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Concept
Business-to-business
Summary
Business-to-business (B2B or, in some countries, BtoB) is a situation where one business makes a commercial transaction with another. This typically occurs when:
A business is sourcing materials for their production process for output (e.g., a food manufacturer purchasing salt), i.e. providing raw material to the other company that will produce output.
A business needs the services of another for operational reasons (e.g., a food manufacturer employing an accountancy firm to audit their finances).
A business re-sells goods and services produced by others (e.g., a retailer buying the end product from the food manufacturer).
Business-to-Business companies represent a significant part of the United States economy. This is especially true in firms of 500 employees and above, of which there were 19,464 in 2015, where it is estimated that as many as 72% are businesses that primarily serve other businesses. One possible argument of economics to explain the levels of Business-to-Business activity is that it allows for business segmentation.
B2B is often contrasted with business-to-consumer (B2C) trade.
B2B involves specific challenges at different stages. At their formation, organizations should be careful to rely on an appropriate combination of contractual and relational mechanisms. Specific combinations of contracts and relational norms may influence the nature and dynamics of the negotiations between firms.
Vertical B2B is generally oriented to manufacturing or business. It can be divided into two directions: upstream and downstream. Producers or commercial retailers can have a supply relationship with upstream suppliers, including manufacturers, and form a sales relationship. As an example, Dell works with upstream suppliers of integrated circuit microchips and computer printed circuit boards (PCBs).
A vertical B2B website can be similar to the enterprise's online store. Through the website, the company can promote its products vigorously, more efficiently and more comprehensively which enriches transactions as they help their customers understand their products well.
Official source
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