How Do Government Buyers Make their Buying Decisions

Government buying practices often seem complex and frustrating to suppliers, who have voiced many complaints about government purchasing procedures. Those include too much paperwork and bureaucracy, needless regulations, emphasis on low bid prices, decision-making delays, frequent shifts in buying personnel and too many policy changes. Yet, despite such obstacles, selling to the government can often be mastered in a short time. The government is generally helpful in providing information about its buying needs and procedures, and is often as eager to attract new suppliers as the suppliers are to find customers.

When the mighty US Fleet edged its way up the Gulf during Desert Storm, five little plastic boats led it. The little Royal Navy Hunt Class MCMVa (Mine Counter-Measure Vessels) were in a league of their own at the dangerous job of clearing a path for the main fleet. They were made by Vesper Thornycroft, a small British company which is a master at selling to governments around the world. While the world's leading defence contractors seek alliances and mergers to meet the 'peace dividend's' reduced demand, Vosper has an order book worth £600 million and 14 vessels under construction, 95 per cent of them for export. Part of its strength is Vesper's dominance in the niche for glass-reinforced plastic (GRP) mine hunters, corvettes and patrol craft. Just the sort of ships that small navies want.

Vbsper's strength extends beyond the vessels. With its vessels it offers a maritime training and support service where it has pioneered computer-based learning. Many clients come from the Middle East and travel with their families, so Vosper has built an Arabic school for 70 pupils next to the maritime training centre. It now does training for other firms selling to the Middle East, so strengthening its position in the region. Others of

Political Graft: Wheeze or Sleaze?

Marketing

Highlight

On 26 May 1994 at the White House, President Bill Clinton's chef de cabinet was forced to resign. He had used a government helicopter to take him to a game of golf. lie was ordered to reimburse the Treasury for the cost of his jaunt, 813,129.66. Other continents; other morals.

On 20 June 1994 in Paris, the new Members of the European Parliament were invited to a briefing on the many perks attached to their new status. The subject excited Jean-Francois Hory, president of Bernard Tapie's socialist MRG party. From his place in the front row lie turned in his seat, fixed a knowing eye on his new colleagues and addressed them in the manner of an old hand talking down to university freshmen: 'One thing you need to know about travel allowances - they'll want to know your address. If you have one or more second homes, make sure you list the one furthest from Brussels.' Obviously, a return flight from Marseilles to Brussels is worth more than the tram fare from Loos-les-Lille to Brussels. Do you detect a whiff of moral purity?

Political corruption used to be a thing other countries did, but no more. In the United States, United Kingdom, France, Spain, Italy, Japan and elsewhere, accusations of political corruption involving businesses have shaken the countries' leaders. Eurofraud is estimated to cost EU taxpayers over 10 billion ecu per year. Sometimes the t'iddles are minor, like exaggerating expense claims on Eurojaimts, but often they are not. In 1991 Antonio Quatraro leapt to his death from a Brussels window. He was a European Commission official responsible for authorizing subsidies. In 1990 a fraud was discovered where he allegedly received backhanders for rigging the auction of Greek-grown tobacco to benefit Italian traders.

The auction rigging would be illegal anywhere, but often what is common practice in one country will bring a senior politician down in another. All governments have codes of practice, but as Table 1 shows, they are not consistent. There are also different cultural traditions about obeying rules. In Britain a Treasury minister had to fight for his political life following accusations that a controversial Arab businessman had paid for a weekend that the minister had had at the Paris Ritz Hotel. The bill was less than Ffr4,000 and in no other European country would he have had to declare such a gift. German political representatives have to sign a register, but the Bundestag's guidelines suggest only declaring gifts over DM10,000.

In Japan the attitude towards political corruption is changing slowly. In 1988 Kiichi Miyazawa resigned as finance minister after being caught up in the Recruit scandal. Recruit, an employment agency, had secretly given large tranches of its own shares to politicians, including cabinet ministers, in exchange for political favours. But by 1991 Mr Miyazawa was sufficiently rehabilitated to become prime minister. This follows the 'traditional' pattern for Japanese politicians caught taking bribes oro-shoku, 'defiling one's job'. O-shoku carries no moral overtones about wrongdoing, it just means that through carelessness the publicity has dishonoured the politician's honoured position. The usual line of defence in the Diet is that the politicians knew nothing, since their aides took the money. In that way the politician does not lose face, junior aides are not worth prosecuting and ever;'one is happy.

The mood changed after the Sagawa scandal. Shin Kanemaru needed money to split the ruling LDP and start one of his own. He needed a lot of cash and most of it came from Sagasva Kyubin, a trucking company that wanted political favour in order to expand its business. Gold bars and bonds were found in Mr Kanemaru's home and office. He was found guilty of not reporting Y2SO million in 'political donations', but fined less than

TABI.EI GOVERNMENT CODES OF PRACTICE IN VARIOUS COUNTRIES

COMPULSORY

REGISTER

REGISTER OF

MPs DECLARE

MUST DECLARE

COUNTRY

REGISTER OF

OPEN TO THE

INCOMPysiIARES

INTEREST IN

FREE RlTZ

INTERESTS?

PUBLIC?

DETAILS?

DEBATE?

WEEKEND?

France

Assets

No

No

No

No

Germany

Yes

Yes

No

No

No

Italy

Income

Yes

Yes

No

No

Spain

Yes

No

No

No

No

United Kingdom

Yes

Yes

No

Yes

Yes

United States

Yes

Yes

Yes

No

Yesa

NOTE: ''Gifts over §250 nut acceptable.

NOTE: ''Gifts over §250 nut acceptable.

y100,000. After this, a new term entered the Japanese political vocabulary, seijijuhai or 'politics rotten to the point of disintegration'.

Such large-scale 'crony capitalism' has much to do with the meltdown of the Tiger economies in the late 1990s. Indonesia is in the most invidious position,' said Chris Tinker, regional economist at ING Bering in Hong Kong. 'Crony capitalism and pressure from the president's children, with privileged business interests, have held back economic restructuring, causing massive capital flight.' Meanwhile Indonesia's annual per-capita consumption declined from US$1,200 to 8300; stook-market capitalization went from $118 billion to Sl7 billion; and onSy 22 of the country's 286 publicly listed companies remained solvent.

When selling to governments, especially foreign ones, marketers face a great dilemma. Should they follow St Ambrose's advice to St Augustine: 'When you are at Rome live in the Roman style; when you are elsewhere live as they live elsewhere'? Or should they behave like a saint?

SOURCES; The loading quotation is from 'An open letter to chose unnerved by the little judges', by MEP Thierry JeanPierre Terry; other sources are Terry McCarthy, 'It's not graft, just duty anil obligation', /ndependenl (27 October 1994), p, 16; 'Hands up all those hit by sleaze', The Economist (29 October 1.994), pp. 49-51; 'The sour taste of gravy', The Kconvmist (5 November 1994), p. 50; Alix Christie and Julie Read, 'fraud crusader gears up for a fight, 7'hu European (11-17 November 1994), p. 11; John McBeth, 'Ground zero', For Eastern,-Economic Review (22 January 1998), pp. 14-17. See also a series of five special reports on 'Asia in Crisis' published in the Financiul Times between 12 and 16 January W98.

Vesper's activities get it closely involved in its customers' operations. The company has a three-year contract for the Ministry of Defence's Record Data Centre and has a five-year contract to operate maritime services craft for the Royal Air Force. Not had for a company sold by British Shipbuilders to a management team in 1985 for £18.5 million - in 1994 the company's value was $236 million.25

Many companies that sell to the government are not so marketing oriented as Vosper Thornycroft for a number of reasons. Total government spending is determined by elected officials rather than by any marketing effort to develop this market. Government buying has emphasized priee, making suppliers invest their effort in technology to bring costs down. When the product's characteristics are specified carefully, product differentiation is not a marketing factor. Nor do advertising or personal selling matter mueh in winning bids on an open-bid basis.

More companies now have separate marketing departments for government marketing efforts. British Aerospace, Eastman Kodak and Goodyear are examples.

These companies want to co-ordinate bids and prepare them more scientifically, to propose projects to meet government needs rather than just respond to government requests, to gather competitive intelligence, and to prepare stronger communications co describe the company's competence.

The business market is vast. In many ways, business markets are like consumer markets, but business markets usually have fewer, larger buyers who are more geographically concentrated. Business demand is derived, largely inelastic and more fluctuating. More buyers are usually involved in the business buying decision and business buyers are better trained and more professional than are consumer buyers. In general, business purchasing decisions are more complex and the buying process is more formal than consumer buying.

The business market includes firms that buy goods and services in order to produce products and services co sell to others. It also includes retailing and wholesaling firms that buy goods in order to resell them at a profit. Business buyers make decisions that vary with the three types of buying situation: straight re&ijys, modified rebuys and new tasks. The decision-making unit of a buying organization -the buying centre - may consist of many people playing many roles. The business marketer needs to know the following: Who are the main participants? In what decisions do they exercise influence? What is their relative degree of influence? And what evaluation criteria does each decision participant use? The business marketer also needs to understand the primary environmental, interpersonal and individual influences on the buying process. The business buy ing-decision process itself consists of eight stages: problem recognition, general needs description, product specification, supplier search, proposal solicitation , supplier selection, order-routine specification and performance review. As business buyers become more sophisticated, business marketers must keep in step by upgrading their marketing accordingly.

The institutional market consists of schools, hospitals, prisons and other institutions that provide goods and services to people in their care. Low budgets and captive patrons characterize these markets. The government market is also vast. Government buyers purchase products and services for defence, education, public welfare and other public needs. Government buying practices are highly specialized and specified, with open bidding or negotiated contracts characterizing most of the buying. Government buyers operate under the watchful eye of politicians and many private watchdog groups. Hence, they tend to require more forms and signatures and to respond more slowly in placing orders.

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    How institutional and government buyers make their buying decisions.?
    7 years ago
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