Classroom Rules
Be on time and be
always prepared for
your class. Bring your
laptop in class.
Keep your mobile
phone switched off
or in a silent mode.
Ask only relevant
questions during
teaching time.
Do not interfere with
the teaching and
learning of your
colleagues.
Be polite and
respectful of the
teacher, yourself,
your classmates and
your institution.
Always do your best.
Foundation Year Project
Week 4 – Day 1: Financial Aspects. Finding
Suppliers.
Session Overview
By the end of this session students will be able to:
1. Learn how to prepare the most important financial
aspects.
2. Discuss supplier selection criteria to ensure the
competitive advantage.
Assignments
Review

Financial Aspects
The main purpose of any business is to
receive a return on investment
through providing goods and services
to customers.
The motivation of individuals to start
a business is:
• to gain profits from the operations,
• to generate wealth for the
shareholders,
• to create benefits for stakeholders.
(Adapted from Smith, 2016; Duska,
1997)
Purpose of business
Example
Frank and Annie decided to
open a hot-dog stand.
They purchased the
equipment, found the
supplier for the food
inventory, obtained the
permit from the local council
and hired a part-time helper.
Investment Expenses Sales
Sales Expenses Profit
Profit Investment Dividends
Activity (5 minutes)
Decide what is a business’s goal towards the following:
Return Control Increase
Increase
Formative activity 4
Finding Suppliers
• Suppliers can help us control our
expenses.
• Saving money is less time-consuming
than earning.
• Strategic purchasing can engender
sustainable competitive advantage by
enabling firms to:
(a) foster close working relationships
with a limited number of suppliers;
(b)promote open communication among
supply-chain partners; and
(c) develop long-term strategic
relationship orientation to achieve
mutual gains (Chen et al, 2004).
Finding Suppliers
One-Stop Shopping, or “solesource procurement”, appeals
to many buyers because of its
simplicity. A one-stop
shopper tries to purchase as
many items as possible from
one supplier. The main
advantage of this
procurement is the reduction
of the ordering cost.
Supplier Selection Criteria
• There is considerably less effort involved
with few orders: less paperwork, less
receiving activity, few deliveries, and
less opportunity for error.
• Another advantage is the possibility of
qualifying for a volume discount when
you purchase a large dollar amount of
merchandise.
• The disadvantages are the reduction in
supplier selection flexibility, and the
possibility that the total dollars spent for
purchases over the long run may be
higher than if the buyer shopped around
a bit.
(Feinstein & Stefanelli, 2012)
• Credit terms. Many
business buyers will
prefer to deal with
suppliers who offer
generous credit terms.
• This criterion could be
the major
consideration in
supplier selection.
Supplier Selection Criteria
• The shorter the lead time, the more
convenient it is:
• a buyer can wait until the last
possible moment before entering
an order for delivery at a
predetermined time.
• All other things being equal, buyers
would probably want to deal with a
purveyor who offers them the ability
to call at night for an order to be
delivered the next morning, rather
than a supplier who requires two or
three day’s notice.
(Feinstein & Stefanelli, 2012)
• Some buyers will not purchase from
suppliers that sell products
manufactured by employees in foreign
countries who do not receive a basic
level of wages and benefits.
• Some buyers will not purchase from
suppliers carrying products whose
processing damages the earth’s
rainforests.
• Some buyers prefer to purchase from
suppliers who employ minorities and
deal with minority-owned
subcontractors.
Supplier Selection Criteria – CSR
(Feinstein & Stefanelli, 2012
Image: Jimsittiparset et al, 2019 )
• Feinstein, A.H. and Stefanelli, J.M. (2012) Purchasing: selection and procurement for the
hospitality industry. Wiley.
• Chen, I., Paulraj, A., Lado, A. (2004) Strategic purchasing, supply management, and firm
performance. Journal of Operations Management, 22(5), pp. 505-523, ISSN 0272-
6963,https://doi.org/10.1016/j.jom.2004.06.002.
• Smith, A. (2016) The Wealth of Nations. Aegitas.
• Duska, R. (1997) The Why’s of Business Revisited. Journal of Business Ethics, 16. pp. 1401-
1409.
• Jermsittiparsert, K. & Siam, M. & Issa, M. & Ahmed, U. & Pahi, M. (2019). Do consumers
expect companies to be socially responsible? The impact of corporate social responsibility
on buying behavior, 7, pp. 741-752. 10.5267/j.uscm.2019.1.005.
References