Chapter 4

Business Government
and Institutional Buying
(My Copy)

JOUHARA G. SAN JUAN DR. SONNY FERRERAS

DBA Student Professor Lecturer
 Organizational Buyer Categories

• Producers: Businesses that buy goods and services in order

to produce other goods and services
• Intermediaries: Purchase products to resell at a profit
• Government agencies: 86,000 Government agencies spend
trillions of dollars on machinery, equipment, facilities,
supplies and services
• Other institutions: Such as hospitals, museums, universities,
nursing homes, and churches

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 Organization Buying Process

1. Purchase-type 2. Structural 3. Behavioral

influences influences influences

Organizational buying process

Organizational Vendor Purchase Postpurchase
need analysis activities evaluation

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 Purchase Types

 Straight rebuy – Routine reordering from a supplier used

in the past
 Common in organizations using just-in-time inventory
 Modified rebuy – Purchase involves considering a
limited number of alternatives before making a selection
 Used when some aspects of the buying situation are
unfamiliar
 New task purchase – Involves an extensive search for
information and a formal decision process
 Often used for purchase of big-ticket items
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 Purchase Types Influences
Differences in Types of Organizational Purchases

Number
Purchase Time
Complexity Of
Type Frame
Suppliers
Straight
Simple Short One
Rebuy
Modified
Moderate Medium Few
Rebuy

New Task
Complex Long Many
Purchase

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Key Differences in Marketing to
Organizational Buyers

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 Structural Influences –
Purchasing Roles
Structural influences – Design of organizational environment and
how it affects the purchasing process
 Initiators – Recognizing need starts process
 Users – People who use the product
 Influencers – People who affect the buying process
 Buyers – Those with formal authority and responsibility
 Deciders – Those with formal or informal power to select or
approve suppliers
 Gatekeepers – Those who control information flow to the
buying center

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 Organization-Specific Factors

• Orientation: Dominant function in an

organization controlling decisions
• Size of organization: Larger the
organization higher degree of joint decision,
smaller the organization autonomous
decision making
• Degree of centralization: This influences
whether the decisions are made individually
or jointly with others
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 Purchasing Policies and Procedures

• Sole sourcing – all of a particular

product is purchased from a single
supplier
• Direct buying – list of approved
vendors for particular products
• Competitive bidding – for large, one-
time purchases
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 Behavioral Influences
• Personal motivations: Factors such as friendship,
professional pride, fear and uncertainty, trust and personal
ambition
 Role perceptions – Organizational buyers’ commitment
depends on what they believe is
 Expected of their role
 The ‘maturity’ of the role type
 Extent of management commitment to role type
- Organizations can be divided into three groups based on
commitment
• Innovative
• Adaptive
• Lethargic

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 Purchasing Agent Influences

• One study involving purchasing agents revealed that there a

greater degree of responsibility and control over decisions
involving
• Design of the product
• Cost of the product
• Performance life
• Naming a specific supplier
• Assessing engineering support from the supplier
• Reduction of rejects

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Organizational Buying Process

ORGANIZATIONAL NEED

VENDOR ANALYSIS

PURCHASE ACTIVITIES

POSTPURCHASE EVALUATION

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Stages in Organizational Buying Process

• Organizational Need
- Needs based on survivability and stated objectives of the
organization
• Vendor analysis
- Search for, locate and evaluate potential providers of goods and
services
- Rate them based on quality, on-time delivery, price, payment
terms, and use of technology
- Helps in developing a list of approved vendors, comparing
competing vendors, and comparing vendor performance both
before and after purchase

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Stages in Organizational Buying Process
Sample Vendor Analysis Form

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Stages in Organizational Buying Process

• Purchase activities
- Purchases can involve extensive negotiations on price, term of
contract – increases with complex goods and services
• Postpurchase evaluation
- Does the purchase perform as expected?
- Should the supplier be used again?
- Must be remembered that different functional areas have
different evaluation criteria

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Functional Areas and their key Concerns in
Organizational Buying

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 Code of Ethics for Organizational
Buyers
• Avoid the intent or appearance of unethical
activity
• Demonstrate loyalty to employee by being
lawful and using reason
• Refrain from private or personal activity
that could create conflicts of interest
• Refrain from soliciting or accepting gifts,
loans, or services from potential suppliers
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Cont…Code of Ethics for Organizational
Buyers
• Handle confidential information with proper
consideration
• Promote positive relationships with suppliers
through impartiality
• Refrain from reciprocal agreements that
restrain competition
• Know and obey both the letter and spirit of
laws governing the purchasing function
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Cont…Code of Ethics for Organizational
Buyers
• Encourage all segments of society to participate by
supporting disadvantaged interests
• Discourage involvement in personal purchases that are not
business related
• Enhance the stature of the purchasing profession by
keeping up with current knowledge and standards
• Conduct international purchasing with regards to U.S. laws
and ethical guidelines

***Thank You and God Bless***

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