INTERNATIONAL PURCHASING ENVIRONMENT AND ANALYSIS:

Purchasing involves all the activities needed for the acquisition of raw materials, goods or services
need for companies to reach their business goals. When such purchasing is done outside the local
market in other to support the company’s operation and ensure a quality source of supply, then the
process is regarded as international purchasing. With the current surge for economic globalization,
international buying activities are becoming more pronounced. Businesses are looking to global
markets for the goods and services needed for the smooth running of their companies.

Insufficient domestic capacity is one of the reasons why firms are looking out for suppliers outside
the local market. Many businesses require raw materials and services which cannot be gotten
within the domestic market, and this calls for the need for international purchasing.

Changes in the business environment also contribute remarkably to the demand for international
purchasing. When you move your business to a new environment, there is a likelihood that such
environment will lack the necessary raw materials and services needed for the smooth operation
of your business, reaching out to the international market will come handy in such a situation.

International purchasing often comes with a very critical factor which is the reduced cost, the cost
of getting raw materials and services from the global market is cheaper when compares with the
local market.

Environmental Analysis:
Environmental analysis is an important aspect of international purchasing. It involves assessing
the environmental impact of procurement activities and identifying ways to minimize this impact.
According to a guide by the Victoria Government, environmental impact can be minimized by
selecting products and services with the least ongoing environmental impacts, such as use of water,
electricity and fuel, waste/disposal management, and impact on human health over the life of the
product or service.

The same guide also suggests that environmental impact should be considered at the front end of
the procurement process if it is to be positioned across the latter stages of the procurement process.
Environmental impact is part of the assessment of complexity. It also features in the contract
management stage with maintenance of environmental standards and taking advantage of
improvements during the period of the contract.

According to an article by McKinsey suggests that including “sustainability as standard” in

procurement processes is an effective way to reduce ESG-related risks and spot opportunities for
incremental improvements. It can also help to ensure that procurement teams and their internal
customers are aware of the environmental and social impact of purchasing decisions.

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Importance of Environmental Analysis
Organizations need to do environmental analysis because it helps them:
Find opportunities: By looking at the outside world, organizations can find new trends and
chances to enter new markets or make new products or services.
Identify threats: It helps businesses find threats to their business, such as new competitors,
changes in regulations, or a slowing economy.
Create effective strategies: Organizations can create effective strategies that are in line with their
goals and objectives when they understand how the outside world affects their business.
Anticipate change: Environmental scanning helps organizations plan ahead for changes in the
outside world and create strategies to deal with them.
Make informed decisions: It helps organizations learn more about the outside factors that affect
their business so that they can make better decisions
Environmental Analysis Process:

1) Determine the effects on the Environment: To begin a business environmental analysis

procedure, select environmental factors evaluating. Your industry determines this.

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 For example, if you work in a medical facility, you might want to think about legal
implications. Regulations managing healthcare experience and safety, for example. Choose
factors that have the potential to influence how you make deals.
2) Obtain Information: Collect information about your chosen environmental factors once you
decide which ones to evaluate. You can observe your factors and conduct research here. There
are two types of information to gather: verbal and written data. Hearing is how people obtain
verbal information.
As an example, consider listening to a radio broadcast. They obtain written information from
sources such as newspapers and magazines.
Using the preceding example, this would involve conducting research online and in medical
magazines. It will assist you in determining whether or not there have been any changes to
health and safety regulations because this may have an impact on your healthcare facility.
3) Consider your Competitors: You may want to gather information about your competitors.
To see if they pose any threats. You can accomplish this by employing a technique known as
spying. This involves unusually gathering information.
Using the same example, you could spy on a nearby health facility to learn about recent
activity.
4) Examine your Strategies: Finally, evaluate your present and prospective strategies to
determine how future environmental changes will impact your organization. This assists you
in resolving potential issues. These factors could have been to blame.
For example, the health facility may wish to develop a new strategy. It will clearly show how
they aim to deal with the decrease in clients caused by their competitor’s new branch.
Environmental Analysis Tools / Techniques / Models
A corporation can use environmental analysis techniques in a variety of ways. But some are more
frequent. The PESTLE study is the most widely used tool for conducting a complete business or
industry environment analysis.
A: PESTLE Analysis
This study is used by managers and strategists to determine where their market is right now. It also
assists in evaluating the company’s future position. The PESTLE study considers several factors
that have an impact on the business environment. It is a macroeconomic instrument that is used to
understand the external environment through more extensive environmental analysis.
Each letter in the acronym represents a different component. These factors can directly or
indirectly impact any sector or organization.
1) Political: Political issues refer to the level of government intrusion into an organization’s
operations. Primary concerns include taxes, tariffs, regulations, elections, and political
stability.
For example, different political parties hold divergent viewpoints on raising the minimum
wage. Small businesses may be affected by an election. When one candidate proposes raising
the minimum wage, it may impact their product/service prices and ability to retain current
employees.

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2) Economic: Businesses in the United States first consider the overall health of the American
economic factors. Growth, employment, inflation, and interest rates are just a few examples.
Organizations operating outside of the United States will concentrate on exchange rates.
A startup, for example, may assess the current state of the economy to determine whether or
not it will be able to survive. The long-term revenue and expenses of a company are affected
by economic conditions.
3) Social: Shifts in age, demographic changes, changing attitudes toward safety and health,
customer preferences, and technical improvements. All are examples of social challenges. 86
percent of young people, for example, use social media.
As a result, of successful business strategies, millennials are more likely to run promotional
ads, especially on social media platforms.
4) Technology: The technology involves research and development, robotics, automation, and
any other type of technological advancement. New technologies are referred to as
“technological disruption.” It has the ability to change the cast of leading competitors
dramatically.
For example, the popularity of Facebook was a technological challenge for Myspace. It was
once the most popular social media network in the early 2000s.
5) Environmental: Climate change, weather, air quality, and natural disasters are examples of
environmental factors. Changes in the environment threaten some industries more than others.
Farmers, for example, could watch the Weather Channel or read the Farmer’s Almanac.
Because pesticide treatment, irrigation schedule, planting dates, and fungicide application are
all affected by the weather.
6) Legal: Legal factors involve employment, health, and safety policies. Customer safety and
discrimination laws can also have an impact on a company’s capacity to operate.
Congress, for example, passed the Dodd-Frank Act in 2009. Following the Great Recession,
banks were subjected to strict requirements to protect customers.
B: SWOT Analysis
SWOT stands for strengths, opportunities, weaknesses, and threats, in case you didn’t know. These
four factors are utilized to determine where a company stands regarding strategy. These four
elements are divided into two groups. We must talk about them a bit to see how they can assist us
in conducting an environmental study.
1) Internal Factors: Internal factors in this type of analysis are strengths and weaknesses.
Because they can be affected and even controlled by the organization, they are referred to
as internal analysis if a corporation has a firm brand name. This is a strength because it was
made possible by the organization’s efficient use of resources. As a result, this is an internally
generated element that highlights one of the causes of the company’s success.
2) External Factors: External considerations in this type of environmental assessment include
threats and opportunities. Unlike the elements listed above, the company cannot control them
in any way. In fact, these circumstances frequently occur on their own. Competition is a
concern to all businesses since it is impossible to eliminate it. As a result, external factors
function in this manner.

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 INTERNATIONAL MARKET RESEARCH:
Marketing research can be defined as the systematic study and evaluation of all factors bearing on
any business operation relative to marketing of goods and service. Logically, marketing research
begins before production starts-in fact, even before the factory is built or the plant is set up,' and
continues as long as the business remains in operation.
Although marketing research is invaluable in the solution of business and marketing problems, it
is by no means a substitute for sound business judgement based on knowledge, experience or even
intuition. It is an aid and a guide to the managerial decision-making process. It eliminates or
reduces guess work by providing facts and throwing light on the areas of enquiry. Objectivity is at
the heart of marketing research
Market research is the key first step in the sourcing process, particularly if the product or service
has not been previously procured. Knowledge about the market is a crucial step in a successful
procurement process.
The purpose of the market research is to gather data on commercial products and services to
determine their availability, market practices and standards, any of which might have an effect on
the acquisition requirements and process.
Importance of International Market Research:
✓ Market research might provide information that encourages the revision of the Terms of
Reference or specifications, thus reducing the risk of few offers being received during a
competition.
✓ Market research also can lead to the establishment of a roster of potential suppliers for future
acquisitions.
✓ Market research helps organizations make informed purchasing decisions. It involves
gathering and analyzing information about the market, suppliers, products, services, and
related business practices to understand their characteristics, trends, and dynamics.
✓ Market research helps procurement professionals identify potential sources from which to
obtain a product or service, align potential solutions with procurement goals and objectives,
gain knowledge of suppliers and the market, identify risks and develop risk mitigation
strategies, make fact-based, data-driven procurement decisions, identify the supplier universe
and who is likely to respond to a solicitation, identify contract gaps and incorporate lessons
learned from previous solicitations.
✓ Market research also provides an opportunity to consider alternative solutions, new
innovations or opportunities for collaboration if some parts of the market are ahead of the
others.
✓ It ensures that procurement strategies align with the capabilities of the market and that there is
no point in building a strategy around something the market cannot deliver. Once you know
what the market can do, you can then tailor your procurement approach to achieve the best
outcome.

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International Market Research Selection:
International Market Selection (IMS) Is the process of establishing criteria for selecting (country)
markets, investigating market potentials, classifying them according to the agreed criteria and
selecting which markets should be addressed first and those suitable for later development.
Generally, the tools and techniques in foreign and domestic marketing research remain more or
less the same but the areas of its application are divergent, creating a variety of operational
problems. The environmental factors, for example, that are relevant for marketing may vary from
country to country or specific information needed in one country may not be required in another.
Within a foreign environment, the changing emphasis on the kinds of information needed, the
research tools and techniques required to collect the information and the difficulty in implementing
the research process constitute the real problems in international marketing research.

International market research selection is a crucial step towards internationalization. It involves

identifying the right markets to focus on and learning how to reach out to them, which could
determine the viability of your expansion strategy. The following are the basic steps in planning
international marketing research

1) Defining Research Objectives: The first step in starting the process of international
marketing research is to define the objectives. The clear definition of objectives helps the
researcher to identify the appropriate sources of information and select the suitable
methodologies for collection of information.
2) Determining Information Required: The information required in the light of research
objectives has to be listed out for planning of data collection. For example, if one of the
objectives is to find out the market potential for a new product, it is necessary to spell out the
specific kinds of information that will throw light on market potential, so that research can be
planned to collect the required information.
3) Determining Methodologies: For collection of different kinds of information from various
sources, different methodologies are used in marketing research. For example, the method of
desk research is used to collect information from secondary sources and survey research is
used to collect data from the primary sources. In desk research various kinds of statistical or
non-statistical techniques are used for compilation and analysis of data. Similarly, in survey
research various techniques are used for generating quantitative and qualitative data on the
objectives of the research study. The reliability and validity of the data is closely related to the
sources and methodologies used for the survey.
4) Actual Collection of Information: Actual collection of data involves appropriate planning
of fieldwork for contacting respondents or other sources for the survey. Respondent contact
can be made either personally or via mail or telephone or online, depending on the nature of
research. It is very crucial stage in conducting survey research, for on the effective conduct of
fieldwork will depend the success of the survey.
5) Analysis and Interpretation: The field data collected via various methods are to be properly
edited, analysed and interpreted in the light of the research objectives initially set out. It is

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 important that analysis and interpretation is done in an objective manner in order to avoid the
possibility of bias or any kind of subjectivity.
6) Preparation of the Report: The information and data collected through research is, after
analysis, presented in the form of a report. The report usually contains not only the findings of
the research but also the comments and recommendations of the researcher.
Sources of Data / Information under international market Research:
The key to successful desk research is the knowledge of how to find out relevant sources of
required data and how to collect and make use of them. There could be numerous specific sources
of information but it is neither possible nor necessary to tap all such sources. It is therefore
necessary to classify sources according to their relative importance. The principal sources of
information can be classified under specific categories like: -
Government Sources: Governments in all countries generate a wide variety of information and
data that are useful and relevant to marketing. Information provided by governments covers wide
areas like population, economy, policies, programmes, industries, institutions, rules and
regulations etc. and are published in the forms of reports, documents, journals, notifications etc.
The governments in different countries are the largest generators of information and data useful
for international marketing.
Semi-Government Sources: In many countries there are specialized semi-government agencies
or institutions charged with specific tasks such as monitoring of consumption trends, foreign trade,
industrial development, income distribution, purchasing power of people, health, education etc.
These institutions usually carry out regular studies primarily to help and guide government policy-
making. The reports and publications of these institutions contain valuable information relevant
for marketing.
Private Sources: There are research institutions, publishing houses, banking and financial
institutions, chambers of commerce, trade associations and a host of others similar organizations
which collect, process and disseminate different kinds of information in their respective areas of
concern which could be relevant to international marketing.
International Sources: International organizations within and outside the UN system publish a
wealth of statistical data and information relating to markets. The important ones among these
organizations are: Food and Agricultural Organizations (FAO), International Labour Organisation
(ILO), United Nations Conference on Trade and Development (UNCTAD), UN Economic
Commission; International Monetary Fund (IMF), Organisation for Economic Cooperation and
Development (OECD), International Trade Centre (ITC), and number of others

Factors to Consider When Choosing a Supplier

Suppliers determine many of the costs of your business and can significantly impact the quality of
your product. The relationship with your supplier can make or break your business. With such high
stakes, what factors should you consider when choosing a supplier?

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1. Price: Price is the leading factor to consider when choosing a supplier. The lowest price is not
necessarily the best value. Price should be relatively fair in relation to the quality of the products
to be supplied.
2. Quality: Is the quality of their business consistent? What’s the quality of their service and
communication? Supplier quality can directly impact your reputation. Choose suppliers with
quality you can count on. Order samples and check with other customers on their experience of
working with this supplier before making a decision. Ask your team for feedback on their
experience of the product or service.
3. Reliability: Is the supplier able to deliver as promised on time, every time? Do they have the
correct quantity? Do you trust the supplier to deliver your order accurately? Before choosing this
supplier, do your homework. What is their reputation for reliability? Have a system in place to
track supplier reliability.
4. Communication: When choosing your supplier think about how well they communicate. Do
they have a communication system to easily place orders? Know who your representative is with
each supplier and how to get a hold of them if you need something. Test their ordering, phone and
email response systems early in the relationship. Be clear of your expectations around
communication.
5. Financially Stable: Build long-term relationships with suppliers who you know are going to be
available when you need them. Just as much as suppliers need to do a credit check on you, it is
wise to do your own homework on the financial stability of your suppliers. Be cautious with big
upfront deposits. Be aware of their return/refund policy and any other financial rules they have in
place.
6. Capacity: The capacity of your supplier is an important factor to consider. What’s their ability
to provide you with what you need when you need it? Is the supplier able to produce enough to
meet your demand? Talk to your suppliers about your needs and timing of those needs. If they
have limited supply of popular products, find out their lead time in placing your order so you don’t
get shorted. Have a back-up supplier.
7. Payment Terms: You may choose a supplier with generous payment terms in order to help
your own cash flow. Consider what the best payment system is for your business. Negotiate
payment terms before your first order. Keep your own credit rating excellent by paying on time as
promised.
8. The location of the supplier: This is another factor that is important. When choosing a supplier
located far away from the location of our company, there may be additional transport costs of
products, however, it should be noted that such a supplier may offer products of higher quality or
lower prices. During the summary, it may turn out that by paying more for delivery, we will receive
a higher quality product with a lower price.
10. Lead Time: This is the time between order and placement of materials and trhe actual delivery.
The shorter the lead time, the better the supplier. Every purchasing firm will be comfortable when
the lead time is shortest possible. Long lead time has the impression that the specific supplier is
less efficient or he has more customers that he can serve thus delaying deliveries..
11. Response of Customers: The response of the customers towards the supplier is one of the
important factors to decide the performance of the supplier. Suppliers with good customer base

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should be preferred than others. Customer numbers cannot lie, where the customer are, the deal is
good.
12. Political Stability: The political status of the supplier’s country and its nature towards the
business policies may affect the long-term relations between the supplier and the manufacturer /
buyer. The more stable the government is, should be preferred