This document provides an overview of organizational buying objectives and processes. It discusses the key objectives of organizational buying as delivery/availability, product quality, lowest price, services, and supplier relationships. It then describes the 8 phases of the organizational buying decision making process: recognition of need, determining specifications, supplier search/qualification, proposal analysis, evaluation/selection, order routine selection, and performance feedback. Finally, it discusses factors that influence organizational buying behavior like purchasing models, interpersonal dynamics within buying centers, and psychological factors affecting individual decision makers.

1. Business/ Industrial Management Prof. Raghavendran.V

2. MODULE 2: Learning objective Organisational buying Activity Buying models and buying centre concept Inter Personal Dynamics of Industrial Buying Behaviour Roles of Buying centre Conflict Resolution in Decision Making Ethics in Purchasing Prof. Raghavendran.V 2

4. Product quality

5. Lowest price

6. Services

7. Supplier relationshipProf. Raghavendran.V 3

8. Delivery/ adaptability To ensure that purchased goods and services are available or delivered when and where needed. If not delivered, work will come to grinding halt and this reflect on the performance of the purchase function Prof. Raghavendran.V 4

9. Product quality It should be consistent with the specifications and use of the product. It can happen that a product may meet the Indian Standard (IS) or British Standard (BS) specifications. It is important to ensure to consistency in quality to reduce cost of inspection, interruptions in production process due to rejections and arranging the replacement of rejected material Prof. Raghavendran.V 5

10. Lowest price Buyer would like to buy at the lowest price consistent with availability and quality of the product. This will be important objective, if delivery and quality criteria’s are met. Prof. Raghavendran.V 6

12. Application or technical assistance,

13. Spare-parts availability

14. Repairs and maintenance capability &

15. Training ( if required)Prof. Raghavendran.V 7

16. Supplier relationship To develop long term supplier/ vendor relationship and to develop new sources of supply. Prof. Raghavendran.V 8

17. The organizational buying process The organizational buying (purchase) process consist of various phases of buying- decision making process. The importance to be given to various phases will depend upon type of buying situations. Robinson, Faris and Wind developed eight phases of decision making processand types of buying situations Prof. Raghavendran.V 9

18. Decision making process: It is also known as BUYPHASES and they are logical in sequence. Recognition of a problem or need Determination of application or characteristics & quality of needed product. Development of specifications or description of needed product. Search for and qualifications of potential suppliers Prof. Raghavendran.V 10

19. Continued Obtaining and analyzing supplier proposals Evaluation of proposals and selection of suppliers Selection of an order routine Performance feedback and post-purchase evaluation. Prof. Raghavendran.V 11

20. Recognition of problem It may originate within the buying firm or may also recognized by a smart marketer. Quality of material Machineries Equipment Prof. Raghavendran.V 12

21. Characteristics & quantity The buying firm will try to answer questions such as: what type of products/services to be considered? Quantity? Engineering/design R&D Production Quality control Prof. Raghavendran.V 13

22. Development of specifications Previous stage are closely related with this stage. Here prominence is given to technical specifications of the product. Prof. Raghavendran.V 14

23. Search for & qualifications To obtain all the relevant information & secondly to decide on acceptable or qualifying suppliers and it depends based on following: Type of buying organization The buying situation The decision making members General characters will be quality, reliability in delivery, service are considered to qualifications of suppliers Prof. Raghavendran.V 15

24. Obtaining & Analyzing supplier proposals Proposal can be formal offer, quotation or a formal bid submitted by supplier, it should contain product specification, price, delivery period, payment terms, taxes & duties, transportation cost, transit insurance and any other costing Prof. Raghavendran.V 16

25. Evaluation of proposals & selection Decision makers of buying organization may evaluate each suppliers on the set agreed parameters or factors. For illustration Prof. Raghavendran.V 17 A supplier evaluation system

26. “Balanced scorecard Technique” It is technique/framework that can evaluate supplier performance in information age companies. It translates companies mission, vision into a set performance measurements. The frame work is divided into 4 parts and they are as follows: Financial, customer, internal business process & learning growth Prof. Raghavendran.V 18

27. Balanced scorecard framework Prof. Raghavendran.V 19 Financial To succeed financially, company should focus on financial objectives that will satisfy shareholders Internal-business- Process To satisfy shareholders & customers, what business process company must excel at ? Customer Which customer value company should focus on, to achieve its mission Mission & Vision Learning and Growth How can company improve & change to achieve its mission

28. Internal- Business- Process Prof. Raghavendran.V 20 Operations Processes Innovation Processes

30. Quantity to be purchased

31. Frequency of order placement

32. Levels of inventory needed

33. Follow up

34. Payment termsProf. Raghavendran.V 21

35. Performance feedback and post evaluation A formal or informal review regarding the performance of each supplier (vendor) takes place. The user department will give feedback on whether the purchased items solved the problem or not. If not, the members of the decision making unit review their decision and decide. Prof. Raghavendran.V 22

36. Types of Purchase/buying situations There are three types of buying situations called buy classes: New task /New purchase Change in supplier/ Modified rebuy Repeat purchase/ straight rebuy Prof. Raghavendran.V 23

37. The buy grid framework Prof. Raghavendran.V 24

38. Multiple buying influences The buying centre, the decision making unit, in business marketing is called buying centre. They consists of individuals or members who participate in buying decision & share the common objectives. Size-- varies Prof. Raghavendran.V 25

39. The buying centre roles Usually members of buying centre accept different roles during the buying process. These roles may vary for different stages of the buying process depending upon the buying situations, complexity of the purchase and the functions involved. Assume several roles which are as follows Users, buyers, influentials, deciders & gate keepers Prof. Raghavendran.V 26

40. Recognizing & identifying key persons Recognizing key influential is an important task carried out sales person. Identifying key members of buying centre. Top management persons Technical persons (functions) Buyers Accountants Marketing function Prof. Raghavendran.V 27

41. Models of Organization buying behaviour There are three models available to provide a comprehensive & integrated picture of major factors. The Webster and Wind Model The Sheth Model The Choffray & Lilien Model Prof. Raghavendran.V 28

45. The Choffray & Lillen Model Prof. Raghavendran.V 31 Individual Responsibility Obtained set of alterative offers Interaction Structure Evaluation Criteria Sources of Info Organizational constraints Environmental Constraints Likely alternative offers Individual preferences formed Organizational preferences Organizational choices

46. Interpersonal Dynamics Organizational buying behavior ultimately influenced by forces within the organization. it is understand and examine the influence of purchasing activities on organizational buyer behavior and how groups and individuals differ in their approach. Prof. Raghavendran.V 32

47. Purchasing influence on BB Material requirement planning Just in time purchasing Centralized purchasing Prof. Raghavendran.V 33

48. Joint decision making Characteristics of the firm ( Employees, Function of the firm) Buying center interaction patterns Vertical involvement Lateral involvement Extensivity Connectedness Prof. Raghavendran.V 34

49. Psychological Factors influencing individual decision making Differences in role orientation Differences in information exposure Perceived risk in the vendor selection process Prof. Raghavendran.V 35

50. Assignment time: Write in detail about conflict and decision making: Refer Reeder Referral book Prof. Raghavendran.V 36

51. END of the Module 2 Prof. Raghavendran. V Prof. Raghavendran.V 37