5.1.1 Introduction to B2B Markets¶
What is B2B Market?¶
B2B refers to the transactions that occur between businesses rather than between a business and individual consumers. In the B2B market, products and services are sold by one company to another company, which often uses these products to produce other products or services.
Some common products in the B2B space are: - Cement - Iron and steel - Plastic - Rubber - Electronic chips
These are products that end consumers do not typically purchase directly. Instead, they are sold to businesses, which use them to create other products. Let's look at a few examples to understand how B2B works:
Example 1: Tisco and Maruti¶
- Tisco manufactures iron and steel.
- Maruti, a car manufacturer, purchases iron and steel from Tisco to manufacture cars.
This is a typical B2B transaction between Tisco (supplier) and Maruti (manufacturer). Maruti, in turn, uses other materials like rubber, plastics, aluminum, and electronic chips, sourcing them from other suppliers, continuing the chain of B2B transactions.
Example 2: Maruti and Showrooms (Franchises)¶
Once Maruti manufactures the cars, they are sold through showrooms or franchisee dealerships. The business relationship between Maruti and the dealerships is also B2B.
Example 3: B2B to B2C¶
From the showrooms, the cars are sold to end consumers. So, while Maruti's dealings with suppliers and dealers are B2B, the final transaction from showrooms to consumers is B2C.
This shows the B2B to B2C flow, where businesses sell products to other businesses, and eventually, the end consumer buys the product.
B2B in Supply Chain:¶
It’s important to note that every B2C business typically involves a supply chain where B2B transactions occur at various stages. For instance: - A B2C product like a smartphone requires numerous B2B transactions for parts like chips, screens, batteries, etc. - Similarly, B2C retail depends on B2B relationships for sourcing raw materials, manufacturing, and distribution.
Thus, B2B is as prevalent as B2C. It is a vital part of the overall business ecosystem.
What Makes B2B Different from B2C?¶
B2B Characteristics:¶
- Longer Sales Cycle: B2B transactions often involve more decision-makers and require more time due to the complexity and higher value of the products.
- Custom Products: B2B products are often customized to meet the specific needs of the buying business.
- Fewer Buyers: Unlike B2C, where businesses target millions of individual consumers, B2B businesses target fewer companies that require larger quantities or specialized products.
- Stronger Relationships: B2B transactions often involve long-term relationships between buyers and suppliers, focusing on trust and reliability.
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