The document provides information about organizational buyers and the organizational buying process. It discusses three types of organizational markets: industrial, reseller, and government. It also outlines the five stages of the organizational buying process: need recognition, information search, evaluation of alternatives, purchase decision, and post-purchase behavior. Finally, it briefly discusses e-marketplaces and online auctions as they relate to organizational buying.

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BELTEI INTERNATIONAL
UNIVERSITY
Faculty of Business Administration
Bachelor’s Program
Lecturer, Moeung Phanny ( MBA )
Moeung Phanny
Master of Business Administration (MBA)/(MJM)
Tel: 011 78 78 80
E-mail: phannyart@yahoo.com

2. Chapter
McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
Understanding
Organization as
Consumers
Chapter
66

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Understanding Organization as
Consumers
Organizational buyers: are those
manufacturers , wholesalers , retailers, and
government agencies that buy goods and
services for their own use or for resale.
Organizational buyers are divided into three
different markets: 1.Industrial 2. Reseller
3.Government markets
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Lecturer, Moeung Phanny ( MBA )

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Organizational buyers
Industrial markets:Industrial markets: These industrial firms inThese industrial firms in
some way reprocess a product or servicessome way reprocess a product or services
they buy before selling it again to the buyer.they buy before selling it again to the buyer.
Reseller markets:Reseller markets: Wholesalers and retailersWholesalers and retailers
that buy physical products and resell themthat buy physical products and resell them
again without any reprocessing are calledagain without any reprocessing are called
resellers.resellers.
Government markets :Government markets :tend to favor domestictend to favor domestic
suppliers and require suppliers to submit bidssuppliers and require suppliers to submit bids
and normally award to the lowest bidderand normally award to the lowest bidder

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Main Influences on Government BuyersMain Influences on Government Buyers
-Government buyers-Government buyers are affected by environmental;are affected by environmental;
organisational; interpersonal; and individual factors.organisational; interpersonal; and individual factors.
-Government-Government is watched by outside publics that areis watched by outside publics that are
interested in how taxpayers’ money is spent.interested in how taxpayers’ money is spent.
-Governments-Governments usually require suppliers to submit bidsusually require suppliers to submit bids
or tenders which are evaluated. (often low costor tenders which are evaluated. (often low cost
wins).wins).
-Governments-Governments normally favour domestic suppliers.normally favour domestic suppliers.
-Government-Government buying decisions often seem complex tobuying decisions often seem complex to
suppliers, but government is generallysuppliers, but government is generally
helpful in providing information about its needshelpful in providing information about its needs
and procedures.and procedures.
Government markets

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Characteristics of
organizational buying
- Characteristics of organizational buying:- Characteristics of organizational buying:
is the decision-making process thatis the decision-making process that
organizations use to establish the need fororganizations use to establish the need for
products and services and identify ,products and services and identify ,
evaluate , and choose among alternativeevaluate , and choose among alternative
brands and suppliers.brands and suppliers.

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Need RecognitionNeed Recognition
Information SearchInformation Search
Evaluation of AlternativesEvaluation of Alternatives
Purchase DecisionPurchase Decision
Post-purchase BehaviorPost-purchase Behavior
The Buyer Decision ProcessThe Buyer Decision Process
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9. Stage in the Buying
Decision Process
Stage 1: Problem recognitionStage 1: Problem recognition
 Purchase-decision processes are triggered byPurchase-decision processes are triggered by
unsatisfied needs or wants.unsatisfied needs or wants.
 We tend to focus on those needs that areWe tend to focus on those needs that are
strongest.strongest.
 A need can become stronger and be brought toA need can become stronger and be brought to
our attention by a deterioration of our actual stateour attention by a deterioration of our actual state
or an upward revision of our ideal state.or an upward revision of our ideal state.
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Stage in the Buying Decision
Process
Stage 2: Information searchStage 2: Information search
 People seek additional information aboutPeople seek additional information about
alternatives brands until they perceive that thealternatives brands until they perceive that the
costs of obtaining more information are equal tocosts of obtaining more information are equal to
the additional value or benefit derived.the additional value or benefit derived.
 Opportunity cost of the time involved in seekingOpportunity cost of the time involved in seeking
information.information.
 Psychological costs involved in searching forPsychological costs involved in searching for
information.information.
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Stage in the Buying Decision
Process
Sources of informationSources of information
 Personal sourcesPersonal sources
 Commercial sourcesCommercial sources
 Public sources of informationPublic sources of information
Commercial sources perform anCommercial sources perform an
informing function for consumers.informing function for consumers.
Personal and public sources serve anPersonal and public sources serve an
evaluating and legitimizing function.evaluating and legitimizing function.
The Internet is reducing the opportunityThe Internet is reducing the opportunity
costs of information gatheringcosts of information gathering
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Stage in the Buying Decision
Process
Stage 3: Evaluation of alternativesStage 3: Evaluation of alternatives
 Consumers simplify their evaluation in severalConsumers simplify their evaluation in several
ways.ways.
They focus on their evoked set.They focus on their evoked set.
They evaluate each of the brands in the evokedThey evaluate each of the brands in the evoked
set on a limited number of product dimensionsset on a limited number of product dimensions
or attributes.or attributes.
They combine evaluations across attributes,They combine evaluations across attributes,
taking into account the relative importance oftaking into account the relative importance of
those attributes.those attributes.

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Stage in the Buying Decision
Process
Stage 4: Purchase decisionStage 4: Purchase decision
 Consumers usually select the source they perceive to beConsumers usually select the source they perceive to be
best on those attributes most important to them.best on those attributes most important to them.
Stage 5: Post-purchase behaviourStage 5: Post-purchase behaviour
 The person’s expectation level and evaluation of how wellThe person’s expectation level and evaluation of how well
the product actually did perform.the product actually did perform.
 The evaluation feeds back into memory where it can beThe evaluation feeds back into memory where it can be
recalled for a similar decision.recalled for a similar decision.
 Consistent positive experiences can ultimately lead toConsistent positive experiences can ultimately lead to
brand loyalty.brand loyalty.

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Buying center a cross-functional
group
Buying situation and The Buying Center:Buying situation and The Buying Center:
The number of people is the buying centerThe number of people is the buying center
largely depends on the specific buyinglargely depends on the specific buying
situationsituation

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UsersUsers are those that will use the product or serviceare those that will use the product or service
InfluencersInfluencers help define specifications and providehelp define specifications and provide
information for evaluating alternativesinformation for evaluating alternatives
BuyersBuyers have formal authority to select the supplier andhave formal authority to select the supplier and
arrange terms of purchasearrange terms of purchase
DecidersDeciders have formal or informal power to select andhave formal or informal power to select and
approve final suppliersapprove final suppliers
GatekeepersGatekeepers control the flow of informationcontrol the flow of information
Participants in the Business Buying Process

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i. New Task / New buy :i. New Task / New buy :
Here, buyers have limited knowledge and experience
of the new product/service. Hence, more
information is obtained, more people are involved,
risks are more, and decisions take longer time.
ii. Modified Rebuy / Change in supplier :ii. Modified Rebuy / Change in supplier :
This situation occurs when the firm is not satisfied
with the performance of existing suppliers, or
there is a change in product specs. Hence, the
need for searching alternate suppliers.
iii. Straight Rebuy / Repeat purchase :iii. Straight Rebuy / Repeat purchase :
Here, the buying firm places repeat orders on
suppliers who are currently supplying certain
products/services. Such decisions are routine, with
less risks and less information needs, and can be
taken by junior executives.
3. Common types of purchases / buying situations

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E n v i r o n m e n t a l V a r i a b l e s
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P h y s i c a l , T e c h n o l o g i c a l
E c o n o m i c , C u l t u r a l
P o l i t i c a l a n d L e g a l
L a b o u r u n i o n s
C u s t o m e r d e m a n d s
C o m p e t i t i v e p r a c t i c e s
S u p p l i e r i n f o r m a t i o n
W E B S T E R A N D W I N D M O D E L
O r g a n i s a t i o n V a r i a b l e s
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O b j e c t i v e s a n d g o a l s
O r g a n i s a t i o n S t r u c t u r e
P u r c h a s i n g P o l i c i e s / P r o c e d u r e s
E v a l u a t i o n & r e w a r d s y s t e m s
D e g r e e o f d e c e n t r a l i s a t i o n
B u y i n g C e n t r e V a r i a b l e s
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A u t h o r i t y , S i z e
K e y i n f l u e n c e r s
I n t e r p e r s o n a l r e l a t i o n s h i p
C o m m u n i c a t i o n
O r g a n i s a t i o n B u y i n g D e c i s i o n s
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C h o i c e o f S u p p l i e r s
D e l a y d e c i s i o n & g e t m o r e i n f o r m a t i o n
M a k e , L e a s e o r b u y
D o n o t b u y
I n d i v i d u a l V a r i a b l e s
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P e r s o n a l G o a l s , V a l u e s
E d u c a t i o n , E x p e r i e n c e
E x p e r t i s e , J o b P o s i t i o n
L i f e s t y l e , I n c o m e
Model of industrial buyer behavior

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E-Marketplace
Virtual Organization MarketsVirtual Organization Markets
Online purchasingOnline purchasing
Company-buying sitesCompany-buying sites
ExtranetsExtranets

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E-Marketplace
AdvantagesAdvantages
 Access to new suppliersAccess to new suppliers
 Lowers costsLowers costs
 Speeds order processing and deliverySpeeds order processing and delivery
 Shares informationShares information
 SalesSales
 Service and supportService and support
DisadvantagesDisadvantages
+Can erode relationships as buyers search for new suppliers+Can erode relationships as buyers search for new suppliers
++SecuritySecurity
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Lecturer , Moeung Phanny ( MBA )

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Online Auctions in Organizational
Markets
Online auctions have grown in popularityOnline auctions have grown in popularity
among organizational buyers and businessamong organizational buyers and business
markets. Many e-marketplace offer thismarkets. Many e-marketplace offer this
service.service.
Two general types of auctions areTwo general types of auctions are
common:common:
+ Traditional Auction+ Traditional Auction ( number of buyers increase )
+ Reverse Auction+ Reverse Auction ( number of sellers increase )

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Online Auctions in Organizational
Markets
+ Traditional AuctionTraditional Auction
AA seller puts items up for sale and would-be-buyers are invited to bid inseller puts items up for sale and would-be-buyers are invited to bid in
competition with each other. As more would-be buyers become involved,competition with each other. As more would-be buyers become involved,
there is an upward pressure on bid prices. Why? Bidding is sequential.there is an upward pressure on bid prices. Why? Bidding is sequential.
Prospective buyers observe the bids of other and decide whether or not toProspective buyers observe the bids of other and decide whether or not to
increase the bid price.increase the bid price.
+ Reverse AuctionReverse Auction
A buyer communicates a need for a product or service and would-beA buyer communicates a need for a product or service and would-be
suppliers are invited to bid in competition with each other.suppliers are invited to bid in competition with each other.
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Lecturer , Moeung Phanny (MBA )

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Thank You for your
attention!