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Organizational Buying

Organizational buying, also known as business-to-business (B2B) buying, refers to the process in which businesses or organizations make purchasing decisions to acquire goods, services, or resources for their operations. Unlike consumer buying, organizational buying involves more complex decision-making processes, multiple stakeholders, and a focus on long-term relationships with suppliers. This mind map aims to provide a comprehensive overview of organizational buying, exploring its key components, influencing factors, and strategies. By visually mapping out the various aspects and considerations involved in organizational buying, we will delve into topics such as the buying center, decision-making models, supplier evaluation and selection, negotiation tactics, and post-purchase evaluation.

Edited at 2023-05-13 10:50:18

Tran Dai Nghia

Recent works View more works>>

Organizational Buying
Organizational buying, also known as business-to-business (B2B) buying, refers to the process in which businesses or organizations make purchasing decisions to acquire goods, services, or resources for their operations. Unlike consumer buying, organizational buying involves more complex decision-making processes, multiple stakeholders, and a focus on long-term relationships with suppliers. This mind map aims to provide a comprehensive overview of organizational buying, exploring its key components, influencing factors, and strategies. By visually mapping out the various aspects and considerations involved in organizational buying, we will delve into topics such as the buying center, decision-making models, supplier evaluation and selection, negotiation tactics, and post-purchase evaluation.

Organizational Buying

Tran Dai Nghia

Recent works View more works>>

Organizational Buying
Organizational buying, also known as business-to-business (B2B) buying, refers to the process in which businesses or organizations make purchasing decisions to acquire goods, services, or resources for their operations. Unlike consumer buying, organizational buying involves more complex decision-making processes, multiple stakeholders, and a focus on long-term relationships with suppliers. This mind map aims to provide a comprehensive overview of organizational buying, exploring its key components, influencing factors, and strategies. By visually mapping out the various aspects and considerations involved in organizational buying, we will delve into topics such as the buying center, decision-making models, supplier evaluation and selection, negotiation tactics, and post-purchase evaluation.

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Organizational buying

1. Buy class

- New task

- When the need for the product has not arisen previously

- Senior management, engineers, production managers and purchasing officers are likely to be involved.

- At the start of the decision-making process

- By providing information and helping with any technical problems that can arise

- Create goodwill and creeping commitment, which secures the order when the final decision is made.

- Likely to be long, and many people are involved

- Supplier companies need to

invest heavily in sales human resources for a considerable period of time

- Missionary sales teams comprising their best salespeople to help secure big new-task orders

- Straight re-buy

- Where an organization buys previously purchased items from suppliers already judged acceptable

- Routine purchasing procedures are set up to facilitate straight re-buys

- Possibly only the purchasing officer is involved

- Often involve engineers, production managers and purchasing officers, but senior management, except when the purchase is critical to the company, are unlikely to be involved.

- When in the position of the supplier

- Must ensure that no change occurs

- Contact to ensure that the customer

- Have no complaints may be necessary, and the buyer may be encouraged to use automatic recording systems

- For the non-supplier

- Has a difficult task unless poor service or some other factor has caused the buyer to become dissatisfied with the present supplier

- The obvious objective is to change the buy class from a straight re-buy to a modified re-buy

- Price alone may not be enough since changing supplier represents a large personal risk to the purchasing officer.

- The new supplier’s products

- Might be less reliable and delivery might be unpredictable

- In order to reduce this risk,

- the salesperson may offer delivery guarantees with penalty clauses and be very willing to accept a small order at first in order to gain a foothold

- Supplier acquisition of a total quality management standard such as BS5750

- The effect of reducing perceived buyer risk

- Necessary to agree to undertake a buyer’s supplier quality assurance programmer

- Organized on a contract basis and buyers may be more receptive to listening to non-supplier salespeople prior to contract renewal.

- Modified re-buy

- Between the two extremes

- A regular requirement for the type of product exists and the buying alternatives are known, but sufficient change has occurred to require some alteration of the normal supply procedure

- Often involve engineers, production managers and purchasing officers

- Value analysis

- Conducted by either supplier or buyer

- Method of cost reduction in which components are examined to see if they can be made more cheaply.

- The items are studied to identify unnecessary costs that do not add to the reliability or functionality of the product.

- Standardising or manufacturing by less expensive means, a supplier may be able to offer a product of comparable quality at lower cost

- Simple redesigns such as changing a curved edge

- Life-cycle cost calculations

- Move the cost focus from the initial purchase price to the total cost of owning and using a product.

- Three types

- Purchase price

- Would be placed residual values

- Start-up costs

- Include installation, lost production and training costs

- Post-purchase costs

- Include operating, maintenance, repair and inventory costs

- Can be powerful motivators

- DMU

- The structure

of the DMU changes

- Influencing DMU members, they are likely to be

much more receptive in new task

- modified re-buy situations than for straight re-buys.

- The decision-making process is likely to be much longer as the buy class changes from a straight re-buy to modified re-buy

- The purchasing manager has already solved the purchasing problems and has other problems to deal with

2. Product type

- Product constituents

- Materials

- Components

- Design engineers tend to be involved

- Product facilities

- Capital plant and equipment

- Products and services

- MROs

- Tend to differ according to product type

- Rarely do they involve themselves

- Tends to be slower and more complex as product type moves from: MRO -> Components -> Materials -> Plant and equipment

- MRO items

- 'Blanket contracts' rather than periodic purchase orders are increasingly being used

- The supplier agrees to resupply the buyer on agreed price terms over a period of time

- Stock is held by the seller and orders are automatically printed out by the buyer's computer when stock falls below a minimum level.

- This has the advantage to the supplying companyof effectively blocking the efforts of the competitors' salesforces for long periods of time.

- Classification of suppliers' offerings by product type gives the salesforce clues about who is likely to be influential in the purchase decision.

- The sales task is then to confirm this in particular situations and attempt to reach those people involved.

- likely to be wasting effort attempting to talk to design engineers, whereas attempts to reach operating management are likely to prove fruitful

3. Importance of purchase to buying organisation

- A purchase is likely to be perceived as important to the buying organization when it involves large sums of money, when the cost of making the wrong decision, for example in lost production, is high and when there is considerable uncertainty about the outcome of alternative offerings.

- In such situations, many people at different organisational levels are likely to beinvolved in the decision and the process is likely to be long, with extensive search and analysis of information.

- Thus extensive marketing effort is likely to be required, but great opportunities present themselves to sales teams who work with buying organizations to convince them that their offering has the best payoff; this may involve acceptance trials

- Guarantees of delivery dates and after-sales service may be necessary when buyer uncertainty regarding these factors is high.