Master of Business Administration

MBA II Semester

MB0046 – Marketing Management

Assignment Set- 1

Q.1 Discuss the different marketing concepts with its merits and drawbacks.

Ans.

The Marketing Concept

After World War II, the variety of products increased and hard selling no longer could be relied upon to generate sales. With increased discretionary income, customers could afford to be selective and buy only those products that precisely met their changing needs, and these needs were not immediately obvious. The key questions became:

What do customers want? Can we develop it while they still want it? How can we keep our customers satisfied?

In response to these discerning customers, firms began to adopt the marketing concept, which involves:

Focusing on customer needs before developing the product Aligning all functions of the company to focus on those needs Realizing a profit by successfully satisfying customer needs over the long-term

When firms first began to adopt the marketing concept, they typically set up separate marketing departments whose objective it was to satisfy customer needs. Often these departments were sales departments with expanded responsibilities. While this expanded sales department structure can be found in some companies today, many firms have structured themselves into marketing organizations having a company-wide customer focus. Since the entire organization exists to satisfy customer needs, nobody can neglect a customer issue by declaring it a "marketing problem" - everybody must be concerned with customer satisfaction.

The marketing concept relies upon marketing research to define market segments, their size, and their needs. To satisfy those needs, the marketing team makes decisions about the controllable parameters of the marketing mix.

Marketing concepts with its merits and drawbacks.

There are certain fundamental concepts and tasks which one needs to know to fully understand the marketing function. These concepts provide foundation for a marketing orientation and to manage the marketing function.

1. Needs and Wants

The marketer’s task lies in satisfying human needs and wants through the exchange process. It is alleged that “marketing creates needs” and makes people buy things they do not actually need. In reality, marketing or marketers do not create “needs”, but they create “wants”. Some needs are the basic human requirements of food, clothing, shelter, water and air. There are other needs such as social needs, esteem needs etc.

When we desire certain specific objects or items to fulfill these needs, they are called wants. This difference between wants and needs is not the same as understood in the subject matter of ‘economics’. The marketer identifies the need which may lie unexpressed by the customer.

 

 

2. Demand

Human wants are unlimited, but their resources are limited. When a want for an object is backed or supported by buying ability, willingness to spend and desire to acquire a product / service, it becomes a potential demand. The task of assessing or estimating demand is very crucial for a marketer. He should understand the relationship of the demand for his product with its price. Demand forecasting is essential for allocation of resources in a company. This is the reason why marketers segment consumers on the basis of their earning capacity. The income of the consumer indicates the potential to buy.

3. Product and Services

‘Product is a generic term used to describe what is being offered by a seller or marketer. It may be a good, a service or idea, which can be marketed by offering a set of benefits it offers to customers to satisfy their needs.

A product can be defined as anything that can be offered to market to satisfy a need or want. Today, many types of entities such as goods, services, experiences, events, persons, places and ideas are being marketed.

 

4. Target Market

Very few products can satisfy everyone in the market. Therefore, marketers divide the market into distinct groups of buyers who have similar preferences. These groups are called segments with their own specific demographic, psychographic and behavioral characteristics. The marketer decides as to which of these segment or segments offer highest opportunity for his company. For each of these target markets, the firm develops a product / service suited to their needs.

TATA group has recently designed an economy car called ‘NANO’ which is priced around Rs. 1 Lakhs. The target market for this car is all aspirants who dream of owning a car but cannot afford cars, which are currently available for minimum Rs. 2.5 Lakhs. A Target Market is the group of people at whom a marketer targets his marketing efforts to sell his goods and services.

5. Marketing Management

Marketing Management which is also the title of this course refers to all the activities which the marketing managers, executives and personnel have to undertake to carry out the marketing function of the firm.

It involves (i) analyzing the market opportunities by undertaking consumer needs and changes taking place in the marketing environment, (ii) planning the marketing activities, and (iii) implementing marketing plans and settings control mechanism to ensure smooth and successful accomplishment of the organizations goals. Marketing Management is a critical function, especially in highly competitive markets. It provides competitive edge to an organization through strategic analysis and planning.

6. Values and Satisfaction

Value is primarily a function of quality, service and cost. Value increases with increase in quality and service and decreases with increase in cost. Value is an important marketing concept and the task of marketing is to identify, create, communicate, deliver and monitor customer value.

Customers generally experience satisfaction when the performance level meets minimum performance expectations of a product or service. When the performance as perceived exceeds the expected performance level, the customer will be not just satisfied, but delighted. Thus customer satisfaction or delight with respect to a product or service encourages customers to come back and repurchase the product or service in future. Satisfied customers can be an asset to the marketing company over a period of time, as they will spread favorable word-of-mouth information or opinions.

Q.2 a) What are the features and objectives of marketing research? b) Give a note on psychoanalytic model of consumer behaviour?

Ans.

Features of Marketing Research

1. It is a systematic process – It has to be carried out in a stepwise and systematic manner and the whole process needs to be planned with a clear objective.

2. It should be objective – It is important that the methods employed and interpretations are objective. The research should not be carried out to establish an opinion nor should it be intentionally suited towards predetermined results.

3. It is multi-disciplinary – Marketing Research draws concepts from other disciplines such as Statistics for obtaining reliable data and from Economics, Psychology and sociology for better understanding of buyers.

 

Objectives of Marketing Research

Marketing Research may be conducted for different purposes. Based on how organizations use Marketing Research, objectives of Marketing Research can be summarized as follows:

1. To understand why customers buy a product

2. To forecast the probable volume of future sales or expected market share

3. To assess competitive strengths and strategies

4. To evaluate the effectiveness of marketing action already taken

5. To assess customer satisfaction of company’s products/services

Note on psychoanalytic model of consumer behaviour

The Psychoanalytical Model:

The psychoanalytical model draws from Freudian Psychology. According to this model, the individual consumer has a complex set of deep-seated motives which drive him towards certain buying decisions. The buyer has a private world with all his hidden fears, suppressed desires and totally subjective longings. His buying action can be influenced by appealing to these desires and longings. The psychoanalytical theory is attributed to the work of eminent psychologist Sigmund Freud. Freud introduced personality as a motivating force in human behavior. According to this theory, the mental framework of a human being is composed of three elements, namely,

1. The id or the instinctive, pleasure-seeking element. It is the reservoir of the instinctive impulses that a man is born with and whose processes are entirely subconscious. It includes the aggressive, destructive and sexual impulses of man.

2. The superego or the internal filter that presents to the individual the behavioral expectations of society. It develops out of the id, dominates the ego and represents the inhibitions of instinct which is characteristic of man. It represents the moral and ethical elements, the conscience.

3. The ego or the control device that maintains a balance between the id and the superego. It is the most superficial portion of the id. It is modified by the influence of the outside world. Its processes are entirely conscious because it is concerned with the perception of the outside world.

The basic theme of the theory is the belief that a person is unable to satisfy all his needs within the bounds of society. Consequently, such unsatisfied needs create tension within an individual which have to be repressed. Such repressed tension is always said to exist in the sub-conscious and continues to influence consumer behavior.

Q. 3 Silver Line Manufacturers produce several varieties of automobile components. They have 3 to 5 suppliers who supply materials regularly. Recently, procurement manager of Silver Line discussed in the meeting that they have to look out for new suppliers since they would be expanding their business operations to many places. How do you think Silver Line have to go about this situation?

Ans.

Procurement is the acquisition of goods or services. It is favorable that the goods/services are appropriate and that they are procured at the best possible cost to meet the needs of the purchaser in terms of quality and quantity, time, and location. Corporations and public bodies often define processes intended to promote fair and open competition for their business while minimizing exposure to fraud and collusion.

Procurement systems

Another common procurement issue is the timing of purchases. Just-in-time is a system of timing the purchases of consumables so as to keep inventory costs low. Just-in-time is commonly used by Japanese companies but widely adopted by many global manufacturers from the 1990s onwards. Typically a framework agreement setting terms and price is created between a supplier and purchaser, and specific orders are then called-off as required.

Procurement process

Procurement may also involve a bidding process i.e.,Tendering. A company may want to purchase a given product or service. If the cost for that product/service is over the threshold that has been established (e.g.: Company X policy: "any product/service desired that is over $1,000 requires a bidding process"), depending on policy or legal requirements, Company X is required to state the product/service desired and make the contract open to the bidding process. Company X may have ten submitters that state the cost of the product/service they are willing to provide. Then, Company X will usually select the lowest bidder. If the lowest bidder is deemed incompetent to provide the desired product/service, Company X will then select the submitter who has the next best price, and is competent to provide the product/service. In the European Union there are strict rules on procurement processes that must be followed by public bodies, with contract value thresholds dictating what processes should be observed (relating to advertising the contract, the actual process etc.).

Procurement steps

Procurement life cycle in modern businesses usually consists of seven steps:

Information gathering: If the potential customer does not already have an established relationship with sales/ marketing functions of suppliers of needed products and services (P/S), it is necessary to search for suppliers who can satisfy the requirements.

Supplier contact: When one or more suitable suppliers have been identified, requests for quotation, requests for proposals, requests for information or requests for tender may be advertised, or direct contact may be made with the suppliers.

Background review: References for product/service quality are consulted, and any requirements for follow-up services including installation, maintenance, and warranty are investigated. Samples of the P/S being considered may be examined, or trials undertaken.

Negotiation: Negotiations are undertaken, and price, availability, and customization possibilities are established. Delivery schedules are negotiated, and a contract to acquire the P/S is completed.

Fulfillment: Supplier preparation, expediting, shipment, delivery, and payment for the P/S are completed, based on contract terms. Installation and training may also be included.

Consumption, maintenance, and disposal: During this phase, the company evaluates the performance of the P/S and any accompanying service support, as they are consumed.

Renewal: When the P/S has been consumed or disposed of, the contract expires, or the product or service is to be re-ordered, company experience with the P/S is reviewed. If the P/S is to be re-ordered, the company determines whether to consider other suppliers or to continue with the same supplier.

Additional Step - Tender Notification: Some institutions choose to use a notification service in order to raise the competition for the chosen opportunity. These systems can either be direct from their e-tendering software, or as a re-packaged notification from an external notification company.

Procurement performance

In July 2011, Ardent Partners published a research report that presented a comprehensive, industry-wide view into what is happening in the world of procurement today by drawing on the experience, performance, and perspective of nearly 250 Chief Procurement Officers and other procurement executives. The report includes the main procurement performance and operational benchmarks that procurement leaders use to gauge the success of their organizations. This report found that the average procurement department manages 60.6% of total enterprise spend. This measure commonly called "spend under management" refers to the percentage of total enterprise spend (which includes all direct, indirect, and services spend) that a procurement organization manages or influences. The average procurement department also achieved an annual savings of 6.7% in the last reporting cycle, sourced 52.6% of its addressable spend, and has a contract compliance rate of 62.6%.

Public procurement

Public procurement generally is an important sector of the economy. In Europe, public procurement accounts for 16.3% of the Community GDP.

Green public procurement

In Green public procurement (GPP), contracting authorities and entities take environmental issues into account when tendering for goods or services. The goal is to reduce the impact of the procurement on human health and the environment.

In the European Union, the Commission has adopted its Communication on public procurement for a better environment, where proposes a political target of 50 % Green public procurement to be reached by the Member States by the year 2010.

Alternative procurement procedures

There are several alternatives to tendering which are available in formal procurement. One system which has gained increasing momentum in the construction industry and among developing economies in the Selection in planning process which enables project developers and equipment purchasers to make significant changes to their requirements with relative ease. The SIP process also enables vendors and contractors to respond with greater accuracy and competitiveness as a result of the generally longer lead times they are afforded.

ROSMA is a procurement acronym created by ATkearney.{Procurement Solutions Division} It stands for Return on Supply Management Assets and endeavors to quantify not only procurement but every piece of the procurement process including strategic resource management.

Q.4 Briefly explain the bases for segmenting consumer markets along with examples. Do you think these bases are required for market segmentation? Why?

Ans.

Bases for segmenting consumer markets

Exhibit 1Bases for Segmenting

Consumer Markets

Exhibit 2Bases for Segmenting

Consumer Markets

So far, we've examined two ways in which markets can be segmented using benefit and consumption rate segmentation bases.  There are many other ways in which markets can be segmented.  In deed, let's shift gears a little bit  and talk in general terms about the possible ways in which markets can be segmented.  This discussion allows us to explore the range of segmentation basis that are available to marketing managers. There are a bunch! Exhibits 1 & 2 summarize the major categories of segmentation bases from which managers can select: 

Geographic bases allows us to segment a market that is spread over a large geographic area into sub-markets that cover smaller geographic areas. Geographic segmentation usually involves dividing up geographic markets by using existing political boundaries, natural climatic zones, or population boundaries.

Demographic segmentation occurs when one or more demographic traits are employed to divide a market. Typical demographic traits that are used include age, gender, race, ethnicity, marital status, family size and stage of the family life cycle. 

Social class segmentation employs a combination of demographic traits that are commonly believed to reflect membership in different social class strata.  Occupation, education, and income are the primary demographic traits that reflect social class membership.

Psychographic segmentation bases divide markets based on differences in lifestyles or differences in personality traits.  Lifestyle segmentation is one of the most popular and effective ways to create segments for consumer products.

Consumer shopping behavior patterns include such things as the type of store shopped in, timing of purchases (i.e. time of day, week, or year), how much of a product is purchased on a given visit to the store, and how often the individual frequents a

particular type of retail establishment or shopping mall.

Product consumption behaviors include product consumption or usage rates base (as discussed earlier).  Other segmentation bases included in this category are product usage occasion, product use versus non-use, and loyalties to specific brands.

Segmenting markets according to consumer predispositions essentially entails creating segments based on differences in consumers' wants, needs, and attitudes. We talked at length about creating market segments based on differences in consumers' wants and needs (i.e. creating benefit segments).  Sometimes it is useful to segment markets based on how knowledgeable people are of a particular product category, or whether they've experienced problems with specific products or brands. And, finally, we also include consumers' media viewing habits in this category.  When segmenting markets using this latter base, we are looking for differences in the types of media consumers prefer i.e. preferences for specific television shows, radio stations, magazines, newspapers, and the like.

Segments Based on Consumption Behaviors

There are multiple ways that we can segment a market based on differences is consumption patterns or behaviors. We've already looked at creating segments based on usage rates with our health club segmentation study.  Additional behaviors that are excellent candidates for segmenting markets include product usage occasion, product user status, and brand loyalty status.  

Product Usage Occasion

When creating market segments based on product usage occasion, the emphasis is on identifying different circumstances or occasions under which the product is used. The same product may be used on different occasions or under different circumstances by different people.  As a result, opportunities exist for segmenting markets based on such differences in 'usage occasions.'   For example, airlines have segmented their market into usage occasion segments consisting of people flying for business purposes (business flyers), vacation flyers, and people flying primarily for family reasons. Each segment represents a different usage occasion and each is targeted with different pricing and promotional strategies. Frequent-flyer programs are geared to business travelers to encourage airline loyalty. Super-low fares tied to advanced booking are used to attract vacation travelers and people flying primarily for family reasons. Cooperative promotional programs with travel agencies, destination resorts, and cruise-lines are commonly employed to provide reduced rates in travel markets.

Food products markets also are commonly segmented by usage occasion.  For example, orange juice has traditionally been promoted as a breakfast drink. In an attempt to build additional demand for orange juice, the orange-grower's trade associations promote the consumption of orange juice at other times of the day. Orange juice is promoted as an afternoon snack or as a 'pick-me-up.' Appropriately, the theme was "its not just for breakfast anymore." Coke has done basically the same thing. We all are aware that colas (e.g. Coke and Pepsi) are consumed during morning hours as a substitute for coffee.  Most colas have a fairly high caffeine content and can give you the same caffeine boost as does coffee as an aid to waking up. This is a particularly attractive alternative for folks that do not like the taste of coffee. Coke, of course, has long recognized this and offers a promotional campaign to its local bottlers called "Coke in the Morning." Pepsi has experimented with a dedicated product geared to this usage occasion segment. The product was branded as Pepsi AM during test market.  The product was a very potent version of Pepsi laced with extra caffeine and sugar.

Product User Status

Marketers employing this segmentation base attempt to identify differences between non-users, potential users, regular users, ex-users, and first-time users of products.  Larger firms with substantial market share often target non-users or potential users in an attempt to stimulate primary demand for the product category.  Smaller firms, in contrast, target regular users in an attempt to encourage brand switching.  Marketers try to differentiate between users and non-users of product categories when consumer characteristics are tied to the need for the product itself rather than to the use of different brands.  For example, consumers' characteristics associated with drinking decaffeinated coffee and using analgesic pain relievers may correlate most highly with the characteristics of the product category, rather than reflect the specific differences between brands. 

Brand Loyalty Status

Firms can learn a lot by analyzing the loyalty patterns of customers in markets.  By finding the characteristics of loyal and non-loyal customers for their brand and those of major competitors, firms can find ways to keep their customers loyal and attract non-loyal customers away from competitors.  Brand loyalty often is defined based solely on consumers' patterns of repeat purchase behavior. For example, consumers buying the same brand five times in a row have been defined as brand loyalty or as the proportion of total purchases within a given product category devoted to the most frequently purchased brand.  A problem with such definitions is that repeat purchase patterns may reflect only a spurious loyalty with little attitudinal attachment to the brand.  Such spuriously loyal consumers can easily be induced to switch to other brands via better prices, coupons, point-of-sale visibility and incentives.

Segments Based on Consumer Predispositions

Markets can be segmented based on differences in consumers' wants, needs, and attitudes. We've already examined in our health club study the value inherent in creating 'benefit segments' that

focus on different wants and needs held by consumers in each segment. Additional predispositions also can lead to meaningful segmentation schemes.  Markets can be segmented based on how knowledgeable people are of a particular product category.  Different promotional programs may be required to communicate with those who know little about the product versus those who don't.

Sometimes marketers may want to differentiate between customers who have experienced specific types of problems with products or brands versus those who have not.  It is possible that customers who frequently encounter problems of specific types may have a common set of characteristics that can suggest how the problem should be addressed.  

Segmenting markets based on consumers' media viewing habits may reveal consistent differences in the types of media consumers prefer (i.e. preferences for specific television shows, radio stations, magazines, and newspapers) and how these differences vary with key customer demographic and psychographic traits.  This information then can be used to more effectively target advertising and other communications to customer groups.

Q.5 Mention the forces in micro and macro environment that are likely to influence an organization’s working and functions. Is environmental scanning necessary for all organizations?

Ans.

Forces in micro and macro environment

The micro-environment

The term micro-environment denotes those elements over which the marketing firm has control or which it can use in order to gain information that will better help it in its marketing operations. In other words, these are elements that can be manipulated, or used to glean information, in order to provide fuller satisfaction to the company’s customers. The objective of marketing philosophy is to make profits through satisfying customers. This is accomplished through the manipulation of the variables over which a company has control in such a way as to optimise this objective. The variables are what Neil Borden has termed ‘the marketing mix’ which is a combination of all the ‘ingredients’ in a ‘recipe’ that is designed to prove most attractive to customers. In this case the ingredients are individual elements that marketing can manipulate into the most appropriate mix. E Jerome McCarthy further dubbed the variables that the company can control in order to reach its target market the ‘four Ps’. Each of these is discussed in detail in later chapters, but a brief discussion now follows upon each of these elements of the marketing mix together with an explanation of how they fit into the overall notion of marketing.

Product and price are obvious, but perhaps place and promotion need more explanation.

Place, it is felt, might better be termed ‘placement’ because it comprises two distinct elements. The first element is channels of distribution that is the outlets and methods through which a company’s goods or services are sold. Thus a channel can be certain types of retail outlet or it can be salespeople selling a company’s industrial products through say a channel which comprises buyers in the chemical industry. The other part of place refers to logistics that relates to the physical warehousing and transportation of goods from the manufacturer to the end customer. Thus, placement might be a better descriptor as it refers to the placing of goods or services from the supplier to the customer. In fact, place has its own individual ‘mix’ which is termed the ‘distribution mix’.

Promotion also has its individual ‘mix’ that is called the ‘promotional mix’. This comprises advertising, selling and sales promotion. In fact promotion is a misnomer, because in advertising agency circles the mention of promotion usually means ‘sales promotion’. Some writers are now separating selling away from promotion and calling it ‘people’ because it is too important an element of marketing to be lumped in with promotion, although in reality it is still promotion (through word of mouth). This fifth P (people) are those who contact customers on a regular basis with the objective of ultimately gaining orders and these people comprise the sales force.

We can thus see that selling is a component part of overall marketing. There are two more Ps for service marketing, but these are dealt with later.

Model of the process of marketing

This more complex model better explains what we are now beginning to understand about marketing. The bottom line represents the elements of the marketing mix over which a company has control. These elements are manipulated in such a way as to best suit customers’ needs and tastes and this represents an operational flow where things have to be done in order to arrive at the optimum marketing mix. Remember that there are sub-mixes within the individual elements of the marketing mix. This bottom line also equates to the earlier notion of the four Ps, or rather the five Ps, as personal selling has been separated from promotion and becomes ‘people’.

The top line represents an information flow from the market to the firm. Data is collected through discussions and interviews with customers on and informal and formal basis. A whole range of techniques is available for this process and this is collectively termed marketing research. A more advanced strategic model that incorporates marketing research is embodied in a marketing information system (MkIS) and this is dealt with in a later lecture. In addition, data is collected from customers in relation to their likely future purchases and this is known as sales forecasting. Another raft of techniques is available for the subject of sales forecasting which lies at the very heart of marketing and business planning.

Thus we begin to see how marketing orientation works. Customers are the starting point and sales forecasting and marketing research determine their likely requirements and tastes. This information is processed internally within the organization and products and promotional messages are devised to suit customers’ needs, to allay their purchasing fears and to reinforce their expectations. Goods and services are supplied as and when required in the quantities needed and when they are requested - not later and not earlier. This latter point is reinforced, because modern marketing dictates that customers demand their goods as needed and this lies at the base of the latest notion of ‘just-in-time’ manufacturing which relates to raw materials and components. This is covered later in the text and it has tremendous implications for modern marketing.

The place of marketing in the modern organization

At a more traditional level, marketing is often found alongside other major functions within business and Figure 4 illustrates this relationship. This organisation chart does not, of course, refer to all business organisations and to a large extent it is the ‘ideal’ theoretical structure. Companies tend to evolve and develop in a non-textbook manner, and in practice many different organisation charts can be found as a result of all kinds of illogicalities that defy modern management thinking. Such illogical functions might well exist because of the forceful personality of a head of department, whose department has assumed a position of power within an organisation through his or her own personal disposition, and there is no managerial justification for putting it in such a position of power in line management. An example could be the material control department that might report direct to the managing director rather than being a sub-function within the purchasing department. Another example, quite commonly

found, is a situation where a sales director can be found in the line alongside a marketing director. In such a situation, it might be a forceful sales director in a sales driven organisation who will not assume the responsibility for marketing, but who is too powerful to put into a subordinate position under marketing.

The proximate macro-environment

The term macro-environment denotes all forces and agencies external to the marketing firm itself. Some of these forces and agencies will be closer to the operation of the firm than others, e.g. a firm’s suppliers, agents, distributors and other distributive intermediaries and competing firms. These ‘closer’ external constituents are often collectively referred to as the firm’s proximate macro-environment to distinguish them from the wider external forces found, for example, in the legal, cultural, economic and technological sub-environments.

This consists of people, organizations and forces within the firm’s immediate external environment. Of particular importance to marketing firms are the sub-environments of suppliers, competitors and distributors (intermediaries). These sub-environments can each have a significant effect upon the marketing firm.

The supplier environment

This consists of other business firms or individuals who provide the marketing firm with raw materials, product constituents, services or, in the case of retailing firms, possibly the finished goods themselves. Firms, whether they be retailers or manufacturers, will often depend on numerous suppliers. The buyer/supplier relationship is one of mutual economic interdependence, both parties relying on the other for their commercial well-being. Although both parties are seeking stability and security from their relationship, factors in the supplier environment are subject to change, such as industrial disputes which will affect delivery of materials to the buying company, or a sudden increase in raw material prices which forces suppliers to raise their prices. Whatever the product or service being purchased by the marketing firm, unexpected developments in the supplier environment can have an immediate and potentially serious effect on the firm’s commercial operations. Because of this, marketing management, by means of the marketing intelligence component of its marketing information system, should continually monitor changes and potential changes in the supplier environment and have contingency plans ready to deal with potentially adverse developments.

The distributive environment

Much reliance is placed on marketing intermediaries such as wholesalers, factors, agents and distributors to ensure that their products reach the final consumer. To a casual observer, it may seem that the conventional method of distribution in any particular industry is relatively static. This is because changes in the distributive environment occur relatively slowly, and there is therefore a danger of marketing firms failing to appreciate the commercial significance of cumulative change. Existing channels may be declining in popularity over time, while new channels may be developing unnoticed by the marketing firm. Nowhere has this ‘creeping’ change been more apparent over recent years in the UK and other parts of the world than in the

retailing of fast moving consumer goods (fmcg). In the 1960s well over half of all fmcg retail trade was accounted for in the independent sector plus a further large proportion to the Co-operative Societies. Nowadays, the sector represented by the larger food multiples has well in excess of this proportion.

The competitive environment

Management must be alert to the potential threat of other companies marketing similar and substitute product whether they are of domestic or foreign origin. In some industries there may be numerous world-wide manufacturers posing a potential competitive threat and in others there may only be a few. Whatever the type, size and composition of the industry, it is essential that marketing management has a full understanding of competitive forces. Companies need to establish exactly who their competitors are and the benefits they are offering to the market. Armed with this knowledge, the company will have a greater opportunity to compete effectively.

The wider macro-environment

Changes in the wider macro-environment may not be as close to the marketing firm’s day-to-day operations, but they are just as important. The main factors making up these wider macro-environmental forces fall into four groups.

1. Political and legal factors2. Economic factors3. Social and cultural factors4. Technological factors

(Often referred to as the ‘PEST’ factors in the marketing analytical context, a useful aide-memoire, although in some texts it is sometimes referred to as ‘STEP’). To this is sometimes added ‘Competitive factors’ and although ‘PEST’ analysis relates to a specific organization ‘Competitive factors’ tend to be subsumed under ‘Economic factors’. Such a PEST analysis means listing all possible points that may affect the organization under review under each of the P.E.S.T. headings. Recently, some texts have added ‘L’ (standing for legal) and ‘E’ (standing for environmental) to this classification, making the acronym ‘PESTLE’. Even more recently, some writers have incorporated yet another ‘E’ (standing for ecological) with the new acronym ‘STEEPLE’.

The political and legal environment

To many companies, domestic political considerations are likely to be of prime concern. However, firms involved in international operations are faced with the additional dimension of international political developments. Many firms export and may have joint ventures or subsidiary companies abroad. In many countries, particularly those in the so-called ‘Third World’ or more latterly termed ‘Developing Nations’, the domestic political and economic situation is usually less stable than in the UK. Marketing firms operating in such volatile conditions clearly have to monitor the local political situation very carefully.

Many of the legal, economic and social developments, in our own society and in others, are the direct result of political decisions put into practice, for example the privatization of state industries or the control of inflation.

In summary, whatever industry the marketing firm is involved in, changes in the political and legal environments at both the domestic and international levels can affect the company and therefore needs to be fully understood.

Other macro-environmental factors

The macro-environmental factors discussed are not intended to be an exhaustive list, but merely to demonstrate the main areas of environmental change. Other sub-environments may be important to marketing management, for example, in some countries the religious environment may pose an important source of opportunities and threats for firms. In the UK, demographic changes are considered important by a number of firms.

In general, the UK population has been stable at approximately 56 million for a number of years, but the birth rate is falling, while people are living longer. Firms that produce goods and services suitable for babies and small children (e.g. Mothercare) have seen their traditional markets remain static or decline slightly. Such companies have tended to diversify, offering products targeted at older age groups. A larger older sector of the population offers opportunities for firms to produce goods and services to satisfy their particular needs. The over-55 age group is the modern marketer’s current major opportunity. In all advanced economies such as the Australia, UK and USA it is this age group that has the largest disposable income, and special products and services such as holidays and pension-related financial services are being marketed to this sector.

Summary

The company’s micro-environment has been discussed in terms of variables over which it has control relevant to the marketing mix. This led to a description of marketing and its various sub-divisions including information from the market-place in terms of forecasting and marketing research. Marketing was then looked at alongside other business functions and its place in line management was noted.

The company’s proximate macro-environment was then examined under supplier, distributive and competitive environment environments and finally the wider macro-environment was examined under the headings: political and legal, economic, socio-cultural and technological environments.

This can best be summed up by looking what has been covered in terms of a number of layers in the environment from customers, to marketing and resources of the company, to the organisation’s proximate macro-environment and finally to its wider macro-environment.

Q.6 Consider the company, Maruthi Udyog Limited. Elaborate on the company’s marketing mix and give examples related to the 4 P’s.

Ans.

The marketing mix is a business tool used in marketing products. The marketing mix is often crucial when determining a product or brand's unique selling point (the unique quality that differentiates a product from its competitors), and is often synonymous with the 'four Ps': 'price', 'product', 'promotion', and 'place'. However, in recent times, the 'four Ps' have been expanded to the 'seven Ps' with the addition of 'process', 'physical evidence' and 'people'.

The term "marketing mix" was coined in 1953 by Neil Borden in his American Marketing Association presidential address. However, this was actually a reformulation of an earlier idea by his associate, James Culliton, who in 1948 described the role of the marketing manager as a "mixer of ingredients", who sometimes follows recipes prepared by others, sometimes prepares his own recipe as he goes along, sometimes adapts a recipe from immediately available ingredients, and at other times invents new ingredients no one else has tried.

The term became popular in the article written by Neil Borden called “The Concept of the Marketing Mix.” He started teaching the term after he learned about it with an associate.

The prominent marketer, E. Jerome McCarthy, proposed a Four 'P's classification in 1960, which has since been widely used by marketers throughout the world. Since consumerism appeared, Four 'C's theory has been born to Japan and the United States late in the 1970s.

Four 'P's

The 'four Ps' consist of the following:

Product - A product is seen as an item that satisfies what a consumer needs or wants. It is a tangible good or an intangible service. Intangible products are service based like the tourism industry & the hotel industry or codes-based products like cellphone load and credits. Tangible products are those that can be felt physically. Typical examples of mass-produced, tangible objects are the motor car and the disposable razor. A less obvious but ubiquitous mass produced service is a computer operating system. [1]

Every product is subject to a life-cycle including a growth phase followed by a maturity phase and finally an eventual period of decline as sales falls. Marketers must do careful research on how long the life cycle of the product they are marketing is likely to be and focus their attention on different challenges that arise as the product moves through each stage.The marketer must also consider the product mix. Marketers can expand the current product mix by increasing a certain product line's depth or by increase the number of

product lines. Marketers should consider how to position the product, how to exploit the brand, how to exploit the company's resources and how to configure the product mix so that each product complements the other. The marketer must also consider product development strategies.

Price – The price is the amount a customer pays for the product. The price is very important as it determines the company's profit and hence, survival. Adjusting the price has a profound impact on the marketing strategy, and depending on the price elasticity of the product, often, it will affect the demand and sales as well. The marketer should set a price that complements the other elements of the marketing mix.

When setting a price, the marketer must be aware of the customer perceived value for the product. Three basic pricing strategies are: market skimming pricing, marketing penetration pricing and neutral pricing. The 'reference value' (where the consumer refers to the prices of competing products) and the 'differential value' (the consumer's view of this product's attributes versus the attributes of other products) must be taken into account.

Promotion - represents all of the methods of communication that a marketer may use to provide information to different parties about the product. Promotion comprises elements such as: advertising, public relations, personal selling and sales promotion.

Advertising covers any communication that is paid for, from cinema commercials, radio and Internet advertisements through print media and billboards. Public relations is where the communication is not directly paid for and includes press releases, sponsorship deals, exhibitions, conferences, seminars or trade fairs and events. Word-of-mouth is any apparently informal communication about the product by ordinary individuals, satisfied customers or people specifically engaged to create word of mouth momentum. Sales staff often plays an important role in word of mouth and public relations (see 'product' above).

Place - refers to providing the product at a place which is convenient for consumers to access. Place is synonymous with distribution. Various strategies such as intensive distribution, selective distribution, exclusive distribution and franchising can be used by the marketer to complement the other aspects of the marketing mix.

4 Ps of marketing

Marketing decision variables are those variables under the firm's control that can affect the level of demand for the firm's products. They are distinguished from environmental and competitive action variables that are not totally and directly under the firm's control.

The four marketing decision variables are:

Price variables

Allowances and deals Distribution and retailer mark-ups Discount structure

Product variables

Quality Models and sizes Packaging Brands Service

Promotion variables

Advertising Sales promotion Personal selling Publicity

Place variables

Channels of distribution Outlet location Sales territories Warehousing system

 

Set 2

Q1: Explain the following: a) Product mix dimensions b) Product line strategies.

Ans:

Product mix dimensions

The number of product lines and items offered by marketer to the consumers.

A company’s product mix has four different dimensions. They are product mix width, product mix length, and product mix depth and product mix consistency.

1. Product mix width: The total number of product lines that company offers to the consumers.2. Product mix length: The total number of items that company carries within its product line.3. Product line depth: The number of versions offered of each product in the line.4. Product mix consistency: If company’s product lines usage, production and marketing are

related, then product mix is consistent, else it is unrelated.          

Product Line Strategies

Product line: The group of related products which uses same marketing efforts to reach the consumer.

The product line identifies profitable and unprofitable products and helps in allocation of resources according to that. The product line understanding helps the marketer to take line extension, line pruning and line filling strategies of the company.Pidilite Industries, the adhesives and chemical company, have the following group of related products (or product lines) in consumer and business markets.

Consumer market.

1. Adhesives and sealants.2. Art materials and stationeries.3. Construction chemicals.4. Automotive chemicals5. Fabric care

Business market

1. Industrial adhesives.

2. Textile chemicals.3. Organic pigment powders.4. Industrial resins and5. Leather chemicals.

Product Line Decisions:The major product line decisions area. Product line lengthb. Product line stretchingc. Product line fillingd. Product line pruning

a. Product line length: The number of items in the product line is called the product line length. Company should decide whether it requires longer chain or shorter length. The decision depends upon the objective of the company, competitive environment and profitability. If the chain is short company can add new products and if it is lengthy company can reduce the number of products. For example, Pidilite’s adhesives and sealants line has following 11 items in the product line. Hence the length of product line is 11

 

b. Product line stretching: Company lengthens its product line either by stretching upwards or downwards or both ways. Line stretching decision depends on three situations -  i. Company which operates in high end market may come up with mid class or low class targeted products.ii. The company which operates in lower end of

market may come up with high end market products.iii. If the company operates in mid segment and comes out with low end product as well as high end product then it is stretching both ways.

c. Product line filling: Adding more items in the present product line. For example, in the year 2000 Maruti Suzuki launched Alto. This product was between Maruti 800 and Maruti Zen. Here company was trying to fill the gap existing in the segment by introducing ALTO, i.e. line filling.

d. Product line pruning: Removing the unprofitable products from the product line. Toyota Kirloskar phased out their well known brand Quails when they thought the brand was not adding value to the product line.Q2: a) Assess the factors that are involved in setting up a distribution channel. b) Give a note on Retailing..

1. White Glue 2. Paper Glue

3. Glue Stick 4. Instant Adhesive

5. Epoxy Putty 6. Epoxy Adhesive

7. PVC Insulation Tape 8. Silicone Sealants

9. Contact Glue 10. All Purpose Glue

11. Maintenance Spray

  Ans:

Assess the factors that are involved in setting up a distribution channel

Marketers should consider various factors before deciding the particular type of channel. It may be organizational or competitive factors. The type of goods to be transported and stored will decide the length and intensity of channel. To decide on the particular channels, marketer will have to take into account the following factors.

1. Understanding the customer profile

Purchasing habits differ from individual to individual. Individuals who face shortage of time would like to purchase on the net (direct channel) and those who have abundant time would like to go through the shopping experience. Some of them would like to have variety of goods, while others want unique or specialized products. Hence marketers should understand who are his customers? How do they purchase and how often they purchase? For example, customers don’t like to travel half a kilometre to purchase a shampoo sachet, but they don’t mind travelling two kilometres while purchasing durable goods.

2. Determine the objectives on which channel is to be developed

a. Reach: Company would like to make the goods available in most of the retail outlets. So it, will adopt intensive distribution channel.

b. Profitability: Company wants to reduce the cost in the channels and enhance their profitability. It will restructure the channel to optimum level so that it can reduce the cost and increase the profit.

c. Differentiation: Company positions their products differently. When most of the industry players follow conventional system, company goes with new format of channels. For example, all computer manufacturers were adopting dealer-retailer channel to sell their products, but Dell started selling its product on the internet.

3. Identify type of channel members:

Once the objectives are set on the basis of company’s policies, it will analyze which types of channels are most suitable. Merchants, agents and resellers are some intermediaries involved in the distribution. Merchants are those who buy the product, take title and resell the merchandise. Agents will find the customers, negotiate with them, but do not take the title of the product.

Facilitators are the people who aid the distribution but do not negotiate or take the title of the product.

4. Determining intensity of distribution: 

Intensity of distribution means how many middlemen will be used at the wholesale and retail levels in a particular territory. If the number of intermediaries is more, then the cost of the channel will increase. However, if the number of intermediaries is less, then company will not be able to meet all target customers. Therefore company should adopt optimum number of intermediaries. On the basis of how many intermediaries are required, company can adopt any one of the following strategies.

a. Intensive distribution: A strategy in which company stocks goods in more number of outlets. The intention is to make the goods available near to the customer. For example, you can find Parle-G glucose biscuits available in almost all the retail outlets in rural and urban areas.

b. Selective distribution: A strategy in which company stocks goods in limited number of retail outlets. For example, televisions are sold only in selected retail outlets. TVs cannot be sold like toothpaste. Onida TVs are available in electronic retail shops like Viveks, Girias, Next, E-zone etc…

c. Exclusive distribution: In this type of channel format, marketer gives only a limited number of dealers the exclusive right to distribute its products in their territories. For example, a Kaya skin care solution of Marico is marketed through exclusive distribution.

5. Assigning the responsibilities to channel members.

 Company should define the territory in which the channel member should operate, at what price he should sell, services he should perform, and how he should sell.

6. Selecting the criteria to evaluate the channel member: 

Company may have different types of channel alternatives. It would like to choose any one of the alternatives, which meets its objectives. Channels can be evaluated in the design phase by the method called SCPCA.

a. Sales(S): The ability of each channel member to generate the sales for company in a given period.

b. Cost(C): How much cost each channel alternative incurs? Which one of the alternatives provides the optimum solution?

c. Profitability (P): Various channel alternatives available to the company and their profitability shall be compared. Channel with better profitability shall be selected.

d. Control (C): Every company would like to have better control over its channel members. Alternative channels can be evaluated on the basis of how much control each channel member desires. And how much control the company is willing to provide.

e. Adaptability (A): Marketing is a dynamic world. Competition exerts pressure on companies to relook at their practices and supply chain continuously. The channel alternatives should be flexible enough to meet the changing requirements. Whichever channel alternative meets such objectives shall be selected. 

Give a note on Retailing:-

 Retail sector has witnessed tremendous growth in the last few years. The major factors which drive the retail boom are change in consumer profile and demographics, increase in the number of international brands available in the Indian market, economic implications of the government, increasing urbanization, credit availability, improvement in the infrastructure, increasing investments in technology and real estate. The Indian retail market, which is the fifth largest retail destination globally, according to industry estimates is estimated to grow from US$ 330 billion in 2007 to US$ 427 billion by 2010 and US$ 637 billion by 2015. Simultaneously, organized retail which presently accounts for 4 per cent of the total market is likely to increase its share to 22 per cent by 2010.

As per Associated Chambers of Commerce and Industry of India (ASSOCHAM), the overall retail market is expected to grow by 36%. The organized sector is expected to register growth amounting to Rs 150 billion by 2008. Retail is amongst the fastest growing sectors in the country and India ranks 1st, ahead of Russia, in terms of emerging markets’ potential in retail.

Characteristics of retailing

i. Direct interaction with customers. Retailer is the final link between company and customer. Retailer understands the need of the customer and provides the proper solution to him. For example, neighbourhood grocery store person knows his customer profile better. He reminds the customer of what to purchase and provides credit.

ii. Purchased in small quantity: Customer purchases small quantity of merchandise at the retail store. Even if customer purchases less quantity he will purchase it frequently. This has led to better relationship between customer and retailer.

iii. Tool of marketing communication: Companies use retailer location for point of purchase displays. They also encourage retailer to promote the products through word of mouth communication.

Functions of retailing

i. Sorting: Retailers arrange the items in proper order so that customer can easily identify the goods or services that he needs.

ii. Breaking bulk: The process of unpacking big packets into small packets. Retailer will perform this function as customer may not be able to purchase large quantity of goods and services.

iii. Holding stock: Retailer works as storage facility to organizations. Retailer holds inventory to meet the day to day needs of consumer.

iv. Channels of communication: Retailer promotes the company product through word of mouth communication. The retailer location is also used for point of purchase display.

v. Transportation: Retailer undertakes door delivery order in case of durable goods. This feature is now adopted by the small grocery stores also.

Type of retailing

A. Store retailing: The mode of retailing where a store is essential in a particular location to do business. Store retailing can be performed in different formats. They are

1) Specialty store: The stores carry large amount of merchandise but in limited product lines like Textile store or furniture store. For example, Tanishq, jewelery retail store.

2) Department store: In this retail format, apparel, home furnishing and consumables goods and services are sold. Each of the formats is considered as a different department and managed in the retail store. For example, Shoppers Stop of Raheja group.

3) Supermarkets: According to Philip Kotler supermarkets are a relatively large, low cost, low margin, high volume, self service operation designed to serve the consumer’s total needs for food and household products. For example, Food World of RPG group.

4) Convenience store: These stores are very near to customer residence; usually carry or hold day to day products of high turnover at premium price. For example, Reliance Fresh

5) Discount store: These stores sell products at low prices with low margin. The store achieves their profit by generating high volumes. Subhiksha, a south India based retailer follows this format.

6) Off price retailers: This type of retailer buys the goods at less than wholesale prices. These products are sold at lesser than retail prices. For example, factory outlets in Marathahalli, Bangalore.

7) Super stores: These are very large stores where customer can purchase food and non food products. The super store includes category killers that carry large merchandise in a particular category. For example, Nalli sarees which carries a large variety of sarees in their stores. Another type of super store format which exists in India is Hypermarkets. These retail outlets have huge space and carry large merchandise. For example, Reliance Mart in Ahmadabad.

B. Non store retailing:

The mode of retailing where a company uses electronic media or direct selling medium to sell their products. For example, direct selling, Telemarketing, Automatic vending, online retailing and direct marketing.

Q3: Geo Ad Agency has many corporate as their clients. Due to lack of resources, it is planning to cut down work and reject certain clients. Further, they want to establish a concrete system in communication development and ad structure. What would be your advice to Geo Ad agency in this aspect?

Ans:

Geo Ad Agency can follow following points to establish a concrete system in communication development.

These points also help Geo Ad agency to sustain their clients:

Preparing target customer profile:

Effective communication starts with identifying the target customer to whom the communication is developed. In this stage company prepares target customer profile.       

 Identifying promotion objectives:

Target customer profile provides inputs about his/her readiness to purchase the product. Customer may be in any of the six stages of hierarchy of effects. The six stages are awareness, knowledge, liking, preference, conviction and purchase. Every company will like to bring their customers to the purchase stage from other five stages. Therefore it creates different promotion program at different stage. To make it clearer, Company first creates awareness about the product, educate them about the advantages, induce them to choose the brand, stimulates and monitors that customer purchases the product. 

Designing a message:

After deciding the communication objectives, Marketer turns to develop right message which should create attention, interest, desire or action (AIDA) by the customer. Before deciding what should be there in the message, we will have to understand AIDA model in detail. The main objective of any message is to meet the AIDA model although the message framed will be subject to product type/category, ad budget and creativity skills of individuals.

I. AIDA model:

1. Attention: The marketing communication should generate attention towards the product. In this stage customer is having the need; organization should provide solution from their communication. For example, when advertisers use a popular film star or a celebrity to promote a perfume brand or even a soap or a toothpaste, it will immediately catch the audience’s attention.

2. Interest: Once the customer provides enough attention towards the communication, organization should stimulate it to create interest. For example, if celebrities are used to endorse products, audience must be curious enough to know what they are saying about that particular product.

3. Desire: The interest created should be forced in the customer mind so that he will develop desire towards the product. For example, when people have seen the ad and show interest, next thing would be to create a desire for that product. People should have the willingness to buy the product and unless they don’t desire it, they will not be eager to buy the same.

4. Action: Strong desires should be turned into action. Hence company should provide the advantages of purchasing of the product in their communication messages. For example, it is very difficult for the Insurance companies to grab the attention of people towards insurance products, create interest and desire as to make a person buy the same. So, it’s a challenge to the marketer to develop such a message that immediately gets the attention and make a person to go for it. For example, it is easy to catch people’s attention towards ice-creams so that they will have interest and desire to taste it and eventually buy it.

II. Deciding the message content.

Message content must have any one of the following appeals

1. Emotional appeal: Positive emotional appeal or negative emotional appeals are strong tools used to intensify the purchasing activity of the customer. Positive emotions like love, pride, joy and humour are used in the message

2. The negative emotions like fear guilt and shame are also used in the advertisement to attract the customer.

3. Rational appeals highlight on the desired benefits about the products. They highlight quality, economy value or performance of the product.

4. Moral appeal: These are concerned towards public health or environment or social responsibility. For example, Shell lubricants show its commitment towards environment in their advertisements.

III. Message format:

The Right Message Format for the Right Marketing Strategy should follow. Depending on message marketing is naturally going to have to change. Shorter messages require different types of advertisements than longer ones.

Selecting the channels of communications

The communicator may use company sales people, reference groups, blogs, RSS, webinar, online communities and social networking sites to promote their products. These media are called as personal communication channels. The word of mouth campaigns buzz marketing and viral marketing are some examples of personal communication channels.

Selecting the message sourceMessages communicated by the celebrities and proper sources have high credibility among the target consumers. Many companies use well known actors and actresses, cricket players, and even cartoon characters to promote their advertisements.

Target Customer FeedbackThe communicator collects the feedback on the promotion campaign to assess how many of target customers are able to see, hear or read the message. This stage helps communicator to understand how many of target customers actually able to recall the message? And among them how many of them really purchased it. Some companies go further and ask the customer to provide suggestion to improve the promotion campaign.

Q4: Discuss the objectives of training and training programme along with its significance.

Answer:

Training

Training is a continuation of selection. Having selected the salesmen, there are two options. They can be sent to the field directly with samples, order books etc., and/or they can be sent for training programme. Some people think that salesmanship is born, but there are no born salesmen like there are no born doctors, lawyer, engineers, teachers etc. However, all these people need training to call them qualified, and so also is the case with salespersons. A person may have interest in the profession. Thiess interest can be fully developed, through proper training. One attains perfection, self-development etc., through training.

Training means the process of perfecting the salespersons for their work. Training programmes are organized procedures or methods through which knowledge as well as skill, for a definite purpose, is acquired. By training, one can increase knowledge in a particular field. The salesmanship is not born but can be made effective through training.

Significance of Training: The present era of marketing world is full of stiff and cut-throat competition. The world is dynamic and not static. Customers are more benefit-oriented. Producers, in order to meet the ever-changing demands of the consumers, produce new products, new devices, and products with multiple uses and so on. Thus, training or repeated training is essential to keep the salesmen, with up-to-date knowledge, in respect of new or developed goods. Training gives scope for improvement.

Objectives of Training:

The objectives are summed up below:

1. To facilitate the salespersons to acquire the techniques and principles of salesmanship, process of sales, canvassing etc.

2. To bring down the labor turnover in the sales force.

3. To facilitate better sales performance.

4. To improve the relations with the customers.

5. To increase the efficiency of sales personnel.

6. To keep the salesperson informed about the products, market, competitors etc., to face different situations.

7. To lower the selling expense so as to increase the profits.

8. To maintain sound relations between employer and employee.

9. To develop better knowledge, and the ways and means to resist all undesirable situations.

Training Programme

A firm should chalk out a programme for sales training. The training is based on the nature of the job and the products to be sold. A planned training programme should function with the following ideas or principles, often referred to as ACMEE.

A: Aim of TrainingC: Content of TrainingM: Method of TrainingE: Execution of TrainingE: Evaluation.

1. Aim of Training: The whole idea behind the training is to make a recruit a good salesperson.

2. Content of Training: No hard and fast rules can be laid down as to the contents of training. The content of the training programme relates to the subject-matter of training.

3. Method of TrainingFor imparting training to the salespersons, different methods are being used. Broadly, these methods may be divided into two:

4. Execution of Training Once sales person done with training he/she should send to actual market to sale the project. A periodic evolution is required to observe of sales person’s performance, based on that it can be decided if sales parson needs more training.

 5. Evaluation of TrainingHaving trained the salespersons, the marketing manager must evaluate the usefulness or effectiveness of training, individually and collectively on the basis of the performance of the sales personnel. Money, effort and time have been spent on training. Therefore, it is natural to expect returns. Evaluation can be made on the basis of performance of sales executive in terms of sales volume, sales profitability, order-size, expenses etc., between, before and after training periods.

Q5 : Management of Sai Systems Pvt. Ltd. has decided to enter international marketing scenario. What methods are applicable to the company to enter international markets and what should be the approach?

Ans: –

Sai Systems Pvt. Ltd. should follow an International Market Entry Strategies:

To enter  international marketing  Sai Systems Pvt. Ltd. know the answers for some basic questions like –

a. In how many countries would the company like to operate?

b. What are the types of countries it plans to enter?

That’s why companies evaluate each country against the market size, market growth, and cost of doing business, competitive advantage and risk level.Once the market is found to be attractive, Sai Systems Pvt. Ltd. should decide how to enter this market. Sai Systems Pvt. Ltd. can enter the international market by adopting any one of the following strategies.

They area. Exportingb. Licensingc. Contract manufacturingd. Management contracte. Joint ownershipf. Direct investment

Exporting is the technique of selling the goods produced in the domestic country in a foreign country with some modifications. For example, Gokaldas textiles export the cloth to different countries from India. Exporting may be indirect or direct. In case of indirect exporting, company works with independent international marketing intermediaries. This is cost effective and less risky too. Direct exporting is the technique in which organization exports the goods on its own by taking all the risks. Maruti Udyog Limited, India’s leading car manufacturer exports its cars on its own. Company can also set up overseas branches to sell their products. Adani Exports, another leading exporter from India has international office in Singapore.

Licensing: According to Philip Kotler, licensing is a method of entering a foreign market in which the company enters into an agreement with a license in the foreign market, offering the right to use a manufacturing process, trademark, patent, or other item of value for a fee or royalty. For example, Torrent Pharmaceuticals has license to sell the cardiovascular drugs of Chinese manufacturer Tasly. Licensing may cause some problems to the parent company. Licensee may violate the agreement and can use the technology of the parent company.

Contract manufacturing: Company enters the international market with a tie up between manufacturer to produce the product or the service. For example, Gigabyte Technology has contract manufacturing agreement with D- link India to produce and sell their mother boards.

Management contracting: In this case, a company enters the international market by providing the knowhow of the product to the domestic manufacturer. The capital, marketing and other activities are carried out by the local manufacturer.

Joint ownership: A form of joint venture in which an international company invests equally with a domestic manufacturer. Therefore it also has equal right in the controlling operations. For example, Barbara, a lingerie manufacturer has joint venture with Gokaldas Images in India.

Direct Investment: In this method of international market entry, Company invests in manufacturing or assembling. The company may enjoy the low cost advantages of that country. Many manufacturing firms invested directly in the Chinese market to get its low cost advantage. Some governments provide incentives and tax benefits to the company which manufactures the product in their country.

Approaches to International Marketing

The three common approaches used in the international market are -

a. Domestic market extension approach.b. Multi domestic market orientation.c. Global market orientation.

Domestic market extension approach: Companies that adopt this strategy think international markets are secondary to its domestic markets. For example, HSBC advertises its banking services with a tag line “the world’s local bank”.Multi domestic market orientation: In the international market each country has its uniqueness. Their preference varies. The consumer profile is different from domestic operation. Companies develop different market plans for such markets. For example, in France, men use more cosmetics than the women, whereas in India women use more cosmetics than men. A cosmetics company should change the product positioning differently.Global market orientation: In this approach, company thinks that products’ needs are universal in nature irrespective of country where they work. Here company tries to standardize their products or services. For example, Sony Walkman is same across the world. The product information brochure contains explanation in different languages of different countries. The final product is same in all the countries.

Q6 : a) Give a note on Product mix pricing strategies. b) What is Brand development? How is it done?

Ans:

Note on Product mix pricing strategies

The product mix is the collection of products and services that a company chooses to offer its market. When the product is a part of product-mix, there are five kinds of strategies involved

1. Product Line pricing:

Strategy of setting the price for entire product line. Marketer differentiates the price according to the range of products, i.e. suppose the company is having three products in low, middle and high end segment and prices the three products say at Rs 10 Rs 20 and Rs 30 respectively.

The three levels of differentiation create three price points in the mind of consumer. The task of marketer is to establish the perceived quality among the three segments. If the customers do not find much difference between the three brands, he/she may opt for low end products.

2. Optional Product pricing:

This strategy is used to set the price of optional or accessory products along with a main product.Organizations separate these products from main product so that customer should not perceive products are costly. Once the customer comes to the show room, organization explains the advantages of buying these accessory products.

3. Captive product pricing:

Setting a price for a product that must be used along with a main product. For example, Gillette sells low priced razors but make money on the replacement cartridges.

4. By-product pricing: 

It is determining the price for by-products in order to make the main product’s price more attractive. For example, L.T. Overseas, manufacturers of Dawaat basmati rice, found that processing of rice results in two by-products i.e. rice husk and rice brain oil. If the company sells husk and brain oil to other consumers, then company is adopting by-product pricing.

5. Product bundle pricing:

It is offering companies several products together as a bundle at the reduced price. This strategy helps companies to generate more volume, get rid of the unused products and attract the price

conscious consumer. This also helps in locking the customer from purchasing the competitors’ products. For example, Anchor toothpaste and brush are offered together at lower prices.  

Brand development

Company can develop the brand on the basis of product category and brand name. Some of the different strategies adopted by companies to develop the brands are as follows:

1. Line extension: Company uses its well known brand name to introduce additional items in a given product category such as new forms, flavours, ingredients or package sizes.

For example, Karnataka Milk Federation, uses its top brand name Nandini, to introduce new items like toned milk, full cream milk , curd and milk powder.It is less risky and requires fewer investments to introduce the product. In the above example Nandini used the extension to meet the excess capacity that it has. The milk procurement was more than the demand from the customer. Hence it started producing the milk powder. But all the products introduced need not to be successful in the market. In case of KMF, Nandini ice creams didn’t click in the market. Another risk of line extension is brand cannibalization, i.e. company’s brand/items compete with each other.

2. Brand extension: A strategy in which company uses one of its familiar brand names for new product category’s items. For example, United Breweries (UB) Limited group used its flagship brand Kingfisher to different categories. Kingfisher was originally a beer brand extended to airlines.Brand extension gives instant recognition to the brand. In the above example, people required very little time to know Kingfisher airline brand, because parent brand was very well known. Brand extension may hurt the parent brand reputation in the market if it fails.

3. Multi brands: The technique of introducing the product or items in existing product category with a new brand name.For example, Hindustan Unilever uses different brand names for their home and personal care category. The above example shows us that HUL have Breeze, Dove, Liril, Lux, Lifebuoy and Pears in the bath soap segment itself. It helps the company to come out with new features in the product or product category. Organizations adopt this strategy to avoid brand cannibalization in the given category. The major disadvantage of this strategy is that none of the brands will enjoy major market share and result in lesser profitability.

4. New brands: The strategy indicates coming out with new brands for new category products. In this strategy, company believes that existing brands cannot be extended to the new category. The new brand strategy requires huge resources to build it. The new category, if it already has some brands of other companies, investment requirement will go up. For example, Hindustan Unilever launched Pure-It in the water purifier category. The category and brand are new to the company.

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