Understanding purchasing orientation is important for B2B companies and suppliers. The more complex the product/service exchange will result in higher degree of power balance and dependency in supplier relationships.

1. B2B Purchasing Orientation
Overview

2. The importance of purchasing and
suppliers
• Purchasing is of major strategic importance to
most companies.
• Purchases from suppliers account for more than
half of the total costs of most companies.
• Specialisation reduces a company’s costs of
technological development and leads to
economies of scale.

3. The Interaction Model - Purchasing
Environment
Market structure
Dynamism
Internationalisation
Channel position
Social system
Atmosphere
Power/dependence
Co-operation
Closeness
Expectations
Organization Organization
Technology Long term relationships Technology
Structure Institutionalisation, Adaptations Structure
Strategy Strategy
Interaction Process
Individual Individual
Aims Aims
Experience
Short term exchange episodes Experience
Skills Products/services
Skills
Information
Financial
Social
Source: Adapted with permission from Håkansson (1982, p24)
3

4. Understanding Purchasing Orientation
• Purchasing – is the process of acquiring resources
and capabilities for the company from outside
providers.
• Purchasing orientation – we mean the overall
philosophy that guide managers who make
purchase-related-decisions and delineates their
span and influence.

5. Nature of Purchasing Relationships
• High-Involvement relationships with suppliers are
costly, but assist in the development of more
complex product / service offerings at higher
prices.
• Low-Involvement relationships with suppliers
compete to offer lowest price for a standard
product offering.

6. Understanding Purchasing Orientation
• Purchasing Orientations:
– Buying
– Procurement
– Supply Management
“The value network”

7. Figure 3.1 Purchasing Orientations and the Value
Network
Source: Adapted from a chart by Professor Sunil Chopra
J.L Kellogg Graduate School of Management, Northwestern University.

8. Understanding Purchasing Orientation
Buying Orientation involves the following:
– Obtain the best deal in terms of price, quality,
and availability.
– Maximise power over suppliers: and
– Avoid risk where possible.

9. Understanding Purchasing Orientation
Developments in Buying:
– Global sourcing
– Target pricing
– Lopez approach
– Customised materials
– B2B Matrix – (E-Hubs)

10. The B2B Matrix
What businesses buy
Operating inputs Manufacturing inputs
How businesses buy
MRO Hubs Catalog Hubs
Ariba Chemdex
W.W Grainger SciQuest.com
Systematic sourcing
MRO.com PlasticsNet.com
BizBuyer.com
Yield Mangers Exchanges
Spot sourcing Employease E-steel
Adauction PaperExchange.com
CapacityWeb .com Altra Energy
IMX Exchange
Source: HBR – E Hubs May 2000

11. Understanding Purchasing Orientation
The Procurement Orientation involves:
– Improving quality
– Reducing total costs
– Cooperating with suppliers

12. Understanding Purchasing Orientation
The Supply Management Orientation:
1. Focus all of the firm’s efforts on delivering
value to end users.
2. Concentrate the firm’s own resources on
a set of core competencies and
strategically outsource all other activities.

13. Understanding Purchasing Orientation
The Supply Management Orientation:
3. Build a supply network that efficiently
completes required business process,
and
4. Sustain highly collaborative relationships
with selected supplier and sub supplier
firms.
4. Pursue Segment specific supply and
management strategies.

14. The Value Network

15. Understanding Purchasing Orientation
Putting Knowledge of Purchasing Orientation
to Use:
– Knowing orientation is useful.
– Helps in suppliers selection strategy
– Helps you understand how your own strategies
and activities hinder the completion of
processes.

16. Summary
• Purchasing orientation is of strategic
importance to most B2B companies.
• Purchasing is global in scope
• How customers handle strategic issues in
purchasing has a profound implications
for business marketing strategy.
• Understanding purchasing orientation
helps companies understand the degree
relationship development required for
product / service solutions.

17. You are welcome to contact Nigel Bairstow at B2B
Whiteboard your source of B2B Asia / Pacific
marketing advice
http://www.linkedin.com/pub/nigel-bairstow/6/41b/726
http://twitter.com/#!/b2bwhiteboard
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