CHAPTER 4 ORGANIZATIONAL BUYING Model of Industrial Buying

CHAPTER 4 ORGANIZATIONAL BUYING

Model of Industrial Buying Purchase Type Structural Behavioral Influences Organizational Need Vendor Analysis Purchase Activities Postpurchase evaluation

Stages in the Organizational Buying Process n Organizational Needs: n n Vendor Analysis: n n Search and locate a prospective vendor. Purchase Activities: n n Products and services. Negotiations on price and formal contracts stating quality, delivery and service. Postpurchase Activities: n Evaluation both the vendor and product

Purchase Type Influences n New Task Purchase n n One of a time purchase such as heavy machinery, equipment or the first time purchase. It involves extensive complex search. In addition, it is a long process and many suppliers may be part of it. Modified Re-buy n It follows the New Task Purchase situation, and help to correct the problem faced with new task decision. New or additional information may be expected to correct the problem of New Task decision. Decision making is shorter.

Purchase Type Influences (cont. ) n Straight Re-buy n The simplest and very short purchasing decision. There is mostly one supplier to deal with. It is continuation of purchasing decision that follows to the New Task decision. EDI system is used to reorder the needed supply. It is popular with manufacturers using the JIT system for raw material supplies.

Purchase Type Influences (cont. ) New Task n Recognizing the need X n Developing Product Specifications X n Soliciting Bids from suppliers X n Making the purchase decision X n Issuing the contract X n Inspecting delivered goods X n Evaluating vender performance X

Structural Process on Organizational Buying n Joint Decision Making USERS-Those will use the product. n GATEKEEPERS-Those who keep tight control on the flow of information. n INFLUENCERS-Those who provide information to buying center members. They help defining the specifications of the purchased product. n DECIDERS-Those who make buying decision. n BUYERS-Those who select the vendors and complete the purchase transaction. n

Structural Process on Organizational Buying(cont. ) n Organization-Specific Factors n Orientation n n Size n n Dominant functions may dominate purchasing decision. Exp. Engineering always dominates in technology oriented firms, and marketing dominates in marketing oriented firms In large size organizations, the joint decision will take place for new task and modified re-buy. Degree of Centralization n Joint decision making will not be allowed if there is high a degree of centralization.

Behavioral Influences on Organizational Buying n Personal Motivations n n Personal motives such as friendship, professional pride and ambition, fear and risk taking have effects on organizational buying decision. Role Perception n Organizational buyers may decide using their own role in the organization. Their perceptions may be different basing upon their role, their commitment to organization, and the maturity of the role type. Some buyers apply only organizational rules, others may be innovative.

Behavioral Influences on Organizational Buying(cont. ) Organizations can be divided into three groups: (1) Innovative firms: individuals may use their occupational role rather than expected norms of behaviors. (2) Adaptive organizations: n moderate commitment of expected norms of behaviors. (3) Lethargic organizations: n Strong commitment of traditionally expected norms of behavior. In these kind of organizations, buyers are less innovative and keep the conflict within the minimum level. n