Wednesday, 23 May 2012

Q1 : Define "direct materials" and "indirect materials". List reasons for a large company having two separate deaprtments to manage the purchasing of each.

Direct Materials -  The raw materials used in the creation of the final products or finished products such as leather for making of shoes, sofa, belts, pants, handbags etc, variety of fabrics for making clothes, dresses, curtains, table clothes, towels etc. Those material which are easily dentified, conveniently measured and directly charged to the cost of production. A Car Agent company as an example - the salesman direct selling various models of imported car to the customer, the price allocated for different cars according to its brand name and production. 

Indirect Materials - Those materials which cannot be conveniently identified & allocated to the cost center or cost unit. The cleaning products are an indirect material cost. Indirect material or a service will usually be delivered directly to an individual or department, it will not be put into inventory such as thread in case of blouse making, pin & paste in case of table cloth making or curtain making etc. A Car Agent company as an example - the company provides various services such as Servicing Center, Workshop for Repair and Maintenance, Retail Shop selling Car spare parts and Car Wash Center. Hence, the company might have to pay the government for the Car Tax charges imported to Brunei. Whilst, repair and maintenance - the mechanics have to check the car and ensure what parts need to be changed and need to be done, labour fees will be charged too.

Q2: In about 200 words, describe the reasons a buyer might have for wanting to participate in an industry consortium marketplace instead of setting up its own private company marketplace.

In this task, I am going to give Empayar Siti Murni (ESM) as an example, one of the private company marketplace that provide various services ranging from non-Professional Model became Professional, non-experienced emcee became the Best emcee and People with no basic experience will learn how to makeup flawlessly to work and daily life. ESM is owned by a Malaysian, Siti Murni and works together with the spouse as a business-partner. Both of them are the CEO of the Empayar Siti Murni. ESM just started their business in early of this year 2012 in January.

The lady owner organize from time-to-time Modelling classes, teaching the New models on how to do proper Catwalk & to perform well with confident on stage with style in public. She conducts her own classes and assisted by her lady ESM and some of the models. She organised a Basic Make-up classes too to those have no basic experience to make-over beautifully their appearance. She has a professional make-up artist too. She held a Contest too, to find more models for her products like scarves and long dresses are sale at Empayar Siti Murni Couture (ESM). All those classes will be held at her own Studio. The updates and promotions are been up-to-date on their private facebook or can be found at page 'Tudung ESM'.

At the same time, while the couple working together with each other, the spouse organize and conducts JET classes (Jadilah Emcee Terbaik), he teaches techniques, dos and don'ts on how to become the best emcee ever. JET classes will be held at different venue as organised by the conductor.
There are two types of business marketplaces such as Industry consortium and Private company. The reasons why a buyer wanting/prefers to participate in an industry consortium marketplace instead of setting up its own private company marketplace are as stated below:

  • Private company marketplaces deal with one buyer only instead of group of companies.
  • Consortium marketplace have more power in a group of buyers instead of one buyer.
  • Economies of Scale - gives the members of the consortium power over the price and negotiation power when dealing with the supplier while a private company trying to accomplish the same business task.
  • Economies of Process  - different companies can benefit from sharing different technology processes so they able to learn more efficient ways to operate the business.
  • Economies of information - by having a variety of companies with different valuable information on suppliers, other companies and successful business processes, it can give the buyer an advantage over private buyers.


Overall, a buyer might have for wanting to participate in an industry consortium marketplace instead of setting up its own private company marketplace because they would became more powerful in a group of buyers instead of one buyer. The more power the easy the company negotiate and control price as they are not operating as a private company.

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