What B2B is?
It is a situation in which a business directs its main activity and efforts to collaborate and work with other businesses and not end-users (retail). Usually, when talking about B2B payments, for example, it means that a certain business pays or receives payment from another business and not from an end customer.
Key Takeaways
B2B transactions tend to happen in the supply chain, where one company will purchase raw materials from another to be used in the manufacturing process.
B2B transactions and collaborations usually require planning to be successful. Such activities rely on a company’s account management personnel to establish business client relationships.
B2B relationships must also be nurtured, typically through professional interactions prior to sales, for successful transactions to take place.
For Example...
Samsung is one of Apple's largest suppliers in the production of the iPhone. Apple also holds B2B relationships with firms like Intel, Panasonic and semiconductor producer Micron Technology.
B2B Models
The Vertical B2B model
A vertical B2B (business-to-business) model refers to a business model in which a company specializes in providing products or services to other businesses within a specific industry or vertical.
Instead of catering to a broad range of businesses, the company focuses on a particular niche or sector, such as healthcare, finance, or manufacturing.
In a vertical B2B model, the company typically has in-depth knowledge and expertise in the industry it serves, allowing it to tailor its products and services to the specific needs and challenges of that industry.
This can include offering specialized software solutions, customized consulting services, or niche products that are only used within that particular industry.
Vertical B2B models can be highly effective in providing value to businesses within a specific industry, as the company can leverage its expertise and industry knowledge to create highly specialized offerings that meet the unique needs of its clients.
This can result in increased customer loyalty, higher profit margins, and a competitive advantage within the niche market.
Examples of companies that use a vertical B2B model include SAP (enterprise software for various industries), Veeva Systems (cloud-based software for life sciences companies), and Emptoris (procurement and supply chain management software for manufacturing and retail industries).
The Horizontal B2B model
The horizontal B2B (business-to-business) model refers to a business model in which a company provides a broad range of products or services to businesses across multiple industries or sectors. Instead of specializing in a particular niche or industry, the company offers a variety of products or services that are applicable to a wide range of businesses.
In a horizontal B2B model, the company typically focuses on providing a core set of products or services that can be customized or tailored to the specific needs of each client. This can include products such as marketing software, accounting software, and productivity tools, or services such as IT consulting, HR management, and financial planning.
Horizontal B2B models can be effective in providing value to businesses that have diverse needs and may not be well-served by specialized providers within a particular industry. The company can leverage its broad range of offerings to attract a wide range of clients and maintain a competitive advantage by continually adding new products or services to its portfolio.
Examples of companies that use a horizontal B2B model include Salesforce (customer relationship management software for multiple industries), Google (advertising and productivity tools for various businesses), and Microsoft (office productivity tools and software for businesses of all sizes).
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