OriginalQuestion:Why is the concept of derived demand so important forcompanies selling products and services to other organizations? What is anexample where an industrial company has benefited from changes in end-consumerdemand?Student#1 Response:Derived demand increasing or decreasing consumerdemand for a specific product. Demand or lack of demand for specific productscan either create or reduce demand for product related to the specific product.For businesses, derived demand creates a right to left flowing chain, whichstarts with consumer demand. Derived demand value chains and the ripple effectunderscore the importance of business to business relationships. The automobile industry is affected by theend-consumer demand. It is the second biggest, a company gets almost fiftypercent of its revenues from automotive companies that deals with steel. Steelis the backbone of the United States; it plays a huge part of the economy andgive people job.References:Lohrey, J. (2015). An Example of Derived Demand |Chron.com. Retrieved from http://smallbusiness.chron.com/example-derived-demand-80611.htmlO’Hara, M. (2014, December 18). Important EndConsumers Of Steel – Market Realist. Retrieved from http://marketrealist.com/2014/12/overview-key-end-consumers-steel/Student#2 Response:The concept of derived demand demonstrates howchanging customer preferences or a changing economy affectsbusiness-to-business markets (Lohrey, 2015). From a business-to-business perspective, derived demand creates aright-to-left-flowing value chain that starts with consumer demand. Everyleftward step in a value chain directly results from consumer demand (Lohrey,2015). Example, a customer order creates a demand for fabric. Getting this fabricstarts with cotton or some other combination of fibers that first must be spunand then woven into cloth. Each step in the chain adds the value necessary tomove raw materials down the chain until raw materials become the finishedproduct (Lohrey, 2015).Derived demand value chains and the ripple effect underscore the importance ofbusiness-to-business relationships. It all starts with creating consumerdemand, especially in cases where demand might not exist. Small businesses inthe same place can collaborate and promote each other’s products or services.Vendors and manufacturers might create demand for their own products bycreating demand for their customer’s products. Joint ventures, strategicpartnerships and vendor partnership agreements are all helpful in using deriveddemand to each business’s best advantage (Lohrey, 2015).ReferenceLohrey, Jackie (2015). An Example of Derived Demand. Retrieved November 5, 2015from http://smallbusiness.chron.com/example-derived-demand-80611.html
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