Chapter 4

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Chapter 4

  1. 2. Business, Government, and Institutional Buying Key Words / Outline Intermediaries, Business-to-Business, Straight rebuys, Modified rebuys, New task purchases, Structural influences, Purchasing roles, Organization-specific factors, Purchasing policies and procedures, Initiators, users, influencers, deciders, buyers, gatekeepers, Sole sourcing, Lethargic organization
  2. 3. Buyer Categories <ul><li>Producers: Businesses that buy goods and services in order to produce other goods and services </li></ul><ul><li>Intermediaries: Purchase products to resell at a profit </li></ul><ul><li>Government agencies: 86,000 Government agencies spend trillions of dollars on machinery, equipment, facilities, supplies and services </li></ul><ul><li>Other institutions: Such as hospitals, museums, universities, nursing homes, and churches </li></ul>
  3. 4. Organization Buying Process Purchase-type influences Structural influences Behavioral influences Organizational buying process Organizational need Vendor analysis Purchase activities Postpurchase evaluation
  4. 5. Purchase Types <ul><li>Straight rebuy: Routine reordering from a supplier used in the past </li></ul><ul><li>Modified rebuy: Purchase involves considering a limited number of alternatives before making a selection </li></ul><ul><li>New task purchase: Involves an extensive search for information and a formal decision process </li></ul>
  5. 6. Organizational Buying Distinctions <ul><li>How marketing to organizational buyers differs from marketing to consumers </li></ul><ul><ul><li>More variation in buyer-seller relationships </li></ul></ul><ul><ul><li>Shorter distribution channels </li></ul></ul><ul><ul><li>Greater emphasis on personal selling </li></ul></ul><ul><ul><li>Greater web integration </li></ul></ul><ul><ul><li>Unique promotional strategies </li></ul></ul>
  6. 7. Behavioral Influences <ul><li>Personal motivations: Factors such as friendship, professional pride, fear and uncertainty, trust and personal ambition </li></ul><ul><li>Role perceptions: Their commitment lies in what they believe is their perceived or expected role </li></ul><ul><ul><li>Organizations can be divided into three groups based on commitment </li></ul></ul><ul><ul><ul><li>Innovative </li></ul></ul></ul><ul><ul><ul><li>Adaptive </li></ul></ul></ul><ul><ul><ul><li>Lethargic </li></ul></ul></ul>
  7. 8. Understanding Buyers’ Code of Ethics <ul><li>Avoid the intent or appearance of unethical activity </li></ul><ul><li>Demonstrate loyalty to employee by being lawful and using reason </li></ul><ul><li>Refrain from private or personal activity that could create conflicts of interest </li></ul><ul><li>Refrain from soliciting or accepting gifts, loans, or services from potential suppliers </li></ul>
  8. 9. Understanding Buyers’ Code of Ethics <ul><li>Handle confidential information with proper consideration </li></ul><ul><li>Promote positive relationships with suppliers through impartiality </li></ul><ul><li>Refrain from reciprocal agreements that restrain competition </li></ul><ul><li>Know and obey both the letter and spirit of laws governing the purchasing function </li></ul>
  9. 10. Purchasing Agent Influences <ul><li>Design of the product </li></ul><ul><li>Cost of the product </li></ul><ul><li>Performance life </li></ul><ul><li>Naming a specific supplier </li></ul><ul><li>Assessing engineering support from the supplier </li></ul><ul><li>Reduction of rejects </li></ul>
  10. 11. Organizational Buying Process ORGANIZATIONAL NEED PURCHASE ACTIVITIES VENDOR ANALYSIS POSTPURCHASE EVALUATION
  11. 12. Organizational Buying Process <ul><li>Organizational Need </li></ul><ul><ul><li>Needs based on survivability and stated objectives of the organization </li></ul></ul><ul><li>Vendor analysis </li></ul><ul><ul><li>Search for, locate and evaluate potential providers of goods and services </li></ul></ul><ul><ul><li>Rate them based on quality, on-time delivery, price, payment terms, and use of technology </li></ul></ul>
  12. 13. Organizational Buying Process <ul><li>Purchase activities </li></ul><ul><ul><li>Purchases can involve extensive negotiations on price, term of contract – increases with complex goods and services </li></ul></ul><ul><li>Postpurchase evaluation </li></ul><ul><ul><li>Does the purchase perform as expected? </li></ul></ul><ul><ul><li>Should the supplier be used again? </li></ul></ul>
  13. 14. Functional Areas in Organizational Buying <ul><li>Design and development </li></ul><ul><li>Production </li></ul><ul><li>Sales / marketing </li></ul><ul><li>Maintenance </li></ul><ul><li>Finance / accounting </li></ul><ul><li>Purchasing </li></ul><ul><li>Quality control </li></ul>

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