This document discusses organizational buying behavior and buyer-supplier relationships. It defines organizational markets and their demand characteristics. It describes the different types of buying situations and buying center participants. It also examines the types of buyer-supplier relationships including transactional, collaborative, and supply alliance relationships. Factors that affect the development of trust between organizations in a relationship are identified.

1. Edited By JQuek

2.  Define the nature and size of organizational
markets
 Describe the demand characteristics of
organizational buying
 Recollect and remember vendor choices
comparison
 List & explain the types of buying behavior of
organizations
 Evaluate the types of buyer-supplier relationships
 List, describe and compare the different types of
relationships

3. THE NATURE AND SIZE OF
ORGANIZATIONAL MARKETS
• Business Marketing
• Industrial Markets (Producers)
• Reseller Markets (Resellers)
• Government Markets (Fed, St, City)
• Not for Profit Associations
Key is
intended
use

4. Business Marketing
Business marketing- The marketing of
goods and services to individuals and
organizations for purposes other than
personal consumption.

5. DEMAND CHARACTERISTICS OF
ORGANIZATIONAL BUYING
Demand is... Description
Derived
Demand for business products results from
demand for consumer products
Inelastic
A change in price will not significantly affect the
demand for product
Joint
Multiple items are used together in final product.
Demand for one item affects all
Fluctuating
Demand for business products is more volatile
than for consumer products

6. Characteristics of Organizational Buying Behavior

7. Characteristic
Demand
Volume
# of Customers
Location
Distribution
Nature of Buy
Buy Influence
Negotiations
Reciprocity
Leasing
Promotion
Business Market
Organizational
Larger
Fewer
Concentrated
More Direct
More Professional
Multiple
More Complex
Yes
Greater
Personal Selling
Consumer Market
Individual
Smaller
Many
Dispersed
More Indirect
More Personal
Single
Simpler
No
Lesser
Advertising
Business vs Consumer Markets

8. HOW BUSINESSES CHOOSE A VENDOR

9. BUYER-SELLER RELATIONSHIPS IN
ORGANIZATIONAL BUYING
 Reciprocity (Kesalingan) - Ford and Firestone
 Supply Partnership – Walmart and P & G

10. Supply Partnership
A supply partnership exists when a
buyer and its supplier adopt mutually
beneficial objectives, policies, and
procedures for the purpose of
lowering the cost or increasing the
value of products and services
delivered to the ultimate consumer.

11. Buying Center
A buying center is the group of people
in an organization who participate in
the buying process and share
common goals, risks, and knowledge
important to a purchase decision.

12. BUYING CENTERS

13.  Buying Situations and the Buying Center
1) Straight Rebuy
2) Modified Rebuy
3) New Buy
BUSINESS BUYING SITUATIONS

14. How the buying situation affects
buying center behavior

15. E-marketplaces are online trading
communities that bring together buyers
and supplier organizations to make
possible the real time exchange of
information, money, products, and
services.
E-Marketplaces

16. ONLINE BUYING IN ORGANIZATIONAL
MARKETS
• 80% of e-trade dollar value is B2B
WHY?
1. Buyers need timely, detailed information
2. Buyers need to get that info quickly
3. E-trade reduces processing costs
4. E-trade reduces marketing costs
5. Wider potential customer or supplier base

17. ONLINE BUYING IN ORGANIZATIONAL
MARKETS
• Online Auctions (lelongan) in Organizational
Markets
 Traditional Auction – Looking for buyers
 Reverse Auction – Looking for sellers

18. A traditional auction is an online
auction in which a seller puts an item
up for sale and would-be buyers are
invited to bid in competition with each
other.
Traditional Auction

19. A reverse auction is an online auction
in which a buyer communicates a
need for a product or service and
would-be suppliers are invited to bid
in competition with each other.
Reverse Auction

20. How buyer and seller participants and
price behavior differ by type of online
auction

22. ◦ Transactional Relationships
This type of business relationship exists mostly in a low-
priced, low-profit margin business. In this case, sales
people sell and do not go back to the customer and does
not care whether the buyer is happy after the purchase.
The sales person does not have a strong relationship with
the buyer. Therefore the buyer have no trust and
confidence in sales person / people. Sales people to
achieve their objective put pressure on the buyer to make
purchase. This kind of sales can be described as hard
selling.

23. ◦ Collaborative Relationships
A collaborative relationship is one of mutual benefit
to both parties. There is a varying level of trust, but
some is required. Companies will work together for
increased savings and future innovations. Often with
this type of relationship buyers have early supplier
involvement.

24. ◦ Supply Alliances
An alliance is formed for a systematic approach to
enhance communication between the two firms.
Unlike collaborative relationships, an alliance is built
to have a trust where both firms can be on the same
level and help each other out when there is a time of
need or uncertainty. If there is no motive to have trust
or manage it then the alliance will most likely fail, and
that is something that just cannot happen

25.  Is one supplier head and shoulders above the rest
in terms of the value it provides; including price,
innovation, ability to adapt to changing situations,
capacity to work with your team, task joint risks,
etc?
 Are some suppliers “strategic” to your business?
 Would your company benefit greatly if the supplier
were more “integrally connected” with your
company?
 Do your customers require high degrees of flexibility
and speed of responsiveness?

26.  Supplier’s want good
customers
 Several issues affect their
assessment, among them are:
◦ Cash Flow
◦ Openness and Approachability
◦ Availability
◦ Professionalism

27.  Is there a danger that the supplier may act in an
opportunistic manner over time?
 Do electronic systems allow for optimum
communication and sharing of information?
 Is the potential strategic alliance able to stay current in
the industry?
 Are both the organizations willing to keep attention
focused on the joint customer?
 Are there other suppliers worth investigating before
committing to a strategic alliance?
 Has the supply manager been thoroughly trained?

28.  Is the organization proud to be aligned and
associated with the supplier?
 Is the organization comfortable with the level of
risk associated with reducing the supply base?
 Are both supplier and buyer aligned in what their
ultimate customer considers to be valuable?
 If there is substantial risk for the supplier to
develop new technologies, products, processes,
or service support?
 Are both supplier and buyer aligned in their
respective visions?
 Are there sufficient operational points of
interaction?

29.  Power is a topic that makes people uncomfortable
 Power is at the heart of all business relationships
 Power plays a key role in two important
subclasses of buyer-supplier relationships:
◦ Captive Buyer: buyer is held hostage by a supplier free to
switch to another customer
◦ Captive Supplier: makes investments in order to secure a
portion of the buyer's business, with no assurance of
sufficient business to recoup the investment

30.  Developing and managing collaborative and
alliance relationships require supply
professionals that possess the following skills
and attitudes:
◦ Recognize the benefits of collaboration
◦ Ability to identify, obtain and use data
◦ Able to work in chaos and uncertainty
◦ Agile, flexible, and highly adaptive

31.  "How does B2B e-Commerce affect our
selection of the 'right' type of relationship?“
◦ Selection must be a function of the
requirement, not of the Internet!
◦ B2B e - Commerce is an enabler

32.  Trap #1: Guilding the pig
◦ Take an archaic, cumbersome
procurement process and “webbize” it
 Trap #2: The Magic pill
◦ Looking for the one solution that can be
used to solve every procurement situation
 Trap #3: Supplier equality
◦ Supplier relationships range from
transactional to alliances

33.  Developed over time
 Internal trust is developed before external trust
 Based on individual and institutional integrity
 It is greater than individual trust.
 Trust and relationship are viewed as investments
 Partners have access to other's strategic plans
 Relevant costs and forecasts are shared

34.  When key individuals leave, fingerprints are left behind
that hold the relationships together
 Trust is visible
 Informal agreements are as good as written
 Both parties are sensitive to the cultural bridge
 Relationship is adaptable in the face of change
 Both firms recognize the interdependency

35.  Sharing information is a means of developing trust
 Conflict in the relationship is openly addressed
 Rights, desires, and opinions are considered
 Firms have mutual goals
 A bank account of trust is created
 Recognizes trust has different cultural meanings
 Both CEO's make a personal investment
 Senior managers from both firms commit
 Ethical issues are freely brought up without fear
 An ombudsman (wakil kerajaan) is assigned at both
firms

36.  An inter-firm team is appointed
 Discussions conducted in an atmosphere of respect
 Inter-firm team receives guidance and training in the
implementation of practices
 Listening, understanding, time, energy are invested
 Senior leaders at both firms act as champions
 A communication system is developed
 Actions to develop and measure trust are created
 Risks and rewards are addressed openly
 Negotiation is used as a trust-building opportunity

37.  Both firms work together on technology plans
 Technical personnel from both firms visit the other
 Contractual relations are designed to enhance trust
 Contract relations focus on continuous improvement
 Team and relationship skills are developed early
 Company leaders create a formal relationship
 A contracting philosophy and a legal infrastructure are
designed to the relationship
 Institutional trust is measured and managed

38.  The merchant supplies the total product.
 Perform self-manufacture with key raw material
suppliers.
 In-house plant is operated by a supplier.