Chapter # 4 Business/Industrial Marketing

Environmental forces: Organizational buyers do not make decision in isolation; they are influenced by a broader rang of forces in the external environment. Such environmental influences define boundaries within which industrial buyers and seller interact. Types of Environmental forces: Six types of environmental forces influence organizational buying behavior: Economic, political, legal, cultural, physical & technical. Economic influences: The general condition of the economy is reflected in economic growth, employment, price stability, income and the availability of resources, money and credit. Political & legal influences: The political environment includes tariffs and treads agreements with other countries, government funding of selected programs, and government attitudes toward business and social service activities. Cultural influences: Culture can be thought of as methods of of coping with the environment that are shared by people as member of society. Cultures as reflected in value, customs, habits, norms, traditions and so on. Physical influences: The physical environments include such factors as climate and geographical location of the organization. The availability of labor, selected raw materials, transportation service often determines the initial selection of a location by an organization. Technological influences: Rapidly changing technology can restructured an industry and dramatically alters organizational buying plans.

Environmental Forces

Organizational Forces Organizational buying Behavior Group Forces

Individual Forces

Figure: Forces Influencing Organizational Buying Behavior (4.1) The Behavioral Theory of the Firm The behavioral theory of the firm describes how organizations actually operate rather than prescribes how they should operate. Four concepts form the foundation of the theory i) Quasi-Resolution of conflict ii) uncertainty avoidance iii) problematic search and iv) Organizational Learning 1. Quasi resolution of conflict Latent conflict may exist among the goals of organizational members: purchasing agents may be concerned with economy, engineers with performance and user with prompt delivery a) Local rationality---- complex are broken down into sub problem and handle by subunits, which are motivated by only some of the broader organizational goal. b) Acceptable level decision rules---- the agreed solution is not optimal decision, but is simply acceptable within constraints of organizational goals and sub goals. c) Sequential attention to goal--- conflicting goals is treated by approaching problems one at a time. 2. Uncertainty Avoidance Organizational members are motivated by a strong desire to reduce uncertainty. 3. Problematic Search The search for information is stimulated by the definition of a problem and directed towards solving the problem. 4. Organizational Learning: The organization learning provides additional insight in to the behavior of organization.

Cyert & March identify three types of significant adaptive organizational behavior over time. 1. Adaptation of goals. --- Goals are shifted up or down in response to success or failure in previous period. 2. Adaptation in attention rules. ---- Organization learns to pay attention to some parts of the environment, to some comparable organization, and to select components their performance and evaluation criteria while ignoring other parts. 3. Adaptation in search rules.---- further search efforts generally being in an area where the solution was found in the past

Selected dimension of organizational climate Achievement Motivation --- the degree to which the organization attempts to excel Rules Orientation----- the degree to which rules are received and followed Readiness to innovate----- the degree to which the organization encourage innovative activity. Industriousness------ the degree to which hard work to expected of organizational members. Organizational positioning of purchasing An organization that centralizes procurement decision will approach differently than a company where purchasing decision are made at individual user locations. When purchasing is centralized, a separate organizational unit is given authority for purchases at a regional, division or head quarter level. Individual Forces Individual and not organization make buying decision. Each member of the buying center has a unique personality, a particular set of learned experience, a specified organizational function and perception of how best to achieve both personal and organizational goals. Understanding the reward / measuring system What factors motivate individual decision makers during the organizational buying process? According to Paul Anderson they are motivated largely by: 1. Intrinsic rewards, attained on a personal basis, such as feeling of accomplishment or self worth. 2. Extrinsic reward, distributed by the such as salary increase or promotions.