Transcript Slide 1
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved. LEARNING OBJECTIVES (LO) AFTER READING CHAPTER 6, YOU SHOULD BE ABLE TO: LO1 LO2 Distinguish among industrial, reseller, and government organizational markets. Describe the key characteristics of organizational buying that make it different from consumer buying. 6-2 LEARNING OBJECTIVES (LO) AFTER READING CHAPTER 6, YOU SHOULD BE ABLE TO: LO3 LO4 Explain how buying centers and buying situations influence organizational purchasing. Recognize the importance and nature of online buying in industrial, reseller, and government organizational markets. But first, you need a basic understanding of a supply chain to really understand B2B. [Syngenta video] 6-3 SUPPLY CHAIN MANAGEMENT OEM GOVERNMENT RESELLERS B2B MARKETS ----------------CONSUMER MARKETS MINING SUPPLY CHAIN TELECOMMUNICATIONS TRANSPORTATION RESELLERS SERVICES MANUFACTURING INSTITUTIONS The supply chain is the vehicle that allows us to enjoy the vast marketplaces of today. Every entity has a supply chain! It involves every process and step from taking materials out of the ground to making a product available in a store or online. The World Food Program video SUPPLY CHAIN MANAGEMENT MARKETS Consumers: Customers Prospects Suspects CUSTOMER’S CUSTOMERS SUPPLIER’S SUPPLIERS SUPPLIERS FOCAL FIRM CUSTOMERS FOCAL FIRM NEW PRODUCT DEVELOPMENT KEY CONCEPT: Where ever you are is the focal firm! THE SUPPLY CHAIN: BREAD Seed ↓ Farm Elevator Mill Bakery Wheat Wheat Wheat Dough ↓ ↓ Flour Bread Retail A simple flow chart of the supply chain chart for bread. Think about all the processes, steps, and systems that are not shown. or Food Service TOPPER THE REICK TERRIER - 2006 TOPPER THE REICK TERRIER - 2006 7-Voice recognition requirements 1-Plastic eyes San Francisco Shenzhen, China 8-Voice recognition programming Taiwan 2-Speaker for voice 9-Speaker for voice Dongguan, China Dongguan, China 3-Plastic body 10-Transistors Shenzhen, China Malaysia 4-Motor for legs 11-IC chips Taiwan Shaoguan, China 12-Wiring Dongguan, China 5-Plastic legs Taiwan 6-Microfiber fabric coat Korea 13-Packaging Hong Kong, China TOPPER’S TRIPS TO MARKET 1-Plastic eyes & 10-transistors Shenzhen, China 2& 9-Speakers for voice, 12wiring Dongguan, China 3-Plastic body Malaysia 4-Motor for legs Shaoguan, China 5-Plastic legs & 11-IC chips Taiwan Manufacturer Outbound Port Inbound Port Warehouses and Distribution Centers 6-Microfiber fabric coat Korea 7-Voice recognition requirements San Francisco 8-Voice recognition programming Taiwan 13-Packaging Hong Kong, China Thousands of Retail Stores SUPPLY [VALUE] CHAIN GOAL • Original definition – To combine the support and direct activities to create value as perceived by the target market[s] segment[s]. • Current definition – To create additional value at every step on the supply chain. BUSINESS [B2B] MARKETS • >70% of total sales • BUSINESS MARKETS – – – – Businesses Governments Resellers International – – – Institutions [education and health care] Non-profits Captive LO1 THE NATURE AND SIZE OF ORGANIZATIONAL MARKETS BUSINESS BUYER CLASSIFICATION PRODUCERS [Manufacturers, OEMs or Private Labelers] RESELLERS [Distributors, Dealers, Wholesalers, Retailers] GOVERNMENTS [Federal, State, Local] ORGANIZATIONS / INSTITUTIONS [Educational, libraries, foundations, galleries] Purchase products for producing other goods and services [can be either a finished good or a component] Purchase finished goods or components for resale, rental, or leasing for a profit Purchase finished goods, components, and/or services for resale, rental, or leasing. They all have different buyer behaviors. Purchase finished goods and services for resale, rental, or leasing for a profit FIGURE 6-A Type and number of organization establishments in the U.S. This looks like the D&B data base. The U.S. government usually says there are between 25,000,000 and 30,000,000 businesses in the U.S. which includes all the one-person entities. 6-13 B2B MARKETS • HORIZONTAL – Numerous industries identified by NAICS codes [usually employ a differentiation or low-cost strategy] • B2C – Inexpensive pens, pencils, pads of paper, … • B2B – floor sweeping compound • VERTICAL – One or a few industries identified by NAICS codes – May be very profitable [usually employ a differentiation or niche strategy] • B2C – $1,000 fountain pen • B2B – CT scanner BUSINESS MARKET COMPLEXITY BUSINESS SERVICES Professional Services Industrial Services Technical industrial Consulting Engineering Investment banking Quality Research Education … Product testing … Project related On-going Education & training Maintenance contracts Installation Field upgrades Maintenance … … THE ECONOMY AND NAICS GROW OR MAKE Agriculture GOV’T SERVICE Wholesale Information Finance Mining Retail Real Estate Professional Utilities Transportation Construction Manufacturing SELL Management Administration Entertainment Education Health Accommodation Other Public Administration MEASURING DOMESTIC AND GLOBAL INDUSTRIAL, RESELLER, AND GOVERNMENT MARKETS LO1 North American Industry Classification System (NAICS) – – – – Supply-oriented system 20 sectors: 1,174 industries [and growing since 2007] NAFTA: 5 digits + 6TH for country coding Compatible with ISIC Rev. 3 [UN] 6-17 FIGURE 6-1 NAICS breakdown for the information industries sector: NAICS code 51 [Paging]. 6-18 COMPARING CHARACTERISTICS OF BUSINESS MARKETS TO CONSUMER MARKETS BUSINESS MARKETS CONSUMER MARKETS Market Structure Geographically concentrated Many types of markets [segments] Fewer; but high volume buyers Geographically dispersed Mass markets Small volumes Products Standard / complex / custom Service etc. are critical Business applications Engineering / Quality / Testing involvement Standard Service etc. of some note Personal use Buyer Behavior Professionally trained Multiple levels involved Performance hurdles Individuals purchasing Some family influence Social / psychological drives Buyer-Seller Relationships Technical expertise Close interpersonal relationships Long-term focus May be very dependent on each other Amateur Impersonal Immediate / Short-term COMPARING CHARACTERISTICS OF BUSINESS MARKETS TO CONSUMER MARKETS BUSINESS MARKETS CONSUMER MARKETS Supply Chains / Channels of Distribution Predominant Often shorter [more direct] Not seen by consumer Usually indirect except for catalog and internet. Promotion Often technical Personal selling Often involves resellers Simple Advertising Price Professional negotiating / purchasing Volume sensitive Complex formalized process Competitive bid / Many strategies Individuals limited purchasing skill Little, if any, leverage Simple process Not applicable Demand Fluctuating and/or derived demand Direct / primary Inelastic in the short-run Elastic Volatile and discontinuous Limited volatility