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2. THE APPROPRIATE LEVEL OF QUALITY
+
3. THE LOWEST TOTAL COST
WHAT COMPANIES REALLY PAY
FOR OWNERSHIP
Cost of ownership goes beyond the price
paid for a product
TOTAL COST OF
OWNERSHIP = PRODUCT PRICE
+ DELIVERY
+ INSTALLATION
+ MAINTENANCE / REPAIR
+ POWER COSTS
+ SUPPLY COSTS
+ OPERATING COSTS
+ FINANCING
PURCHASING PARTNERSHIPS ARE
MADE WITH VENDORS WHO
PROVIDE:
High-purchase-volume materials,
components or strategic products
Information and training for effective product
use
Services requiring specialized knowledge for
cost reductions and/or performance
Materials unavailable elsewhere
Steps in the Business Buying
Process
1. Recognizing the need
2. Developing product specifications
3. Soliciting bids from potential
suppliers
4. Making the purchase decision
5. Issuing the contract
6. Inspecting delivered goods for
quality
7. Evaluating vendor performance
MAKE-OR-BUY DECISION
ANALYSIS
RISK ASSESSMENT
FINANCIAL RISKS MARKETING RISKS
Resource Allocation Customer Impact
Investment of Resources Supplier Impact
Accurate Cost Analysis
Legal Issues
MANUFACTURING RISKS POLITICAL RISKS
Reliability Management commitment/
Expertise willingness to partner
Equipment Turf Battles
Patent Protection Internal Strife
Straight rebuy:
◦ Most common type of business buying situation;
buyer purchases a part, material, or service
routinely, with little thought going into buying
process.
Modified rebuy:
◦ Reevaluation of alternatives; necessary because
buying requirements have changed such that
relatively routine buy or purchase no longer is
routine.
Examples of Products Purchased
Using the Buy-Class
Straight Modified New
Rebuy Rebuy Buy
Office Vehicles Consulting Installations
Supplies Services
Pure Complete
Electrical
routine Components negotiation
Electricity Computer Moon Shot
Gas/Water Systems Insurance
Bulk
Chemicals
Buygrid Analysis Framework
Selective exposure.
Selective attention.
Selective retention.
Impact of Increasing Levels of
Perceived Risk
Buying center becomes larger
Higher level managers become involved
Information search more active
Wider variety of info sources accessed
Buying center members exert more
effort
Sellers with proven track records tend
to be more favored
Product quality & after-sale service tend
to become more important than price