Back to: Marketing SS1
Oganisation buying is the decision-making process by which formal organisations establish the need for purchased products and services and identify, evaluate and choose among alternative brands and suppliers.
Some of the characteristics of organisational buyers are:
1. Consumer market is a huge market in millions of consumers where organisational buyers are limited in number for most of the products.
2. The purchases are in large quantities.
3. Close relationships and service are required.
4. Demand is derived from the production and sales of buyers.
5. Demand fluctuations are high as purchases from business buyers magnify fluctuation in demand for their products.
6. The organisational buyers are trained professionals in purchasing.
7. Several persons in organisations influence purchase.
8. Lot of buying occurs in direct dealing with the manufacturer.
FACTORS THAT INFLUENCE ORGANISATIONAL BUYING BEHAVIOUR
Organisational buying is much more complex than consumer buying, and thus deserves to be studied separately. The entwined interpersonal relationships and the multiple communication processes between the organisational members involved in the buying decision process are some of the major contributors to this complexity. The list of affecting factors is not limited to these; there are many more important ones such as:
1. External Environmental Factor As a major constraint under which a business operates, the external environment impacts nearly every aspect of a business, including its buying decisions. Here is a list of the external elements that affect organisational buying.
(a) Economic conditions: The fluctuations in the money markets and the interest rates have a major impact on the buying strategies. The interest rates and organisational buying have an inverse relation; in most cases, an increase in the interest rates may bring about a drop in the buying.
(b) Regulatory changes: Any changes in the corporate laws, rules and regulations will also influence how, when and what the organisations buy. There are also regulatory changes that may affect only a particular industry and accordingly the related organisations will change their buying patterns to stay in line with the new regulations.
(c) Political environment: A change of the government or policy has a direct impact on the economic scenario, and this ultimately translates into a shift in the organisational buying patterns as well.
(d) Social environment: Societies and cultures are ever evolving, and every business has to change its practices and procedures to meet up with the societal changes. For instance, with the rise in the number of animal lovers, pure leather suppliers have seen a slump in their business. The clothing and footwear manufacturers have shifted to artificial leather suppliers. This points out how the social environment can affect the buying patterns of organisations.
(e) Competition: Today’s business is all about beating competition and staying ahead. So, when an organisation’s competitors move on to a newer product or service, or if they get to enjoy a competitive edge because of their suppliers, it is very likely for the organisation to change its trendstoo and thus, it’s buying pattern will change accordingly.
2. Internal Organisational Factors
More than the external factors, it is the internal organisational factors that influence the Organisational buyings. These internal factors are:
(a) Organisation’s goal and objectives: The goals and objectives of an organisation are major determinants of how and what the organisation will purchase. An organisation that wants to capture a bigger chunk of the market by selling cheaper stuff is more likely to look for suppliers who can supply larger quantities at a low price. However, a company whose goal is to deliver quality products may have a very contrasting buying pattern, and they will focus more on the quality issues than on the price advantage.
(b) Organisational structure: Hierarchical and management structures vary from one organisation to another. While some organisations have a well established purchase department, others may assign this job to the HR or Administration department. There are also organisations where the purchase decisions must be taken collectively by all concerned departments. Organisations also have well-defined guidelines as to which purchase decisions can be made and by which management level. The internal set-up and how authority and responsibility flow through it, play an important role in the organisational purchasing.
(c) Policies and procedures: How the purchase order is routed depends on the organisation’s policies. How the buying procedure begins, who will participate do and who has the ultimate authority to decide on the purchase are all dependent on the policies and procedures of the organisation. Some organisations prefer to invite public bids, while others may contact only the few suppliers on their list. There are also budgetary policies that have a say in the purchase decisions. For instance, while some organisations may have a flexible policy to make purchases as and when the need arises, others may have to wait till the allocation of the annual or biannual budget.
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