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Commercial Enterprises Government Units Non-Profit Organizations 2 › Manufacturers › Construction › Service firms › Transportation › Professional › Resellers Includes

I. Industrial Distributers II. Value Added Resellers III. Original Equipment Manufacturers (OEM) IV. Users and End Users 3

 Provide 4 types of utility: o Form, Time, Place, Possession  Assortment of Products from many manufacturers based on segment needs  Serve smaller customers where direct representation is not efficient 4

 More than just a distributor  Provides unique, complete offering from many sources  Creates a value network at the user level 5

 Purchase products and incorporate those products into their products  Usually the largest-volume users of goods and services Ex: Intel is an OEM to many computer manufacturers. Goodyear is an OEM to the auto industry. 6

 A manufacturer that purchases goods or services for consumption or incorporation into its own products  Identity of the purchased product becomes lost Ex: When Goodyear purchases steel for fabrication of steel belts for tires, Goodyear is the steel manufacturer’s end user 7

 Consumer grouping consists of: o Hospitals o Churches (Mosques) o Colleges o Nursing Homes 8

Raw Material Producers Component Parts and Manufacture d Materials Producers Accessory Equipment Suppliers Capital Goods Manufacturers 9

Raw Materials Producer  Compete in price sensitive markets  Seek Value Added positions  Product loses identity once incorporated into customer’s product  Dominated by a few very large producers 10

Component Parts and Manufactured Materials Producers  Parts retain their same form when incorporated  Retain identity when incorporated into consumer’s product  Differentiated by value added EX:Seagate Disc Drives in Hewlett Packard Computers Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall 11

Capital Goods Manufacturer  Consists of large purchases with high risk to customer  Many parts of customer organization involved in decision  Customers expect installation, equipment and accessories 12

Accessory Equipment Suppliers  Equipment that works with another offering  Accessories can be added to a bundle opportunity by a channel intermediary  Produced by an independent supplier  Add value by complying with industry standards for primary offering 13

 Communities of interested parties who are not direct participants in a market as customers, channel members, suppliers or competitors. 14

 Financial Publics  Independent Press  Public Interest Groups  Internal Publics o All may have interests because of economic or societal effects of activities o Often may be considered stakeholders in the buying center 15

Demographic Environment Economic Environment Socio- cultural Environment Technological Environment Natural Environment Influenc e Value Creation 16

Exhibit 2-5: The Product Life Cycle (PLC) Decline Introduction Growth Maturity Time Sales Revenue/ period 17

Exhibit 2-6: The Technology Adoption Life Cycle (TALC) TechnophilesTechnophiles VisionariesVisionaries LaggardsLaggards TimeTime Sales from New Adopters/ period PragmatistsPragmatists ConservativesConservatives 18

 Address the needs of business customers of all types.  May have to juggle different, clashing objectives. Purchasing Goals

Factors that drive total cost. Acquiring and managing costs. Quality, reliability over the life cycle. Value of product to firm/customers.

1 st Point, each firm has a unique portfolio. 2 nd Point, more attention on purchases having the greatest impact on revenue generation or the greatest risk to performance.

Sales (000$)12,000 Direct Materials5,000 Direct Labor3,000 Gross Profit4,000 Selling & Administration cost 1,500 Net Profit2,500 Sales (000$)12,000 Direct Materials6,000 Direct Labor3,000 Gross Profit3,000 Selling & Administration cost 1,500 Net Profit1,  All supply management activities have potential for cost reduction and hence increased profit.  If the firm’s sales remained the same, a reduction of $1,000 of material cost, would result in $1,000 increase in net profit:  The ratio is 1:1.

 Compliance- requires government contractors maintain affirmative action programs.  Set-aside - a percentage of contract set aside for small minority businesses.  Minority-subcontracting- may require major contractors to subcontract a certain percentage of contract to minority firms.

1. Fixed-price contracts A price is agreed to before contract is awarded and payment is made at conclusion of work. Provides for the greatest profit potential. Poses greater risks. 2. Cost-reimbursement contracts Reimbursement for allowable costs may be allowed; sometimes “cost-plus” contracts allow costs and certain percentage of profit.

1. Formal Advertising—the government solicits bids from suppliers, and usually the lowest bidder is awarded the contract. 2. Negotiated Contract—used to purchase products or services that are not differentiated on price alone, competition is common.

 Schools, health care organizations, non-profit agencies.  Similar to government buyers--political considerations and laws.  Similar to commercial buyers--often managed like corporations--broad range of purchase requirements.  Group purchasing quite common.