business-to-business
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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 Accounting or Accountancy is the measurement, processing, and communication of financial and non financial information about economic entity, economic entities such as businesses and corporations. Accounting, which has been called the "language ...
firm to
audit An audit is an "independent examination of financial information of any entity, whether profit oriented or not, irrespective of its size or legal form when such an examination is conducted with a view to express an opinion thereon.” Auditing ...
their finances). * A business re-sells goods and services produced by others (e.g., a
retail Retail is the sale of goods In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (e ...

retail
er buying the end product from the food manufacturer). B2B is often contrasted with business-to-consumer (B2C). In B2B commerce, it is often the case that the parties to the relationship have comparable
negotiating Negotiation is a dialogue between two or more people or parties intended to reach a beneficial outcome over one or more issues where a conflict exists with respect to at least one of these issues. Negotiation is an interaction and process ...
power, and even when they do not, each party typically involves professional staff and legal counsel in the negotiation of terms, whereas B2C is shaped to a far greater degree by economic implications of
information asymmetry In contract theory and economics, information asymmetry deals with the study of decisions in transactions where one party has more or better information than the other. This asymmetry creates an imbalance of power in transactions, which can sometime ...
. However, within a B2B context, large companies may have many commercial, resource and information advantages over smaller businesses. The United Kingdom government, for example, created the post of Small Business Commissioner under the Enterprise Act 2016 to "enable small businesses to resolve disputes" and "consider complaints by small business suppliers about
payment A payment is the voluntary tender of money or its equivalent or of things of value by one party (such as a person or company) to another in exchange for goods, or services provided by them, or to fulfill a legal obligation. The party making a ...

payment
issues with larger businesses that they supply." 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.


Comparison with B2C

The principal difference between B2B and B2C is that the first one refers to commerce transaction between manufacturer and retailer, and the second one it is the retailer supplying goods to the consumer. In B2B there are business people on both sides, whereas in B2C there is normally one business person and one consumer. In the first case, the decision is pursued by need (because the other business needs it), and in the second case, they are expectations rather than needs. B2B has many sellers and different stores, whereas B2C, is usually just one supplier. B2B concentrates on raw data for another company, but B2C focuses on producing something for consumers. A B2B transaction entails direct-sourcing contract management, which involves negotiating terms that establish prices and various other factors such as volume-based pricing, carrier and logistics preferences, etc. B2C transaction is clearer, it has spot sourcing contract management that offers a flat retail rate for each item sold. Time is also different as B2B has a slower process than B2C which is concluded in shorter periods (that could be minutes or days). Business-to-business generally requires an upfront investment whereas business-to-customers do not need a business to spend money on infrastructure. The last difference mentioned here is that in B2B they have to deal with back-office connectivity and invoicing a number of different partners and suppliers, while B2C results in more seamless transactions as options, such as cyber-cash, allows the business to accept a wider variety of payment options. B2B, as there are normally bigger amounts involved over longer periods of time, usually have higher costs than B2C, which consists of quick, daily transactions. In B2B, the brand reputation depends on is the personal relationship between the businesses. On the other hand, in B2C, the business's reputation is often fuelled through publicity and the media. In many cases, the overall volume of B2B (business-to-business) transactions is much higher than the volume of B2C transactions. The primary reason for this is that in a typical
supply chain In commerce Commerce is the exchange of goods and services, especially on a large scale. Etymology The English-language word ''commerce'' has been derived from the Latin word ''commercium'', from ''com'' ("together") and ''merx'' ("merchandise ...

supply chain
there will be many B2B transactions involving subcomponents or
raw materials A raw material, also known as a feedstock, unprocessed material, or primary commodity, is a basic material that is used to produce goods, finished Product (business), products, energy, or intermediate materials that are feedstock for future finish ...
, and only one B2C transaction, specifically the sale of the finished product to the end customer. For example, an automobile manufacturer makes several B2B transactions such as buying tires, glass for windows, and rubber hoses for its vehicles. The final transaction, a finished vehicle sold to the consumer, is a single (
B2C Retail is the process of selling consumer goods A final goods or consumer goods is a commodity that is used by the consumer to satisfy current wants or needs, unlike intermediate goods which is utilized to produce another goods. A microwave o ...
) transaction.


Organization

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.


Business to business model


Vertical B2B model

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 company is working 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. Or, the website can be created for business, where the seller advertises their products to promote and expand transactions in an intuitive and convenient way.


Horizontal B2B model

Horizontal B2B is the transaction pattern for the intermediate trading market. It concentrates similar transactions of various industries into one place, as it provides a trading opportunity for the purchaser and supplier, typically involving companies that do not own the products and do not sell the products. It is merely a platform to bring sellers and purchasers together online. The better platforms help buyers easily find information about the sellers and the relevant information about the products via the website.


B2B2C

B2B2C means "business-to-business-to-consumer" and according to the
TechTarget TechTarget is an American company which offers data-driven marketing services to business-to-business technology vendors. It uses purchase intent data gleaned from the readership of its 140 + technology focused web sites to help tech vendors rea ...
website, the purpose of the terminology is to "extend the business-to-business model to include
e-commerce E-commerce (electronic commerce) is the activity of electronically The field of electronics is a branch of physics and electrical engineering that deals with the emission, behaviour and effects of electrons using electronic devices. Electronics ...

e-commerce
for consumers". B2B2C aims to "create a mutually beneficial relationship between suppliers of goods and services and online retailers". According to Lomate and Ramachandran, it enables manufacturers (the first "B" in B2B2C) to connect with, understand and serve their end customers ("C") without undermining their sales and distribution networks, including online sellers (the second "B") or excluding them from continuing
customer engagement Customer engagement is an interaction between an external consumer/customer (either B2C or B2B) and an organization (company or brand) through various online or offline channels For example, Hollebeek, Srivastava and Chen's (2019, p. 166) S-D logic ...
.Lomate, O. S. and Ramachandran, S.
B2B2C: The Future of Customer Engagement
Infosys, 2019, accessed 23 January 2021


See also

*
Account manager An account manager (AM) is a person who works for a company and is responsible for the management of sales Sales are activities related to selling or the number of goods sold in a given targeted time period. The delivery of a service for a co ...

Account manager
*
B2B e-commerce B2B e-commerce, short for business-to-business electronic commerce E-commerce (electronic commerce) is the activity of electronically buying or selling of Product (business), products on online services or over the Internet. The term was coined ...
* Business-to-consumer *
Business-to-government Business-to-government (B2G),Market Business NewsWhat is B2G or business-to-government? Definition and examples accessed 31 August 2020 also known as business-to-administration (B2A), refers to trade between the business sector In business B ...
* Customer to customer


References

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