Professional Documents
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Chapter 8 Slide 2
Industrial Market
“Individuals and organizations that acquire goods
and services to be used, directly or indirectly, in the
production of other goods and services or to be
resold.”
TEXT
W.T.G.R.
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Chapter 8 Slide 5
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Chapter 8 Slide 6
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Chapter 8 Slide 8
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Chapter 8 Slide 9
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Chapter 8 Slide 10
• Example
• asbestos company makes asbestos material
• another company buys it, shapes it, and makes
asbestos brake pads
• another company buys the pads - puts them together
with the other brake parts to form a component
• the auto assemble company buys the whole
component and puts it on the car as it is going down
the assembly line
Chapter 8 Slide 11
• Example
• sport shoes, with special NIKE logo - makes the shoes
more expensive
• t-shirt with special design or drawing
• animal fur - made into a fur coat
• ice cream - ice cream w strawberries on top
• watch - watch with diamonds and jewels added
• wood - wood made into furniture
• blank canvas - “Picasso”
Chapter 8 Slide 12
• Geographic
eg. Auto parts companies tend to locate near
auto assembly plants
• Small number of buyers
34,000 mfg companies in Canada
30 million population as consumers
- however mfg. Companies make bigger purchases
than an individual consumer
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Chapter 8 Slide 13
see http://www.webplaces.com/naics/back.htm
Chapter 8 Slide 15
1. Derived Demand
2. Joint Demand
3. Inventory Adjustments
4. Demand Variability
Chapter 8 Slide 16
1. Derived Demand
means the demand is derived (or caused by, or
linked to) demand for a consumer item
- demand for lithium is “derived” from the demand
for lithium batteries, which is in turn “derived” from
the demand for cell phones
- demand for wood pulp is derived from the demand
for paper, which is derived from the increase in
people printing on paper
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Chapter 8 Slide 17
2. Joint Demand
means the demand is related to the demand for
other industrial things
eg. The demand for printer cartridges is linked to
the demand for printer paper
3. Inventory Adjustments
means the demand is related to how much the buyer
needs to have in stock
If the buyer needs a larger inventory, then demand
will be higher
If the buyer is trying to cut back on inventory (eg.
Using computer controlled materials handling) then
they will need less inventory and just buy in time
(called JIT) Just In Time
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Chapter 8 Slide 19
4. Demand Variability
the “impact” of derived demand on the demand for
interrelated products used in producing consumer
goods
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Chapter 8 Slide 20
Accelerator Principle
not equal
The disproportionate impact that changes
in consumer demand have on industrial
market demand
1. Capital Items
- things that last a long time, and become
less and less in value over time
2. Expense Items
- things that are used within a short
period of time
- some types of raw materials, office supplies,
materials in production
Chapter 8 Slide 22
1. Capital Items
ex - car
- office building
- machinery and equipment
2. Expense Items
ex - gas for the car
- washing the windows for the building
- parts for the machinery
Chapter 8 Slide 23
•Depreciation
• Straight Rebuy
• recurring (buying all the time) the same thing
• Modified Rebuy
• regular buying, but with some re-evaluation to think
about things each time
• New Task / First-time Buying
• this takes a lot of effort on the part of the buyers to
consider many aspects
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Chapter 8 Slide 28
1. Users
2. Gatekeepers
3. Influencers
4. Deciders
5. Buyers
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Chapter 8 Slide 29
A Model of the Industrial
Buying Process
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Chapter 8 Slide 30
A Model of the Industrial
Buying Process
Need Recognition
- simply the understanding that you need something
- can be caused by an emergency, or just the execution
of your plans to do something
Chapter 8 Slide 31
A Model of the Industrial
Buying Process
Information Search
- make a list of who are the best potential suppliers
- purpose is to know, in detail, what you need, and what
you should buy
- have to develop a list of technical specifications
eg. Waterproof, or withstand heat of 200 degrees
Chapter 8 Slide 32
A Model of the Industrial
Buying Process
Delineation of Suppliers
- collect information on potential suppliers
Chapter 8 Slide 33
A Model of the Industrial
Buying Process
Sales Demonstration/Proposal
- potential suppliers are then invited to make a
presentation, or come for a meeting to provide a
proposal
- includes technical and economic considerations
Chapter 8 Slide 34
A Model of the Industrial
Buying Process
Advertisements
- usually done in trade magazines and newsletters
Chapter 8 Slide 35
A Model of the Industrial
Buying Process
•Word of Mouth
•Personal and interpersonal influences
•Review of Internal Proposals
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Chapter 8 Slide 37
Reciprocity
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Chapter 8 Slide 39
• Bids
• price quotations from potential suppliers
• Specifications
• Specific descriptions of the items
• in many situations, this information is extremely
detailed
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Chapter 8 Slide 40
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