1. How would you differentiate between organizational buying and individual buying? Taking the example of purchase of a computer for your personal use and for organizational purposes, explain the differences.
Definition of organizational buying:
Webster and wind define organizational buying as follows:
‘Organizational buying is a complex process of decision making and communication, which takes place over time, involving several organization members and relationship with other firms and institutions. ( Ignou Text book).
‘Organizational buying is the decision making process by which formal organizations establish the need for purchased products and services and identify, evaluate and choose among the alternative brands and suppliers’ ( Webster and Wind- Philip Kotler 12E , Page 196)
Definition of individual Buying or Consumer buying:
Individual buying is defined as follows
“The decision process and physical activity engaged in when evaluating, acquiring, using or disposing of goods and services”( Ignou Text Book)
Some features of organizational buying are as follows:
1. Multi person buying activity
In most of the situations in many organizations buying will be a multi person activity. Though every organization will have ‘material management’ and ‘procurement’ departments which will conduct ‘buying activity’ its decisions are based on feedback from concerned persons from different departments. Persons involved in such decision process may also be from different hierarchy and background such as managers, technicians, marketing personnel, finance controllers and users of the product. Moreover each persons involved in buying process may play different roles.
For example in EQUATE Petrochemical Company purchase of computers for Marketing department involve following roles: • Users- Marketing Department Staff
• Influencers: Business Director, Regional Sales Manager, IT quality controllers etc. • Deciders: Committee appointed by the Marketing Department • Buyers: Persons appointed by the ‘material management department to make IT related purchases. • Coordinators: Administrative persons who are following up activities from placing the order through Internal SAP system to the delivery of goods.
2. Formal activity where organizational procedures are followed.
Buying in an organization is a formal activities in which regular set of procedures are followed. Sometimes there are contracts between organization and suppliers to comply with certain conditions during all kinds of purchasing activities.
For examples while buying a computer for the organization following procedures are followed in EQUATE Petrochemical Company. • Office Administrator will raise ITSR ( IT Service Request) requesting computer for himself through the system. • Manager will give former approval the request through the system. • IT manager will receive the approval through the system and request the office administrator to raise PO (Purchase Order ) through SAP system mentioning the Cost Center ( in order to charge it against the concerned department’s budget). • Office administrator will raise PO ( Purchase Order) through SAP system mentioning specifications and budget, unloading point and other particulars. • Buyer from Material Management will receive the request and will make purchase of the material with the regular vendor with whom company has contract. • Product will be delivered to the department
3. Longer time lag between efforts and results
Due to work processes and procedures organizational buying will take long time. In EQUATE any purchase of Computers may require 15 days time from the date of ITSR ( IT Service Request) to the formal delivery of goods. Meanwhile if the organizational is of complex nature and if hierarchy to approve the procedure are many, then it will take further long time. Normally in ministries and government organizations, due to bureaucratic set up , any purchase...
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