merchandise budget plans are concerned with the financial planning of merchandise ranges,
rather than the control of the physical number of items.
 For any retailer (of any size) it is vital that a balance is achieved between the amount of
money going out of a business to pay for supplies of stock, and money coming into the
business from sales to customers.

10.5 Keywords

Classification: After determining the broad categories of merchandise the store is to stock
(men’s clothing, stationary, costume jewelry, etc.), the retailer divides the broad categories into
smaller categories called classifications (men’s suits, tuxedos, raincoats, etc.).
Net Sales: This figure represents a realistic dollar estimate of your monthly merchandise sales
Open-to-Buy: To arrive at the open-to-buy figure for the month, it is necessary to subtract (from
the above planned purchases figure) the dollar value of the commitments already placed for
delivery during the same month.
Purchases: This figure represents the dollar value of merchandise the buyer must purchase to
replenish the stock likely to be sold to your retail customers.
Purchasing: Purchasing refers to a business or organization attempting to acquiring goods or
services to accomplish the goals of its enterprise.

Reductions: Reductions refer to the lowering of retail value of your inventory and is caused by
planned markdowns, shrinkage (stock shortage) and discounts to employees or other special
groups.
Stock: In order to achieve your estimated (planned) sales figure you must provide sufficient
stock to permit a satisfactory selection for your customers. This stock figure can be determined
by calculating your inventory turnover rate or your sales-stock ratio, or by estimating the
maximum quantity for each item or the stock requirements based on expected weekly sales.

Unit stock plan: A unit stock plan of the number of items to be stocked in each by price, style,
color and size is then prepared.

10.6 Review Questions

1. Define the term purchasing.

2. What is retail buying means?
3. What are the extent to retail purchasing in the domestic market?
4. What are the extent to retail purchasing in the foreign market?

5. What are the major differences between purchasing in the domestic and in the foreign
marketplace?
6. What are the various essential of purchasing?

7. Discuss the importance of the linkage between the purchasing function and the other
functions within a firm.
8. ““Knowing” the supplier takes a lot of time and work at the beginning”. Elucidate.

9. “Internationalization of the marketplace, global competition, and changes in the business
environment have contributed to the increase in international purchasing”. Comment.

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