Market Research on procurement in the goods category (Gas Product)

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Executive Summary

Market research in procurement and pricing is an essential area of study to enable businesses set prices for their products based on the existing market factors. This research will cover some areas essential for setting prices of different products in a market with the natural gas as the selected product for this research. The paper will analyze the market by studying the demand-supply factors and heir relationship with the price of the commodity.The other areas of this research are the current pricing mechanism for a product and the factors affecting the pricing methods. The research paper will also give the analysis of prices and the mechanisms of setting them to help people understand the trends in various markets.

Practitioner Corporate Award

Market Research on procurement in the goods category (Gas Product)

Introduction

Gas is a substance that is common in our day to day life especially in our homes, schools, and industries. Gas has many uses, such as cooking, in vehicle tyres, in cleaning, and in air balloons. This paper will analyse the market for the gas production particularly from the petroleum products. The research will deal with gas products and analyze the nature of its market on pricing, demand and supply and the extent of the market. Through this research, several issues, such as pricing and anything that has some effect on the prices of commodities will be of great importance.

Market research on gas products

Natural gas is a very important resource has many uses in both the public and the private sector, especially as a fuel. The market for gas products such as gasoline is very wide, and many industries use the fuel to run their machines and propel engines of some locomotives and aeroplanes. The number of the consumers for the product is very high in comparison to the producers, which makes it enjoy a very big market worldwide. Some of the products are hydrogen, oxygen, and methane produced by fractional distillation in the gas and oil refineries. The producers sell the product to big manufacturing industries, transport industries, and electricity production industries.

There is a lot of competition for the gas products that pushes the prices very high for some consumers. There are very few countries with natural gas deposits such as the Saudi Arabia and some Middle Eastern countries. The competition for the commodity pushes the prices up making it unaffordable for the low-income earners. The many uses of the gas such as cooking and propelling locomotive causes stiff competition in the gas market. The procurement exercise for the gas products is long since it has to come from the gas producing countries there is stiff competition among the gas manufacturing companies for the gas market all over the word. Many companies merge and sell their product under one name because of the high level of competition.

Demand and supply factors on the gas product

The factors influencing demand and supply are

The product’s price (Gas)

The market price of the natural has a big effect on the amount bought and supplied by the market since an increase in price encourages the suppliers to supply more. The potential buyers are few when the market price is very high, where many cannot afford the product. However, many gas sellers will not be willing to sell their products and may decide to hoard them.

The prices of similar products

Research shows that a decrease in the price of the crude oil for production of fuels may lead to the high demand for the natural gas products. The gas and the oil products can replace one another, such that one can by oil and leave the as depending on their prices. If the prices of the other similar products increase more than the gas, many buyers will buy the gas products increasing its demand and supply.

Government Policies

The government of the gas producing countries many limit the amount of gas the companies should supply to the marked reducing its supply.

Changes in the level of incomes

Incomes determine the type f the fuel people use in their houses, which means that if people have high income, they tend to buy more of it increasing the demand for the gas. When the people’s incomes are low, they tend to go for the cheaper fuels reducing the demand for the product.

The consumers’ tastes and preferences

Some consumers may prefer using the other products such as paraffin for fuels to gas, which will lower the demand for the gas. In other cases, people may favour the use of gas, which will increase it demand and consequently the supply.

The number of consumers for the product and the population

A commodity may have a large number of consumers favouring it, which tends to raise its demand. If a large population uses natural gas for cooking, its demand will be very high compared to when a few people in a certain country uses it..

Future expectations

Consumers may expect the prices of the gas products to go up, making them buy more of it at that time. The demand for the gas will decrease if the buyers hope for lower prices in the future and increase if they suspect that the prices might rise. If the sellers expect the prices to drop, they flood the market with the product, and if they predict a rise in the price, they hoard the product until that time.

The current pricing mechanism for the gas product

There are different means of setting prices for the product to come up with the best price for it. Some of them are

Government policy

The policies of some governments limit the amount of goods imported through various means such as quotas and bans. The government may set prices for the natural gas products depending on their policies, or it may impose a tax that will need upward adjustments to the price of the gas in that country. Some ways of controlling prices are taxation, subsidies, and quotas, which can either raise or lower the price of the product.

Bargaining

Some buyers try to negotiate the prices through haggling to see whether the supplier will lower the price. If the two do not strike a viable price for the product, the seller retains his/her item. The method is mostly for durable goods, which cannot go bad quickly in case the seller does not find a potential buyer.

Tendering

Tendering is a process where the buyers quote their prices for the commodity and present them sealed to the procurement committee. Once opened, the supplier who bids the lowest supplies the goods and the buyer who quotes the highest price buys the goods.

Auction

Auction involves buyers quoting different prices in the open until there is one, who quotes the highest price. The method involves suggesting of prices until the seller gets the best price for the commodity, after which he/she seals the deal with the highest bidder. Items sold by this method are houses, parcels of land, and machinery.

Factors that impact on the pricing of the product

A number of issues determine the pricing of commodities, such as the environment, which constitutes the presence of distribution channels, inflation, and the government role. The other factor is the size and the type of the enterprise, such as whether it will supply enough, promotion, and delivering costs. Another factor is the prospect characteristics, which defines the perception of the product, market trends, and awareness.

Conclusion

In conclusion, procurement is a very important area in any business and other organizations. The named product has a big market in the world with the producers of the gas exporting large volumes to the countries without gas deposits. Demand and supply are very important issues as they affect the nature of the market through the different factors that shape them. The current pricing for various product includes bargaining, tendering, auction, and the government policy. The factors that impact on the pricing are the environment, the enterprise size, he market type and the prospect. There is the need for some research on this area o find out the importance of procurement in the business world.