TOPIC 1 INTODUCTION TO BUSINESS

MARKETING

COURSE LEARNING OUTCOMES (CLO) :

CLO 1 :Describe Business Marketing, Business Buying

Behaviour And Business Marketing Mix In Planning Marketing Strategy. (C2)

1.1 UNDERSTAND BUSINESS MARKETING

BUSINESS MARKETING

DEFINE BUSINESS MARKETING Business marketing is the marketing of products

(goods) and services to business organizations. for their use and consumption in their daily

operation, for the production of other goods and services, and for resale. Business organizations : manufacturing companies (commercial enterprises), governments bodies, and other profit and nonprofit institutions (public &

private sector organizations) Cooperative societies.

The companies (selling organizations) that :

• Material : Steel , Plastics, alumininum , and• Component parts : Motors, semiconductors ,

computer disk drives, and packaging • Capital Equitpment : Machine tools, forklift

trucks, and laboratory measuring instruments, and • Construction : Manufacturing plants, grain

elevators, and warehouses.• Courier services / Consumers services :

Consulting, food service, and yard maintenance, and • Supplies : Preprinted paper forms, heat, light, and

power, cutting tools : lubricants.• Other goods and services

FIGURE 1.1 :VALUE CHAIN FOR ELECTRONICS PRODUCTS.

Metal Plastics

Business market

ElectronicComponent

s

Businessmarket

Printed circuit boards

Business market

Televisions Computers

Consumer market

Business market

THE ROLES OF BUSINESS MARKETING

THE ROLES OF BUSINESS MARKETING1. Increase productivity in production.

2. To increase credibility, thoughts and ideas are

always3. Increase the use of technology in

industrial production.

THE ROLES OF BUSINESS MARKETING

4. Improve the basic skills and advanced levels.

5. Increasing the contribution of funds through the production of goods for use by

the end.

6 .Improving the good relationship between the providers of end-users.

FLASHBACKPre Test dulu

REFLEKSI KENDIRI1. Can you define business

marketing ? And give a few example of business firms.

2. State six roles of business marketing ?

1.1 UNDERSTAND BUSINESS MARKET AND CONSUMER MARKET

THE DIFFERENCES BETWEEN

BUSINESS MARKET AND

CONSUMER MARKET

Area s

(1) Market

characteristics

Industrial Markets

a. Number and Size of

Customers - relatively

fewer buyers.

b. Geographica

lly concentrate

d

Consumer Markets

a. Mass markets

b. Geographically disbursed

Area s

(2) Product character

istics

Industrial Markets

a. Technical complexity.

b. Customised

Consumer Markets

a. Standard

Area s

(3) Services character

istics

Industrial Markets

a. Services, timely

delivery and availability

very important

Consumer Markets

a. Service, delivery and availability somewhat important.

Area s

(4) Buyer

behaviour

Industrial Markets

Consumer Markets

Area s

(5) Channel

characteristics

Industrial Markets

a. More direct.

b. Fewer intermediaries / middlemen

Consumer Markets

Area s

(6) Promotio

nalcharacter

istics

Industrial Markets

a. Emphasis on personal selling

Consumer Markets

Area s

(7) Price

characteristics

Industrial Markets

a. Competitive bidding and negotiated

pricesb. List prices for standard

products.

Consumer Markets

THE TYPE OF BUSINESS CUSTOMERS

Customers in business market categorized into three (3) main group :

1 •Commercial Enterprise

2 •Government and Public Organizations

3 •Institutional Organizations

1. COMMERCIAL ENTERPRISES

business entities which seek to make profits from their operations.They consist of firms of various sizes and structures and includes sole proprietorships, partnerships, private limited companies, publicly listed companies and multinational corporations. This customer group can be very complex and is the most heterogeneous of the three group.

1. COMMERCIAL ENTERPRISES

As commercial enterprises operate with profit motives, the costs of purchase may be key concern. Costs include the cost of products and services purchased, shipping and delivery, operation, maintenance, reworks due to poor quality, industrial accidents, financing, training and so on.

1. COMMERCIAL ENTERPRISES (CE)

Usually assess purchases based on the overall package and will examine different aspects of a purchase with the involvement of staff with different expertise. One example of a commercial enterprise in the business market is PCA Technology.

( www.pcatechnology.com)

( WWW.PCATECHNOLOGY.COM) A Singapore –based electronics

manufacturer.

The company is a contract manufacturer of electronic components for making handphones , computers and music players

1. COMMERCIAL ENTERPRISES

In general, CE are always on the lookout for strategies to compete more effectively in the market places. CE also consisting of i. industrial distributors, or dealers, ii. Original equipment manufacturers (OEMs) iii. Users

2. GOVERNMENT AND PUBLIC ORGANIZATIONS

The government consists of differents levels, such as national or fedrel government, state or provincial goverment, and city, contry or local government. These goverment units purchase almost all kind of industrial products and services. They represent a huge market. ( the largest purchasers of industrial goods and services )

2. GOVERNMENT AND PUBLIC ORGANIZATIONS

To complete successfully and to get business, an industrial marketer must understand the complexities involved in selling to goverment units. There are many centres where state and Central goverment units buy a variety of products required by railways, department of telecommunications, state electricity boards, state transport undertakings, defence units, and so on.

2. GOVERNMENT AND PUBLIC ORGANIZATIONS

However, other large Central and state goverment units have their own procurement departments with a set of standard terms and conditions to be fulfilled by the suppliers. The key concern of the government in making buying decisions is accountability. It is spending taxpayers’ money and thus its buying decisions must be made carefully and objectively.

2. GOVERNMENT AND PUBLIC ORGANIZATIONS

As such, most government units are required to rigidly follow established procurement procedures to ensure objectivity and transparency. Very little flexibility is allowed. Business marketers must familiarize themselves with these procedures and comply with all the requiremenrs, including adherence to the contract terms and onditions.

2. GOVERNMENT AND PUBLIC ORGANIZATIONS

Government purchasing procedures tend to involve competitive bidding, and the results of such exercises are often published. Nomally, the lowest bidder is awarded the contract; otherwise , the officials responsible often need to provide lengthy justifacations to their superiors for their decision.As such, the focus tends to be on price, and many business marketers find their profit margin for the government segment smaller than that for CE for the same type of product or project.

EXAMPLE PURCHASING IN GOVERNMENT

UNITS, IN A FEW COUNTRY.

( INDONESIA) The Indonesian government adopts the

principles of fair and effective broad-based competition to guide its procurement activities.

It employs 4 general approaches :i) bidding

ii) direct selection iii) limited tender, and iv) public tender , depending on the value of

purchase.

(SINGAPORE ) The Singapore government in its procurement

prescribes to the fundamental principles of fairness, openness and competitiveness.

Based on the price of the required item, government officials select one of the following three (3) procurement procedures :

i) Small –value purchase ( appropriate for procuring items less than S$3,000 in value )

ii) Quotation ( items costing between S$3,000 and S$70,000)

iii) Tender ( Procurement activities above S$70,000 in value ), 3 type of tender : Open tender, selective tender and limited tender.

( MALAYSIA ) The Malaysian government adopts the

fundamental principles of accountability, transparency, value for money, fair competition and fair dealings in its procurement activities.

In addition, its procurement policy favours local supplies ( especially bumiputera, or native, business and local service providers. )

The Malaysia procurement procedure consists of 3 main approaches :

i) direct purchase, ii) quotation iii) tender, depending on the value of the item involved.

3. INSTITUTIONAL ORGANIZATIONS

Institutional organizations include educational ( universities, colleges and schools), medical ( hospitals, clinics and nursing homes), religious ( mosques, churches and temples) and charitable organizations. Most of them tend to be non-profit-making, some are profit oriented. The purpose of most Institutional organizations is to provide services.

3. INSTITUTIONAL ORGANIZATIONS Many institutional organizations do not have proper purchasing procedures or dedicated purchasing departments. Some of these institutions have rigid purchasing rules and others have more flexibile rules.As a result, buying expertise is weak, and their operational personnel or specialists often have strong influence on buying decisions.A business marketing person needs to understand the purchasing practice of each institute so as to be effective in marketing the products or services.

EXAMPLE Medical specialists and surgeons in hospital

exert strong influence on the type of medical equipment to purchase.

Institutional organizations (IO) may lack technical expertise and need better procurement support from suppliers.

THE CLASSIFICATION OFBUSINESS PRODUCTS

AND SERVICES

CLASSIFICATION OF BUSINESS PRODUCTS AND SERVICES

Business products and services

Material and parts

Capital Items

Supplies and services

1.MATERIAL AND PARTS These goods enter the product directly ( call as Entering Products ). Entering product are the initial materials which enter the manufacturing process to make other products. They consist of : i) Raw materials ( such as wood, sand, metal, water, gas, vegetables, fruits and meat. ii) Manufactured /processed material ( such as rubber ( for latex), plastics, glass, steel, paper and cement. iii) Component / fabricated parts ( such as gears, ball bearings, printed circuit boards, and cover and casings

FOR EXAMPLE The Australian company, Oxiana carries out copper mining

in Loas and produces some 30,000 tones of copper concentrate.

Other mining companies would sent the concentrate to smelters in Japan, Europe and Chile to be processed into metal., but

Oxiana itself has the capabilities to process the concentrate into copper metals, which it sells to buyers in China, Malaysia, Thailand and Vietnam.

These buyers then fabricate the copper mental into parts such as wires and couplers.

CONT… 1.MATERIAL AND PARTS The cost of these items are treated by the purchasing company as part of manufacturing cost, and alsoThe cost of entering products translates into the cost of goods sold and, as such, the price of these products is of prime concern to manufacturers.Other concerns include the continuity of supply as well as product design and quality.

2. CAPITAL ITEMS Capital items are those which are used in the production processes and they wear out over certain time frame.

Assets which support the operations of the firm. They represent investments and are of strategic importance to the firm.

Capital items are classified into three(3) groups : i) Heavy equipment/installations, ii) Accessories/ Light Equipment . iii) Plant and Buildings

i) Heavy equipment/installations,

These are major and long term investment items such as general purpose and special purpose machines, turbines, generators, furnaces, and earth moving equipment. These items are shown in the balance sheet as plant and equipment, and are fixed assets to be depreciated over a period of years if they are purchased outright. However, if these are leased, the cost is treated for tax purpose as expenses by the purchaser. As the unit purchase price of capital items are high, these items are financed by borrowing money for a period of time, which is roughly equivalent to the expected life of the fixes assets.

ii) Accessories/ Light Equipment .Light equipment and tools which have lower purchase prices and are not considered as part of heavy equipment, are power operated hand tolls, small electric motors, dies, jigs, typewriters and computer terminals.

Purchases of accessories are either consider as current expenses with purchase prices taken as operating expenses in the year purchased, or they may be consider as fixed assets and therefore, depreciated over a period of few years.

iii) Plant and Buildings These are the real estate property of a company. It includes the firm’s offices, plants (factories) , warehouses, housing, parking lots , and so on.

3.SUPPLIES AND SERVICES Supplies and services support the operation of the purchasing organisation . They do not become a pert of the finished product. They are treated as operating expenses for the periods the periods they are consumed. SUPPLIES – Items such as paints, soaps, oils and greases, pencils, typewriter ribons , stationery and paper clips belong to this category. These items are generally standardised and are marketed to a wide cross-section of industrial users. SERVICES – Companies need a wide range of services like building maintenance services, auditing services, legal services, courier services, marketing research services and others.

1.3 COMPREHEND THE PROCUREMENT OR PURCHASING PROCEDURES.

THE PROCUREMENT PROCEDURES

THE THREE PURCHASING ORIENTATIONS :

(A) BUYING(B) PROCUREMENT, OR(C) SUPPLY CHAIN MANAGEMENT

(A) BUYING ORIENTATION The purchasing firm with buying orientation has a narrow and short focus. The buyer , in these firms, follow the practices as under :

1. Lowest Price -2. Gain Power -3. Risk -

(B) PROCUREMENT ORIENTATION The buyers, with procurement orientation, seek both quality improvements and costs reductions.

To achieve these objectives, the company adopts the following practices:

(a)Collaborative relationship with major suppliers(b)Working closely with functional areas.

(C) SUPPLY CHAIN MANAGEMENT The role of purchasing is further expended to become more value-adding, and strategic operations.The company with supply chain management orientationfocus on how to improve the whole value chain from raw materials to end users. The supply chain management orientation has the three purchasing philosophies:(a) deliver values to end users(b) Outsource non-core activities; and (c) support collaborative relationship with major suppliers.

PURCHASING ORIENTATIONS OF BUSINESS CUSTOMERS ( BUYERS)

Supply Chain Management OrientationProcurement Orientation

BuyingOrientation

Component Raw Material and

Intermediaries Suppliers Subassembly

(Distributors, Suppliers Final

Dealers) Assembly Consumers/

Manufacturer End Users

REFLEKSI KENDIRI

Which categories of industrial products do the following belong to ?a. Three-storey buildingb. Motorsc. Paintd. Forkliftse. Potatoesf. Photocopying paper

R & R