# data[].attributes.body
4.1 The role of marketing
Marketing

Addresses people’s needs and wants and influences target consumers to buy a specific product instead of other competing products

A management process involved in identifying, anticipating, and satisfying consumer requirements profitably

It is about satisfying consumer needs and wants through exchange

It is a research based process of getting customers interested in a product through the management of the 4 (or 7) P’s

Marketing goods/products versus services

Goods/Products: 4Ps

Product

Place

Price

Promotion

Services: 7Ps

4Ps

People (frontline staff appearance, skill, charm, helpfulness)

Processes (time, ease, accessibility, payment, aftersales)

Physical evidence (facilities, cleanliness, design, atmosphere, peripheral products)

Has a product oriented approach

Product oriented vs. market oriented marketing

Product Oriented Marketing

Business develops products based on what it is good at making

Mainly for products that are high tech, high quality, and high differentiation

Market Oriented Marketing

Business develops products based on the market

Geared to mass consumer markets using expensive market research, but is more flexible and less risky

Flexible: Adapts more easily as this approach is sensitive to market trends, such as habits, needs, lifestyle, and taste

Less Risky: More assurance of success since the product meets customer requirements

Social vs. commercial marketing

Social marketing

Seeks to influence behavior to benefit society as a whole by selling a desired behavior, thus satisfying societal needs

Using social marketing (i.e. commercials, etc.) to bring about social change

Celebrity endorser

Media coverage

Giving out cards

Workshops/modules

Movies

Signature campaign – Pledge board

Slogans

Dropboxes

Email/hotline/customer service

Commercial marketing

Seeks to satisfy customers by selling a particular needed product or service, thus satisfying individual needs

Delivering what people already want instead of changing what people want

Market

A place or process which allows suppliers and customers to exchange physical goods, services, information, etc..

Kinds of Markets

Consumer – General public

Industrial/Commercial – Businesses and governments

Markets size

Can be measured through the number of potential customers, the total volume of sales achieved by the numerous businesses active in the market, or the value of said sales

Helps businesses assess whether a particular market is worth participating in due its number of potential customers and the barriers to entry

Market growth

Rate the size of a market increases/decreases over a period of time

Measured by an increase in the total value or volume of sales in a market

Helps businesses assess whether a particular market is worth entering due to its rate of growth or contraction

Market share

The percentage of all the sales in a particular market that are held by a business, and can be measured by the volume or value of the sales

Importance

Helps measure a firm’s performance and market position against other competitors

Might indicate that a business is a market leader

Can influence its competitors to follow the leader’s model

Can influence the leader to continually enact strategies in order to maintain its position

Can indicate the degree of success or failure of a business’ current strategies

Can lower prices or maintain higher profit margins as compared to competitors due to better economies of scale

Ways to increase market share

Brand promotion

Improved customer service

Copyright and patent filing

Product development

Limitations

May be difficult to identify the most important market share value for products that cross into several markets

Cannot be used as an absolute measure of a firm’s success or performance

Firms can be intentionally lowering their market share as a result of its more stringent client selection

A decline in a firm’s market share can be a result of a new entrant and not necessarily as a result of lowered sales

Should mainly be compared against the most similar and closest of competitors, and not necessarily the market as a whole

Marketing objectives

Common targets that marketing activities will achieve

Market share/leadership

Acquiring a greater/bigger market share and volume by improving sales/revenues (e.g. expansion, globalization, franchising, aggressive advertising, further market penetration, etc.)

Customer service

Providing loyalty programs, after sales services/policies through quality staff training

Brand building

Improving the image of the company through CSR, sponsorships, publicity, packaging, etc.

Growth strategies

Innovation

Launching a totally original or new product into the market (attain the first-mover advantage)

Positioning

Involves expanding or modifying product line/mix to enhance or change image.

Successful marketing objectives are

Aligned with business’ overall main vision-mission-goals (or VMGs)

Appropriate to organization’s size, financial capacity and production efficiency

Mindful of competition, external (PEST) factors and social issues

4.2 Marketing Planning
Marketing mix

Combination of key decisions that must be taken in the marketing of a product

Consists of the 4 or 7 Ps (product, price, place, promotions, etc.)

Not all of the P’s have the same degree of significance in all cases

P’s must be coherent in an interrelated marketing plan

Marketers must be careful not to confuse consumers with conflicting messages about the goods or services being sold

(The Ps will be discussed in units 4.5 and 4.6)

Marketing plan

Formal written document that outlines how a business intends to achieve its marketing objective

Contains detailed action programs, budgets, sales forecasts and strategies

Effective marketing planning relies on a clear awareness of market trends, competitor’s actions and consumer wants

Marketing plan usually begins with a marketing audit which is a review of a business’ current marketing situation

SWOT and the 4P’s employed

Current PEST

Review of current marketing strategies

Elements

Key marketing objectives

Market research (target market, competition, market size, trends etc.)

Marketing strategies for the marketing mix and specific activities

Marketing budget

Likely problems and backup plans

Monitoring and review process (to be modified along the way)

Market segmentation

Process of dividing the market into subgroups based on defined attributes

Each segment has distinct identity, specific needs, and preferences

Attributes provide each segment with a clear customer profiles allowing business to target a segment with the appropriate marketing mix

Successful segmentation requires a business to have a clear picture of the consumer in the target market it is aiming to sell in

Marketing mix has to be appropriate for the target market and positioning of the business

Profile segmentation by

Demographics

Age, group, gender, marital status, income group, social class, education, profession, religion, language

Psychographics

Status, values, cultures, interests, politics, causes, beliefs, buying habits, decision factors

Geographic

Location: urban, rural, cosmopolitan or closed, multicultural, island, low/uplands

Climate: desert, tropical, four season, seasonal rain, humidity

Advantages

Define the market more precisely

Identifies gaps in the market for exploitation

Minimize selling to consumers who have no intention of buying

Small firms can specialize in one or two target markets

Allows for price discrimination to maximize revenue and profits

Disadvantages

May need product variations to satisfy different segments:

High cost for R&D, varied promotions, and production and inventory

Excessive specialization is dangerous if your segment changes your attitudes or behavior

Using DAMAS for segmentation

Differentiated

Each segment must be unique in response to different elements of marketing mix

Actionable

Business must be able to address the needs of each segment

Measurable

Size and purchasing power must be quantifiable

Accessible

Customer in the segment must be reached in a cost-efficient way

Substantial

Sufficiently large in order to generate profits

Target marketing

Part of market research, comes after market segmentation

Targeting refers to the market segment that a business wishes to sell to

Appropriate marketing strategies are then developed for these target markets

Niche/concentrated

Targets a specific, well-designed segment that requires very specialized product or high luxury item

Undifferentiated/mass market

Ignores segments but targets wide market to maximize volume

Differentiated/selective

Uses different marketing mix for each segment to address differences in perceptions and lifestyles

Market positioning

Basically consumer perception

An analysis that looks at how consumers “perceive” brands (how they are ranked or classified in the eyes of the consumer)

Stages of positioning

Identify the competitive advantage of the product (brand or USP)

Decide on which strengths should be marketed to the segment

Implement the desired positioning by using the appropriate marketing mix

Brand VS. USP (Unique Selling Proposition)

Corporate image is the consumer perception behind a brand

USP is the differentiating factor that makes a company product unique and thus motivates consumers to buy

Product position/perception map

Shows the general market’s or consumers’ perceptions of a product’s or brand’s key aspects in relation to other competitors in the particular market

Mainly uses two variables, such as price and quality, convenience and environment, taste and healthiness, etc.

Uses

Allows businesses to identify any gaps in its product portfolio or in the market, which it can fill with new or existing products

Can be used for targeting strategies

Allows businesses to determine how to place their products more competitively

Can inform businesses if the need to reposition their products arises

Businesses may try to reposition its products according to market/consumer tastes in order to further capitalize on consumer demand without developing entirely new products

Involves modifying the product’s image, features or target market

Limitations

Filling gaps in the market however shouldn’t always be a priority as gaps could exist for reasons, such as generally low demand or low profitability, high barriers of entry, etc.

Firms also have to asses whether they have the capacity or ability to fill the gaps in the market, and whether going into such gaps correspond to the business’ image

# data[].attributes.body
1.1 Introduction to business management
Business sectors:

primary-involves the harvesting of naturally available resources

secondary- involves manufacturing of raw products to finished or component goods

tertiary- Involved with service and retail

quaternary- involves intellectual activities or innovation services

1.2 Types of organization
Private vs. Public sectors
Private Sector

Goal is to make profit

Owned, financed and run by private individuals or entities

Public Sector(museums,public hospitals and etc)

Goods and services provided by the government or local authority

May be free or sometimes with a small fee

Types of for-profit/commercial organizations

Sole trader

Business is owned by one person

Simplest form of business

Owned by a single person who assumes all profits and liabilities

Advantages

Little legal requirements for setup

All the income goes to one man

Less restrictions and easy decision-making

Disadvantages

All the income tax is shouldered by one man

Unlimited liability (owner is the same legal entity as the business) and all the debt incurred by the business is put on the owned

Partnership

Company ran by two or more individuals

Each person contributes money and resources, as well as sharing the responsibilities of managing a business.

Involves presence of “silent” or “sleeping” partners, who do not make decisions, merely giving money to the business and earning profit

Advantages

Liability is spread around

Range of skills

Higher capital

Disadvantages

Unlimited liability despite being spread out between partners

Slower decision-making

Types of for-profit social enterprises

Cooperatives

Organizations that are jointly owned and run by its members who share in profits and benefits

Advantages

Shareholders must be help run organization, work is more spread out

Equal voting rights/power among all shareholders

Disadvantages

Decision-making may be more time consuming or involve more conflicts

Less profit for each shareholder as it is spread among many members

Microfinance providers

Microfinance – loan service offered to individuals or groups with no access to more conventional banking services (unemployed, low-income individuals, etc.)

Public-Private Partnerships (PPP)

Public corporations are sold-off or transferred to the private sector

Advantages

Incentivized to be more efficient and productive

Government can focus on other projects and infrastructure

Enjoy the skills and talents of the private sector (can lead to increased efficiency and productivity)

Disadvantages

Services provided would be more expensive

Prices goes up, government has to subsidize (increase in taxes)

Aim of profit may lead to cost cutting, lower quality, higher prices

1.3 Organizational Objectives
Vision statement and mission statement
Vision

Describes a desired position for the company in the far future (“Where do we want to be?”)

Mission

Purpose of business, states what the business is and does (“How do we get there?”)

Aims, objectives, strategies, and tactics

Aims – long term goals of what the company wants to be

Objectives – shorter term goals that are specific and measurable

Individual targets, departmental objectives, divisional objectives, corporate objectives, mission, aim (pyramid, base to height is left to right)

Guides and unifies management and workforce

Basis for strategic planning

Builds trust and goodwill

Ansoff Matrix
(https://www.mindtools.com/media/Diagrams/Ansoff-Matrix-1-NEW.jpg)

Analytic tool to determine growth strategy by focusing on product/market combination

Growth strategies

Existing product + existing market = Market Penetration (low risk)

Seeks to maintain or increase market share

Price adjustments

Increase of market promotion

Minor product improvements

Intense competition

New product + existing market = Product Development (medium risk)

Innovation to replace existing products

Focusing on consumer needs

Brand extension

Capitalize on technology

Consumers in existing market may not like the new product

Existing product + new market = Market Development (medium risk)

New distribution channel

Expanding geographically

Attract new market segments

New consumers may not like the product

New product + new market = Diversification (high risk)

If successful, higher gains can be reaped from various industries

Spreads out risks and safeguards against economic shocks over diverse product portfolio

1.4 Stakeholders
Stakeholders

People who can be affected by and therefore have interest or stake in actions of the business

e.g. shareholder, employees, suppliers, customers, competition, government/state, pressure groups, etc.

Stakeholder Concept – priority to stakeholders rather than shareholders

Interests of internal stakeholders vs. interests of external stakeholders

Internal

Employees-employment security, wage levels, conditions of employment, participation in the business

Managers-employment security, salary and benefits offered, responsibilities given

Shareholders-owners of shares in the company, have decision-making power, receive dividends (share of profit)

External

Suppliers-speed of payment, level and regularity of orders, fairness of treatment

Customers-value for money, product quality, quality of service

Government-job creation, tax payments, value for output produced, impact on wider society/economy

Special Interest groups (SIGs)-Care about individual interests: payment of debts, environment, etc.

Competitors-fairness of competitive prices, strategic plans of the business

Stakeholder conflict

Not possible to satisfy all stakeholders all the time

Conflict will always arise from new developments, business activities, etc.

Stakeholder conflict resolution

Arbitration

To resolve industrial disputes between workers and managers

Advantage

Both sides agree to an independent arbitrator who will decide th

Disadvantage

Neither stakeholder group will likely receive what they want

Decision is binding

Workforce Participation

To improve communication, decision-making and reduce potential conflicts between employees and managers

Advantage

Gain cooperation of workers – better motivated and involved

Disadvantage

Waste of time and resources to be able to get all information

Profit-sharing scheme

Reduce conflict between workers and shareholders over allocation of profits and benefits

Advantage

Sharing profits can encourage workers to work in ways that will increase  long-term profit

Disadvantage

Reduces retained profits and/or profits paid out to shareholders unless the scheme pays off

Share-ownership scheme

To reduce conflict between workers , manager and shareholders

Advantage

Provides share options; employees and shareholders benefit and aligns their interests with one another

Disadvantage

Administration costs, decreased ownership, qualification constraints may limit motivation

1.5 External Environment

STEEPLE

Business tool for understanding a business’ external environment

Looks at the market potential and situation

Stands for Social, Technological, Economic, Environmental, Political, Legal, and Ethical analysis (of the industry)

External environmental factors are analyzed in decision making and strategy development because they can heavily influence the business

Social

Attitude of society towards wide range of issues

Population demographics (more young/old, more women/men, etc.)

Roles and attitudes of people

Cultural and religious beliefs

Security and education

Technological

Use of tools and machines

Information technology

Innovations in technology

Economic

State of the economy

Interest and tax rates

Exchange rates and foreign relations

Inflation rates, unemployment rates, etc.

Environmental

Abundance of natural resources or raw materials

Threats from nature (or natural disasters)

Waste disposal/recycling

Political

Laws (employment, consumer, business) & policies (fiscal and monetary)

Changes brought about by new government

Possible effects of political unrest

Legal

Employment or contract laws

Trade unions

Environmental protection regulations

Ethical

Client confidentiality

Bribery and other forms unethical (and possibly illegal) business transactions

Fair competition

How changes in STEEPLE factors affect a business’s objective and strategy

Changes in trends, social norms, public opinion, views on ethics can affect the company’s products, business activities, and the way they market their products

Changes to legal or political factors may force businesses to change the way they operate to comply with new laws or regulations

Changes to technological factors could result to the company adopting newer technology or machinery to increase efficiency or keep up with industry standards

Changes to environmental factors could force companies to adapt to scarce raw materials, frequent natural disasters, etc.

Changes to economic factors (economic growth, interest rates, etc.) could affect the costs of operations of the business, spending attitude of consumers, etc.

1.6 Growth and evolution
Economies and diseconomies of scale

Scale of operations/business

Maximum output that can be achieved using available resources

Scale can only be increased in the long term by employing more of all inputs

Producing more =/ increasing scale of production

Increase scale of operations attains economies of scale

Economies of scale

Increase in efficiency of production as the number of output increases

Average cost per unit decreases through increased production

Fixed costs are spread over an increased number of output

Cost per unit = (total variable costs + total fixed cost) ÷ units produced

Importance: customer enjoy lower prices due to the lower costs which in turn increases market share or  business could choose to maintain its current price for its product and accept higher profit margins

Types of economies of scale:

Internal – achieved by the organization itself

Purchasing (bulk-buying) economies

Wholesale discounts

Technical economies

Investing in technology to reduce costs

Financial economies

Easier for large companies to receive loans from banks

Marketing economies

More efficient to advertise a large number of products

Managerial economies

Larger firms are able to hire specialists who help improve efficiency

External

Improved infrastructure (e.g. transportation)

Advances in the industrial efficiency due to better training, innovations in processes/machinery, etc.

Growth of other industries that support the organization

Diseconomies of scale

Economies of scale have peaks, if this point is passed, diseconomies of scale are experienced

Can occur when a company or even the whole industry becomes too big and unit costs begin to increase rather than decrease

Possible due to:

Communication problems leading to poor coordination

Overworked machinery and laborers

Alienation of workforce and slower decision-making (for larger businesses)

Diminishing marginal returns

Decrease in the marginal (per-unit) output of a production process as the amount of a single factor of production is increased, while the amounts of all other factors of production stay constant

Small vs. large organizations

Importance of small businesses

Small firms create jobs

Small businesses are often run by dynamic and innovative entrepreneurs

Provides competition for big business

Supply specialists goods and services for specific industries

Small firms can become big businesses in the future

Advantages

Small business

Easily managed & controlled by the owner

Quicker to adapt to changing customer needs and feedback

Offer personal service to customers

Establishes better employer-worker relationships

Large business

Can afford to employ specialist, professional managers

Benefit from more economies of scale

More access to varied sources of finance

Can diversify in several markets, thus spread out the risks

Can afford more formal research & development

Disadvantages

Small business

Can’t afford to employ specialist, professional managers

Doesn’t benefit from more economies of scale

Less access to varied sources of finance

Can’t diversify in several markets, thus spread out the risks

Can’t afford more formal research & development

Large business

Difficult to be managed & controlled by the owner

Slower to adapt to changing customer needs and feedback

Can’t offer personal service to customers

Establishes poorer employer-worker relationships

Internal growth vs. external growth

Internal/organic growth

Occurs when businesses grow using its own resources to increase the scale of its operations and sales revenue

Methods used to achieve internal growth:

Change of pricing strategies

Increase advertising and promotions

Offer flexible financing schemes

Improve and innovate the product or service

Sell in different locations

Increase capital expenditure on production and technologies

Train and develop staff

External/inorganic growth

Occurs through dealings with outside organizations

Vertical integration

The main business takes part in the primary, secondary, and tertiary aspect of business

Horizontal/lateral integration

Businesses unify under the same industry

Between firms who have the same operations, but do not necessarily compete with one another

e.g. Ford bought Jaguar, Ford is low to mid class while Jaguar is high class. They don’t compete and when they merge they now cater to a bigger market

External growth methods

Conglomerate mergers, takeovers, or acquisitions

Amalgamation of two businesses that are in completely different markets

Results in dissolution of original business entities in favor of forming a new one

Reasons for mergers:

They want to increase revenue

Fight the rising of prices together

Increased customer satisfaction (new and better content)

Bigger market

Reasons for failure:

The companies could not synergize

The competition was stronger than the merged business

Conflicting cultures

Poor management and leadership

Poor timing/recession

Joint ventures

Two companies join for a specific undertaking and set-up a new legal entity

e.g. Sony + Ericsson = Sony Ericsson

Strategic alliances

Like a joint venture, but NO new legal entity is created (only for a specific project or product)

Profit is split between the two companies

Franchising

An individual buys the right to operate under another business’ name

Can be offered individuals or large businesses

Franchisee pays a franchise fee (royalties and supplies) and is given a license to operate by the franchiser

Franchisee is a different type of entrepreneur – much less risk compared to the normal entrepreneur

Franchiser provides marketing, training and equipment to set-up

Support to ensure business will have a good chance of success, retain good brand image, and maintain standard of product/service quality

Franchiser may take a portion of profits and has a say on how the business should be run

Franchisor

Benefits

Grow cheaply and quickly

Less manpower to directly manage

Income from franchise fee, royalties, and supply purchases

Downside

Not easy to revoke

Less control over quality or performance of franchise

Conflict in profit vs. volume

Franchisee

Benefits

Known brand results in strong start-up sales

Support from franchisor

Easy financing options

Lower cost of supplies because of economies of scale (though sometimes the franchisor charges high for supplies)

Downsides

Little freedom/flexibility in running

Franchise/start up fee may be too costly

Bad management in headquarters affects all branches

Still not guaranteed success