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International
Marketing MKT630
VU
Lesson
# 31
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,
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International
Marketing MKT630
VU
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
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International
Marketing MKT630
VU
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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