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

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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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Table of Contents:
  1. OVERVIEW OF INTERNATIONAL MARKETING:Domestic marketing, Multinational marketing, Globalization of markets
  2. INETRNATIONAL MARKETING PROCESS:Situation Analysis, Implementation and Control, Relationship
  3. INETRNATIONAL MARKETING PROCESS:The Product Concept, The Societal Marketing Concept
  4. INETRNATIONAL MARKETING PROCESS
  5. ENGAGING IN INETRNATIONAL MARKETS:Expansion of technology, Merchandize export and import
  6. INTERNATIONAL TRADE & INVESTMENT THEORIES:Theory of Comparative Advantage, Country Similarity Theory
  7. INTERNATIONAL TRADE & INVESTMENT THEORIES:Global Strategic Rivalry Theory,
  8. INTERNATIONAL MARKETING INFORMATION REQUIREMENTS:Foreign exchange info
  9. INTERNATIONAL MARKETING INFORMATION REQUIREMENTS:The Product
  10. FOREIGN NATIONAL ENVIRONMENTS:Political systems in the world, Political risks in international markets
  11. FOREIGN NATIONAL ENVIRONMENTS:Types of legal systems,
  12. FOREIGN NATIONAL ENVIRONMENTS:Conciliation, Mediation, Global relevance
  13. ROLE OF GOVERNMENTS IN INTERNATIONAL MARKETS:Industry-level needs, Promotion of exports by governments
  14. INTERNATIONAL CULTURAL AND SOCIAL ENVIRONMENTS:The concept of culture, Attitudes & beliefs,
  15. INTERNATIONAL CULTURAL AND SOCIAL ENVIRONMENTS:Culture is a human medium
  16. DETERMINING EXPORT POTENTIAL IN INTERNATIONAL MARKETS:Political Environment
  17. DETERMINING EXPORT POTENTIAL IN INTERNATIONAL MARKETS:Product Potential
  18. INTERNATIONAL MARKETING RESEARCH PROCESS:market structure, Implementing the research plan
  19. INTERNATIONAL MARKETING RESEARCH PROCESS:Identify alternative information sources
  20. INTERNATIONAL MARKETING RESEARCH PROCESS:Issues with primary global research:
  21. INTERNATIONAL MARKETING RESEARCH PROCESS:Problems with data, Comparative Analysis
  22. MODES OF ENTRY INTO INTERNATIONAL MARKETS:Export intermediaries, Export and import management
  23. MODES OF ENTRY INTO INTERNATIONAL MARKETS:Licensing contract, Licensing risks
  24. MODES OF ENTRY INTO INTERNATIONAL MARKETS:The franchiser’s balance,
  25. MODES OF ENTRY INTO INTERNATIONAL MARKETS:Forms of countertrade, Specialized entry modes
  26. MODES OF ENTRY INTO INTERNATIONAL MARKETS:Demand factors, Political factors
  27. MODES OF ENTRY INTO INTERNATIONAL MARKETS:Drivers behind successful joint ventures
  28. MODES OF ENTRY INTO INTERNATIONAL MARKETS:Distribution agreements, Critical mass & optimism traps
  29. INTERNATIONAL STRATEGIC ALLIANCES:Impetus for international alliances, Management of strategic alliances
  30. INTERNATIONAL CONSUMER MARKETS:Model of Consumer BehaviorThe Buyer Decision Process
  31. INTERNATIONAL BUSINESS MARKETS:Nature of buying unit, Major influences on international business buyers
  32. INTERNATIONAL TARGET MARKETING:Market segmentation, Market positioning
  33. INTERNATIONAL MARKET SEGMENTATION:Geographic, Behavioral, Situational factors
  34. INTERNATIONAL MARKET SEGMENTATION:Basis for country segmentation, Stages of economics development
  35. INTERNATIONAL MARKET SEGMENTATION:Cultural Variables,
  36. INTERNATIONAL MARKET SEGMENTATION:Market coverage strategy, Socio-economic variables
  37. INTERNATIONAL MARKETING MIX - PRODUCT POLICY:Individual product decisions, Branding
  38. INTERNATIONAL MARKETING MIX – PRODUCT POLICY:
  39. INTERNATIONAL MARKETING MIX - PRODUCT POLICY:Modular Approach
  40. INTERNATIONAL MARKETING MIX – PRODUCT POLICY:Issues in labeling, Pricing, Distribution
  41. INTRODUCING NEW PRODUCTS IN INTERNATIONAL MARKETS:The new product development process
  42. PRICING IN INTERNATIONAL MARKETS:Factors influencing international pricing,
  43. ITERNATIONAL MARKETING CHANNELS:Channel membership, Vertical marketing, Control over distribution
  44. PROMOTING IN INTERNATIONAL MARKETS:Advertising, Direct marketing, Public Relationing
  45. REVISION