Chapter 4

Business Government
and Institutional Buying

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
• Modified rebuy: Purchase involves
considering a limited number of alternatives
before making a selection
• New task purchase: Involves an extensive
search for information and a formal decision
process

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 Purchase Types Influences
Differences in Types of Organizational Purchases

Purchase Time Number

Complexity
Type Frame Of 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
• How marketing to organizational buyers
differs from marketing to consumers
- More variation in buyer-seller relationships
- Shorter distribution channels
- Greater emphasis on personal selling
- Greater web integration
- Unique promotional strategies

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 Structural Influences –
Purchasing Roles
Structural influences – Design of organizational
environment and how it affects the purchasing process
 Initiators
 Users
 Influencers
 Buyers
 Deciders
 Gatekeepers

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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

• 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
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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?

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 Functional Areas and their key Concerns in
Organizational Buying

• Design and development

• Production
• Sales / marketing
• Maintenance
• Finance / accounting
• Purchasing
• Quality control

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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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