Nature and Scope of Business Markets
Like final consumers, an organization purchases products to fill needs. However, its primary need—meeting the demands of its own customers—is similar from organization to organization. A manufacturer buys raw materials to create the company’s product, while a wholesaler or retailer buys products to resell. Companies also buy services from other businesses. Institutional purchases such as government agencies and nonprofit organizations buy things to meet the needs of their constituents.
Business buying decisions, while handled by individuals, occur in the context of formal organizations. Environmental, organizational, and interpersonal factors are among the many influences in B2B markets. Budget, cost, and profit considerations all play parts in business buying decisions. In addition, the organizational buying process typically involves complex interactions among many people. An organization’s goals must also be considered in the organizational buying process.
The B2B market is diverse. Transactions can range from orders as small as a box of paper clips or copy machine toner for a home-based business to deals as large as thousands of parts for an automobile manufacturer or massive turbine generators for an electric power plant. Businesses are also big purchasers of services, such as telecommunications, computer consulting, and transportation services.
Four major categories define the business market:
1) The commercial market
2) Trade industries
3) Government organizations
Business markets are markets for products and services, local to international, bought by businesses, government bodies, and institutions (such as hospitals) for incorporation (for example, ingredient materials or components), for consumption (for example, process materials, office supplies, consulting services), for use (for example, installation or equipment) or for resale . . .
The only markets not of direct interest are those dealing with products or services which are principally directed at personal use or consumption such as packaged grocery products, home appliances, or consumer banking. The factors that distinguish business marketing from consumer marketing are the nature of the customer and how that customer uses the product. In business marketing, the customers are organizations (businesses, governments, institutions).
Business firms buy industrial goods to form or facilitate the production process or use as components for other goods and services. Government agencies and private institutions buy industrial goods to maintain and deliver services to their own market: the public. Industrial or business marketing (the terms can be used interchangeably) accounts for more than half the economic activity in developed countries. More than 50 percent of all business school graduates join firms that compete directly in the business market. The heightened interest in high technology markets—and the sheer size of the business market—has spawned increased emphasis on business marketing management in universities and corporate executive training programs.