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Original Question:

Why is the concept of derived demand so important for companies selling products and services to other organizations? What is an example where an industrial company has benefited from changes in end-consumer demand?

Student #1 Response:

Derived demand increasing or decreasing consumer demand for a specific product. Demand or lack of demand for specific products can either create or reduce demand for product related to the specific product. For businesses, derived demand creates a right to left flowing chain, which starts with consumer demand. Derived demand value chains and the ripple effect underscore the importance of business to business relationships.

The automobile industry is affected by the end-consumer demand. It is the second biggest, a company gets almost fifty percent of its revenues from automotive companies that deals with steel. Steel is the backbone of the United States; it plays a huge part of the economy and give people job.


Lohrey, J. (2015). An Example of Derived Demand | Chron.com. Retrieved from http://smallbusiness.chron.com/example-derived-demand-80611.html

O'Hara, M. (2014, December 18). Important End Consumers 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 how changing customer preferences or a changing economy affects business-to-business markets (Lohrey, 2015). 

From a business-to-business perspective, derived demand creates a right-to-left-flowing value chain that starts with consumer demand. Every leftward step in a value chain directly results from consumer demand (Lohrey, 2015). 

Example, a customer order creates a demand for fabric. Getting this fabric starts with cotton or some other combination of fibers that first must be spun and then woven into cloth. Each step in the chain adds the value necessary to move raw materials down the chain until raw materials become the finished product (Lohrey, 2015).

Derived demand value chains and the ripple effect underscore the importance of business-to-business relationships. It all starts with creating consumer demand, especially in cases where demand might not exist. Small businesses in the same place can collaborate and promote each other's products or services. Vendors and manufacturers might create demand for their own products by creating demand for their customer’s products. Joint ventures, strategic partnerships and vendor partnership agreements are all helpful in using derived demand to each business’s best advantage (Lohrey, 2015).

Lohrey, Jackie (2015). An Example of Derived Demand. Retrieved November 5, 2015 from http://smallbusiness.chron.com/example-derived-demand-80611.html

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