MARKETING MANAGEMENT CIA -1

MARKETING MANAGEMENT
TWO MARKERS
1. Define marketing.

As defined by American Marketing Association, “Marketing is the activity, set of institutions, and
processes for creating, communicating, delivering, and exchanging offerings that have value for
customers, clients, partners, and society at large”.
Example: When eBay recognized that people were unable to locate some of the items they desired
most, it created an online auction clearinghouse. When IKEA noticed that people wanted good
furnishings at substantially lower prices, it created knockdown furniture. These two firms
demonstrated marketing savvy and turned a private or social need into a profitable business
opportunity.

2. Explain social and managerial marketing.

Societal marketing is a marketing concept that holds that a company should make marketing decisions
not only by considering consumers' wants, the company's requirements, but also society's long-term
interests.

Managerial marketing is designed to identify, at a strategic level, the key audiences that an
organization wishes to reach and the most appropriate tools and messages to reach those audiences
and compel them to make a purchase decision.

3. State the entities of marketing.

Marketing is typically seen as the task of creating, promoting and delivering goods and services to
consumers and businesses. Marketers market 10 main types of entities: goods, services, events,
experiences, persons, places, properties, organizations, information, and ideas.

4. Define a market. State the key customer markets?

The term market refers to the group of consumers or organizations that is interested in the product,
has the resources to purchase the product, and is permitted by law and other regulations to acquire
the product.

Key customer markets are

 Consumer markets
 Business markets
 Global markets
 Non-profit & Governmental markets
5. State the evolution of marketing concepts.

The marketing concept as a business philosophy is traced from its origins as a business belief where
efficient production was the emphasis to the current belief which emphasizes customer needs as a
means of long-run business success. The concept has evolved in a progressive fashion over the last
century.
The Production Concept: It holds that consumers prefer products that are widely available and
inexpensive.
The Product Concept: This concept proposes that consumers favour products offering the most
quality, performance, or innovative features.
The Selling Concept: The selling concept holds that consumers and businesses, if left alone,
Won’t buy enough of the organization’s products.
The Marketing Concept: This concept assumes that the starting point for any marketing process is the
customer needs and wants, and no longer the aggressive selling.
The Holistic Marketing Concept: Holistic marketing is based on the assumption that the approach to
marketing should be the adoption of all activities of marketing.

6. List the various factors that determines the bargaining power of suppliers.

There are five major factors when determining the bargaining power of suppliers:

 Number of suppliers relative to buyers

 Dependence of a supplier’s sale on a particular buyer
 Switching cost (switching costs of supplier)
 Availability of suppliers for immediate purchase
 Possibility of forward integration by suppliers

7. List the various factors that determine the bargaining power of buyers.

There are four major factors when determining the bargaining power of buyers:

 Number of buyers relative to suppliers: If the number of buyers is small relative to that of
Suppliers, the buyer’s power will be stronger.
 Dependence of a buyer’s purchase on a particular supplier: If a buyer is able to get similar
products/services from other suppliers, buyers depend less on a particular supplier. Therefore,
the power of the buyer would be greater.
 Switching costs: If there are not many alternative suppliers available, the cost of switching is
high. Therefore, buyer power would be low
 Backward Integration: If the buyer is able to integrate or merge suppliers, the buyer has greater
bargaining power over the existing suppliers.
 FIVE MARKERS
1. What is marketing? Explain with examples.

Marketing is about identifying and meeting human and social needs. Kotler and Keller gave the short
definition of marketing as meeting customer needs profitably.
As defined by American Marketing Association, “Marketing is the activity, set of institutions, and
processes for creating, communicating, delivering, and exchanging offerings that have value for
customers, clients, partners, and society at large”.

Marketing is the science and art of exploring, creating, and delivering value to satisfy the needs of a
target market at a profit. Marketing identifies unfulfilled needs and desires. It defines measures and
quantifies the size of the identified market and the profit potential. It pinpoints which segments the
company is capable of serving best and it designs and promotes the appropriate products and services.
Example: When eBay recognized that people were unable to locate some of the items they desired
most, it created an online auction clearinghouse. When IKEA noticed that people wanted good
furnishings at substantially lower prices, it created knockdown furniture. These two firms
demonstrated marketing savvy and turned a private or social need into a profitable business
opportunity.

2. What is marketing? Explain social and managerial marketing.

Marketing is about identifying and meeting human and social needs. Kotler and Keller gave the short
definition of marketing as meeting customer needs profitably.
As defined by American Marketing Association, “Marketing is the activity, set of institutions, and
processes for creating, communicating, delivering, and exchanging offerings that have value for
customers, clients, partners, and society at large”.

We can distinguish between a social and managerial definition of marketing.

Societal marketing is a marketing concept that holds that a company should make marketing
decisions not only by considering consumers' wants, the company's requirements, but also
society's long-term interests. A social definition shows the role marketing plays in society.
For example, one marketer has said that marketing’s role is to “deliver a higher standard of
living.” Here is a social definition that serves our purpose: Marketing is a societal process by
which individuals and groups obtain what they need and want through creating, offering, and
freely exchanging products and services of value with others.

“The aim of marketing is to know and understand the customer so well that the product or
service fits him and sells itself”- Peter Drucker. Managerial marketing is designed to identify, at
a strategic level, the key audiences that an organization wishes to reach and the most
appropriate tools and messages to reach those audiences and compel them to make a purchase
decision. Ideally, marketing should result in a customer who is ready to buy. All that should be
needed then is to make the product or service available.

For example, when Nintendo designed its Wii game system, when Canon launched its ELPH digital
camera line, and when Toyota introduced its Prius hybrid automobile, these manufacturers were
swamped with orders because they had designed the right product, based on doing careful marketing
homework.
3. What entities are marketed in marketing?/ Explain the entities of marketing?

Marketing is typically seen as the task of creating, promoting and delivering goods and services
to consumers and businesses. Marketers market 10 main types of entities: goods, services,
events, experiences, persons, places, properties, organizations, information, and ideas.

 Goods: Physical goods constitute the bulk of most countries’ production and marketing
efforts. Examples: refrigerators, television sets, food products, machines etc.

 Services: As economies advance, a growing proportion of their activities focuses on the

production of services. The U.S. economy today produces a 70–30 services-to-goods mix.
Services include the work of airlines, hotels, car rental firms, barbers and beauticians,
maintenance and repair people, and accountants, bankers, lawyers, engineers, doctors,
software programmers, and management consultants. Many market offerings mix goods and
services, such as a fast-food meal.

 Events: Marketers promote time-based events, such as major trade shows, artistic
performances, and company anniversaries. Global sporting events such as the Olympics and the
World Cup are promoted aggressively to both companies and fans.

 Experiences: By orchestrating several services and goods, a firm can create, stage, and
market experiences. For example, Walt Disney World’s Magic Kingdom allows customers to visit
a fairy kingdom, a pirate ship, or a haunted house. There is also a market for customized
experiences, such as a week at a baseball camp with retired baseball greats, a four-day rock and
roll fantasy camp, or a climb up Mount Everest.

 Persons: Artists, musicians, CEOs, physicians, high-profile lawyers and financiers, and other
professionals all get help from celebrity marketers.Some people have done a masterful job of
marketing themselves—David Beckham, Oprah Winfrey, and the Rolling Stones. Management
consultant Tom Peters, a master at self-branding, has advised each person to become a
“brand.”

 Places: Cities,states,regions,and whole nations compete to attract

tourists,residents,factories,and company headquarters. Place marketers include economic
development specialists, real estate agents, commercial banks, local business associations, and
advertising and public relations agencies. For example, The Las Vegas Convention & Visitors
Authority succeeded with its provocative ad campaign, “What Happens Here, Stays Here,”
portraying Las Vegas as “an adult playground.” In the recession of 2008, however, convention
attendance declined. Concerned about its potentially out-of-step racy reputation, the Authority
took out a full-page Business Week ad to defend its ability to host serious business meetings.
Unfortunately, the 2009 summer box office blockbuster The Hangover, set in a debauched Las
Vegas, likely did not help the city position itself as a choice business and tourist destination.
 Properties: Properties are intangible rights of ownership to either real property (real estate)
or financial property (stocks and bonds). They are bought and sold, and these exchanges require
marketing. Real estate agents work for property owners or sellers, or they buy and sell
residential or commercial real estate. Investment companies and banks market securities to
both institutional and individual investors.
 Organizations: Organizations work to build a strong, favourable, and unique image in the
minds of their target publics. For example, in the United Kingdom, Tesco’s “Every Little Helps”
marketing program reflects the food marketer’s attention to detail in everything it does, within
the store and in the community and environment. The campaign has vaulted Tesco to the top of
the UK supermarket chain industry. Universities, museums, performing arts organizations,
corporations, and nonprofits all use marketing to boost their public images and compete for
audiences and funds.
 Information: The production, packaging, and distribution of information are major
industries. Information is essentially what books, schools, and universities produce, market, and
distribute at a price to parents, students, and communities. For example, the former CEO of
Siemens Medical Solutions USA, Tom McCausland, says, “[our product] is not necessarily an X-
ray or an MRI, but information. Our business is really healthcare information technology, and
our end product is really an electronic patient record: information on lab tests, pathology, and
drugs as well as voice dictation.”
 Ideas: Every market offering includes a basic idea. Charles Revson of Revlon once observed:
“In the factory we make cosmetics; in the drugstore we sell hope.” Products and services are
platforms for delivering some idea or benefit.

4.Define a market. Explain the key customer markets?

Traditionally, a “market” was a physical place where buyers and sellers gathered to buy and sell
goods. In marketing, the term market refers to the group of consumers or organizations that is
interested in the product, has the resources to purchase the product, and is permitted by law
and other regulations to acquire the product.Marketers view sellers as the industry and use the
term market to describe customer groups.

A Key customer is a person or a company who gives a substantial amount of business to your
organisation. These key customers some times are given special discounts like cash discount,
trade discounts, turn over discounts, quantity discounts and other privileges according to the
organisation's policies.

The following are key customer markets: consumer, business, global, and nonprofit.

 Consumer Markets Companies selling mass consumer goods and services such as juices,
cosmetics, athletic shoes, and air travel spend a great deal of time establishing a strong brand
image by developing a superior product and packaging, ensuring its availability, and backing it
with engaging communications and reliable service. Consumer market is characterized by
aggressive marketing campaigns, for consumers tend to be disloyal to brands and can easily
switch from one to another. Also, competing companies are focused on innovating and
improvising their products and production models to garner greater market share.
 Business Markets Companies selling business goods and services often face well-informed
professional buyers skilled at evaluating competitive offerings. Business buyers buy goods to
make or resell a product to others at a profit. Business marketers must demonstrate how their
products will help achieve higher revenue or lower costs. Advertising can play a role, but the
sales force, the price, and the company’s reputation may play a greater one. The metals
industry is a good example of Business Market. Here, raw metals (sometimes in the form of
ores) are bought by private companies from government agencies. The former then go on to
process and add value to the metal before selling it to other industries or end consumers.
 Global Markets Companies selling goods and services in the global marketplace face
additional decisions and challenges. They must decide which countries to enter; how to enter
each country as an exporter, licenser, joint venture partner, contract manufacturer, or sole
manufacturer and how to adapt their product and service features to each country. The pricing
of their products in different countries and adapting their communications to fit different
cultures is a prime criterion. These decisions must be made in the face of different
requirements for buying, negotiating, owning, and disposing of property; different culture,
language, and legal and political systems; and a currency that might fluctuate in value. For
example, China has the largest global market for smart devices.
 Non-profit and Governmental Markets Companies selling to nonprofit organizations with
limited purchasing power such as churches, universities, charitable organizations, and
government agencies need to price carefully. Lower selling prices affect the features and quality
the seller can build into the offering. Much government purchasing calls for bids, and buyers
often focus on practical solutions and favor the lowest bid in the absence of extenuating
factors. For example a government agency that performs these functions is the Postal Services.

5. What are the new trends in marketing?

New marketing forces and capabilities have profoundly changed marketing management and have
created new marketing trends. In theory, the marketing planning process consists of analyzing
marketing opportunities, selecting target markets, designing marketing strategies, developing
marketing programs, and managing the marketing effort. The highly competitive marketplaces
that are more often the norm, marketing planning is more fluid and is continually refreshed.

Companies must always be moving forward with marketing programs, innovating products and
services, staying in touch with customer needs, and seeking new advantages rather than relying on
past strengths. This is especially true of incorporating the Internet into marketing plans. Marketers
must try to balance increased spending on search advertising, social media, direct e-mail, and
text/SMS marketing efforts with appropriate spending on traditional marketing communications.

Major societal forces create complex challenges for marketers, but they have also generated a
new set of capabilities to help companies cope and respond.

 Marketers can use the Internet as a powerful information and sales channel. The Internet
augments marketers’ geographical reach to inform customers and promote products worldwide. A
Web site can list products and services, history, business philosophy, job opportunities, and other
information of interest. For example, in 2006, a Montgomery, Alabama, flea market gained
national popularity when owner Sammy Stephens’s rap-style advertisement spread virally through
the Internet. Created for $1,500, the advertisement was viewed more than 100,000 times on
YouTube and landed Stephens on The Ellen DeGeneres Show. Stephens now sells T-shirts,
ringtones, and other branded merchandise through his Web site, advises retailers about
advertising, and hosts hundreds of visitors from all over the world at his store each month.
 Marketers can collect fuller and richer information about markets, customers, prospects, and
competitors. Marketers can conduct fresh marketing research by using the Internet to arrange
focus groups, send out questionnaires, and gather primary data in several other ways. They can
assemble information about individual customers’ purchases, preferences, demo- graphics, and
profitability. For example, the drugstore chain CVS uses loyalty-card data to better understand
what consumers purchase, the frequency of store visits, and other buying preferences. Its Extra
Care program netted an extra 30 million shoppers and $12 billion a year in revenue across 4,000
stores.
 Marketers can tap into social media to amplify their brand message. Marketers can feed in-
formation and updates to consumers via blogs and other postings, support online communities,
and create their own stops on the Internet superhighway. For example, Dell Corporation’s @Dell
Outlet Twitter account has more than 600,000 followers. Between 2007 and June 2009, Dell took
in more than $2 million in revenue from coupons provided through Twitter, and another $1
million from people who started at Twitter and went on to buy a new computer on the company’s
Web site.
 Marketers can facilitate and speed external communication among customers. Marketers can
also create or benefit from online and offline “buzz” through brand advocates and user
communities. Word-of-mouth marketing agency BzzAgent has assembled a nationwide volunteer
army of 600,000 consumers who join promotional programs for products and services they deem
worth talking about. For example, in 2005, Dunkin’ Donuts hired BzzAgent to help launch a new
espresso beverage, Latte Lite. Three thousand trained volunteers (called BzzAgents) in 12 test
markets experienced the Latte Lite, formed their opinions, engaged in natural conversations about
the product, and reported back to BzzAgent via the company’s reporting interface. After four
weeks, product sales had increased by more than 15 percent in test markets.
 Marketers can send ads, coupons, samples, and information to customers who have requested
them or given the company permission to send them. Micro-target marketing and two-way
communication are easier, thanks to the proliferation of special-interest magazines, TV channels,
and Internet newsgroups. Extranets linking suppliers and distributors let firms send and receive
information, place orders, and make payments more efficiently. The company can also interact
with each customer individually to personalize messages, services, and the relationship.
 Marketers can reach consumers on the move with mobile marketing. Using GPS technology,
marketers can pinpoint consumers’ exact location and send them messages at the mall with
coupons good only that day, a reminder of an item on their wish list, and a relevant perk, for
example, buy this book today and get a free coffee at the bookstore’s coffee shop. Location
based advertising is attractive because it reaches consumers closer to the point of sale. Firms can
also advertise on video iPods and reach consumers on their cell phones through mo- bile
marketing.
 Companies can make and sell individually differentiated goods. Thanks to advances in factory
customization, computer technology, and database marketing software, customers can buy M&M
candies, TABASCO jugs, or Maker’s Mark bottles with their names on them; Wheaties boxes or
Jones soda cans with their picture on the front; and Heinz ketchup bottles with customized
messages. For example, BMW’s technology allows buyers to design their own car models from
among 350 variations, with 500 options, 90 exterior colours, and 170 trims. The company claims
that 80 percent of the cars bought in Europe and up to 30 percent bought in the United States are
built to order.
 Companies can improve purchasing, recruiting, training, and internal and external
communications. Firms can recruit new employees online, and many have Internet training
products for their employees, dealers, and agents. Retailer Patagonia has joined Walt Disney,
General Motors and McDonald’s in embracing corporate blogging to communicate with
the public and employees. Patagonia’s The Cleanest Line posts environmental news,
reports the results of its sponsored athletes, and posts pictures and descriptions of
employees’ favorite outdoor locations.
 Companies can facilitate and speed up internal communication among their
employees by using the Internet as a private intranet. Employees can query one
another, seek advice, and
Download or upload needed information from and to the company’s main computer.
For example, seeking a single online employee portal that transcended business units,
General Motors launched a platform called my Socrates in 2006 consisting of
announcements, news, links, and historical information. GM credits the portal with
$17.4 million in cost savings to date.
 Companies can improve their cost efficiency by skillful use of the Internet.
Corporate buyers can achieve substantial savings by using the Internet to compare
sellers’ prices and purchase materials at auction, or by posting their own terms in
reverse auctions. Companies can improve logistics and operations to reap substantial
cost savings while improving accuracy and service quality.

6. Discuss the evolution of marketing concepts. / Discuss the business

orientation towards market place from production to holistic marketing.

Marketing is about identifying and meeting human and social needs. Kotler and
Keller gave the short definition of marketing as meeting customer needs profitably.
Marketing is defined as the activity, set of institutions, and processes for
creating, communicating, delivering, and exchanging offerings that have
value for customers, clients, partners, and society at large.
The marketing concept as a business philosophy is traced from its origins as a
business belief where efficient production was the emphasis to the current belief
which emphasizes customer needs as a means of long-run business success. The
concept has evolved in a progressive fashion over the last century.
Increasingly, marketers operate consistently with the holistic marketing concept. As
the market has changed, so has the way the company deals with the marketplace.
The company orientation towards marketplace deals with the concepts which a
company may apply while targeting a market. There are basically five different
orientations which a company takes towards the marketplace.

The Production Concept

The Production concept can be traced back to the 1850s, through to the 1900s. This was
the period of industrial revolution in the United States. At this period the country
witnessed growth in electricity generation, rail transportation, division of labour,
assembly lines, and mass production. These made it possible to produce goods more
efficiently with new technology and new ways of using labour. Despite the increase
in production of goods with these emerging ways of production, there was heavy
demand for manufactured goods. The production concept is one of the oldest
concepts in business. It holds that consumers prefer products that are widely
available and inexpensive. Managers of production-oriented businesses concentrate
on achieving high production efficiency, low costs, and mass distribution. This
orientation makes sense in developing countries such as China, where the largest PC
manufacturer, Legend (principal owner of Lenovo Group), and domestic appliances
giant Haier take advantage of the country’s huge and inexpensive labor pool to dominate the
market. Marketers also use the production concept when they want to expand the market.

The Product Concept

The product concept was the dominant marketing philosophy at the dawn of the 1900s and
continued to the 1930s. According to Fullerton, “For more than a generation the concept of the
production era dominated the understanding of marketing’s past held by students and
scholars”. The production orientation assumes that consumers will prefer product based on its
quality, performance and innovative features. This means that the company knows its product
better than anyone or any organization. Thus, the company knows what will work in designing
and producing the product and what will not work. Since the company has the great knowledge
and skill in making the product, it also assumes it knows what is best for the consumer. The
product concept compelled companies to ensure improving product quality, and introduce new
features to enhance product performance; as much as possible.In much of the product era,
organizations were able to sell all of the products that they made. The success of this
philosophy was due mostly to the time and level of technology in which it was dominant. The
product concept survived much of the time after the Industrial Revolution.
The product concept proposes that consumers favor products offering the most quality,
performance, or innovative features. However, managers are sometimes caught in a love affair
with their products. They might commit the “better-mousetrap” fallacy, believing a better
product will by itself lead people to beat a path to their door. A new or improved product will
not necessarily be successful unless it’s priced, distributed, advertised, and sold properly.

The Selling Concept

The selling concept was the concept of businesses that preceded the product era, and has the
shortest period of dominance compared to the two preceding philosophies. It began to be
dominant around 1930 and stayed in widespread use until about 1950. The emphasis
of selling concept was to create a department to solely be responsible for the sale of the
company’s product; while the rest of the company could be left to concentrate on producing
the goods.According to Kotler and Armstrong, the orientation of the selling concept was that
the company can sell any product it produces with the use of marketing techniques, such as
advertising and personal selling. The concept assumes that consumers are unlikely to buy the
product unless they are aggressively persuaded to do so – mostly that ‘hard sell’ approach. The
selling concept takes an ‘inside-out’ perspective. It starts with the factory, focuses on the
company’s existing products, and calls for heavy selling and promotion to obtaining profitable
sales. It focuses primarily on customer conquest getting short-term sales with little concern
about who buys or why.
The selling concept holds that consumers and businesses, if left alone, won’t buy enough of the
organization’s products. It is practiced most aggressively with unsought goods—goods buyers
don’t normally think of buying such as insurance and cemetery plots and when firms with
overcapacity aim to sell what they make rather than make what the market wants. Marketing
based on hard selling is risky. It assumes customers coaxed into buying a product not only won’t
return or bad-mouth it or complain to consumer organizations but might even buy it again.
The Marketing Concept

The marketing concept started to dominate business orientation during the 1950s,and
continues until the twenty first century. This concept assumes that the starting point for any
marketing process is the customer needs and wants, and no longer the aggressive selling. The
key assumption underlying the marketing philosophy is that “a market should make what it
can sell, instead of trying to sell what it has made”. The marketing concept focuses on the
needs and wants of the buyer rather than the needs of the seller and the product.
The job is to find not the right customers for your products, but the right products for your
customers. For example,Dell doesn’t prepare a perfect computer for its target market. Rather, it
provides product platforms on which each person customizes the features he or she desires in
the computer. The marketing concept holds that the key to achieving organizational goals is
being more effective than competitors in creating, delivering, and communicating superior
customer value to your target markets. Harvard’s Theodore Levitt drew a perceptive contrast
between the selling and marketing concepts:

Selling focuses on the needs of the seller; marketing on the needs of the buyer. Selling is
preoccupied with the seller’s need to convert his product into cash; marketing with the idea of
satisfying the needs of the customer by means of the product and the whole cluster of things
associated with creating, delivering, and finally consuming it.
Several scholars found that companies embracing the marketing concept at that time achieved
superior performance. Despite the fact that new concepts have developed since the emergence
of the marketing philosophy, the concept still reigns superior in creating and retaining
profitable customers,which is a primary objective of businesses.

The Holistic Marketing Concept

The holistic marketing concept is a 21st century business thinking.The concept is based on the
“development,design, and implementation of marketing programmes, processes and activities
that recognizes their breadth and interdependencies”. Without question, the trends and forces
that have defined the first decade of the 21st century are leading business firms to a new set of
beliefs and practices. “Marketing Memo: Marketing Right and Wrong” suggests where
companies go wrong—and how they can get it right—in their marketing.The holistic marketing
concept suggests that the 21st century business firm needs a new set of beliefs and practices
toward business operation that is more complete and cohesive than the traditional application
of the marketing concept. According to Kotler and Keller,holistic marketing recognizes that
“everything matters”in marketing. Holistic marketing is thus based on the assumption that the
approach to marketing should be the adoption of all activities of marketing.Holistic marketing
includes internal marketing, performance marketing, integrated marketing and relationship
marketing.Holistic marketing acknowledges that everything matters in marketing and that a
broad, integrated perspective is often necessary. Holistic marketing thus recognizes and
reconciles the scope and complexities of marketing activities.

7. What are the factors affecting the new marketing realities?

Marketing Reality is a real-time existing tactic to generate leads for marketing. With changing
times, rather with every second now, the war of standing out from the crowd is getting tougher
amongst the participants (sellers/traders). One has realized that if there is even a single day’s
delay in updating your knowledge with the ‘NEW’ thing in the market, you consider this as an
already lost race. One has to keep up with the pace of improving, updating, and analyzing the
entries and exits of a market.
A marketing reality is something that changes and governs our road of marketing. It can be
something already existing but latent, or something which has just emerged out of nowhere.
We can say with some confidence that the marketplace isn’t what it used to be. It is
dramatically different from what it was even 10 years ago.
The major forces affecting new marketing realities to this date and time are as below:

 Network information technology: The digital revolution has created an Information Age
that promises to lead to more accurate levels of production, more targeted communications,
and more relevant pricing.
 Globalization: Technological advances in transportation, shipping, and communication have
made it easier for companies to market in, and consumers to buy from, almost any country in
the world. International travel has continued to grow as more people work and play in other
countries.
 Deregulation: Many countries have deregulated industries to create greater competition
and growth opportunities. In the United States, laws restricting financial services,
telecommunications, and electric utilities have all been loosened in the spirit of greater
competition.
 Privatization: Many countries have converted public companies to private ownership and
management to increase their efficiency, such as the massive telecom company Telefónica CTC
in Chile and the international airline British Airways in the United Kingdom.
 Heightened competition: Intense competition among domestic and foreign brands raises
marketing costs and shrinks profit margins. Many strong brands have become megabrands and
extended into a wide variety of related product categories, presenting a significant competitive
threat.
 Industry convergence:Industry boundaries are blurring as companies recognize new
opportunities at the intersection of two or more industries. The computing and consumer
electronics industries are converging, for example, as Apple, Sony, and Samsung release a
stream of entertainment devices from MP3 players to plasma TVs and camcorders. Digital
technology fuels this massive convergence.
 Retail transformation:Store-based retailers face competition from catalog houses; direct-
mail firms; newspaper, magazine, and TV direct-to-customer ads; home shopping TV; and e-
commerce. In response, entrepreneurial retailers are building entertainment into their stores
with coffee bars, demonstrations, and performances, marketing an “experience” rather than a
product assortment. For example, Dick’s Sporting Goods has grown from a single bait-and-
tackle store in Binghamton, New York, into a 300-store sporting goods retailer in 30 states. Part
of its success springs from the interactive features of its stores. Customers can test golf clubs in
indoor ranges, sample shoes on its footwear track, and shoot bows in its archery range.
 Disintermediation:The amazing success of early dot-coms such as AOL, Amazon.com,
Yahoo!, eBay, E*TRADE, and others created disintermediation in the delivery of products and
services by intervening in the traditional flow of goods through distribution channels. These
firms struck terror into the hearts of established manufacturers and retailers. In response,
traditional companies engaged in reintermediation and became “brick-and-click” retailers,
adding online services to their offerings. Some became stronger contenders than pure-click
firms, because they had a larger pool of resources to work with and established brand names.
 Consumer buying power: In part, due to disintermediation via the Internet, consumers have
substantially increased their buying power. From the home, office, or mobile phone, they can
compare product prices and features and order goods online from anywhere in the world 24
hours a day, 7 days a week, bypassing limited local offerings and realizing significant price
savings. Even business buyers can run a reverse auction in which sellers compete to capture
their business. They can readily join others to aggregate their purchases and achieve deeper
volume discounts.
 Consumer information: Consumers can collect information in as much as they want about
practically anything. They can access online encyclopedias, dictionaries, medical information,
movie ratings, consumer reports, newspapers, and other information sources in many
languages from anywhere in the world. Personal connections and user-generated content thrive
on social media such as Facebook, Flickr (photos), Del.icio.us (links), Digg (news stories),
Wikipedia (encyclopedia articles), and YouTube (video).Social networking site such as Dogster
for dog lovers, TripAdvisor for ardent travelers, and Moterus for bikers bring together
consumers with a common interest. For example, at CarSpace.com auto enthusiasts talk about
chrome rims, the latest BMW model, and where to find a great local mechanic.
 Consumer participation: Consumers have found a loud voice to influence peer and public
opinion. In recognition, companies are inviting them to participate in designing and even
marketing offerings to heighten their sense of connection and ownership. Consumers see their
favorite companies as workshops from which they can draw out the offerings they want.
 Consumer resistance:Many customers today feel there are fewer real product differences,
so they show less brand loyalty and become more price and quality sensitive in their search for
value, and less tolerant about undesired marketing. A Yankelovich study found record levels of
marketing resistance from consumers; a majority reported negative opinions about marketing
and advertising and said they avoid products they feel are over- marketed.

8. What environmental factors affect the business?

There are various environmental factors which can impact the businesses in an economy. These
environmental factors can be categorized into external and internal environment of the
businesses. The internal environment of the company includes the factors which are within the
company and under the control of company like product Organizational culture, Leadership,
and Manufacturing (quality). On the other hand, the external factors are not under the control
of the company and include Social environment, political conditions, suppliers, competitors of
the company, Government regulations and policies, accounting agencies like Accounting
standard board, Resources in an economy and demographics of people.

 Political factors:These refer to government policy such as the degree of intervention in the
economy. What goods and services does a government want to provide? To what extent does it
believe in subsidizing firms? What are its priorities in terms of business support? Political
decisions can impact on many vital areas for business such as the education of the workforce,
the health of the nation and the quality of the infrastructure of the economy such as the road
and rail system.
 Economic factors : These include interest rates, taxation changes, economic growth,
inflation and exchange rates.

For example: higher interest rates may deter investment because it costs more to borrowa strong
currency may make exporting more difficult because it may raise the price in terms of
Foreign currency inflation may provoke higher wage demands from employees and raise costs
higher national income growth may boost demand for a firm's products.

•Social factors: Changes in social trends can impact on the demand for a firm's products and
the availability and willingness of individuals to work. In the UK, for example, the population has
been ageing. This has increased the costs for firms who are committed to pension payments for
their employees because their staffs are living longer.

• Technological factors: New technologies create new products and new processes. MP3
players, computer games, online gambling and high definition TVs are all new markets created
by technological advances. Online shopping, bar coding and computer aided design are all
improvements to the way we do business as a result of better technology. Technology can
reduce costs, improve quality and lead to innovation. These developments can benefit
consumers as well as the organizations providing the products.

9. What are the internal and external environmental factors that affect a business?

The internal factors refer to anything within the company and under the control of the company
no matter whether they are tangible or intangible. These factors after being figured out are
grouped into the strengths and weaknesses of the company. If one element brings positive
effects to the company, it is considered as strength.

Few of the internal factors of a company are :

 Human resources
 Marketing and Financial resources
 Inter personal relationship with employees
 Plans and Policies .

On the contrary to internal factors, external elements are affecting factors outside and under no
control of the company. Considering the outside environment allows businessmen to take
suitable adjustments to their marketing plan to make it more adaptable to the external
environment.
There are numerous criteria considered as external elements. Among them, some of the most
outstanding and important factors need to be listed they are :
 Current economic situation
 Laws
 Surrounding infrastructure
 Customer demands.
10. What is competition analysis? Why is it necessary to analyse the potential competitor who
may join the industry bandwagon?
Competitive analysis identifies your competitors and evaluates their strategies to determine
strengths and weaknesses relative to your brand.

A competitive analysis covers the following:

 Your company’s competitors

 Competitor product summaries
 Competitor strengths and weaknesses
 The strategies used by each competitor to achieve their objectives
 The market outlook.

There are various potential competitor who may join the industry bandwagon, hence it
is important to analyse both the present and potential competitors. Various potential
competitors are:

 Firms who derive synergy from being in the industry , like a soda manufacturer getting
into flavoured soft drink manufacturing or soft drink firm diversifying into fresh fruit
juice manufacturing and marketing and thus getting synergy from such diversification.
 Firms for whom competition in the industry is an obvious extension of corporate
strategy, for example, an automobile manufacturer marketing spare parts and
competiting with the spare parts manufacturer.
 Customers or suppliers who may integrate forward or backward. Firms often integrate
to derive economies of scale and also to ensure fuller utilisation of capacity. Example: A
cable manufacturer firm getting into power generation business.

11. Explain the effects of technology on competition with examples.

The level of technological development in the industry creates an opportunity for a market
to develop new products. Indian automobile industry provides an illustration in this regards.
Until 1984, a prospective car buyer had to contend with old obsolete cars like the
Ambassador and the Premier and a two wheeler buyer with a Lambretta, a Bajaj or a
Rajdoot motorbike. However, with the introduction of Maruthi 800 which caught the
imagination of consumers, Hindustan motors and Premier Automobiles had to look into the
engine designs and other ergonomics of their vehicles. This led to the launch of luxury cars
like the Contessa from Hindustan motors and the 118 NE from Premier Automobiles.
The threat from Maruthi has been so real and serious that these manufacturers had to
improve their vehicle performances in terms of fuel efficiency, driving comfort, aesthetic
appeal of the car by introducing new dashboard, steering wheel and other attractive
features.
Similar developments were visible in two wheelers and telecommunication industries.
Hence, development in technology increases the competition between the industries and
therefore, a better product is delivered to the customers.
12. What are the effects of government policies on market?
Governments establish many regulations and policies that guide businesses. Some rules, like
minimum wage, are mandatory, while other policies may influence your business indirectly.
Businesses need to be flexible enough to respond to changing rules and policies.
Policy as a market catalyst
The government can implement a policy that changes the social behaviour in the business
environment. For example, the government can levy taxes on the use of carbon-based fuels
and grant subsidies for businesses that use renewable energy. Imposing on a particular
sector more taxes or duties than are necessary will make the investors lose interest in that
sector.
Similarly, tax and duty exemptions on a particular sector trigger investment in it and may
generate growth. For example, a high tax rate on imported goods may encourage local
production of the same goods. On the other hand, a high tax rate for raw materials hampers
domestic production.
Political stability and culture
Government policy will always depend on the political culture of the moment. Policy crafted
in a politically stable country will be different that formed in an unstable country. A stable
political system can make business-friendly decisions that promote local businesses and
attract foreign investors.
Unstable systems present challenges that jeopardize the ability of government to maintain
law and order. This has a negative affect on the business environment.
Government taxations
Governments get money to spend from taxation. Increased spending requires increases in
taxes or borrowing. Any tax increase will discourage investment, especially among
entrepreneurs, who take the risks of starting and managing businesses.
Setting interest rates
Government policy can influence interest rates, a rise in which increases the cost of
borrowing in the business community. Higher rates also lead to decreased consumer
spending. Lower interest rates attract investment as businesses increase production.
The government can influence interest rates in the short run by printing more money, which
might eventually lead to inflation. Businesses do not thrive when there is a high level of
inflation
Business permit and licensing
This is required by the government authority before the operation commences. Obtaining a
business licence usually involves a fee along with submitting application to the government
agencies
 13. How does bargaining power of buyer vary with circumstances?
According to Michael Porter, the relationship between supplier and the firm epitomises a
powerful equation between them. This condition is based on the extent to which each of
them is dependent on each other.
Bargaining power of buyer increases in the following circumstances:
 The buyer firm can easily switch its vendors as it faces few switching costs.
 The buyer firm earns low profits and hence has a pressure to lower its purchasing costs.
 Buyers are more concentrated than sellers
 Threat of backward integration is high
 Buyer is price sensitive
 Buyer is well-educated regarding the product
 Undifferentiated product
 When the buyer firm is monopoly, buys large volume relative to sellers’ sale.
 Substitutes are available
 Buyer purchases comprise large portion of seller sales

Bargaining power of buyer decreases in the following circumstances:

 Buyers are less concentrated than sellers
 Buyer switching costs are high
 Threat of backward integration is low
 Buyer is not price sensitive
 Buyer is uneducated regarding the product
 Highly differentiated product
 Buyer purchases product in low volume
 Substitutes are unavailable
 Buyer purchases comprise small portion of seller sales

14. How does bargaining power of supplier vary with circumstances?

The Bargaining Power of Suppliers, one of the forces in Porter’s Five Forces Industry Analysis
Framework, refers to the pressure suppliers can put on companies by raising their prices,
lowering their quality, or reducing the availability of their products.

Bargaining power of supplier increases in the following circumstances:

 Switching costs of buyers are high

 Threat of forward integration is high
 Small number of suppliers relative to buyers
 Low dependence of a supplier’s sale on a particular buyer
 Switching costs of suppliers are low
 Substitutes are unavailable
 Buyer relies heavily on sales from suppliers

Bargaining power of supplier decreases in the following circumstances:

 Switching costs of buyers are low

 Threat of forward integration is low
 Large number of suppliers relative to buyers
 High dependence of a supplier’s sale on a particular buyer
 Switching costs of suppliers are high
 Substitutes are available
 Buyer does not rely heavily on sales from suppliers

15. What are the barriers to entry and exit in a market.

A barrier to entry is something that blocks or impedes the ability of a company (competitor) to
enter an industry.

A barrier to exit is something that blocks or impedes the ability of a company (competitor) to
leave an industry.

Typical barriers to the entry:

 Economies of size (economies of scale) and Network effects – The need for a large volume
of production and sales to reach the cost level per unit of production for profitability is a
barrier to entry or expansion within a market.
 Capital intensive – The large capital investment limits entry to many industries. Most start-
ups underestimate the capital required to get the first production unit out the door. Larger-
than-planned capital investment also may be necessary for expansion within an existing market.
Funds may be required for additional storage, excess spoilage or shrinkage, dealer programs
and similar promotional expenses.

 Government standards and Permitting requirements –Restricted government policies are the
most significant barrier in any market. Industries where rigid industry standards, permitting
and licensing exist may have substantial barriers to entry. For example, air-transport
agreements, that make it difficult for new carriers to obtain routes.

 Intellectual property – Patents, trademarks, service marks, and other types of proprietary
intellectual property are very effective in limiting industry entry. Patents, intended to
encourage invention and new-business development, give a firm the legal right to stop
other firms from producing a product for a set period, and so restrict market entry. Licenses
on these patents guarantee incentive proceeds. Trademarks and service marks reward those
businesses that “blazed the trail,” but also may be something of an entry barrier if the
market is dominated by one or a few well-known names.
 High switching costs – High switching costs - The tendency for buyers of an industry’s
products to be reticent about switching to a new supplier tends to limit entry
 Distributor agreements - Exclusive agreements with key distributors, retail chains or well-
known on-line outlets can impede or prevent market participation.
 Supplier agreements - Exclusive agreements with key suppliers within the supply chain can
make it difficult for other manufacturers to timely produce competitively priced product within
a given industry.
 Established brand identity and market power theory of advertising – Industries dominated by
branded products are difficult to enter due to the large amount of time and money required to
create a competing brand of similar market stature. Established firms' use of advertising creates
a consumer perceived difference in its brand from other brands to a degree that consumers see
its brand as a slightly different product.

Typical Barriers to Exit

 Redundancy costs – Large number of employees, employees with high salaries, or employees
contracts that incur significant cost to a point where the company is no longer profitable or has
the necessary agility to compete within its market.
 Specialized skills – Highly specialized skills and market knowledge, not transferrable to other
industries, are a strong impediment to leaving a particular market.
 High fixed costs – High levels of dedicated fixed costs tend to be an impediment to leaving an
industry. Frequently, this is usually in the form of non-transferable fixed assets, common for
companies with heavy capital-investment in specialized equipment.
 Closure costs – Faced with pay-outs or buy-outs for early contract terminations, loans,
employee agreements and similar contractual penalties, a firm may find that it is preferable to
stay in production, perhaps with an eye toward market upturn, developing new product lines or
strategic partnerships.

16.What are the effects of competition on pricing strategy?

The price is one of the first things that a consumer notices about a product and is one of the deciding
factors when it comes to their decision to buy it or not.When two products have similar core
features, but are produced by different companies, competition results. Competition-based
pricing strategy involves setting your prices based on your competitors’ prices rather than on
your own cost and profit objectives.

There are three things that an organisation can do in order to set the right price for products:

 Pricing to Meet Competition

Many organizations attempt to establish prices that, on average, are the same as those set by
their more important competitors.

The key to implementing a strategy of meeting competitive prices is to have an accurate

definition of competition and a knowledge of competitors’ prices. A maker of handcrafted
leather shoes is not in competition with mass producers. If he/she attempts to compete with
mass producers on price, higher production costs will make the business unprofitable. A more
realistic definition of competition in this case would be other makers of handcrafted leather
shoes.

 Pricing Below Competitors

While some firms are positioned to price above competition, others wish to carve out a market
niche by pricing below competitors. The goal of such a policy is to realize a large sales volume
through a lower price and lower profit margins. By controlling costs and reducing services, these
firms are able to earn an acceptable profit, even though profit per unit is usually less.

Such a strategy can be effective if a significant segment of the market is price sensitive and/or
the organization’s cost structure is lower than competitors. Costs can be reduced by increased
efficiency, economics of scale, or by reducing or eliminating such things as credit, delivery, and
advertising. For example, if a firm could replace its field sales force with telemarketing or online
access, this function might be performed at lower cost. Such reductions often involve some loss
in effectiveness, so the trade-off must be considered carefully.

 Pricing Above Competitors

Pricing above competitors can be rewarding to organizations, provided that the objectives of
the policy are clearly understood and the marketing mix is developed in such a way that the
policy can be successfully implemented by management.

Pricing above competition generally requires a clear advantage on some nonprice element of
the marketing mix. In some cases, that advantage may be due to a high price-quality association
on the part of potential buyers.

Example: Nike used a strategy of raising prices—while its competitors were holding pricing flat
or reducing prices—because its analysis showed that it was providing sufficient value to sustain
a higher price.

Eight markers

1. Define marketing. Explain the entities of marketing?

Marketing is about identifying and meeting human and social needs. Kotler and Keller gave the
short definition of marketing as meeting customer needs profitably.
As defined by American Marketing Association, “Marketing is the activity, set of institutions,
and processes for creating, communicating, delivering, and exchanging offerings that have value
for customers, clients, partners, and society at large”.
Marketing is the science and art of exploring, creating, and delivering value to satisfy the needs
of a target market at a profit. Marketing identifies unfulfilled needs and desires. It defines,
measures and quantifies the size of the identified market and the profit potential. It pinpoints
which segments the company is capable of serving best and it designs and promotes the
appropriate products and services.
Example: When eBay recognized that people were unable to locate some of the items they
desired most, it created an online auction clearinghouse. When IKEA noticed that people
wanted good furnishings at substantially lower prices, it created knockdown furniture. These
two firms demonstrated marketing savvy and turned a private or social need into a profitable
business opportunity.
Marketing is typically seen as the task of creating, promoting and delivering goods and services
to consumers and businesses.Marketers market 10 main types of entities: goods, services,
events, experiences, persons, places, properties, organizations, information, and ideas.

 Goods: Physical goods constitute the bulk of most countries’ production and marketing
efforts. Examples: refrigerators, television sets, food products, machines etc.

 Services: As economies advance, a growing proportion of their activities focuses on the

production of services. The U.S. economy today produces a 70–30 services-to-goods mix.
Services include the work of airlines, hotels, car rental firms, barbers and beauticians,
maintenance and repair people, and accountants, bankers, lawyers, engineers, doctors,
software programmers, and management consultants. Many market offerings mix goods and
services, such as a fast-food meal.

 Events: Marketers promote time-based events, such as major trade shows, artistic
performances, and company anniversaries. Global sporting events such as the Olympics and the
World Cup are promoted aggressively to both companies and fans.

 Experiences:By orchestrating several services and goods, a firm can create, stage, and
market experiences. For example,Walt Disney World’s Magic Kingdom allows customers to visit
a fairy kingdom, a pirate ship, or a haunted house. There is also a market for customized
experiences, such as a week at a baseball camp with retired baseball greats, a four-day rock and
roll fantasy camp, or a climb up Mount Everest.

 Persons: Artists, musicians, CEOs, physicians, high-profile lawyers and financiers, and other
professionals all get help from celebrity marketers.Some people have done a masterful job of
marketing themselves—David Beckham, Oprah Winfrey, and the Rolling Stones. Management
consultant Tom Peters, a master at self-branding, has advised each person to become a
“brand.”

 Places:Cities,states,regions,and whole nations compete to attract

tourists,residents,factories,and company headquarters.Place marketers include economic
development specialists, real estate agents, commercial banks, local business associations, and
advertising and public relations agencies. For example,The Las Vegas Convention & Visitors
Authority succeeded with its provocative ad campaign, “What Happens Here, Stays Here,”
portraying Las Vegas as “an adult playground.” In the recession of 2008, however, convention
attendance declined. Concerned about its potentially out-of-step racy reputation, the authority
took out a full-page BusinessWeek ad to defend its ability to host serious business meetings.
Unfortunately, the 2009 summer box office blockbuster The Hangover, set in a debauched Las
Vegas, likely did not help the city position itself as a choice business and tourist destination.
 Properties: Properties are intangible rights of ownership to either real property (real estate)
or financial property (stocks and bonds). They are bought and sold, and these exchanges require
marketing. Real estate agents work for property owners or sellers, or they buy and sell
residential or commercial real estate. Investment companies and banks market securities to
both institutional and individual investors.
 Organizations: Organizations work to build a strong, favorable, and unique image in the
minds of their target publics. For example, in the United Kingdom, Tesco’s “Every Little Helps”
marketing program reflects the food marketer’s attention to detail in everything it does, within
the store and in the community and environment. The campaign has vaulted Tesco to the top of
the UK supermarket chain industry. Universities, museums, performing arts organizations,
corporations, and nonprofits all use marketing to boost their public images and compete for
audiences and funds.
 Information: The production, packaging, and distribution of information are major
industries. Information is essentially what books, schools, and universities produce, market, and
distribute at a price to parents, students, and communities. For example,the former CEO of
Siemens Medical Solutions USA, Tom McCausland, says, “[our product] is not necessarily an X-
ray or an MRI, but information. Our business is really healthcare information technology, and
our end product is really an electronic patient record: information on lab tests, pathology, and
drugs as well as voice dictation.”
 Ideas:Every market offering includes a basic idea. Charles Revson of Revlon once observed:
“In the factory we make cosmetics; in the drugstore we sell hope.” Products and services are
platforms for delivering some idea or benefit.

2. What are the new trends in marketing? What are the factors affecting the new marketing
realities?

New marketing forces and capabilities have profoundly changed marketing management and
have created new marketing trends. In theory, the marketing planning process consists of
analyzing marketing opportunities, selecting target markets, designing marketing strategies,
developing marketing programs, and managing the marketing effort. The highly competitive
marketplaces that are more often the norm, marketing planning is more fluid and is continually
refreshed.

Companies must always be moving forward with marketing programs, innovating products and
services, staying in touch with customer needs, and seeking new advantages rather than relying
on past strengths. This is especially true of incorporating the Internet into marketing plans.
Marketers must try to balance increased spending on search advertising, social media, direct e-
mail, and text/SMS marketing efforts with appropriate spending on traditional marketing
communications.

Major societal forces create complex challenges for marketers, but they have also generated a
new set of capabilities to help companies cope and respond.

 Marketers can use the Internet as a powerful information and sales channel. The Internet
augments marketers’ geographical reach to inform customers and promote products worldwide.
A Web site can list products and services, history, business philosophy, job opportunities, and
other information of interest. For example,in 2006, a Montgomery, Alabama, flea market gained
national popularity when owner Sammy Stephens’s rap-style advertisement spread virally
through the Internet. Created for $1,500, the advertisement was viewed more than 100,000
times on YouTube and landed Stephens on The Ellen DeGeneres Show. Stephens now sells T-
shirts, ringtones, and other branded merchandise through his Web site, advises retailers about
advertising, and hosts hundreds of visitors from all over the world at his store each month.

 Marketers can collect fuller and richer information about markets, customers, prospects, and
competitors. Marketers can conduct fresh marketing research by using the Internet to arrange
focus groups, send out questionnaires, and gather primary data in several other ways. They can
assemble information about individual customers’ purchases, preferences, demo- graphics, and
profitability. For example,the drugstore chain CVS uses loyalty-card data to better understand
what consumers purchase, the frequency of store visits, and other buying preferences. Its
ExtraCare program netted an extra 30 million shoppers and $12 billion a year in revenue across
4,000 stores.
 Marketers can tap into social media to amplify their brand message. Marketers can feed in-
formation and updates to consumers via blogs and other postings, support online
communities, and create their own stops on the Internet superhighway. For example,Dell
Corporation’s @DellOutlet Twitter account has more than 600,000 followers. Between 2007
and June 2009, Dell took in more than $2 million in revenue from coupons provided through
Twitter, and another $1 million from people who started at Twitter and went on to buy a new
computer on the company’s Web site.
 Marketers can facilitate and speed external communication among customers. Marketers can
also create or benefit from online and offline “buzz” through brand advocates and user
communities.Word-of-mouth marketing agency BzzAgent has assembled a nationwide
volunteer army of 600,000 consumers who join promotional programs for products and
services they deem worth talking about.For example, in 2005, Dunkin’ Donuts hired BzzAgent
to help launch a new espresso beverage, Latte Lite. Three thousand trained volunteers (called
BzzAgents) in 12 test markets experienced the Latte Lite, formed their opinions, engaged in
natural conversations about the product, and reported back to BzzAgent via the company’s
reporting interface. After four weeks, product sales had increased by more than 15 percent in
test markets.
 Marketers can send ads, coupons, samples, and information to customers who have
requested them or given the company permission to send them. Micro-target marketing and
two-way communication are easier,thanks to the proliferation of special-interest magazines,
TV channels, and Internet newsgroups. Extranets linking suppliers and distributors let firms
send and receive information, place orders, and make payments more efficiently. The company
can also interact with each customer individually to personalize messages, services, and the
relationship.
 Marketers can reach consumers on the move with mobile marketing. Using GPS
technology, marketers can pinpoint consumers’ exact location and send them messages at the
mall with coupons good only that day, a reminder of an item on their wish list, and a relevant
perk, for example,buy this book today and get a free coffee at the bookstore’s coffee shop.
Location based advertising is attractive because it reaches consumers closer to the point of
sale. Firms can also advertise on video iPods and reach consumers on their cell phones through
mo- bile marketing.
  Companies can make and sell individually differentiated goods. Thanks to advances in factory
customization, computer technology, and database marketing software, customers can buy
M&M candies, TABASCO jugs, or Maker’s Mark bottles with their names on them; Wheaties
boxes or Jones soda cans with their picture on the front; and Heinz ketchup bottles with
customized messages.Forexample,BMW’s technology allows buyers to design their own car
models from among 350 variations, with 500 options, 90 exterior colors, and 170 trims. The
company claims that 80 percent of the cars bought in Europe and up to 30 percent bought in
the United States are built to order.
 Companies can improve purchasing, recruiting, training, and internal and external
communications. Firms can recruit new employees online, and many have Internet training
products for their employees, dealers, and agents. Retailer Patagonia has joined Walt Disney,
General Motors, and McDonald’s in embracing corporate blogging to communicate with the
public and employees. Patagonia’s The Cleanest Line posts environmental news, reports the
results of its sponsored athletes, and posts pictures and descriptions of employees’ favorite
outdoor locations.
 Companies can facilitate and speed up internal communication among their employees by
using the Internet as a private intranet. Employees can query one another, seek advice, and
download or upload needed information from and to the company’s main computer.For
example, seeking a single online employee portal that transcended business units, General
Motors launched a platform called mySocrates in 2006 consisting of announcements, news,
links, and historical information. GM credits the portal with $17.4 million in cost savings to
date.
 Companies can improve their cost efficiency by skillful use of the Internet. Corporate buyers
can achieve substantial savings by using the Internet to compare sellers’ prices and purchase
materials at auction, or by posting their own terms in reverse auctions. Companies can improve
logistics and operations to reap substantial cost savings while improving accuracy and service
quality.

Marketing Reality is a real-time existing tactic to generate leads for marketing. With changing
times, rather with every second now, the war of standing out from the crowd is getting
tougher amongst the participants (sellers/traders). One has realized that if there is even a
single day’s delay in updating your knowledge with the ‘NEW’ thing in the market, you consider
this as an already lost race. One has to keep up with the pace of improving, updating, and
analyzing the entries and exits of a market.

A marketing reality is something that changes and governs our road of marketing. It can be
something already existing but latent, or something which has just emerged out of nowhere.
We can say with some confidence that the marketplace isn’t what it used to be. It is
dramatically different from what it was even 10 years ago.
The major forces affecting new marketing realities to this date and time are as below:
 Network information technology:The digital revolution has created an Information Age that
promises to lead to more accurate levels of production, more targeted communications,
and more relevant pricing.
 Globalization:Technological advances in transportation, shipping, and communication have
made it easier for companies to market in, and consumers to buy from, almost any country
in the world. International travel has continued to grow as more people work and play in
other countries.
 Deregulation:Many countries have deregulated industries to create greater competition
and growth opportunities. In the United States, laws restricting financial services,
telecommunications, and electric utilities have all been loosened in the spirit of greater
competition.
 Privatization: Many countries have converted public companies to private ownership and
management to increase their efficiency, such as the massive telecom company Telefónica
CTC in Chile and the international airline British Airways in the United Kingdom.
 Heightened competition:Intense competition among domestic and foreign brands raises
marketing costs and shrinks profit margins. Many strong brands have become megabrands
and extended into a wide variety of related product categories, presenting a significant
competitive threat.
 Industry convergence:Industry boundaries are blurring as companies recognize new
opportunities at the intersection of two or more industries. The computing and consumer
electronics industries are converging, for example, as Apple, Sony, and Samsung release a
stream of entertainment devices from MP3 players to plasma TVs and camcorders. Digital
technology fuels this massive convergence.
 Retail transformation:Store-based retailers face competition from catalog houses; direct-
mail firms; newspaper, magazine, and TV direct-to-customer ads; home shopping TV; and e-
commerce. In response, entrepreneurial retailers are building entertainment into their stores
with coffee bars, demonstrations, and performances, marketing an “experience” rather than a
product assortment. For example, Dick’s Sporting Goods has grown from a single bait-and-
tackle store in Binghamton, New York, into a 300-store sporting goods retailer in 30 states. Part
of its success springs from the interactive features of its stores. Customers can test golf clubs in
indoor ranges, sample shoes on its footwear track, and shoot bows in its archery range.
 Disintermediation:The amazing success of early dot-coms such as AOL, Amazon.com,
Yahoo!, eBay, E*TRADE, and others created disintermediation in the delivery of products and
services by intervening in the traditional flow of goods through distribution channels. These
firms struck terror into the hearts of established manufacturers and retailers. In response,
traditional companies engaged in reintermediation and became “brick-and-click” retailers,
adding online services to their offerings. Some became stronger contenders than pure-click
firms, because they had a larger pool of resources to work with and established brand names.
 Consumer buying power: In part, due to disintermediation via the Internet, consumers have
substantially increased their buying power. From the home, office, or mobile phone, they can
compare product prices and features and order goods online from anywhere in the world 24
hours a day, 7 days a week, bypassing limited local offerings and realizing significant price
savings. Even business buyers can run a reverse auction in which sellers compete to capture
their business. They can readily join others to aggregate their purchases and achieve deeper
volume discounts.
 Consumer information: Consumers can collect information in as much as they want about
practically anything. They can access online encyclopedias, dictionaries, medical information,
movie ratings, consumer reports, newspapers, and other information sources in many
languages from anywhere in the world. Personal connections and user-generated content thrive
on social media such as Facebook, Flickr (photos), Del.icio.us (links), Digg (news stories),
Wikipedia (encyclopedia articles), and YouTube (video).Social networking site such as Dogster
for dog lovers, TripAdvisor for ardent travelers, and Moterus for bikers bring together
consumers with a common interest. For example,at CarSpace.com auto enthusiasts talk about
chrome rims, the latest BMW model, and where to find a great local mechanic.
 Consumer participation: Consumers have found a loud voice to influence peer and public
opinion. In recognition, companies are inviting them to participate in designing and even
marketing offerings to heighten their sense of connection and ownership. Consumers see their
favorite companies as workshops from which they can draw out the offerings they want.
 Consumer resistance: Many customers today feel there are fewer real product differences, so
they show less brand loyalty and become more price and quality sensitive in their search for
value, and less tolerant about undesired marketing. A Yankelovich study found record levels
of marketing resistance from consumers; a majority reported negative opinions about
marketing and advertising and said they avoid products they feel are over- marketed.

3.Define marketing.Discuss the evolution of marketing concepts./ Discuss the business

orientation towards market place from production to holistic marketing.
Marketing is about identifying and meeting human and social needs. Kotler and Keller gave
the short definition of marketing as meeting customer needs profitably.
As defined by American Marketing Association, “Marketing is the activity, set of institutions,
and processes for creating, communicating, delivering, and exchanging offerings that have value
for customers, clients, partners, and society at large”.
Marketing is the science and art of exploring, creating, and delivering value to satisfy the
needs of a target market at a profit. Marketing identifies unfulfilled needs and desires. It
defines, measures and quantifies the size of the identified market and the profit potential. It
pinpoints which segments the company is capable of serving best and it designs and promotes
the appropriate products and services.
Example: When eBay recognized that people were unable to locate some of the items they
desired most, it created an online auction clearinghouse. When IKEA noticed that people
wanted good furnishings at substantially lower prices, it created knockdown furniture. These
two firms demonstrated marketing savvy and turned a private or social need into a profitable
business opportunity.
Marketing is about identifying and meeting human and social needs. Kotler and Keller gave
the short definition of marketing as meeting customer needs profitably.
Marketing is defined as the activity, set of institutions, and processes for creating,
communicating, delivering, and exchanging offerings that have value for customers,
clients, partners, and society at large.

The marketing concept as a business philosophy is traced from its origins as a business belief
where efficient production was the emphasis to the current belief which emphasizes customer
needs as a means of long-run business success. The concept has evolved in a progressive
fashion over the last century.
Increasingly, marketers operate consistently with the holistic marketing concept. As the
market has changed, so has the way the company deals with the marketplace. The company
orientation towards marketplace deals with the concepts which a company may apply while
targeting a market. There are basically five different orientations which a company takes
towards the marketplace.

 The Production Concept

The Production concept can be traced back to the 1850s, through to the 1900s. This was
 the period of industrial revolution in the United States. At this period the country witnessed
growth in electricity generation, rail transportation, division of labour, assembly lines, and mass
production. These made it possible to produce goods more efficiently with new
technology and new ways of using labour. Despite the increase in production of goods with
these emerging ways of production, there was heavy demand for manufactured goods
The production concept is one of the oldest concepts in business. It holds that consumers prefer
products that are widely available and inexpensive. Managers of production-oriented
businesses concentrate on achieving high production efficiency, low costs, and mass
distribution. This orientation makes sense in developing countries such as China, where the
largest PC manufacturer, Legend (principal owner of Lenovo Group), and domestic appliances
giant Haier take advantage of the country’s huge and inexpensive labor pool to dominate the
market. Marketers also use the production concept when they want to expand the market.

 The Product Concept

The product concept was the dominant marketing philosophy at the dawn of the 1900s and
continued to the 1930s. According to Fullerton, “For more than a generation the concept of
the production era dominated the understanding of marketing’s past held by students and
scholars”. The production orientation assumes that consumers will prefer product based on
its quality, performance and innovative features. This means that the company knows its
product better than anyone or any organization. Thus, the company knows what will work in
designing and producing the product and what will not work. Since the company has the
great knowledge and skill in making the product, it also assumes it knows what is best for
the consumer. The product concept compelled companies to ensure improving product
quality, and introduce new features to enhance product performance; as much as possible.In
much of the product era, organizations were able to sell all of the products that they made.
The success of this philosophy was due mostly to the time and level of technology in which
it was dominant. The product concept survived much of the time after the Industrial
Revolution.
The product concept proposes that consumers favor products offering the most quality,
performance, or innovative features. However, managers are sometimes caught in a love
affair with their products. They might commit the “better-mousetrap” fallacy, believing a
better product will by itself lead people to beat a path to their door. A new or improved
product will not necessarily be successful unless it’s priced, distributed, advertised, and sold
properly.

 The Selling Concept

The selling concept was the concept of businesses that preceded the product era, and has the
shortest period of dominance compared to the two preceding philosophies. It began to be
dominant around 1930 and stayed in widespread use until about 1950. The emphasis
of selling concept was to create a department to solely be responsible for the sale of the
company’s product; while the rest of the company could be left to concentrate on producing
the goods.According to Kotler and Armstrong, the orientation of the selling concept was that
the company can sell any product it produces with the use of marketing techniques, such as
advertising and personal selling. The concept assumes that consumers are unlikely to buy the
product unless they are aggressively persuaded to do so – mostly that ‘hard sell’ approach.
The selling concept takes an ‘inside-out’ perspective. It starts with the factory, focuses on the
company’s existing products, and calls for heavy selling and promotion to obtaining
profitable sales. It focuses primarily on customer conquest getting short-term sales with little
concern about who buys or why.
The selling concept holds that consumers and businesses, if left alone, won’t buy enough of
the organization’s products. It is practiced most aggressively with unsought goods—goods
buyers don’t normally think of buying such as insurance and cemetery plots and when firms
with overcapacity aim to sell what they make rather than make what the market wants.
Marketing based on hard selling is risky. It assumes customers coaxed into buying a product
not only won’t return or bad-mouth it or complain to consumer organizations but might
even buy it again.
 The Marketing Concept

The marketing concept started to dominate business orientation during the 1950s,and
continues until the twenty first century. This concept assumes that the starting point for any
marketing process is the customer needs and wants, and no longer the aggressive selling.
The key assumption underlying the marketing philosophy is that “a market should make
what it can sell, instead of trying to sell what it has made”. The marketing concept
focuses on the needs and wants of the buyer rather than the needs of the seller and the
product.
The job is to find not the right customers for your products, but the right products for your
customers. For example,Dell doesn’t prepare a perfect computer for its target market.
Rather, it provides product platforms on which each person customizes the features he or
she desires in the computer. The marketing concept holds that the key to achieving
organizational goals is being more effective than competitors in creating, delivering, and
communicating superior customer value to your target markets. Harvard’s Theodore Levitt
drew a perceptive contrast between the selling and marketing concepts:
Selling focuses on the needs of the seller; marketing on the needs of the buyer. Selling is
preoccupied with the seller’s need to convert his product into cash; marketing with the idea
of satisfying the needs of the customer by means of the product and the whole cluster of
things associated with creating, delivering, and finally consuming it.
Several scholars found that companies embracing the marketing concept at that time
achieved superior performance. Despite the fact that new concepts have developed since
the emergence of the marketing philosophy, the concept still reigns superior in creating and
retaining profitable customers,which is a primary objective of businesses.

 The Holistic Marketing Concept

The holistic marketing concept is a 21st century business thinking.The concept is based on the
“development,design, and implementation of marketing programmes, processes and
activities that recognizes their breadth and interdependencies”. Without question, the trends
and forces that have defined the first decade of the 21st century are leading business firms to
a new set of beliefs and practices. “Marketing Memo: Marketing Right and Wrong” suggests
where companies go wrong—and how they can get it right—in their marketing.The holistic
marketing concept suggests that the 21st century business firm needs a new set of beliefs
and practices toward business operation that is more complete and cohesive than the
traditional application of the marketing concept. According to Kotler and Keller,holistic
 marketing recognizes that “everything matters”in marketing. Holistic marketing is thus based
on the assumption that the approach to marketing should be the adoption of all activities of
marketing.Holistic marketing includes internal marketing, performance marketing, integrated
marketing and relationship marketing.Holistic marketing acknowledges that everything
matters in marketing and that a broad, integrated perspective is often necessary. Holistic
marketing thus recognizes and reconciles the scope and complexities of marketing activities.

4. What are the core concepts of marketing ?

Philip Kotler, the eminent writer, defines modern marketing as, “Marketing is social and
managerial process by which individuals and groups obtains what they needs and wants
through creating and exchanging product and value with others.” Careful and detailed analysis
of this definition necessarily reveals some core concepts of marketing, shown in the Figure .

 Needs:

Existence of unmet needs is precondition to undertake marketing activities. Marketing tries to

satisfy needs of consumers. Human needs are the state of felt deprivation of some basic
satisfaction. A need is the state of mind that reflects the lack-ness and restlessness situation.

Needs are physiological in nature. People require food, shelter, clothing, esteem, belonging,
and likewise. Note that needs are not created. They are pre-existed in human being. Needs
create physiological tension that can be released by consuming/using products.

 Wants:

Wants are the options to satisfy a specific need. They are desire for specific satisfiers to meet
specific need. For example, food is a need that can be satisfied by variety of ways, such as
sweet, bread, rice, sapati, puff, etc. These options are known as wants. In fact, every need can
be satisfied by using different options.

Maximum satisfaction of consumer need depends upon availability of better options. Needs
are limited, but wants are many; for every need, there are many wants. Marketer can
influence wants, not needs. He concentrates on creating and satisfying wants.
 Demand:

Demand is the want for specific products that are backed by the ability and willingness (may
be readiness) to buy them. It is always expressed in relation to time. All wants are not
transmitted in demand. Such wants which are supported by ability and willingness to buy can
turn as demand.

Marketer tries to influence demand by making the product attractive, affordable, and easily
available. Marketing management concerns with managing quantum and timing of demand.
Marketing management is called as demand management.

 Product:

Product includes the basic contents or utility . It can also have product related features such
as : color , branding , labeling etc. Tangible product is the package of services or benefits.
Normally, product is taken as tangible object for example , pen , television set , book etc.

People are not interested just owning or possessing products , but the services rendered by
them. Now we shall take an example . We do not buy a pen , but writing service. Similarly we
do not buy a car , we buy a transportation service . Thus as per the definition , anything which
can satisfy needs and wants can be a product. It can be in forms of physical objects , person ,
idea , activity that can provide any kind of services that satisfy some needs or wants .

 Utility (value) , Cost and Satisfaction :

Utility means overall capacity of product to satisfy need and want. It is a guiding concept to
choose the product. Every product has varying degree of utility. As per level of utility,
products can be ranked from the most need-satisfying to the least need-satisfying.

Cost means the price of product. It is an economic value of product. The charges a customer
has to pay to avail certain services can be said as cost. The utility of product is compared with
cost that he has to pay. He will select such a product that can offer more utility (value) for
certain price. He tries to maximize value, that is, the utility of product per rupee.

Satisfaction means fulfillment of needs. Satisfaction is possible when buyer perceives that
product has more value compared to the cost paid for. Satisfaction closely concerns with
fulfillment of all the expectations of buyer. Satisfaction releases the tension that has aroused
due to unmet need(s). In short, more utility/value with less cost results into more satisfaction.

 Exchange, Transaction, and Transfer:

Exchange is in the center of marketing. Marketing management tries to arrive at the desired
exchange. People can satisfy their needs and wants in one of the four ways – self-
production, coercion/snatching, begging, or exchanging.

Marketing emerges only when people want to satisfy their needs and wants through
exchange. Exchange is an act of obtaining a desired product from someone by offering
something in return. Obtaining sweet by paying money is the example an exchange.
 Relationships and Network:
Relationship marketing results into economical, technical, social, and cultural tie among the
parties. Marketing manager is responsible for establishing and maintaining long-term
relations with the parties involved in business.

Network is the ultimate outcome of relationship marketing. A marketing network consists of

the company and its supporting stakeholders – customers, employees, suppliers,
distributors, advertising agencies, colleges and universities, and others – whose role is
considered to be essential for success of business. It is a permanent setup of relations with
stakeholders. A good network of relationships with key stakeholders results into excelling
the marketing performance over time.

 Market, Marketing, Marketer, and Prospect:

In marketing management, frequently used words are markets, marketing, marketer, and
prospects. A market consists of all potential customers sharing a particular need or want
who might be willing and able to engage in exchange to satisfy this need or want.

Marketing is social and managerial process by which individuals and groups obtain what they
need and want through creating and exchanging product and value with others.

Marketer is one who seeks one or more prospects (buyers) to engage in an exchange. Here,
seller can be marketer as he wants other to engage in an exchange. Normally, company or
business unit can be said as marketer.

Prospect is someone to whom the marketer identifies as potentially willing and able to engage
in the exchange. (In case of exchange between two companies, both can be said as
prospects as well as marketers).

5. What are the major societal forces have affected the marketing?

 Network information technology. The digital revolution has created an Information Age that
promises to lead to more accurate levels of production, more targeted communications,
and more relevant pricing.
 Globalization. Technological advances in transportation, shipping, and communication have
made it easier for companies to market in, and consumers to buy from, almost any country
in the world. International travel has continued to grow as more people work and play in
other countries.
 Deregulation. Many countries have deregulated industries to create greater competition
and growth opportunities. In the United States, laws restricting financial services,
telecommunications, and electric utilities have all been loosened in the spirit of greater
competition.
 Privatization. Many countries have converted public companies to private ownership and
management to increase their efficiency, such as the massive telecom company Telefónica
CTC in Chile and the international airline British Airways in the United Kingdom.
 Heightened competition. Intense competition among domestic and foreign brands raises
marketing costs and shrinks profit margins. Brand manufacturers are further buffeted by
powerful retailers that market their own store brands. Many strong brands have become
megabrands and extended into a wide variety of related product categories, presenting a
significant competitive threat.
 Industry convergence. Industry boundaries are blurring as companies recognize new
opportunities at the intersection of two or more industries. The computing and consumer
electronics industries are converging, for example, as Apple, Sony, and Samsung release a
stream of entertainment devices from MP3 players to plasma TVs and camcorders. Digital
technology fuels this massive convergence.
 Retail transformation. Store-based retailers face competition from catalog houses; direct
mail firms; newspaper, magazine, and TV direct-to-customer ads; home shopping TV; and e-
commerce.
 Disintermediation. The amazing success of early dot-coms such as AOL, Amazon.com,
Yahoo!, eBay, E*TRADE, and others created disintermediation in the delivery of products and
services by intervening in the traditional flow of goods through distribution channels. These
firms struck terror into the hearts of established manufacturers and retailers.
 Consumer buying power. In part, due to disintermediation via the Internet, consumers have
substantially increased their buying power. From the home, office, or mobile phone, they can
compare product prices and features and order goods online from anywhere in the world 24
hours a day, 7 days a week, bypassing limited local offerings and realizing significant price
savings. Even business buyers can run a reverse auction in which sellers compete to capture
their business.
 Consumer information. Consumers can collect information in as much breadth and depth as
they want about practically anything. They can access online encyclopedias, dictionaries,
medical information, movie ratings, consumer reports, newspapers, and other information
sources in many languages from anywhere in the world. Personal connections and user-
generated content thrive on social media such as Face book, Flickr (photos), Del.icio.us (links),
Digg (news stories), Wikipedia (encyclopedia articles), and YouTube (video).
 Consumer participation. Consumers have found an amplified voice to influence peer and
public opinion. In recognition, companies are inviting them to participate in designing and
even marketing offerings to heighten their sense of connection and ownership. Consumers
see their favorite companies as workshops from which they can draw out the offerings they
want.
 Consumer resistance. Many customers today feel there are fewer real product differences,
so they show less brand loyalty and become more price- and quality-sensitive in their search
for value, and less tolerant about undesired marketing.

6.Write a note on competitive advantage.

A competitive advantage is an advantage over competitors gained by offering consumers

greater value, either by means of lower prices or by providing greater benefits and service
that justifies higher prices.The term is commonly used for businesses. The strategies work for
any organization, country, or individual in a competitive environment.

To create a competitive advantage, you've got to be clear about these three determinants.

 What is the real benefit your product provides? It must be something that your
customers truly need. it must also offer real value. You must know your product's features, its
advantages, and how they benefit your customers. You must stay up to date on the new
trends that affect your product. This includes new technology. For example, newspapers were
 slow to respond to the availability of free news on the internet. They thought people were
willing to pay for news delivered on a piece of paper once a day

 Who are your customers? What are their needs? You've got to know exactly who buys from
you and how you can make their life better. That’s how you create demand, the driver of
all economic growth. Newspapers' target market shrank to those older people who
weren't comfortable getting their news online.

 Have you identified your real competitors? They aren't just similar companies or products.
They also include anything else your customer could do to meet the need you can fulfill.
Newspapers thought their competition was other newspapers until they realized it was the
internet. They didn't know how to compete with a news provider that was instant and free.

Porter suggested four "generic" business strategies that could be adopted in order to gain
competitive advantage

 Cost Leadership
In cost leadership, a firm sets out to become the low cost producer in its industry. The sources
of cost advantage are varied and depend on the structure of the industry. They may include
the pursuit of economies of scale, proprietary technology, preferential access to raw materials
and other factors. A low cost producer must find and exploit all sources of cost advantage. if a
firm can achieve and sustain overall cost leadership, then it will be an above average
performer in its industry, provided it can command prices at or near the industry average.

 Differentiation
In a differentiation strategy a firm seeks to be unique in its industry along some dimensions
that are widely valued by buyers. It selects one or more attributes that many buyers in an
 industry perceive as important, and uniquely positions itself to meet those needs. It is
rewarded for its uniqueness with a premium price.

 Focus
The generic strategy of focus rests on the choice of a narrow competitive scope within an
industry. The focuser selects a segment or group of segments in the industry and tailors its
strategy to serving them to the exclusion of others.
The focus strategy has two variants.
(a) In cost focus a firm seeks a cost advantage in its target segment, while in (b) differentiation
focus a firm seeks differentiation in its target segment. Both variants of the focus strategy rest
on differences between a focuser's target segment and other segments in the industry. The
target segments must either have buyers with unusual needs or else the production and
delivery system that best serves the target segment must differ from that of other industry
segments. Cost focus exploits differences in cost behaviour in some segments, while
differentiation focus exploits the special needs of buyers in certain segments.

7. Explain Porter’s Five Forces analysis.

Porter’s five force model is an analysis tool that uses five industry forces to determine the
intensity of competition in an industry and its profitability level.
This was created by M. Porter in 1979 to understand how five key competitive forces are
affecting an industry. The five forces identified are:

These forces determine an industry structure and the level of competition in that industry.
 Threat of new entrants. This force determines how easy (or not) it is to enter a particular
industry. If an industry is profitable and there are few barriers to enter, rivalry soon
intensifies. When more organizations compete for the same market share, profits start to fall.
It is essential for existing organizations to create high barriers to enter to deter new entrants.
Threat of new entrants is high when:

 Low amount of capital is required to enter a market;

 Existing companies can do little to retaliate;
 Existing firms do not possess patents, trademarks or do not have established brand
reputation;
 There is no government regulation;
 Customer switching costs are low (it doesn’t cost a lot of money for a firm to switch to other
industries);
 There is low customer loyalty;
 Products are nearly identical;
 Economies of scale can be easily achieved.

 Bargaining power of suppliers. Strong bargaining power allows suppliers to sell higher
priced or low quality raw materials to their buyers. This directly affects the buying firms’
profits because it has to pay more for materials. Suppliers have strong bargaining power
when:

 There are few suppliers but many buyers;

 Suppliers are large and threaten to forward integrate.
 Few substitute raw materials exist.
 Suppliers hold scarce resources.
 Cost of switching raw materials is especially high.

 Bargaining power of buyers. Buyers have the power to demand lower price or higher
product quality from industry producers when their bargaining power is strong. Lower price
means lower revenues for the producer, while higher quality products usually raise
production costs. Both scenarios result in lower profits for producers. Buyers exert strong
bargaining power when:

 Buying in large quantities or control many access points to the final customer;
 Only few buyers exist;
 Switching costs to other supplier are low;
 They threaten to backward integrate;
 There are many substitutes;
 Buyers are price sensitive.

 Threat of substitutes. This force is especially threatening when buyers can easily find
substitute products with attractive prices or better quality and when buyers can switch from
one product or service to another with little cost. For example, to switch from coffee to tea
doesn’t cost anything, unlike switching from car to bicycle.
 Rivalry among existing competitors. This force is the major determinant on how
competitive and profitable an industry is. In competitive industry, firms have to compete
 aggressively for a market share, which results in low profits. Rivalry among competitors is
intense when:

 There are many competitors;

 Exit barriers are high;
 Industry of growth is slow or negative;
 Products are not differentiated and can be easily substituted;
 Competitors are of equal size;
 Low customer loyalty.

Although, Porter originally introduced five forces affecting an industry, scholars have
suggested including the sixth force: complements. Complements increase the demand of
the primary product with which they are used, thus, increasing firm’s and industry’s profit
potential. For example, iTunes was created to complement iPod and added value for both
products. As a result, both iTunes and iPod sales increased, increasing Apple’s profits.

What are the Marketing Challenges:

In such a rapidly changing marketing environment it is really difficult for business organizations to
make quick and sound decisions, and facing various marketing challenges.

1.Rapidly changing customer needs, wants, and expectations;

2.Increasing domestic and global competition;

3.Heterogeneous and fragmented market

4.Increasing popularity of Internet;

5.Rapid technological changes;

6.Challenge of selecting among too many options; and

1.Rapidly Changing Customer Needs, Wants, and Expectations

Today, the needs, wants, and expectations of customer is changing rapidly. It is a great challenge not
only for small marketers but for big players too. It requires extensive study of market trends and
consumer behaviour while developing new product or updating existing product.

2. Global and Domestic Competition

Competition today is global rather than just domestic. Marketers have to compete not only with
domestic players but with global players too. The intense and global competition is a great challenge
for marketers to deal with.

3.Increasing Popularity of Internet

With the increase in popularity of Internet a new spectrum of marketing channel is emerged. The
worldwide increase in number of Internet users brought a shift from traditional print-based media to
new online platforms. It presents a new set of marketing challenges - challenge of deciding how much
to allocate to digital v/s print-based media; challenge of using social media marketing largely because
of regulatory issues and concerns over its measurability; and challenge of doing more with less money
as the rise of Internet made communication cheaper and efficient .

4.Challenge of Selecting Among Too Many Options

The greatest challenge the marketers facing today is simply too many options. Too many potential
customer segments. Too many product or service options. Too many communication tools. It is really
difficult and challenging for marketers to choose among too many options. The marketers today
doesn't suffer from lack of opportunities or options. The picture is totally opposite today. Now they
suffer from too many opportunities or options.

5. Heterogeneous and fragmented market

If a market is characterized by heterogeneous needs and heterogeneous means to satisfy those needs,
the resulting structure is likely to be fragmented markets consisting of many specialists who cater to
unique market segments.

What are the Trends in Marketing:

1. More Emphasis on Quality, Value, and Customer Satisfaction:

Today’s customers place a greater weight to direct motivations (convenience, status, style, features,

services and qualities) to buy product. Today’s marketers give more emphasis on the notion, “offer
more for less.”

2. More Emphasis on Relationship Building and Customer Retention:

Today’s marketers are focusing on lifelong customers. They are shifting from transaction thinking to

relationship building. Large companies create, maintain and update large customer database

containing demographic, life-style, past experience, buying habits, degree of responsiveness to

different stimuli, etc., and design their offerings to create, please, or delight customers who remain

loyal to them. Similarly more emphasis is given to retain them throughout life. Marketers strongly
believe: “Customer retention is easier than customer creation.”

3. More Emphasis on Managing Business Processes and Integrated Business Functions:

Today’s companies are shifting their thinking from managing a set of semi independent departments,
each with its own logic, to managing a set of fundamental business processes, each of which impact

customer service and satisfaction. Companies are assigning cross-disciplinary personnel to manage
each process.
Marketing personnel are increasingly working on cross- disciplinary terms rather than only in the

marketing department. This is the positive development, which broadens marketers’ perspectives on
business and also leads to broaden perspective of employees from other department.

4. More Emphasis on Global Thinking and Local Market Planning:

As stated earlier, today’s customers are global, or cosmopolitan. They exhibit international

characteristics. This is due to information technology, rapid means of transportation, liberalization,

and mobility of people across the world. Companies are pursuing markets beyond their borders. They
have to drop their traditions, customs, and assumptions regarding customers.

They have to adapt to their offering as per the cultural prerequisites. Decisions are taken by local

representatives, who are much aware of the global economic, political, legal, and social realities.

Companies must think globally, but act locally. Today’s marketers believe: “Act locally, but think
globally.”

5. More Emphasis on Strategic Alliances and Networks:

A company cannot satisfy customers without help of others. It lacks adequate resources and

requirements to succeed. Company needs to involve in partnering with other organisations, local as
well as global partners who supply different requirements for success

Senior manager at top-level management spends an increasing amount of time for designing strategic

alliance and network that create competitive advantages for the partnering firms. Merger, acquisition,
and partnering are result of a strong thirst for strategic alliance and networks.

6. More Emphasis on Direct and Online Marketing:

Information technology and communication revolution promise to change the nature of buying and

selling. Companies follow direct channel in term hiring salesmen, setting own distribution network,

designing network marketing, applying online marketing, and contracting with giant shopping/retailing
malls.

People anywhere in the world can access the Internet and companies’ home pages to scan offers and

order goods. Via online service, they can give and get advice on products and services by chatting with
other users, determine the best values, place orders, and get next-day delivery.
As a result of advances in database technology, companies can do more direct marketing and rely less

on wholesale and retail intermediaries. Beyond this, much company buying is now done automatically

through electronic data interchange link among companies. All these trends portend a greater buying
and selling efficiency.

7. More Emphasis on Services Marketing:

As per general survey, about 70% people are, either directly or indirectly, involved in service

marketing. Because services are intangible and perishable, variable and inseparable, they pose

additional challenges compared to tangible good marketing. Marketers are increasingly developing

strategies for service firms that sell insurance, software, consulting services, banking, insurance, and
other services.

8. More Emphasis on High-tech Industries:

Due to rapid economic growth, high-tech firms emerged, which differ from traditional firms. High-tech

firms face higher risk, slower product acceptance, shorter product life cycles, and faster technological

obsolescence. High-tech firms must master the art of marketing their venture to the financial
community and convincing enough customers to adopt their new products.

9. More Emphasis on Ethical Marketing Behaviour:

The market place is highly susceptible to abuse by those who lack scruples and are willing to prosper at

the expense of others. Marketers must practice their craft with high standards. Even, governments

have imposed a number of restrictions to refrain them from malpractices. Marketers are trying to sell
their products by obeying and observing moral standards or business ethics.

Difference Between Needs and Wants

 We all know that economics is a social science, which
deals with production, distribution and consumption functions. It is all about making choices regarding
the allocation of scarce resources, so as to make their best possible use and satisfy human wants and
needs. In economics, we often go through the terms needs and wants, but have you wondered about
their differences. Needs point out the something you must have for survival.

On the other hand, wants refers to something which is good to have, but not essential for survival. For
the purpose of spending and saving money wisely, every person must know the difference between
needs and wants.

Content: Needs Vs Wants

1. Comparison chart
2. Definition
3. Key differences
4. Conclusion

Comparison Chart
BASIS FOR
NEEDS WANTS
COMPARISON

Meaning Needs refers to an individual's Wants are described as the goods and
basic requirement that must be services, which an individual like to
fulfilled, in order to survive. have, as a part of his caprices.

Nature Limited Unlimited

What is it? Something you must have. Something you wish to have.

Represents Necessity Desire

Survival Essential Inessential

BASIS FOR
NEEDS WANTS
COMPARISON

Change May remain constant over time. May change over time.

Non-fulfillment May result in onset of disease or May result in disappointment.

even death.

Definition of Needs

By the term needs, we mean those requirements which are extremely necessary for a human being to
live a healthy life. They are personal, psychological, cultural, social, etc that are important for an
organism to survive.

In ancient times the three basic needs of the man are food, clothing and shelter but with the passage
of time, education and healthcare also became integral, as they improve the quality of life. They are a
person’s first priority as they are the things, that they keep us healthy and safe. Therefore, if needs are
not satisfied in time, it may result in illness, inability in functioning properly or even death.

Definition of Wants

In economics, wants are defined as something that a person would like to possess, either immediately
or at a later time. Simply put, wants are the desires that cause business activities to produce such
products and services that are demanded by the economy. They are optional, i.e. an individual is going
to survive, even if not satisfied. Further, wants may vary from person to person and time to time.

Conclusion

With the above discussion, on these two concepts of economics, it concluded that needs and wants
are separate forces, that compels actions for satisfaction. If needs are not met on time, the survival of
a person is at stake whereas wants are something which a person is craving for, that does not
challenge a person’s survival if not satisfied.

So, needs can be distinguished from wants on the basis of their level of importance. Hence, the
distinction is between what is required and what is desired.

THE INFLUENCE OF THE ENVIRONMENT ON MARKETING DECISIONS:

There are two kinds of external marketing environments; micro and macro. These environments’
factors are beyond the control of marketers but they still influence the decisions made when creating
a strategic marketing strategy.
Micro Environment Factors

 The suppliers: Suppliers can control the success of the business when they hold the power. The
supplier holds the power when they are the only or the largest supplier of their goods; the
buyer is not vital to the supplier’s business; the supplier’s product is a core part of the buyer’s
finished product and/or business.

 The resellers: If the product the organisation produces is taken to market by 3rd party resellers
or market intermediaries such as retailers, wholesalers, etc. then the marketing success is
impacted by those 3rd party resellers. For example, if a retail seller is a reputable name then
this reputation can be leveraged in the marketing of the product.

 The customers: Who the customers are (B2B or B2C, local or international, etc.) and their
reasons for buying the product will play a large role in how you approach the marketing of your
products and services to them.

 The competition: Those who sell same or similar products and services as your organisation are
your market competition, and they way they sell needs to be taken into account. How does
their price and product differentiation impact you? How can you leverage this to reap better
results and get ahead of them?

 The general public: Your organisation has a duty to satisfy the public. Any actions of your
company must be considered from the angle of the general public and how they are affected.
The public have the power to help you reach your goals; just as they can also prevent you from
achieving them.

Macro Environment Factors

 Demographic forces: Different market segments are typically impacted by common

demographic forces, including country/region; age; ethnicity; education level; household
lifestyle; cultural characteristics and movements.

 Economic factors: The economic environment can impact both the organisation’s production
and the consumer’s decision making process.

 Natural/physical forces: The Earth’s renewal of its natural resources such as forests, agricultural
products, marine products, etc must be taken into account. There are also the natural non-
 renewable resources such as oil, coal, minerals, etc that may also impact the organisation’s
production.

 Technological factors: The skills and knowledge applied to the production, and the technology
and materials needed for production of products and services can also impact the smooth
running of the business and must be considered.

 Political and legal forces: Sound marketing decisions should always take into account political
and/or legal developments relating to the organisation and its markets.

 Social and cultural forces: The impact the products and services your organisations brings to
market have on society must be considered. Any elements of the production process or any
products/services that are harmful to society should be eliminated to show your organisation is
taking social responsibility. A recent example of this is the environment and how many sectors
are being forced to review their products and services in order to become more
environmentally friendly.

Micro and macro environments have a significant impact on the success of marketing campaigns, and
therefore the factors of these environments should be considered in-depth during the decision making
process of a strategic marketer. Considering these factors will improve the success of your
organisation’s marketing campaign and the reputation of the brand in the long term.

RELATION OF MARKETING TERMS TO REAL WORLD SITUATIONS

The Michelin Guide by Michelin

The Michelin Guide launched all the way back in 1900. It's still available today in print. At first sight, it
may seem weird that A TIRE COMPANY HAS A TRAVEL GUIDE offering information about hotels,
restaurants and roadways. But, upon deeper analysis, it's a really smart piece of print marketing.
Much like The Furrow, which has always covered the rural lifestyle, The Michelin Guide is a great
example of content marketing because it connects to Michelin customers. In the beginning, Michelin
used its guide as a way to encourage travel via the car (which would lead to more tire purchases).
Now, it's a quintessential guidebook for those in search of fresh experiences.