TOPIC 1 INTODUCTION TO BUSINESS MARKETING

1. TOPIC 1 INTODUCTION TO BUSINESS MARKETING

2. Course Learning Outcomes (CLO) : CLO 1 : Describe Business Marketing, Business Buying Behaviour And Business Marketing Mix In Planning Marketing Strategy. (C2)

3. 1.1 Understand business marketing

4. Business marketing

5. 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 : include manufacturing companies (commercial enterprises), governments bodies, and other profit and nonprofit institutions (public & private sector organizations)

6. 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

7. FIGURE 1.1 :Value Chain for Electronics Products. Metal Plastics Business market Electronic Components Business market Printed circuit boards Business market Televisions Computers Consumer market Business market

8. The roles of Business marketing

9. The roles of business marketing 1. Increase productivity in production. 2. To increase credibility, thoughts and ideas are always 3. Increase the use of technology in industrial production.

10. 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.

11. FLASHBACK Pre Test dulu

12. RefleksiKendiri • Can you define business marketing ? And give a few example of business firms. • State six roles of business marketing ?

13. 1.1 Understand business market and consumer market

14. The differences Between business market and Consumer market

22. The type of business customers

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

24. 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.

25. 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.

26. 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)

27. ( www.pcatechnology.com) • A Singapore –based electronics manufacturer. • The company is a contract manufacturer of electronic components for making handphones , computers and music players

28. 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

29. 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 )

30. 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.

31. 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.

32. 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.

33. 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.

34. EXAMPLE PURCHASING IN GOVERNMENT UNITS, IN A FEW COUNTRY.

35. ( 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.

36. (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.

37. ( 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.

38. 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.

39. 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.

40. 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.

41. The classification of business products and services

42. Classification Of Business Products And Services

43. 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

44. 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.

45. Cont… 1.MATERIAL AND PARTS • The cost of these items are treated by the purchasing company as part of manufacturing cost, and also • The 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.

46. 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

47. 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.

48. 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.

49. 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.

50. 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.