Knowledge about the related supply market in the industry is a vital part of every sourcing process. This knowledge can be gained by performing a supply market analysis which aims to identify market characteristics for specific goods or services, key suppliers, and the competitiveness of a market. The supply market analysis has a big impact on the success of a company’s procurement initiatives.
Analysing the Existing Supply Market Structure
This analysis can be done by defining the market segment into commercial, technical, and/or geographic segments which will help in targeting the relevant suppliers. Once the market segment is defined, the procurement team will determine the size of the total market in terms of sales and volume/turnover.
The size of the total market can be further broken down at an international, national or regional level. After that, the key suppliers and their respective market shared are studied. This is to determine whether the market is dominated by a small number of suppliers. The number, size, and distribution of suppliers in the market will affect the negotiating power of a company as a customer.