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Perspectives on the

Organizational Buyer

Dr. Neeraj Pandey

Business Market Processes


Managing
Market
Offerings

New
Offering
Realization

Business
Channel
Management
Gaining
New
Business

Marketing
Sensing

Understanding
Firms as
Customers
Crafting
Market
Strategy

Understanding
Value

Creating
Value

Delivering
Value

Guiding Principles

Sustaining
Reseller
Partnerships

Managing
Customers

Regard Value as the Cornerstone


Focus on Business Market Processes
Stress Doing Business Across Borders
Accentuate Working Relationships & Business Networks

Business Market Management is


the process of understanding, creating,
and delivering value to B-I-G.

Guiding Principles of Business


Market Management
Regard value as the cornerstone
Focus on business market management
processes
Stress working across borders
Accentuate working
business networks

relationships

and

Value as the Cornerstone of


Business Market Management
What is Value in Business Markets?

Monetary

Economic, technical, service, and social net benefit

The exchange for price paid

Fundamental Value Equation


(Value Price ) > (Valuea Pricea )
f

Offeringsf

Offeringsa

Value
Value can only be estimated.
Value changes when:
Same functionality or performance provided
while its cost changes to customer
Functionality or performance changes while
cost remains the same
Customer Incentive to Purchase
difference between value and price.

is

the

Assessing Value
Supplier firms create and deliver value to
targeted

market

segments

and

customer

characteristics
Business market management strives to both
understand and capitalize on customer and
market segment variations

Processes
How the CEO runs the company
Management How management interacts with employees
Processes How decisions get made
How communication takes place

Focus is on reengineering efforts

Business
Large, crosscutting collections of activities (product design, order
Processes fulfillment, customer service)

Work Basic building blocks of business processes


Processes How the work actually gets done
Business Market Management, 3rd edition

Chapter 1-9

A. Commercial Enterprises
Manufacturers
Construction
Service firms
Transportation
Professional
Resellers
Business marketers typically serve far fewer, but far larger, customers.

Commercial Enterprises: Unique


Characteristics
Distribution by Size
Geographical Concentration (high potential markets, hubs)
Classifying Commercial Enterprises (Large Enterprises,
SMEs, Tiny Enterprises)

The Purchasing Organization


Goals of Purchasing Function

Goals of Purchasing Function


Uninterrupted Flow of Material
Manage Inventory
Improve Quality
Developing and Managing Supplier Relationship
Achieve Lowest Total Cost

Commercial Enterprises: Unique


Characteristics
Understanding the Total Cost
Levels of Procurement Development

Firms operate at different levels of development and emphasize


different pathways to cost reduction and revenue enhancement.

Levels of Procurement Development and


Pathways to Savings/Revenue Enhancement

Segmenting Purchase Categories


1st Point, each firm has a unique portfolio.
2nd Point, more attention on purchases having the greatest impact on
revenue generation or the greatest risk to performance.

Segmenting the Buy

E-Procurement
E-Procurement Softwares: Ariba, Oracle, Emptoris,
etc.
On-line negotiation [request-for-proposal (RFP), request

for-quote (RFQ), request-for-information (RFI), Reverse Auction]

Collaboration tools [linkages with departments and supplier

through ERP]

Knowledge management [about supplier performance,

material and component cost, process flows and best practices]

Analytical Tools

Evaluating Potential Suppliers


Quality
Price
Delivery Reliability
Company Image
Capability

B. Government Contracts Programs


Compliance- requires government contractors maintain
affirmative action programs.
Set-aside- a percentage of contract set aside for small
minority businesses.
Minority-subcontractingmay
require
major
contractors to subcontract a certain percentage of
contract to minority firms.

Two Types of Contracts


1. Fixed-price contracts
A price is agreed to before contract is awarded and
payment is made at conclusion of work.
Provides for the greatest profit potential.
Poses greater risks.
2. Cost-reimbursement contracts
Reimbursement for allowable costs may be allowed;
sometimes cost-plus contracts allow costs and
certain percentage of profit.

Government Procurement
1. Ministry of Defense (MoD) - one of the
largest single enterprise in world.
2. Non-defense procurement administered
by wide variety of agencies.

Two Procurement Strategies


1. Formal Advertisingthe government solicits bids
from suppliers, and usually the lowest bidder is
awarded the contract.
2. Negotiated Contractused to purchase products or
services that are not differentiated on price alone,
competition is common.

Different Strategy for Government Client


Understanding the complex rules and standards
that must be met (DGSD (Director General of Supplies &
Disposal) , Rate Contract, Sales and Goods Act, etc.)

Developing a system to keep informed of each


agencys procurement plans
Generating a strategy for R&D and NPD that
facilities the firms response to government
product needs

Different Strategy for Government Client


Developing a communication strategy that
focuses on how technology meets agency
objectives
Generating a negotiation strategy to secure
favorable terms regarding payment, contract
completion and cost overruns due to
exchanges in product specifications

C. The Institutional Market

Schools, health
agencies.

care

organizations,

Similar to government
considerations and laws.

Similar to commercial buyers -- often managed like


corporations -- broad range of purchase requirements.

Group purchasing quite common.

buyers

non-profit
--

political

Discussions