Organizational Buying

A Multidisciplinary Perspective of Organizational Buying

Since the 1970s there have been a range of attempts to define organizational buying. Thus, it is possible to articulate, or infer, organizational buying interpretations from a variety of academic discipline areas (which also align to traditional functional units within organizations). This process reveals crucial differences and similarities.

Those fields that offer the strongest direct definitions of organizational buying include marketing and procurement. Supply chain management also deals with organizational buying, as does project management. There is also a more casual interpretation with consideration, the “business-as-usual” view.

The Marketing View

Some of the earliest attempts to define organizational buying date back to 1972. Webster Jr and Wind (1972) define organizational buying as “a decision-making process carried out by individuals, in interaction with other people, in the context of a formal organization”. This is typical definition of organizational buying that permeate much of the marketing and sales literature.

There are some common elements of organizational buying from this perspective:

• First, organizational buying is about decision-making or, more specifically, the decision to buy a product or service.
• Second, organizational buying is a process. Rather than relying on impulses or hunches, there is a deliberate set of activities that facilitate consent or agreement about the nature of the buyer firm’s problems, their requirements, and the means to achieve desirable outcomes.
• Third, organizational buying requires the engagement of a collection of individuals called the DMU, each with their own expertise, viewpoints, and requirements, to arrive at a purchase decision.

The DMU (decision-making unit) also called buying centre includes the key individuals with involvement as the lead representatives from both within the buyer firm and beyond it that contribute to the final purchase decision.

Marketers and sales personnel have a common interest in understanding how to shape or influence the nature of purchase decisions in their favor. This has led to an emphasis on promoting or shaping product/service offerings to address buyer requirements. It also means that the purchase decision equates to the end of the organizational buying process from the perspective of marketing and sales professionals.

Indeed, marketing and sales-related approaches to defining organizational buying tend not to consider what happens beyond contract signing. While we may be able to identify colleagues with marketing and sales roles that do continue their buyer firm engagement beyond contract signing, the current approaches to defining organizational buying from these discipline areas do not consider post-purchase behavior as crucial.

The Procurement View

The procurement view of organizational buying is slightly different.

This view is more explicit in terms of the specific activities that organizational buying entails.

It involves finding alternative offerings available in the marketplace. The implication of this is that a buyer firm looks to maximize its options, rather than relying on a single source (unless it must).

The procurement view also raises the prospect of agreeing to terms. This highlights contract negotiations and finalization as important aspects of the organizational buying process.

The acquisition of goods, services, or works also suggests that buyer firms seek a variety of different inputs and that each one calls for distinct consideration. This implies that the buyer firm faces nuances that require different usage approaches to their inputs.

A tendering or competitive bidding process is often necessary to comply with legislative requirements (particularly in the case of government organizations) and/or to demonstrate an auditable trail of decision inputs (such as market-based information) as well as the resulting purchase decisions, to promote transparency and accountability. Considering the procurement view highlights impacts that organizational buying processes have on a buyer firm prior to the purchase itself.

The Supply Chain Management View

While both the marketing and procurement views focus on organizational buying as a process that concludes with contract agreement, the supply chain management view focuses on order fulfillment and, consequently, takes a supplier firm network perspective.

In simple terms, order fulfillment refers to all the activities necessary to take a buyer firm’s order and to meet the requirements for that order. Such activities require supplier firm capabilities in order taking, logistics, warehouse management, inventory management, order tracking, returns handling, and complaints management.

It is more often the case that orders relate to discrete products or services in supply chain management rather than large-scale single purchases. Therefore, order fulfillment requires managing a divers network of actors to fulfill customer orders that tend to entail discrete transactions.

The Project Management View

The receipt of a product or service can have profound effects on a buyer firm. This is particularly the case for large-scale capital acquisitions such as the installation of a new IT system.

For example, the Canadian Defence Force continues its installation of SAP, an enterprise resource planning system designed to manage inputs towards desirable outcomes.

Rather than simply installing the software and running it, SAP installations often require the reconfiguration of multiple process and procedures. It is sometimes necessary to reconfigure or restructure an organization that undergoes such profound change.

It then follows that project managementOpens in new window, as a means of change management, is also a consideration in organizational buying. For a project such as the SAP installation in the Canadian Defence Force, it is necessary for the buyer firm to assemble a team of people to help lead, and contribute to, the implementation process. The implementation process involves achieving milestones over a prolonged period. Milestone completion determines the payment cycle.

Along the way, the project team often discovers needs for more purchases to address emerging problems or issues. New purchases then promote a new stream of organizational buying activities, many of which are not subject to rigorous information search and decision-making processes.

The project management view often does not receive consideration as an organizational buying perspective.

This is because project management is a profession as well as an independent academic discipline. Yet, the majority of project management work involves the integration of new products or service into the activities of the buyer firm. This then sees project management professionals as crucial contributors to organizational buying.

The Business-as-Usual View

A perspective that also receives limited attention as a distinct organizational buying perspective is the “business-as-usual” view.

The organizational buying process that accompanies the decision to place regular orders with the same supplier may not require an extensive deliberation and decision-making process. Electricity supply, water supply, and cleaning services are examples of regular, predictable business needs that require ongoing purchases, through a contractual agreement fall within the domain of business-as-usual.

Business-as-usual can also involve unplanned and sporadic purchases to address an immediate need.

For example, the need to replace a laptop for a staff member who left theirs on a plane accidently can lead to a manager signing off a new laptop purchase from their discretionary budget.

Again, this purchase situation does not involve an extensive deliberation and decision-making process. It is for this reason that the business-as-usual view explains a considerable number of purchases. Managers often use their own discretionary budgets to enact such purchases. Entertainment expenses, reactive recruitment expenses, travel expenses, hosting guests, replacing broken equipment or furniture, and, sometimes, larger items can all fall into this category.

Comparing Different Organizational Buying Views

A direct comparison of each organizational buying view reveals some interesting insights. Each organizational buying view relates more to certain purchase situations than to others.

• The marketing view has become a “catch-all” interpretation of organizational buying relevant to that field. Advances in the marketing field over the past forty-or-so years, however, highlight the differences in purchase situation as important influences on marketing and sales approaches. While the marketing view can accommodate different purchase situations, its focus tends to emphasize promotions, communications, and relationships more so than other activities.
• The procurement view centers on organizational buying situations that require extensive consideration through a formal procurement process. This implies they are worth investing the time and effort necessary to consider procurement options carefully prior to committing to a purchase.
  
  This means that the procurement view is more relevant to high-risk, high-cost decision such as large-scale project implementations, long-term contractual commitments, and/or the formation of panels or multi-use lists that pre-qualify a set of suppliers for ongoing purchase opportunities from the buyer firm.

• The supply chain management view, with its focus on order fulfillment, is more amenable to situations where a discrete product is the subject of purchase. Discrete products have standard formats. This allows them to pass from one actor to another actor along the supply chain. Most products are tangible and do not often include service components. This also limits the opportunities for differentiation between product offerings.
• The project management view tends to refer to capital goods procurement or to other purchases that require a discrete project to implement the product/service in the buyer firm.
  
  
  The project management view focuses on purchase activities that occur during the lead-up to the project (so, they coincide with the procurement view to some extent) as well as those activities that occur during project implementation.
• The business-as-usual view has a similar emphasis to the supply chain management view. The business-as-usual view also concentrates on discrete transactions. Business-as-usual purchases can be either to approve an existing, ongoing purchase arrangement or to fill sporadic, unplanned needs that emerge during the normal course of business.