Introduction 

With the economy growing at a faster rate than ever, the demand for industrial products is increasing significantly. This has led to more and more companies entering the fray and existing companies trying to find ways to sustain their competitive edge. And with the changing business environment, the dynamics of industrial markets is also rapidly changing. Companies in this market have realized that they need to reduce their product development cycle and also be more innovative. For instance, Godrej & Boyce, manufacturer of a wide range of office furniture, is keeping pace with the times by constantly enhancing its manufacturing, design and marketing capabilities. It is facing stiff competition from the American company, Haworth, the Malaysian company, Bristol, and the Chinese brand, UB. Godrej & Boyce is upgrading its technology and designing techniques to cater to the rapidly changing market requirements as well as to beat the competition. Godrej is focusing its efforts on new product development activities. As against two new products that were developed per annum earlier, the company now develops around seven new products.

The company is also taking proactive steps to influence the buying process of customers. The buying process for industrial products is totally different from that of consumer products and it takes a lot of time. Towards this end, it is targeting architects, builders and interior designers for its products, while keeping a watchful eye on the competition. The business process outsourcing and the call center boom in India are presenting enormous opportunities for office furniture manufacturers. Godrej has already launched a variety of chairs to cater to this sector.

In large cities such as Delhi, Mumbai, Chennai, Hyderabad and Bangalore, the company is segmenting its dealers, with each dealer concentrating on one segment of the market. For example, individual dealers will cater to the PSUs market, hospitals and so on. The company is training its dealers in smaller towns to visit offices and recommend furniture that will suit the office in both functional and aesthetic terms. It offers design options at no additional cost to cater to the small and medium enterprises, which generally do not like to spend money on the services of architects or interior designers for their offices.

If a company catering to the industrial segment is to succeed, it has to have a thorough understanding of the organizational markets and their buying behavior. Godrej's understanding of the office furniture market helped it to effectively serve the organizational market and thus increase its profitability. The company even entered into a tie-up with Milliken Carpets, a $3 billion company in the US, to provide complete office solutions to its customers.

The Concept Of Organizational Buying

The concept of organizational buying is entirely different from that of consumer buying. While the buying decisions of individual customers are made relatively easily and quickly, usually without any systematic decision-making process, organizational buying involves a thorough and deep analysis. In organizational buying, managers deal with personnel with varied responsibilities, before actually buying a product. Organizations purchase products ranging from highly complex machinery to small components, and from products that are bought on a regular basis to those that are very rarely purchased. The purchasing manager's experience in organizational buying affects the buying process in organizations.

If the purchase is of a regular kind, it is normally done without much thought. But if it is not of the regular kind and a relatively new one, then the manager needs sufficient information about the product and the service provided by the vendors, before actually taking the decision. For instance, the manager may not wish to spend significant time on taking a decision, in the purchase of stationery, office equipment, etc., However, if s/he wants to purchase raw materials, machinery, etc., his/her decision will be dependent on various organizational factors and s/he needs to follow the organizational process. With organizations having such a varied range of requirements, it is difficult for marketers to effectively target these buyers individually. Therefore, some popular websites like indiamarkets.com are offering intermediary services wherein the website acts as a link between the supplier and the customer.

Stages Of Buying

Although organizations differ significantly from each other in their purchasing process, most buying processes pass through certain stages. These stages are problem recognition, general need recognition, product specification, value analysis, vendor analysis, order routine specification, multiple sourcing and performance review.

1. Problem Recognition

Normally, the purchasing decision process starts with the problem or need recognition. The problem can be recognized by someone who is internal to the organization (e.g. employees) or by someone who is external to the organization. The problems that employees are most likely to recognize pertain to machinery becoming obsolete, certain parts of it becoming very old and requiring replacement or unsatisfactory quality levels of certain products. The top management of the company may be considering the idea of developing a new product. Consequently, the need for new raw materials will arise. The apprehension of potential damage occurring to some of the machinery may warrant a replacement. Likewise, low or poor service standards of the existing supplier may trigger a search for new suppliers.

Problem recognition may also take place by someone external to the organization such as the suppliers to the organization. A supplier may come up with a product idea, or provide information about a new technology in the market that will considerably enhance the operational capabilities of the organization. The advantage in the supplier giving such ideas or information is that the organization will most likely purchase such technology from the same supplier.

2. General Need Recognition

After problem recognition, the firm has to identify the exact quantity of the product required and the quality levels desired. The people involved in problem recognition must find out the alternatives available to solve the problem that has been identified. For products that are purchased regularly, the specifications will be e standardized. Also, for the smaller general products, the specifications can be easily given by the people who actually use the product. But for products of a complex nature, the purchase department needs the assistance of all those who are concerned with the product to lay down the product specifications. It requires technical assistance from the engineers and technicians, and general inputs from the ultimate users of the product.

3. Product Specification

This is a crucial stage in the buying process, where the firm starts negotiating with the suppliers by giving the technical specifications of the product. Methods such as product value analysis are adopted by means of which the firm will search for chances of reducing the price of the products and alternately identify ways and means of producing those products through cheaper methods. This is the stage where those who have specified the details of the product have a say in the purchase process. In this stage, the purchase department searches for external information to issue product specifications. It is beneficial at this stage for the suppliers to maintain a close coordination with the buyers of the organization, since such suppliers will have an early advantage over competitive suppliers.

4. Searching for Potential Suppliers

At this stage, the buyers in the organization search for potential suppliers who can supply the products at the desired specification levels. Potential suppliers are found with the help of trade related directories and magazines. The Internet has become a powerful tool through which the search process can be carried out very effectively. Once a list of suppliers is finalized, the company carefully analyzes each supplier and selects one who meets the specifications, quality standards and delivery schedules set by the purchasing department. Industrial marketers who have a significant presence in all of the above said media will have a significant advantage over other suppliers.

5. Value Analysis

Value analysis involves various techniques to reduce costs and improve performance of equipment, production processes, etc. Whenever a purchase process is initiated, the manager first analyzes the value and quality specification given by the users of the product. He then compares these specifications with the product supplied by the suppliers. Each component that is used and every attribute and feature of the supplier's product is thoroughly analyzed to ensure that no component or feature is added to the product that does not add value to it. It is the objective of the purchase department to find the most economical product. At the same time, the desired quality levels should be met. Therefore, value analysis helps the manager cut the costs of the components that are not adding any value to the final product.

6. Vendor Analysis

Suppliers need to deliver products that match the technical specifications. However, just conforming to the quality levels is not sufficient for a supplier to qualify for supplying goods to an organization. Apart from meeting the quality levels, he has to deliver goods on time and stick to the delivery schedules. Suppliers must ensure that they deliver the goods on time, since any delay on their part will have an adverse impact on the company's manufacturing process, delay production, and eventually result in losses. Especially in today's competitive scenario where companies are cutting costs to the extent of zero level inventory maintenance with the help of techniques like just-in-time, the supplier has to be more careful and responsible in his dealings with the organization. Vendors must also be evaluated according to their infrastructure and management capabilities.

7. Order Routine Specification

Order routine specification involves the process of specifying the quantity of goods required by the company, the time and frequency of delivery, and finalizing issues regarding warranties and service contracts. Organizations do not treat the purchase process as complete till the ordered goods are delivered in good condition to the user department. It is only after receiving confirmation from the user department that it is satisfied with the quality and quantity of the goods delivered, the purchase department forwards the bill to the finance department.

8. Multiple Sourcing

Multiple sourcing is the process wherein an organization depends on several different suppliers for purchase of goods and services. Sometimes organizations adopt the policy of multiple sourcing because having many suppliers from different backgrounds gives the organization an edge over its competitors as it can have access to the latest information about the products and services. Another major advantage is that the firm need not completely rely on the skills and capabilities of one single supplier.

9. Performance Review

The organizational buyer continuously monitors the performance of the products delivered and the service provided during the product's life. By conducting periodic reviews and evaluations of the supplier and the product's performance, the company can ensure that it is not incurring any losses at any stage of the production cycle due to negligence or lack in the service performance of the supplier.

The company may adopt different methods to evaluate the suppliers such as contacting the end users of the products from time to time to enquire about the performance of the products. The company may also adopt techniques like weighted score methods to grade the suppliers. The performance review will greatly help the organization in evaluating the suppliers and taking effective decisions, such as whether to retain the existing supplier or search for a new one.