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COMMERCE 2MA3 Study Guide - Final Guide: Value Engineering, Offshoring, Remanufacturing


Department
Commerce
Course Code
COMMERCE 2MA3
Professor
Ambika Badh
Study Guide
Final

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Chapter 5: Business to Business Marketing
(B2B)
Business to Business (B2B) Marketing – organizational sales and purchases of goods and services to
support production of other products, to facilitate daily company operations, or for resale. Basically when
a particular business tries to sell goods and services to another business
Components
1. Commercial Market – individuals and firms that acquire products to support, directly or indirectly,
production of other goods and services. Includes companies that buys stuff from other industries
and modify/change it to sell to other consumers
Largest segment
Includes manufacturers, farmers, members or resource-producing industries, and providers of
such services, like transportation financing, real estate etc.
IE. Sobeys buys flour and physically uses it in the production of bread food in their bakery
2. Trade Industries – organizations, such as retailers or wholesales that purchase for resale. Are
mainly finished goods that the buyers sell to final consumers
Resellers may buy a good, but repackage before selling complete product
IE. Buy a big chunk of meat, but seller cuts it into smaller slices before selling it
Buy stuff just to resell is not re-modified at all.
3. Government – primary purpose it to provide some form of public benefit such as national
defense or pollution control. Includes federal, provincial or territorial, municipal and foreign
4. Institutions – includes a diverse array of organizations, including hospitals, schools, museums,
and not for profit organizations. Can be either private or public
Segmenting B2B Markets
Segmentation helps marketers develop most appropriate strategy. We segment in b2b markets because it
helps plan better and create more satisfaction for the customers. NAICS helps further classify types of
customers, after they’ve been passed NAFTA requirements. IE. A client dealing with a company for the
first time VS a long term client  the strategy you would use to deal with each respectively will be very
different
Demographic (Size) Characteristics:
Based on size of firm, amount of money, sales & revenue etc.
Customer Type:
groups based on type of customer, such as manufacturer, service provider, government agency
etc, or even by industry.
customer-based:
oDividing a B2B market into homogeneous groups based on buyers product specifications
End-Use Application: how the product will be used – if it is to be resold or modified,
Segmenting a B2B market based on how industrial purchasers will use the product. IE a baseball
bat manufacturer will create baseball bats differently based on who’s using them, because high
school kids play with aluminum bats while professionals use wooden.
Purchase Categories: are you dealing with customers for the first time or is it a long term relationship.
Customer relationship management (CRM): combination of strategies and tools that drives
relationship programs, reorienting the entire organization to a concentrated focus on satisfying
customer’s
Characteristics of B2B Market
Geographic market concentration:
Certain industries locate in particular areas to be close to customers. Firms make chose to locate
sales offices and distribution centers in these areas to provide more attentive service. IE. Ottawa
area is favourable for companies selling to the federal government

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Sizes and Numbers of Buyers: you can find data online to determine how big or small a customer is,
and depending on the size determines how many buyers there will be. IE. Many buyers in limited-buyer
markets are large organizations  international market for jet engines is bought mainly by 3 big
manufacturing customers
The Purchase Decision Process:
To effectively manage to other organizations, businesses need to understand the dynamics.
B2B is more complex and involves more time
Suppliers have to work with many buyers and evaluate customer needs and develop proposals
Buyers need to make decisions and analyze competing proposals
Buyer-Seller Relationships:
Buyer-seller relationships are often more complex than consumer relationships and require
superior communication among the organizations personnel. Satisfying one major customer may
mean the difference of millions of dollars to a firm
Evaluation International Business Markets
Business patterns differ from country to country
Global Sourcing – Purchasing goods and services from suppliers worldwide  can bring significant cost
savings but requires adjustments and product quality has to be carefully monitored
Categories of Business Market Demand
DERIVED DEMAND:
Demand for a resource that results from demand for the goods and services that are produced by
that resource
IE. The demand for computer microprocessor chips comes from demand of personal computers,
so if fewer computers are sold, demand for chips decreases.
Derived demand creates volatile demand because business demand is often derived from
consumer demand and even the smallest shifts in consumer demand can produce
disproportionate and volatile shifts in businesses.
JOINT DEMAND:
Demand for a product that depends on the demand for another product used in combination with
it
Usually seen in complimentary goods and between tow finished products that are used together
IE. Laptop case and laptops
IE. lumber and concrete
INELASTIC DEMAND:
Demand that, throughout an industry, will not change significantly due to a price change
Demand of product isn’t dependent on price
IE. Housing sector isn’t doing well, and there’s not demand for houses. Even though the wood is
cheaper, there still isn’t any demand for houses (wood is derived from demand of houses, but the
demand for houses STILL won’t even if wood is mad cheap)
VOLATILE DEMAND:
Comes from derived demand
IE. Demand of wood is dependent on demand of housing sector – things are very uncertain and
can instantly change
INVENTORY ADJUSTMENTS:
Just In Time (JIT):
ovendors to deliver inputs as they are needed by the production process.
oJIT leads to sole sourcing (which is buying entirely from just one vendor).
oSeeks to boost efficiency by cutting inventories to absolute minimum levels by making
vendors deliver inputs as the production process needs them
JIT 2
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