Understanding IndustrialUnderstanding Industrial

Markets :Markets :

It’s Nature, Systems andIt’s Nature, Systems and

EnvironmentEnvironment

Value Chain FlowValue Chain FlowRaw Material, Spare Parts and Raw Material, Spare Parts and

Semi finished MaterialSemi finished Material

Sale of Capital Goods, SuppliesSale of Capital Goods, Supplies and andConsumer Goods to Households,Consumer Goods to Households,

Govt.,Govt., Business & Insts. And ExportersBusiness & Insts. And Exporters

ManufacturingManufacturingIndustriesIndustries

OEM --- Other Indust.OEM --- Other Indust.

Nature of Industrial Nature of Industrial MarketingMarketing

Three Broad Divisions of EconomyThree Broad Divisions of Economy

ManufacturingAnd AlliedIndustries

ConsumingUnits

ExtractiveIndustries

Product Flow DiagramProduct Flow Diagram

ManufacturingAnd AlliedIndustries

Manufacture/Setup/Create/

Sale toOther

Manufactures

ConsumingUnits

Households

Govt.

Other Business

Users

Exporters

ExtractiveIndustries

Farms

Mines

Forests

Fisheries

ENVIRONMENAL TIERSENVIRONMENAL TIERS

Internal

Customers

Competitors

Industry

Macro Macro

Types of EnvironmentTypes of Environment

Ecological and physicalEcological and physical

- Air and Water Pollution- Air and Water Pollution

- Solid Waste Disposal- Solid Waste Disposal

- Conserving Natural - Conserving Natural ResourcesResources InternalInternal ExternalExternal

- - MicroMicro

- Macro- Macro

MICRO / MACRO ENVIRONMENTMICRO / MACRO ENVIRONMENT

COMPANY

New Entrants

Suppliers Substitutes

Rival Firms Buyers

Government’s RoleGovernment’s Role Regulating AgenciesRegulating Agencies

Laws / PoliciesLaws / Policies

Programme FundingProgramme Funding

Research FundingResearch Funding

Import / Export RegulationImport / Export Regulation

Levying TaxesLevying Taxes

Controlling Interest RatesControlling Interest Rates

Providing Social ProgrammesProviding Social Programmes

Environment ScanningEnvironment Scanning

Gathering and MonitoringGathering and Monitoring Information Information

On Customers and CompetitorsOn Customers and Competitors through Marketing and Sales through Marketing and Sales StaffStaff

Analyzing Trade and Govt.Analyzing Trade and Govt. Publications Publications

Carrying out Market ResearchCarrying out Market Research and Market Forecasting and Market Forecasting

Environment MonitoringEnvironment Monitoring

Understand Changes in Understand Changes in CustomerCustomer Needs Needs Monitor Competitors’ Actions Monitor Competitors’ Actions andand Strategies Strategies Identify Technological Identify Technological InnovationsInnovations Changes in Govt. Policies, LawsChanges in Govt. Policies, Laws Changes in Major Customers Changes in Major Customers andand the Total Market the Total Market Changes in Environmental Changes in Environmental FactorsFactors

Gordon E.Miracle’s Gordon E.Miracle’s Qualitative CategorizationQualitative Categorization

Cost of Cost of ProductProduct

VL L M H VL L M H VHVH

Significance Significance totoThe BuyerThe Buyer

VL L M H VL L M H VHVH

Technical Technical ComplexityComplexity

VL L M H VL L M H VHVH

TechnologicalTechnologicalChange Change FrequencyFrequency

VL L M H VL L M H VHVH

After Sales After Sales Service Service

VL L M H VL L M H VHVH

Gordon E.Miracle’s Gordon E.Miracle’s Qualitative CategorizationQualitative Categorization

Purchase Purchase FrequencyFrequency

VL L M H VL L M H VHVH

Speed or Speed or RateRateof Usageof Usage

VL L M H VL L M H VHVH

Variety of Variety of NeedsNeedsto be Satisfiedto be Satisfied

VL L M H VL L M H VHVH

Extent of EffortsExtent of Effortsto Get the to Get the ProductProduct

VL L M H VL L M H VHVH

Some ExamplesSome Examples

Very Low Iron Ore, Coal, Lime Very Low Iron Ore, Coal, Lime StoneStone

Low Alumina, Pig Iron,Low Alumina, Pig Iron, Kerosene Oil Kerosene Oil

Medium Tire and Tubes Medium Tire and Tubes

High Motors, High Motors, Compressors,Compressors, Pumps, Bulldozers Pumps, Bulldozers

Very High Fork Lifts, Lathe Very High Fork Lifts, Lathe Machines,Machines, Fabricated and Fabricated and CapitalCapital Equipments, Equipments, SoftwareSoftware

Classification of Classification of Industrial ProductsIndustrial Products

Major Equipments and materialsMajor Equipments and materials

Accessory EquipmentsAccessory Equipments

Fabricating or Component PartsFabricating or Component Parts

Process MaterialProcess Material

Operating Supplies Operating Supplies

Operating servicesOperating services

Major Equipments and Major Equipments and MaterialsMaterials

● ● Large Machines or Other ToolsLarge Machines or Other Tools● ● Charged to Capital AccountCharged to Capital Account

●● Two types :-Two types :-1.1. Multipurpose or Standard Multipurpose or Standard

machines example Dyes in machines example Dyes in Stamping MachineStamping Machine

2.2. Special Duty or Single Purpose Special Duty or Single Purpose Machine : Grinding MachineMachine : Grinding Machine

Accessory EquipmentsAccessory Equipments

● ● Machinery used in Auxiliary Machinery used in Auxiliary CapacityCapacity

● ● Cost is Generally Charged to Cost is Generally Charged to CurrentCurrent Expenses Expenses

● ● Horizontal DemandHorizontal Demand Small latheSmall lathe Fractional Horse power motorsFractional Horse power motors Small TractorsSmall Tractors Fork Lifts Fork Lifts

Fabricating or Component Fabricating or Component PartsParts

The work is carried on by a series of The work is carried on by a series of plants, often under diverse plants, often under diverse ownership, each performing a single ownership, each performing a single operation or homogeneous group of operation or homogeneous group of operations on the material.operations on the material.

Example:-Example:-

Batteries and tires in automobile Batteries and tires in automobile industryindustry

Fabricating or Component Fabricating or Component PartsParts

● ● On the Basis of SpecificationsOn the Basis of Specifications

● ● Long Term Supply CommitmentLong Term Supply Commitment

● ● Uniformity and Reliability of QualityUniformity and Reliability of Quality

● ● Strict Delivery ScheduleStrict Delivery Schedule

● ● Retain Their Identity in FinishedRetain Their Identity in Finished Products Products

● ● Large Replacement MarketLarge Replacement Market

Process MaterialProcess Material

Form an Un-Distinguished Part ofForm an Un-Distinguished Part of Finished Product Finished Product

Broken up and Dissipated in theBroken up and Dissipated in the Production Process Production Process

CatalystCatalyst

Binding agentsBinding agents

FlavoursFlavours

PreservativesPreservatives

Operating SuppliesOperating Supplies

Do not Become Part of Finished Do not Become Part of Finished ProductProduct

Continuously Worn out or Used upContinuously Worn out or Used up

Needed by Many Different IndustriesNeeded by Many Different Industries

Bought in Small QuantitiesBought in Small Quantities

Purchased in a Routine MannerPurchased in a Routine Manner

StandardizedStandardized

MRO (Maintenance, Repair andMRO (Maintenance, Repair and Operating) Items Operating) Items

Operating SuppliesOperating Supplies

PaintsPaints

SoapsSoaps

OilsOils

GreasesGreases

PencilsPencils

Type WriterType Writer

Stationary paper etcStationary paper etc

Operating servicesOperating services

Building MaintenanceBuilding Maintenance

AuditingAuditing

Legal ServicesLegal Services

Courier Services etcCourier Services etc

Major Industrial SuppliersMajor Industrial Suppliers

Machine Tool ManufacturersMachine Tool Manufacturers

Mill Industries – Steel, Aluminum,Mill Industries – Steel, Aluminum,

Pulp, CopperPulp, Copper

Processing Plants, RefineriesProcessing Plants, Refineries

Fabricators, Spare Part SuppliersFabricators, Spare Part Suppliers

Industrial Service OrganizationsIndustrial Service Organizations

Thank YouThank You