1.

Illustrate with example why industrial demand is called derived demand

The demand for industrial goods is dependent upon various economic and social
pressures within an economy, while social, political and economic forces are at the root
of public authority buying.
Example the provision of public services currently enjoyed (administration, defence, etc.)
and
also for capital formation, i.e producers' goods to further future services (building of
schools, construction of roads, etc.).
2. Explain the concept of joint demand and cross-elaticity of demand with examples from
industrial marketing
Joint demand occurs when one product requires the existence of others to be careful
while exceptions may be found. Most products require several components, parts or
ingredients. Example; A bakery require flour, salt, preservatives, yeast in the production
of bread. If one of the ingredients cannot be obtained other purchases will be curtailed or
discontinued. Joint demand situations can also be affected by changes in product
specifications
Cross elasticity of demand is the responsiveness of the sales of one product to a price
change in another. It can have a dramatic impact on the marketing strategy of an
Industrial firm.

Cross elasticity for substitutes is always positive i.e., the price of one good and the
quantity demanded of the other always more in the same direction. The more positive is
this ratio the larger the cross elasticity and more definite it is that the products compete in
the same market. Cross elasticity for complements is negative-price and quantity move in
opposite directions. The more negative this relationship the more closely the demand for
the products is related.
The concept of cross elasticity of demand can be very useful to Industrial marketers. For
example the quantity of granite required for construction is related to the price of its close
substitute bricks or marble and vice-versa. It is important that a firm know how the
demand for its products is likely to be affected by changes in the prices of other goods
and also the interrelationship among industries.
3. Discuss the type of industrial customers and their purchase practice in Ethiopia?

Commercial Enterprises, Government Customers, Institutional Customers and

Cooperative Societies are the different types of industrial customers.
Commercial Enterprises These are private sector, profit seeking organisations
consisting of Industrial Distributors and Dealers, Original Equipment Manufacturers
(OEM’s) and Users.
I Industrial Distributors and Dealers They purchase industrial goods and resell them in
the same form to other industrial customers such as commercial enterprises, government
and institutional customers.
II. Original Equipment Manufacturers (OEM’s) These industrial customers purchase
industrial goods to incorporate them in the products that they produce.
III. Users When a commercial enterprise purchases industrial products or services to
support its manufacturing process or to facilitate business operations it is classified as a
User.
Government Customers The largest purchasers of industrial products in India are
Central and State Government Departments such as Railways, Defence, Telephones,
State Transport Undertakings, State Electricity Boards and Director General of Supplies
and Disposal (DGS&D). These government units purchase almost all kinds of industrial
products and services and they represent a huge market.
Institutional Customers Public and private institutions such as Hospitals, Schools,
Colleges, Universities and Prisons are classified as Institutional Customers.
Cooperative Societies An association of persons forms a Cooperative Society. It can be
manufacturing units like Cooperative sugar mills or non-manufacturing organisations like
Cooperative banks or Cooperative housing societies.
4. Make notes describing the principles that underpin the buildup and break down
approaches to market segmentation. What are the main disadvantages? Practices in
Ethiopia

We can use five segmentation approaches in Ethiopian context , which we have arranged
as a nested hierarchy—like a set of boxes that fit one into the other. Moving from the
outer nest toward the inner, these criteria are: demographics, operating variables,
customer purchasing approaches, situational factors, and personal characteristics of the
buyers.
The segmentation criteria of the largest, outermost nest are demographics—general,
easily observable characteristics about industries and companies; those of the smallest,
innermost nest are personal characteristics—specific, subtle, hard-to-assess traits. The
marketer moves from the more general, easily observable segmentation characteristics to
the more specific, subtle ones. This approach will become clearer as we explain each
criterion.
Demographics
The outermost nest contains the most general segmentation criteria, demographics. These
variables give abroad description of the company and relate to general customer needs
and usage patterns. They can be determined without visiting the customer and include
industry, company size, and customer location.
The Industry.
Knowledge of the industry affords a broad understanding of customer needs and
perceptions of purchase situations. Some companies, such as those selling paper, office
equipment, business-oriented computers, and financial services, market to a wide range
of industries. For these, industry is an important basis for market segmentation. Hospitals,
for example, share some computer needs and yet differ markedly as a customer group
from retail stores.
Marketers may wish to subdivide individual industries. For example, although financial
services are in a sense a single industry, commercial banks, insurance companies, stock
brokerage houses, and savings and loan associations all differ dramatically. Their
differences in terms of product and service needs, such as specialized peripherals and
terminals, data handling, and software requirements, make a more detailed segmentation
scheme necessary to sell computers to the financial services market.
Company Size.
The fact that large companies justify and require specialized programs affects market
segmentation. It may be, for example, that a smaller supplier of industrial chemicals, after
segmenting its prospective customers on the basis of company size, will choose not to
approach large companies whose volume requirements exceed its own production
capacity.

Customer Location.
The third demographic factor, location, is an important variable in decisions related to
deployment and organization of sales staff. A manufacturer of heavy-duty pumps for the
petrochemical industry, for example, would want to provide good coverage in the Gulf
Coast, where customers are concentrated, while putting little effort into New England.
Customer location is especially important when proximity is a requirement for doing
business, as in marketing products of low value-per-unit-weight or volume (such as
corrugated boxes or prestressed concrete), or in situations where personal service is
essential (as in job shop printing).

As noted, a marketer can determine all of these demographic variables easily. Industry-
oriented and general directories are useful in developing lists of customers in terms of
industry, size, and location. Government statistics, reports by market research companies,
and industry and trade association publications provide a great deal of demographic data.
Operating Variables
The second segmentation nest contains a variety of segmentation criteria called
“operating variables.” Most of these enable more precise identification of existing and
potential customers within demographic categories.
Operating variables are generally stable and include technology, user/nonuser status (by
product and brand), and customer capabilities (operating, technical, and financial).
Company Technology.
A company’s technology, involving either its manufacturing process or its product, goes
a long way toward determining its buying needs. Soda ash, for example, can be produced
by two methods that require different capital equipment and supplies. The production of
Japanese color televisions is highly automated and uses a few large, integrated circuits. In
the United States, on the other hand, color TV production
once involved many discrete components, manual assembly, and fine tuning. In Europe,
production techniques made use of a hybrid of integrated circuits and discrete
components. The technology used affects companies’ requirements for test gear, tooling,
and components and, thus, helps determine a marketer’s most appropriate marketing
approach.

Product and Brand-Use Status.

One of the easiest ways, and in some situations the only obvious way, to segment a
market is by product and brand use. Users of a particular product or brand generally have
some characteristics in common; at the very least, they have a common experience with a
product or brand.

Manufacturers who replace metal gears with nylon gears in capital equipment probably
share perception so frisk, manufacturing process or cost structure, or marketing strategy.
They probably have experienced similar sales presentations. Having used nylon gears,
they share common experiences including, perhaps, similar changes in manufacturing
approaches.
Customer Capabilities.
Marketers might find companies with known operating, technical, or financial strengths
and weaknesses to be an attractive market. For example, accompany operating with tight
materials inventories would greatly appreciate a supplier with are liable delivery record.
And customers unable to perform quality-control tests on incoming materials might be
willing to pay for supplier quality checks. Some raw materials suppliers might choose to
develop a thriving business among less sophisticated companies, for which lower-than-
usual average discounts well compensate added services.
Purchasing Approaches
One of the most neglected but valuable methods of segmenting an industrial market
involves consumers’ purchasing approaches and company philosophy. The factors in this
middle segmentation nest include the formal organization of the purchasing function, the
power structures, the nature of buyer-seller relationships, the general purchasing policies,
and the purchasing criteria.
Purchasing Function Organization.
 The organization of the purchasing function to some extent determines the size and
operation of a company’s purchasing unit. A centralized approach may merge individual
purchasing units into a single group, and vendors with decentralized manufacturing
operations may find it difficult to meet centralized buying patterns.1 To meet these
different needs, some suppliers handle sales to centralized purchasers through so-called
national account programs and those to companies with a decentralized approach through
field-oriented sales forces.
Power Structures.
These also vary widely among customers. The impact of influential organizational units
varies and often affects purchasing approaches. 
Buyer-Seller Relationships.
A supplier probably has stronger ties with some customers than with others. The link may
be clearly stated. A lawyer, commercial banker, or investment banker, for example, might
define as an unattractive market segment all companies having as a board member the
representative of a competitor.
General Purchasing Policies.
A financially strong company that offers a lease program might want to identify
prospective customers who prefer to lease capital equipment or who have meticulous
asset management.
Purchasing Criteria.
The power structure, the nature of buyer-seller relationships, and general purchasing
policies all affect purchasing criteria. Benefit segmentation in the consumer goods market
is the process of segmenting a market in terms of the reasons why customers buy.
Urgency of Order Fulfillment.
It is worthwhile to differentiate between products to be used in routine replacement or for
building a new plant and those for emergency replacement of existing part
5. In which phase of the purchasing process will top management most likely involved? At
what should the marketer’s attempts to become involved? Practice in Ethiopia
The top Management most likely involved in Contract Negotiation and Approval phase of the
purchasing process
The marketers might involve when business dealing is reciprocity
6. Write a proposal in industrial marketing topics?

FACTORS AFFECTING BRAND CHOICE OF

AUTOMOBILE BUYERS IN ADDIS ABABA
Abstract
Every customer in the market has his/her own brand choice. Customers consider certain
attributes beforepurchasing products. The objective of this study will to identify factors
affecting brand choice of automobile buyers in Addis Ababa. The variables included in
this study are brand image, reliability, price, availability of spare part, safety, fuel
consumption durability and social values of automobile. A sample of 400 automobile
buyers will beselected using convenience sampling technique with distributing structured
questionnaire based on likert type scale was used to elicit information from the sampled
respondents in the city of Addis Ababa. But 382 of them return correctly and within time.
The data will be analyzed using descriptive statistic to calculate general information of
the respondent and inferential statistics to test like multiple regressions, normality,
reliability,correlation and multicolinearity of data.
Key words: brand choice, model of buying behavior, brand image, reliability, safety,
availability of spare part, fuel consumption, durability, social value, durability
1. INTRODUCTION
1.1 Background of the Study
The production of cars and its trade in global market have impact on employment, the
balance of payments, economic growth and valuable inward foreign direct investment.
The car in the twentieth Century has been described “The machine that changed the
world” (Womac, et al., 1990). Due to its deep forward and backward linkages with
several key segments of the economy, the automobile industry is having a strong
multiplier effect on the growth of a country and hence is capable of being the driver of
economic growth.
The rise of income levels in many African countries and the emergence of a middle class,
the continent as the final frontier for the global automotive industry. Given Africa‟s
population size and its positive economic outlook, automotive companies will be able to
gain a competitive advantage by adopting a medium- to long-term view towards the
continent.”(Black, A.& McLennan, T. (2015). The Last Frontier: Prospects and Policies
for the Automotive Industry in Africa).
Africa‟s automotive market is relatively small. In 2014, there were just over 42.5 million
registered vehicles in use in Africa – a continent of approximately one billion people that
time.
As a result, the motorization rate on the continent is only 44 vehicles per 1 000
inhabitants.
This is far below the global average of 180 vehicles per 1 000 inhabitants, and lower than
other developing regions such as Latin America (176) and Developing Asia, Oceania and
the Middle East (79). McLennan, T. (2015). The Last Frontier: Prospects and Policies for
the Automotive Industry in Africa).
In 2015, approximately 1.55 million new vehicles were sold or registered across Africa.
South Africa, Egypt, Algeria and Morocco – all countries with established and rapidly
developing automotive industries – together accounted for more than 80% of total new
vehicle sales in 2015. Based on recent sales trends, some sources estimate that Africa‟s
passenger vehicle sale could reach up to 10 million units per annum within the next 15
years. McLennan, T. (2015). The Last Frontier: Prospects and Policies for the
Automotive Industry in Africa).

Ethiopia was Africa‟s fastest growing economy in 2015 and has the continent‟s second
largest population. Ethiopia‟s automotive potential is underpinned by the state-driven
economy and a government that is geared toward industrialization, which makes it the
African economy that is most similar and arguably likely to replicate the development
successes of China of the mid- 1980s onwards. (Ethiopian Investments Commission
(2015). Invest in Ethiopia. Addis Ababa:
EIC.)
Since Ethiopia doesn‟t or little manufacture automotive, construction machineries and
agricultural equipments locally at present, it imports those from various countries of the
world. Automotive importing companies in Ethiopia are importing different types of
vehicles to the country‟s vehicle market. In doing so, a predictive study on the marketing
trends of imported
automotive is necessary to clearly see the demand supply gap and for the growth in sales
ofautomotive in Ethiopia.(Ethiopian Investment Commission. (2015). Invest in Ethiopia.
Addis
Ababa: EIC)
1.2 Statement of the problem
The automotive industry is an important segment of the economy in any country as it
links
industries and services. It is the key driver of any growing economy. It plays an important
role in growing the economy in each country and one way to strengthen the industry is to
improve consumer insight into vehicle buying behavior.
Besides, competitive pressure of automotive companies arising in Ethiopia has led the
companies to look for an edge to be competitive in automotive industry. Both the local
and
foreign cars are competing to get attention from the consumers like Toyota ,Suzuki
,Mercedes , Hyundai ,lifan motors….etc Therefore, the objective of this study is to
identify the factors influencing consumer buying behavior while buying automobile.
From different ground consumers „choice is limited to few brands from a range of brands
available in the market. As various studies explained, the brand preference of consumers
might be affected by marketing strategy of firms. Moreover, consumers may have their
own choice criteria in selection of a particular brand from a set of brands in a given
product category. Ethiopia‟s automotive potential is underpinned by the state-driven
economy and a government that is geared toward industrialization, which makes an
industry need an emphasis to study on.
Despite the current limited disposable income, Ethiopia‟s automotive market is
dominated by second-hand imported vehicles – particularly commercial vehicles, there
are many brands of automobile cars in the market.
This shows it is very critical for companies to understand the customer‟s requirement and
provide the products that satisfy their needs. Consumers brand preference represents a
fundamental step in understanding consumer choice. In most product category,
consumers have more choices, more information and higher expectations than ever
before. To move consumer from trial to preference, brands need to deliver on their value
preposition, as well as dislodge someone else from the consumer‟s existing preference
set.
There are minimum number international journals and studies in Ethiopia that‟s try to
show the customer preference regarding buying automobile car for their own purpose.
Mr.Eskinder Desta study the automotive industry and trend Analysis and show trends in
countries as
general but still the specific case that show the determinant factor that influence the brand
choice of buyers while buying automobiles are not addressed. Observed that is found to
be an initiation to conduct the study is lack of theoretical evidence that can be used as an
insight to understand customers‟ perception towards building a brand through the use of
brand equity dimensions.
Thus from the above ground this study is conducted to identify the underlying factors of
consumers brand choice it will lead them to formulate a better marketing programs. The
main research question of the study is ―Determining factors that affect brand choice of
automobile buyers in Addis Ababa? Under this main research question, the following
specific research questions were addressed;
1.3 Objectives of the Study
1.3.1 General objective
 The general objective of the study is to identify factors that affect brand
choice of automobile buyers in Addis Ababa.
1.4.2 Specific objectives
The specific objectives of the study are:
 To identify the most preferred brand among the set of brands available
in the city.
 To identify which determinants are more significantly affect choice of
automobile brand.
1.5 Definition of terms
1.5.1 Conceptual Definition
 Marketing Concept; "The marketing concept is marketers can sell more if they
produce the consumer needs and wants than to produce what they want to sell. In
marketing concept consumer needs and wants became the firm‟s primary focus. Hence
basically marketing concept is a philosophy of consumer oriented" (Leon G. Schiffman,
2007 pp.).
 Consumers;"Consumers are individuals and households that buy the firms product for
personal consumption" (Sata, 2013 pp.).
 Brand Awareness: is related to the strength of the brand trace in memory as reflected
by consumers‟ ability to recall or recognize the brand under different conditions. (Keller
(2004).
 Brand preference: is the degree of brand loyalty in which a customer definitely prefers
one brand over competitive offerings and will purchase this brand if it is available.
(Dibb S., Simikin L., Pride W.M., and Ferrell O.C. (2006)).
 Brand choice is concerned with the selection and consumption of the brand (Bettman
et
al., 1998).
 Purchasing behavior; As Pikini Rani, tries to define purchasing behavior is the
decision processes and acts of people involved in buying and using products (Rani,
2014).
1.4 Significance of the Study
Automobile market in Ethiopia is growing rapidly. Different automobile brands are
introducing to the market and at the same time, demand is increasing. The introduction of
various brands will lead to tight competition, which in turn make consumers to face brand
choice decision in the market. In such a situation, it becomes necessary for manufacturers
to understand the major
factors attracting buyers to one„s own brand, so that they can succeed in the market and
win the competition. A clear understanding of the factors that influence brand choice is
critical to ensure that a company„s branding and marketing efforts are matched with the
needs of buyers. Therefore, this study can help marketers to design a better marketing
strategy by identifying the factors that determine buyers brand choice Thus; the study
will have a theoretical contribution
in the area of product purchase decision and buyers brand choice criteria in the context of
Ethiopian market specifically in Addis. Furthermore, the study will give insight for other
researchers to explore and investigate more in the area, in a broader scope and wider
context.
1.7 Scope of the Study
This study would try to show the main factors that determine the buyers brand choice in
automobile cars. To achieve this aim, the scope of the study is to identify different
factors, i.e. Brand image, Reliability, Price, Availability of spare parts, Safety, Fuel
consumption,
Durability and Social value that influence a brand choice of a particular automobile brand
in the city.
The scope of the study is limited to Addis Ababa, capital city of Ethiopia. This
geographical
limitation is not only chosen because of time, access and cost restriction, but also it is
believed that a considerable number of automobile users are available in Addis Ababa.
More specifically data were collected from the owners of automobile, may be they are
self
employee, different company‟s employees or trader by distributing structured questioners
that are related with the main variables the researcher wants to touch within convenient
time for the respondents.
1.8 Organization of the Research Report
The content of this research would have five chapters. The first chapter includes the
research background, problem statement and research questions, objective of the study,
significance of the study, scope of the study and organization of the report and followed
by the discussion of concepts and theories related to the area of study (chapter two,
literature review). The third chapter describes the research design, participants of the
study, the data source, data collection and analysis techniques and procedures. The fourth
chapter deals with data analysis, interpretation and discussion of the findings. Finally, in
the last chapter; summery, conclusion and recommendations were being included.
ancial asset. It aims at producing measures in monetary values.