Capital goods

  • Capital goods are industrial products that are directly used in production. Capital goods consist of installations and accessory equipment. Buildings, plants, and machinery are examples of installations.
  • Installations are usually bought directly from the producer. Accessory equipment includes workman’s tools and office equipment like calculators, fax machines, etc.
  • Accessory equipment is marketed through intermediaries because the buyers of those products are scattered over a large geographic area, and individual purchase volume is small.

Raw Materials

  • These are industrial goods that will be used in the making of other products. Included in this category are natural resources such as forest products, minerals, water, oceanic products, and agricultural products and livestock. In most instances, raw materials lose their individual identities when used in the final product.
  • Materials and parts become a part of the buyer’s product through further processing. They include raw materials and manufactured materials and parts. Raw materials include farm products and natural products such as jute, cotton, wheat, fruits, crude petroleum, coal, iron ore, and natural gas.
  • Farm products are supplied by many small producers who sell them to intermediaries. These intermediaries then process and sell them. Natural products are of big bulk and low unit value and to be transported from producer to user.
  • Producers of natural products are few in number and large. They market their products directly to industrial users.
  • Manufactured materials and parts include component matters such as iron, yarn, cement, and wires, and component parts such as small motors, tires, and casting. Component materials usually are processed further.

Major Equipment

  • This category comprises industrial products used to make, process, or sell other goods. These include machinery, typewriters, computers, automobiles, tractors, engines, and so on.
  • Normally, they are relatively expensive and have a useful life over one year. Major equipment is not limited solely to the production process. It is found in wholesale (e.g., forklifts) and retail (e.g., cash registers) operations.

Accessory Equipment

  • This equipment includes industrial products used to facilitate the production process or middleman sales. It does not become part of the finished product but aids in the overall production or selling effort.
  • Accessory equipment would include tools, shelving, and many other products that tend to have a lower cost and shorter life than major equipment.

Operating Supplies

  • Supplies include operating supplies like office stationery, repair, and maintenance items. Supplies can be treated as convenience products of the industrial market as they are purchased with minimal effort.
  • These are products that are incidental to the production or selling functions. Included in this category are low cost and quickly (within one year) used up in the company’s operations. Pencils, papers, lubricating oils, cash register, tape, and maintenance and repair items are included in this category.

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