In reference to business, the terms Tier 1 and Tier 2 usually refer to the manufacturing industry. The relationship between the original equipment manufacturer (OEM) and its tiers is crucial to the goal of creating, and in some cases, selling its products.
Tier 2 companies are the suppliers who, although no less vital to the supply chain, are usually limited in what they can produce. These companies are usually smaller and have less technical advantages than Tier 1 companies. If they are the first link in the supply chain, they start the ball rolling for the OEM’s final product, which means they really are vital to the speed of production. Tier 2 companies also must be rigorous in safety and standards compliance, because if something isn’t right, then it cannot go on to Tier 1.