ICT-ED Institute

of Science and Technology

Principles of Marketing
12 – ABM
Classroom Code: s627h3v

Week 7 – October 7, 2020

Wednesday
11:00 am to 12:30 pm
Instructor:
Jojie R. De Ramos
 ICT-ED Institute
of Science and Technology Purchase Decision Process in
Organization
PURCHASE DECISION-MAKING PROCESS IN
ORGANIZATIONS
When making purchases, organizations make use of the
decision-making process consisting of the following stages:
1. recognition of a problem or need;
2. search for information about products and suppliers;
3. evaluation and selection of supplier;
4. the purchase; and
5. performance evaluation and feedback.
 ICT-ED Institute
of Science and Technology Purchase Decision Process in
Organization

Recognition of a Problem or Need

When someone in the business firm
recognizes a need that can be satisfied by
buying the appropriate product or service, the
purchasing process has begun. In this stage
of the buying process, however, there are
some factors that must be considered. They
are as follows
 ICT-ED Institute
of Science and Technology Purchase Decision Process in
Organization

1.Organizational purchasing is a result of product

and operational needs.
The primary objective of the firm is to make
profits, and this is possible if the firm can provide
the product or service that the customers want. To
facilitate production, however, various
requirements must be put in place. Many of these
requirements need to be bought
 ICT-ED Institute
of Science and Technology Purchase Decision Process in
Organization
2. An organization's need can be identified by different
employees of the firm.
Changes in the internal and external environment of
the firm requires corresponding adjustments in the firms
operations. These may involve changes in the
company's products, processes, and policies. These
changes would be translated to needs that will be
identified by persons in various units of the firm. The
needs could be requirements for new equipment,
different materials and supplies, or redesigned building.
 ICT-ED Institute
of Science and Technology Purchase Decision Process in
Organization
3. Progressive firms are engaged in
requirements planning.
Environmental demands for efficiency
makes it necessary for firms to reduce costs
and uncertainties in the continuous provision
of supply. As such, firms make attempts to
forecast future requirements to plan their
purchases in advance.
 ICT-ED Institute
of Science and Technology Purchase Decision Process in
Organization

Requirements planning paves the way for

the signing of long-term contracts designed
to minimize the risk of supply shortage and
price increase. With requirements planning
there is a strong possibility that the firm can
carry less inventory without sacrificing
operational efficiency.
 ICT-ED Institute
of Science and Technology Purchase Decision Process in
Organization

4. The firm needs to determine product

specifications.
This is a very important requirement because
any discrepancy between what is really required
and what has been delivered by suppliers Will
mean additional expenses if the problem is to be
corrected. Delay can be also a consequence of
the discrepancy and it may mean lost
opportunities for the firm.
 ICT-ED Institute
of Science and Technology Purchase Decision Process in
Organization

Search for Information about Products

and Suppliers
If the problem or need has been
recognized, the next logical step is to in
possible solutions. As such, the following
must be undertaken:
 ICT-ED Institute
of Science and Technology Purchase Decision Process in
Organization

1. A listing of products or services that will solve

the problem.
This is followed by value analysis which
means a systematic appraisal of the design,
quality, and performance of the products or
services so listed. The aim of value analysis is
to determine which products or services meet
the firm's requirements including the cost factor.
 ICT-ED Institute
of Science and Technology Purchase Decision Process in
Organization

2. Make or buy analysis.

Sometimes, firms consider manufacturing its
own needs due to the following:
a. it is more economical; and
b. the firm wants to minimize the risk of a
single supplier's vulnerability to strike, or to
avoid the possibility of future price
increases, or poor service.
 ICT-ED Institute
of Science and Technology Purchase Decision Process in
Organization

3. Information must be gathered

about potential suppliers.
The information required includes
the firm's financial health, credit
history, production capacity, and
quality standards.
 ICT-ED Institute
of Science and Technology Purchase Decision Process in
Organization

Evaluation and Selection of Suppliers

Both the consumers and organizations
evaluate alternative suppliers and their
products or services. However, organizations
are more formal and they use a set of choice
criteria which show the advantages offered
by each supplier.
 ICT-ED Institute
of Science and Technology Purchase Decision Process in
Organization

The criteria used and the importance of each vary

according to the following:
1. the quality of goods or services being considered
for purchase;
2. the characteristics and needs of the buyer;
3. the supplier's ability to meet quality standards;
4. the supplier's ability to meet delivery schedules;
5. the price; and
6. the technical capability of the supplier.
 ICT-ED Institute
of Science and Technology Purchase Decision Process in
Organization
The Purchase
In support of the efficiency objective, organizations prefer to
routinize their purchases. If the new-task buying is satisfactory
the organization would shift to the straight rebuy situation for
repeat purchases. Most often this is undertaken through a
blanket purchase order which is actually an agreement where the
supplier promises to resupply the buyer as needed on agreed
price terms over a specified period of time.
The blanket purchase order effectively shuts out other
suppliers until the buyer is no longer satisfied with its relationship
with the current supplier.
 ICT-ED Institute
of Science and Technology Purchase Decision Process in
Organization

Performance Evaluation and Feedback

The efficiency objective of the organization
is carried through all activities of the firm
including purchasing. One way is
performance evaluation of the product and
the supplier. The evaluation commences as
soon as the products are delivered.
 ICT-ED Institute
of Science and Technology Purchase Decision Process in
Organization
The following steps are undertaken:
1. the buyer inspects the delivered products to determine
whether it meets the required specifications;
2. the user will determine if the purchased product performs
according to expectations; and
3. the buyer evaluates the supplier's performance on
a. promptness of delivery;
b. product quality; and
c. after sales service.
The purpose of the foregoing exercise is to provide necessary
information in evaluating proposals and selecting suppliers about
similar purchases in the future.
 ICT-ED Institute
of Science and Technology Purchase Decision Process in
Organization
WHAT INFLUENCES ORGANIZATIONAL
BUYERS
Buyers in organizations are not immune to
influences when performing their buying functions.
They are influenced by two general factors:
1. economic - such as price, product quality, and
service
2. personal - such as favors, attention, and risk
avoidance
 ICT-ED Institute
of Science and Technology Purchase Decision Process in
Organization

Buyers may be influenced by either

factor. For instance, when competing
products are equal in economic terms,
the buyer may be influenced by personal
factors. The influence of economic
factors, however, will prevail if the
competing products differ substantially.
 ICT-ED Institute
of Science and Technology Purchase Decision Process in
Organization
Specifically, influences on organizational buyers
may be classified as follows
1. Environmental factors. The economic situation,
as well as developments in technology, politics, and
competition are the environmental factors affecting
organizational buying For instance, during
recession competition becomes more intense as
many firms start to cease operations. To win
purchasing contracts, marketers must offer more
product benefits to buyers.
 ICT-ED Institute
of Science and Technology Purchase Decision Process in
Organization
2. Organizational factors. Organizations
are different in terms of policies,
organizational structure, procedures,
systems, and past experiences. Even if the
marketer is able to convince the
organizational buyer, factors like policies
and procedures may still hinder progress in
the buying process.
 ICT-ED Institute
of Science and Technology Purchase Decision Process in
Organization
3. Interpersonal factors. Members of the
organization's buying center will have
different interests, authority, and
persuasiveness. It will be to the advantage
of the marketer if he will have information
about the different personalities involved in
the purchasing process.
 ICT-ED Institute
of Science and Technology Purchase Decision Process in
Organization

4. Individual factors. Each buying center

member has his own personal
motivations, preferences, and
perceptions. Some of them will be
meticulous, and some would want to do
the job quickly. Some would even want to
make the suppliers play against each
other.
ICT-ED Institute
of Science and Technology

Thank
you!
 ICT-ED Institute
of Science and Technology Purchase Decision Process in
Organization

Activity week 7
1. Based on the explanation, what is the
greatest factor that affects the buying
decision process of the organization?
 ICT-ED Institute
of Science and Technology

Specific Instruction:
Minimum of 250 words each essay
To be submitted on October 10, 2020.
To be Submitted via Email –
jojie.deramos@yahoo.com
The email Subject must be your complete
name and activity number