Nature and Factors Affecting Industrial Buying
23/02/2020Industrial buying behavior is the pattern of actions by a company involved in manufacturing, processing and other heavy industry. Many of these companies are required to make regular purchases as a means of supplying their businesses. Although each company — and each industry — will have buying behavior affected by its own set of factors, there are several main variables that can affect industrial buying as a whole.
- Demand
Perhaps the main driver of industrial buying is demand. The amount of buying that an industrial concern will do is directly depended on the amount of business that the company can expect in the near future. Generally, if a company expects higher demand, then it will stock up on raw materials as a means of ensuring that it will be able to meet consumer demand and maximize revenue.
- Price
Buying patterns are also affected by the price of the materials the companies are purchasing. When prices are higher or the company expects a decrease in the near future, the company may choose to hold off making purchases, so as to save money. This can involve some difficult decision making. For example, a company that uses fuel in the production of its products may attempt to guess the direction of oil prices.
- Economy
In addition to current demand and the current prices for a product, industrial companies may look to the economy as an indication of the future availability of materials relative to the consumer demand for them. If the economy is trending upward, the company may purchase more based on the expectation of a future rise in sales, while a downward trending economy may push it to the opposite course of action.
- Technological Changes
In addition, industrial companies are heavily influenced by changes in technology that affect both the provision of goods and their own requirements. For example, if purchasing a piece of technology means that a raw material becomes cheaper to use, then the company may choose to invest in the new technology. Similarly, the acquisition of new technology will often change the company’s buying habits, as the technology will have different raw material requirements to run.
- Political/Legal Factors
Government influence on the Industrial marketing environment. From the time of Jawaharlal Nehru to the time of Mr. Atal Behari Vajapayee there has been major influence of the Government in the industry to protect the Indian industries’ foreign investment or for that matter, foreign participation of any kind has not been allowed in the areas of defence, steel, drugs, fertilisers, machine tools etc.
More encouragement was given to small scale and cottage industry. Even the banks were nationalised, the multinationals which were present in India till about 1980s were engaged in commerce, trade and finance or export of tea. Indian Government felt that in areas where adequate Indian skills and capital are available, there was no need for foreign collaboration.
In fact, in 1977 Coca-Cola was asked to wind up operations in India, and IBM was to dilute equity to stay. Some companies like Alkali Chemicals, Dunlop, Goodyear and Asbestos Cement were allowed to remain as they were operating in non-priority areas. Today the Government having realised the importance has liberalised in many areas.
Still controls the industries do not contribute to an extent the effective and fair functioning of the economy. The Government acts as a regulatory agency in import and export matters. It controls the tax and interest rates. It provides economic stabilisation through control of inflation. It is environmentally and socially conscious. It passes rules, regulations and laws from time to time to ensure that general public interest is not compromised.
The Government has placed a large number of drugs with dubious justification under the scanner. Doubts persist about safety of a host of drugs including CISAPRIDE, the drug for night heart burn, and PPA, an ingredient in certain paediatric preparations. The review of iron preparations containing zinc, amino acids and vitamins decision could be of grave concern to many leading MNCs as these drugs are high margin products.
The Government can also change the marketing environment by making changes to its procedures for example Mr. Chandra Babu Naidu, Ex-Chief Minister of Andhra Pradesh, has decided to experiment with online procurement in four of its government departments.