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Business to Business (B2B) Definition
Business to business is a business model whereby business make transactions or engage in commerce with one another. Business to business is otherwise called B to B (B2B), it describes a situation where a business engages in sales or products and services to other businesses. This relationship can be between a manufacturing company and a wholesaler or a wholesaler and a retailer. For instance, when a business supplies raw materials for the production of another business, this type of relationship is business to business.
Business to business differs from business-to-consumer (B2C) model which is commerce between a company and its customers.
Understanding Business to Business (B2B)
Any form of supply chain is a business to business model because it entails businesses transacting with one another until the peculiar needs of each business are met. Manufacturing companies, wholesalers and retail business often engage in business to business transaction before their finished products get to the end user.
Aside from the exchange of goods and services between businesses, information is also exchanged via business to business model. When employers and employees from different companies interact with one another, exchange information and pass knowledge, this is also a form of business to business practise. In many countries, business to business transactions occupy a major position in the country’s commerce.
Interactions, exchange of goods and services done between businesses using the internet or electronic channels are forms of business to business transactions. This form of transactions are regarded as B2B E-commerce. The internet provides numerous opportunities for businesses to thrive and do business with one another. Given the robust, productive and profitable environment that the internet provides, many businesses leverage the internet to engage in transactions with other businesses.
In the United States, B2B e-commerce contribute a significant percentage to the economy. By 2023 B2B e-commerce is expected to generate 17% of the economy as against the 12% it generated in 2018. There are many online platforms and supply exchange that allow companies to engage in B2B transactions.
An example of B2B transaction is a trade arrangement where Company A which is a textile company supplies materials to Company B produces clothes for children and adults.
Generally, construction companies and technology companies might be unable to survive without B2B transactions, this is because they depend on other businesses to supply them building materials, software for technology and others. There are also companies that offer services to other businesses or sell products to them, examples are housekeeping companies.
Real life examples of business to business transactions is the relationship that Apple maintains with firms like Panasonic, Intel and companies that produce semiconductors for the production of Apple’s iPhone and some other electronic gadgets.
B2B Relationship Development
For business to business transactions to be successful, there is a need for adequate planning, relationship development and relationship management by participating businesses. Businesses need to maintain sustainable business relationship for B2B transactions to be effective and successful. Usually, the account management department of companies handle business to business relationships. The account management personnel ensures that relationships with other businesses are well nurtures and the business also positions itself as a force to be reckoned with.
Reference for “Business to Business – B to B”
Academic research on “Business to Business – B to B”
Customer value, satisfaction, loyalty, and switching costs: an illustration from a business–to–business service context, Lam, S. Y., Shankar, V., Erramilli, M. K., & Murthy, B. (2004). Customer value, satisfaction, loyalty, and switching costs: an illustration from a business-to-business service context. Journal of the academy of marketing science, 32(3), 293-311. Although researchers and managers pay increasing attention to customer value, satisfaction, loyalty, and switching costs, not much is known about their interrelationships. Prior research has examined the relationships within subsets of these constructs, mainly in the business-toconsumer (B2C) environment. The authors extend prior research by developing a conceptual framework linking all of these constructs in a business-to-business (B2B) service setting. On the basis of the cognition-affect-behavior model, the authors hypothesize that customer satisfaction mediates the relationship between customer value and customer loyalty, and that customer satisfaction and loyalty have significant reciprocal effects on each other. Furthermore, the potential interaction effect of satisfaction and switching costs, and the quadratic effect of satisfaction, on loyalty are explored. The authors test the hypotheses on data obtained from a courier service provider in a B2B context. The results support most of the hypotheses and, in particular, confirm the mediating role of customer satisfaction.
Modeling the determinants of customer satisfaction for business–to–business professional services, Patterson, P. G., Johnson, L. W., & Spreng, R. A. (1996). Modeling the determinants of customer satisfaction for business-to-business professional services. Journal of the academy of marketing science, 25(1), 4-17. This research empirically examines for the first time the determinants of customer satisfaction or dissatisfaction (CS/D) in the context of business professional services. The simultaneous effect of key CS/D constructs (expectations, performance, and disconfirmation) and several variables-fairness (equity), purchase situation (novelty, importance, and complexity)-and individual-level variables (decision uncertainty and stakeholding) are examined in a causal path framework. Data were obtained from a two-stage longitudinal survey of client organizations. The results indicated substantial support for the hypothesized model. The effect of purchase situation and individual-level variables (via their indirect affects) rivals that of disconfirmation and expectations in explaining CS/D. Performance was found to affect CS/D directly but not as powerfully as disconfirmation.
Business–to–business electronic commerce, Lucking-Reiley, D., & Spulber, D. F. (2001). Business-to-business electronic commerce. Journal of Economic Perspectives, 15(1), 55-68. Just as the industrial revolution mechanized the manufacturing functions of firms, the information revolution is automating their merchant functions. Four types of potential productivity gains are expected from business-to-business (B2B) electronic commerce: cost efficiencies from automation of transactions, potential advantages of new market intermediaries, consolidation of demand and supply through organized exchanges, and changes in the extent of vertical integration of firms. The article examines the characteristics of B2B online intermediaries, including categories of goods traded, market mechanisms employed, and ownership arrangements, and considers the market structure of B2B e-commerce.
Return on relationships (ROR): the value of relationship marketing and CRM in business–to–business contexts, Gummesson, E. (2004). Return on relationships (ROR): the value of relationship marketing and CRM in business-to-business contexts. Journal of business & industrial marketing, 19(2), 136-148. This article is about ongoing efforts to come to grips with the question: Does relationship marketing pay? The question is discussed under the umbrella concept return on relationships. Much of what is being done in relationship marketing and customer relationship management has a bearing on both business‐to‐business and business‐to‐consumer marketing, and on manufacturing as well as services. Although there is a shortage of empirical research and proven practice, the article aims to show current efforts to generate knowledge of return on relationships, with particular emphasis on business‐to‐business environments. The article ends with action strategies to improve return on relationships, and a summary of conclusions.
Family versus nonfamily business: A comparison of international strategies, Abdellatif, M., Amann, B., & Jaussaud, J. (2010). Family versus nonfamily business: A comparison of international strategies. Journal of family business strategy, 1(2), 108-116. The internationalization strategies of family businesses versus nonfamily businesses remain a neglected area of study. This investigation uses a sample of 759 Japanese subsidiaries worldwide that can be identified as family businesses or nonfamily businesses to reveal two key results. First, family businesses establish fewer joint ventures than nonfamily businesses, in relative terms, and resort less to using Sôgô Shôsha, or Japanese general trading companies. This result implies family businesses prefer more to remain independent compared with nonfamily businesses. Second, expatriation policies do not differ significantly between family businesses and nonfamily businesses, contrary to a priori expectations. Differences in the strategic behavior of family businesses and nonfamily businesses therefore do not appear in every aspect of the internationalization process.
Trust in business to business relationships: An evaluation of its status, Blois, K. J. (1999). Trust in business to business relationships: An evaluation of its status. Journal of Management Studies, 36(2), 197-215. The concept of trust has been used in a growing number of empirical and theoretical marketing studies of business to business relationships. Examination of a number of influential studies indicates a lack of clarity in their conceptualization of trust. The nature of this lack of clarity is examined and it is proposed that there are a number of features of trust which account should be taken of when conducting such studies.
Brand equity in the business–to–business market, Bendixen, M., Bukasa, K. A., & Abratt, R. (2004). Brand equity in the business-to-business market. Industrial marketing management, 33(5), 371-380. Brands have been developed by consumer companies but have been slow to develop in business-to-business marketing. This article explains the concept of brand equity in a specific industrial marketing setting. In addition, the sources of brand equity are investigated as well as the appropriate communications strategy and the relative importance of brand relative to other purchase criteria. The research method used was a conjoint analysis experiment. The subjects were decision-making unit (DMU) members of industrial companies in South Africa that purchase medium-voltage electrical equipment. Research results suggest that while brand equity has a role to play, price and delivery were more important. However, a price premium can be obtained when a company has high brand equity. Implications for managers are discussed.
Exploring the phenomenon of customers’ desired value change in a business–to–business context, Flint, D. J., Woodruff, R. B., & Gardial, S. F. (2002). Exploring the phenomenon of customers’ desired value change in a business-to-business context. Journal of marketing, 66(4), 102-117. Increasingly, organizations are pushed to adopt customer value strategies in order to grow profits and ensure long-term survival. Yet little is known about the dynamic nature of how customers perceive value from suppliers. The authors present findings from a grounded theory study conducted in a business-to-business context that sheds light on the nature of customers’ desired value change and related contextual conditions. The authors discover that the phenomenon of customers’ desired value change typically occurs in an emotional context, as managers try to cope with feelings of tension. The phenomenon extends well past the change itself into strategies customers use to motivate suppliers to meet their changed needs. Customers’ value change provides a reason for customers to seek, maintain, or move away from relationships with suppliers.