UNDERSTANDING

BUSINESS MARKETS

AND

ENVIRONMENT

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At the end of this module, the learning outcomes are:

 Understand the types of industrial customers as well as

industrial goods and services.

 Know the marketing implications for different types of

customers and products.

 Understand the purchasing orientations and practices

of industrial customers.

 Know types of environment and strategies to manage

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external environment.
 UNDERSTANDING INDUSTRIAL
MARKETS
Suggested Readings
• B2B Marketing
By
Havaldar, Chapter 2
Tata McGraw Hill

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 What are the types/classifications of

Industrial/Business customers?
INTERMEDIARIES /
MIDDLEMEN (DISTRIBUTORS)
COMMERCIAL OEMS
ENTERPRISES
USERS

PUBLIC SECTOR
UNITS (BHEL)
GOVERNMENT
CUSTOMERS GOVT. UNDERTAKINGS
(RAILWAYS, DEFENCE UNITS)
INDUSTRIAL /
BUSINESS
CUSTOMERS PUBLIC INSTITUTIONS
(GOVT. HOSPITALS)
INSTITUTIONAL
CUSTOMERS
PRIVATE INSTITUTIONS
(SCHOOLS, COLLEGES)

MANUFACTURING
UNITS (SUGAR, MILK)
CO-OPERATIVE
SOCIETIES
NON-MANUFACTURING
UNITS (BANKS, HOUSING)

FIG. TYPES OF INDUSTRIAL / BUSINESS CUSTOMERS

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How are Industrial Products / Services Classified?
Classification into 3 Groups shown below.

RAW MATERIALS (IRON ORE, CRUDE OIL)

MATERIALS MANUFACTURED MATERIALS
& PARTS (STEEL, FUEL OIL)
(ENTER PRODUCT
COMPONENT PARTS (BEARINGS, TYRES)
DIRECTLY)
SUB ASSEMBLIES (EXHAUST PIPE IN M.C.)

INDUSTRIAL CAPITAL ITEMS LIGHT EQPT (COMPUTERS, HAND TOOLS)

PRODUCTS / (USED IN
HEAVY EQPT (MACHINES, TURBINES)
SERVICES PRODUCTION /
OPERATIONS) PLANT/BUILDING (FACTORIES, OFFICES)

SUPPLIES / SUPPLIES (LUBRICANTS, ELECTRICAL ITEMS)

SERVICES
(TO SUPPORT
OPERATIONS) SERVICES (LEGAL, COURIER)

FIG. CLASSIFICATION / TYPES OF INDUSTRIAL PRODUCTS / SERVICES

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 UNDERSTANDING INDUSTRIAL
MARKETS
Industrial – Goods classification
• Materials and parts
• Capital items
• Supplies and business services

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 UNDERSTANDING INDUSTRIAL
MARKETS
Maruti
Buys three types of products
•Steel/Tyres
•Laptops
•Cartridges for printers

Is the marketing same or different for these

products
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UNDERSTANDING INDUSTRIAL MARKETS

Materials and parts

Two types
• Raw materials
• Manufactured material and parts

Steel/Tyres

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 UNDERSTANDING INDUSTRIAL
MARKETS
Raw materials
• Farm products
• Natural products

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 UNDERSTANDING INDUSTRIAL
MARKETS
Farm products
• Wheat
• Cotton
• Fruits
• Supplied by many producers
• Handover to market intermediaries
• Provide grading

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 UNDERSTANDING INDUSTRIAL
MARKETS
Natural products
• Petroleum
• Iron ore
• Limited in supply
• Great bulk and low unit value
• Fewer marketer handle such products
• Long-term supply contracts

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 UNDERSTANDING INDUSTRIAL
MARKETS
Manufactured material and parts
Two categories
• Component materials
• Component parts

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 UNDERSTANDING INDUSTRIAL
MARKETS
Component materials
• Usually fabricated further
• Cast iron into steel
• Yarn into cloth

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 UNDERSTANDING INDUSTRIAL
MARKETS
Component parts
• Enter the finished product
• With no further change
• Tyres in cars

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 UNDERSTANDING INDUSTRIAL
MARKETS
Capital items
• Long-lasting goods
• Facilitate developing or managing the finished
products
Two groups
• Installation
• Equipments
Buying of Laptops by Maruti
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 UNDERSTANDING INDUSTRIAL
MARKETS
Installation
Consists of
• Buildings, generators
• Major purchases
• Bought directly from the producer

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 UNDERSTANDING INDUSTRIAL
MARKETS
Equipment
• Shorter life and lighter than installations
• Numerous buyers
• Widespread
• Hand tools

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 UNDERSTANDING INDUSTRIAL
MARKETS
Supplies & Business Services
• Short-term goods and services
• Facilitate developing or managing the finished
product
Two types
• Supplies
• Business services
Cartridges for printers by Maruti
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 UNDERSTANDING INDUSTRIAL
MARKETS
Supplies
Two types
• Maintenance and repair items
• Operating supplies

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 UNDERSTANDING INDUSTRIAL
MARKETS
Maintenance and repair items
• Paint, nails
• Minimum effort
• Marketed through intermediaries
• Low unit value

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 UNDERSTANDING INDUSTRIAL
MARKETS
Operating supplies
• Lubricants
• Writing paper
• Similar to maintenance and repair items

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 UNDERSTANDING INDUSTRIAL
MARKETS
Business services
Two types
• Maintenance and repair services
• Business advisory services

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 UNDERSTANDING INDUSTRIAL
MARKETS
Maintenance and repair services
• Maintenance of air conditioners, photocopier
• Contracts from original equipments

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 UNDERSTANDING INDUSTRIAL
MARKETS
Business advisory services
• Legal
• Management consultancy
• Based on reputation and staff

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 UNDERSTANDING INDUSTRIAL
MARKETS
Business advisory services
Four Major differences .
– Intangibility
– Heterogeneity
– Simultaneous production and consumption
– Perishability

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UNDERSTANDING INDUSTRIAL MARKETS

Business Markets
•https://www.youtube.com/watch?
v=RYGZaJZvGbc&ab_channel=Z47%28fkaMatrix
PartnersIndia%29

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 B2B Marketing
Mckinsey Consultant
https://www.youtube.com/watch?v=xs2Bf1fqd6
4

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(C) Marketing Implications for different types of
products & customers?

 For Materials & Parts, Direct selling is done to large

OEMs (Original Equipment Manufacturers) and
users, but indirect selling through industrial
distributors / dealers becomes cost effective for
smaller volume OEMs and users.

 For Capital items, Direct selling through company

sales force is common, with extensive interactions
on technical & commercial factors.

 For Supplies Industrial distributors / dealers are

mostly used but for marketing of services, word-of-
mouth plays an important marketing role, with
quality & price of service as key factors.
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 B2B Marketing
Exercise:
All Groups are requested to have a look at the
websites of one of the following
•Boeing
•L & T
•Cummins
•Microsoft
•Apple
•Any other Business Marketing company.
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 B2B Marketing

Exercise
Identify
•various products categories.
•Identify different customer segments.

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 (D) Purchasing Orientations of Business Buyers
Business buyers/ Industrial customers follow one of the three purchasing
orientations:
(i) Buying, (ii) Procurement, or (iii) Supply chain Management

(i) Buying Orientation: The firm with buying orientation follows the
practice of (a) selecting lowest price supplier, (b) gaining power over
suppliers and (c) avoiding risk of buying from new suppliers. It has a
Short-term focus.

(ii) Procurement Orientation: The purchasing firm with procurement

orientation has a long-term focus. It achieves the objectives of
quality improvement and cost reductions by following the practices
of (a) collaborative relationship with major suppliers and (b)
working closely with other functional areas in the company.

(iii) Supply chain Management Orientation: Here, the firm focuses on

improving the value chain from raw materials to end users. This is
achieved by (a) delivering superior value to end users, (b) outsourcing
non-core activities, (c) and supporting collaborative relationships with
major suppliers.
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 UNDERSTANDING INDUSTRIAL
MARKETS
Application of Purchase orientations
Buying orientation
• Understanding of purchase orientation is
critical
• Most government buyers have ‘buying
orientation’
• Purchasing on the basis of lower prices

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 UNDERSTANDING INDUSTRIAL
MARKETS
Procurement orientation
Tata Motors
• Buying components from suppliers
• Work closely with suppliers to reduce costs
• Share rewards
• Successful in reducing LCV prices

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 UNDERSTANDING INDUSTRIAL
MARKETS
Supply Chain Management orientation
• Role of purchase
• Value-addition
• How to improve the whole value-chain from
suppliers to customers

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 UNDERSTANDING INDUSTRIAL
MARKETS
Supply Chain Management orientation
Dell Computers
• Customized PCs
• Close relationship with suppliers
• Low inventory
• Integrates its procurement with suppliers
• Suppliers know what has to be supplied

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 UNDERSTANDING INDUSTRIAL
MARKETS
Purchase practices of industrial customers
• Purchasing in commercial enterprises
• Purchasing in Govt. units
• Purchasing in Institutions
• Purchasing in cooperative societies
• Purchasing in resellers market

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 UNDERSTANDING INDUSTRIAL
MARKETS
Purchasing in commercial enterprises
– Major Tasks / Procedure: identifying,
negotiating, selecting suppliers, building
relationship.
– Purchasing to improve operational efficiency
& contribute to firm’s competitive advantage.
– Involve Technical & Commercial depts.

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 UNDERSTANDING INDUSTRIAL
MARKETS
Purchasing in Govt. units
– DGS&D agency finalizes rate contracts for standard
products for Govt. units.
– Main Tasks / Procedure : Registration of the firm & its
Products, Tender Advertisements, no negotiation in “
Open” tenders, negotiations done in closed / limited
tenders.
– Orders Finalised on lowest bidders (suppliers offering
Lowest prices / Landed Costs)

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 UNDERSTANDING INDUSTRIAL
MARKETS
Purchasing in Institutions
– If the Institute is a Govt. Hospital Purchasing
practices of Govt. units Followed
– Similarly a private School / College follows
practices of commercial enterprises
– However, better to study each major
institution.

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 UNDERSTANDING INDUSTRIAL
MARKETS
Purchasing in cooperative societies
– Similar to Institutional purchase

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 UNDERSTANDING INDUSTRIAL
MARKETS
Purchasing in resellers market
• Industrial dealers/distributors
• Resale purpose
• Selection of company depends on product
quality or supplier policies
• Has to abide by the policies of the supplier

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 Types & Analysis of Environment
AIR & WATER POLLUTION

ECOLOGICAL SOLID WASTE DISPOSAL

CONSERVING NATURAL RESOURCES

WATER, POWER, TRANSPORTATION

PHYSICAL
LOW-COST, SKILLED MANPOWER

COMPANY LOCATION, IMAGE / REPUTATION

ENVIRONMENT R & D & PRODUCTION FACILITIES
INTERNAL
(S&W ANALYSIS) H R & FINANCIAL RESOURCES
MARKETING EFFECTIVENESS

MICRO CUSTOMERS & COMPETITORS

(AFFECTS A
PARTICULAR
FIRM) SUPPLIERS
EXTERNAL
(O&T ANALYSIS) ECONOMIC

MACRO TECHNOLOGICAL
(AFFECTS
GOVT., POLITICAL, LEGAL
ALL FIRMS)
CULTURAL & SOCIAL
PUBLIC - PRESS, SHARE
HOLDERS, INVESTORS &
PUBLIC INTEREST GROUPS

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 UNDERSTANDING INDUSTRIAL
MARKETS
Ecological Environment
• Industrial units
• Sensitive to environment
• Closure of chemical factories in Delhi
• Availability of raw material

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 UNDERSTANDING INDUSTRIAL
MARKETS
Physical Environment
• Tata Steel
• Plant close to raw material
• Competitive advantage

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 UNDERSTANDING INDUSTRIAL
MARKETS
Internal environment
• Strength-Weakness analysis
Tata Motors
• Production driven to market driven
• Make each department understand that
customer is King
• Become customer oriented

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 UNDERSTANDING INDUSTRIAL
MARKETS
External Environment
• Opportunity-Threat analysis
• Identify changes
Tata Motors
• Liberalization in 90s
• New opportunities
• Truck manufacturer to passenger vehicles

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Strategies for Managing Changing External Environment

(i) Independent Strategies.

(ii) Cooperative Strategies.
(iii) Strategic Planning. It Aims at keeping the

firm consistently
successful in changing

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 UNDERSTANDING INDUSTRIAL
MARKETS
Independent Strategies
• Independent efforts
• Use of its own resources
• Respond to competitor moves

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 UNDERSTANDING INDUSTRIAL
MARKETS
Cooperative Strategies
• Collaborative arrangements
• Toyota
• Enter a new market
• Close relationship with suppliers

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 UNDERSTANDING INDUSTRIAL
MARKETS
Strategic Planning
• Long-term
• Understanding of environment
• Analyze its strengths/weaknesses
• Carry out
• Vertical integration
– Backward integration
– Forward integration
• Horizontal integration
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 SUMMARY

Types /Classifications of Industrial/ Business Customers are

(i) Commercial Enterprises, (ii) Government
(iii) Institutional, (iv) Cooperative societies.

Industrial Products/Services are classified into

 (i) Materials & Parts, (ii) Capital Items, (iii) Suppliers & Services.
 Marketing strategies differ for different product & Customer types.
 Industrial / business Buyers follow one of the three purchasing
orientations : buying, procurement, or supply chain management.
 Purchasing practices vary for different types of customers. It is
important to understand it for each major customer.
 Types of environment are Ecological, Physical, Internal, & External,
Strategies used for managing changing external marketing
environment are : (i) Independent, (ii) Cooperative, (iii) Strategic
Planning.
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