Transcript Beckman PowerPoint Presentation

Chapter 8
Slide 1
Chapter 8
Slide 2
The purpose for mentioning Bombardier :
The success of this company is because it has a good
understanding of the buyer behaviour of the business market
In this chapter we’ll cover
Chapter 8
Slide 3
• The Industrial Buying Process
• 3 types of industrial markets
- producers and manufacturers
- trade industries (wholesalers and retailers)
- governments
• industrial market demand characteristics
• industrial product categories
• government markets
Slide 4
Chapter 8
Industrial Market
“Individuals and organizations that acquire goods
and services to be used, directly or indirectly, in the
production of other goods and services or to be
resold.”
TEXT
“People who buy stuff to make other things.”
W.T.G.R.
Page 161
Chapter 8
Slide 5
- producers and manufacturers
- trade industries (wholesalers and retailers)
- governments
Page 161
Chapter 8
Slide 6
• producers and manufacturers
Those who transform goods and services, through
production, into other goods and services
• manufacturing firms (eg. Auto parts, computers)
• farms
• mining and forest industries
• construction and building companies
• service companies (trucking, air, rail)
• public utilities, banks, insurance companies Page 161
Chapter 8
Slide 7
• Trade Industries (gong ye maoyi)
• Organizations such as wholesalers and retailers
that buy things for resale to customers
• examples - lumber dealers, fabric wholesalers, building
materials
• metal and electrical products
Page 162
Chapter 8
Slide 8
• Governments (zheng fu)
• Federal Ministries and Crown Corporations,
Provincial Ministeries and Crown Corporations,
Municipal governments and agencies
• examples: Dept. of Defense buying trucks from GM, Dept.
of Revenue buying computers, Royal Canadian Mint
buying paper and
• Provincial agencies buy services such as snow clearance,
cellular phone service …...
Page 162
Chapter 8
Slide 9
• The Increase in value of input material
when transformed into semi-finished or
finished goods.
• input material = parts, raw resources, components etc.
• transformed = process, or manufactured, or shaped, or
altered etc.
Page 162
Chapter 8
Slide 10
• Example
• asbestos company makes asbestos material
• another company buys it, shapes it, and makes
asbestos brake pads
• another company buys the pads - puts them
together with the other brake parts to form a
component
• the auto assemble company buys the whole
component and puts it on the car as it is going
down the assembly line
Chapter 8
Slide 11
• Example
• sport shoes, with special NIKE logo - makes the
shoes more expensive
• t-shirt with special design or drawing
• animal fur - made into a fur coat
• ice cream - ice cream w strawberries on top
• watch - watch with diamonds and jewels added
• wood - wood made into furniture
• blank canvas - “Picasso”
Slide 12
Chapter 8
Industrial Market - Features
• Geographic
eg. Auto parts companies tend to locate near
auto assembly plants
• Small number of buyers
34,000 mfg companies in Canada
30 million population as consumers
- however mfg. Companies make bigger purchases
than an individual consumer
Page 162-163
Slide 13
Chapter 8
Standard Industrial Classifications (SIC) Codes
A series of industrial classifications
developed by the federal
government for use in collecting
detailed statistics for each industry.
SIC out of date - it will be replaced by the NAICS
Chapter 8
Slide 14
NAICS
North American Industry
Classification System
• It is a new system that replaces the SIC
• The purpose is to promote uniformity in
collecting statistics about the economy
and companies activities
• Will be used in U.S.A., Canada and Mexico
see http://www.webplaces.com/naics/back.htm
Chapter 8
1. Derived Demand
2. Joint Demand
3. Inventory Adjustments
4. Demand Variability
Slide 15
Slide 16
Chapter 8
1. Derived Demand
means the demand is derived (or caused by, or
linked to) demand for a consumer item
- demand for lithium is “derived” from the demand
for lithium batteries, which is in turn “derived” from
the demand for cell phones
- demand for wood pulp is derived from the demand
for paper, which is derived from the increase in
people printing on paper
page 165
Slide 17
Chapter 8
2. Joint Demand
means the demand is related to the demand for
other industrial things
eg. The demand for printer cartridges is linked to
the demand for printer paper
for services, the demand for Netscape 4.05 - is
linked to the demand for an ISP account
page 165
Slide 18
Chapter 8
3. Inventory Adjustments
means the demand is related to how much the buyer
needs to have in stock
If the buyer needs a larger inventory, then demand
will be higher
If the buyer is trying to cut back on inventory (eg.
Using computer controlled materials handling) then
they will need less inventory and just buy in time
(called JIT) Just In Time
page 165
Slide 19
Chapter 8
4. Demand Variability
the “impact” of derived demand on the demand for
interrelated products used in producing consumer
goods
page 166
Slide 20
Chapter 8
Accelerator Principle
not equal
The disproportionate impact that changes
in consumer demand have on industrial
market demand
eg. Small changes in consumer demand can have big
changes in the requirement for industrial parts,
components and materials to make those products
page 166
Slide 21
Chapter 8
Categories of Industrial Products
1. Capital Items
- things that last a long time, and become
less and less in value over time
2. Expense Items
- things that are used within a short
period of time
- some types of raw materials, office supplies,
materials in production
Slide 22
Chapter 8
Categories of Industrial Products
1. Capital Items
ex - car
- office building
- machinery and equipment
2. Expense Items
ex - gas for the car
- washing the windows for the building
- parts for the machinery
Slide 23
Chapter 8
Categories of Industrial Products
•Depreciation
• The accounting concept for charging a
portion of the cost of a capital item as a
deduction against the company’s revenue
- eg. 486 DX2 Office computer bought in 1995
- deduct $750 in 1995
- deduct $750 in 1996
etc.
page 166
Chapter 8
Slide 24
• Many people involved in the decision making
process
• Takes a lot of time to “network” and explain
aspects of the product
• Need to get the approval of many peope to get a
final decision
• Committees may be involved and this takes time
• Many organizations try to use different sources
and therefore do not always buy from the same
supplier all the time
Page 167
Chapter 8
Slide 25
The Complexity of Industrial Purchases
• negotiations can take a long time
• Many people involved in the decision making
process have different points of view
• Many companies selling industrial parts and
components spend a lot of time in developing
relationships with key people who are buyers
• Many companies buying industrial parts and
components have a person who specifically deals
with buying - the “purchasing manager”
Page 167
Chapter 8
Slide 26
The Purchase of a Capital Item
• negotiations can take months to full explain all
the
- features
- advantages
- benefits
of the product
• sometimes the seller has to convince the buyer
they can create a special customized product for
their special industrial needs
• eg. New type of utility pole
Page 168 - 169
Slide 27
Chapter 8
• Straight Rebuy
• recurring (buying all the time) the same thing
• Modified Rebuy
• regular buying, but with some re-evaluation to think
about things each time
• New Task / First-time Buying
• this takes a lot of effort on the part of the buyers to
consider many aspects
Page 170
Slide 28
Chapter 8
Buying Centre Roles
1. Users
2. Gatekeepers
3. Influencers
4. Deciders
5. Buyers
Page 171
Chapter 8
Slide 29
A Model of the Industrial Buying Process
Page 173
Chapter 8
Slide 30
A Model of the Industrial Buying Process
Need Recognition
- simply the understanding that you need something
- can be caused by an emergency, or just the execution
of your plans to do something
Chapter 8
Slide 31
A Model of the Industrial Buying Process
Information Search
- make a list of who are the best potential suppliers
- purpose is to know, in detail, what you need, and what
you should buy
- have to develop a list of technical specifications
eg. Waterproof, or withstand heat of 200 degrees
Chapter 8
Slide 32
A Model of the Industrial Buying Process
Delineation of Suppliers
- collect information on potential suppliers
Chapter 8
Slide 33
A Model of the Industrial Buying Process
Sales Demonstration/Proposal
- potential suppliers are then invited to make a
presentation, or come for a meeting to provide a
proposal
- includes technical and economic considerations
Chapter 8
Slide 34
A Model of the Industrial Buying Process
Advertisements
- usually done in trade magazines and newsletters
Chapter 8
Slide 35
A Model of the Industrial Buying Process
Technical articles + in the late 1990’s, extensive
Internet searches
- the buying group examines this information to
determine how it fits their requirements
Chapter 8
Slide 36
A Model of the Industrial Buying Process
•Word of Mouth
•Personal and interpersonal influences
•Review of Internal Proposals
Page 173
Slide 37
Chapter 8
Reciprocity
• Buying from suppliers who are also
customers
• eg. Computer manufacturer buys all
computer paper from forest products
company that uses their computers
• eg. Ford executives rent cars from Hertz
- cause Hertz uses Ford cars !
Chapter 8
Slide 38
• Government buying of products and
services is 52% of Canada’s GDP
• therefore selling to the government is
important business
Page 174
Slide 39
Chapter 8
• Bids
• price quotations from potential suppliers
• Specifications
• Specific descriptions of the items
• in many situations, this information is extremely
detailed
Page 174
Slide 40
Chapter 8
• Three Ways of Obtaining Bids
• An Invitation to Tender (offer)
• - for big things that cost a lot of money
• Requests for Quotations
• - for small purchases less than $5,000
• Requests for Proposals
• - for noncompetitive purchases more than $5,000
Page 175