Table of Contents
Executive Summary...................................................................................................... 2
Introduction................................................................................................................... 2
Question One (LO 4.2)................................................................................................. 2
Question Two (4.3)........................................................................................................ 4
References.................................................................................................................... 6
Executive Summary
There are various differences
that distinguish organization buying from the purchases made to the end t the
end consumers. Purchases made to the end consumers are made to the final
consumer of the product and the organizational buying involves selling the
product to a business who would use the same product to produce one of their
product/services in the product portfolio. Such differences in organizational
buying and the consumer buying are identified in this report and some of the
differences include Demand derived from demand from end consumer for
organizational buying, formalized buying procedure, complexness in buying,
repetition in buying and involvement of more than one party in the purchasing
process and so on. There are various factors that differentiate the domestic
marketing from the international marketing and the marketers need to be highly
aware of these factors before venturing into marketing their products
internationally. Considering marketing organic energy bars in an international
market, differences such as language barrier, socio cultural factors, economic
conditions and currency differences are established.
Introduction
Once the product is successfully
established in the consumer market, the next step is to move into the
organizational buying which has higher margins than the consumer buying.
Similarly, some companies decide to go international in order to achieve
growth. There are various factors that needs to be considered in such decision
making and this report evaluate those factors.
Question One (LO 4.2)
There are various differences
that distinguish organization buying from the purchases made to the end t the
end consumers. Purchases made to the end consumers are made to the final
consumer of the product and the organizational buying involves selling the
product to a business who would use the same product to produce one of their
product/services in the product portfolio. For example, selling a chocolate to
a customer who would consume it as a snack is identified as a purchase made to
an end consumer. However, selling chocolates to a milkshake shop who would use
the same chocolate to product milkshakes to be sold in their shop amount to an
organizational sale where the product is not to the end consumer but to another
organization who would use it to produce an end product for consumers. With
this understanding, the differences between organizational purchase and
purchases made by consumers can be discussed as follows:
Demand derived from demand
from end consumer – The analysis above identified that the organizational sales
does not involve end consumers in making the sale where the products are sold
to the businesses who would produce another good for the end consumer.
Therefore, it is identified that demand for organizational sales are derived
through the consumer’s demand for the end product as businesses would need
those raw materials/inputs to produce end products for consumers only when there
is a demand for the end product. (Weele, 2010) Therefore, the demand for
organizational sales is highly impacted by the demand for the end product and a
positive relationship between these two factors can be established.
Formalized Buying Procedure –
Consumer buying process is very informal where there can be spontaneous
purchases as and when the consumer needs/feels. However, the organizational
buying procedure is highly formalized where the company needs to follow various
steps to make a purchase while making sure that the purchased good meet the
purchasing standards of the company. (Weele, 2010) Further, there is a
significant level of documentation involved involving calling for purchase
orders, issuing purchase orders and invoicing to make the payment and so on.
Therefore, the organizational buying process seems to be formalized than the
purchasing procedure of the consumers.
Lengthy and complicated- The
consumer’s buying behavior and the process is very short and less complicated
where the decisions are made quickly. However, the organizational buying
process is highly complicated and it is a lengthy process, which involves
calling for quotations, evaluation of quotations, purchase order issuing and
also formalized post purchase evaluation to be conducted by the users.
Involves more than one person
– The decisions of a consumer purchase is made by one person and the whole
process involves only the consumer who would look for information, evaluate
options and purchase the product. However, the organizational buying behavior
involves many people in the process such as initiator (person who requires for
the purchase) influencer, (person who positively encourages the purchase),
decider (person who decides on the supplier and specifications), approver
(person who approves the cost and the purchase). (Weele, 2010)The ultimate of
the product could be different from all these users mentioned above making it a
complicated process.
Repetition in purchases – As
organizational has the a long process for purchases, in order to save times,
companies engage in relationship building through purchases where they tend to
use the same supplier for a long period of time creating repetition in the
purchases. In consumer purchases there is a less chance of repurchases and for
organizational buying there is a high chance of repurchase depending on the
quality and the cost of the product. (Weele, 2010)
Question Two (4.3)
There are various factors
that differentiate the domestic marketing from the international marketing and
the marketers need to be highly aware of these factors before venturing into
marketing their products internationally. Considering marketing organic energy
bars in an international market, following differences can be observed from
marketing the same product domestically:
Language – In designing a
marketing campaign, the language of the campaign plays a significant role as it
communicates a message to the audience. When products are marketed in a local
market, the domestic language is used to design the marketing message. However,
when marketed internationally, the company needs to place emphasis on the
language that is widely spoken in the chosen international market and the
marketing message should be defined accordingly without making the wrong
impression by using a wrong language.
International Socio Cultural
Values - When the product are marketed locally, the product and the marketing
messages are defined according to the local cultural and social values.
However, when marketing the product in the international market, the company should
place emphasis on the cultural and social values of the chosen international
market, going beyond the local market. (Vasudeva, 2006) For example, when
McDonalds was launched in India, they excluded the beef burger because the cow
is considered to be sacred in the Hindu traditions in India. (CBS News, 2009) Many
examples can be cited from various countries and companies. Some companies also
have made blunders in terms of not understanding the cultural and social
backgrounds of international market, which had made their product a failure in
the international market.
Economic background of the
International Market – The pricing for a product should depend on the
purchasing power of the consumers and the purchasing power of consumers in the
international market would vary from the domestic market. (Vasudeva, 2006) Therefore,
the company should place enough emphasis on identifying the purchasing power of
the consumers in the market before deciding on the price for the product. The
purchasing power of consumers in the international market is heavily impacted
by the global economic situation as well as the economic situations in those
specific countries, which are highly dynamic. Therefore, the company should
identify factors, which influence the purchasing power and thereafter make the
pricing decisions in the international market. Further, there is a concept
called the price discrimination, which involves selling the similar products at
two different prices in different geographical location and some countries have
banned such practices. (Butler, 2012) Therefore the company should identify
such legal factors in making pricing decisions and thereby abide by the law to
avoid any discomforting situations.
The currency difference- The pricing in the international market
should be carried out based on the currencies that are used in the chosen
foreign market as opposed to the prices in local currency in domestic
marketing. (Vasudeva, 2006) Therefore, the company should take into account of
the currencies in the international market and decide on the price for the
product. However, making sales in an international currency could result in
exchange loss/gains in income statement of the company as the currency
conversion results in the same. Therefore, the emphasis also should be placed
on such factors and margins should be allowed for such losses, in the pricing
strategy of the company in the initial stage.
References
Butler, E . (2012). The
unintended consequences of banning price discrimination . Available: http://www.adamsmith.org/blog/regulation-industry/the-unintended-consequences-of-banning-price-discrimination.
Last accessed 12th July 2013.
CBS News . (2009). Where's
The Beef? . Available: http://www.cbsnews.com/2100-500522_162-2640540.html.
Last accessed 12th July 2013.
Vasudeva, P K (2006).
International Marketing . 3rd ed. New Delhi: Excel Books.
Weele A V J (2010).
Purchasing and Supply Chain Management: Analysis, Strategy, Planning and
Practice . Hampshire - UK: Cengage Learning.
