1. CHAPTER 2 THE ORGANIZATIONAL BUYING PROCESS

2. Important Topics of the Chapter Changing Role of Business Buyer. The Business Buying Process. Business Buying and Buying Center. Environmental Forces and Buying Decision.

3. Objectives of Business Buyers Availability of Product/service. Reliability of sellers. Consistency of quality, delivery and price. Decision by business buyers directly effects to cost and profitability.

4. Changing Role of Buyer Relationship marketing Alliances and strategic partnership understanding the needs treating as a partner employees are friendly with customers providing quality service Profile of a business buyer 36-45 years old and at least 15 years experience have degree in business Women are gradually increasing

5. Value Analysis Developed by GE in 1940s. It aims at studying products and all its components to improve quality, lower cost with more stable supply. It exchanges efficiency and profitability. It may be used for vendor cooperation with lower cost. Its purpose to secure improved performance with approach It cannot be implemented without input from production, purchasing and marketing.

6. Make-or-Buy Analysis It may be generated because of poor vendor performance. Ascertaining Profitability All cost must be considered such as delivery, direct labor, purchasing and opportunity Resources in maximizing production, managerial and financial capabilities can be formalized Profitability of the organization is higher

7. Make-or-Buy Analysis(cont.) Manufacturing Make-or Buy decision will be based upon, if: Items are required in large volume and suppliers are unreliable. They are adopted in manufacturing facility. It is cheaper to produce than purchasing from a vendor. It is not protected by patent rights.

8. Negotiation It is the art of bringing two sides together to obtain desired objectives. It is a technique of communicating ideas. It represents a structural process related to quality, quantity, payment term and service. The both sides should show self-confidence, self- esteem, courage, flexibility, patience, and understanding of need satisfaction, tolerance, and intelligence.

9. Negotiation Buyer and Seller Strengths The unprepared side may loose the negotiation. Buyer and seller must know each other. At the end both side must win something and feeling good. Differences must be identified and resolved for complete satisfaction. Understanding the outcomes may allow negotiators more flexibility in choosing the negotiation behavior adopted.

10. The Business Buying process Recognizing the need Developing Product Specifications Soliciting Bids from suppliers Making the purchase decision Issuing the contract Inspecting delivered goods Evaluating vender performance

11. Evaluating Potential Vendor Performance analysis Efficiency, reliability and cost Plant visit Geographic location Capacity quality and price requirements

12. Business Buying Situation New-Task Modified-Rebuy Straight-Rebuy

13. The Buying Center Users Gatekeepers Influencers Deciders Buyers

14. Materials Management Concept It is the flow of goods for manufacturing operations. It expands to raw materials, component parts, and inventory control along with being an important tool in planning and forecasting. Alternative approaches Traditional Just-in-time Kanban Integrated Supply Chain Partnering management usually develop between a purchaser and a distributor on an intermediate to long-term basis.

15. Environmental Forces and Buying Decision Economic Environment Derived nature of business demand Physical Environment Geographic characteristics of region The Competitive Environment Technological Environment Knowledge explosion Legal-Political Environment-FDA, FTC The Ethical Environment

16. Business Buying Motives Businesses are not buying for themselves. They are buying for their business. Therefore, they try to: reduce uncertainty in quality and service select a supplier with the most favorable value use multiple sources Use psychology-human side of selling/ buying

17. Behavioral Clues in Buying Power and formal authority often go together. Communication with the buying-center power-holders is necessary. Use your experiences to know who is the powerful buyer. The most powerful buying-center members are probably not easily identified

18. Behavioral Clues in Buying (Cont.) No correlation exists between the functional area of manager and his or her power within the company.

19. Purchasing Organizations Purchasing functions what to buy in what quantities at what time from what sources with what procedures Implementation function requisition ordering receiving and paying

20. Purchasing Organization (Cont.) Organization structure under the production and manufacturing division under the control of top management Separate buying department Centralized Vs. Decentralized Buying Control process Independent in decision making understanding the differences in needs developed goodwill through local distributor

21. Purchasing Organization (Cont.) Centralized purchasing Standardization becomes easier Administrative duplication is eliminated Provides faster delivery and lower cost Better control over purchasing Provides better specialization and expertise in purchasing