BM Short Notes (PBP)

Prepared by : Muhammad Asif
Updated &: Faraz Ahmad

Presented by : Syed Atif Hassan Abidi
PREFACE
The Examinations of ICAP are a demanding test of students ability to master the wide
range of knowledge and skills required of the modern professionals. ub!e"t of #$usiness
%anagement& is one of the efforts made by ICAP in this "ontext for enhan"ing students
knowledge about detailed o'er'iew of effe"ti'e management of businesses.
The best and re"ommended book for this sub!e"t is #tudy Text by P$P& that "o'ers ea"h
and e'ery area of syllabus in extraordinary detail. The basi" problems fa"ed by the
students in going through P$P are its si(e and the language used. tudents who are new
to this sub!e"t ha'e to spend most of their pre"ious time in understanding the theme
"on'eyed in any "hapter. %oreo'er students feel it 'ery hard to re'ise the "omplete
"ourse near or on the exam day.
)or these reasons there arise needs to ha'e some short and easy to re'ise notes for this
sub!e"t that "o'ers the extent of P$P in a "on"ise form. )or this purpose we used short
notes of P$P prepared by %uhammad Asif *Ex A.%+ A)) , Co -ahore. / years earlier.
After "ompiling the notes )ara( Ahmad reorgani(ed the notes and updated it using the
P$P. 0ow those notes are finali(ed and presented to you in a booklet form. 1opefully it
will help you all.
I would suggest that first of all you should read $% from P$P and afterwards you may
"onsult these notes for re'ision purposes. An Annexure has been gi'en at the end of this
booklet to help you de"iding how you "an use this booklet in "ombination with P$P.
%ay A--A1 bless you with su""ess in e'ery exam of both li'es.
Thanks
Talib e 2oa
yed Atif 1assan Abidi
)ara( Ahmad
%ar"h /3+ 4556
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Chapter 1 : Objectives of Organisation
Introduction to Strategy
Strategy:
# Course of a"tions+ in"luding spe"ifi"ation of resour"es required+ to a"hie'e a spe"ifi" ob!e"ti'e&
Influences on /Determinants of Strategy:
External
o o"iety
o 7rgani(ed groups
0ature of business
o %arket situation and "onditions
o Produ"ts of "ompany
o Te"hnology used
7rgani(ations Culture
o 7rgani(ational system and stru"ture
o -eadership style
o 7rgani(ations history
o 7rgani(ations founder
takeholders powers *mapping. and Internal "oalition
E"onomi" ob!e"ti'es
o"ial responsibility
Environmental conditions affecting Strategic Planning:
3. 8esour"es *mineral.
4. 2isaster
/. -ogisti"s
9. :o'ernment
En'ironmental %anagement A""ounting is a solution; examples are
3. E"o < $alan"e
4. Cleaner Te"hnology
/. -ife"y"le assessment
9. Performan"e appraisal
=. $udgetary planning and "ontrol
>. Corporate liabilities *a fa"tor in PE8T.
Characteristics of Strategic Decision:
"ope; 7'erall long?term dire"tion.
%at"hing; %at"hes a"ti'ities to en'ironment , resour"es "apability.
Affe"t; Affe"ted by 'alues+ beliefs and powers of people in organi(ation. , Affe"t operational de"isions.
Impli"ations for "hange.
Complex in nature.
Allo"ation or reallo"ation of resour"es.
Strategic Financial Management:
It is identifi"ation of strategies able to maximi(e 0P@ and to allo"ate s"ar"e resour"es+ and implementing and
monitoring of su"h strategy.
Financial management decision: (Also see end of chapter 9)
In'esting de"isions *merger+ di'estment et"..
)inan"ing de"isions *Capital stru"ture and Aorking Capital %anagement.
2i'idend de"isions *Cash or $onus share.
Financial objectives: Non financial objectives:

PrimaryB to maximi(e wealth of shareholders er'i"e pro'ision.
7thers are )ulfillment of responsibility to suppliers , "ustomers.
o 2e"rease in debt. Aelfare of o"iety
o Profit retention. Aelfare of %anagement
o ales growth. Aelfare of Employees
overnment organi!ations:
External )inan"ing -imit.
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To "reate Value for Money+ funds must be applied conomically! fficiently and ffectively.
Chapter 2 & 4 : Strategy Formulation and Choice
Strategy formulation/choice
3. 1ow to gain "ompetiti'e ad'antageC*question of sur'i'al.
i. Porters :eneri" trategies *= for"es.
4. Ahi"h 2ire"tion to go
i. :rowth dire"tion
a. 7rgani" growth
Ansoffs Produ"t?%arket %atrix
b. Doint de'elopment
ii. 2efensi'eE0on growth strategies
a. Capital 8estru"ture "heme
b. 2ownsi(ing
". 2i'estment
Porter"s eneric Com#etitive Strategies $to achieve com#etitive advantage%:
"ompetitive position is the market share+ "osts+ pri"es+ quality and a""umulated experien"es of an organi(ationEprodu"t
relati'e to "ompetition.
"ompetitive strategy is taking offensi'e or defensi'e a"tion to "reate a defendable position in an industry+ and to "ope
with "ompetiti'e for"es yielding superior 87I.
"ompetitive advantage is anything whi"h gi'es one organi(ation an edge o'er "ompetitors.
There are following "ompetitive #trategies for "ompanies to a"hie'e Competiti'e Ad'antage.
&o'er Cost Differentiation
(road )arget
*iche Focus

$ifferentiation is #"reating 'alue through uniqueness&. It "ould be at following le'els of produ"t i.e.
3.A"tual Produ"t
a.. )eatures.
b.. Fuality le'el.
".. 2esign.
d..$rand name
e.. Pa"kaging.
4. Augmented Produ"t
i. 2eli'ery and "redit
ii. Aarranty
iii. Installation
i'. After sale ser'i"e
"ost %eadership is #ha'ing lowest "ost of produ"ing&. It "ould be a"hie'ed by;
%ass Produ"tion *e"onomies of s"ale.
-atest Te"hnologies
)a'orable a""ess to raw materials
Automation
%inimi(ing o'erhead by exploiting bargaining power
Constantly impro'ing effi"ien"y and e"onomy e.g. through 'alue "hain analysis
Focus in'ol'es a restri"tion of a"ti'ities to only part of the market *a segment. through
Pro'iding goodsEser'i"es at lower "ost *Cost fo"us.
Pro'iding a differentiated produ"tEser'i"e *2ifferentiation fo"us.
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Cost -eadership 2ifferentiation
Cost )o"us 2ifferentiation )o"us
*for luxury goods.
Advantages&"omparison of "ompetitive #trategie s :
Com#etitive Force Cost &eadershi# strategy Differentiation strategy
8i'alry Profitable e'en in pri"e "ompetition. 8edu"es dire"t "ompetition.
0ew Entrants -ow pri"e is entry barrier. Customer loyalty is entry barrier.
ubstitutes )irm is less 'ulnerable than "ompetitors. $rand loyalty is weapon.
Customers Customers wont swit"h. -ow pri"e sensiti'ity.
uppliers 1igh bargaining power be"ause of market
share.
upplier may raise pri"es but higher
margin offsets it.
Ansoff"s Product+Mar,et Matri-:
Present Product *e' Product
Present Mar,et
*e' Mar,et

Mar'et (enetration: *low riskB no "apital in'estment.
To in"rease usage by existing "ustomers or
To in"rease market share through Competiti'e pri"ing+ Ad'ertising+ ales promotion taking share of
"ompetitors
Mar'et $evelopment: *low riskB less in'estment.
0ew geographi"al area
0ew segment
0ew pa"king si(e
(roduct $evelopment: *riskierB requires in'estment.
Company "an exploit followings
Existing marketing arrangements *e.g. Promotion+ 2istribution.
Gnowledge of "ustomers and habits
Cost of entry will go up for "ompetitors.
$iversification *high riskB requires in'estments and new "ompeten"e.
Related diversification is when produ"t is new but still within broad "onfines of industry. e.g.
@erti"al integration *"ontrol o'er supply "hain.
)orward integration *"ontrolEownership o'er distributors or retailers.
$a"kward integration *"ontrolEownership o'er suppliers.
1ori(ontal integration *"ontrolEownership o'er "ompetitors.
Unrelated diversification is where de'elopment is beyond industry and produ"t is entirely new ha'ing
no relation with existing te"hnology+ market or produ"ts.
)ran"hising Hnrelated )orward
2i'ersifi"ation @erti"al
8elated $a"kward
:rowth 1ori(ontal
7rgani" :rowth
.oint Develo#ment Strategies
Take 7'erE A"quisition
%ergers
Doint @entures
trategi" Allian"e
-i"enses
Agen"y Agreement
)ran"hising
%arket Penetration Produ"t 2e'elopment
%arket 2e'elopment 2i'ersifi"ation
Chapter # 3 : Planning and Control
Planning
Planning:
# Planning in'ol'es making "hoi"es between alternati'es and is primarily a de"ision making a"ti'ity&
/ a##roaches to #lanning:
)op*do+n approach means strategi" management starts from top management and flows down the stru"ture.
,ottom*up approach means information is a""umulated at lower le'el and presented to top management along with
summary and options a'ailable.
Planning cycle
3. Identify ob!e"ti'es
4. Identify a'ailable strategies
/. E'aluate ea"h strategy
9. Choose strategy *"ourse of a"tion.
=. Implement long?term plan in the form of annual budgets
Ris, factors in #lanning:
)ypes of ris's:
Physi"al
E"onomi"al
Politi"al
)inan"ial
$usiness
Produ"t life"y"le
Accounting for -is':
8equired rate of return+ ad!usted by
8eturn Iage
Payba"k period
)inan"e *stri"t rules of finan"ing i.e. out of profits.
.uantification ris':
8ule of Thumb *best estimate of 'alue within worst to best possible range.
Probability Theory *likelihood of o""urren"e of a fore"ast result.
tandard 2e'iation *"al"ulate tandard 2e'iation of Expe"ted @alue+ the higher it is the higher risk is.
Budgetary Control
Control:
#Control is "omparing a"tual results with planned performan"e and taking appropriate a"tions&
Control Cycle
3. A"tual results are re"orded and analy(ed for ea"h responsibility "enter.
4. )eedba"k is reported to management.
/. %anagement "ompares a"tual results with plans or targets.
9. 2o one of three things
i. 2e"ide to do nothing
ii. Take "ontrol a"tions
iii. Alter the plan or target
Feed0ac,:
# The pro"ess of reporting ba"k "ontrol information to management and the "ontrol information itself&
It may be ingle -oop or 2ouble -oop.
It may be Positi'e or 0egati'e.
Feed for'ard Control:
Control a"tions taken in ad'an"e.
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A"tual results are "ompared with $udgeted *i.e. ad!usted by past results.
/ell organi0ed system of control should have:
1ierar"hy of budget "enter.
Clearly defined responsibilities.
8esponsibilities for Cost+ 8e'enue+ and Capital Employed.
(udget Center:
#Ea"h se"tion of the organi(ation for whi"h budget is prepared&
1bjectives of budgeted planning and control:
3. %oti'ates employees
4. Establish system of "ontrol
/. 8esponsibility a""ounting
9. A"hie'ement of goals
=. Communi"ation
>. Coordination
J. Compel planning
Res#onsi0ility Accounting:
Ea"h manager has a "learly defined area of responsibility and authority to make de"isions within that area. 0o
un"ertainty as to who is responsible for what *sometimes dual responsibility exists..
There are / different areas of responsibility.
)ype of responsibility center Cost Center Profit Center Investment Center
%anager has "ontrol o'erK Controllable "ost Controllable "ost
ales Pri"e
ales 'olume
Controllable "ost
ales pri"es
ales 'olume
In'estment in fixed and
"urrent assets
Prin"ipal performan"e
measures
@arian"e analysis Profit 8eturn on in'estment and
residual in"ome
-esponsibility "enter is a unit of organi(ation headed by a manager who has a dire"t responsibility for its performan"e.
"ontrollable "ost is an item of expenditure whi"h "an be dire"tly influen"es by a gi'en manager within a gi'en time
span.
"ontrollability of fi2ed cost:
Committed fixed "ost *e.g. PPE???????non?"ontrollable in short term.
2is"retionary fixed "ost * e.g. 8.,2. or Ad'ertisement ?????????? "ontrollable in short term.
-ole of 3) in #trategic Management
I) as changing industry:
Aith Porters = for"es model.
I)/IS as com#etitive advantage:
Aith Porters generi" strategies for "ompetiti'e ad'antage. ,
1ith Pe##ard"s 2 'ays
4 forces 5eneric strategies
3. Ensure "ompetiti'e pri"ing
4. Establish entry barrier *"ost of entry.
/. Hsing information as a produ"t
9. -imiting a""ess to distribution "hannel
=. Affe"ting "ost of swit"hing
>. $uilding "lose relationship with supplier and
"ustomer.
J. 2ifferentiating Produ"tEer'i"e
L. In"reasing Cost effi"ien"y
6. 2e"reasing upply Cost.
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Chapter 4 & 5 : Strategic Management : Traditional & other
models
)raditional and other models of Strategic Management
Strategic Management:
#trategi" %anagement is the analysis+ "hoi"e+ implementation and "ontrol of agreed strategies&
#trategy is a "ourse of a"tion in"luding the spe"ifi"ation of resour"es required to meet a spe"ifi" ob!e"ti'e.
)actics is the deployment of resour"es to exe"ute an agreed strategy.
(olicy is a general statement pro'iding guidelines for management of de"ision?making.
&evels of strategy: *by 1ofer and "hendel.
67 "orporate #trategy determines the o'erall purpose and s"ope of the organi(ation. It is "on"erned with what types of
business the organi(ation is in.
2efining aspe"ts of "orporate strategy;
"ope of a"ti'ities *whole organi(ation.
)a"es en'ironment *opportunities and threats.
8esour"es *how to obtain and allo"ate them.
@alues *of people in power in organi(ation affe"t it.
Time s"ale *long term.
Complexity *un"ertainty of future.
87 ,usiness #trategy is how an organi(ation approa"hes a parti"ular produ"t market area *applied at $H le'el..
97 Functional&1perational strategies deal with spe"iali(ed area of a"ti'ity within an $H e.g. Produ"tion+ %arketing+
18%+ )inan"e.
)raditional a##roach to ma,e strategy: (through Planning in a systematic way)
o trategi" analysis
Analy(ing @ision+ %ission and 7b!e"ti'es *trategi" 2ire"tion.
Corporate appraisal *where we are.
o Analy(ing external en'ironment
i. -EPT analysis
ii. Porters = for"es model
iii. "enarios
o Analy(ing internal en'ironment (Situation analysis/Position audit)
i. 8esour"es Audit
ii. $C: and :E$ matri"es
iii. @alue "hain
i'. ystem stru"ture
o A7T Analysis
o :ap analysis
o trategy formulationEChoi"e (how we can go)
o trategy implementation
o trategy e'aluation and Control
Favor of rational model: *Ansoff and 2ru"ker support it.
3. Corporate le'el first
4. trategies are best generated from Top?2own
/. Pro'ide a "ommon thread
9. Enables de"ision making in "onditions where
i. Partial ignoran"e *Ansoff.
ii. 8isk is ine'itable *2ru"ker.
=. $asis for strategi" "ontrol
>. Impro'es stakeholders per"eption
Pro0lems 'ith rational model: *%int(berg "riti"i(es it.
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3. 7rgani(ations are in"apable of ha'ing ob!e"ti'es be"ause
i. 7b!e"ti'es may "onfli"t with ea"h other.
ii. 7b!e"ti'es will "hange from time to time
iii. 7b!e"ti'es are unlikely to be dire"tly related to e"onomi" benefits of shareholders.
4. enior management should not be only strategy? setter.
/. In reality formulation is not a simple step by step pro"ess.
9. trategies that firms follow are not the same as ones they set in plans.
=. 7'er relian"e on formali(ation.
>. Predetermination
J. )ailure in pra"ti"e *suitable for only stable en'ironment.
L. 1inders inno'ation and radi"al "hange.
Other models of(making strategy) Strategic Management
Mint!0erg"s emergent strategy model: *Considers random sho"ks.
It is unlikely that a firms en'ironment is totally predi"table.
Emergent strategy is a non?"ons"ious strategy arising from patterns of beha'ior.
trategi" %anagement is to "ontrol and shapeE"raft these emergent strategies as they arise.

Activities affecting "rafting #trategy:
%anage stability
o Implement+ not !ust plan
o 7bsession to "hange is dysfun"tionalB know when to "hange
%anage patterns
o 2ete"t patterns and help them shapeB grow positi'es and eliminate negati'es.
Gnow the business operations
2ete"t dis"ontinuing and signifi"an"e of en'ironmental "hanges.
Crafting strategy???? requires natural synthesis of past+ present and future. *re"on"ile "hange and "ontinuity.
Mint0berg:s ; styles of strategic management:
3. Planned strategies *imposed by "entral leadership+ large no. of "ontrols+ pre"ise intentions.
4. Imposed strategies *imposed by en'ironment e.g. influential "ustomers.
/. Ideologi"al strategies *"olle"ti'e 'ision of organi(ations members+ shared 'alues.
9. Hmbrella strategies *ends are defined+ means are emergent+ target based.
=. 2is"onne"ted strategies *members mind their own business+ strategies are deliberate for sub?units but
emergent for organi(ation.
>. Consensus strategies * groups shares "ommon patterns.
J. Entrepreneurial strategies *'isioned from strong leadership.
L. Pro"ess strategies
Mint0berg:s 4 +ays to describe strategy:
3. Plan ? "ons"iously intended "ourse of a"tion
4. Ploy ? a "ompetiti'e game *e.g dis"ouraging "ompetitors to enter.
/. Pattern ? ideas of emergent strategies
9. Position ? #en'ironmentally fit& , relationship with other organisations
=. Perspe"ti'es ? approa"h towards world
Strategy and managerial intent: *Dohnson and "holes. not emergent
)he "ommand vie+:
trategy de'elops through the dire"tion of an indi'idual or group+ but not ne"essarily through formal
planning.
Intended
trategies
2eliberate
trategies
8eali(ed
trategies
Hnreali(ed
trategies
Emergent
trategies
Patterns of
beha'ior
Hnexpe"ted
Contingen"ies
Control of strategy dire"tion is possessed by auto"rati" or "harismati" leader.
(aradigm and (olitics:
Paradigm *basi" assumption and beliefs "ommon in organi(ations de"ision makers. is inhabitant and
"onser'ati'e than "ulture.
Politi"s is pro"ess of bargaining and negotiation of strategy among powerful stakeholders.
Pro"ess by whi"h Paradigm and Politi"s influen"e pro"ess of strategy de'elopment.
o Issue awareness *by internal results+ "ustomer response or en'ironmental "hange.
o Issue formulation *analysis of issue to get its root.
o olution de'elopment
%emory sear"h *from past experien"e.
Passi'e sear"h *time will tell.
o olution sele"tion
Eliminate una""eptable plans *politi"s.
Endorsement to !unior management
Incrementalism:
,ounded -ationality )heory: *1erbert imon.
%angers are limited by time+ information and skills.
They satisfi"e rather than maximi(e.
3ncrementalism: *-indblom.
It in'ol'es small?s"ale extension of past pra"ti"es.
7rgani(ations "hange in"rementally+ during whi"h time+ strategies form gradually.
$isadvantages of 3ncrementalism:
3. 0ot suitable where radi"al new approa"hes are needed.
4. ome "hanges are dramati" not in"remental.
/. Ignores influen"e of "orporate "ulture.
9. Appli"able to stable en'ironment only.
%ogical 3ncrementalism: *mid way.
%anagers ha'e a 'ague notion as to where the organi(ation should go+ but strategies should be tested in small steps
be"ause of un"ertainty about future.
Gnowledge as a sour"e ta"it knowledge
&earning 0ased strategy:
Gnowledge "reation expli"it knowledge
trategy de'elopment is a learning pro"ess.
-earning organi(ation will generate a flow of fresh ideas and insights+ This will promote renewal and pre'ent
stagnation.
Learning organization is one whi"h is skilled at "reating+ a"quiring+ and transferring knowledge+ and at modifying
its beha'ior to refle"t new knowledge and insights.
Double loop learning is where !ur!ose is also reviewed. "derived from control theory#
)uture will "hange in"rementally
Future 3rientation: *1amel and Prahalad.
)uture will be radi"ally different
)uture is not !ust something that happens to organi(ation.
7rgani(ations "an "reate the future.
They offered a Mdiagnosti" to indi"ate how future oriented an organi(ation is.
$iagnostic:
$iagnostic statement (rotect the past "reate the future
enior management+ 'iew about future 8ea"ti'e 2istin"ti'e
enior management+ spending most time on 8e?engineering "urrent pra"ti"es 8egenerating "ore strategies
Are managersKK Engineers of present Ar"hite"t of future
Summary:
a. %anagers do not take best
de"isions but satisfa"tory
ones.
b. %anagers do not pursue the
whole rational model but take
small?s"ale de"isions.
Are employeesK.. Anxious 1opeful
The "ompany is better at 7perational effi"ien"y $uilding new businesses
Aithin the industry+ the "ompany )ollows the rules %akes the rules
Competiti'e ad'antage is pursued by Cat"hing up with "ompetitors Creating new sour"es of
"ompetiti'e ad'antage
Agenda for "hange is set by Competitors @ision of future
4o' to co#e 'ith future:
? imply more far?sightedness
? Imaging produ"ts and ser'i"es that do not exist.
? pend less time in positioning in "ompetiti'e en'ironment
? )uture orientation is embodied in the "orporate "ulture.
Environmental Fit: *1ofer and "hendel.
trategy is a mediating for"e between organi(ation and en'ironment.
Fit or Suitaility means M 7rgani(ations are su""essful when they intentionally a"hie'e internal harmony and
external adaptation.
Strategic logic requires that strategy must;
o $e "onsistent with ob!e"ti'es
o %at"h organi(ations "apabilities with en'ironment.
Ecology Model:
7rganisations en'ironment "hanges radi"ally+ it will only sur'i'or if it adopts its en'ironment and e'ol'es i.e finding
ni"he areas whi"h pro'ide both demands for output and resour"es to be used as input to the system.
Pattern and Com#etencies: *Andrew.
Corporate strategy is the pattern of management de"isions in a "ompany
o That determines and re'eals its ob!e"ti'es+ purposes or goals+
o That produ"es the prin"ipal poli"ies and plans to a"hie'e those goals+
o 2efines the range of business+ and
o Gind of human and e"onomi" organi(ation it is or intends to be.
trategy is exploitation of "ompeten"ies.
o The distinctive competence is what it does well+ uniquely or better than ri'als. It "omes through
Experien"e
Fuality of "o?ordination
Talents and potentials of indi'iduals
Strategic )hin,ing: *Geni"hi , 7hmae.
trategy is a "reating pro"ess
u""ess business strategies result not from rigorous analysis but from a parti"ular state of mind.
Aspe"ts of strategi" thinking
o )lexible thinking *what if Cquestions.
o Geeping details in perspe"ti'e *spe"ially un"ertain.
o )o"us on key fa"tors and distin"ti'e "ompeten"es.
1ow strategi" thinking operates
o Ask right question
o )ind solution of problem+ not remedy or symptom.
o 7bser'e the problem
o :roup problems together *e.g. by brainstorming. to see key fa"tors.
Com#etition: *7hmae , Porter.
"ompetitive strategy is the ta$ing of offensive or defensive actions to create a defendale !osition within an
industry------ and a su!erior return on investment.
#uccessful strategy is the interplay of 9 "s (strategic triangle)
ur'i'al and growth are pro"ess of adoptation ;
Ahy ; be"ause en'ironment gi'es physi"al resour"es and finan"ial resour"es
1en"e ; "hoi"e of strategy must follow a strategi" logi".
3. Competitor
4. Customer
/. Company
9 assumptions of theory: (focus: survival in competitive environment)
3. ur'i'al of business is impossible without a "ompetiti'e strategy.
4. A"tual strategy will be unique.
/. %arketpla"e is a battlefield.
Com#etitive strategy:
# A strategy by whi"h a firm "an ha'e signifi"ant ground on its "ompetitors at an a""eptable "osts&
Com#etitive Advantage:
? 8e?ad!ust "urrent resour"es i.e identify key su""ess fa"tors
? 8elati'e superiority i.e exploiting "ompetitors weakness
? Challenge assumptions
? 2egree of freedom i.e segmenting
4o' to create sustaina0le strategic #osition:
? operational effe"ti'eness
? doing unique things
? doing trade?off
? "ombining good indi'idual a"ti'ities
? making own "hoi"es i.e not blindly imitating "ompetitors
Realised Strategies
Intended or #lanned strategies Emergent strategies
? enior management de"isions ? not planned
? Imposed from top ? not fore throught
? Aell planned ? not the result of management intentions
? Aell thought?out ? "aused by pattern of beha'ior
? Time "onsuming
? 2eliberately planned
Im#licit 5 E-#licit Strategies
*2epends upon extent to whi"h strategies are
deliberate or emergent.
Im#licit 7nly in head of "hief exe"uti'e
E-#licit Properly do"umented
Fla's:
? Purely deliberate strategy pre'ents
learning from experien"e.
? A purely emergent strategy defies
"ontrol
Descri#tive and Prescri#tive Strategies
Descri#tive ; #what is a"tually happening in the organisations i.e paradigm+ politi"s+ pattern of de"isions+ in"remental approa"h
Prescri#tive ; #to pres"ribe something& i.e rational model+ strategi" thinking+ learning based en'ironment+ resour"e based
model
Chapter # 6 : SWOT Analysis ad gap analysis
Cor#orate A##raisal
Corporate appraisal *where we are.
o Analy(ing external en'ironment
i'. -EPT analysis
'. Porters = for"es model
'i. "enarios
o Analy(ing internal en'ironment (Situation analysis/Position audit)
i. 8esour"es audit
ii. $C: and :E$ matri"es
iii. @alue "hain analysis
i'. ystem stru"ture
o A7T Analysis
o :ap analysis
"orporate appraisal is assessment of A7T in relation to internal *A. and external *7T. fa"tors affe"ting
organi(ation to establish long term plans.
3) Analysis+++Analy!ing e-ternal 0road environment:
o"ial fa"tors
-egal fa"tors
E"onomi" fa"tors
Politi"al fa"tors
Te"hni"al fa"tors
/hat #ocial factors affect:
Changing 'alues and lifestyle
Changing pattern of work and leisure
2emographi" "hange
Ahy so"ial fa"tors are "onsidered;
N takeholders are members of so"iety??assessment of their 'alues and beliefs
N :ood *ethi"al. reputation
N A'oid restri"ti'e legislation
N Change O opportunities
%egal factors:
o 1ealth and safety legislation
o Employment laws
o En'ironmental legislation
o Information about performan"e.
conomic 'ey forces affecting organi0ations:
E"onomi" :rowth
Interest 8ates and Tax rates
A'ailability of Credit
Inflation 8ates
:o't. fis"al poli"ies *taxation+ go't. spending+ borrowing and repayment. and monetary poli"ies *"ontrol of
money demand and supply through rates.
)oreign Ex"hange 8ates
)oreign Trade $alan"es
Consumer in"ome+ debt and spending
:o't. ubsidy
Hnemployment rate
International e"onomi" issues;
o Extent of prote"tionist measures
o Comparati'e rates of growth+ inflation+ wages and taxation
o The freedom of "apital mo'ement
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o Ex"hange rates
o E"onomi" agreements
E-change rate is the rate at whi"h a national "urren"y ex"hanges for other national "urren"y.
2eterminants are;
2emand and supply of "urren"ies in foreign ex"hange market *)loating ex"hange rate.
:o't. *)ixed ex"hange rate.
ynthesis of abo'e two *%anaged ex"hange rate.
Types are;
pot ex"hange rate *rate set for immediate deli'ery of a "urren"y.
)orward ex"hange rate *rate set for future ex"hange of a "urren"y.
Closing rate *pot ex"hange rate at $alan"e heet date.
(olitical factors:
Type of :o't.
tability of :o't.
:o't. attitude i.e. pri'ati(ation or nationali(ation
Amount of bureau"ra"y
Pri"ing+ di'idend+ tax+ employment issues
Politi"al risk is the risk that politi"al fa"tors will affe"t an organi(ation e.g. war+ "orruption+ nationali(ation+ politi"al
instability.
Deannet and 1ennessry de'eloped a "he"klist to assess politi"al risk;
3. 1ow stable is Politi"al system.
4. 1ow long will go't. remain in power.
/. 1ow strong is go't.s "ommitment to spe"ifi" rules of game.
9. If present go't. is su""eeded+ how spe"ifi" rules of games would "hange.
=. Ahat would be the effe"t of "hange in spe"ifi" rules of game.
>. In light of these effe"ts+ what de"isions and a"tions should be taken nowC
)echnological factors:
o Change in production techniques
o In'ention and inno'ation
OT Analysis ---Analyzing external specific and direct environment:
(Porters forces model!
i) /hen costumers have po+ers:
Nmall number of "ustomers Nmall number of "ustomers
NThey make high 'olume pur"hases NThey make high 'olume pur"hases
NProdu"ts they are buying are undifferentiated NProdu"ts they are buying are undifferentiated
NAlternati'e sour"es of supply are a'ailable *substitute or swit"hing. NAlternati'e sour"es of supply are a'ailable *substitute or swit"hing.
ii) /hen #uppliers <ave (o+er:
Nmall number of suppliers Nmall number of suppliers
N)ew substitutes exist N)ew substitutes exist
Nuppliers are not dependent on the buyer for a lot of their sales Nuppliers are not dependent on the buyer for a lot of their sales
Nuppliers ha'e differentiated their produ"ts Nuppliers ha'e differentiated their produ"ts
NIt is "ostly to swit"h suppliers NIt is "ostly to swit"h suppliers
iii) /hen -ivalry Among 2isting "ompetitors 3s 3ntense:
Nlow industry growth Nlow industry growth
N1igh fixed "osts *plants+ ma"hinery+ outlets. N1igh fixed "osts *plants+ ma"hinery+ outlets.
NHndifferentiated produ"ts NHndifferentiated produ"ts
NA large number of "ompetitors NA large number of "ompetitors
N1igh exit barriers *what you lose if you lea'e the business. N1igh exit barriers *what you lose if you lea'e the business.
Nmall "hanges in market share ha'e a big pay?off Nmall "hanges in market share ha'e a big pay?off
iv% (arriers )hat (loc, *e' Entrants
NE"onomies of s"ale NE"onomies of s"ale
N-arge "apital requirements N-arge "apital requirements
NProdu"t differentiation NProdu"t differentiation
N1igh swit"hing "ost N1igh swit"hing "ost
N-imited a""ess to distribution "hannels N-imited a""ess to distribution "hannels
Nome go'ernment poli"ies and regulations Nome go'ernment poli"ies and regulations
N7ther ad'antages that are hard to dupli"ate su"h as patents+ great lo"ations+ subsidies+ partnerships+ et". N7ther ad'antages that are hard to dupli"ate su"h as patents+ great lo"ations+ subsidies+ partnerships+ et".
N1istory of aggressi'e retaliation toward new entrants N1istory of aggressi'e retaliation toward new entrants
v% Indirect Com#etitors/Su0stitutes
NClose substitutes pla"e a "eiling on the pri"e that "an be "harged for a produ"t or ser'i"e NClose substitutes pla"e a "eiling on the pri"e that "an be "harged for a produ"t or ser'i"e
NClose substitutes also set indire"t performan"e "omparisons NClose substitutes also set indire"t performan"e "omparisons
N%ain produ"t is sensiti'e to pri"e of substitute. N%ain produ"t is sensiti'e to pri"e of substitute.
Res#onding to the 3rgani!ation/Mar,eting environment:
Companies "an passi'ely take en'ironment as un"ontrollable and they must adapt to.
Companies "an take en'ironmental management perspe"ti'e i.e. a"ti'ely working to "hange the
en'ironment.
Ahere'er possible+ "ompanies should try to be proa"ti'e rather than rea"ti'e.
Strategic Intelligence:
trategi" Intelligen"e is the knowledge of business en'ironment+ whi"h enables an organi(ation to anti"ipate "hanges
and design appropriate strategies that will "reate business 'alue for "ustomers and profit for "o.
Process of creating strategic intelligence:
ensing *Identify appropriate external indi"ations of "hange.
Colle"ting *:ather information in ways that ensure it is rele'ant and meaningful.
7rgani(ing *tru"ture the information in the right format.
Pro"essing *Analy(e information for impli"ation.
Communi"ating *Pa"kage and simplify information for users.
Hsing *Apply strategi" intelligen"e.
Sources for strategic intelligence ! Sources of information
S1 Analysis +++Analy!ing internal environment:
Internal analysis "onsists of;
8esour"es Audit
$C: %atrix
:E$ matrix
@alue Chain analysis
Core Competen"e *"riti"ally underpins organi(ations "ompetiti'e ad'antage.
Criti"al u""ess )a"tors *C) are fa"tors on whi"h strategy is fundamentally dependent for its su""ess.
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Miscellaneous conce#ts:
A "ruciform "hart summari(es signifi"ant A7T.
"ritical #uccess Factors are those "omponents of strategy in whi"h organi(ation must ex"el to outperform
"ompetition.
5ap analysis *ob!e"ts < existing strategies O :ap. is a "omparison between ob!e"ti'es and expe"ted performan"e of
pro!e"ts both planned and underway. E.g. Profit :ap *Target profit < )ore"ast Profit.
Forecasting is the identifi"ation of fa"tors and quantifi"ation of their effe"t on an entity as a basis for planning. It
in"ludes !udgment6
(rojection an expe"ted future trend pattern obtained by extrapolation. It in"ludes quantitati'e fa"tors.
2trapolation is a te"hnique of determining pro!e"tion by statisti"al means.
Scenario Planning:
# A scenario is an internally "onsistent 'iew of what the future might turn out to be&
An industry s"enario is "on"erned with the future of industry.
Macro scenario uses ma"ro e"onomi" or politi"al fa"tors+ "reating alternati'e ways of the future en'ironment.
= steps in planning scenarios:
3. 2e"ide on the dri'er for "hange
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Mar'eting Finance&Accounting 1peration ->$ <-M M3#
Is market and share
in"reasingC
uffi"ient working
"apitalC
Produ"tion "apa"ity Adequate 8,2
fa"ilitiesC
Effi"ient 7r
experien"e
manpower
Is I updated
regularlyC
egmented
effe"ti'elyC
Can we raise "apital
or borrowingsC
E"onomies of s"ale 7utsour"ing is
"ost effe"ti'eC
8e"ruitment and
Training
Contribution by all
fun"tional
managersC
Channel of
distribution reliable
and "ost?effe"ti'eC
8eturn on in'estment
, Cost of "apital
In'entory "ontrol
poli"ies and
pro"edures+
effe"ti'eC
Are 8,2
resour"es allo"ated
effe"ti'elyC
Communi"ation Effe"ti'e
passwords for
entryC
Condu"t market
resear"hC
Effe"ti'e budgeting
pro"essC
Is ma"hinery
te"hni"ally updatedC
Communi"ation
between 8, and
other unitsC
-abor relations Hser friendly IC
Produ"t pri"ed
appropriatelyC
A""ounting ratios+
strong or weakC
Is equipment in good
"onditionC
Are present
produ"ts
te"hnologi"ally
"ompetiti'eC
Turno'er and
absenteeism
Training pro'idedC
Effe"ti'e
promotionC
Fuality "ontrol
poli"ies and
pro"edures+
effe"ti'eC
Hnder or o'er
staffingC
Continuous
impro'ementC
$rand strength 1ow mu"h
expensi'eC
(roducts #toc's
Produ"t quality and brand reputation our"es of supply
Age and life of produ"ts Turno'er periods
Pri"e elasti"ity of demand torage "apa"ity
%argin and "ontribution 7bsoles"en"e and deterioration
%arket share and growth
i. En'ironmental analysis
ii. Important issues and degree of "ertainty *time hori(on is 35 years.
4. $ring dri'ers together into a 'iable framework
/. Pro'ide J to 6 mini s"enarios.
9. :roup mini s"enarios into two or three larger s"enarios "ontaining all topi"s.
=. Arite the s"enario.
>. Identify issues arising.
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Chapter 7 : Performance Appraisal & Analysis
Performance A##raisal
Measurement of Performance:
Measurement of 5ro+th and effects of inflation:
3. 8e'enue
4. Profits
/. Assets
9. Cash )low
=. 87CEE87I
>. %arket share
J. 0umber of employees
L. 0umber of produ"ts
? profit concepts to measure performance of divisions:
Contribution *sales < 'ariable "ost.
Controllable profit * sales ? 'ariable "osts ? )ixed "ost "ontrollable.
Controllable margin * Controllable profit < other "osts dire"tly tra"eable.
0et ProfitE%argin * Controllable margin < allo"ated ser'i"e "enter "osts and general management o'erhead.
Value added is "ost of material and bought in ser'i"e.
Measuring performance of (rofit "enter:
3. 87IE87CE
4. 8esidual In"ome *measure of "enters profit after dedu"ting notional or imputed interest "ost.
(enchmar,ing: (ado"tion of est "ractices)
$en"hmarking is establishment of targets and "omparators *through data gathering. through whi"h relati'e le'els of
performan"e "an be identified.
)ypes of ,enchmar'ing:
3nternal ,enchmar'ing "omparing one operating unit with another within same industry.
Functional ,enchmar'ing internal fun"tions "ompared with best external regardless of industry.
"ompetitive ,enchmar'ing information about dire"t "ompetitors is gathered through te"hniques e.g. re'erse
engineering.
#trategic ,enchmar'ing aimed at strategi" a"tion and organi(ational "hange.
%evels of ,enchmar'ing:
3. 8esour"es through resour"es audit
4. Competen"es in separate a"ti'ities through analy(ing a"ti'ities
/. Competen"es in linked a"ti'ities through analy(ing o'erall performan"es.
Inflation:
? Effe"t of inflation on a""ounting system
? Effe"t of inflation on strategy in referen"e to operating in "ompetiti'e market and exporting goods
o'erseas
Performance measurement and inflation:
i. )ixed asset 'alues , depre"iation histori"al "osting problem
ii. Cost of sales and inflation in"reased profits but low sto"k turno'er
*o'erstated profits.
iii. 0eed for working "apital
i'. $orrowing benefits in period of inflation real 'alue of loan de"reases o'er times
'. Comparability of finan"ial figures figures are ditorted
'i. 8atios for "ontrol ratios will be unaffe"ted+ as both side of balan"e
sheet will be inflated
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Costs;
? )ixed "osts
? @ariable "osts
??????????????????????????????????????
? 2ire"tly attributable "osts
? hared general o'erheads
??????????????????????????????????????
? Controllable "osts
? Hn"ontrollable "osts
Chapter 8 : Mission Goals and Objectives
Analyzing "ision# $ission and O%&ectives
4ierarchy
@ision????????%ission??????????:oals *ob!e"ti'es and aims. at / le'els??????????strategy at / le'els
7ision:
# Ahere the organi(ation wants to be&
Advantages of vision:
? gi'es general dire"tions to organisation
? gi'es hope and moti'ation
? establishes s"ope and boundaries
? enables flexibility in "hoi"e
Pro0lems 'ith vision
It ignores real+ pra"ti"al problems
It "an degenerate into wishful thinking
Strategic intent:
#@ision with an emotional "ore to energi(e and stret"h&
? similar to 'ision
? stret"h "urrent "ompeten"ies
? gi'es sense of dire"tion
? gi'es "oheren"e to plans
Mission Statement:
This is a statement purpose of existen"e?Ahat it wants to a""omplish in the larger en'ironment.
%ission statement in"ludes (urpose! "ompetence! #trategic #cope! (roduct! )argeted customers! and Values of
'arious stakeholders.
It should e mar'et oriented! specific! realistic! motivating and consistent with market en'ironment.
e.g. #To pro'ide best satisfa"tion to "ustomers and fair return on in'estment+ keeping en'ironment healthy and "lean
and promising se"ure future to employees&.
Place of mission statement:
? Annual reports
? Publi"ity materials
? In "hairmans offi"e
? Communal work area
Elements of mission statement:
? Purpose * e.g "reating wealth+ satisfy shareholders.
? trategy * e.g logi"+ produ"t+ ser'i"e.
? "ope
? Politi"s , beha'iors
? @alues , "ulture *e.g "ommitment.
Characteristics of mission statement:
? $ra'ity
? )lexibility
? 2istin"ti'eness
Pro0lems 'ith mission statement:
? Ignoran"e in pra"ti"e
? 7nly for publi" showment and not for internal de"ision making
? 7nly rationalising existen"e of organisation
? Aish list+ full of generalisations
Functions/Im#ortance of mission
3. Employee moti'ation
4. Contributes to profitability
/. )o"us for strategi" de"ision making
9. 8epla"es national or di'isional sub"ulture with a "orporate "ulture
=. Communi"ates nature of organi(ation to insiders and outsiders
Pro0lems 'ith mission 8 Pro0lems 'ith Rational model of Strategic Management
oals:
:oals "ould be
7b!e"ti'es *quantifiable.
Aims
A goal must be %A8T.
pe"ifi"
% %easurable
A Attainable
8 result?oriented
T time?bounded
9 levels of goals&objectives and strategy:
Corporate le'el
$H le'el
7perational le'el
"orporate level objectives: (trade off bet+een objectives)
3. Profit *A""ounting Profit O E"onomi" Profit O ale pri"e < Expli"it Cost < Impli"it Cost i#e# $""ortunity
%ost.
4. %arket share and growth
/. Cash flow
9. Customer satisfa"tion
=. Fuality of produ"t
>. Industrial relations
J. 87CE
L. EP
@nit 1bjectives:
Commer"ial se"tor
In"rease number of "ustomer by 3=I *sales department.
2e"rease number of re!e"ts by =5I *produ"tion department.
Publi" se"tor
To pro'ide "heaper+ subsidi(ed bus tra'eling *lo"al transport department.
8esponding more qui"kly to "alls *poli"e+ fire station+ hospital.
)y#es of oals:
3. ystem :oals P2eri'ed from organi(ations existen"eQ
4. Ideologi"al :oals P)o"us on organi(ations missionQ
/. )ormal :oals PImposed goalsB e.g. from hareholdersQ
9. hared Personal :oals PConsensus bEw indi'idual and "olle"ti'e goalsQ
#ystem goals (subverting Mission)
ur'i'al
Effi"ien"y
Control
:rowth
Dealing 'ith goal conflict $inter de#artmental%:
8ational e'aluation *finan"ial "riteria.
atisfi"ing *not aiming to maximi(e profit.
$argaining *bEw different goals of managers.
equential attention *one by one.
Priority setting
:oals
7perational goals 0on?operational goals
%easurable not measurable
309ectives
Primary e"ondary
-ong?term hort?term
5oal "ongruence tate of indi'iduals to take a"tions whi"h are in their own interest and also in
best interest of organi(ation.
)rade off 0et'een o09ectives: P7ne at expense of other.Q
Primary and secondary o09ectives: P$ased on importan"e.Q
Sta,eholders
#ta'eholders are :roups or Indi'iduals whose interests are dire"tly affe"ted by a"ti'ities of a firm or organi(ation.
#ta'eholder 1bjectives
hareholders To maximi(e wealth
In"reased by *di'idend+ "apital gain of shares+ EP+ 87CE.
%easured by *in"rease in 8etained earnings+ %arket @alue listed or non?listed.
-enders Timely repayment of interest and prin"ipal
Trade "reditors Timely payment
1igh pri"es
Continuing profitable relations
Employees 1igh wages
Dob se"urity
Dob satisfa"tion
8etailers and
"ustomers
Continued supply
Fuality produ"ts
%anagement %aximi(e own reward
Training and "areer de'elopment
o"iety 1E Issues
-e'el of employment
:o't. Taxes
-egislation "omplian"e
8 approaches to sta'eholders:
3. trong 'iew *To balan"e all stakeholders is important.
4. Aeak 'iew *Primary ob!e"ti'e is profit+ stakeholders are satisfied indire"tly.
#ta'eholders: mapping: (Mendelo+)
4igh Interest &o' Interest
4igh
Po'er
Gey Players
trategy must be a""eptable for them
E.g. ma!or "ustomer
Pessimist
hould be kept satisfied.
E.g. large institutional stakeholders
&o'
Po'er
Influen"e powerful stakeholders
hould be kept informed
E.g. Community representati'esECharities
0egligible
3rgani!ation"s Culture
Culture/3rgani!ation"s Culture:
# Culture is sum total of belief+ knowledge+ attitudes+ norms+ "ustoms+ 'alues and pe"uliarities that pre'ail in a so"ietyE
an organi(ation&.
Influences on organi!ation"s culture:
7rgani(ations founder
7rgani(ations history
-eadership and management style
tru"tures and ystems
&evels of Culture:
There are / le'els of "ulture in an organi(ation;
3. $asi"+ underlying assumptions *guide the beha'ior of indi'iduals and groups in organi(ation.
4. 7'ert beliefs *expressed by organi(ation and its members.
/. @isible artifa"ts *e.g. style of offi"es+ display of trophies et"..
Some Im#ortant conce#ts:
,elief is what we feel to e the case on the asis of o%ective and su%ective information.
Values are beliefs whi"h are relati'ely general and widely a""epted as "ulturally appropriate beha'ior.
"ustoms is "ulturally a""epted beha'ior in response to gi'en situation.
Artifacts are physi"al tools designed by human beings for their physi"al and psy"hologi"al well being in"luding works
of arts and te"hnology.
-ituals are a"ti'ities whi"h take on symboli" meanings.
thics is a set of moral prin"iples to guide beha'ior.
Mc:insey"s ;+S model
Explains relationship of different aspe"ts of business; P-ink bEw organi(ational , indi'idual beha'iorQ
/ 1ard elements; P)ormal Aspe"tsQ
3. tru"ture *di'ision of tasks and hierar"hy of authority.
4. ystem *te"hni"al system e.g. A""ounting+ 18%+ %I.
/. trategy *org plans+ ta"kling "ompetitors+ a"hie'ing ob!e"ti'es.
9 oft elements; PInformal Aspe"tsQ
9. hared 'alues
=. taff *own "on"erns and priorities.
>. tyle *ways of working+ attitude of management.
J. kills
French and (ell"s ice0erg:
7'ert formal aspe"ts *O / hard .
i. :oals
ii. tru"ture
iii. Poli"ies and pro"edures
i'. Produ"ts
'. )inan"ial resour"es
Co'ert informal aspe"ts * O 9 soft .
i. Attitude+ belief+ feelings+ per"eption
ii. @alue
iii. Informal intera"tions
i'. :roup norms
Theories on Culture
<arrison and <andy:s /or': (gods of management)
There are 9 types of "ulture in organi(ations;
i% Po'er Culture $<eus%
All de"isions are "entered on one person i.e. founder of business
)or small entrepreneurial "ompanies
ii% )as, Culture $Athena%
0o dominant leader
Prin"ipal "on"ern is to get the !ob done
iii% Role Culture $A#ollo%
7rgani(ation has formal stru"ture and well established rules and pro"edures
People do their !obs as spe"ified in their "ontra"ts
)or large organi(ations where work is predi"table
iv% Person/E-istential Culture: $Dionysus%
7rgani(ations purpose is to ser'e interest of indi'iduals within it.
Miles and #no+:s /or': *models of strategi" "ulture.
There are 9 approa"hes to strategy in organi(ational "ulture.
=6 Defenders $doing things right%
-ow risk+ low profits
e"ured ni"he market e.g. a""ountants+ engineers et"
Tried and trusted solution
/6 Pros#ectors $doing the right thing%
1igh risk+ high profits
%o'e into new ways e.g. designers
Take initiati'es
>6 Analysers
$alan"e risk and profit
Hsing "ore stable produ"ts , markets e.g. managers
)ollow the "hange+ do not initiate "hange
?6 Reactors
2o not ha'e 'iable strategy
Denision"s model:
#trategic orientation of firm to+ards environment
Focus on internal Focus on e2ternal
#table environment Consisten"y Culture
)ormal ways of beha'ior+ predi"tability and
reliability*bureau"rati".
%ission Culture
Customer oriented. *hospital+ "hur"h.
"hanging
environment
In'ol'ement Culture *satisfied employees gi'e
performan"e e.g. 7r"hestra.
Adaptability Culture * fashion "o..
)o"us on external en'ironment whi"h is
"hanging.
Deal and :ennedy"s 'or,: *Asso"iation of "ulture , risk.
Culture is fun"tion of #willingness of employees to take risk& and #Their feedba"k&
#lo+ feedbac' Fast feedbac'
<igh ris' $et your "ompany Culture
#low and steady wins the ra"e&
-ong de"ision "y"les
tamina required
7il "ompany+ Air"raft "ompany+ Ar"hite"ts
1ard M%a"ho Culture
#)ind a mountain and "limb it&
Entertainment+
Ad'ertisement+ Consultan"y
%o+ ris' Pro"ess Culture
#It is not what you do+ it is the way you do&
Attention to ex"ellen"e of te"hni"al detail.
8isk management
Pro"edures and tatus symbol
$anks+ )inan"ial ser'i"es+ :o'ernment
Aork hardEPlay hard "ulture
#)ind a need and fill it&
All a"tion and fun
Team spirit
Computer "ompanies
Peter and 1aterman"s E-cellence Culture:
#2ominan"e and "oheren"e of "ulture was an essential feature of ex"ellent "ompanies&.
Employees are loyal and make efforts if;
Cause is great.
They are treated as winners.
They "an satisfy dual needs of team and own interest.

Aey attributes of e2cellence
3. Autonomy and Entrepreneurship
4. $ias for a"tion
/. Customer orientation
9. ti"k to "ore a"ti'ities
=. imple organi(ational stru"ture
>. imultaneous loose?tight properties *"ompetition between indi'iduals and group within organi(ation.
Pum#in"s dynamic com#any *Cultural "hara"teristi"s of dynami" "ompanies.
#2ynami" "ompany is one that "onsiderably in"reases the benefits for its stakeholders within a relati'ely short time&
? aspects of such a culture
peed
Produ"ti'ity
Expansion
8isk taking
1ea, areas in a dynamic com#any
Customer ser'i"e
Inno'ation
Te"hnology
Attitude to workfor"e
Company spirit and loyalty
#trategic 2cellence (osition: *similar to ex"ellen"e.
EP will fall into / fields;
3. Produ"t related
4. %arket related
/. )un"tional
EP "an be de'eloped only if "ulture supports it.
Chapter 9 : Mergers and Acquisitions
)a,e 3vers:
#Pur"hase by a "ompany of a "ontrolling interest in the 'oting share "apital of another "ompany&
Mergers:
#%erger is a business "ombination that results in the "reation of a new reporting entity formed from the "ombining
parties& *%utual sharing of risks and benefits.
-easons for Mergers&)a'e 1vers:
3. ynergy *3R3O33.
4. Eliminating "ompetition
/. Entry in new market
9. pread risk *di'ersifi"ation.
=. A"quisition is "heaper than internal expansion
>. Assets ba"king
J. %anagement a"quisition
L. 7perating e"onomies *by eliminating dupli"ate and "ompeting fa"ilities.
6. Impro'ement of liquidity and finan"e?raising ability
$eciding factors in a ta'eover decision:
3. Cost
4. @alue
a. Earning basis
b. Assets basis
". Prospe"ts for sale and growth basis
d. a'ing brought and additional expenditure basis
/. Aill it be desirable for shareholders and sto"k market
9. Ahat will be form of pur"hase "onsideration
a. Cash *borrowed.
b. Equity shares
". 2ebentures
d. Con'ertible -oan to"k
=. 1ow takeo'er would be refle"ted in published a""ounts
-is's for shareholders of acBuiring company in ta'eover:
3. 2e"rease in EP of own "ompany
4. 2e"rease in hare Pri"e of own "ompany
/. 2e"rease in Assets ba"king per share *de"rease in net assets.
9. Entry in risky industry
/hen ta'eover resisted by )arget "ompany:
Hnwilling to sell
Hnder bidding
Hnattra"ti'e after tax 'alue
Terms are poor
7pposed by employees
)ounder appeals loyalty of shareholders
"ounter steps by )arget "ompany:
3. Issuing a fore"ast of attra"ti'e future profits and di'idends.
4. -aun"hing ad'ertising "ampaign against the takeo'er bid.
/. )inding a #Ahite Gnight&+ i.e. a "ompany whi"h will make a wel"ome takeo'er bid.
9. %aking a "ounter bid for the predator "ompany.
=. Arranging a management buyout
>. Introdu"ing a #Poison?Pill& + i.e. anti takeo'er ad'i"e
)actics by AcBuiring company:
Persuading dissatisfied shareholders
1igh pri"es
Payment Methods
+ Cash Pur"hase
+ hare ex"hange
+ Hse of "on'ertible loan sto"k
+ Earn out arrangements
Methods are affected by
+ &vailaility of cash
+ 'esired level of gearing
+ %hanges in control
+ %hanges in structure
"hoice of "ash or (aper offer or ,oth for payment depends on vie+ of parties:
&c(uiring com"any and its shareholders:
If pur"hase "onsideration is in equity shares+ EP might fall.
If pur"hase "onsideration is in debentures *or "ash borrowed elsewhere.+ it will be "heaper be"ause Interest
will be allowable for tax purposes and earnings will not be diluted.
Issue of additional loan sto"k will be una""eptable for parties if "ompany is highly geared.
Issuan"e of large new shares will signifi"antly "hange "ontrolling stru"ture.
Payment in shares preser'es "ash a'ailable.
Company might ha'e to in"rease authori(ed share "apital or borrowing limits.
)arget %om"any:
If Cash is re"ei'ed+ tax on "apital gain will be"ome payable immediately.
If other "onsideration is re"ei'ed+ it is to be ensured that
o Existing in"ome is at least maintained+ and
o hares retain their 'alue.
If shareholders want to ha'e stake in business+ they will prefer shares.
*ezzanine Finance: (y iding com"any+ to "ay for shares)
-ies between equity and debt finan"e.
It is short to medium term+ unse"ured+ high rate of return loan
It has option to ex"hange loan for share after takeo'er.
It is also used in %$7.
,arn-out arrangement:
Ahen "onsideration is payable upon the target "ompany rea"hing "ertain performan"e targets.
(# before and after a ta'eover:
hare pur"hased at higher PEE ratio will gi'e fall in EP+ and 'i"e 'ersa.
Company may a""ept dilution of earnings on acBuisition if;
There is in"rease in net assets ba"king.*from a "ompany ha'ing more assets and less earnings.
Fuality of earnings is superior.
Post ac@uisition integration: ('ruc.er/s 0 golden rules)
3. There must be "ommon "ore of unity.
4. A"quirer must ask+ #Ahat is in for us& and # Ahat we "an offer&
/. A"quirer must treat produ"t+ market and "ustomers of a"quired "ompany with respe"t.
9. A"quirer must pro'ide top management with rele'ant skills within one year.
=. Cross "ompany promotions should o""ur within one year.
A ste#s of Integration se@uence: (% S 1ones)
3. 2e"ide and "ommuni"ate initial reporting relationships
4. A"hie'e rapid "ontrol of key fa"tors whi"h will require a""ess to right+ a""urate information
/. 1uman and physi"al 8esour"e audit to get a "lear pi"ture
9. 8edefine "orporate ob!e"ti'es and to de'elop strategi" plans
=. 8e'ise the organi(ational stru"ture
Failure of mergers and ta,eovers:
3. trategi" plan fails to produ"e expe"ted benefits
4. 7'er optimism about future market "onditions
/. Poor integration management
9. Cultural differen"es
=. -ittle or no post a"quisition planning
>. -a"k of knowledge of target "ompany or industry
J. -ittle or no experien"e of a"quisition.
Im#act of mergers and ta,eovers on sta,eholders:
7n a"quiring "ompanys shareholders
EP may fall espe"ially in equity?finan"ed bids and first time players
Cost of mergers ex"eeds gains.
7n target "ompanys share holders
:reatest benefit through signifi"ant premium o'er market pri"e.
A"quiring "ompany management
In"reased status and influen"e
In"reased salary and benefits
Target "ompany management
Gey personnel will be kept others will be fired
7ther employees
E"onomies of s"ale will be a"hie'ed by loss of !ob and eliminating dupli"ation of ser'i"es.
)inan"ial institution
7utright winners
The more "omplex+ longer and problemati" the deal is+ the greater their fee in"ome regardless of result.
.oint 7entures
.oint ventures: (2
st
ste" of ac(uisition)
# It is an arrangement where two or more firms !oin for"es for manufa"turing+ finan"ial and marketing purposes and
ea"h has a share in both equity and management of business&
Advantages:
Doint "ontribution of
o Produ"tion te"hnology
o Corporate expertise
o %arket knowledge
A""ess to foreign markets
Eliminating "ompetition
Cheaper than internal expansion
pread risk
uitable for smaller "ompanies
Pro0lems:
Confli"t of interests
Ahere profits will go *in resident "ompany or shareholders of foreign "ompany.
-o"al partners may wish to export to other "ountries where foreigner is already supplying.
Transfer pri"ing issues *on transfer of expertise+ te"hnology and "omponents.
Cultural differen"es e.g.
Equal employment opportunity
Commer"ial pra"ti"es
hort term and long term planning
-a"k of smooth "oordination+ "ontrol and de"ision making
Aho will lead
Aho is responsible
Confidentiality issues
Strategic Alliances
Strategic Alliance:
# Ahen two or more firms agree to work together to exploit "ommon ad'antages&
e.g. allian"e between national airlines to "ross?book passengers.
'icenses
-i"enses are 'ery similar to )ran"hising in their finan"ial aspe"ts+ howe'er degree of "entral "ontrol and support is
usually less.
(ranc)ising
This gi'es limited right to fran"hisee *e.g. in a geographi"al area. to exploit patent produ"t or produ"tion pro"ess+
brands+ manufa"turing know how andEor te"hni"al ad'i"e and assistan"e. e.g. G)C+ %"2onald
Mechanism:
)ran"hiser grants permission.
)ran"hisee pays for permission and assistan"e.
)ran"hisee is responsible for day to day running of fran"hise.
)ran"hiser may impose Fuality Control %easures to ensure that goodwill is not damaged.
)ran"hisee supplies "apital+ personal in'ol'ement and lo"al market knowledge.
,enefits to Franchiser:
8apid expansion *fran"hisee pro'ides "apital..
-o"al knowledge.
E"onomies of s"ale.
(roblems to Franchiser:
-imited "ontrol o'er quality.
Confli"ts of interest.
)ran"hisee may be"ome "ompetitor.
*ey (inancial management decisions:
3nvestment Financing $ividend
+trategic
ele"tion of produ"ts and markets
8equired le'el of profitability
)undamental fixed assets
Target debtEequity mix Capital growth or
high di'idend payout
)actical Effi"ient and effe"ti'e use of
resour"es
Pri"ing
-ease @s. $uy "rip or "ash
di'idend
1perational Aorking "apital management Aorking "apital
management
??????
Chapter 10 : Corporate Reorganisation
Defensive Strategies Defensive Strategies
Capital ,estructuring +c)eme
# A "apital re"onstru"tion s"heme is a s"heme whereby a "ompany reorgani(es its "apital stru"ture&.
(rocedure of designing a capital restructuring scheme:
3. Cal"ulate what ea"h partys position would be in a liquidation
4. Assess possible sour"es of finan"e
/. 2esign the re"onstru"tion
9. Assess ea"h partys position as a result of the re"onstru"tion
=. Che"k that the "ompany is finan"ially 'iable.
2it strategies for a venture capitalist:
3. ale of shares to publi" or institutional in'estors following a flotation
4. ale of shares to another "ompany
/. ale to "ompany itself or its owners
9. ale to institution management
Do'nsi!ing Do'nsi!ing
Divestment+ $selling of 0usiness%
#2i'estment is a proportional or "omplete redu"tion in ownership stake of an organi(ation& e.g.
2emerger
ell off
-iquidation
pin off
%anagement $uy 7ut *%$7.
Pri'ati(ation
-easons for $ivestment:
To "on"entrate on a parti"ular part of business
elling a loss making unit
-iquidity problems
elling a subsidiary with high risk
elling a subsidiary at profits
Pro'ide an exit route for in'estors
8emo'e 'alue gaps to a'oid takeo'er
$emerger is splitting up of a "orporate body into two or more separate and independent bodies.
#ell off is a form of di'estment in'ol'ing the sale of a part of a "ompany to third party usually another "ompany.
%iBuidation is extreme form of liquidation where the entire business is sold and funds are distributed to shareholders in
their proportion.
Management ,uy 1ut7 (M,1) management buyout is the pur"hase of all or part of a business from its owners by its
managers.
Management ,uy 1ut7(M,3) where pur"hase of a business is made by group of managers from outside the business.
#pin 1ff ; a new "ompany is "reated whose shares are owned by the shareholders of the original "ompany whi"h is
making the distribution of assets.
$anagement Buy Out:
(ossible reasons for M,1:
All reasons of 2i'estment
$est offer from management
ale "an be arranged qui"kly
:roup "an still maintain relations
#uccess factors of M,1s: (Advantages)
)a'orable buyout pri"e
Personal moti'ation and determination
Fui"ker de"ision making and more flexibility
a'ing in o'erheads
1ealthy relationship with subsidiary
.uestions in evaluating M,1s for investment:
2oes management has full range of skillsC
Ahy is the "ompany for saleC
Pro!e"ted benefits and "ash flowsC
Ahat is being boughtC
Pri"eC
)und a'ailabilityC
Exit routesC
(roblems faced by M,1s: ($isadvantages)
-ittle experien"e of finan"ial management
Tax and other legal "ompli"ations
Changing the attitude of employees
2e"iding the bid pri"e
Cash for maintenan"e of fixed assets
Change in 18 *loss of key employees.
%aintenan"e of relations with suppliersE"ustomers
-oing Private
#A publi" "ompany goes Pri'ate when a small group of indi'iduals buys all of the "ompanys shares *possibly
in"luding existing shareholders.&
Advantages:
Cost sa'ing *"ost of meeting statutory requirements are sa'ed.
-imited number of members
imilar ob!e"ti'es of shareholders
hareholders are "lose to management
Prote"tion against 'olatility in share pri"e
$isadvantages:
0o trading of shares on sto"k ex"hange
-oss of repute
-oss of some 'alue of share
Disadvantages of De+Merger
-oosing e"onomies of s"ale
-ower turno'er
1igher o'erhead "ost
-ess ability to raise finan"e
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Chapter # 11 : Ethics and Social Responsibility
Ethics
Ethics:
Ethi"s is a set of moral prin"iples to guide beha'ior. It "on"erns with what is right and what is wrong.
&evels of
Practicing ethics
Ethical #ro0lems faced 0y organi!ation:
Ahile a"hie'ing a higher 87I+ an organi(ation fa"es following problems;
1E Issues *afety+ 1ealth+ En'ironment.
Extra payments to go't. offi"ials
Extortion *when offi"ials threaten "ompany with "omplete "losure.
$ribery *where organi(ation is not entitled to ser'i"es.
:rease money * where organi(ation is entitled but unable to re"ei'e ser'i"es.
:ifts
1onesty in ad'ertisement *e.g %arketing ethi"s.
Competiti'e beha'ior *e.g putting others to "ompetiti'e disad'antage.
Ethical systems in an organi!ation:
Personal ethi"s *e.g religious+ politi"al+ personality ethi"s.
Professional ethi"s *e.g CA "ode of ethi"s+ medi"al ethi"s+ fit and proper "riteria.
7rgani(ation "ulture *e.g. "ustomers first.
7rgani(ation system *ethi"s must be "ontained in formal "ode e.g part of ethi"al sys. and mission
statement.
/ a##roaches to manage ethics:
"ompliance based approach aims to remain within letter of law by establishing system of audit and re'iew so that
'iolations are pre'ented+ dete"ted and punished. It works from outside the system.
3ntegrity based approach "ombines a "on"ern for the law with an emphasis on managerial responsibility. This
approa"h in"orporates ethi"s in organi(ations "ulture in whi"h managers will do the right thing e.g shared
a""ountability+ sound beha'ior+ defining 'alues. It works from within the system
1histle 0lo'ing:
It is the dis"losure by an employee of illegal+ immoral or illegitimate pra"ti"es on part of the organi(ation.
Four types of ethical leaderships in organisations:
i. Creati'e ;? refle"ting founder+ su"h leaders "reate ethi"al style.
ii. Prote"ti'e ;? they sustain 'alue of "ustomer ser'i"es
iii. Integrati'e ;? aim through "onsensus through people
i'. Adapti'e ;? "hanging "ulture as per new en'ironment
Social Responsibility
309ectives of a com#any:
E"onomi" ob!e"ti'es
o"ialEEthi"al ob!e"ti'es
$oundaries *Imposed rulesB they restri"t managements freedom of a"tion.
8esponsibilities *@oluntarily undertaken obligations e.g. "harities.
Social/Ethical o09ectives of a com#any:
1E Issues *e.g minimum wages+ !ob se"urity.
:ood employer *e.g good working en'ironment+ !ob satisfa"tion.
:ood Publi" image *e.g good quality produ"ts.
o"iety well being *e.g regular order and timely payments to suppliers.
Pollution
Indi'idual
Personal ethi"s professional ethi"s
7rganisation
7rg. "ulture 7rg. ystem
)inan"ial assistan"e *e.g. Charity+ ports.
(For other o3ectives see Sta.eholders/ o3ectives)
Arguments against and favoring Social Res#onsi0ility recognition:
o"ial responsibility is expe"ted from all types of organi(ations.
A5A3N#):
7rgani(ations should "on"ern wealth only be"ause
hareholders own assets.
hareholders are part of so"iety.
Taxes on re'enues are gi'en to build so"iety.
$usinesses exist for profit.
FAV1@-: *by %int(berg.
%ost shareholders are passi'e.
Hltimately "onsumer pays taxes 'ia higher pri"es.
:o't. support
)irms produ"es 4 outputs;
:oods and ser'i"es
o"ial "onsequen"es of a"ti'ities e.g. Pollution
8esponsibility re"ognition *e.g. "harity. impro'es;
Publi" relations.
$usiness su""ess and de'elopment as part of so"iety.
2e"isions by organi(ation affe"ts so"iety
2ternality is a so"ialEen'ironmental "ost of organi(ations a"ti'ities not borne by organi(ation.
(oundary Management:
? :ood publi" image ? se"uring politi"al en'ironment
? Prote"t en'ironment from pollution ? impro'ing quality of life
? :ood employer ? prote"ting minorities
? Aelfare of lo"al "ommunity
Com#liance (ased A##roach Integrity (ased A##roach
e.g ? Audit e.g ? Internal "ommitment
? 8e'iew ? :uiding 'alues
? Fuestioning ? Pattern of thoughts
? ystem for employees ? hare a""ountability *managers.
? 2is"iplinary pro"edures *lawyers.
Chapter 12 : Corporate Governance
"orporate 5overnance is the system by whi"h "ompanies are dire"ted and "ontrolled.
Patterns of share o'nershi#: *Aho are shareholders of "ompany.
)ypes of institutional investors:
Pension funds
Insuran"e "ompanies
In'estment trusts
Hnit trust
@enture "apital organi(ations
Range of shareholders:
Advantages:
:reater a"ti'ity in firms shares
0o indi'idual "ontrolling whole firm
-ess effe"t on share pri"e if anyone sells
0o threat of takeo'er
$isadvantages:
Administrati'e "ost is high.
@arious ob!e"ti'es in holding shares.
1hy ,no'ing shareholders:
To get support by ex"hanging 'iews.
Gnowledge of shareholders preferen"e about 2i'idend Poli"y.
To explain re"ent share pri"e mo'ement.
hareholders attitude to risk and gearing.
Gey shareholders to "onsult in the e'ent of takeo'er bid.
Agency )heory:
#Although indi'idual members of the business team a"t in their own self?interest+ the well being of ea"h indi'idual
depends on the well being of other team members and on performan"e of the team in "ompetition with other teams&
Assumptions of t)eory:
$eha'ioral
Indi'idual welfare maximi(ation.
Indi'idual rationality.
Indi'iduals are risk?a'erse.
tru"tural
In'estments are not infinitely di'isible.
Indi'iduals 'ary in their a""ess to funds and their entrepreneurial ability.
Agency (roblem:
Arises from separation of ownership from management.
5oal "ongruence: *solution for agen"y problem.
It is a""ordan"e between ob!e"ti'es of agents *a"ting within organi(ation. and ob!e"ti'es of organi(ation as a whole.
@ia *e.g..
Profits related pay e.g. bonuses+ "ommission+ in"enti'e et".
8ewarding managers with shares
Exe"uti'es hare 7ption Plans
4on-e5ecutive directors are directors not running the day to day o"erations of the com"any#
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Chapter 13 : Human Resource Management
4uman Resource Management+Introduction
<uman -esources Management is "on"erned with people at work and their relationship as they arise in working
en'ironment.
Roles/Sco#e of 4R Manager:
#taffing:
Dob Analysis
18 Planning
8e"ruitment
ele"tion
8etirement+ 8esignation+ 8edundan"y
<- $evelopment:
Performan"e Appraisal
Career Planning
Training
2e'elopment
Motivation& (3ndividuals):
Dob Analysis and 2esign
Pay and Promotion
%eadership and 5roups:
Creating effe"ti'e teams
%anaging "onfli"ts between teams
1ther Aspects:
1ealth and afety
Aorkfor"e di'ersity *Equal Employment 7pportunity.
%aternity
Complian"e with legal and other standards
Personnel re"ord and Information ystem
4ecessity of se"arate 6R 'e"artment de"ends on Size and &ctivities of organization#
309ectives of 4RM:
Cooperati'e 8elationships
2e'elopment of moti'ated employees
Effe"ti'e response to "hange
)ulfilling so"ial and legal requirements
Advantages of 4RM:
2e"rease in taff Turno'er
In"rease in Produ"ti'ity
In"rease in :roup learning
In"rease in initiati'e
2e"rease Absenteeism
-esser "onfli"ts
In"rease quality
In"reased "o?operation
In"reased "ommitment
4RM )heories
"ientifi" management PClearly defined prin"ipalsQ
1uman 8elation P)ulfillment of needsQ
8ational P2i'ision of authorityQ
Contingen"y theory PChange a""ording to situationQ
? Roles/Areas of 4R Planning: (by )yson as per ne+ strategic vie+point)
To represent organi(ations "entral 'alue system
To maintain boundaries of organi(ation
To pro'ide stability and "ontinuity
To adapt the organi(ation to "hange
7ie's of 4RM:
)raditional 1dd Cob vie+ Ne+ #trategic Vie+point
#It is a "olle"tion of in"idental te"hniques without mu"h
internal "ohesion& ($ruc'er)
%anager was partly a Clerk+ housekeeper+ so"ial worker
and fire fighter.
It dealt mainly with 1iring and )iring. It is "on"erned about 7rgani(ation+ %oti'ation+
Employees relations and ser'i"e.
8ea"ti'e and defensi'e role Proa"ti'e and "onstru"ti'e role
Employees Consent was obtained. Employees Commitment is obtained.
4R Planning
4uman Resource Planning:
#18 Planning is fore"asting demand of human resour"es+ fore"asting its supply and "losing gap between demand and
supply&
It "onsiders Ahen employees needed. 1ow many employees needed. o basi"ally 18 Plan deals with re"ruitment+
retention+ downsi(ing , training of workfor"e.
Process of uman Resource Planning
3. trategi" Analysis *of.
a. En'ironment
b. 7rgani(ations ob!e"ti'es
". %anpowers A7T
4. Dob Analysis
a. Dob des"ription
b. Dob spe"ifi"ation
". Employee spe"ifi"ation
/. )ore"asting of
a. Internal 2emand and upply
b. External upply
9. Implementation
a. 18 Plan
.o0 Analysis
The pro"ess of "olle"ting+ analy(ing , setting out information about the "ontents of !ob in order to pro'ide basis for !ob
des"ription and data for re"ruitment+ training+ !ob e'aluation , performan"e management.
ystemati" way to gather and analy(e information about the
Content
Context
1uman requirements of the !ob.
)y#e of information needed
Purpose of the !ob
Content of the !ob
8elations to other !ob
Performan"e "riteria
8esponsibility
A""ountabilities
7rgani(ational fa"tors
2e'elopment fa"tors
En'ironmental fa"tors
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Dob analysis results in;
Dob des"ription
Dob spe"ifi"ation
Employee spe"ifi"ation
Cob $escription
A written statement of duties+ responsibilities and tasks of !ob.
It should be written in outputs and performan"e le'els.
Pur"ose of 1o descri"tion:
7rgani(ational????????? 2efines !obs pla"e in organi(ational stru"ture *!ob e'aluation..
8e"ruitment???????????? Pro'ides person spe"ifi"ation
-egal???????????????????? Pro'ides basis for "ontra"t of employment
Performan"e??????????? Performan"e ob!e"ti'es "an be set.
%ontents of 1o descri"tion:
A !ob des"ription should be a formal+ written do"ument+ usually from one to three pages long. It should in"lude the
following;
2ate written.
Dob tatus *full?time or part?timeB salary or wage..
Position title.
Dob summary *a synopsis of the !ob responsibilities..
2etailed list of duties and responsibilities.
uper'ision re"ei'ed *to whom the !obholder reports..
uper'ision exer"ised+ if any *who reports to this employee..
Prin"ipal "onta"ts *in and outside the organi(ation..
8elated meetings to be attended and reports to be filed.
Competen"y or position requirements.
8equired edu"ation and experien"e.
Career mobility *positionPsQ for whi"h !ob holder may qualify next..
&lternative to 1o 'escri"tion is Role 'efinition# (wider)
Cob #pecification
%inimum a""eptable qualifi"ation *i.e. knowledge+ skills+ abilities+ experien"e and other "hara"teristi"s needed to do a
parti"ular !ob..
(erson #pecification
Identifies the type of person needed to do a parti"ular !ob.
)ollowing "hara"teristi"s are assessed; (Fraser:s 4 point to assess pattern of personality)
3. Impa"t on other
4. %oti'ation
/. A"quired knowledge or qualifi"ation
9. Innate ability *initiati'e+ inno'ati'e.
=. Ad!ustment and emotional balan"e
Methods of Cob Analysis:
-ogosE2iaries
Inter'iews
7bser'ations
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"ompetencies
Capa"ity of a person that leads to beha'ior that meets the !ob demands.
Intelle"tual Competen"e *trategi"+ !udgment+ planning.
Interpersonal Competen"e *managing staff.
Adaptability *flexibility with "hange.
8esults
Fuestionnaires
18 managers write !ob des"ription , spe"ifi"ation for re'iew by managers
%anagers identify performan"e standards based on !ob analysis information.
Forecasting Demand and Su##ly of man#o'er:
$emand is estimated from:
0ew markets
0ew produ"tEser'i"e
0ew te"hnology
2i'estment
7rgani(ational restru"turing
#upply is estimated from:
Current workers to"ks and )low analysis
External labor market
A (osition #urvey "ompares demand and supply. *:rade+ skills+ lo"ation et".
Closing the ga# 0et'een Demand and Su##ly+ 4R Plan: (along with susidiary "lans of 6R Plan)
R Plan is prepared on the basis of personnel requirements, productivity and cost.
Meeting Shortage of R "&ess su!!ly More 'emand#
Internal Promotions+ Transfers (-edevelopment (lan) and Training ()raining (lan) et".
8edu"ing -abor turno'er (-etention (lan)
7'ertime ((roductivity (lan)
External re"ruitment (-ecruitment (lan)
Meeting Surplus of R "&ess 'emand More su!!ly#
8estri"ting re"ruitment
Part?time working
8edundan"ies (-edundancy (lan)
Recruitment$a #art of 4R #lan%
Definition:
# 8e"ruitment is the pro"ess of generating a pool of qualified appli"ants for organi(ations !ob&
Strategic Recruitment Decisions:
3. 7rgani(ation based @s. 7utsour"ing
4. 8egular @s. Contra"tual @s. -eased
/. Internal @s. External re"ruitment
9. EE7 and 2i'ersity issues
Systematic a##roach to recruitment and selection:
18 Planning
Dob analysis
Identifi"ation whether employee is to be re"ruited from outside or promoted inside *from 18 Plan.
E'aluation and use of our"es of 8e"ruitment
ele"tion
0otifi"ation of result
Indu"tion training
Sources of Recruitment:
3nternal #earch:
3. 7rgani(ational database *18I. to sort employee data a""ording to !ob requirement.
4. Employee referrals
/. Promotion and Transfers
www."anotes.multiply."om /J
Advantages:
:ood employee relations
En"ourages ambitious indi'iduals
-ess "ostly
0o ad!ustment or orientation time required+ be"ause already familiar
i. Indi'idual with organi(ation and poli"ies
ii. 7rgani(ation with indi'idual
$isadvantages:
0o new blood+ no inno'ation and new perspe"ti'es
Politi"al fight for promotion
%orale problems of those not promoted
2i'ersity la"king
8equires training
2ternal #earch:
3. Ad'ertisement *method depends on organi(ation and nature of !ob.
0ewspaper
T.@.
0et
4. Agen"ies and Professional organi(ation
/. $lind $ox ads
9. "hools+ Colleges and Hni'ersities
=. Hnsoli"ited appli"ations
>. Creati'e re"ruitment methods
$anners
Announ"ing pri(es for
8eferee
Appli"ants
/hat must be included in job advertisement:
Information about organi(ation
Primary business
EE7 Employer
Information about !ob and appli"ation pro"ess
Title and responsibility
Dob lo"ation
tarting pay range
Conta"t address
Closing date for appli"ation
2esired qualifi"ation of "andidate
Experien"e
/????= Chara"teristi"s needed
3nternet #earch:
3. Employer website
4. Professional "areer websites
Ad'antages;
Cost sa'ing
Time sa'ing
:lobal in nature
2isad'antages;
0on?serious appli"ation
2iffi"ult to pro"ess large number of appli"ation
0ot a""essible to all
Selection: ("art of Recruitment)
www."anotes.multiply."om /L
#The pro"ess of "hoosing indi'iduals who ha'e needed qualifi"ation to fill !ob in an organi(ation&
(urpose of selection:
#)illing a right person to the !ob& ensuring
Person fits !ob *mat"hing people with !ob "hara"teristi"s.
Person fits organi(ation *7b!e"ti'es+ "ulture+ 'alues et". of organi(ation.
#teps in selection process:
Initial s"reening
Complete appli"ation *on spe"ifi" form.
Employment tests
Comprehensi'e inter'iew *keeping in mind !ob des"ription , !ob spe"ifi"ation.
$a"kground information *depends on nature and sensiti'ity of !ob.
%edi"al examination
Conditional !ob offer
Permanent !ob offer
/hy and /hat tests are conducted
Cogniti'e ability tests
o Thinking+ memory+ reasoning
o %athemati"al abilities
o Communi"ation abilities
Physi"al ability tests
Ariting analysis
Performan"e simulation test *requiring to perform a"tually a small segment of the !ob.
Advantages of intervie+
%ost 'alid to determine appli"ants
7rgani(ation fit
-e'el of moti'ation
Interpersonal skills
%imitations of 3ntervie+s
Hnreliable assessment *wrong de"ision.
)ail to pro'ide a""urate predi"tion *error of !udgment.
1alo and 1orns Effe"t *based upon single attribute.
tereotyping "andidates on the basis of dress+ hairstyle+ a""ent et".
$iscrimination in sele"tion is !ustified only if required by law.
Induction )raining:
Identify area for later learning or training *e.g. detailed te"hni"al knowledge.
Explain nature of !ob and goal of ea"h task
Explain working hours
Explain stru"ture of organi(ation hierar"hy and his position
Introdu"e with people in offi"e.
Plan and implement training program.
Appraise after /+> or 34 months.
Chapter 14 : Motivation and Performance
Individuals
@ariables affe"ting Dob performan"e;
1rgani0ational and #ocial variables
o"ial en'ironment
Type of In"enti'es
Type of Training and uper'ision
#ituational variables
Chara"teristi"s of 7rgani(ation
Physi"al en'ironment
(hysical and Cob variables
%ethods of work
Aork spa"e and arrangements
2esigning and "ondition of work equipment
3ndividual (non +or') variables
Age
ex
Physique
Edu"ation
Experien"e
Intelligen"e
Aptitude
%oti'ation
Personality
Personality and individual Develo#ment:
(7ndividuals are different ecause their "ersonality is difference and "ersonality differences affect wor. ehavior)#
(ersonality is the total patterns of thinkingB feeling and beha'ing that "onstitute the indi'iduals distin"ti'e method of
relating to the en'ironment.
A""ording to "hris Argyris! as people mature they display "ertain "hara"teristi"s;
3. In"reasing self awareness
4. A""eptan"e of equal or superior relationship to others
/. A tenden"y to mo'e from dependen"e towards independen"e
9. 2i'ersifi"ation of beha'ior patterns
=. An in"reasing tenden"y to a"ti'ity+ rather than passi'ity
>. 2eepening and more stable interests
Factors affecting #ersonality differences:
+ Authoritarinism ? 0eed of a"hie'ement
+ elf?esteem ? Attitude
+ )eedba"k on performan"e ? "ontrols and standard
+ %oderately diffi"ult tasks ? le'els of risk taking
+ Psy"hologi"al su""ess ? "hallenging goals and a"hie'ement
+ Commitment ? willingness
Motivation (%ontent theories 8S Process )heories)
Motivational )heories
Mcregor"s theory B and theory C:
Theory S???People dislike work and responsibility+ they ha'e to be "ontrolled+ threatened+ punished to
get work done.
Theory T???Aork is as natural as play and rest+ they a""ept responsibility+ they gi'e way to "onsultation
and self growth.
Maslo'"s hierarchy of needs:
* A ranked stru"ture of beha'ior stimulating within indi'idual whi"h explains moti'ation.
elf a"tuali(ation *fulfillment of personal potential+ freedom+ fairness+ !usti"e.
Esteem needs *Independen"e+ status+ respe"t+ gaining knowledge.
o"ial needs *relationship+ affe"tion+ belonging.
afety needs *se"urity+ threat.
Physiologi"al needs *food+ "loth+ shelter.
Alderfer"s ER theory:
E?????Existen"e
8???8elatedness
:???:rowth
McClelland"s needs:
0eed for a"hie'ement+ 0eed for power+ 0eed for affiliation
These needs "ould be taught from top to lower managers.
4er!0erg"s t'o factor theory:
There are 4 groups of work related fa"tors.
1ygiene fa"tors *remo'e dissatisfa"tion e.g. alary+ Dob se"urity+ Aorking "onditions+ Interpersonal
relations.
%oti'ators *"reates satisfa"tion e.g. tatus+ growth in !ob+ power authority and responsibility.
7room"s e-#ectancy theory:
%oti'ation shall depend upon expe"ted results of his efforts i.e 'alue atta"hed to an out"ome.
F *)or"e i.e. moti'ation. 8 7 *'alen"e i.e. strength for preferen"e of out"ome. D E *Expe"tan"y i.e. expe"tation that
performan"e will lead to out"omes.
Porter and la'ler"s model: $e-tension of e-#ectancy theory%
)or"e
Ability Hnderstanding
atisfa"tion A"tual Performan"e
Intrinsi" rewards Extrinsi" rewards
*interest+ en!oyment. *pay+ bonus.
E@uity theory:
8eward of 3E7utput of 4 O 8eward of 4E 7utput of 4
atisfa"tion O *atleast fair reward+ not maximum reward.
+ people "ompare results and rewards
+ people get upset if inequity in rewards
oal theory:
:oals "an moti'ate.
Expe"tan"y @alen"e
Importan"e of
reward
u""essE)ailure
Top management Power
Entrepreneur
A"hie'ement
Employees Affiliation
Psychological contracts
#%embers will expend efforts and organi(ation will reward them in ex"hange&
"oercive contract *returns are inadequate "ompensationB in'oluntary "ontribution.
"alculative contract *returns are definedB 'oluntary "ontribution.
"ooperative contract *employees parti"ipate also in de"ision making.
(ay and Cob satisfaction
Hnder 1er(bergs theory+ Pay is the most important of all hygiene fa"tors.
Hnder Expe"tan"y theory+ Pay moti'ates if pay is linked with performan"e and is 'alued by indi'idual.
$ifficulties in incentive schemes:
0o moti'ation if employee already en!oys good pa"kage.
External fa"tors may affe"t output and reward.
0ot suitable in groups
Assessment of satisfaction and moral:
Through Produ"ti'ity+ Absenteeism and Turno'er.
)y#es of incentive schemes:
+ performan"e related pay *P8P. i.e "ommission
+ bonus s"hemes
+ profit sharing e.g opportunity of being member of the "ompany.
.o0 Design (with "arameters of *intzerg)
#Dob design is the pro"ess of
determining the spe"ifi" tasks to be performed (Cob speciali0ation)+
methods used in performing these tasks (training and indoctrination in organi0ational values)+ and
how !ob relates to other works in organi(ation (regulation of behavior).
Change in !ob design may be ;
Dob enri"hment
@erti"al expansion of responsibilities
Change in the "ontent and responsibility of !ob to pro'ide greater "hallenge
Dob enlargement
1ori(ontal expansion of duties
Pro'ides greater 'ariety of tasks
.o0 Com#onents:
7""upation??????Dobs???????????Position??????????2uties????????????Tasks *8esponsibilities.
.o0 restructuring and redesign:
Dob redesign suiting of !obs a""ording to moti'ational fa"tors.
Dob rotation allowing 'ariety and understanding+ de'elopment of extra skills
Dob enlargement adding extra and related tasks to "urrent !ob
Dob enri"hment in"reases depth of responsibility by adding planning and "ontrol of "urrent !ob.
1or,ing arrangements:
attitude and 'alues flexible working arrangement
high performan"e work systems multi?skilling
empowerment flexitime
"ompressed week !ob sharing
part?time work home?working *distant working.
i. 0umeri"al flexibility
ii. )inan"ial flexibility
iii. Task flexibility
Em#loyee A##raisal
#Appraisal is a systemati" re'iew and assessment of an employees performan"e&
1hy:
Employee 2e'elopment;
pe"ifi" Dob performan"e feed ba"k
Career opportunity information
Assessing employee potential
2e"ision %aking for A"tion by Administration; *8esults of appraisal.
Promotion
2emotion
Transfer
Termination
7rgani(ational 8esear"h; *Importan"e of appraisal.
18 Planning *Promotability and Potential.
E'aluation of ele"tion and Training methods
To moti'ate employees gi'ing feedba"k
In'entory assessment for planning
To assess training needs
Purpose of appraisal;
8eward re'iew for deser'ing employees
Performan"e re'iew to "onfirm whether any training is required or not
Potential re'iew to "onfirm whether any management "areer planning is required or not.
7b!e"ti'es;
A"hie'ing ob!e"ti'es
Performan"e le'els
Training needs
Identifying la"king areas
Communi"ation
>EF+degree feed0ac, +Sources:
elf
enior
Peers
Duniors
Assessment "enters
Customers
PHpward appraisal is better.Q
)y#es: *Ahat "ould be assessed.
Traits
$eha'ior
Performan"e
Methods:
3. Che"k list appraisal *yesEno.
4. )or"ed "hoi"e appraisal *%CFs.
/. Essay appraisalE 7'erall assessment *paragraph.
9. :rading+ result oriented s"hemes+ and self appraisals
An a##raisal system:
i. Identify "riteria for assessment
ii. Preparation of appraisal report
iii. Appraisal inter'iew
i'. 8e'iew assessment
'. A"tionEplan preparation
'i. %onitoring progress *follow?up.
Methods of a##raisal:
i. Hpward appraisal sub?ordinates upraise their seniors
ii. Customer appraisal internal , external
iii. />5 degree appraisal
Mair"s > a##roaches to a##raisal intervie':
The tell and sell method
The tell and listen method
The problem sol'ing approa"h
Effective A##raisal:
Dob related "riteria
tandardi(ation
Trained appraisers
Employee a""ess
Purpose must be understood by both
It must be parti"ipati'e+ problem sol'ing a"ti'ity
8egularly "ondu"ted.
Effort+ integrity and ability of line managers.
&oc,ett"s a##raisal 0arriers:
-a"k of agreement on performan"e le'el
8ater is biased.
8e"en"y effe"t *weighting re"ent e'ents.
2isagreement on long term prospe"ts
7ne sided pro"ess
Central tenden"y
%any targets at annual meeting be"ome out of date.
Central tenden"y *gi'ing a'erage rating to anyone.
ampling Error *a'ailable information is insuffi"ient or ina""urate.
!nter"ie# and counseling:
3. Tell and sell method *manager tells+ and then try to gain a""eptan"e.
4. Tell and listen method *manager tells+ the subordinates responds+ and "onsensus is a"hie'ed.
/. Problem sol'ing approa"h *manage be"omes "ounseller+ and ask work problems.
Managing Careers:
Career management is a te"hnique whereby the progress of indi'iduals within an organi(ation from !ob to !ob is
planned keeping organi(ation needs and indi'idual "apa"ity in mind.
$ifference bet+een Functional Manager and 5eneral Manager:
Functional Manager 5eneral Manager
oals hort term -ong term
3rientation Task oriented :oal oriented
Role 7rgani(er )a"ilitator
Coordinating interdepartmental
a"ti'ities
7btaining and allo"ating resour"es
Information 2efined sour"es
)ormal "hannels
Poorly defined sour"es
Informal "hannels
Chapter 15 : Training Appraisal and Career Management
)raining and Develo#ment
4R Develo#ment:
#The pro"ess of extending personal abilities and qualities through de'elopment a"ti'ities e.g. training+ appraisal+ "areer
planning+ !ob rotation et".&
)raining:
#The pro"ess of pro'iding employees with spe"ifi" skills to "arry out work effe"ti'ely or to "orre"t defi"ien"ies in their
performan"e&
Develo#ment:
# An effort to enhan"e a persons abilities that organi(ation will need in future&.
$evelopment purpose:
Ensures firm meet "urrent and future performan"e ob!e"ti'es by
%aximi(ing peoples potential
Continuous impro'ement
$evelopment activities:
Training *on !ob and off the !ob.
Career planning
Dob rotation
Appraisal
7ther learning opportunities
(enefits of training and develo#ment:
For 1rgani0ation
Training supports business strategy
1igher produ"ti'ity
%anagement of 1E issues
-ess need for detailed super'ision
%ulti skilled people
u""ession planning
In"reased "ommitment
For employees:
Enhan"ed skills
Psy"hologi"al benefits *'aluable.
o"ial benefits *e.g. "onta"t.
Dob management
1hen training does not 'or,:
$ad management
Poor Dob design
Poor equipment
%oti'ation
Poor re"ruitment
7ther "hara"teristi"s of employee *e.g. intelligen"e.
)y#es of training courses:
2ay release
2istant learning
E'ening "lasses
8e'ision "ourses
andwi"h "ourse
)ull time "ourse
&earning organi!ation:
An organi(ation that fa"ilitates the learning of all its members and "ontinuously transforms itself.
A learning organi(ation "reates+ exploits and shares knowledge.
"haracteristics of learning organi0ation:
-earning approa"h to strategy
Parti"ipation in de"ision making
Information is used as a resour"e
)ormati'e a""ounting
8eward flexibility
Enabling stru"tural responsi'eness to external "hanges
All employees are en'ironmental s"anners
Inter"ompany learning
-earning "limate
)raining Process:
#tep 67 )raining needs are identified:
Training need analysis
"urrent state $esired state
Existing knowledge and skills 8equired knowledge and skills
Indi'idual performan"e 8equired standard
7rgani(ations "urrent results 2esired results
2ifferen"e between two "olumns is Training :ap.
Training sur'eys
Corporate strategy
Appraisal and performan"e re'iew
Attitude sur'eys
E'aluation of existing training programs
Dob analysis
#tep 87 #pecify 'no+ledge! s'ills and competence reBuired:
#tep 97 $efine training objectives:
These ob!e"ti'es should be "lear+ spe"ifi"+ measurable+ and obser'able.
#tep ?7 (lan training program
#tep 47 3mplement the training
%ethods of training
)ormal training
Course training *le"tures+ dis"ussions+ exer"ises+ role?plays+ "ase studies.
Computer based training
7n Dob Training
Instru"tionsE2emonstrations
Coa"hing
Dob rotation
Temporary promotion
MAssistant to Positions
A"tion learning
Committees
Pro!e"t work
#tep =7 valuate the training
Aays to e'aluate.
7rgani(ational "hanges as a result of training
Trainees learning test
Trainees rea"tion to experien"e
Changes in !ob beha'ior following training
Impa"t of training on organi(ations goals
8alidation of training means obser'ing results of training and measuring whether training ob!e"ti'es ha'e been
a"hie'ed.
,valuation of training means "omparing "osts in"urred with benefits obtained to redesignEwithdraw s"heme.
Personnel Develo#ment Plan:
#2e'elopment plan for indi'idual&
#'ill analysis:
Aim is to put interest into a"tual role.
(erformance
%i'ing of s'ills
&earning cycle 0y :ol0:
&earning styles of individuals 0y 4oney and Mumford:
Theorists
Hnderstand underlying "on"epts
Preferen"e for "on"epts or analysis
Take intelle"tual Mhand?off approa"h based on logi"al argument
8efle"tors
7bser'e phenomena+ think about them and then "hoose how to a"t
)ind learning diffi"ult if for"ed into hurried program.
Tend to be fairly slow+ non parti"ipati'e and "autious.
A"ti'ists
8equire training on hand?on
Ex"ited by parti"ipation and pressure e.g. new pro!e"ts
)lexible+ optimisti"+ rush without preparation+ take risks and get bored.
Pragmatists
:ood at learning new te"hniques in 7DT
Aim is to implement a"tion plans andEor do the task better
%ay dis"ard as impra"ti"al good ideas whi"h require de'elopment.
Com#etence
# Capa"ity that leads to beha'ior that meets !ob demands within organi(ational en'ironment and brings desired results&
)ypes of competence:
3. PersonalE$eha'ioral *Personal "hara"teristi"s and beha'ior required for su""essful performan"e..
4. Aork basedE7""upational "ompeten"e; *expe"tation of work performan"e and outputs and standards that are
expe"ted by people in spe"ifi" roles.
/. :eneri" "ompeten"e "an apply to all people in an o""upation.
"ompetence of managers:
Intelle"tual
i. trategi" Perspe"ti'e
ii. Analyti"al Dudgment
iii. Planning and 7rgani(ing
Interpersonal
i. %anaging staff
ii. Persuasi'eness
<igh %o+
<igh -ikes and does well
*%oti'ated.
-ikes but does not do well
*8equires training.
%o+ 2islikes but does well 2islikes and does not do well
Con"rete
experien"e
7bser'ation
and
refle"tion
)ormation of
abstra"t "on"epts
and generali(ations
ApplyingEtesting
the impli"ations
of "on"epts in
new situations
iii. Asserti'eness and 2e"isi'eness
i'. Interpersonal sensiti'ity
'. 7ral "ommuni"ation
Adaptability results
i. Initiati'e
ii. %oti'ated
iii. $usiness sense
Chapter 16 : Management and Human Resource
&eadershi#
)rait )heories:
-eaders ha'e "ertain qualities *Inborn or A"quired. e.g. 1eli"opter fa"tor i.e "ertain traits makes a person good leader.
Style theories:
A manager:s style is the way in whi"h the manager handles his relationship with the task and with subordinates.
-eadership is an interpersonal pro"ess and is affe"ted by beha'ior. To "reate an effe"ti'e group+ "hara"teristi"s of
followers should mat"h with "hara"teristi"s of leader.
<uneryager and <ec'man:
2i"tatorial
%anager makes de"isions and enfor"es them
%anager makes de"isions and announ"es them
Auto"rati"
%anager sells his de"isions
%anager suggests own ideas and asks "omments
2emo"rati"
%anager suggests his idea and amends as per "omments
%anager presents problem+ asks for ideas and makes a de"ision
-aisse(?faire
%anager presents a problem and asks to sol'e it.
%anager allows his subordinates to a"t freely within pres"ribed limits.
&eadershi#:
+ 2efinition
+ %anagement 's -eadership
+ %anager @ -eader
+ Gey leadership skills
+ 2e'eloping managers as leaders
+ Theories of leadership
i. Trait theory
ii. tyle theory
iii. Contingen"y theory
&eadershi# s,ills:
+ Entrepreneurship
+ Interpersonal skills
+ 2e"ision making
+ Time management
+ elf de'elopment skills
+ Competiti'e
+ :oal oriented
+ Team empowering
+ moti'ated
1holly tas, oriented
&eaders
1holly #eo#le oriented
%ic'ert:s ? elements presented in effective managers:
3. Expe"t high le'el of performan"e
4. Employee "entered
/. 0o "lose super'ision
9. Parti"ipati'e style
? styles of leadership:
Style Characteristics Strengths 1ea,nesses
)ell
(autocratic)
%anager makes de"isions
and enfor"es them
Fui"k de"ision making
uitable for routine work.
0o initiati'e and
"ommitment
7ne way "ommuni"ation
#ell
(persuasive)
%anager makes de"isions
but "on'in"e staff to
moti'ate them.
8easons are told to staff.
They ha'e better idea of
what to do
0o initiati'e and
"ommitment
"onsults %anager presents
problem+ asks for ideas
and makes a de"ision
Employees "ontribute
knowledge and
experien"e.
Initiati'e and "ommitment
low de"ision making
taff may not be mature.
Coins
(democratic)
-eader and followers
make de"isions on
"onsensus.
1igh moti'ation and
"ommitment
hares knowledge and
experien"e
low de"ision making
taff may not be mature.
Confli"t may arise.
,la'e and Mouton:s managerial grid:
1igh

Concern for #eo#le

-ow
-ow 1igh
Concern for #roduction
Contingency a##roach to leadershi#: (y %harles 6andy)
)a"tors whi"h "ontribute to the su""ess of leader;
-eaders personality
ubordinates
Task
En'ironment
Po'erG authority and res#onsi0ility:
Po'er is ability to do.
)ollowing are different forms of powers in an organi(ation;
Position powerElegitimate power
En!oyed by senior management.
It is asso"iated with parti"ular !ob+ almost authority.
8esour"e power *reward power.
En!oyed by senior management
Control o'er resour"es and power to grant them e.g. promotion
Physi"al power *"oer"i'e power.
En!oyed by seniorEmiddle management
Power of superior for"e but mostly absent.
Expert power
En!oyed by middleElow management
Power based on expertise
0egati'e power
En!oyed by middleElow management
Hse of disrupti'e attitude to stop things+ it may be destru"ti'e.
Personal power
Power in personality of indi'iduals
www."anotes.multiply."om =5
Country "lub Team
%iddle road
Impo'erished Task
Authority is right to do. *de"ision?making power.
-esponsibility is obligation to do.
3nfluence is ability to "hange beha'ior of others.
Accountability managers are a""ountable for their a"tion.
$elegation of authority sharing of de"ision making power.
Disci#line
$iscipline promotes good order and beha'ior in an organi(ation by enfor"ing a""eptable standards of "ondu"t.
$isciplinary problems:
Absenteeism
Poor pun"tuality
Poor !ob performan"e
Poor attitudes
$rea"hes of safety regulations
8efusal to "arry out legitimate instru"tions
$isciplinary actions:
Informal talk
7ral warning Aarning
Aritten or offi"ial warning
2is"iplinary lay?offs or suspension
2emotion A"tion
2is"harge
RetirementG ResignationG Redundancy
/hy retirement is encouraged:
Promotion opportunities for younger.
Early retirement is an alternati'e to 8edundan"y.
Age stru"ture may be"ome unbalan"ed.
Cost of pension rise with age.
-esignation:
Exit inter'iew
Period of noti"e.
Fair grounds for dismissal:
8edundan"y
o Employer has "eased to "arry on business all or in part
o 8equirements of employees ha'e "eased or diminished.
o 0o "ompensation if
uitable alternati'e offer made.
Employee is of pension?able age or has less than 45 years of "ontinues ser'i"e.
-egal impediment
0on?"apability
%is"ondu"t
7ther substantial reasons
Hnfair Dismissal *ee P$P.
Discrimination and E@ual o##ortunities
$iscrimination "ould be
2ire"t
Indire"t
Positi'e *law prote"ted.
Measures to address underlying problems of eBual opportunity:
upport from the top
Appoint equal opportunity managers
En"ourage disad'antaged groups to apply
%onitoring of minority
%aternity lea'es+ %aternity Pay+ Aork pla"e nurseries
)lexible hours
Career break
A""ommodate wheel"hair users
4ealth and Safety
Im#ortance of 4ealth and Safety at 'or,:
3. -egal obligation
4. A""idents "ost money
i. Compensation R 8epair "ost R In"reased insuran"e premium
ii. Time lost
iii. ubsequent performan"e is redu"ed.
i'. 8e"ruitment and training of repla"ement has "ost.
/. Corporate image is impro'ed.
Em#loyer"s Duties:
Aork en'ironment must be safe and healthy.
Plant and equipment must be maintained to standard.
Aork pra"ti"es must be safe.
1ealth and afety Poli"y should be "ommuni"ated to all employees.
tatement of prin"iples
2etail of safety pro"edures
2etailed instru"tion of how to use equipment
Training requirement
Complian"e with law
8isk assessment should be made.
1a(ard and risk information should be shared.
Identify employees who are espe"ially at risk.
Controls must be introdu"ed to redu"e risks.
There must be safety and health ad'isors.
Em#loyee"s duties:
Take reasonable "are of themsel'es and others.
Allow the employer to "arry out his duties.
Inform the employer of any situation whi"h may "ause danger.
Hse all equipment properly.
*ational legislation on im#ortant la0or matters
3. Industrial and Commer"ial Employment *tanding 7rders. 7rdinan"e 36>L
i. Appointment+ transfer+ promotion
ii. -ea'es
iii. Insuran"e
i'. $onus
'. Termination
'i. :ratuity
4. Industrial 8elations 7rdinan"e 36>6.
/. Employee o"ial e"urity 7rdinan"e 36>=
i. %edial expenses
ii. Compensation in lieu of wages during illness
9. Employee 7ld age $enefits A"t 36J>
i. 8ules for pension
=. Company Profit *Aorkers Parti"ipation. A"t 36>L.
i. =I of net profit R ad!ustments
ii. )und "ould be maintained.
>. Aorkers Aelfare )und 7rdinan"e 36J3.
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Chapter 17 : Groups in Organisation
rou#s:
#A group is any "olle"tion of people who per"ei'es themsel'es to be a group&.
ense of identity
-oyalty to group
Purpose , -eadership
)eam:
#A team is a small number of people with "omplementary skills who are "ommitted to a "ommon purpose+
performan"e goals for whi"h they hold themsel'es a""ountable&
A team "ould be;
%ulti?dis"iplinary teams
Contains spe"ialists in different areas
)reer and faster "ommuni"ation between dis"iplines in organi(ation
%ulti skilled teams
Contains people who possess many skills
Tasks "an be shared in flexible way.
Develo#ment of team: (y )uc.man)
)orming *"olle"tion of indi'iduals.
torming *targets are set and trust in"reases.
0orming *work sharing+ indi'idual requirements and expe"tations.
Performing *exe"ution of task.
Mem0ers/Roles of team: (y 9elin)
Coordinator *presides and "oordinates.
haper *dominant+ extro'ert+ task oriented.
Plant *intro'erted+ sour"e of ideas.
%onitor e'aluator *analyti"al rather than "reati'e.
8esour"e in'estigator
Implementer *administrator not leader+ s"heduling+ planning.
Team worker *supporti'e+ noti"ed in absen"e.
)inisher
Pro0lems 'ith team:
:roup norms restri"t indi'idual personality.
Confli"t in roles and relationship
Personality problems
8igid leadership
0ot suitable for all !obs
Too mu"h harmony *group think. or differen"es of opinion
Creating an effective team 'or,: (& contingency a""roach y 6andy)
The :i'en
:roups members
:roups task
:roups en'ironment
Inter'ening fa"tors
%oti'ation
-eadership
Pro"ess
Pro"edure
The 7ut"omes
Produ"ti'ity
Effe"ti'ity
7b!e"ti'e is met within time
:roup satisfa"tion
%anagement "an operate on both Mgi'ens and Minter'ening fa"tors to affe"t the Mout"omes.
Indications of Effective )eam:
Fuantitati'e fa"tors
Produ"ti'ity
Absenteeism
Turno'er rate
A""ident rate
Targets
Interruption to work rate
Fualitati'e fa"tors
Commitment
Hnderstanding
Communi"ation
)eed ba"k
Dob satisfa"tion
%oti'ation
Conflict in organi!ations: $Individual / rou# level%
Different vie's conflict in organi!ations:
)he happy family vie+:
7rgani(ations are essentially harmonious.
There are "ooperati'e stru"tures to a"hie'e "ommon goals with no systemati" "onfli"t of interest.
)he conflict vie+:
7rgani(ations ha'e "onfli"t on indi'idual and group le'el.
%embers battle for limited resour"es+ status and reward.
Confli"t "ould be destru"ti'e if not handled "arefully.
)he evolutionary vie+:
Confli"t is seen as a useful basis for e'olutionary "hange and not for re'olutionary "hange.
Could be "onstru"ti'e if handled by arguments or "ompetition(6andy).
"auses and tactics of conflicts bet+een departments:
7perati'e goal in"ompatibility
Personality differen"es
Task interdependen"e *if managed badly.
"ar"ity of resour"es
Power distribution *$oundaries of authority.
Hn"ertainty *in "hange.
8eward systems *not being fair.
"onflict D constructive and destructive
<o+ constructive <o+ destructive
2ifferent solutions 2istra"t attention from task.
Creati'ity and testing of ideas 7b!e"ti'es may be sub'erted for se"ondary goals.
Attention on indi'idual
"ontribution
2isintegration of the group
$rings emotions into open
%oti'ational fa"tors brings out
EmotionalE Ain?lose "onfli"ts may arise. *Close
"ompetition.
Effects of Conflicts 'ithin grou#s: (Sherif and Sherif) P)%L vs# Union
:ithin a grou":
:roup be"omes more stru"tured and organi(ed.
%embers eliminate their differen"es+ get "lose and demand loyalty.
Climate be"omes task oriented.
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%embers indi'idual needs are subordinated to a"hie'ement.
-eadership mo'es from demo"rati" to auto"rati" with groups a""eptan"e.
:inning grou":
Cohesion
8elaxation
8eturn to group maintenan"e and "on"ern for members needs.
Assertion for group self?"on"ept with little ree'aluation.
Losing grou":
It may deny defeat or blames on others.
-oses "ohesion.
Turn to regrouping.
8ee'aluates per"eption of itself and other group.
%ight be"ome "ohesi'e and effe"ti'e unit if defeat is a""epted.
Managerial res#onse to conflicts: (y 6unt)
2enialEAithdrawal *if "onfli"t is tri'ial.
uppression *preser'e working relations despite minor "onfli"ts.
2ominan"e *appli"ation of power to settle the "onfli"t.
Compromise *bargaining+ negotiating+ "on"iliating.
IntegrationECollaboration *emphasis must be put on task and indi'iduals must modify beha'ior.
)o reduce conflict behavior:
-imited "ommuni"ation
tru"tural separation
$ureau"rati" authority *use of.
)o encourage cooperative behavior:
Dob rotation
Inter?group training
Integration de'i"es *e.g. problem sol'ing teams+ for"e to work together.
rou# thin,: (7L 1anis)
#Psy"hologi"al dri'e for "onsensus at any "ost+ that suppresses dissent and appraisal of alternati'es in "ohesi'e
de"ision making groups&
#ymptoms of group thin':
%oral blindness *might is right.
Per"eption of unanimity
trong group pressure to quit dissent
8ationali(ation for in"onsistent fa"ts.
%utual support to guard the de"ision.
rou# su0culture:
ub"ultures are "ultures whi"h exist within "ultures.
"haracteristics:
:roup share distin"ti'e way of life+ beliefs.
-earned from others in the group.
Aay of life has somehow be"ome traditional.
Political 0ehavior:
7rgani(ations are politi"al systems be"ause people within them ha'e their own ob!e"ti'es and priorities.
Politi"al beha'ior is "on"erned with "ompetition+ "onfli"t+ ri'alry and power relationships in organi(ation.
(olitical 5ame :
%int(berg identifies various Political ;ames "layed in organization which can e useful or harmful#
;ame resist authority
;ame to counter this resistance
;ame to uild "ower asis (control over resources and su"eriors< colleagues< suordinates etc#)
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;ame to defeat rivals (interde"artmental)
;ame to change the organization
&t senior level "olitical activities occur in following cases
&llocation of resources#
*anagement Succession
7nterde"artmental coordination
Structural change
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Chapter 18 : Strategies for Critical Periods
&arge 7s6 Small organi!ations
Issues/#ro0lems in large organi!ations:
$rganization/s structure:
haring roles and responsibilities *who does whatC.
1ow mu"h spe"iali(ation
1ow many le'els of management
2elegation of authority *"entrali(ed or de"entrali(ed.
Planning and control:
@ague a""ountability
%I should be in pla"e
Coordination
8eward
Slow ado"tion to change
*otivation is down
4o self-esteem
Slow decision-ma.ing
Solutions:
2e"entrali(ed and delegation of authority
)air pay poli"ies with bonus+ awards and rewards
%I
2elayering in hierar"hy
Dob design
Issues/#ro0lems in small organi!ations:
7'er relian"e on a few key persons
0o e"onomies of s"ale
mall market areaE restri"ted range of produ"ts
-ow bargaining power
Cannot raise money
Can not afford help *from experts.
Solutions:
:rowth
pe"ialist ser'i"ing
Gey persons insuran"e
Cor#orate decline
> ty#es of decline:
67 $eclining industries (i7e7 nvironment entropyE environment is no longer supportive)
Temporary de"line *produ"t re'itali(ation.
Permanent de"line *end game.
87 Vulnerability
-EPT
Porters = for"es
97 $eclining company (i7e7 organi0ation atrophy)
ymptoms *by tuart latter.
2e"rease in sales re'enue
2e"rease in profitability
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2e"rease in liquidity
2e"rease in market share
-a"k of planning
In"rease in gearing
Top management fear
Change in senior exe"uti'e
)inan"ial engineering *"hange in a""ounting poli"ies+ auditors et"..
8estri"tion on di'idend poli"y
9 stages in the "risis *by tuart latter.
$lind stageECrisis denial
Ina"tionE1idden "risis
)aulty a"tionE2isintegration
CrisisECollapseE2issolution
Causes of decline and strategies to overcome:
Causes Strategies
Poor management
Poor finan"ial "ontrols
1igh "ost stru"ture
Poor marketing
Competiti'e weakness
$ig pro!e"tsEa"quisition
Es"alation of "ommitment of bad de"isions
0ew management R restru"turing
Tighter "ontrols R delegation of responsibilities
Cost fo"us strategy R Ansoffs matrix
8ede'elop marketing mix R moti'ate sales for"e
Porters generi" strategies
)easibility reports
-easons for escalation:
They think de"ision was rightB implementation was wrong.
1umiliation of "limb down.
Consisten"y is 'alued.
%istakes are 'iewed as failure not learning
7ut"omes are un"ertain.
)ailure to understand prin"iple of rele'ant "ost.
)urnaround of decline:
@isionary leader required.
Contra"tion and "ost "utting.
8ein'estment in organi(ations "apability.
8ebuilding with inno'ation.
Chapter 19 & 20 : Change Management and Changing
Environment
Change
)y#es of change:
Changes in en'ironment *Cause.
Changes in organi(ation *Effe"t.
Changes in produ"tsEser'i"es
Changes in te"hnology and working "onditions
Changes in management and working relations
Changes in organi(ational stru"ture and si(e
"hange is small and gradual whereas )ransformation is crucial and significant#
Factors forcing change:
En'ironmental fa"tors;
-EPT
Porters = "ompetiti'e for"es
Changes in Te"hnology;
Computeri(ation
0ew produ"ts
$etter %I
Change in Aorking "onditions;
0ew offi"es
@aried work times
Emphasis on health
:o't. regulations
Change in %anagement;
0ew style of leadership
Parti"ipation in de"ision making
Collaboration between management staff , unions
Change in Personal poli"ies;
Change in rules and pro"edures *e.g. smoking.
Promotion+ transfer+ training + de'elopment
Change in stru"ture and si(e;
2ue to Takeo'ers
2elegation of authority
Centrali(ation
2ownsi(ing
Model for change:
2etermine needEdesire for "hange in a parti"ular area.
Prepare tentati'e plan *'ia $rainstorming.
Analy(e probable rea"tions to "hange.
%ake a final de"ision *Coer"i'e or Adapti'e.
Establish time table for "hange. peed of implementation will depend on;
Type of "hange *Coer"i'e+ Adapti'e or %anaged resistan"e "hange.
8ea"tion of people *A""eptan"e+ Indifferen"e+ Passi'e resistan"e+ A"ti'e resistan"e.
2ri'ing and 8estraining for"es *)or"e )ield Analysis.
Communi"ate the plan for "hange
Implement+ re'iew and modify "hange.
8e'iew the "hange
A##roaches to change:
i. Hnfree(e < %o'e Ehake< 8efree(e
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Changes may occur due to
? Threat of new entrants
? $argaining power of suppliers
? $argaining power of "ustomers
? Threat of substitutes
? 8i'alry between "ompetitors
*ature of strategic change:
In"remental
Change may be
Transformational
8ea"ti'e
%anagement may
$e Pro?a"ti'e
tep "hange
Types of Planned "hange
Changes
Emergent "hange
Resistance to change
A"ti'e resistan"e passi'e resistan"e
ii. Adapti'e "hange approa"h
iii. Coer"i'e "hange approa"h
i'. Hsing Change agent
'. Integrati'e @ segmentalist
'i. Theory E , Theory 7
Force Field Analysis: *-ewin.
It is an interplay of restraining and dri'ing for"es that keeps things in equilibrium.
Introducing change:
/ fa"tors to "onsider to minimi(e resistan"e.
(ace of change:
Adapt strategy a""ording to time a'ailable.
Manner of change:
8esistan"e should be wel"omed.
8easons and results of "hange should be "ir"ulated.
Change must be sold to people "on"erned.
Indi'iduals must be helped to learn.
#cope of change:
mall or Transformation.
Change #rocess: *by -ewinE"hein.
@nfree0e e2isting behavior:
%ost diffi"ult and negle"ted stage.
elling the "hange.
:i'e moti'e for "hange.
,ehavior change:
Identify new beha'ior.
En"ourage indi'iduals to own "hange.
-efree0e ne+ behavior:
Through positi'e or negati'e reinfor"ement
Effect of change on Peo#le:
Physiologi"al effe"t *e.g. pattern of shift working affe"t eating+ walking and sleeping habits.
Cir"umstantial effe"t *e.g. working en'ironment and working relations.
Psy"hologi"al effe"t *e.g. feeling of disorientation+ Inse"urity+ risk of re!e"tion+ feeling of misfit.
Effe"t on elf "on"ept *0ew psy"hologi"al "ontra"t+ Hn"ertainty affe"ts sense of "ompeten"e.
Changing culture:
1amper Turner suggests > modes of inter'ention;
3. )ind the dangers *lo"ate bla"k sheeps.
4. $rings "onfli"ts in open.
/. 2is"uss "ulture with members *play out "orporate drama.
9. 8einterpret the "orporate myths.
=. -ook at symbols+ images+ rituals.
>. Create a new learning system.
Pattern of unhealthy culture: *by Edwin $aker.
)lourished initially by founder.
)ounder retired+ employees be"ome rigid and insular.
peed+ inno'ation+ flexibility+ "on"ern for sur'i'al and "ustomer disappeared.
)ormali(ation
2epartmentalismE ub optimi(ation
Coer"i'e a"tions needed to "ompete.
3rgani!ational life cycle:
4andy"s sigmoid curve:
Appli"ation of "on"ept of life"y"le to organi(ation with 9 broad stages;
3. The organi(ation is established.
4. 7rgani(ation grows in si(e and s"ope.
/. Period of maturity
9. 7rgani(ation begins to de"line.
u"h a life"y"le is not ine'itable+ if organi(ation is able to adapt.
reiner"s gro'th model: $ro'th 5 3rganisational Develo#ment%
As an organi(ation ages+ it grows in si(e.
This growth takes pla"e in = dis"rete phases.
Ea"h phase has 4 "hara"teristi"s i.e.
E'olution *distin"ti'e fa"tor that dire"ts growth. and :rowth *#%o'e& tage.
8e'olution. *"risis to pass to enter next phase. Crisis *#Hnfree(e& tage.
(hase 6: (Focus)
E'olution *mall organi(ation fo"using on operations+ personnel issues and inno'ation.
8e'olution *0eed for leadership skills.
(hase 8: (Management&group)
E'olution *%anagement is professionali(ed+ there are more employees but less enthusiasm.
8e'olution *delegation is problemB la"k of detailed "ontrolB no initiation.
(hase 9: (#ystem)
E'olution *de"entrali(ed de"ision making.
8e'olution *no "oordination between departments+ sub optimi(ation o""urs.
(hase ?: (3nternal "ontrols)
E'olution *Internal "ontrol systems and pro"edures are de'eloped for "oordination and optimal use of
resour"es.
8e'olution *new pro"edure inhibits useful a"tions.
(hase 4: ("ommunication & collaboration)
E'olution *In"reased informal "ollaborationB "ontrol is "ultural rather than formal.
8e'olution *Crisis of psy"hologi"al saturation in whi"h indi'iduals be"ome exhausted by teamwork.
Criticism on lifecycle models:
)ormation "ould also be by %erger or Doint 'enture. i.e not always founded by 'isionary ppl.
Too many issues for growth and "ontrol. *i.e org. stru"ture+ org. "ulture.
:rowth is not the same as effe"ti'eness. *i.e not a normal state of affair.
0o idea of time s"ale in'ol'ed in any stage. *i.e -inear de'elopment.
:rowth seen as linear de'elopment o'er timeB there might be different rates of growth at
different times and e'en loss.
%odel does not "learly indi"ate relationship with en'ironment. *i.e it ignores en'ironment.
Effe"t of "ompetition in market is also ignored.
Measurement of ro'th: (how &dam3ee is the largest insurance co#)
ales re'enue
Profit *in absolute term or 87CE.
0o. of goodsEser'i"es sold.
0o. of outlets
0o. of employees
0o. of "ountries rea"hed.
0o. of markets ser'ed.
Chapter 22 : The evolution of marketing concept
Ithe right #roduct or service to the right customerG at the right #riceG at the right time and right #laceJ
Mar,eting De#artment: Functions $ResearchG DemandG DesignG Selling%
Mar,eting Environment: PES)E& $PoliticalG EconomicalG SocialG )echnologicalG EcologicalG &egal%
C)apter .- /ntroduction
Mar,etingG :
Managerial definition: %anaging profitable "ustomer relationships+ by deli'ering superior 'alue to "ustomers.
#ocial definition: #a so"ial and managerial pro"ess by whi"h indi'iduals and groups obtain what they need and want
through "reating and ex"hanging produ"ts and 'alue with others.&
Core Mar,eting conce#ts:
Mar'et:
A mar.et is the set of a"tual and potential buyers of a produ"t.
Needs! +ants and demands:
0eeds are fulfilled ; a state of felt depri'ation.
Aants are satisfied ; the form taken by a human need as shaped by "ulture and indi'idual personality.
2emands are extinguished ; 1uman wants that are ba"ked by buying power.
Mar'eting 1ffer:
Combination of good?ser'i"e offered to market to satisfy need or want.
Value and #atisfaction
Customer"s #erceived value is the differen"e between the 'alues that the "ustomer gains from owning and using a
produ"t and the "osts of obtaining the produ"t.
Satisfaction is whether performan"e meets or ex"eeds expe"tations.
2change! )ransaction and relationship:
2change is an a"t of obtaining a desired ob!e"t from someone by offering something in return.
)ransaction is a trade of 'alue between two parties.
Elements of Mar,eting:
Company
upplier %arket Intermediaries End user
Competitors
E0@I780%E0T
Customer"s life time value:
@alue of entire stream of pur"hases by "ustomer o'er his lifetime.
Customer E@uity:
Total lifetime 'alue of all of "ompanys "ustomers.
Mar,eting Management:
*ar.eting management has four fun"tions; &nalysis< Planning< 7m"lementation and control#
'emar.eting/s aim is to redu"e demand temporarily or permanently. It is done when produ"t is not feasible from
supplier or "ustomers point of 'iew. i.e intentional and non?intentional redu"tion in demand.
Mar,eting Management 3rientations
The production concept holds that "onsumers will fa'or produ"ts that are a'ailable and highly affordable and that
management should+ therefore+ fo"us on impro'ing produ"tion and distribution effi"ien"y.
The product concept states that "onsumers will fa'or produ"ts that offer the most quality+ performan"e+ and features+
and that the organi(ation should+ therefore+ de'ote its energy to making "ontinuous produ"t impro'ements.
The selling concept is the idea that "onsumers will not buy enough of the organi(ations produ"ts unless the
organi(ation undertakes a large?s"ale selling and promotion effort.
The mar'eting concept holds that a"hie'ing organi(ational goals depends on determining the needs and wants of target
markets and deli'ering the desired satisfa"tions more effe"ti'ely and effi"iently than "ompetitors do.
The societal mar'eting concept holds that the organi(ation should determine the needs+ wants+ and interests of target
markets. It should then deli'er the desired satisfa"tions more effe"ti'ely and effi"iently than "ompetitors in a way that
maintains or impro'es the "onsumers and the so"ietys well?being.
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C3*CEP) CHS)3MER 1A*)S C3MPA*C S43H&D
Produ"tion "on"ept A'ailability and affordability Impro'e produ"tion+ distribution
efforts
Produ"t "on"ept Fuality+ performan"e+ features Continues produ"t impro'ement
elling "on"ept 0o feelings to pur"hase -arge s"ale selling+ promotion
%arketing "on"ept 0eeds , wants of target market Effe"ti'e , effi"ient than "ompetitor
)'o Ste#s of mar,eting:
2etermine 0eed+ Aants And Interest 7f Target %arket
Then atisfy Them Effe"ti'ely And Effi"iently
Mar,eting 7s6 Selling:
tarting point )o"us %eans Ends
elling "on"ept )a"tory Existing produ"ts 1ow to in"rease
demand
Profits through sales 'olume
%arketing "on"ept %arket Customer needs 1ow to satisfy
demand
Profits through "ustomer
satisfa"tion
2espite adoption of market oriented approa"hB there is need for sales force:
To "reate awareness
To "on'in"e to buy from "ompany+ not from "ompetitors
To reassess benefits to "ustomers
To "on'in"e that a'erage "ustomers requirements are met
(roblems in introducing the mar'eting approach:
Hnderstand what marketing orientation a"tually means
7rgani(ational+ stru"tural and "ultural "hanges are required.
Assessment of Produ"t+ logisti"+ le'el of ser'i"es and marketing te"hniques
7rgani(ation wide dedi"ation
Aorking together as whole
Sco#e of Mar,eting 8 Mar,eting Planning
Mar,eting 7s6 R5D de#artment:
%arketing has "ommer"ial and "ompetiti'e atmosphere whereas 8,2 has Hni'ersity atmosphere with open?end work
and "onsumption of substantial resour"es.
Customers needs and "hange in produ"t spe"ifi"ation tighten them.
Consumerism is a term des"ribing importan"e and power of "onsumers.
Customer 2atabase
Customer Relationshi# Management:
Customer Portfolio
2efined narrowly as a "ustomer database management a"ti'ity.
#C8% is managing detailed information about indi'idual "ustomers and "arefully managing "ustomer tou"h points to
maximi(e "ustomer loyalty&.
Companies look for tou"h points. These in"ludes "ustomer pur"hases+ sales for"e "onta"t+ ser'i"e+ and support "alls+
Aeb site 'isits+ satisfa"tion sur'eys+ "redit and payment intera"tions+ market resear"h studies+ et".
To be effe"ti'e in C8%+ the marketer must forego short?term profit maximi(ation on indi'idual transa"tions.
Elements of Mar,eting Mi-:
"ontrollable:
Produ"t
Pri"e
Pla"e
Promotion
@ncontrollable: *%arketing en'ironment.
)y#es of Mar,eting
Strategic Mar,eting )actical Mar,eting
Tied with "orporate strategy hort term+ and fo"uses
e.g whi"h produ"t of market to "hoose on pla"e+ promotion+
pri"e
4o' to et Customer )ouch Points:
? Pur"hasing trend
? Payment trend
? er'i"e obtaining trend
? )amily trend
? 1istory
? upport "alls
? Aebsite 'isits
? Emotional atta"hments
-EPT Analysis
Porters = for"es model
i. Threat of new entrants
ii. Threat of substitutes
iii. $argaining power of "ustomers
i'. $argaining power of suppliers
'. 8i'alry among "ompetitors
#ervice industry:
People
Pro"esses
Physi"al e'iden"e
Im#ortant Points for discussion @uestions:
3. Expe"tation O Per"ei'ed 'alue
4. Customers often do not !udge produ"ts 'alue and "ost a""urately and ob!e"ti'ely.
/. A Customer buys the highest per"ei'ed 'alue.
9. atisfied "ustomers gi'e benefits of
i. -oyal
ii. $eing less pri"e sensiti'e
iii. Talk fa'orably
=. Two fold ob!e"t of marketing
i. 8etain existing "ustomer by pro'iding satisfa"tion
ii. Attra"t and grow new "ustomers by promising superior 'alue
Mar,eting A##roaches
Push A##roach Pull A##roach
)o"used on pushing goods to )o"used on pulling resellers
8eseller and "ustomer. The fo"us and "ustomers by satisfying them+
Is on sale 'olumes. )ulfilling their demands to attra"t
Them to the "ompany
)hree Im#ortant Conce#ts:
7alue+Chain : 1ow a"ti'ities of organisation "ontributes towards "reating 'alue in goods or ser'i"es.
Internal Customer Conce#t: 2epartment in an organisation treat ea"h other as M"ustomers+ it en"ourages ser'i"e?
oriented attitude. 1en"e when e'ery department is satisfied ultimately the
quality will be enhan"ed.
Relationshi# Mar,eting: To build long term relationship with existing "ustomers+ rather than fo"using on produ"ts+
fo"us is on relationship i.e selling more produ"ts to same "ustomer+ rather than to new
"ustomers.
Model of Consumer 0ehavior:
A model of "onsumer beha'ior helps managers answer questions about what+ where+ how and how mu"h+ when and
why they buy.
)he stimulus*response model of buyer beha'ior shows that marketing *made up of the four PsUprodu"t+ pri"e+ pla"e+
and promotion. and other en'ironmental stimuli *%i"ro and %a"ro. center on the consumer:s Fblac' bo2& and
produce certain responses.
*ar.eters must figure out what is =in> the consumer/s =lac. o5#>
Mar,eting and other environmental stimuli: *i.e timulus < response model.
&lready discussed
Consumer"s (lac, 0o-:
)he Fblac' bo2G has two parts.
3.. The buyers "hara"teristi"s influen"e how he or she per"ei'e and rea"t to
stimuli. *Hn"ontrollable.
4.. The buyers de"ision pro"ess itself affe"ts the buyers beha'ior. *emi?"ontrollable.
Characteristics affecting consumer 0ehavior:
%arketer "an not "ontrol them but should learn them.
Cultural
o Culture
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o ub"ulture
o o"ial "lass
o"ial
o 8eferen"e group
o )amily
o 8oles and status
Personal
o Age and life"y"le stage
o 7""upation
o E"onomi" situation
o -ifestyle
o Personality and self "on"ept
Psy"hologi"al
o %oti'ation
o Per"eption
o -earning
o $eliefs and attitudes
"ulture is the set of basi" 'alues+ per"eptions+ wants+ and beha'iors learned by a member of so"iety from family and
other important institutions.
#ubculture is a group of people with shared 'alue systems based on "ommon life experien"es and situations.
ub"ultures might be nationality groups+ religious groups+ ra"ial groups+ or geographi" area groups.
#ocial classes are so"ietys relati'ely permanent and ordered di'isions whose members share similar 'alues+ interests
and beha'iors.
-eference group has a dire"t *fa"e to fa"e. or indire"t points of "omparison or referen"e in forming a persons attitudes
or beha'ior.
Aspirational group is one to whi"h an indi'idual wishes to belong.
1pinion leader is a person within a referen"e group who+ be"ause of spe"ial skills+ knowledge+ personality or other
"hara"teristi"s+ exerts influen"e on others.
(ersonality is a persons unique psy"hologi"al "hara"teristi"s that lead to relati'ely "onsistent and lasting responses to
his or her own en'ironment.
A motive (drive) is a need that is suffi"iently pressing to dire"t the person to seek satisfa"tion.
(erception is the pro"ess by whi"h people sele"t+ organi(e+ and interpret information to form a meaningful pi"ture of
the world.
%earning is "hanges in an indi'iduals beha'ior arising from experien"e.
,elief is a des"ripti'e thought that a person holds about something.
Attitude is a persons "onsistently fa'orable or unfa'orable e'aluations+ feelings+ and tenden"ies toward an ob!e"t or
idea.
Purchase Decision Process
i% Pro0lem Recognition:
Per"ei'ing a need.
It "an be stimulated by;
Consumers depleted assortment *e.g. empty paste. or
%arketing efforts
ii% Information Search:
To "larify options a'ailable to "onsumers.
o Internal sear"h; "anning of memory *experien"e. or knowledge about solution of problemEneed suffi"ient
)or frequentEregular pur"hases.
o External sear"h;
Personal sour"es *family+ friends+ neighbors+ a"quaintan"es.
Commer"ial sour"es *ad'ertisement+ dealers+ websites+ salesmen.
Publi" sour"es * %ass media+ "onsumer rating organi(ations.
)or new produ"ts.
#Aord of %outh& or #Personal sour"es& has 4 ma!or ad'antages *through satisfied "ustomers.;
3. Con'in"ing+ i.e. of "onsumers by "onsumers for "onsumers
4. Costs are low.
At the end of this stage+ "ustomer arri'es at a set of final brand "hoi"es.
iii% Evaluation of alternatives:
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Assessing 'alue.
Customer may be interested in many attributes. E.g. for Camera
Pi"ture tube
Ease of use
i(e
Pri"e
1owe'er sometimes "onsumer has to base his de"ision only on one attribute.
iv% Purchase Decision: PThe best rated "amera will be bought.Q
v% Post+Purchase 0ehavior:
2issatisfied
atisfied
2elighted
A poli"y by firms is to understate performan"e be"ause "ustomers are delighted with better?than?expe"ted performan"e.
1hy satisfaction of Customer/study of this stage is im#ortant:
3. To attra"t new "ustomers "ost more than to retain "urrent "ustomers.
4. atisfied "ustomers are less pri"e sensiti'e.
/. atisfied "ustomers tell others *words of mouth.. $ad words tra'el farther and faster.
Decision #rocess for ne' #roduct i6e6 stages in ado#tion #rocess $from hearing to ado#tion%:
3. Awareness;
4. Interests; seek information i.e. through external sour"es
/. E'aluation; whether to try or not
9. Trial; on small s"ale to impro'e estimate of 'alue
=. Adoption; de"ides to make full and regular use
Cha#ter / Com#any and mar,eting strategy
Strategic Planning Process:
#trategi" Planning is the pro"ess of de'eloping and maintaining a strategi" fit between organi(ations goals and
"apabilities and its "hanging marketing en'ironment.
)ollowing are steps of strategi" planning;
3. 2efining mission
4. Analysis of $usiness Portfolio
/. etting strategi" ob!e"ti'es and goals
9. 2e'eloping Competiti'e strategies
i. Porters = for"es
ii. Cost?2ifferentiation?)o"us Triangle
iii. :rowth trategies *"roduct/mar.et e5"ansion grid)
=. 2e'eloping detailed marketing and departmental plans and strategies
Mission Statement:
This is a statement of organi(ations purposes? Ahat it wants to a""omplish in the larger en'ironment.
It should be mar'et oriented! specific! realistic! motivating and consistent with market en'ironment.
e.g. #To pro'ide best satisfa"tion to "ustomers and fair return on in'estment+ keeping en'ironment healthy and "lean
and promising se"ure future to employees&
Designing the 0usiness #ortfolio:
,usiness portfolio is the "olle"tion of businesses and produ"ts that make up the "ompany.
$usiness portfolio planning in'ol'es 4 steps;
3. Analysis of "urrent business portfolio.
4. 2e'eloping strategies
=6 Portfolio Analysis:
A tool by whi"h management identifies and e'aluates #,@s to determine whi"h business should re"ei'e more+ less or
no in'estment.
,"5 gro+th*share matri2 is used to e'aluate a "ompanys $Hs in terms of market growth rate and relati'e market
share.
#,@ is a unit of "ompany that has a separate mission and ob!e"ti'es and that "an be planned independently from other
"ompany businesses.
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/6Develo#ing strategies for gro'th and do'nsi!ing:
The "roduct/mar.et e5"ansion grid is a portfolio?planning tool for identifying "ompany growth opportunities through;
E-isting Product *e' Product
E-isting Mar,et %arket Penetration Produ"t 2e'elopment
*e' Mar,et %arket 2e'elopment 2i'ersifi"ation
Do'nsi!ing:
Ahen a firm redu"es business portfolio by eliminating produ"ts or business that is not profitable or no longer fit its
o'erall strategy..
Setting strategic o09ectives and goals:
)irms mission is translated into set of ob!e"ti'es for the "urrent period for ea"h $H.
Develo#ing #lans and strategies
Mar,eting Process:
The mar,eting #rocess is the pro"ess of
3. segmenting the market+
4. sele"ting target markets+
/. marketing positioning
9. de'eloping the marketing mix+ and
=. managing the marketing effort.
Mar,eting mi-:
The marketing mix is the set of "ontrollable fa"tors that the firm blends to produ"e the response it wants in the target
market. i.e. Produ"t+ Pri"e+ Pla"e+ Promotion
Managing the Mar,eting Effort:
%arketing %anagement has four fun"tions of analysis< "lanning< im"lementation< and control.#
=6 Mar,eting Analysis
o Analysis of "ompanys trength and Aeakness PInternalQ
o Analysis of en'ironments 7pportunities and Threats. PExternalQ
/6 Mar,eting Planning in'ol'es de"iding on marketing strategies to attain its o'erall strategi" ob!e"ti'es of "ompany.
>6 Mar,eting Im#lementation is the pro"ess that turns marketing strategies and plan into marketing a"tions in order to
a""omplish strategi" marketing ob!e"ti'es. Implementation addresses the who+ where+ when+ and how.
?6 Mar,eting control is the pro"ess of e'aluating the results of marketing planning and its implementation+ and taking
"orre"ti'e a"tion to ensure that marketing ob!e"ti'es are attained.
Two broad forms of "ontrol are important;
3.. 1perating control in'ol'es "he"king ongoing performan"e against the annual plan and taking "orre"ti'e
a"tion when ne"essary.
4.. #trategic control in'ol'es looking at whether the "ompanys basi" strategies are well mat"hed to its
opportunities. The ma!or tool for a""omplishing this form of "ontrol is the marketing audit.
The mar'eting audit is a systemati" analysis and e'aluation of organi(ations marketing position and performan"e. It
may "o'er all marketing a"ti'ities or some of them.
Audit will fo"us on / things;
3. %arketing "apabilities
4. Performan"e e'aluation *are sales meeting fore"astsC.
/. Competiti'e effe"ti'eness *"ompetiti'e ad'antage+ produ"t differentiation.
Partnershi# relationshi# management:
#Aorking "losely and !ointly with
7ther departments of "ompany
7ther "ompanies
to bring greater 'alue&.
7alue Chain and 7alue delivery net'or,:
Value "hain is series of departments within the "ompany "arrying out 'alue?adding a"ti'ities e.g.
2esigning
Produ"ing
%arketing
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2eli'ery
upporting
Value delivery net+or' is network of suppliers+ "ompany+ intermediaries+ and "onsumers who partner with ea"h other
to impro'e performan"e of entire system.
Chapter 23 : Strategic Marketing & Planning
67 Mar'et #egmentation
Mar'et segmentation is di'iding a market into smaller group of distin"t buyers who ha'e different needs+
"hara"teristi"s or beha'ior and might require different marketing mixes.
Mar'et segment is a group of buyers who respond in a similar way to a gi'en set of marketing mix.
(asis of segmenting mar,ets:
Segmenting consumer mar,et
5eographic segmentation "alls for di'iding the market into different geographi"al units su"h as states+ regions+
"ounties+ "ities+ or neighborhoods.
$emographic segmentation "alls for di'iding the market into groups based on 'ariables like age+ gender+ family si(e+
family life "y"le+ in"ome+ o""upation+ edu"ation+ religion+ ra"e+ generation+ and nationality.
(sychographic segmentation "alls for di'iding a market into different groups based on so"ial "lass+ lifestyle+ or
personality "hara"teristi"s.
There are four possible lifestyle "ategories;
3. Hpward mobile+ ambitious
i. eek better or more affluent lifestyle
ii. 1igher standard of li'ing
iii. Aill try new produ"ts
4. Traditional and so"iable
i. Compliant and "onform to group norms
ii. Pur"hasing pattern will be M"onformist
/. e"urity and tatus seeking
i. tresses se"urity and ego?defensi'e needs
ii. Pur"hase of known and established produ"ts and brands e.g. Insuran"e
9. 1edonisti" preferen"e
i. Emphasis on #en!oying life now&
ii. Immediate satisfa"tion of needs and wants
,ehavioral segmentation in'ol'es di'iding a market into groups based on "onsumer knowledge+ attitudes+ uses+ or
responses to a produ"t. E.g.
7""asion segmentation; di'iding market a""ording into groups a""ording to o""asions when buyers get the
idea to buy+ a"tually make their pur"hase+ or use pur"hased item.
$enefit sought; 2i'iding market into groups a""ording to different benefits that "onsumers seek from the
produ"t. Consumers seek unique "ombination of benefits e.g. for a laundry detergent+ from "leaning and
blea"hing to e"onomy+ fresh smell+ strength or mildness et".
Hser status and user rate
-oyalty status
Segmenting (usiness Mar,ets
$emographic segmentation
Industry *whi"h industry.
Company si(e *what si(e.
-o"ation
1perating variables
Te"hnology *what te"hnology to fo"us.
Hser? nonuser status *hea'y+ medium or light user.
Customer "apabilities *many ser'i"es or few ser'i"es.
(urchasing approaches
Pur"hasing fun"tion organi(ation *"entrali(ed or de"entrali(ed.
Power stru"ture
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0ature of existing relationship
:eneral pur"hasing poli"ies *leasing+ ser'i"e "ontra"ts+ or sealed bidding.
Pur"hasing "riteria *quality+ ser'i"e or pri"e.
#ituational factors
Hrgen"y *qui"k deli'eryEser'i"eC.
pe"ifi" appli"ation
i(e of order
(ersonal characteristics
$uyer?seller similarity of 'alues
Attitude towards risk *risk taking or a'erse.
-oyalty *to "ompanies who show high loyalty to suppliers.
Segmenting International Mar,ets
Companies "an segment international markets using one or more of a "ombination of 'ariables. The "hief fa"tors that
"an be used are;
3.. :eographi" lo"ation; lo"ation or region
4.. E"onomi" fa"tors; Population in"ome or le'el of e"onomi" de'elopment
/.. Politi"al and legal fa"tors; Type E stability of go'ernment+ monetary regulations+ amount of bureau"ra"y+ et".
9.. Cultural fa"tors; -anguage+ religion+ 'alues+ attitudes+ "ustoms+ beha'ioral patterns.
Re@uirements for Effective Segmentation
Su0stantialUsegment must be substantially large or profitable.
Accessi0leUsegment must be rea"hed and ser'ed easily.
Differentia0leUIt must be "on"eptually distinguished and should ha'e the ability to respond differently to different
marketing mix elements and programs.
Actiona0leUIt should be possible to design effe"ti'e programs for attra"ting and ser'ing market segment.
Measura0leUi(e+ pur"hasing power+ and profiles of a market segment should be measurable.
87 )arget Mar'eting
)arget mar'et is a set of buyers sharing "ommon needs or "hara"teristi"s that the "ompany de"ides to ser'e.
)arget mar,eting strategies: ((roduct affecting (romotion)
The firm "an adopt one of four target marketing strategies;
A. @ndifferentiated mar'eting $or mass mar,eting% a market?"o'erage strategy in whi"h a firm de"ides to ignore
market segment differen"es and go after the whole market with one offer
$. $ifferentiated mar'eting $or segmented mar,eting% a market?"o'erage strategy in whi"h a firm de"ides to target
se'eral market segments and designs a separate offer for ea"h.
C. "oncentrated mar'eting $or niche mar,eting% a market?"o'erage strategy in whi"h a firm goes after a large
share of one or a few segments or ni"hes.
2. Micromar'eting is the pra"ti"e of tailoring produ"ts and marketing programs to suit the tastes of spe"ifi"
indi'iduals (individual mar'eting) and lo"al "ustomer groups (%ocal mar'eting).
%arket offers "an be differentiated along the lines of;
Produ"t
er'i"e
Channels
People
Image
Considerations 'hile choosing strategy:
Company+ resour"es and ob!e"ti'es
Competitor+ strategies
Produ"t
o stage in the life "y"le
o 'ariability
%arket+ 'ariability
Evaluating Mar,et Segments
egment si(e and growth
egment stru"tural attra"ti'eness
-e'el of "ompetition
ubstitute produ"ts
Power of buyers
Power of suppliers
Company ob!e"ti'es and resour"es
97 (roduct (ositioning
(roduct positioning is imaging the produ"t in the minds of "onsumers relati'e to "ompeting produ"ts.
Positioning task *or "hoosing a positioning strategy. "onsists of following four steps;
3. Identifying possible "ompetiti'e ad'antages
4. Choosing right "ompetiti'e ad'antages
/. ele"ting an o'erall positioning strategy
9. 2e'eloping a positioning statement
=% Identifying #ossi0le com#etitive advantages:
"ompetitive advantage (ma'ing a difference) is an ad'antage o'er "ompetitors gained by offering "onsumers greater
'alue+ either through lower pri"es or by pro'iding more benefits that !ustify higher pri"es.
/% Choosing the right com#etitive advantages:
<o+ many to promote:
7nly one differen"e. Aggressi'e approa"h
%ore than one differen"es. Ahere more than one firms are "laiming to be the best at same attribute. 1owe'er it risks
disbelief and a loss of "lear positioning.
/hich ones to promote:
Important for buyers
2istin"ti'e than "ompetitors offer
uperior
Communi"able and 'isible differen"e
Competitors "an not "opy easily
Affordable for buyers
Profitable for "ompany
>% Selecting an overall com#etitive #ositioning strategy:
Ahat offer to make in relation to "ompetitors offer *Hse 4x4 or /x/ :rid.
Price
Kuality
1ther strategies are:
%ore for same *Penetration.
ame for less
-ess for mu"h less
?% Develo#ing #ositioning statement:
(ositioning statement is a statement that summari(es "ompany or brand positioning+ it takes following form;
#To *target segment and need. our *brand. is *"on"ept. that *point of differen"e.&
e.g.
#To young+ a"ti'e+ soft?drink "onsumers who ha'e little time for sleep+ %ountain 2ew is the soft drink that gi'es you
more energy than any other brand be"ause it has the highest le'el of "affeine&.
More Same &ess
More Premium brand uper bargain brand
Same A'erage $argain brand
&ess Cow bow brand E"onomy brand
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Chapter 24 : Marketing Research
Mar,eting Research
Mar,eting Research:
#It is the ob!e"ti'e gathering+ re"ording+ and analy(ing of all fa"ts about problems relating to the transfer and sales of
goods and ser'i"es from produ"er to "onsumer or user&
%arketing resear"h helps in
a. 8egulating systems
b. 8edu"ing risks
". 2e"ision making
)y#es of Mar,eting Research:
Mar'et research:
tudy and analysis of
Chara"teristi"s of market
%arket share
%arket trends
ales fore"asting for all produ"ts
%arket potential for existing produ"ts
-ikely demand for new produ"ts
(roduct research:
Comparati'e study between "ompetiti'e produ"ts
tudies into pa"kaging and design
)ore"asting new uses for existing produ"ts
Customer a""eptan"e of proposed new produ"ts
2e'elopment of new produ"t lines
Test marketing
(rice research:
Analysis of elasti"ity of demand
Analysis of "ost and profit margins
Effe"t of "hange in "redit poli"y on demand
Customers per"eption of pri"e and quality
(lace ($istribution) research:
The lo"ation and design of distribution "enters
Analy(ing the pa"kaging for transportation and shel'ing
Cost of different methods of transportation and warehousing
2ealer supply requirements
2ealer ad'ertisement requirements
(romotion research:
Analy(ing the effe"ti'eness of sales for"e
Analy(ing the effe"ti'eness of ad'ertising on sales demand
Establishing sales territories
Research #rocedure:
The mar,eting research #rocess "onsists of following steps;
3. 2efining the problem
4. 2esigning the resear"h *basis of resear"h ob!e"ti'es.
/. Colle"tion of data
9. Analysis of data *Pre and Post testing et".
=. Presentation of report
>. %anagement de"ision
0efining t)e pro%lem and designing t)e researc)
After the problem has been defined "arefully+ the manager and resear"her must set the resear"h ob!e"ti'es.
Collection of data (,esearc) 1or2!
%arketing 8esear"h data "omprises of
Primary 2ata *)ield sear"h.
e"ondary 2ata *2esk ear"h.
8esear"hers usually start from se"ondary data.
=6 Collecting secondary data: ('es. research)
#econdary data collection is information that is neither dire"t nor spe"ifi".
#ources of secondary data:
3nternal databases: (i7e7 M'3#)
Advantages Disadvantages
Fui"k a""ess In"omplete
Cheaper Arong form
8egular , 8eliable Ages qui"kly
Confidentiality 0ot expert
2ternal sources:
Information about Competitors *annual reports+ press releases+ web pages+ business publi"ations+
ad'ertisements et"..
Analy(ing "ompeting produ"ts
8i'al "ompanies personnel *exe"uti'es+ engineers+ sales for"e+ pur"hasing agents.
Trade suppliers
7utside suppliers
7nline databases
0ew patents or appli"ations for patents

$% Collecting primary data:" Field research#
(rimary data is information "olle"ted for the spe"ifi" purpose at hand.
A plan for primary data "olle"tion "alls for a number of de"isions on
8esear"h approa"hes+
7bser'ational resear"h
ur'ey resear"h
Experimental resear"h
8esear"h methods
EP7 *Ele"troni" Point of ale system.
2 *2e"ision upport system.
2ata Aarehousing
Internet
Conta"t methods+
%ail questionnaires
Telephone inter'iewing
Personal inter'iewing
Indi'idual inter'iews
:roup inter'iews *in"luding fo"us?group inter'iews.
7nline *Internet. marketing resear"h
%e"hani"al instruments
i. People meters
ii. upermarket s"anners
iii. A gal'anometer measures strength of interest or emotions aroused by a sub!e"ts
exposure to different stimuli+ su"h as an ad or pi"ture.
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i'. Eye "ameras are used to study respondents eye mo'ements to determine at what points
their eyes fo"us first and how long they linger on a gi'en item.
ampling plans
As sur'eying the whole population would be too expensi'e , time "onsuming+ so a sample is sele"ted.
ample is a segment of population sele"ted for marketing resear"h to represent population as a whole.
ample should be a true representati'e of population and should not be biased
)y#es of sam#les:
-andom sampling:
E'ery member has a known and equal "han"e of sele"tion.
Non*random sampling:
3. ystemati" *E'ery n
th
item is sele"ted.
4. tratified *Population is di'ided into mutually ex"lusi'e groups e.g. age groups and sele"ting random samples
from ea"h group.
/. %ultistage *Pro"ess of subdi'iding population and sele"ting sample again and again till a suitable sele"tion is
made.
9. Fuota *2ifferent "ategories of populations are made and a spe"ifi" quota from ea"h "ategory is sele"ted.
=. Cluster *In'estigators are told to examine e'ery item in a small population that fits the required definition.
(otential faults in sampling:
Insuffi"ient data
Hnrepresentati'e data
$ias *where "han"e of o""urren"e is not equal.
7mission of an important item in questionnaire
Carelessness
%isinterpretation of data
>LIm#lementing the Research Plan
This in'ol'es pro"essing+ and analy(ing the information.
?LInter#reting and Re#orting the Findings
Distri0uting the information:
M,IS:
#%arketing Information ystem represent a systemati" attempt to supply "ontinuous+ useful+ usable marketing
information within an organi(ation to de"ision makers often in the form of a database&.
Audits:
)rade audits: "ount of sto"k at wholesalers and retailers
-etail audits: "ount of sto"k at retailers only
Mar,eting in the Digital age
E6(usiness is the all ele"troni" based information ex"hange within "ompany or between "ompanies and "onsumers
using following platforms;
Intranet
Extranet
Internet
Intranet is a network that "onne"ts people within a "ompany to ea"h other and to the "ompany network.
E-tranet "onne"ts a "ompany with its suppliers+ distributors+ and other outside partners.
Internet is a 'ast publi" web of "omputer networks+ whi"h "onne"ts users of all types all around the world to ea"h
other.
E6Commerce is more spe"ifi" than E.$usiness. It is the ability to buy and sell goods and ser'i"es ele"troni"ally
primarily by internet.
E6 Mar,eting is the marketing side of E.Commer"e. Company efforts to "ommuni"ate about+ promote and sell
produ"ts and ser'i"es o'er internet. It in"ludes only $usiness and Consumers.
Advantages:
:eographi"al rea"h
peed
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Information sharing of any kind e.g. text+ audio+ 'ideo+ animation+ graphi"s
hopping at home *Consumer.
0o physi"al barriers *Consumer.
2oing business 49 hours *$usiness.
Paperless business *$usiness.
Disadvantages:
e"urity "on"erns *"onsumer.
Ahom to "omplaint *"onsumer.
Ahat you see is sometimes not what you get *"onsumer.
ometimes physi"al presen"e is ne"essary e.g. smelling a perfume or fitting "lothes *"onsumers.
-ogisti"+ shipping+ distribution and deli'ery "hallenges *business.
A'ailability of se"ure and affordable "ommuni"ation network
E6(usiness Models:
overnment (usiness Consumer Em#loyee
overnment :4: :4$ :4C :4E
(usiness $4: $4$ $4C $4E
Consumer C4: C4$ C4C S
(/C E6Commerce o""urs when an a'erage "iti(en intera"ts with a "ompany *like $ata Pakistan or ama(on."om.
through a website to buy shoes or books online or making inquiries.
(/( E6Commerce is "ompanies doing business ele"troni"ally with other businesses e.g. a business selling up+ down or
a"ross the supply "hain in'ol'ing business partners. u"h as All Pakistan Textile Asso"iation %ills
(/E E6Commerce is use of intranet te"hnology to handle a"ti'ities that take pla"e within a business. Hsing $4E
E.Commer"e employees "ollaborate with ea"h other+ ex"hange data and information and a""ess in?house database+
sales information+ market news and "ompetiti'e analysis.
Its need arises when bran"hing out and spreading business a"ross geographi"al areas. E.g. 1E7 re"ei'ing and
pro"essing Timesheets+ Expense Claims+ and Absent forms.
C/C E6Commerce is "onsumers selling goods dire"tly to "onsumers in an au"tion pro"ess. E.g.
E$ay
Chat rooms for information and ad'ertisement
7'er personal websites
Ad'ertisement on E.news papers
/C E6Commerce is the use of E.Commer"e te"hnology by the go'ernment to handle a"ti'ities ele"troni"ally in
whi"h go't. is in'ol'ed with. E.g.
To publish and disseminate information by :o't.
Change in address+ marital or family status
ubmission of tax returns
To "ast 'ote
Customi!ation and Customeri!ation:
"ustomi0ation is indi'iduali(ing the marketing offer. E.g. taking measurement of !eans for a "ustomer.
"ustomeri0ation is lea'ing it to indi'idual "ustomers to design the marketing offer+ allowing "ustomers to be
prosumers rather than "onsumers. E.g. adding spe"ifi" features to !eans like "olorful pat"hes.
*e' technology in Distri0ution:
28T@
Internet *$4C.
o Aebsites
o Email
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Chapter 25 : Product
Product
A product is anything that "an be offered to a market for use+ or "onsumption and that might satisfy a want or need
su"h as soap.
Produ"t in"ludes;
:oods
er'i"es
7ther entities e.g. People+ idea+ pla"es+ organi(ations
#ervices are a form of produ"t that "onsist of a"ti'ities+ benefits offered for sale that are essentially intangile and do
not result in the ownershi" of anything. su"h as a do"tors exam.
&evels of Products and services:
The core produ"t+ Ahat is the buyer really buyingC
The actual produ"t may ha'e as many as fi'e "hara"teristi"s that "ombine to deli'er "ore produ"t benefits. They are;
Fuality le'el..
)eatures
tyle and design.
A brand name.
Pa"kaging.
The augmented produ"t in"ludes any additional "onsumer ser'i"es and benefits built around the "ore and a"tual
produ"ts.
b. 2eli'ery and "redit
". Aarranty
d. Installation
e. After sale ser'i"e
Classification of #roducts:
3. Consumer Produ"ts
i. Con'enien"e
ii. hopping
iii. pe"ialty
i'. Hnsought
)y#es of consumer #roducts
4. Industrial *$usiness. Produ"ts+;
i. %aterial and parts
ii. Capital items
iii. upplies and er'i"es
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Mar,eting
Consideration
Convenience Sho##ing S#ecialty Hnsought
Consumer 0uying
0ehavior
)requent pur"hase
-ittle planning
-ittle effort and in'ol'ement
-ittle "omparison
-ess frequent
pur"hase
%u"h planning
%u"h effort ,
in'ol'ement
%u"h "omparison
pe"ial effort
-ittle "omparison
trong brand loyalty
-ow pri"e sensiti'ity
Either no awareness
or no interest
Price -ow 1igher @ery high @aries
Place Intensi'e distribution at
"on'enient lo"ations
ele"ti'e distribution in
fewer outlets
Ex"lusi'e distribution in only
one or few outlets per market
area
@aries
Promotion %ass promotion Ad'ertising and
personal selling
Targeted promotion by
produ"er and reseller
Aggressi'e
ad'ertising and
personal selling
E-am#les Tooth pastes
%aga(ines
Tele'isions
)urniture
Clothing
-uxury goods e.g. 8olex
wat"hes
-ife insuran"e
8ed "ross blood
donation
:ey Decisions a0out #roduct:
Indi'idual produ"t
o tandardi(ed or adapted %arket offers "an be differentiated along the lines of;
Produ"t
er'i"e
Channels
People
Image
o Produ"t attributes
Tangible
Fuality
)eatures
tyle and design
$rand name
Pa"kaging
Intangible
Image
Per"ei'ed 'alue
o Pa"kaging , -abeling
o Produ"t support ser'i"e
Produ"t -ine 2e"isions
o Produ"t line length
Produ"t %ixEAssortmentEPortfolio 2e"isions
o Aidth *0o. of produ"t lines of a "ompany.
o 2epth *0o. of items per produ"t line.
o Consisten"y *how "losely related the 'arious produ"t lines are in end use+ produ"tion requirements+
distribution "hannels+ or in some other way.
A brand is a name+ sign+ symbol+ or design+ or a "ombination of those that identifies the maker or seller of a produ"t or
ser'i"e.
(ac'aging is the a"ti'ity of designing and produ"ing the "ontainer or wrapper for a produ"t.
%abeling is also part of pa"kaging and "onsists of printed information appearing on or with the pa"kage
(roduct support services are the ser'i"es that augment a"tual produ"ts.
A product line is a group of produ"ts that are "losely related be"ause they fun"tion in a similar manner+ are sold to the
same "ustomer group+ are marketed through the same types of outlets+ or fall within gi'en pri"e ranges.
(roduct line length is the number of items in the produ"t line. -ongEshort depends on in"rease of profit by
addingEdeleting items.
&n organization with several "roduct lines has a "roduct mi5.
Product&Market Matrices:
It is a simple te"hnique used to "lassify a (roduct&,usiness a""ording to the features of the produ"t and market to
determine the
8elati'e positions of $usinessesEProdu"ts and
trategies for resour"es allo"ation between them.
There are 4 "ommonly used te"hniques;
3. $oston Consulting :roups :rowth?hare %atrix
4. :eneral Ele"tri" $usiness "reen *:E$.
6) ,"5 gro+th*share matri2 is used to e'aluate a "ompanys $HsEProdu"t in terms of market growth rate and
relati'e market share.
Star
0eeds hea'y in'estment to
finan"e rapid growth potential
Kuestion Mar,
8equires a lot of "ash
*Problem Child.
Cash Co'
Established+ su""essful
0eeds less in'estment
Dog
Enough to maintain themsel'es
0o future
:rowth rate *Iage.
8elati'e market share
After determination of position of a $H in $C: matrix+ following strategies are a'ailable;
$uild
1old
1ar'est
2i'est
The $C: and other formal methods re'olutioni(ed strategi" planning. u"h approa"hes+ howe'er+ ha'e limitations;
3.. They "an be diffi"ult.
4.. They "an be time "onsuming.
/.. They "an be "ostly to implement.
9.. %anagement may find it diffi"ult to define $Hs and measure market share
and growth.
=.. The approa"hes fo"us on "lassifying "urrent businesses but pro'ide little
ad'i"e for future planning.
#,@ is a unit of com"any that has a se"arate mission and o3ectives and that can e "lanned inde"endently from other
com"any usinesses#
8) 5eneral lectric ,usiness #creen (5,#):
This approa"h is like $C: matrix but in"ludes a broader range of "ompany and market fa"tors.
%atrix "lassifies produ"ts a""ording to;
Industry attra"ti'eness *market si(e+ market growth+ "ompetiti'e "limate+ stability of demand+ ease of
market entry+ industry "apa"ity+ le'el of in'estment+ nature of regulation+ profitability.
Company strength *market share+ "ompany image+ produ"tion "apa"ity+ produ"tion "osts+ finan"ial
strengths+ produ"t quality+ distribution systems+ "ontrol o'er pri"esEmargins+ benefits of patent
prote"tion.
Classifi"ation is highly sub!e"ti'e assessment. trategy for an indi'idual $HEProdu"t is then suggested on the basis of
the position of the matrix.
Mar,et attractiveness
(usiness Strength
'ature and Characteristics of a Ser"ice
3.. er'i"e intangiility *"annot be tou"hed.
4.. er'i"e inse"araility *from pro'ider.
/.. er'i"e variaility (standard will 'ary ea"h time)
9.. er'i"e "erishaility *"annot be stored.
=.. er'i"e ownershi" (not transferred to ser'i"e taker.
Mar,eting mi- of services:
Along with 9 normal Ps+ 9 extra Ps are also required i.e.
3. Personal selling *greater reassuran"e+ information and relian"e required.
4. Pro"ess
/. People *sometimes people and ser'i"es are inseparableB first line importan"e.
9. Physi"al e'iden"e * remedy for intangibility.
Service Profit Chain:
#Profit of ser'i"e firm is linked with satisfa"tion of employees and "ustomers&
i. Internal ser'i"e quality
ii. atisfied and produ"ti'e ser'i"e employees
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Attractive Average @nattractive
#trong
In'est for growth In'est sele"ti'ely for
growth
2e'elop for in"ome
Average In'est sele"ti'ely
and build
2e'elop sele"ti'ely
for in"ome
1ar'est or 2i'est
/ea' 2e'elop sele"ti'elyB
build on strength
1ar'est 2i'est
iii. :reater ser'i"e 'alue
i'. atisfied and loyal "ustomers
'. 1ealthy ser'i"e profits and growth
It requires more than !ust traditional external marketing;
External marketing *$4C.
Internal marketing *$4E.
Intera"ti'e marketing *E4C.
Product Develo#ment: $*e' Product%
/hat is a ne+ product:
That opens up an entirely new market
That repla"es an existing produ"t
That broadens the market of an existing produ"t.
/hen an old product can be ne+:
Introdu"ed into a new market
Pa"kaged in different way
2ifferent marketing approa"h is used
%ix 'ariable is "hanged.
$egree of ne+ness:
Hnquestionably new produ"t
Partially new produ"t
%a!or produ"t "hange
%inor produ"t "hange
#ources for ne+ products:
-i"ensing
Internal produ"t de'elopment
Customers
External inno'ators
Competition
A"quisition
A"ademi" institutions
Patent agents
/hy so many ne+ products fail:
3.. 7'erestimated market si(e.
4.. Poorly designed produ"t.
/.. Poorly pri"ed+ pla"ed+ promoted or positioned.
9.. 8esult based on poor market resear"h findings.
=.. The "osts of produ"ing the produ"t may ha'e been higher than expe"ted.
>.. ometimes "ompetitors fight ba"k harder than expe"ted.
4 product characteristics affecting rate of adoption for ne+ product:
8elati'e ad'antage i.e. new te"hnology making it superior
Compatible with 'alues and experien"e of potential "onsumers
Ease of understand and use
Trial option
Communi"ability of results of using produ"t.
Product Develo#ment Process
=6 Idea generation
whi"h is the systemati" sear"h for new produ"t ideas rather than hapha(ardC
a. Internal sour"es *8,2.
b. External sour"es *"ustomers+ "ompetitors+ distributors+ suppliers.
/6 Idea screening
E'aluation against "riteria to spot good ideas and drop poor
>6 Conce#t develo#ment and testing
Product conce"t is a detailed 'ersion of the new?produ"t idea stated in meaningful "onsumer terms.
%once"t testing in'ol'es testing the "on"epts with a group of target "onsumers to find out if the "on"epts ha'e
strong "onsumer appeal.
?6 Mar,eting strategy develo#ment
A marketing strategy statement should be produ"ed. This is a statement of the planned strategy for a new produ"t
that outlines the target market+ positioning+ market mix and market share+ long term sales+ profit goals and
marketing budget for the first few years.
A6 (usiness analysis
8e'iew of the sales+ "osts+ and profit pro!e"tions for a new produ"t to find out whether these fa"tors satisfy the
"ompanys ob!e"ti'es
E6 Product develo#ment
2e'eloping the produ"t "on"ept into a physi"al produ"t in order to ensure that the produ"t idea "an be turned into
a workable produ"t
;6 )est mar,eting
The basi" purpose is to test the produ"t itself in real markets.
M6 Commerciali!ation
Introdu"ing a new produ"t into the market.
Stages of Product &ife Cycle $P&C%
3. Introdu"tion
4. :rowth
/. %aturity
9. 2e"line
Ex"eptions are )ad+ tyle+ and )ashions.
trategies "hange with "hange in stage of P-C.
Product life cycle+ CharacteristicsG o09ectives and strategies: Nvery nice ta0leO
Introduction ro'th Maturity Decline
Characteristics
ales -ow 8apidly rising Peak sales 2e"lining sales
Cost 1igh per "ustomer A'erage "ost per
"ustomer
-ow "ost per
"ustomer
-ow "ost per
"ustomer
Profit 0egati'e 8ising 1igh profit 2e"lining profit
Customers Inno'ators Early adopters %iddle ma!ority -aggards
Competitors )ew :rowing table number
beginning to de"line
2e"lining number
Mar,eting o09ectives Create produ"t
awareness and trial
%aximi(e market
share
%aximi(e profit
defending market
share
8edu"e expenditure
and milk the brand
Strategies
Produ"t 7ffer $asi" produ"t 7ffer produ"t
extensions+ ser'i"e+
quality
2i'ersify brand and
model
Phase out weak items
or 8epositioning
Pri"e Hse "ost?plus Pri"e to
penetrateEskim
market
Pri"e to mat"h or
beat "ompetitors
Cut pri"e
Pla"e ele"ti'e distribution Intensi'e distribution %ore intensi'e
distribution
:o sele"ti'eB phase
out unprofitable
Promotion Hse hea'y sales
promotion
8edu"e to take
ad'antage of hea'y
demand
In"rease to
en"ourage brand
swit"hing
8edu"e to minimal
le'el
Targeting Early adopters *build
awareness.
%ass market *build
awareness.
tress brand
differen"es and
benefits
8edu"e to le'el
needed to retain "ore?
loyals
Assessment of P&C:
8egular re'iew of existing produ"ts
Analysis of past trends
1istory of other produ"ts
%arket resear"h
Analysis of "ompetitors
Estimate of future life and profitability should be dis"ussed with experts
8,2 2eptt. ??????????????????????Produ"t life
%arketing staff???????????????????Pri"e and demand
%anagement a""ountant??????? Cost
2e"ide to "ontinue+ stop or "hange strategy.
Criticism on P&C a##roach:
8ele'ant only for produ"ts where "onsumer demand is high
Hnderlying stage of P-C is determined by marketing a"tions.
tages "an not be easily defined.
#& shape does not always o""ur in P-C
trategi" de"isions "an "hange P-C
Pac,aging:
Functions of pac'aging:
Prote"tion
Fuality standard *e.g. expiry.
2istribution
elling *Ad'ertising+ attra"ti'e+ moti'ating+.
Hser "on'enien"e *'alue depi"ting.
Conforms to go't. regulations *e.g. ingredients+ pri"e+ expiry et"..
Hsually goods are pa"kaged in more than one layer.
.ualities reBuired of a pac'ing:
i(e and 'ariety should be minimi(ed.
Attra"ti'e and distin"ti'e to target "onsumer.
All fun"tions of pa"king are also required.
Cost effe"ti'e
)itting for storage purposes
Product Portfolio Planning
All produ"t lines and items that "ompany offer for sale P7'erall produ"t range of organi(ationQ
Aidth *0o of produ"t lines "arried by Company.
2epth *0o of items "arried di'ided by 0o of produ"t lines.
Consisten"y *"loseness of items in range in terms of marketingEprodu"tion "hara"teristi"s.
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Chapter 26 : Price
PR!C!'( CO'S!)*R+,!O'S +') +PPRO+C*S
#Price is the sum of the 'alues that "onsumer ex"hange for the benefits of ha'ing or using the produ"t.
7nly element to produ"e re'enues
%ost flexible element
Could be )ixed or 2ynami"
Price Setting
Cost
Competition
2emand *Elasti" E Inelasti".
Common Pricing Mista,es
3.. Pri"ing is too "ost?oriented.
4.. Pri"es are not re'ised often enough to refle"t market "hanges.
/.. Pri"es do not take into a""ount the other elements of the marketing mix.
9.. Pri"es are not 'aried for different produ"ts+ market segments+ and pur"hase o""asions.
Internal Factors Affecting Pricing Decisions
3. %arketing ob!e"ti'es
4. %arketing mix strategies
/. Costs
9. 7rgani(ational "onsiderations
=6 Mar,eting o09ectives ;
ur'i'al
Current profit maximi(ation
%arket share leadership
Produ"t quality leadership
7ther ob!e"ti'es
To pre'ent "ompetitors
To keep loyalty and support of reseller
To a'oid go't. inter'ention
To "reate ex"itement or draw attention of new "ustomers
To help the sale of other produ"t in produ"t line
/6 Mar,eting mi- strategy:
Pri"e de"isions must be "oordinated with produ"t design+ pla"e+ and promotion de"isions to form a "onsistent and
effe"ti'e marketing program.
Companies often make their pri"ing de"isions first and then base other marketing?mix de"isions on the pri"es that they
want to "harge.
)arget costing is positioning of produ"t on pri"e and then tailoring other marketing de"isions to the pri"e they want to
"harge.
$ut remember that "onsumers rarely buy on pri"e alone.
>6 Costs
et the floor for the pri"e that the "ompany "an "harge. *pri"e below this is not a""eptable.
Companies want to "harge a pri"e that "o'ers all its "osts for produ"ing+ distributing+ and selling the produ"t+ and
pro'ides a fair rate of return for its effort and risk.
To pri"e wisely+ management needs to know how its "osts 'ary with le'els of produ"tion.
)he e2perience curve (or the learning curve) indi"ates that a'erage "ost drops with a""umulated produ"tion
experien"e
?6 3rgani!ational considerations6
%anagement must de"ide within the organi(ation who should set pri"es.
mall "ompanies; CE7 or top management
-arge "ompanies; 2i'isional or produ"t line managers
ome "ompanies ha'e pri"ing departments
E-ternal Factors Affecting Pricing Decisions
3. 0ature of market and demand
4. Competitors "osts+ pri"es+ and offers
/. 7ther en'ironmental elements
=% *ature of mar,et and demand
(ure competition 0o single buyer or seller has mu"h effe"t on the going market pri"e.
Monopolistic competition %arket "onsists of many buyers and sellers who trade o'er a range of pri"es be"ause they
"an differentiate their produ"ts.
1ligopolistic competition %arket "onsists of a few sellers who are highly sensiti'e to ea"h others pri"ing and
marketing strategies.
(ure monopoly %onopolists do not always "harge a full pri"e be"ause;
3Q. They do not want to attra"t "ompetition.
4Q. They want to penetrate the market faster.
/Q. They fear go'ernment regulation.
Price+demand relationshi#
2emand "ur'e
Pri"e elasti"ity of demand
Factors affecting Demand / Price elasticity of demand/ Consumer choice
Pri"e
Pri"e of substitute and "omplementary goods
Consumer in"ome
Taste and fashion
Ad'ertisement and Training
After sale ser'i"es and grant of "redit
/% Com#etitors" costsG #ricesG and offers
>% 3ther environmental elements
a.. E"onomi" "onditions *su"h as boom or re"ession+ inflation+ or interest rates..
b.. 8esellers poli"ies *rea"tions. must be "onsidered espe"ially if they do not mat"h the suppliers.
".. The go'ernment *be"ause of its regulatory power. must be "onsidered.
d.. o"ial "on"erns may affe"t the firms short?term sales+ market share+ and profit goals.
eneral Pricing A##roaches/Methods
Pri"e will be set between 4 extremes.
8oof E Ceiling i.e. Customers 'alue
)loor i.e. Cost
Pri"e will be set between these 4 le'els after "onsideration of
Competitors pri"es and
7ther internal and external fa"tors
A##roaches
Cost based pri"ing
Cost plus pri"ing
$reak e'en or target profit pri"ing
Customer 'alue based pri"ing *i.e. demand based .
Competiti'e based pri"ing
:oing rate pri"ing
ealed bid pri"ing
1hy Cost 0ased #ricing is #o#ular
3. ellers are more "ertain about "ost than demand
4. Pri"e is simplified being tied to "ost.
/. )airer to both buyer and seller
9. Pri"e "ompetition is minimi(ed
*e'+Product Pricing Strategies
Mar,et+S,imming Pricing
#etting a high pri"e for a new produ"t to skim maximum re'enues layer by layer from segments
willing to pay the high pri"e&.
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Produ"t image must support pri"e
Competitors must not be able to enter the market
Pri"es are lowered when demand falls
Mar,et+Penetration Pricing
#etting a low pri"e for a new produ"t to attra"t a large number of buyers and a large market
share&.
1igh 'olume redu"es "ost
pare resour"es are utili(ed
Eliminates "ompetition
%ay promote related produ"ts.
Product Mi- Pricing Strategies
Produ"t -ine Pri"ing
etting pri"e steps between produ"t line items.
Godak pri"es different types of films at different le'el.
7ptional?Produ"t Pri"ing
Pri"ing optional or a""essory produ"ts sold with the main produ"t
Car buyer may "hoose to order power windows+ "ruise "ontrol+ and a C2 "hanger.
Capti'e? produ"t pri"ing#
etting a pri"e for produ"ts that must be used along with a main produ"t.
Examples of "apti'e produ"ts are blade with ra(ors+ game "assettes with system.
$y?Produ"t Pri"ing
Pri"ing low?'alue by?produ"ts to get rid of them
Produ"t $undle Pri"ing
Pri"ing bundles of produ"ts sold together
Theater and support teams sell season ti"kets.
Price ad9ustment strategies:
#To a""ount for 'arious "ustomer differen"es and situation differen"es&
$iscount and allo+ance pricing 8edu"tion in pri"e to reward "ustomer response for paying or promoting produ"t.
#egmented pricing Ad!usting pri"es to allow for differen"es in "ustomers+ produ"ts+ or lo"ations.
(sychological pricing eller "onsiders the psy"hology of pri"es and not simply the e"onomi"s e.g. "onsumers usually
per"ei'e higher pri"ed produ"ts as ha'ing higher quality in the absen"e of past experien"e
or information.
(romotional pricing Temporarily redu"ing pri"ing to promote short term sales.
5eographical pricing Ad!usting pri"es to a""ount for the geographi" lo"ation of "ustomers.
3nternational pricing Ad!usting pri"es for international markets.
Assessing and res#onding to com#etitor"s #rice changes
1as "ompetitor "ut pri"esC
0
T
Aill lower pri"e negati'ely affe"t our market share and profitC
0
T
CanEhould affe"ti'e a"tion be takenC
T
0
Some other conce#ts that could not 0e covered here in Details
Pri"e -eadership
Pri"e elasti"ity of demand
Absorption , %arginal Costing and breake'en analysis
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1old "urrent
pri"e and
"ontinue to
monitor
"ompetitors
pri"es 8edu"e pri"e
8aise per"ei'ed quality
Impro'e quality and redu"e pri"e
-aun"h low?pri"e #fighting brand&
Chapter 27 : Place
Place / Distri0ution Channels / Delivery System
(lace is sele"tion of distribution "hannels to deli'er goods to "onsumers.
:ey issues in Distri0ution Channel::
Co'erage and density *Ex"lusi'e+ ele"ti'e+ Intensi'e.
Channel length *no. of intermediaries between "onsumer and produ"er.
Power and alignment of different elements
-ogisti" and physi"al distribution
upport and after sale ser'i"e
Channel design de"ision *Customer+ Produ"t "hara"teristi"s+ 2istributor "hara"teristi"s+ Channel
"hoosed by "ompetitors+ uppliers own "hara"teristi"s.
*ature and Im#ortance and Functions of Mar,eting Channels:
Mar'eting "hannel (distribution channel) is a set of interdependent organi(ations (intermediaries) in'ol'ed in the
pro"ess of making a produ"t or ser'i"e a'ailable for use or "onsumption by "onsumer or business user. Ea"h
organi(ation performs a spe"iali(ed and spe"ified role.
3mportance includes:
3. Channel de"isions affe"t other marketing de"isions
4. Competiti'e ad'antage "ould be gained.
/. In'ol'es long term "ommitments to other firms
9. Channel members add 'alue through
a. Their "onta"ts+ experien"e+ spe"iali(ation and s"ale *e"onomies. of operation.
b. %at"hing supply and demand
". $ridging Time+ Pla"e and Possession gap
Functions performed by members of mar'eting channel:
)un"tions that help to "omplete transa"tions;
3. Information **ar.eting research and intelligence information.
4. Promotion *'evelo"ing and s"reading "ersuasive communication.
/. 8eselling *Finding and communicating with "ros"ective uyers.
9. %at"hing *sha"ing and fitting to the uyers/ needs e#g# assemling< "ac.ing.
=. 0egotiation
)un"tions that help to fulfill the "ompleted transa"tions;
>. Physi"al distribution *)rans"ortation< storing and 7nventory management.
J. )inan"ing *&c(uiring and using funds.
L. 8isk taking *&ssuming the ris. of carrying out the channel wor..
#Tou "an eliminate middle man+ but not middle mans fun"tions&
)y#es of Distri0ution channels:
$irect distribution channel has no intermediary.
Intermediaries dont get their share.
Intermediaries dont get dominant
7wn sales for"e is best for geographi"ally "entered buyers.
3ndirect distribution channel has one or more intermediaries.
Ahere resour"es are insuffi"ient to finan"e large sales for"e.
Ahere no lo"al knowledge of market
uitable for geographi"ally spread buyers.
)y#es of Distri0utors:
a) Franchisees:
#Trade in name of parent in ex"hange of initial fee R share of sales 'olume&
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b) $istributors&$ealers:
#$uy and resell at profit&
2ealing in narrow range of produ"tsB
ometimes ex"lusi'e distribution or dealing only one manufa"turerB
Also pro'ide after sale ser'i"es.
c) Agents: *'s. 2ealers.
#Consigned for "ommission on sale.
d) /holesaling:
#elling goods to business buyers&
e) -etailing:
#elling goods to "onsumer buyers&
f) Multiple #tores:
#ell under the Mown label brand name&
4o' do channel firms interact and organi!e to do the 'or, of the channel:
"hannel "onflict is disagreement among marketing "hannel members on goals+ roles and rewards *who should do
what for what reward.. It may be
<ori0ontal! "onfli"t among firms at same le'el of "hannel e.g. dealers may "omplain that others are
pri"ing too low or selling beyond their territory.
Vertical! "onfli"t among firms at different le'el of "hannel e.g. "onfli"t with dealers when opening
online stores e'en though for hard to reach customers.
$isintermediation is eliminating or repla"ing intermediaries. e.g. opening online stores
Mar,eting logistic and Su##ly Chain Management $SCM%:
Mar'eting logistic (or physical distribution) in'ol'es planning+ implementing and "ontrolling the physi"al flows of
goods+ ser'i"es form points of origin to points of "onsumption.
%arketing logisti" addresses whole upply Chain %anagement i.e.
7utbound distribution *mo'ing produ"t form fa"tory to reseller and ultimately to "onsumers.
'ownstream
Inbound distribution *mo'ing produ"ts from supplier to fa"tory. U"stream
8e'ere distribution *mo'ing broken+ unwanted or ex"ess produ"ts returned by "onsumers or
resellers.
Major logistic functions& Functions in distribution process:
Aarehousing
o Produ"tion and "onsumption "y"les rarely mat"h.
o A "ompany must de"ide+ how many+ what types and where
o Company might use either storage ware house or distribution "enters.
In'entory management
o %anagers must maintain balan"e between too little and too mu"h in'entory.
o Cust in time requires a""urate fore"asting along with fast+ frequent and flexible deli'ery
o Dust in time substantial "ost sa'ing in "arrying and handling "ost and low obsoles"en"e.
-ogisti" information management+ In VM3 *@endor %anaged In'entory. "ustomer share real?time
data on sales and "urrent in'entory le'els with supplier and supplier then takes full responsibility
for managing in'entories and deli'eries.
Transportation
Promotion
2isplay
*e' technology in Distri0ution:
28T@
Internet *$4C.
o Aebsites
o Email
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Chapter 28 : Promotion
)'o 0asic strategies of Promotion:
(ush strategy using sales for"e to push the produ"t through the "hannels+ the produ"er promotes the produ"t to
wholesalers+ the wholesalers promote to the retailers+ and the retailers promote to the final "onsumers.
(ull strategy spending a lot on ad'ertising and "onsumer promotion to build up "onsumer demandB if su""essful+
"onsumers will ask their retailers for the produ"t+ the retailers will ask the wholesalers+ and the wholesalers will ask the
produ"ers.
Communication media
3. Personal "ommuni"ation "hannels+ through whi"h people "ommuni"ate dire"tly with ea"h other.
i. )a"e to fa"e
ii. Person to audien"e
iii. 7'er telephone
i'. Through mail
'. Through internet "hat
4. 0onpersonal "ommuni"ation "hannels+ media that "arry messages without personal "onta"t or feedba"k.
i. Print media *newspapers+ maga(ines.
ii. $road"ast media *radio+ tele'ision.
iii. 2isplay media *signs+ posters.
i'. 7nline media *online ser'i"es+ Aebsites.
Mar,eting communication mi- or Promotional mi-
It is a blend of
A. Ad'ertising
$. Personal selling
C. ales promotion
2. 2ire"t %arketing and
E. Publi" relations tools
That a "ompany uses to "ommuni"ate with its "ustomers.
A range is better than only one.
A% Advertising:
#Any paid form of nonpersonal presentation and promotion of ideas+ goods+ or ser'i"es by an identified sponsor&
Advertising objectives (A3$A) are as follows;
3. Informati'e ad'ertising
a. To "ommuni"ate information
b. To "reate awareness
". In Early stage of P-C or on modifi"ation
4. Persuasi'e ad'ertising
a. To "reate a desire for a produ"t and to stimulate a"tual pur"hase
b. In growth stage of P-C
/. 8eminder ad'ertising
a. 8einfor"ing knowledge and
b. 8eminding of benefits
". In %aturity stage of P-C
Advertising media
Abo'e the line *Press+ 8adio+ T@+ Cinema.
$elow the line *2ire"t mail+ Exhibition+ Pa"kage design+ %er"handi(ing.
Advantages (Vs7 (ersonal selling):
%ass "ommuni"ation
Expressi'e ad'ertisement
tandardi(ation and legitima"y
eller is able to repeat a message many times
$isadvantages (Vs7 (ersonal selling)
Costly
Impersonal
0ot so persuasi'e
(% Personal Selling $face to face via sales force%:
# Personal presentation by the firms sales for"e for the purpose of making sales and building "ustomer relationships
i.e. paid form of personal "ommuni"ation&
ales for"e stru"tures;
3. alary only
4. alary with bonus
/. Commission only
C% Sales Promotion:
#%arketing a"ti'ities other than personal+ selling , ad'ertising that stimulates "ustomer pur"hasing&
# hort?term in"enti'es to en"ourage the pur"hase or sale of a produ"t or ser'i"e&.
%a!or tools are;
3. amples
4. Coupons
/. 8ebates
9. Premiums *buy 4 get 3 free.
=. Contests+ sweepstakes+ and games
>. )ree gifts
$3ectives of sales "romotion:
To in"rease in sales re'enue
To laun"h a new produ"t
To attra"t new "ustomers
To attra"t resellers to sto"k
To "lear out old sto"k
Countera"tion for "ompetitors
D% Direct Mar,eting: $one to one mar,eting%
#2ire"t "onne"tions with "arefully targeted indi'idual "onsumers to obtain and immediate response and "ulti'ate
lasting "ustomer relationships&
It is the use of mail+ telephone+ fax+ email+ internet and other tools to "ommuni"ate dire"tly with spe"ifi" "onsumers.
"haracteristics of 2ire"t marketing;
0on publi"
Immediate and "ustomi(ed
Intera"ti'e
Forms of dire"t marketing;
3. )a"e to fa"e selling
4. Telephone marketing
i. 7utbound "alls
ii. Inbound "alls *toll free numbers.
/. Catalog marketing
9. 2ire"t mail marketing
e% Pu0lic relations:
#$uilding good relations with the "ompanys 'arious publi"s by obtaining fa'orable publi"ity+ and building up a good
"orporate image&
(ublicity is non?paid+ non?personal "ommuni"ation dealing mass audien"e.
Planning a Promotion cam#aign:
Identify the target audien"e
pe"ify the promotional message
ele"t media
"hedule media
et the promotional budget
E'aluate promotional effe"ti'eness
(randing:
Expenditures on promotion gi'es rise to brands.
A ,rand is a name+ term+ sign+ symbol or design intended to identify the produ"t of a seller to differentiate it from
those of "ompetitors.
-easons for branding:
Produ"t differentiation
Con'eying lot of information qui"kly and "on"isely
Ad'ertisement needs a brand name.
The more similar a produ"t is to "ompeting goodsB the more branding is ne"essary.
It fa"ilitates self sele"tion.
It redu"es pri"e sensiti'ity.
$rand loyalty gi'es "ontrol o'er marketing strategy.
7ther produ"ts *i.e. new fla'orsEsi(es. "an be introdu"ed into brand nameErange. *$rand extension.
Eases personal selling
Eases market segmentation
,rand strategies:
$rand extension
%ulti branding *different names for similar nature goods ser'ing similar "onsumer habits.
Produ"t????????????????0ames????????????????$rands in ea"h name
)amily branding
Relationshi# Mar,eting: *Geeping "ustomersB not getting "ustomers.
ale is not end of pro"essB but start of relationship.
It is easy+ "heaper and profitable to retain old "ustomers than to make new "ustomers be"ause;
7ld are 'aluable
7ld ha'e trust in "ompany
7ld are satisfied.
:ey account management: $:ey Customer Data0ase%
-ike relationship marketing but more spe"ifi"
It refers to how an organi(ation manages its relationship with those "ustomers identified as key to the
organi(ation in a"hie'ing its ob!e"ti'es.
)a"tors used to identify a key a""ount;
1istori" 'alue of pur"hases
Expe"ted future pur"hases
7ther "ompetiti'e fa"tors
o tatus within the marketpla"e
o Personal relationship of people
o To pre'ent a "ompetitor getting a hold in market
Extra ser'i"es gi'en to key a""ount
Time
)inan"e
Pro"edure
1ospitality
Auditing Customer satisfaction: $'hy customers are not satisfied P %
Customer satisfa"tion sur'eys
Aork won and lost
Changes in market shares
8e'enue from newly released produ"ts
8ude and unhelpful staff
A poli"y is to en"ourage "ustomers to "omplain* 6>I do not.
)echnology Develo#ment Q Interactive mar,eting:
Intera"ti'e marketing in instant "ommuni"ation and responses between promoter and "ustomers. It may be "alled
sometimes as Computeri(ed Personal elling e.g.
28T@ *2ire"t 8esponse Tele'ision.
Intera"ti'e Internet websites
Intera"ti'e Giosk
Part F : International Business
)heories on International )rade
#carce resource is a resour"e for whi"h the quantity demanded at a nil pri"e would ex"eed the a'ailable supply.
9 s"ar"e resour"es are -and+ -abor+ Capital and Enterprise.
#carcity is the ex"ess of human wants o'er what "an be produ"ed.
(roduction (ossibility "urve illustrates limits of possible produ"tion of two produ"ts within gi'en resour"es.
1pportunity "ost is the "ost of sa"rifi"ed alternati'e.
Mercantilism:
Export V Import
Wero?sum game *benefit at the expense of other.
A0solute advantage:
Absolute ad'antage is produ"ing goods more effi"iently than any other "ountry.
Country should produ"e goods for whi"h they ha'e an absolute ad'antage and then trade these goods for
other goods produ"ed by other "ountries.
Com#arative advantage:
7ne step further than absolute theory introdu"ing "on"ept of opportunity "ost.
Country should spe"iali(e in the produ"tion of those goods in whi"h it has lowest opportunity "ost.
1hy countries avoid s#eciali!ation
Comparati'e ad'antage is ne'er stable.
2i'ersifi"ation prote"ts fall in world demand.
Agri"ulture industry is sub!e"t to un"ertainties of "limate.
Import restri"tions are possible by other go'ernments to de'elop self suffi"ien"y.
%ulti nationals may assemble or manufa"ture in different "ountries for politi"al or logisti" reasons.
Com#etitive advantage $national%:
(orter states that Comparati'e Ad'antage is too general "on"ept to explain su""ess of indi'idual "ompanies and
industries.
1e belie'es 9 "onditions *diamonds. within a "ountry help firms to "ompete.i.e.
3. )a"tor "onditions
4. 2emand "onditions
/. )irm strategy+ stru"ture and ri'alry
9. 8elated and supported industries
3rientations of International (usiness Management $0y Perlmutter%
Ethnocentrism:
Company fo"uses on domesti" market and export is se"ondary.
0o lo"al resear"h+ marketing mix is standardi(ed.
ame produ"ts with same market programs.
Polycentrism:
Ea"h "ountry is unique and requires "ustomi(ation.
Produ"t and market programs must mat"h with lo"al en'ironment.
Company establishes independent lo"al subsidiaries and de"entrali(es marketing management.
eocentrism:
ynthesis of two approa"hes.
Think globally+ a"t lo"ally.
Integrated approa"h to "reate a global strategy that is fully responsi'e to lo"al market.
Regiocentrism:
It is :eo"entri"ism but that it re"ogni(es regional differen"es.
*"olution and Reasons of (lobal -usiness (%y O)mae!
Evolution:
Ethnocentrism
3. Export *extension of home sales.
4. 7'erseas bran"hes *when turno'er is large+ greater in'estment.
/. 7'erseas produ"tion *exploits "heap labor and redu"es exporting "ost.
Polycentrism
9. Insiderisation *full fun"tional organi(ation ha'ing produ"tion and distribution system is set?up o'erseas+
"ompany is multinational.
eocentrism
=. The :lobal Company
Reasons:
4 "s
3. Customer *market "on'ergen"e.
4. Company *e"onomies of s"ale.
/. Competition *Geeping up.
9. Curren"y *ex"hange rate risk.
=. Country *Absolute and "omparati'e ad'antage+ lo"al orientation.
1ther reasons:
)or :o't. )or Company
urplus defi"it balan"e -arge market en"ouraging
e"onomies of s"ale.
Politi"al ad'antages In"reased "ompetition at home
market
To support go't. poli"ies *e.g. $alan"e of Payment. %ature or de"lining home market
To dispose ex"essi'eEdis"ontinued
produ"ts.
E-change rate:
(urchasing (o+er (arity theory "al"ulates ex"hange rate based on relati'e "ost of pur"hasing same basket of goods in
two "ountries.
A "urren"ys ex"hange rate is also determined by $emand and #upply. They in turn are determined by Inflation+
pe"ulation+ Interest rates+ :o't. poli"ies and $alan"e of Payment.
2change rate ris' is the risk that foreign "urren"y will ex"hange in smaller amount of domesti" "urren"y in future.
)ypes:
This "an arise under any of three Ex"hange 8ate ystems i.e.
3. )ixed *Central bank interferes to fix the rate.
4. %anaged *-ike fixed but allowed to 'ary between preset limits.
/. )loating *depends on supply and demand.
Managing e2change ris':
1edging de'i"es
)low of money in both dire"tion
Design for glo0al 0usiness (by ,artlett and 5hoshal )
%o+ reBuirement for local adaptation
and responsiveness
<igh reBuirement for local adaptation and
responsiveness
<igh pressure to
5lobali0e
:lobal en'ironment
:eo"entri" orientation
:lobal produ"t di'isions
Chemi"als+ Constru"tion
Transitional en'ironment
Poly"entri" orientation
Integrated system and stru"ture
Pharma"euti"al+ motor 'ehi"les
*fo"us of organi(ation is heteroar"hy.
%o+ (ressure to
5lobali0e
International En'ironment
Ethno"entri" orientation
International di'ision
%ultinational en'ironment
Poly"entri" orientation
0ational or regional di'isions
Paper+ textile )ast food+ toba""o
Planning to enter Foreign Market
Phase =: Preliminary analysis and screening:
E'aluation of a'ailable markets *to ex"lude ob'ious unfit.
Applying s"reening "riteria to e'aluate remaining markets *"riteria might in"lude Profit+ %arket hare+
Fuality.
Analysis of en'ironment "onditions in ea"h "ountry
Porters = for"es analysis
Choosing "ountry *i.e. Target %arket.
Screening Process "onsists of ; (y 1eannet and 6ennessy)
%ar"o le'el resear"h
En'ironmental analysis
Climate and demographi"
:eneral %arket fa"tors
i(e of market
8egulations
Culture
%i"ro le'el resear"h
Competition
Transportation
1ealth"are
Edu"ation
-abor
Target %arket
Phase /: Ada#ting the mar,eting mi- to target mar,ets:
2e"iding Adaptation or tandardi(ation
Phase >: Develo#ing the mar,eting #lan:
ituation analysis
7b!e"ti'es
trategi" options
$udgets
A"tion programs
Phase ?: Im#lementation and Control
7b!e"ti'es and tandards
Assign responsibilities
%easure performan"e
Corre"ti'e a"tions
Pro0lems in International Planning:
)oreigners dont know lo"al "ulture+ feelings+ attitudes
-o"al le'el problems
2ifferent attitude to produ"t and marketing task
-a"k of strategi" outlook and marketing expertise
8esentment at being bossed around
Hn"lear goals
Inadequate "ontrol
18 "onsiderations to be managed at lo"al le'el
Poor I and Communi"ation
2i'ersifi"ation of "ountries o'er population+ in"ome+ de'elopment+ edu"ation et".
Time hori(on
International Mar,eting Research
309ectives:
A'ailability and quality of information is enhan"ed for planning.
Change in "ustomers needs and preferen"es is timely obser'ed.
Competitors plan and strategy
)inding of new markets
7pportunities and Threats
Trends of market
-EPT analysis
Te"hnology < Fuality of information
Information sources for International Mar,ets:
1uman sour"es
%anagers of subsidiaries+ asso"iates+ bran"hes *rele'ant R unpublished R biased.
Consumers+ Customers+ 2istributors+ uppliers and e'en Competitors
2o"umentary sour"es *Publi"ations et".+ not to the point.
2ire"t sour"es
2ire"t obser'ation and spe"ialist knowledge
2ire"t obser'ation and ba"kground information
Personal experien"e supporting indire"t information
Export publi"ations
Export %arket Information Centers
IMR Process:
%onitoring
Passi'e information gathering *%arket not yet targeted.
Identifi"ation of market for whi"h information needs to be gathered.
In'estigation *a""urate assessment of market opportunities.
Existing demandB where "ustomers needs are already being ser'ed.
-atent demandB where potential "ustomers are "urrently re"ogni(ed but are not being
ser'ed.
In"ipient demandB where there is foreseeable+ but not a present+ market for produ"ts.
8esear"h
2efine s"ope of pro!e"t
2efine pro!e"ts+ information needs
E'aluate a'ailable sour"es for required information
Hndertake desk resear"h
Hndertake field resear"h
Hsing IMR data:
To estimate patterns of demandE"onsumption in indi'idual markets by
2emand pattern analysis
In"ome elasti"ity of demand
To "ompare patterns of demandE"onsumption in different markets by
Comparati'e analysis
Intermarket timing differen"es
To identify "lusters of markets with similar "hara"teristi"s
To identify strategi"ally equi'alent segments
Pro0lems in IMR:
e"ondary data problems
-a"k of data
0ot timely+ out of date information gathered on unpredi"table s"hedules
0ot "omparable+ different data definitions in different "ountries
-a"k of reliability
8esponse problems *Peoples unwillingness to pro'ide info.
Tax e'asion and a'oidan"e of responsibilities
Aish to preser'e se"re"y
Cultural taboos and norms
:eneral problems *de'eloped 's. unde'eloped.
0o suitable list *sampling frame.
Inadequate "ommuni"ation infrastru"ture
-ow le'el of litera"y
Problems of language and "omprehension
Entry in International Market
ntry in 3nternational Mar'et "ould be through;
)oreign 2ire"t In'estmentE7'erseas produ"tion
355I owned subsidiary
Doint 'enture
o Industrial "ooperationEContra"tual *fixed period.
o Doint?equity 'enture *"ontinued.
Export
2ire"t *greater "ontrol but lesser market knowledge.
o To $ran"h offi"e
o To Agents between importer and exporter
o To Aholesaler+ 8etailer or Consumers
Indire"t *greater market knowledge but lesser "ontrol.
o Through Export houses
o Through pe"ialist export management firms
o Through HG buying offi"es of foreign stores and go'ernment
o Through Complimentary Export *i.e. Piggy ba"k export.
-i"ensing
:i'ing right to use produ"tion pro"ess for 8oyalty.
Critical analysis of entries
Foreign Direct Investment is dire"t in'estment in business operations in a foreign "ountry. It may be;
3. 1ori(ontal )2I *in'estment in same industry abroad.
4. @erti"al )2I *in'estment in an industry abroad whi"h pro'ides input to firms domesti" operations.
i. $a"kward Integration *to a"quire raw material.
ii. )orward Integration *to establish final produ"t.
Selection criteria for entry mode: $Factors to 0e considered%
%ode 'aries among firms+ a""ording to markets and o'er time.
)irms marketing ob!e"ti'es *in relation to 'olume+ time s"ale and "o'erage.
-ow ??????????export
1igh??????????produ"e lo"ally
)irms si(e
mall????????export
%ode a'ailability
:o't. may restri"t modes
%ode quality
Fualified+ trained staff is ne"essary for export of high te"hnology goods.
1uman 8esour"e 8equirement
If staff is suitable?????????2ire"t export
If staff is not suitable????Indire"t export *agent based.
%arket information feedba"k
Is re"ei'ed in "ase of 2ire"t export.
-earning "ur'e requirement
1ea'y in'estment "alls for learning "ur'e i.e. "lose obser'ation through dire"t export before
in'estment.
Politi"al risks
Control needs
FDI vs6 E-#ort vs6 &icense:
FDI$Foreign Direct Investment% E-#ort &icense
A
d
v
a
n
t
a
g
e
s
-ower produ"tion "ost
$etter understanding of
%arket and Customers.
-ower transportation "ost.
7'er"omes tariff and non?
tariff barriers.
Con"entration on
produ"tion
E"onomies of s"ale
Consisten"y of produ"t
quality
International experiment on
small s"ale
Easiest+ "heapest+ most
"ommon
Politi"al risks are a'oided.
A'oids "osts and hassle of
setting up o'erseas.
8apid penetration
0o in'estment
0o Politi"al risk+ 0o
Prote"tionism
:
e
y

I
s
s
u
e
s
Politi"al risks.
Partnership
%anaging o'erseas
fa"ilities
Hsually more in'ol'ement
but subsidiary may a"t
independent.
Prote"tionism
Ex"hange rates
Hsually less in'ol'ement
mall "ash inflows
Fuality standards issues
Indire"t "ompetition where
both export
-i"ensee may be"ome
"ompetitor *by transfer of
knowledge and te"hnology.
If FDIG =FFR o'ned su0sidiary or .oint venture:
/holly o+ned subsidiary (as compared to Coint venture)
Ad'antages;
0o sharing in profit
0o sharing in de"ision making
0o "ommuni"ation problem
7peration of integrated international
systems
@aried experien"e
Gey Issues;
1ea'y in'estment needed
uitable managers not a'ailable
:o't. dis"ourages 355I ownership
0o lo"al knowledge
Protectionism (discouraging imports! by (o"t%
:o'ernment and -o"al produ"ers get benefit not "onsumers.
3. Tariff *tax on imports.
4. 0on?tariff barriers
a. 7ffi"ial
i. ubsidy
ii. Import FuotasE Export 8estraint
iii. -o"al Content 8equirement *spe"ifi" fra"tion must be produ"ed lo"ally.
i'. Anti?dumping poli"ies *e.g. spe"ial duty.
'. Administrati'e poli"ies *informal instruments or bureau"rati" rules.
'i. Embargo *total ban.
b. Hn?7ffi"ial
i. Fuality and inspe"tion pro"edures
ii. Pa"king safety and do"umentation standards
iii. 8estri"tion of distribution
/. Ex"hange "ontrol *making diffi"ult to obtain required "urren"y.
9. Ex"hange rate poli"ies *e.g. "ompetiti'e de'aluation of "urren"y.
$umping is selling goods in foreign market below "ost or market 'alue to;
Hnload ex"essi'e produ"tion
Capture market.
Political ris, in FDI for multinationals
(olitical ris' is the risk that politi"al a"tions will affe"t the position and 'alue of a "ompany.
4o' Political actions can affect:
3. Tariff and non?tariff barriers e.g. Fuotas
4. :o't. interferen"e in "ontra"ts
/. Imposition of
i. In"reased tax rates
ii. Pri"e "ontrols
iii. Ex"hange "ontrols through
a. 8ationing supply of foreign ex"hange
b. $lo"king funds of foreign parent *"ounter ways.
2i'idend
elling goodsEser'i"es *'olume and transfer pri"ing.
8oyalty
-oan and high interest rates
%anagement "harges
9. 0ationali(ation
<o+ to cope +ith political ris':
3. 0egotiation *agreement. with :o'ernment
i. Transfer of "apital
ii. A""ess to lo"al finan"e
iii. :o't. interferen"e
i'. Taxation
'. Transfer poli"y
4. Insuran"e
/. Conta"ts with markets
9. %anagement stru"ture *!oint 'enture or gi'ing "ontrol to lo"al.
=. )inan"ial management *obtain finan"e lo"ally.
>. Produ"tion strategies *gi'ing "ontrol to lo"al to produ"e 7r to supply "hain management.
Regional trading groups.blocks&&& + #ay to o"ercome Protectionism and Political risks
8egional trading group promotes trading between members of group. )ollowing are "ommon types;
Free trade area:
Internal barriers to trade are remo'ed.
Ea"h "ompany determines its own external trade poli"y.
"ustoms @nion:
Internal barriers to trade are remo'ed.
Common external trade poli"y is adopted.
"ommon Mar'et:
imilar to "ustoms union ex"ept it allows fa"tors of produ"tion to mo'e freely between "ountries.
conomic @nion:
It is Common market but more "loser integration in"luding establishment of "ommon "urren"y and tax rates.
)a-ation issues in FDI
$y stru"turing the group+ tax ad'antages "ould be a'ailed.
Foreign ta2 credit a'oids double taxation in both "ountries.
)a2 havens is a "ountry with ex"eptionally low or e'en no in"ome tax but there should be;
table "urren"y and :o't.
Adequate finan"ial ser'i"es support fa"ilities.
Ca#ital Structure Decisions
Equity or borrowing
If equity+ Parents or ubsidiarys
If externally+ from host or other "ountry
Ahat Curren"y *same to a'oid flu"tuation and symmetry.
1ow mu"h and what period
Factors influencing choice of financing:
3. -o"al finan"e "ost
4. Taxation system
/. 8estri"tion on di'idend remittan"e
9. )lexibility in repayment
:lobal Capital %arket
International 0an,s *pro'ide finan"ial and other ser'i"es.
Factors affecting development of international ban's:
3. :lobali(ation *Trade of se"urities world wide e.g. Euro equity.
4. e"uriti(ation *2ebt 'ia issuan"e of se"urities e.g. Euro bonds+ Euro "ommer"ial papers.
/. 2eregulation *national barriers.
9. 2isintermediation *dire"tly from in'estor.
=. In"reased foreign ex"hange and interest rate 'olatility
,enefits of international ban's:
3. )inan"ing of foreign trade
4. )inan"ing of "apital pro!e"ts
/. Pro'ision for ad'i"e and information
9. Pro'iding full lo"al banking ser'i"es in different "ountries
=. International Cash %anagement ser'i"es
>. Trading in foreign ex"hange and "urren"y options
J. Parti"ipation in syndi"ated loan fa"ility
L. -ending and borrowing in foreign and euro "urren"y markets
6. Hnderwriting of euro bonds
,orro+ing in uro mar'et Vs7 $omestic mar'et
2omesti" banking is sub!e"t to tighter regulation
2omesti" banking is sub!e"t to se"urity requirements
Euro finan"e may ha'e
i. )lexibility in draw?down dates
ii. Early redemption penalties
iii. Commitment fee
Euro is suitable for 'ery large finan"e requirements
Euro Currency:
)ollowing types of "urren"y is a'ailable in Euro %arkets;
3. Euro equity
4. Euro bond
/. Euro "urren"y
9. Euro Curren"y loan
=. Euro "redits
>. Commer"ial papers
J. yndi"ated "redits
L. %7)s
Euro e@uity issue:
Issue of equity in a market outside the "ompanys own domesti" market.
0ot de'eloped like Euro bonds+ hen"e Msweeteners are added e.g. 8olling Put 7ption
Euro 0ond:
%urrency differs country of issue *underwritten by international syndi"ate of banks and sold internationally.
Euro bonds are suitable when;
-arge organi(ation with ex"ellent "redit rating
8equires long term loan for "apital expansion
8equires borrowing not sub!e"t to national ex"hange "ontrol
Interest rates are fixed or floating with minimum.
3nvestors of urobonds will be "on"erned about;
%arketability
Anonymity
8eturn on In'estment
e"urity
Euro currency:
Euro"urren"y is any "urren"y banked outside of its "ountry of origin e.g. Eurodollars are dollars banked outside Hnited
tates.
Euro Currency loan:
HG "ompany borrows in H X from a HG bank+ it is a Euro 2ollar loan.
Euro credits: like Euro "urren"y loan
Commercial #a#ers:
An example of e"uriti(ation.
hort term finan"ial instruments
Issued in the form of unse"ured promissory notes with a fixed maturity date.
Issued in bearer form
Issued on dis"ount basis
Companies with net "apital of 4= million "an issue it.
Syndicated credit mar,et:
Pro'ides "redit at high rates o'er -I$78.
uitable for
Takeo'er bids
:o't. borrowings
Pro!e"t finan"ing
"redit is a fa"ility whereas %oan is a transa"tion.
M3Fs:
Multiple 1ptions Facilities (M1F) "omprise 'ariety of instruments through whi"h "ompany "an raise funds and
in"lude;
0ote Issuan"e )a"ilities *0I).
8e'ol'ing Hnderwriting )a"ilities *8H).
Counter ,rade
"ounter trade is a trade of goods and ser'i"es for other goods and ser'i"es.
)ypes&arrangements of "ounter )rade:
,arter *dire"t ex"hange of goodsEser'i"es between two parties without a "ash transa"tion.
"ounter purchase *A re"ipro"al buying agreement between two parties whereby seller also undertakes to
pur"hase a "ertain amount of mer"handi(e from other "ountry.
1ffset *like "ounter pur"hase but party "an pur"hase from any firm in the "ountry.
#+itch )rading *A third party trading house buys the firms "ounter pur"hase "redits and sells them to
another firm that "an better use them.
,uybac' *7ne "ountry supplies "apital goods and re"ei'es its output as partialEfull payment.
Advantages of "ounter )rade:
3. A mode to finan"e exports when other modes are not a'ailable.
4. Competiti'e ad'antage o'er parties preferring "ash transa"tions.
$isadvantages of "ounter )rade:
3. :oods re"ei'ed may be unusable+ poor quality+ or unprofitable.
4. Expensi'e and time "onsuming to de'elop a separate in?house trading department to dispose those goods
/. Hnrealisti"ally high 'alue may be impose on goods.
9. Cost may ex"eed expe"tation. *Cost in"ludes Consultan"y fee+ 2is"ount+ $ank fee+ Insuran"e+ Any fee paid to
third party.
/hy "ountries do "ounter trade:
Countries la"k "ommer"ial "redit or "on'ertible )CT.
Countries use it as an instrument of politi"al+ e"onomi"al poli"ies *e.g. $alan"e of Trade+ relationships.
To boost de'eloping manufa"turing industries
To obtain more trade or new te"hnology
/hich "ountries do "ounter trade:
7il exporting "ompanies.
-ess de'eloped and de'eloping "ountries.
Hnusual in industrial "ountries with ex"eption of defense+ a'iation and big ad'an"ed te"hnology.
(inancial pro%lems in (oreign Trade
)oreign Trade raises spe"ial finan"ial problems i.e.
$ad debts risk is greater
-arge in'estment appears in re"ei'able and sto"ks
Reducing 0ad de0ts" ris,:
3. Export fa"toring
4. )orfeiting
/. 2o"umentary Credit *-EC.
9. International Credit Hnions
=. Export Credit :uarantee "hemes
2port factoring:
)a"toring "ompany pro'ides administration of;
Client in'oi"ing
ales a""ounting
2ebt "olle"tion
Credit prote"tion
Forfeiting: *pro'iding medium term export finan"e.
Exporter sends Capital goods to o'erseas buyer who wants medium term loan.
$uyer makes down payment and issues notesE a""epts draft.
0otesEdrafts are guaranteed by A'ailising bank.
Exporter dis"ounts them from )orfeiting bank.
$ocumentary "redit (%&"):
3. Importer orders.
4. Exporter a""epts.
/. Importers bank issues -EC to exporters bank.
9. Exporters bank authori(es exporter to ship mer"handi(e.
=. Exporter ships and gi'es do"uments and draft to own bank.
>. Exporters bank sends do"uments to importers bank and gets the draft a""epted.
J. Importers bank informs importer about arri'al of do"uments and mer"handi(e.
L. Importer pays *or not pays. his bank.
6. 7n maturity+ importers bank pays to exporters bank who pays to exporter.
3nternational "redit @nions:
These are organi(ationsEasso"iations of finan"e housesEbanks in different "ountries ha'ing re"ipro"al arrangements for
pro'iding installment "redit finan"e.
2port "redit 5uarantee #cheme: *where -EC is not a""eptable by strong importer.
Preshi"ment Facility:
:uarantee is issued to banks to indemnify them against losses on finan"e gi'en to exporters to manufa"ture
and pro"ess goods for export.
8isks "o'ered are;
o Insol'en"y of exporter
o Inability to repay or deli'er on due date
Postshi"ment Facility:
Exporter submits appli"ation with required parti"ulars to EC:.
EC: will issue a guarantee spe"ifying maximum amount "o'ered and rate of premium.
8isks "o'ered are;
o Insol'en"y of buyer
o Politi"al and E"onomi" risks
o 8isks of refusal to take deli'ery
o 8isk of any loss *beyond "ontrol of buyer or exporter.
Reducing large investment in Receiva0les and Stoc,s:
Ad'an"e against "olle"tion
2o"umentary "redit
0egotiation of bills or "heques
International Mar,eting Mi- Policies
3nternational place policies:
Ex"lusi'e
ele"ti'e
Intensi'e
3nternational product policies:
tandardi(edEHndifferentiated marketing *same produ"t+ pri"e+ marketing program for all markets.
AdaptedE2ifferentiated marketing
Con"entrated marketing
+tandardization "s3 Adaptation: whether to ado!t or not is lin$ed with !romotional issues.
(roduct #tandardi0ation (roduct Adapted
"ommunication
#tandardi0ation
7""asional exporters
Also ma!or "ompanies
seeking e"onomies of
s"ale
ingle produ"t meets the same
need in all markets but need to be
adapted.
"ommunication Adaptation ame produ"t for
different uses in
different "ountries
Costly
8equired to exploit market fully
,arriers to 3nternational #tandardi0ation:
-aw
Pri"e "ontrol
Produ"t regulation
2istribution restri"tions
Ad'ertising and media restri"tions
Competition
0ature of existing produ"ts
Competitors pri"es
Culture
Consumers tastes and habits
-anguage and attitude differen"es
E"onomy
In"ome le'el
%edia a'ailability
$omestic business as compared to 3nternational business:
o"ial fa"tors;
0o language problem.
1omogenous market.
8ules of game are understood.
imilar pur"hasing habits.
E"onomi" fa"tors;
ingle "urren"y
Hniform finan"ial "limate
table business en'ironment
Competiti'e fa"tors;
2ata "olle"tion is easy and a""urate.
Politi"al fa"tors;
8elati'ely unimportant
Te"hnologi"al fa"tors;
tandard produ"tion and measurement systems
Motivating international agents:
Communi"ation
Assuring long term business relationships
8egular and frequent personal "onta"ts
Ex"lusi'ity
4ofstede"s model of national culture:
1ofstede pointed out that "ountries differ on following dimensions;
.3 Po1er distance how for su!eriors are e(!ected to e(ercise !ower
4. @ncertainty avoidance some "ultures prefer "larity and order while others prefer no'elty
/. 3ndividualism in some "ultures+ it is indi'idual a"hie'ement what matters.
9. Masculinity in su"h "ulture+ roles of sexes are "learly differentiated.
1ofstede grouped "ountries into eight clusters:
3. %ore de'eloped -atin
4. -ess de'eloped -atin
/. %ore de'eloped Asian
9. -ess de'eloped Asian
=. 0ear Eastern
>. :ermani"
J. Anglo
L. 0ordi"
)y"e of industry and size of com"any is also im"ortant#
Finance in !nternational -usiness
)reasureshi#:
)reasureship is the fun"tion used with pro'ision and use of finan"e. It "o'ers
Pro'ision of short term borrowingsE "apital
)oreign Curren"y management
$anking
Colle"tion
%oney market in'estment
Treasury department should be "ost "enter or profit "enterC
Cash Management:
"entrali0ed "ash Management:
3. A'oids mix of "ash urplus and o'erdraft.
4. -arge 'olumes of "ash are a'ailable to in'est
/. Any borrowing "ould be arranged in bulk at lower rates.
9. )oreign "urren"y risk management in impro'ed.
=. pe"ialist Treasury 2epartment will employ experts.
$ecentrali0ed "ash Management:
3. :reat autonomy
4. Fui"k and more response to needs of indi'idual operating units
/. %ore opportunities to in'est on short?term basis.
Float is amount of money tied up between initiali(ation and finali(ation of payment.
%easures to redu"e )loat in"lude;
-odgment delay should be minimum
$AC
C1AP
tanding ordersE dire"t debit for regular payments
-o"k boxes for international payments
"ash (ooling is netting of 2ebit and Credit balan"es with same bank to redu"e interest "ost.
<o+ "ash surplus arises
$y profitability
$y low "apital expenditures
$y re"eipt from selling part of business
<o+ "ash surplus is utili0ed
Takeo'er bids
$uy ba"k of shares
hort term in'estments
o $anks
o In'estment in listed shares
o In'estment in debt instruments
Certifi"ate of 2eposits *"ertifi"ates by bank a"knowledging deposit for spe"ified
time.
Treasury bills *I7Hs by go't. issued weekly for 63 days to finan"e go't. pro!e"ts.
Eligible bank bills *I7Hs by those top rated banks whose bill $ank of England
agrees to buy.
$ills of ex"hange
-o"al authority bonds
Commer"ial papers
Certifi"ate of 2eposits+ Treasury bills and Eligible bank bills are 0egotiable and 8esalable.
International #ayment modes:
Cheque
-o"k boxes *speeds up payment by "heque.
$ills of ex"hange
$ank draft *"heque by a bank drawn on one of its own a""ount.
%ail Transfer
It is a written payment order authenti"ated by offi"ial in sending bank whi"h
Instru"ts by Airmail to pay a "ertain sum of money to a benefi"iary.
Telegraphi" Transfer
-ike mail transfer but instru"tions are sent by "able or telex instead of by airmail.
peeder+ Costly and Confidentiality than %ail Transfer.
AI)T *o"iety for Aorldwide Interbank )inan"ial Tele"ommuni"ation.
Pro'ides rapid ele"troni" fund transfer
In addition to banks+ users in"lude e"urity houses+ Ex"hanges+ %oney brokers+ )und
managers et".
International %oney 7rders
)ransfer #ricing:
$asis in"lude
tandard Cost
%arginal CostE )ull CostE 7pportunity Cost
%arket Pri"e
%arket Pri"e < dis"ount
0egotiated Pri"e *any other basis.
Advantages of having Mar'et (rice as )ransfer (rice $isadvantages of having Mar'et (rice as )ransfer (rice
3. )or buying department
i. $etter quality of ser'i"es
ii. :reater flexibility
iii. 2ependability of supply
4. )or both departments
i. -ower "ost of administration+ selling
and transportation
3. %arket pri"es may be temporary.
4. 2isin"enti'e to use spare resour"es as
"ompared to in"remental "ost approa"h.
/. $uying department may enfor"e dis"ount.
9. %any produ"ts dont ha'e equi'alent market
pri"es.
RM in !nternational -usiness
4RM issues in International (usiness:
3. Expatriate or lo"al management
E-#atriate $as com#ared to local%
Ad'antages;
Poor edu"ationalEte"hni"al
opportunities in lo"al market
:reater "ontrol
$etter "entral "ommuni"ation
Corporate pi"ture is "lear
Gey Issues;
Costs more
-esser lo"al knowledge
Culture sho"k
-anguageECommuni"ation
training required
4. 8e"ruitment and Training
/. Career management within firm
9. Appraisal s"hemes
=. Communi"ation with staff *e?mails+ "onferen"es and news letters et"..
Changes in 1orld mar,et#lace: *by Derry Aind.
:lobali(ation of businesses
"ien"e and Te"hnology de'elopment
trategi" allian"es
Changing "ustomer 'alue and beha'ior
In"reased s"rutiny of business de"isions by go't. and publi".
In"reased deregulation
Changing business pra"ti"es *e.g. outsour"ing++ downsi(ing+ reengineering.
Changing so"ial and business relationship between "ompanies+ employees+ "ustomers and other
stakeholders.
Porter"s national com#etitive advantage:
There are 9 determinants of national "ompetiti'e ad'antage.
(actor conditions
These are a "ountrys endowment of inputs to produ"tion e.g. 1uman 8esour"es+ Physi"al resour"es+ Capital+
Gnowledge and infrastru"ture.
These fa"tors "ould be
$asi" *inherited and "reation in'ol'es less in'estment e.g. natural resour"es. or
Ad'an"ed *in"lude modern digital "ommuni"ations+ highly edu"ated people and resear"h laboratories
et"..
$emand conditions
The home market determines how firms per"ei'e+ interpret and respond to buyer needs.
-elated and supported industries
Competiti'e su""ess in one industry in liked to su""ess in related industries.
Firm strategy! structure and rivalry
Anne-ure IAJ
)o#ic P(P Reference )o#ic P(P Reference
Cha#ter ? 5 A : Strategic Management :
)raditional and other models
Cha#ter // : )he Evolution of Mar,eting
Conce#t
-e'els of strategy )igure %arketing management Explanation
Traditional approa"h to make strategy Explanation Elements of marketing mix < Promotion 2etails
A"ti'ities affe"ting Crafting strategy Explanation @alue?"hain Explanation , examples
-earning based strategy Explanation %arketing pro"ess 2etails
Competiti'e strategy 7'er'iew Cha#ter /> : Strategic Mar,eting 5
Planning
Cha#ter E : S13) Analysis and a# Analysis 2e'elopment in segmentation 2etails
Porters = )or"es model )igure ,
Explanation
$enefits of market segmentation 2etails
Cha#ter ; : Performance A##raisal 5
Analysis
Target %arket Explanation
%easuring performan"e of profit "enter. Explanation ,
examples
E'aluating market segments < porters = for"es Explanation
Inflation 2etail Competiti'e strategy options 2etails
Cha#ter 2 : Mergers and Ac@uisition Identifying gap in market through positioning Explanation
trategi" allian"es < benefits to fran"hiser 2etails ,
examples
Cha#ter /? : Mar,eting Research
Cha#ter =F : Cor#orate Re+organi!ation 8esear"h pro"edures ? Analysis of data Explanation
%anagement buy?out 2etails Colle"ting se"ondary data < internal and
external databases
2etails
Cha#ter == : Ethics and Social Res#onsi0ility Fuestionnaires 2etails
o"ial responsibility < )a'ors ? Externality Explanation %arketing Information ystem *%kI. Explanation
Cha#ter => :4uman Resource Management %arketing 2e"ision upport ystem Explanation
2ifferent "on"epts ? Pg ; 46L %arket ensing Explanation
Termination 2etails er'i"e Fuality *E8@FHA-. Explanation
Cha#ter =? : Measurement and Performance ales )ore"asting P)ore"asting demandsQ Explanation
)a"tors affe"ting personality differen"es Con"epts %arketing Communi"ation Explanation
Dob restru"turing , redesign 2etails Cha#ter /A : Product
Employee appraisal < working arrangements and
types of organi(ations
Explanation ,
examples
0ature and "hara"teristi"s of a ser'i"e Explanation
Types of in"enti'e s"hemes 2etails tages of produ"t life "y"le 2etails
Employee appraisal < %ethods of appraisal 2etails Produ"t Portfolio Planning Explanation
Cha#ter : =A )rainingG A##raisal and Career
Management
Cha#ter /E : Price
Competen"e 2etails Pri"e leadership Explanation , Example
Cha#ter =E : Management and 4uman
ResourceS
Pri"e Elasti"ity of 2emand Explanation , Example
Trait theory Explanation Absorption and %arginal "osting+ and
breake'en analysis
Explanation
-eadership Explanation ,
examples
Cha#ter /; : Place
2is"ipline < 2is"iplinary problems in
organi(ations
2etails Channel "onfli"t < 1ori(ontal and @erti"al
Confli"t
Explanation
8etirement+ 8esignation+ 8edundan"y < Hnfair
2ismissal
2etails Consideration in distribution 2etails
Cha#ter =; : rou#s in 3rgani!ation Channel design de"ision Explanation
Effe"ts of "onfli"ts within groups < :roups ,
2epartments
2etails $enefits of dire"t and indire"t sales 2etails
Cha#ter =M : Strategies for Critical #eriods 2istribution strategy Explanation
Corporate 2e"line < / types of de"line Explanation %arketing and Information ystem 2etails
Cha#ter =2 5 /F : Change Management and
Changing Environment
Customer 2ynami"s and internet as
distribution "hannel
2etails
0ature of strategi" "hange Explanation Cha#ter /M : Promotion
%odel for "hange Explanation Push and Pull trategy 2etails
Approa"hes to implement "hange Explanation %er"handising Explanation
)or"e )ield Analysis Explanation Planning a promotion "ampaign 2etails
Change pro"ess 2etails 8elationship %arketing 2etails
Pressure groups Explanation ,
examples
Cha#ter : International (usiness
Chap 45 ; trategi" intelligen"e 2etails Competiti'e ad'antage 2etails
Chap 45 ; En'ironmental data 2etails Prote"tionism Explanation
Y2etails Z Topi" in"luded in these notes and needs further detail from P$P
YExplanation Z Topi" not in"luded in these notes at all so needs to be read from P$P
YExample Z )or examples relating to the topi"+ see P$P
Y)igure Z )or graphi"al representation relating to the topi"+ see P$P

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