PROJECT ON PURCHASING IN

SUBMITTED TO: PROF. PRASHANT SIR SUBMITTED BY: ASHWINI .A. BANSODE MMS Y.T.I.E.T

ACKNOWLEDGEMENT
We would like to confer our heartiest thanks to project guide Prof. Prashant ambavkar for giving us the opportunity to expel and work in the field of culture studies, especially its practical applications. While preparing our project we got to have an in depth knowledge of practical applications of the theoretical concepts and definitely the things which we have learned will undoubtedly help us in future, to analyze many processes going on in our culture studies. We would also like to thank all those people who directly or indirectly helped us in accomplishing this project.

Meaning of business buying behavior / Industrial buying behavior

Buyers of goods and services may be regular consumers who purchase goods/ services for meeting their regular needs or industrial buyers who purchase products such as machines, plants and office equipments, raw materials, packaging material, spare parts and components and services such as insurance, financing, consulting and transportation. Such buying is for meeting their manufacturing needs. Industrial buying is substantially more as machinery; equipments, spare parts components, etc. are required continuously for the conduct of manufacturing activities. In brief, industrial buying refers to the buying activities of organization that purchase products and services for end- use purposes. Such organization includes services organization like universities and financial firms and industrial organizations. Industrial buyers purchase a large volume of products and services than do all consumers. The terms, organizational buyer, industrial buyer and business buyer indicate the same meaning.

Derived demand for industrial goods

The demand for industrial goods is a derived demand. It is not for direct consumption. The buyers of industrial goods are located in certain areas such as Industrial Township, industrial Estates and other places where industrial activities are located. The industrial goods are costly and the buyers of industrial goods are normally smaller in number. Shorter channel is normally used for marketing industrial goods. In additional, negotiations are necessary between buyers and sellers of industrial goods.

Business buying process

According to Kotler and Armstrong, business buying process is the decision-making process by which business buyer establish the need for purchase products and services and identify, evaluate and choose among alternative brands and suppliers . Industrial/organizational buying is a lengthy process involving many decisions of complex nature. The steps that make up the process differ across c companies and products. Each organization evolves its own procedures for making purchase decisions. However, steps common to much decision provide a model of industrial buying. Industrial buyer goes through a series of steps in which sellers. Industrial buying includes several kinds of decisions.

Important buying decisions are:

Authorization to purchase the product or services. Determining product specifications. Choosing a suitable supplier for actual buying.

The buying decision process in the case of industrial buying / organizational buying is lengthy and normally involves many steps as noted below:

STEPS IN BUSINESS BUYING PROCESS:

The steps involved in the in the organizational/ business buying process are as explained below:

Need recognition:

This is the first step in the organizational buying process where the customer /buyer recognize a need for the product. Exact specifications of the product are normally not defined at this stage. Here, the buyer accepts a problem and is looking for an acceptable solution. The problem may be related to cost reduction, high productivity, quality improvement, etc. buying will be for solving such problem. In brief, industrial purchasing starts with a need for a product or service. Needs are varied and related to the operation of business. Needs recognition is not complicated and is a routine step in buying decision-making process. It is the starting point of organizational buying process.

Determining product specification/determining quality and quality characteristics: Here, the industrial buyer is more specific
about what he is looking for. He lays down specifications for the product (quantity, quality etc.) he also spells out the services requirements. Before asking supplier for additional information, the buying organization must specify product performance characteristics; quantity needed delivery and installation requirements, and price limits.

In brief, product specifications must be decided clearly so that adequate information will be collected from supplier and order can be placed quickly. Product specification gives convenience to buying organization as well as supplier/sellers.

Search for suppliers: In this, stage information is collected from suitable

supplier for placing an order. At times, organizational buyer lay down the technical and commercial qualifications for potential suppliers/vendors. This is one of the ways

by which buyers are able to screen out a large number of suppliers who may not be able to meet their requirements. This will be followed by inviting proposals from properly qualified suppliers. The proposals are collected in sealed envelopes. The invitation may be by open tender notice for all pre-qualified suppliers or the supplier may make an enquiry and submit proposal. In addition, the organizational buyer may seek proposals from only a few pre-qualified suppliers. This makes selection of supplier easy and manageable.

Analysis of proposals:

After the receipt of the proposals, the next logical step is to make scrutiny of the proposals received. Such analysis of proposals is called evaluating the proposals .such evaluation of proposals related to their requirements. If .necessary, additional information is collected from supplier for evaluation purpose. After the scrutiny of the proposals, the suitable supplier is short-listed for placement of order. Short-listing makes final selection of supplier easy.

Selection of suppliers:
Once the technical evaluation is completed and the suppliers are short-listed for final selection, the proposal is commercially evaluated. Suppliers are now assessed more carefully strictly as regards their competence in meeting the organisations requirements. This is the stage when negotiations often take place with shortlist suppliers. The supplier is selected after evaluation and negotiations. In practice, the buyer generally selects two suppliers/vendors so as to ensure uninterrupted supplies.The total quantity required is divided between the two selected suppliers.

Selection of an order routine:

During this stages, the normal routine/procedure for order placement is completed. This stage can be called determination of order size placement of order. The buyer decides the size of the order lot. If the item is raw materials, the quantity to be purchased is decided. The time table for the supply is also decided. If two suppliers are selected, the customerbuyer may choose to apportion the order among the two at this stage only. Actual order is also placed in this stages of buying process/procedure. The suppliers supply the materials as per the written order placed and the payment is also made as per the terms agreed before.

Post purchase evaluation:

This is the last stage in the business organizational buying process. This stage is very critical for the seller. As a normal practice, the buyer reviews the performance of the suppliers and also obtains a feedback from all the departments using the supplier products. The buyer then gives a feedback to the seller by either repeating his purchase, reducing or increasing the quantity of material purchased or may float a subsequent enquiry only to those executing the previous order. With this, the organizational/business buying process comes to an end.

3. Sales & Marketing Division: A typical hotel should usually have Sales & Marketing division. However, if the staff size, volume business, hotel size, expected group arrivals is low enough, the hotel might have marketing staff placed under the reservation department (i.e. No need for a Sales & Marketing Division). A typical Sales & Marketing Division is composed of four different departments: a) Sales b) Convention Services c) Advertising d) Public Relations

Coordination is not as important an issue in the marketing and sales department, which is generally much smaller than the food and beverage department. The primary responsibility of the sales managers who make up the marketing and sales department is sales, or the selling of the hotel facilities and services to individuals and groups. Sales managers sell rooms, food, and beverages to potential clients through advertising, attendance at association and conference meetings, and direct contacts. The marketing and sales department is also removed from most of the day-to-day operational problems faced by other departments. The division of work among the sales managers is based on the type of customers a hotel is attempting to attract. Individual sales managers often specialize in corporate accounts, conventions, or tour and travel markets. Sales managers accounts are sometimes subdivided along geographical lines into regional or national accounts. The sales staff of the largest full-service hotels usually does not exceed a dozen or so. These sales managers work more or less independently in their particular market segments.

Characteristics of industrial /business market

Product: Industrial product are purchased mainly by manufactures (industrial user) for the
conduct of manufacturing activities. Product is in industrial market such as raw material, fabricated material, components parts, and accessories. There is also defence product such as tanks, trucks, rifles, gun carriers, missiles, etc. and industrial products are also available in durable goods such as camera, TV sets, home appliances, airplane, computers, etc. and in non durable goods are grocery items, office items , etc.

Market: Industrial market is less as compared to consumer market. In industrial market

their may be channel of distribution such whole seller, retailer, agent, or whole seller to direct consumer. The size of this market is small. Because the consumer looks for specific product .and they are loyal to the product before purchasing they taken advise from the expert person or collecting the detail information of the product from the market. industrial market concentrated in few localities.

Service: Industrial highly technology product so they need basic information such as how to
use? Demonstration, handle and care the product etc. they maintained the relationship with customer after selling. Because the consumer loyalty is more important in industrial market and industrial goods. Consumer hardly switching the brands as compare to consumer market. and it very essential and can be used as a selling point.

Price: price of industrial product are high. Buyers are relatively insensitive to small price
changes. and industrial product are highly technological product they used higher cost of raw material and machinery for production .and the price are negotiations for industrial product.

Promotional practice: They more focus on person selling (salesmanship). In personal selling it involve oral conversation between seller and consumer. sales promotion create positive attitude in the minds of consumer toward specific product and encourages immediate decision and action on the part of consumer. it gives detail information of new products are available in the market through advertising it always attack the customer. Channel distribution: channel levels deals with layer intermediaries that perform
some work in bringing the product and its ownership closer to the ultimate buyer. Channel is decided as per the number of intermediaries involved in the distribution process. The distribution chain such as.

Manufacture whole sellerretailerconsumer manufactureagentconsumer

ADVANTAGES OF B2B MARKETS:

1. Recognition of customers : Innumerable consumers buying goods of MNCs have remained unknown and faceless. With e-marketing MNCs are maintaining customer profile thereby giving recognition to their presence in the market.

2. Tailor-made sales promotion : It is now possible to collect and retain data about the likes, dislikes and preferences of buyers. Tailor-made sales promotion is used to achieve satisfactory response and increase sales.

3. Customer loyalty :

When online customers are satisfied with one site, they do not switch over to any other site , brings large volume and regular business.

4. Economical distribution : B2B enterprises need not set up huge establishment to distribute their gooks. The also save on employment of sales personnels. Distributing goods through a specific site is always economical.

5. Round-the-clock access : Never before in the history of marketing customers could access business informations round-the-clock. It is now possible to handle huge number of customers spread over wide geographical areas. The company can make parent site for all locations and make regional domains to suit specific requirements.

Differences between consumer buying behavior and business buying behavior Consumer buying behavior Business buying behavior 1. Meaning: Individual buying behavior 1. Organizational/Industrial buying behaviour
refers to the actions of individual consumers while purchasing goods and services for their satisfaction. Buying behavior is based on emotions and may not be rational. refers to the actions to purchase products/services for the organization. Buying behaviour is more objective and rational. 2. Organisational/industrial buying is done by people who work for organizations with a formal chain of command and assigned responsibilities for their employers.

2. Buying decision-making:
Majority of households include more than one member and each member has a voice in many consumer buying decisions.

3. Steps in the decision process: Need recognition, deciding

involvement level, identifying alternatives, evaluating alternatives, taking buying decision and post purchase behaviour are the steps involved in the decision process. However no formalities are involved in buying.

3. Recognizing a need, identifying suppliers, deciding product specifications, evaluating suppliers, negotiating a purchase order and evaluating performance of supplier are the steps involved in the decision process. Many procedural formalities are involved in organizational buying.

4. Product knowledge: limited

product knowledge is available to individual consumer/buyer.

4. Organisational buyers have more product knowledge due to their training and job related experience.

5. Purchasing Goals: Consumers

buy for their own use or for use by people close to them. Personal goals are important to consumers when deciding what to buy.

5. Industrial buyers buy for the organization. Since people are doing the buying in organizational goals play equally important role in organizational buying.

6. Buyer-supplier contact:
Individual buyer do not keep close and direct contact with the supplier. Direct selling is not possible in the case of consumers.

6. Organisational buyers are less in number and industrial seller keeps close contact with them. Direct selling to organizational buyers is possible as industrial markets are more centralized than consumer marmets.

Participants in business buying process:

Business buying process is different as compared to individual buying process in which one single individual/consumer takes buying decision. In case of buying organization the buying decision is taken by a unit. The decision-making unit (DMU) of a buying organization is called its buying centre and all individuals and units that participate in the business decision-making process are participants in the business buying process. The marketer should indentify all the DMUs in the client organizations and understand their needs and expectations. The participants in the business buying process are as briefly explained below:

1. Users: User is the member of the organization who will use the product or service
bought. In many cases, users initiate the buying proposal and help define product specification which is to be purchased

2. Influencers: Influencers often help define specifications and also provide information
for evaluation of alternatives. Technical personals particularly act as important influencers. They play a key role in decision making process. The opinions and views expressed by them are given due weight age at higher level.

3. Buyer: The buyer is the person who makes an actual purchase. Buyers have formal
authority to select the supplier and finalize term of purchase. Buyer may help in deciding product specifications. However their major role relates to the selection of vendors and negotiating buying transaction. In the case of complex purchase, buyer might include high level officers participating in the negotiations.

4. Deciders: Decider are the people in the organizations buying center who have formal
or informal power to select or approve the final suppliers. In routine buying, the buyer are often the deciders or at least the approvers

5. Gatekeepers: Gatekeepers are people in the organizations buying centre who control
the flow of information to others. For Example, purchasing agents often have authority to prevent salespersons from seeing users or deciders. Gatekeepers include technical personal secretaries.