The concept of derived demand is significant for companies that sell products and services to organizations because these enterprises only have so much control over the number and type of consumers purchasing their products or not. Similarly, the concept illustrates the changing preference of the consumers or economy influences the business-to-business markets (Havaldar, 2005).
For instance, an industrial company that deals with manufacturing PVC pipes for plumbers will benefit in the following ways from changes in end-consumers demand. The company’s sales might be affected by factors such as the housing market. In the situation when houses are selling, the company will be able to sell more PVC pipes. Moreover, the company will derive benefits when it has a competitive advantage over other. In situations when the firm is the only one in the market, that offers better products at low prices, it will attract more consumers (Havaldar, 2005). On the other hand, if the cost of the PVCs is high compared to other firms, the company will suffer because more consumers will move to purchase from other companies. Lastly, the PVC manufacturing firm will benefit in cases when the State building codes require the use of PVC pipes when building; hence, this will increase their demand. On the negative part, in situations when one of the firms in the market offers a better product such as copper piping, the company’s sales will drop.
Havaldar, K. K. (2005). Industrial marketing: Text and cases. New Delhi: Tata McGraw-Hill.
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