The necessity to observe market, business spending separately is the result of specific features that separate it from the market of personal consumption.
Specifics of Business Markets
- A number of businesses in a particular territory
- Smaller number of consumers
- Higher value cash transactions
- Shorter and simpler distribution channels
Business market is the area of exchange between the provider of business arrangements and commercial petitioner-both sides realize some business, which is not the case in the market of individual consumers. It consists of all the organizations that buy goods and services for the production of further products and services for sale and for-profit and non-profit organizations and institutions that buy for their own use or to provide services to others. The value of cash transactions is high (50% above the value of transactions in the market of personal consumption).
Type of Business Markets
Given the objective of buying, market business spending is divided into three types:
- Market producers
- Market intermediaries
- Government and institutional market
1. Market of producers
It is the most important segment of the business market. This is the market that requires a large, pre- planned purchase of the product, semi-products and raw materials etc. For example, manufacturers in the United States only for raw materials annually spend 1,500 Billion (nearly 400,000 manufacturing companies).
2. Market of intermediaries
The main function is buying intermediaries from producers or other suppliers with a view to resale in the same form. Wholesalers, retailers, manufacturers and different government agencies perform the functions of intermediaries. Retailers-buy products continue to sell them to end users.
3. Government and institutional markets
Government Market is the largest single market. Government and institutional markets offers products or services by sealed bids (tender) on a contract basis as a result of negotiations (Negotiated contract). Government institutions like hospitals, schools, foundations, houses usually buy by the principles of state.
Specifics of Purchasing Process
Industrial buying process – The process of deciding which formal organization determines the need for the purchase of products and services and identifies, evaluates and selects alternative products (services) and suppliers.
Decisions about the purchase – It is a process of gathering and processing information, and the process of selecting targets and criteria that influence the selection of brands and suppliers. The complexity of the industrial process of decision–making is much more than buying at the market of private consumption due to the numerous factors that influence the decision.
Types Business Buyer Behavior
The complexity of buyer behavior is reflected in the numerous factors that influence the result of the buying decisions. All the factors can be classified into four types:
- Environmental factors
- Organizational factors
- Mutual ( Interpersonal , Social factors)
- Individual ( Psychological factors)
1. Environmental Factors
Environmental Factors is a context in which an organization is created and develops. This factor actually lies beyond the impact of the business entity. It is necessary to separate the effects of the environment (processed) of the institutions that are the source of the impact of the environment (state and state institutions, professional associations, businesses).
Country core business units – influence over the 5 allocated roles:
- Regulator’s legal environment that restricts and regulates the actions of the industrial undertaking.
- Macroeconomic policy affects the availability of cash, the amount of supply and demand, the amount of income, the price.
- Funding basic research.
- As a political entity, influences the priority objectives, trade relations with other countries fund the military.
- It is an important buyer of products and services.
- Trade Association – Coordination of production and trade activities harmoniously customer needs.
- Professional Association – establishing technical norms and standards used for the evaluation of products and services.
- Formal and informal groups.
2. Organizational Factors
Organization – four complex compositions:
- Tasks – a job that should be completed to achieve the goals of the organization
- The structure presented ensembles communication, authority, status, rewards and workflows
- Technological solutions within the course of production, sales, data processing
- The people – the main factors of the overall composition
Each of these compositions is dependent of one another and affects one another. These factors affect the complexity of the decision-making stage of purchase, time, number and structure of people who will participate in the purchase
It is necessary to consider all four determinants to determine the most appropriate decision-making procedures.
3. Mutual Factors
It contains five sub-levels which influence the decision-making process of purchase:
- The level and direction of communication
- The level of authority
- Status level
- The level of remuneration
4. Individual factors
Individual factors are a key element of organizational buying behavior. Individual motives and goals of the individual affected are:
- Collective goals and motives
- Objectives of individuals who interact with
- Task of organizing
- Core values, principles and norms of individual change according to the attitudes and norms of narrower and broader groups within the organization
- To what extent will the individual lead or dominate, or follow in their relations with other members of the species depends on its properties (personality affects the speed, method of adaptation to the environment and organizational structure, determines its involvement in the achievement of the buying task).
- The role of the individual is not constant – it changes depending on the situation and the purchasing members who are buying it.
- The individual assumes a greater number of roles depending on the status of the organization.
- Organizational and individual behavior is a consequence of the complexity of the combination of organizational and personal motives:
- An individual can own personal motivation for achievement relate to the organizational motive to achieve a goal – success is inevitable (motives are directly linked to the global mission of the business entity)
- The motives of the individual does not have to be directly linked to the objectives of the (Improving, ego), but the indirect impact on reaching the set target industry (individual perceives the connection between improving the industry by attaining the goal).