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Government markets: Governments buy goods and services to support their internal operations;
they do not transform the goods and services or resell them to make a profit. Government
markets usually buy their goods through a bidding process and include federal, state, county, and
local governments.
Institutional markets: Institutions are non-government organizations that buy goods and
services to support their internal operations. The function of institutions is to better their
communities, not to make a profit. Examples of institutional markets are hospitals and colleges
If we talk about the institutional market so it consists of schools, hospitals, nursing homes,
prisons and other institutions that must provide goods and services to people in their care. Many
of these organizations are characterized by low budgets and captive clienteles. For example
hospitals have to decide what quantity of food to buy for patients. The buying objective here is
not profit, because the food is provided as part of the total service package; nor is cost
minimization the sole objective, because poor food will cause patients to complain and hurt the
hospitals reputation. The hospital purchasing agent has to search for Institutional food vendors
whose quality meets or exceeds a certain minimum standard and whose prices are low. In fact,
many food vendors set up a separate division to sell to institutional buyers because of these
buyers special needs and characteristics.
However, the government market offers large opportunities for many companies, both big and
small. In most countries, government organizations are major buyers of goods and services
Government organizations typically require suppliers to submit bids and normally they award the
contract to the lowest bidder. In some case, the government unit will make allowance for the
supplier’s superior quality or reputation for completing contracts on time.
Government will also buy on negotiated contract basis, primarily in the case of complex projects
involving major R&D costs and risks and in cases where there is little competition. Government
organizations tend to favor domestic supplier. A major complaint of multinationals operating in
Europe was that each country showed favoritism towards its nationals in spite of superior offers
available from foreign firms. Government organizations require considerable paperwork from
suppliers, who often complain about excessive paperwork, bureaucracy, regulations, decision
making delays, and frequent shifts in procurement personnel.
Institutional buyer passes through different stages to buy goods or services and the buying
decisions of Institutions are as follows
1. Need Recognition
The first stage of organizational buying process is to recognize problem or need. Such problem
or need is recognized due to internal reasons such as unsatisfactory performance of existing
machines and equipment or external reasons such as announcement of new product, consultation
of supplier with sales representative, newspaper advertisement. Similarly, the external reasons
such as newspaper advertisement and trade fair etc. also motivate to buy a new product. A
successful marketer tries to understand the problems or needs of his institutional customers and
uses making program that can to identify problems.
In this stage of buying process, special specifications such as quantity, quality, price, mode of
payment etc are determined. After problem or need is recognized, an imagination of the product
that can solve the problem comes into mind. This stage helps consultants, engineers, designers,
researchers, developers, producers and sales specialists to find out the product for solving the
problem.
In this stage, a capable supplier of the necessary goods is searched. Purchase agent can seek
capable supplier in consultation with related employees. A Potential supplier is searched and a
proposal demanded by looking the record of the company, contacting with suppliers for
information, requesting acquainted suppliers to send their proposal, looking in price list or
looking in different business publications etc.
In this stage, evaluation and analysis of the proposals submitted by different suppliers are made.
The suppliers can submit their proposals in both written and oral
form. Buying organization should do vendor analysis for systematic evaluation of potential
suppliers. The received proposals should be comparatively evaluated on the basis of price,
quality, goodwill, services, delivery capacity and personal relation with buyer etc.
5. Selection Of suppliers And Purchase Order
After detailed evaluation of the proposals, the buyer can negotiate for better terms, conditions
and price before taking final decision. The buyer should take decision whether to buy all the
materials from a supplier or use different suppliers. After a proper supplier has been selected,
purchase order is given to the supplier. In this stage, packing, mode of transportation and
delivery, condition of credit facility, mode of payment, services and agreement are determined.
6. Evaluation of Performance
In the last stage of buying process, products as well as performance of supplier is evaluated. In
comparison of personal consumers, the activity of institutional buyers becomes very formal,
directed and clear after buying any products. They evaluate the quality and performance of the
product supplied by a supplier. evaluation of the products is useful for both supplier and buyer. It
also helps to maintain quality and ensure satisfaction of the buyers.
6 Conditions of Contract
Bids are invited
Depending on the process, the agency may contact suppliers directly or they may
publicly advertise the purchase.
Quotes are generally not advertised while an open tender will be. Therefore, to maximise your
opportunities, you should make sure that the government buyer is aware of you and your
business and you should also ensure your are registered on the Tenders website.
Suppliers respond
The next step requires you to respond to the invitation to quote or advertisement. To do this,
make sure you have received all relevant documents from the agency contact (noting that for
very simple purchases there may be no formal documentation).
You should also
2 Clarify any uncertainties you have in relation to the purchase or the documents;
4 Submit your response in the right format, on time and at the right location.