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<< Chapter 5
Organizational Markets and Organizational Buying Behavior : Chapter 6
SUMMARY: The organizational buying process is entirely different from the consumer buying process. While buying decisions are made relatively easily and quickly by individual customers, organisational buying involves thorough and deep analysis. Organizations purchase products ranging from highly complex machinery to small components.
Organizations adopt certain methods for buying products such as checking a sample before the actual purchase. Most organizational purchases involve purchase of products in large lots. So it is not feasible to individually inspect each and every item in the lot. In such situations, a sample is checked assuming that this sample represents the entire lot. Like the consumer markets, organizational markets also possess certain demand characteristics. The organizational demand for products or services may be inelastic, derived, joint or fluctuating in nature. Organizational markets normally purchase the goods or services for producing other goods and services, using these as raw materials. There are also resellers, who purchase the products to sell directly to other customers without any modifications. Apart from producers and resellers, there are also government and institutional customers who buy the goods. Government buys goods for public utility or for use in their departments or for production purposes.
The buying decisions of organizations are influenced by environmental factors, organizational factors, social factors and personal factors. Participants in the organizational buying process play as many as seven different roles, namely those of initiator, influencer, user, decider, approver, buyer and gatekeeper. Although organizations differ significantly from each other in their purchasing process, the various stages of industrial buying comprise problem recognition, general need recognition, product specification, value analysis, vendor analysis, order routine specification, multiple sourcing and performance review. Marketers need relevant information about the characteristics of the industries for marketing their goods and services effectively. To search for such information, the prime sources are government and industrial publications. The Standard Industrial Classification is a process where such characteristics of manufacturing, financial and service sectors are depicted in a coded format.
Organizational Markets and Organizational Buying Behavior - An overview
The Concept of Organizational Buying
Differences between Organizational Markets and Consumer MarketsDimensions of Organizational Buying
Organizational Markets in India
The Classification of Organizational Markets
Producer MarketsFactors Influencing Organizational Buying
Participants in Organizational Buying
BuyingStages of Buying
Supply Management Orientation
Problem RecognitionUsing Standard Industrial Classification Codes
General Need Recognition
Searching for Potential Suppliers
Order Routine Specification
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Demand Issues : Chapter 4
Procurement is a function that is gaining in importance. Managements have realized that a good procurement department helps in the growth of the company and increases the profits considerably. The procurement function has both task-oriented objectives and non-task objectives, and is usually governed by a clearly articulated purchase policy.
The vendors are also regularly monitored for their performance. A firm purchases goods under three situations. In a new task, the firm buys a totally new product or an existing product for the first time. This involves extensive information and supplier search. The second situation is straight re-buy. Here the firm purchases the same material from the same supplier without any alterations in the contract.
And the last situation is modified re-buy. It involves modifications in the form of change in supplier, change in terms of the contract, etc. A buying center involves people from across the departments of the firm to make the buying decisions for the firm. The buying center is influenced by the individual and group factors. Hence the decisions taken by the buying center will bear these influences.
Value analysis is used in the firm to assess the value of the product to be purchased and consequently to take 'make or buy' decisions. It helps the firm to reduce unnecessary costs in the purchase of the product or materials. Vendor evaluation helps in choosing the right vendor. Vendor rating is performed to appraise vendors from time to time with respect to the products supplied and services rendered; it is done on the parameters of price, quality, delivery, and service.
There are different factors that influence organizational buying behavior such as environmental factors, organizational factors, group factors, and individual factors. The different models of organizational buying behavior discuss these factors with differing levels of attention being given to each. They include the Sheth model, Webster and Wind model, and the Anderson and Chambers Reward/Measurement Model.
Chapter 4 : Overview
The Procurement Function
Objectives of the Procurement Function
The Buying Decision Process
Searching for and Qualifying Potential Suppliers
Soliciting and Analyzing Proposals
Making the Purchase Decision
Selecting the Order Routine
Evaluating Vendor Performance
Types of Buying Situations
Profile of Business Buyers
Functions of Value Analysis
Activities of Value Analysis
Criteria for Evaluating Potential Vendors
Models of Organizational Buying Behavior
Factors Influencing Organizational Buyer Behavior
The Sheth Model
The Webster and Wind Model
The Anderson and Chambers Reward/Measurement Model