Organizational Products. There are two basic types of industrial products

There are two basic types of industrial products. – expense items

and capital items. Expense items are relatively inexpensive goods and

services that are generally used within a year of purchase. Those that

are more expensive and have a longer useful life are considered capital

items. Another classification of organizational or industrial products is

the most commonly used classification system which outlines the basic

characteristics of each class of organizational product:

· Raw materials: basic ingredients that undergo processing in the


· Component parts: items used in the assembly of the finished product;

· Installations: major capital purchases, such as a new factory building

or an airport’s computerized baggage system;

· Accessory equipment: equipment that aids in the operation of the

business, such as cash registers, photocopiers, forklift trucks;

· Operating supplies: paper, pencils, brooms, and other short-lived

items that are routinely purchased and used up in the organization’s ope-


· Services: work provided by others, such as janitorial services, repair

and maintenance services, and the services of lawyers and accountants.

All organizational products have one thing in common: derived de-

mand. Derived demand means the demand for every organizational



product depends on the demand for some other product. The demand

for tempera paints, water colors, and chalk sold to the art departments

of public schools is derived from the demand of students or their parents

for a basic, well-rounded education. Ultimately the demand for all or-

ganizational products depends on consumer demand for finished goods

and services.

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