Another characteristic of B2B markets that you may or may not have noticed or thought about is that firms in the same industry tend to cluster in the same geographic areas. In the United States, many banks and financial companies are located on or near Wall Street in New York City. Many film and television companies operate out of Hollywood. Is it just by chance that this has occurred? No.
The clustering occurs because the resources these firms need—both human and natural—are located in some areas and not others. For example, the Gulf of Mexico is rich with oil deposits. As a result, many oil companies and facilities are located along or near the Gulf in cities such as Houston. Likewise, many high-tech companies are located in Silicon Valley (California). One reason is that nearby Stanford University is one of the top computer-science schools in the country, and the firms want to hire graduates from the school.
But that’s not the only reason businesses in the same industry cluster together. Another reason is the sellers want to be close to their buyers. Bentonville, Arkansas, the world headquarters of Walmart, used to be a sleepy little rural town. As Walmart grew, so have the number of companies moving into the area to do business with Walmart. In the last twenty years, the size of the town has nearly tripled.
Why do companies want to be near their buyers? Let’s go back to our date analogy. Suppose you hit it off with the person you’re interested in and you become “an item.” You probably wouldn’t want to be half the world away from the person for a long period of time because you would miss the person and because you wouldn’t want a rival moving in on your turf! Companies also want to be close to their suppliers because it can help them get inventory more quickly. Dell’s suppliers are located right next to the company’s assembly plants. And, as you have learned, some companies actually locate their personnel on their customers’ sites.