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Purchase Decisions in Business Firms. INSTITUTION Michigan Univ., Ann Arbor

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Purchase Decisions in Business Firms. INSTITUTION Michigan Univ., Ann Arbor DOCUMENT RESUME ED 047 272 AC 010 076 AUTHOR Patchen, Martin; And Others TITLE Case Studies of Decision-Making in Organizations: Purchase Decisions in Business Firms. INSTITUTION Michigan Univ., Ann Arbor. Survey Research Center. PUB DATE Aug 69 MOTE 241p. EDRS PRICE EDRS Price MF-$0.65 HC-$9.87 DESCRIPTORS *Communication (Thought Transfer), *Decision Making, *Industry, *Information Sources, Investigations, *Purchasing, Surveys ABSTRACT Conducted during 1966-67, these 33 case studies were expected to provide insights into various aspects of organizational decision making (especially the ways in which influence is exerted and perceived in specific decisions). Eleven firms, all having headquarters and at least ore plant or division in the Chicago area, were chosen from a directory of the 1,000 largest United States industrial corporations. These 11 firms ranged in type from heavy industrial equiplent to publishing and musical instruments. Accounts of nonrepetitive (infrequent or first time) purchasing included 11 cases involving decisions to purchase and use new materials, eight on purchasing or leasing business machines, six on buying machinery and tools, five to purchase trucks, two to conduct plant expansion and maintenance, and a decision to obtain furniture for an individual office. In an effort to trace the chain of communication, 180 people were interviewed as to the product and its use, how the need arose, internal and external information sources, the choice of a particular type of product, and factors (including the supplier's role) in the choice of the successful supplier. (LY) U.B. DEPARTMENT DF HEALTH, EDUCATION WELFARE OFFICE OFEDUCAON THIS DOCUMENT RAS CENTEREPRODUCED EXACTLY AS RECEIVED FROM THE PERSON OR ORGANIZATION ORIGINATING IT POINTS OF VIEW OR OPINIONS STATED 00 NOT NECES SAFELY REPRESENT OFFICIA L OFFICE OF EDU CATION POSITION OR POLICY 1 STUDIES OF DECISION-MAKING IN ORGANIZATIONS: (NJ "I.:f Purchase DecisionsDisions in Business Firms W by MARTIN PATCH EN With the assistance of Vicki Lundgren I Joan Goodrich Lynn Garber Carol Arenberg Deborah Linderman Survey Research Center INSTITUTE FOR SOCIAL RESEARCH University of Michigan August 1969 ACKNOWLEDGMENTS Interviewing for this study was done by the National Opinion Research Cuter.Eve Weinberg and Jean Schwartz of N.O.R.C. made helpful suggestions on the interview schedule and procedures, and supervised the field staff. Robert Fibkins of Time, Inc. made useful suggestions on the design and content of the study. We wish, also, to acknowledge the gracious assistance of the companies which cooperated in the study, and thus made it possible. It Martin Fitchen CONTENTS THE PURCHASE DECISION STUDY. ZrallaLWIta&ILLUEIMILIZTILIALE Case 1. Ferromanganese for Steel Castings Case 2. A Resin Binder for Steel Castings Case 3. Plastic Containers for Dairy Products Case 4. Plastic Material for Organ Keys Case 5. Plastic Laminate for Furniture Manufacture Case 6. Auto Part Made of Zinc Rather than Aluminum Case 7. Conveyor Cross-Rods Made of a New Type of Steel Case 8. A Coolant for Cutting Tools Case 9. Rubber Component for Machine Produced Case 10. Hydrochloric Acid for Processing Steel Case 11. A Vanadium Alloy for Making Steel ; r :11 Case 12. A Copying MAchine (Purchase) Case 13. A Copying Machine (Leese) Case 14. A Printins Calculator (Purchase) Case 15. A Bookkeeping Machine and a Printing Calculator (Purchase) Case 16. An Blectri: Typewriter (Purchase) Case 17. An Accoun:img Machine (Purchase) Case 18. A Computer (Lease) Case 19. A Data Rtz.rding and Communications System (Furthest) CONTENTS (CCUTINVED) DEGIUM-20tURCWIW---.0111nRIC AND TOOLZ Case 20. Printing Presses 148 Case 21. System for Cleaning Milk Processing Equipment 154 Case 22. A Mold for rlastic Organ Parts 161 Case 23. A Piercing Press 171 Case 24.Body-Maker for Can Manufacture in New Plant 179 Case 25. A Coal Crusher 188 PECISIOVS To PURCHASE Mai Case 26.A Tractor Truck 194 Case 27. A Pick-Up Truck With Snow-Plowing Blade 200 Case 28. Fleet of "Over-the-Road" Trucks and Trailers (Lease) 206 Case 29. A Pick-Up Truck 211 Case 30. A Lift-Truck 217 ainaNESZaZiatiMEUGUALMINIZAUE Case 31. A Plant Roof Repaired 222 Case 32. Resting Equipment for Plant Expansion (Purchase) 228 igarllaiLM21191AILAEIGLITEELEZE Case 33. Furniture for an Individual Office 234 Survey Research Center Institute for Social Research University of Michigan THE PURCHASE DECiSIOM STUDY Who Did The Study TITEITMY was done as part of the Organization Behavior Program of the Survey Research Center, Institute for Social Research, University of Michigan. Within this program, a large number of studies of various facets of organizational life -- productivity, morale, leadership, power and influence, etc. - -have been conducted over the past twenty years. The study of purchase decision-making was under the direction of Dr. Martin Patchen. Interviewing for the study was done by the Motional Opinion Research Center, an affiliate of the University of Chicago, under a sub-contract with the University of Michigan. The study was sponsored by Time, Inc. tic-Darsattotaga While questions about how decisions are made in organizations have been asked in other studies of the Organizational Behavior program, the previous studies have notfocused on specific decisions. This study is the first in the program to study decision-making in depth. As such, it was expected that the study would prove useful in indicating some of the useful approaches and some of the problems in the study of specific de- cisions by interview methods. It was expected also that case histories of specific purchase de- cisions would provide insights into various aspects of decision-making in organizations. The ways in which influence is exerted and perceived in specific decisions is a subject of particular interest. Finally, it was anticipated that the results of the study would be useful to those people In business organizations and in marketing who are professionally concerned with the specific type of decision studied--i.e., with purchasing decisions. III. When The Study Was Done Exploratory interviews and pre-tests of interview schedules in several companies were conducted in the fall of 1966. Most of the in- terviewing for the main part of the study took place in January and February 1967. Additional interviews were conducted during March through May 1967 with individuals who could not be reached earlier and with per- sons in several companies where the interviewing began later. 2 IV... How The Companies Were Chosen Names of companies which were asked to participate in the study were obtained from the Fortune Plant and Product Directory of the 1,000 Largest U.S. Industrial Corporations. 1966. Working from the beginning of the alphabetical listing of companies, letters were sent by the study director at the Survey Research Center to the Presidents of companies which had company headquarters and at least one plant or division in the Chicago metropolitan area.These letters explained the purposes of the study, its sponsors, and procedures, and requested the -olperation of the companies in this investigation. Such letters, followed by telephone calls and sometimes by per- sonal visits from the study director, were sent to companies selected in alphabetical order from the Fortune Directory (approximately thirty- five companies were contacted) until the goal of ten cooperating companies had been obtained. An eleventh company was added to the study after it proved possible to study only one purchase decision in one of the original set of companies. Since the sample of companies is small and is composed of com- panies which were willing to cooperate in the study, it is not possible to know the extent to which this sample is representative of all com- panies listed in the Fortune directory. The companies included do repre- sent considerable diversity in type of organization and type of product produced. These cases permit us to realize the study's basic objective of understanding purchase decision - making in a variety of specific cases. V. What Companies Were Included In The Study Eleven large companies, with hu and at least one plant or division in the Chicago area, were included in the study.These companies fall in the following general categories: a) Manufacturers of heavy industrial equipment (e.g., railroad cars, moving equipment, presees--three companies; b) Manufacturers of lighter goods, including consumer products (e.g., farm implcments, automotive parts)--two companies; c) producers of food products--two companies; d) producers of musical instruments, especially organs and pianos--two companies; e) steel producer--one company; f) publisher--one company. VI. How Purchase Decisions Were Chosen For Study At each company which agreed to cooperate in the study, a person knowledgeable about the purchasing function (almost always the head of the Purchasing Department) was interviewed informally by the project director. The project director indicated that "we'd like to focus not. on repetitive purchases where the same product is bought over and over again by the company, but rather on non-repetitive purchases where a product was bought for the first time or had been bought only infre- quently before." In clarifying the type of non-repetitive purchase with which the study was concerned, an interest in purchases which revised deliberation about whether or not to make the purchase, and/or what type of product to obtain, was emphasized. 6 3 A preference was also expressed by the study
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