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Lesson#31
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INTERNATIONAL BUSINESS MARKETS
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INTERNATIONAL BUSINESS MARKETS
Business markets consist of individuals or groups that purchase
a specific kind of product for resale,
direct use in producing other products, or use in general daily
operations. There are producer, reseller,
government, and institutional markets.
Producer markets include those
individuals and business
organizations purchasing products for the purpose of making a
profit by using them to produce other
products or by using them in their operations.
Reseller markets are intermediaries
who buy finished
products and resell them to make a profit.
Government markets are federal,
state, county, and local
governments that buy goods and services to support their
internal operations and provide products to
their constituencies.
Institutional markets are
organizations with charitable, educational, community,
or other nonbusiness goals.
Business transactions differ from consumer transactions in
several ways. Business transactions tend to
be larger, and frequently involve more than one person or
department in the purchase. They may also
involve
reciprocity, an arrangement in which two organizations agree to buy from
each other. Business
customers are usually better informed than ultimate consumers
and are more likely to seek information
about a product's features and technical specifications.
When purchasing products, business customers are particularly
concerned about quality, service, and
price. To achieve an exact level of quality, businesses often
buy products on the basis of a set of
expressed characteristics, called specifications. Because
services have such a direct influence on a firm's
costs, sales, and profits, such matters as market information,
on-time delivery, and availability of parts
are crucial to a business buyer. Although business customers do
not depend solely on price to decide
which products to buy, price is of prime concern because it
directly influences profitability.
Business buyers use several purchasing methods, including
description, inspection, sampling, and
negotiation. Most business purchases are either
new-task purchases (an initial
purchase of an item to b
used to perform a new job or solve a new problem),
straight rebuy purchases (a routine
purchase of
the same products), or
modified rebuy purchases (a
new-task purchase that is changed on subsequent
orders or when the requirements of a straight rebuy purchase are
modified).
Unlike consumer demand, the demand for industrial products can
be characterized as derived, inelastic,
or sometimes joint demand.
Derived demand is demand for
industrial products that stems from demand
for consumer products.
Inelastic demand is demand that is
not significantly altered by a price increase
or decrease.
Joint demand involves the use of two or more items in combination to produce
a product.
Because business demand derives from consumer demand, the demand
for business products can
fluctuate widely.
Business buying behavior refers to the purchase behavior of
producers, government units, institutions,
and resellers. Business purchase decisions are generally made
through a
buying center,
which includes
users, influencers, buyers, deciders, and gatekeepers who make
purchase decisions.
The stages of the business buying decision process are problem
recognition, development of product
specifications, search for and evaluation of products and
suppliers, selection and ordering of the most
appropriate product, and evaluation of the product's and
supplier's performance. During the search for
and evaluation of possible products, some businesses engage in
value analysis, an
evaluation of each
component of a potential purchase, and/or
vendor analysis, a formal,
systematic evaluation of current
and potential vendors. Results of deliberations and assessments
in the third stage are used in selection
and ordering of the product. In some cases the buyer uses
multiple sourcing (the decision to
use several
suppliers), and in others the buyer uses
sole sourcing (the decision to use
only one supplier).
Four categories of factors influence business buying decisions:
environmental, organizational,
Page
95
interpersonal, and individual.
Business marketers have available to them a considerable amount
of information about customers.
Much of this information is based on an industrial
classification system. A marketer can obtain the name
and location of potential customers by using government and
commercial data sources. Marketers then
must estimate potential purchases by finding a relationship
between a potential customer's purchases
and a variable available in industrial classification data.
Characteristics of international business markets:
Marketing structure and demand
– contain fewer
but larger buyers
– close
supplier-customer relationship
– more
geographically concentrated
– buyer demand
is mostly derived from final consumer demand
– more inelastic
to price in short term
– demand
fluctuates more & more quickly
– professional
purchasing
Nature of buying unit
– involves more
buyers / influencers
– involves a
more professional purchasing effort
Types of decision & decision process
– more complex
buying decisions
– buying process
is more formalized
– buyers &
sellers work more closely & build long-run relationships
Other characteristics
– buyers often
buy directly from producers, rather than through retailers & wholesalers
– buyers often
practice reciprocity, buying from suppliers who also buy from them
– buyers often
lease equipment rather than buying it out right
Participants in international buying process:
• Initiators /
Users
– who use the
product - often initiate buying & define specs.
• Influencers
– often help define
specs., & info. for evaluation of the products
• Deciders /
Approvers
– who approve the
final supplier/product
• Buyers
– the persons who
makes actual purchase
• Gatekeepers
– who control flow
of info. out of the organization
Major influences on international business buyers:
• Environmental
factors
– level of primary
demand
– economic outlook
– cost of money
– supply conditions
– rate of
technological change
– political &
regulatory developments
– competitive
developments
• Organizational
factors
– objectives
– policies
– procedures
– organizational
structure
– systems
• Interpersonal
– authority,
status, empathy, persuasiveness
• Individual
– age, education,
job position, risk attitude
Importance of international business marketing tools:
• Telemarketing &
direct mail 34%
• Merchandise
incentives 14%
• Exhibits 13%
• Travel &
entertainment 11%
• Advertising 10%
• other incentives
(travel, sweep stakes) 5%
• Public relations
4%
• Research 4%
• Others 5%
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