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Chapter 2. The Business Market: Perspectives on the Organizational Buyer

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... the contractual and legal side of government purchasing federal buying process ... federal government's budget on procurement ... – PowerPoint PPT presentation

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Title: Chapter 2. The Business Market: Perspectives on the Organizational Buyer


1
Chapter 2. The Business Market Perspectives on
the Organizational Buyer
  • BA 303
  • BUSINESS 2 BUSINESS MARKETING
  • LINDELL PHILLIP CHEW

2
The three sectors of the business market,
commercial enterprises, government, and
institutions.
  • The chapter is pivotal to formulating an
    effective business marketing strategy,

3
Commercial enterprises
  • Unique aspects of the sector, geographic
    concentration and volume concentration by large
    firms
  • DERIVED DEMAND
  • North American Industrial Classification System
    (NAICS) Replaces SIC system

4
Commercial Enterprises Unique Characteristics Man
ufacturing, construction, service, professional
groups, resellers
  • Small in number large in volume 360,000
    manufacturers 10 percent of the manufacturers
  • produce 78 percent of the value
    added

5
government purchasing practices and procedures
are explored
  • understand the contractual and legal side of
    government purchasing federal buying process is
    provided to emphasize the type of marketing
    efforts required by potential suppliers

6
Government contracts Stringent legal
requirements, often unrelated to the purchase,
small subcontractor preferences, minority
employmentPublic laws which specify contractual
arrangementsVendors must carefully understand
government laws
  • RED TAPE

7
Knowledge of government requirement needed for
effective negotiation Types of contractsFixed
price profit potential is good if inflation is
stable andcosts are controlled Cost
reimbursement effective when extensivedevelopment
al efforts are required. Carefully monitored
  • NOTEHORROR STORIES

8
say hi to Chester A 12!NOTEHORROR
STORIESserving up a fixed price nightmare!!
Various governmental agencies publish booklets
explaining how sell to that particular
agencyplease read them!!!!
  • ENTER AT YOUR OWN RISK

9
Defense Procurement The Department of Defense
spends a large portion of thefederal
government's budget on procurement Defense
Logistics Agency procures distributes common
supplies to all military branchesMilitary
branches procure major items
  • RISKY BUSINESS

10
institutional buying environment
  • institutional buying forms a middle ground
    between the commercial and government sectors in
    terms of purchasing processes and procedures

11
Nondefense procurementAccomplished through a
wide variety of cabinet departments, commissions
agencies the GSA-General Services
Administration Centralized procurement of items
in common use byall government agencies
  • FORMAL ADVERTISED, NEGOCIATED, SET ASIDE

12
Institutional Market Unique characteristics A
large market composed of a vast array of schools,
hospitals, universities,libraries, foundations
etc A middle ground between business and
government
  • Requires the marketer to respond to the needs of
    the product users (professional staff) and the
    buyers (purchasing personnel)
  • Outsourcing Group
    buying

13
The Market Centered customer driven to driving
organization
  • Business buyer diversity Marketers must respond
    to the unique purchasing requirements of each
    segment of the market The marketing organization
    is structured so that major customer markets
    become the centers around which the firm is
    organized Firm's marketing efforts are therefore
    focused on each market sectorgovernment,
    business, institutional, and international
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