INTERNATIONAL BUSINESS MARKETS:Nature of buying unit, Major influences on international business buyers

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International Marketing MKT630

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,

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

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,

International Marketing MKT630

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

International Marketing MKT630

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)

Public relations

Research

Others

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