– over half of all US business school grads take jobs in firms that engage in
– all buyers in an nation except ultimate consumers
-purchase and lease large volumes of capital equipment, raw materials and manufactured parties, supplies and business services.
– total annual purchases of OB are far greater than those of climate consumers. 48 Mil.
– divided into three markets: industrial, reseller, and government (also exist at global scale)
– engage in a decision process when selecting P & S
– 80% of the global dollar value of all online transactions
– reprocess a product or service they buy before selling it again to the next buyer
– importance of services in the US today is emphasized by the composition of industrial markets.
– 25% are companies that primarily sell physical goods
– 75% are mix of service companies and others
– In united states, 1.5 million retailers and 435,000 wholesalers.
-89,000 in US
– replaced the Standard Industrial Classification ( SIC) system, which had been in place for more than 50 years.
– consistent with the International Standard Industrial Classification of All economic activities , to facilitate measurement of global economic activity
– groups economic activity to permit studies of market share, demand for good and services, import competition in domestic markets etc.
– designates industries with a numerical code in a defined structure
– permits a firm to find the NAICS codes of its present customers and then obtain NAICS-coded lists for similar firms
– important limitation: five digit national industry codes are not available for all three countries because the respective governments will not reveal data when too few organizations exist in a category
– based on the expectations of future consumer demand.
derived: how it was created
-dollar value of a single purchase runs into thousands or millions of dollars
– most organizations place constraints on buyers in form of purchasing policies or procedures
– buyers get at least three bids if oder is amount specific amount and may require review or approval of a VP or prez of company
– knowing how order size affects buying practices is important in determining who participates in the purchase decision and makes final decision and the length of time required to arrive at pu. agreement
– firms selling to organizations have a lot less buyers
-business buying objective: to increase profits through reducing costs or increasing revenues- buying from minorities
– nonprofit/government agencies: meet the needs of the groups they serve
– improve executive decision making: buy advanced computer systems to process data
– companies broadened to include an emphasis on buying form minority and women owned supporters and vendors
-successful business marketers recognize hat understanding buying objectives is a necessary first step in marketing to organizations
– most commonly used criteria that create customer value:
2) ability to meet the quality specifications required for the item
3)ability to meet required delivery schedules
4) technical capability
5) warranties and claim policies in the event of poor performance
6) past performance on previous contracts
7) production facilities and capacity
– buyers who purchase in global marketplace supplement their criteria with supplier ISO 9000 certifications
– the standards for registration and certification of a manufactures quality management and assurance system based on an on site audit of practices and procedures
– gives 3M confidence in the consistent quality of its suppliers manufacturing.
**3M buys and markets products globally, 80% + facilities ISO 9000 certified**
– The practice of organizational buyers transforming buying criteria into requirements that are communicated to suppliers
– Us justice department disapproves because it restricts the normal operation of free market
– can limit the flexibility of OB in choosing alternative suppliers
– often include provisions: sustainable procurement
– involve the physical distribution of goods
– share common goals, risks, and knowledge important to a purchase decision
– for most large multi-store chains, a highly formalized and called buying committee.
– most companies use informal groups of people or meetings to make decision
– requires a firm marketing to many firms and gov. units understand the structure, the technical and business functions represent and the behavior of groups
– composition depends on item being bought
– major questions in penetrating is finding and reaching the people who will initiate, influence and make decision
– number of people depends on situation
– people who use the product
– affect the buying decision
– formal authority and responsibility to select the supplier
-cuts the check
– the formal/informal power to select or approve the supplier that receives the contract
– the hardest to find
– control the flow of the information in the buying center
the world is like a stage and we are actors and we play different roles. Student, daughter, consumer, friend etc.
straight rebuy or routine reorder
new buy or new purchase
modified rebuy: in-between Straight and new buy
– greater potential risks in the purchase
– be prepared to act as a consultant to the buyer, work with technical personnel and expect a long time for decision to be reached
– emphasize a competitive price and a reliable supply in meetings with purchasing agent
– changes usually necessitate enlarging the BC to include people outside the purchasing department
1) organizational buyers depend heavily on timely supplier information that describes product availability, technical specifications, application uses, price, and delivery schedule
2)this technology has been shown to substantially reduce buyer order processing costs
3) business marketers have found that internet technology can reduce marketing costs, particularly sales and advertising expense, and broaden their potential customer base for many types of products and services
4: industry group,
5: specific industry
6: individual country level national industries)
– inventory system that reduces the inventory of production parts to those to be used within hours or days
– result: on time deliver becoming a requirement
-^^ OB more likely to involve complex negotiations concerning delivery schedules, prices, technical specifications warranties and claim policies.
– continues to evolve with the application of Internet technology
-significant development: creation of online trading communities, called e-marketplace
– aims to integrate environmental considerations into all stages of an organizations buying process
– goal of reducing the negative impact on human health and the physical environment
2. wha tis relative influence of each member
3.what are the criteria of members
4. how does each member perceive our firm, products, salespeople
Influencers- help define the specificaitons for what is bought
Buyers- r in routine orders.
– info systems manager key influencer
– routine orders: Usually buyer or purchasing manager
– Important technical purchases: someone from R&D, engineering, quality control
– Key component being incorporated in final product: any of above three
– purchasing personnel, technical experts, secretaries
– chief elements are optics, light source, camera, video processors and computer software.
– mainly used for product inspection
– becoming important in info feedback loop of systems that control manufacturing processes
– mostly sold to original equipment manufactures (OEM) who incorporate them in still larger industrial automation systems.
– frequently a new buy
– product performance, a suppliers technical support and ease of use are the three most frequently mentioned BC.
– generated from the company’s purchasing databank as well as from engineering inputs
– firms selected from list are sent a quotation request from the purchasing agent describing desired quantity, delivery dates, specifications of components or assembly
2. get on the right bidders list
3. find the right people in BC
4. provide value to organizational buyers
1. OB depend heavily on timely supplier info that describes product availability, technical specifications, application uses, price and delivery schedule
2. technology shown to substantially reduce buyer order processing costs
3. business marketers found internet technology can reduce marketing costs, particularly sales and advertising expense and broaden their potential customer base
– brings together buyers and suppliers
– B2B exchanges and e-hub other names
– make possible: real time exchange of info, money, P&S
– independent trading communities or private exchanges
– many offer online auctions
– charge a fee for service
– esist in settings that have one or more of the following:
1. thousands of geographically dispersed buyers and sellers
2. volatile prices caused by supply and demand fluctuations
3. time sensitivity due to perishable offerings and changing technologies
4. easily comparable offerings between a variety of sellers
– small business buyers and sellers, benefit the most from.
– focus on streamlining a companies purchase transactions with its supplier and customer
– provide tech trading platform and central market for buyer seller interactions
– represent the interests of their owners (not neutral third party)
– bidding is sequential
– often used to dispose of excess merchandise
– upward pressure on bid prices ( more buyers involved
– downward pressure on bid prices for the buyers business (more suppliers involved )
-benefit organizational buyers by reducing the costs of their purchases
-suppliers often favor because they give them a chance to capture business that they might not had because of long-standing purchase relationship
-suppliers also say puts too much emphasis on price, discourage consideration of other BC, may threaten supply partnership opportunities
Size of purchase
– estimated 7 states almost 50% of all manufacturing is done here/concentrated: rust belt.
– California, Michigan , New York, Pennsylvania, Illinois, new jersey, Ohio
supplier buyer relationship
-buying from creator of the item.
New task rebuy
– alternative evaluation
– purchase decision
– post purchase behavior
-Who bought it?
– Why did they buy it?
– his answer depends on consumer demand
-person complained about amountn of tip so he scratched it out
– price/industry typically does not affect how much is taken.
– will not buy any less as price increases
– passes the difference on to the consumer
-everyone has skills, expertise, and worth.