Marketing Management, MBA – University of Nairobi, Kenya

Executive Summary

Business organizations do not only sell; they also buy vast quantities of raw materials,
manufactured components, equipment, supplies, and business services. Business buyers
purchase goods and services to achieve specific goals, such as making money, reducing
operating costs, and satisfying social or legal obligations.

In contrast to consumer buying, buying decisions in a business setting are mostly made by a
group of individuals. This group is referred to as the buying center. This term paper, seeks
to identify the composition of this decision making unit, and to identify the possible roles
that its members may play. It also identifies the factors that influence the buying center and
expounds on the challenges it faces. Finally it suggests some of the ways in which the
effectiveness of this important unit can be improved.

To help bring out these issues, a study of the buying center at Mater Hospital, a leading
healthcare institution in Nairobi was done. Mater has defined and documented procedures
for most of its functions, including its buying activities in pursuit of a high level of quality.
It has been awarded the Kenya Quality Award by the Kenya Bureau of Standards.

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1. Introduction

Mater Hospital located in the Kenyan capital Nairobi. Founded in 1962 by a group of
Catholic sisters, the Sisters of Mercy, it has since grown to be one is one of the most
successful privately owned hospitals in the East African region. Operating as a non-profit
trust, the hospital offers a wide range of health-care services and hosts the regions best rated
heart unit. Recently, it became the first hospital in the country to be awarded the Kenya
Quality Award by the Kenya Bureau of Standards. Mater has documented all its procedures
to ensure top quality standards. Its procurement procedures also underwent the same
process. Below, we analyze the nature, processes, challenges and steps that are being taken
to improve organizational buying at the hospital.

A buying center (also known as a decision making unit), is a group of employees

responsible for purchasing an item for the organization.

Webster and Wind call the decision-making unit of a buying organization the buying center.
The buying center is composed of “all those individuals and groups who participate in the
purchasing decision-making process, who share some common goals and the risks arising
from the decisions.”

Hill and Hillier (1977) says “the DMU consist of the individuals who actively participate in
the decision when it is in the negative and zero states”

2. Buying center roles

In the consumer market a very large percentage of purchase decisions are made by a single
person. The business market is significantly different. While single person purchasing is
not unusual, especially within a small company, a significant percentage of business
buying, especially within larger organizations, requires the input of many.

In the marketing literature those associated with the purchase decision are known to be part
of a Buying Center, which consists of individuals within an organization that perform one
or more of the following roles:

• Buyer – responsible for managing company purchases. He/she supervises all purchases
made by the company and identifies the suppliers to be used by the company. This
person, however, is not the person who decides. Whenever the purchase does not
involve the purchasing department, the purchaser can be someone from another
department within the organization. dealing with suppliers and placing orders (e.g.,
purchasing department

• Decider/decision maker – this is the key person. s/he has the power to commit the firm
to the supplier. – has the power to make the final purchase decision e.g. C.E.O

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• Influencer – this is the person who influences the ultimate purchase. Such a person can
be a member of the organization or may well be part of the external organization has
the ability to affect what is ordered such as setting order specifications e.g. engineers,
Doctors
• User – they receive the goods purchased. This person is often at the origin of demand
and can influence the initial stages of the purchase and the evaluation of the offer. those
who will actually use the product when it is received e.g. office staff

• Initiator – any buying center member who is the first to determine that a need exists

• Gatekeeper –controls communications between members of the buying unit and their
relationship with the supplier involved. This person is also the purchaser. In our case
(mater hospital) he has the capacity to blacklist a supplier, they do not necessarily have
the authority to make the final decision.– anyone who controls access to other buying
center members e.g. the administrative assistant

• Approvers - People who authorize the proposed actions of deciders or buyers. E.g. for
Mater Hospital these are the Governing Council representatives

3. Types of Business Purchase Decisions

a) Straight Re-Purchase

These purchase situations involve routine ordering. In most cases buyers simply reorder
the same products or services that were previously purchased. In fact, many larger
companies have programmed re-purchases into an automated ordering system that initiates
electronic orders when inventory falls below a certain pre-determined level.

b) Modified Re-Purchase

These purchases occur when products or services previously considered a straight re-
purchase are for some reason now under a re-evaluation process. There are many reasons
why a product is moved to the status of a modified re-purchase. Some of these reasons
include: end of purchase contract period, change in who is involved in making the
purchase, supplier is removed from an approved suppliers list, mandate from top level of
organization to re-evaluate all purchasing, or strong marketing effort by competitors.

c) New Task Purchase

As the name suggests, these purchases are ones the buyer has never or rarely made before.
In some ways new task purchases can be considered as either minor or major depending on
the total cost or overall importance of the purchase. In either case the buyer will spend
considerably more time evaluating alternatives. For example, if faced with a major new
task purchase, which often involves complex items, such as computer systems, buildings,
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robotic assembly lines, etc., the purchase cycle from first recognizing the need to placement
of the order may be months or even years.

4. Composition of a buying center

In a business setting, major purchases typically require input from various parts of the
organization, including finance, accounting, purchasing, information technology
management, and senior management.

Highly technical purchases, such as information systems or production equipment, also

require the expertise of technical specialists. In some cases the buying center is an informal
ad hoc group, but in other cases, it is a formally sanctioned group with specific mandates,
criteria, and procedures. The employees that constitute the buying center will vary
depending on the item being purchased. As depicted in the following table composition
depends on the type of decision to be made.

Committee Composition Type of Decision Frequency of

Meetings
Central  Chief executive officer Capital nature Meet on ad hoc
Tender  Financial controller basis
Committee  Procurement manager
 Legal officer
 Quality analyst
 Medical Director
 Member of governing council
 Expert/specialist who
prepares tender documents
Annual  Representatives from section High cost but recurrent Annual meeting
Tender or department expenditure e.g. drugs,
Committee  Procurement specialist surgical equipments

Table: Composition of a buying center (Case study: Mater Hospital)

5. Buyer decision process

Mater purchases a wide range of goods and services for its operations. These range from
medicinal drugs, medical equipment, foodstuffs, cleaning services, communication services
etc.

Mater Hospital like any other organization follows the same five-step buying process faced
by consumers:

• Need Recognition
• Search
• Evaluate Options
• Purchase
• After-Purchase Evaluation.

a) Need Recognition
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At Mater Hospital needs arise from just about anywhere within the organization. The
Buying Center concept shows that Initiators are the first organizational members to
recognize a need.

In most situations the Initiator is also the User or Buyer. Users are inclined to identify the
need for new solutions (i.e., new drugs) while buyers are more likely to identify the need to
re-purchase products.

As part of this step, a specifications document may be generated that lays out the
requirements of the product or service to be purchased. Several members of the buying
center may be involved in creation of the specifications.

b) Search

The primary intention of their search efforts is to identify multiple suppliers who meet
product specifications and then, through a screening process, offer a selected group the
opportunity to present their products to members of the Buying Center. Mater Hospital
keeps a database of approved suppliers to make search process easy.

c) Evaluate Option

Once the search has produced options, members of the Buying Center may then choose
among the alternatives. In more advanced purchase situations, members of the Buying
Center may evaluate each option using a checklist of features and benefits sought by the
buyer.

Each feature/benefit is assigned a weight that corresponds to its importance to the purchase
decision. In some cases the hospital requires that, suppliers must submit bids with the
lowest bidder often being awarded the order, assuming products or services meet
specifications.

d) Purchase

At Mater Hospital this role is played by the procurement department

to actually place the order may require the completion of paperwork (or electronic
documents) such as a purchase order. Acquiring the necessary approvals can delay the
order for an extended period of time. And for very large purchases, such as expensive
surgical equipments or large equipments, financing options may need to be explored.

e) After-Purchase Evaluation

After the order is received the purchasing company may spend time reviewing the results of
the purchase. This may involve the Buyer discussing product performance issues with
Users. If the product is well received it may end up moving to a straight re-purchase status
thus eliminating much of the evaluation process on future purchases.

6. Major Influences on Business Buying

Business buyers respond to many influences when making buying decisions. When
supplier offerings are similar, buyers can satisfy the purchasing requirements with any
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supplier and they place more weight on the personal treatment they receive. When
supplier offerings differ substantially, buyers are more accountable for their choices and
pay more attention to economic factors. Buyers at Mater Hospital respond to four main
influences: environmental, organizational, interpersonal, individual and culture.

Environmental Factors

A number of environmental factors influence on the buying center. An example is the

bargaining power of suppliers. Mater Hospital occasionally makes high cost purchases
such as hospital equipment. In some cases only one supplier of the machinery is
available and the hospital’s bargaining position with regards to price and other offerings
is weakened.

Factors in the economic environment such as the exchange rate influence decisions
whether to do a local purchase of import required hospital supplies.

Concerns about the pollution of the natural environment, such as disposal of certain
hospital supplies influence decisions on their purchase.

Cultural Factors

Cultural factors may also have an influence on the buying center. Negative cultural
influences not only reduce the effectiveness of the buying center but present a
disadvantage to business marketers.

Relationships in Kenya are very strong along family lines. This has sometimes
manifested itself negatively in form of nepotism, where persons making purchasing
decisions may decide to grant supply contracts to their relatives. Mater recognizes
chances of this happening and prohibits it in its procurement manual.

“Employees of the Mater Hospital or their relatives (i.e. spouses, children etc) shall not
be vendors or contractors.”

Corruption has also been a big problem for African countries, Kenya included. Although
mostly evident in government buying, the private sector has not been an exception.
Mater hospital recognizes corruption as a possible negative influence on it buying
processes and attempts to deal with it in its procurement manual

“Procurement Staff shall not use their positions to exert improper influence over
suppliers and shall not offer, pay or accept bribes in any form. The practice of soliciting
gifts or gratuities of any kind from suppliers or prospective suppliers is expressly
forbidden.”

Organizational Factors

Every organization has specific purchasing objectives, policies, procedures,

organizational structures, and systems. Consequently, these organizational plans have an
influence on the structure, composition and functioning of the buying center. A major
organizational factor that manifests itself at Mater Hospital’s buying center is its balance
between centralized and decentralized decision making. Decisions on purchase worth

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Kshs. 1 million and above are made by the governing council at the headquarters, while
for those worth KSh. 250,000 have to involve the CEO.

The organization’s policies also come into play. For example purchases that are of a
capital nature are handled by a central tender committee, which includes the CEO.
Decisions on high cost but recurrent expenditure e.g. drugs, surgical equipments are
handled by the annual tender committee which is chaired by the procurement department
manager.

Interpersonal Factors

Buying centers usually include several participants with differing interests, authority,
status, empathy, and persuasiveness. The business marketer is not likely to know what
kind of group dynamics take place during the buying decision process. Therefore,
successful ones strive to find out as much as possible about individual buying center
participants and their interaction and train sales personnel and others from the marketing
organization to be more attuned to the influence of interpersonal factors.

Individual Factors

Each buyer carries personal motivations, perceptions, and preferences, as influenced by

the buyer’s age, income, education, job position, personality, attitudes toward risk, and
culture. Moreover, buyers definitely exhibit different buying styles. Marketers
approaching Mater Hospital need to understand these factors can better prepare
marketers for dealing with individuals within the buying center.

7. Challenges faced by the Mater Hospital’s buying center

a) Breach of confidentiality

Due to the fact that several people are involved and access the buying center information,
information might sometimes be divulged to competing suppliers thereby interfering with
purchasing negotiations. Some members of departments may hold prior communications
with suppliers or their representatives, without the knowledge of the buying center
members.

Mater hospital requires that all purchasing personnel treat information received from
suppliers in a responsible way such that any proprietary or confidential information be
maintained within the hospital and is not disclosed. It also requires that commercial or
technical information received from one supplier shall not be disclosed to another supplier,
either before or after the award of an order or contract

Proprietary or confidential data means pricing, conditions, specifications, etc, of suppliers

or specifications or data to Mater Hospital.

Suppliers often request information pertaining to their failure to win an order or contract.
Whilst non-commercial reasons for failure, e.g. technical safety, capacity etc may be
disclosed, commercial information, e.g. price differences, discounts etc may not be
divulged.
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b) Conflict of interest by buying center members

While the Mater Hospital purchasing program is based on honesty, fairness, personal
integrity and impartiality toward suppliers, actions of employees may not always reflect and
enhance these traits and may have personal financial interest in the procurement process.

Conflict of Interest exists when any outside interest may inhibit or influence an employee’s
business judgment, or when an employee takes advantage of benefits due to the Hospital.

This could involve the practice of soliciting gifts or gratuities of any kind from suppliers or
prospective suppliers or having employees of the Mater Hospital or their relatives (i.e.
spouses, children etc) as vendors or contractors.

c) Maintaining a large Supplier Base

The Mater Hospital maintains a supplier base of over 100 suppliers who have been
subjected to supplier evaluation, selection and appraisal (SESPA) Process. This is a tedious
process that has to be done continuously. Quality critical goods suppliers or high
volume/shilling value suppliers are evaluated as a minimum annually.

d) Delays in decision making as a result of supplier evaluation, selection and

performance appraisal (SESPA).

All suppliers are subjected to supplier evaluation, selection and performance appraisal
(SESPA) process. This process is carried out by a team composed of representatives
(stakeholders) from user Departments who are most affected by the services of the potential
supplier and those from Finance, Quality Assurance and Procurement.

The process takes long as representatives of the user departments are not always available.
This also means the representatives will be absent from their duty work stations carrying
out other duties that are not core.

e) Bureaucratic purchasing procedures

Supply requisitions will trigger off the purchasing process after need has been determined
either through a stock out or re-order point (ROP). The buyers then forward all supply
requisitions with prices to the originators budget holders or head of departments for
approvals depending on limits of authority.

This process takes long especially when budget holders are unavailable for approval and
may result to order delays.

f) Abuse of Blanket Purchaser Order

Blanket purchase order is an agreement to purchase specified items over a stated period of
time and identified prices, terms and conditions, delivery schedule etc. Blanket purchase
orders can be utilized for repetitive purchases of equipment, materials or services from a
particular supplier over an established period of time.

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Blanket orders can be abused where market prices for supplies been revised downwards but
the buyer continues to requisition for them at the company approved prices.

g) Delays awaiting authorized Signatories

In the event that the signatories mentioned in section 4 above are not available, purchase
orders are signed by company bank signatories and later countersigned by procurement
manager when he/she is available.

h) Different objectives

For instance, the Decider, who may be the company president, wants to make sure the
purchase will not negatively affect the company’s bottom line, the Buyer wants to be
assured the product will be delivered on time. Focus on prices at the expense of brand
performance.

In these cases the decision to buy is often whittled down to one concern – which has the
lowest price.

i) Decision Making Time

Depending on the product, business purchase decisions can drag on for an extensive
period. Unlike consumer markets where impulse purchasing is rampant, the number of
people involved in business purchase decisions results in decisions taking weeks, months or
even years. They also have to follow the organizations policies - request for contracts,
quotations, proposals etc.

j) Unavailability of the Buying center members

The members of the buying center are usually very busy and sometimes its difficult to
convene the meetings especially when they are required to avail themselves for a whole day

8. Improving efficiency of the buying center

The following measures have been put in place at Mater Hospital. In respect of specific
functions within purchasing are as follows, so that for every purchase decision, every
member of the buying centre has their role clearly defined. This has had the effect of
improving the speed with which purchase decisions are made:

a) Defining Responsibilities

In respect of specific purchasing functions, responsibilities are defined as follows

• Procurement Manager

He/She is responsible for the formulation of purchasing policies, practices, and

procedures, and to direct and supervise the activities of the procurement section.
All policy matters will however be agreed with the Chief Executive Officer.

• Senior Buyer and Buyers

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 Senior Buyer and buyers are responsible for purchasing equipment, goods and
services, both stock and non-stock items on behalf of the Hospital and as required
for the various operations serviced by the procurement section.

This includes sourcing, vendor selection commercial negotiation, placing as well as

capturing of purchase orders, communication with suppliers and expediting of
outstanding purchase orders.
In addition the buyers are responsible for ensuring that all customer/supplier queries
are dealt with expeditiously.

• Purchasing Assistant (PA)

The PA is responsible for clerical functions in support of the day-to-day purchasing

activities, including logging and tracking of all requisitions, preparation of orders
and correspondence, filing, processing of price variation, preparing and processing
of import documentation.

• Stores Coordinator

The stores coordinator is responsible for receiving, storing, issuing and accounting
for stocks in all stores locations and coordinating setting of stock levels. He is
responsible for the inventory management processes that trigger of timely
replenishment of stocks including raising of on line supply requisitions.

He is therefore responsible for generating on line supply requisitions and vetting of

all the supply requisitions for non-stock items raised by user departments. He is
also responsible for disposal of obsolete, scrap and surplus stocks.

b) Delegation of Authority

All purchase orders are generated from a duly authorized Purchase/Stock requisition by
respective Heads of Department. Approvals from the Tender Committee are deemed duly
authorized from signed minutes of the committee.

The purchase order constitutes a formal contract between the company and a vendor and
depending on the total order value Mater has adopted the following authorization policy:

All orders are signed by the buyer responsible based on limits of authority as indicated
below:
• Buyers up to Ksh.. 50,000
• Senior buyer up to Ksh. 75,000
• Procurement Manager up to Ksh. 250,000
• CEO above Ksh. 250,000

The limits for financial commitment are as follows:

• Up to Ksh. 200,000 – Manager Financial Accounting
• Ksh. 201,000 – 500,000 – Financial Controller
• Ksh. 500,000 – 1,000,000 – CEO

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 • Above Ksh. 1,000,000 – Governing Council Representative.

c) Purchasing Policies And Procedure

No one has the authority to divulge information that would interfere with purchasing
negotiations, except with approval of the procurement manager or Chief Executive Officer.
In all such cases, the purchasing officer is kept advised and receives copies of all
correspondence.

The Procurement Section employs the best operating practices (BOP) to reduce cost across
the board by sourcing from the best in class suppliers that offer reduced acquisition costs
and the necessary reliability that compresses the delivery cycle time and cut on production
costs.

d) Ethics

The Mater Hospital purchasing program is based on honesty, fairness, personal integrity
and impartiality toward suppliers. Employee actions are expected to reflect and enhance
these traits.

Personal financial interest or benefit of any kind resulting from personnel having interest,
either direct or indirect, financial or otherwise, in any enterprise or profession doing
business with the Hospital is prohibited under all circumstances.

Procurement Staff are not allowed to use their positions to exert improper influence over
suppliers and should not offer, pay or accept bribes in any form. The practice of soliciting
gifts or gratuities of any kind from suppliers or prospective suppliers is expressly forbidden.

Employees of the Mater Hospital or their relatives (i.e. spouses, children etc) are not
allowed to be vendors or contractors.

e) Supplier Base and Supplier Relationships

Supplier relationships are considered important resources and as such, they are developed
and maintained in the most ethical manner. These relationships are maintained with
suppliers who have been subjected to supplier evaluation, selection and appraisal (SESPA)
Process. Normally the Mater Hospital maintains a supplier base not exceeding 150
suppliers.

The Procurement Department is the initial and primary contact point for those wishing to
sell equipment, materials, and services to the Hospital.

Persons visiting the Mater Hospital with the intent to solicit purchase orders are referred to
the appropriate purchasing authority that may at his/her discretion, refer them to other
personnel.

f) Confidentiality

The purchasing personnel will treat information received from suppliers in a responsible
way such that any proprietary or confidential information be maintained within the Hospital

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and is not disclosed. Commercial or technical information received from one supplier shall
not be disclosed to another supplier, either before or after the award of an order or contract.

Proprietary or confidential data shall mean pricing, conditions, specifications, etc, of

suppliers or shall mean specifications or data to Mater Hospital.

Should the hospital’s proprietary or confidential information be required to be sent to

vendors for purposes of bidding and/or purchasing, it is the responsibility of the purchasing
section to ensure that the vendor completes, acknowledges, and returns the applicable
secrecy declaration form prior to being furnished the data considered proprietary.

g) Supplier, Evaluation, Selection and Performance Appraisal (SESPA).

All suppliers are subjected to Supplier, evaluation, Selection and performance Appraisal
(SESPA) process. This process is carried out by a team composed of representatives
(Stakeholders) from User Departments who will be most affected by the services of the
potential supplier and those from Finance, Quality Assurance and Procurement.

The Procurement Manager is responsible for forming the team. The main purchasing
function being to monitor, evaluate and document supplier performance on a continuous
basis for major or crucial suppliers, and suppliers of quality critical items in accordance
with the Mater Hospital’s standard supplier selection and Appraisal Process (SESPA).

h) Supply Requisition

The buyers forward all supply requisitions with prices to the originators budget holders or
heads of departments for approvals depending on limits of Authority. Prices are obtained
from the following sources:

• Quotations or Enquiries from Suppliers

• Contract prices
• Price lists
• Recent purchase orders
• Market Research Reports or just the market
• Purchasing journals and market reports

i) Computerized Purchasing System

Procurement makes use of available computer software to computerize purchasing and

inventory management. Current system in use is Lifeline.
The system will allow Procurement personnel to create, change, and expedite purchase
orders on-line.

j) Blanket Purchaser Order

Blanket purchase orders can be utilized for repetitive purchases of equipment, materials or
services from a particular supplier over an established period of time. Blanket orders

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should not be utilized as substitution to competitive bidding and should be reviewed and
bids invited competitively yearly or otherwise established period.

8.0 Conclusion

The buying center at Mater hospital involves a number of individuals playing a variety of
roles; including users, buyers, influencers and deciders. The composition of the center
varies with each class of purchasing decisions; from direct purchase of low cost and routine
supplies being handled by procurement staff, to the annual tender committee being
responsible for high cost but fairly routine purchases such as insurance services. A central
tender committee decides on purchases of a capital nature.

A number of factors influence buying decisions at the hospital, including organizational

factors such as centralized decision making and environmental factors such as bargaining
power of suppliers.

The buying center at Mater hospital faces a number of challenges such as delays associated
with group decisions, ethical issues such as corruption and at times and inflexible
organizational structure.

The hospital has taken a number of steps to improve the effectiveness of the buying center.
Most of these are documented in a procurement manual, a document that consists of
policies, procedures and guidelines for obtaining materials, supplies, equipment, contractual
services and all other items.

However more needs to be done to further improve the effectiveness and efficiency of this
important decision making unit. These include defining clear responsibilities for temporary
purchasing committee members, eliminating negative influences such as nepotism and
corruption and improved confidentiality during tendering.

References
1. Trondsen, T. J. Some Characteristics of Adopters of a Major Innovation in the
Computer Field and Its Potential Use in Marketing. Industrial Marketing
Management Volume: 25 Issue: 6 (November 1996), pp: 567-576
2. F. E. Webster and Y. Wind, 'Organizational Buying Behavior ' (Prentice-Hall, 1972)
3. D. Mercer, ‘Marketing’ (Blackwell, 1996)
4. Marketing Management – Philip Kotler
5. Business Buying –
6. Mater Hospital Procurement Manual
7. Mater Hospital Website

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