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Chapter 3<br />
<br />
Organizational Buying &<br />
Buying Behavior<br />
www.dinhtienminh.net<br />
<br />
DINH Tien Minh (Ph.D.)<br />
University of Economics HCMC<br />
<br />
Objectives<br />
<br />
Understand organizational buying objectives.<br />
Gain knowledge organisational buying process<br />
including the types of buying situation.<br />
<br />
Identify the members of decision making unit.<br />
Understand some of models of organizational<br />
buying behavior.<br />
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Outline<br />
3.1 Purchasing Objectives<br />
3.2 Organisational Buying Process<br />
3.3 Types of Purchase or Buying Situations<br />
3.4 The Buying Center<br />
3.5 Models of Organisational Buying Behavior<br />
3.6 Questions and Homework<br />
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3.1. Purchasing Objectives<br />
<br />
Buying the right item in the right quantity, at<br />
the right price, for delivery at the right time<br />
and place.<br />
What’s right for each dimension?<br />
<br />
<br />
<br />
<br />
<br />
<br />
Delivery/ Availability<br />
Product quality<br />
Lowest price<br />
Services<br />
Supplier relationship<br />
<br />
4<br />
<br />
3.1. Purchasing Objectives (cont’)<br />
<br />
The Firm and Personal objectives.<br />
<br />
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin<br />
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3.2. Organisational Buying Process<br />
More complex than the consumer decision process<br />
and takes place within formal organization’s budget,<br />
cost, and profit considerations.<br />
<br />
Source: Krishna K Havaldar (2010), Business Marketing, McGraw Hill, 3rd edition.<br />
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3.2. Organisational Buying Process (cont’)<br />
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Stage 1: Anticipate a problem/need and a<br />
general solution<br />
Need to provide employees with a good cup of coffee<br />
to enhance productivity.<br />
<br />
Stage 2: Determine the characteristics and<br />
quantity of a needed good or service<br />
Offering a coffee system that brews one cup of coffee<br />
at a time according to each employee’s preference.<br />
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3.2. Organisational Buying Process (cont’)<br />
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Stage 3: Describe characteristics and the<br />
quantity of a needed good or service<br />
Firms<br />
need<br />
a<br />
simple<br />
system<br />
for<br />
brewing a good cup of coffee; quantity<br />
requirements are easily correlated to the<br />
number of coffee drinkers.<br />
<br />
Stage 4: Search for and qualify potential<br />
sources<br />
Choice of supplier.<br />
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3.2. Organisational Buying Process (cont’)<br />
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Stage 5: Acquire and Analyze proposals<br />
May involve competitive bidding, especially if the<br />
buyer is the government or a public agency.<br />
<br />
Stage 6: Evaluate proposals and Select<br />
suppliers<br />
Buyers choose proposal best suited to their needs.<br />
Final choice may involve trade-offs between feature<br />
such as price, reliability, quality, and order accuracy.<br />
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3.2. Organisational Buying Process (cont’)<br />
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Method: A Supplier Evaluation System<br />
Attribute<br />
(or Factor)<br />
Quality<br />
Delivery<br />
Price<br />
Service<br />
Flexibility<br />
Total<br />
<br />
Weight<br />
(Important)<br />
30<br />
25<br />
15<br />
20<br />
10<br />
100<br />
<br />
Supplier<br />
Performance*<br />
0.8<br />
0.4<br />
0.6<br />
0.6<br />
0.2<br />
<br />
Supplier Rating<br />
(or Score)<br />
30 x 0.8 = 24<br />
25 x 0.4 = 10<br />
15 x 0.6 = 09<br />
20 x 0.6 = 12<br />
10 x 0.2 = 02<br />
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* The information on the existing supplier’s performance is obtained from departments.<br />
Krishna K Havaldar (2010), Business Marketing, McGraw Hill, 3rd edition, p42.<br />
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3.2. Organisational Buying Process (cont’)<br />
<br />
Method 2: Use the concept of Balanced Scorecard<br />
(BSC) to evaluate Suppliers’ performance<br />
Translate a company’s mission and strategy into a<br />
set of performance measurements, in which the<br />
Internal-business-process is relevant for evaluating<br />
supplier performance.<br />
Find additional measurements (timely delivery)<br />
that create superior value beside the traditional<br />
factors (price, quality).<br />
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3.2. Organisational Buying Process (cont’)<br />
<br />
The Balanced Scorecard (BSC) Framework<br />
Financial<br />
To success financially,<br />
Company should focus on<br />
financial objectives that will<br />
satisfy shareholders.<br />
<br />
Customer<br />
Which customer value<br />
company should focus on,<br />
to achieve its mission<br />
<br />
Mission<br />
&<br />
Strategy<br />
<br />
Internal-BusinessProcess<br />
To satisfy shareholders<br />
and customers, what<br />
business process company<br />
must excel at?<br />
<br />
Learning and Growth<br />
How can company improve<br />
and change to achieve its<br />
mission<br />
Robert S. Kaplan & David P. Norton, The Balanced Scorecard, Harvard Business School Press, 1996.<br />
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3.2. Organisational Buying Process (cont’)<br />
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Internal-Business-Process<br />
Innovation<br />
Processes<br />
Identify<br />
Customer<br />
needs and<br />
Market<br />
<br />
Design,<br />
Develop<br />
Product/<br />
Service<br />
<br />
Operations<br />
Processes<br />
Make/<br />
Buy<br />
Product/<br />
Service<br />
<br />
Market<br />
Product/<br />
Service<br />
<br />
Satisfy<br />
Customer<br />
Needs<br />
<br />
Krishna K Havaldar (2010), Business Marketing, McGraw Hill, 3rd edition, p43.<br />
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3.2. Organisational Buying Process (cont’)<br />
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Stage 7: Select an order routine<br />
Buyer and Vendor work out best way to process<br />
future purchases.<br />
<br />
Stage 8: Obtain feedback and Evaluate<br />
performance<br />
Buyers measure vendors’ performance.<br />
Larger firms are more likely to use formal evaluation<br />
procedures.<br />
Some firms rely on outside organizations to gather<br />
quality feedback and summarize results.<br />
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3.3. Types of Purchase or Buying Situations<br />
<br />
Source: Krishna K Havaldar (2010), Business Marketing, McGraw Hill, 3rd edition.<br />
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