Principles of Marketing

PRINCIPLES OF MARKETING
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CONTENTS
Sl No Description Page No

PART-I MARKETING CONCEPTS AND PROCESSESS
1 ELEMENTS OF MARKETING CONCEPT 6

1.1 Introduction to Marketing 6
1.2 Marketing Orientations 7
1.3 Social Issues and Emergent Philosophies 7
1.4 Customers and Competitor Orientation 7
1.5 Efficiency and Effectiveness 8
1.6 Satisfying Customers’ Needs and Wants 8
1.7 Value and Satisfaction 9
1.8 Exchange Relationships 9
1.9 Development of Marketing Function Over the Years 10
1.10 Limitations of the Marketing Concept 10
2 ELEMENTS OF MARKETING PROCESS 11

2.1 Marketing Objectives 11
2.2 Constraints 11
2.3 Options 12
2.4 Business Environment 12
2.5 SWOT Analysis 13
2.6 Plans to Include Target Markets and Marketing Mix 13
2.7 Scope of Marketing 14
2.8 Integrated Marketing 14
2.9 Marketing Audit 14
3 BENEFITS AND COSTS OF MARKETING ORIENTATION FOR A SELECTED

ORGANISATION 16
3.1 Marketing and Competitive Advantage 16
3.2 Building Customer Satisfaction 17
3.3 Desired Quality 17
3.4 Service and Customer Care 18
3.5 Relationship Marketing 18
3.6 Customer Retention 18
3.7 Customer Profitability 19

PART-II BUSINESS ENVIRONMENT & INTERNATIONAL MARKETS
4 MACRO AND MICRO ENVIRONMENTAL FACTORS INFLUENCING

MARKET DECISIONS 21
4.1 The Business Environment 21
4.2 Internal and External Environment 21
4.3 Composition of External Environment 22
4.3.1 Economic Environment 22
4.3.2 Socio-Cultural Environment 23
4.3.3 Political Environment 23
4.3.4 Legal Environment 23
4.3.5 Technological Environment 23
4.4 Techniques for Environmental Analysis 24
4.4.1 Competitors’ Analysis 24
4.4.2 Customers’ Analysis 24
4.4.3 Porter’s “Five Forces Method” for Competitive Analysis 25
4.4.4 Boston (BCG) Growth/Market-Share Analysis Matrix 26
4.4.5 Analysis of External Environment: PESTEL Analysis 27
4.4.6 SWOT Analysis to Identify Organisational Competencies 28
5 INTERNATIONAL MARKETS & GLOBALISATION 30

5.1 Development of International Markets 30
5.2 Concept of Global Business 31
5.3 Globalisation of Business 31
5.4 Conduct of International Business 31
5.5 Entering and Competing in Different Markets 32
5.6 Trade Partnerships for Entering the International Market 33
5.7 Policies & Regulations 34
PART-III MARKETING PRACTICES
6 MARKETING MIX: McCARTHY’S 4Ps 36

6.1 The Changing ‘Marketing-Thrust’ 36
6.1.1 The Customer Concept 37
6.1.2 The Societal Marketing Concept 37
6.1.3 The Changing ‘Marketing-Thrust’ 38
6.1.4 The Customer Concept 38
6.1.5 The Societal Marketing Concept 38
6.2 4Ps - the Four Pillars of Marketing 39
6.3 B2C and B2B Markets 40

6.4 Service and Product Marketing 41
6.5 Additional 3Ps of Marketing Mix 41
7 MARKET SEGMENTATION, TARGETTING AND POSITIONING 43

7.1 Introduction to Market Segmentation 43
7.2 Basis for Segmenting the Markets 43
7.3 Market Segmentation Process 44
7.4 Benefits of Segmentation 45
7.5 Market Targeting 46
7.6 Target Marketing Strategies 46
7.7 Product Positioning 47
7.7.1 Definition and Meaning 47
7.7.2 Relationship to Segmentation and Positioning 47
7.7.3 Influence Over Marketing-Mix Factors 48
7.7.4 Repositioning 49

PART-I MARKETING CONCEPTS AND PROCESSESS

UNIT 1 ELEMENTS OF MARKETING CONCEPT
1.1 Introduction to Marketing

1.2 Marketing Orientations
1.3 Social Issues and Emergent Philosophies
1.4 Customers and Competitor Orientation
1.5 Efficiency and Effectiveness
1.6 Satisfying Customers’ Needs and Wants
1.7 Value and Satisfaction
1.8 Exchange Relationships
1.9 Development of Marketing Function Over the Years
1.10 Limitations of the Marketing Concept

Marketing is an important business function of an organisation. It is the marketing function which
identifies potential customers in various markets for the goods and services produced by the
organisation. A business organisation earns revenue for profit generation through its marketing of
goods and services.

Marketing deals with ‘identifying’ and ‘meeting’ requirements of the customers for products and
services. In old times, the market team used to go directly to the customers. But over period of time,
professional function of marketing developed, where the customers used to be contacted through
middlemen and the retailers. Basically, marketing today means identifying and reaching out to the
potential customers and influencing them to buy the goods and services produced by the business
organisation.

1.1 Introduction to Marketing

Marketing is basically a group of activities undertaken for designing/creating the goods & services,
promoting, creating demand and finally delivering the goods and services to the customers needing
these in exchange of money. Marketing persons are responsible for promoting the goods & services
created by the business organisation, and creating demand for these among the people.

The people who need such goods and services to meet their requirements, and who are willing to
buy these in exchange of money are called the customers. There may be more than one business
organisation to provide same or similar products/services for meeting the requirements of the
customers. Each of such organisations tries to attract their customers to buy their products/services.
Such organisations are called the competitors.

In simple words, the sum total of (i) customers and (ii) competitors supplying the goods and services
to the customers is called the market. Generally, the marketing organisations (the competing
organisations) quote a fixed money value for their goods and service, which is called their price.
Some marketing organisations may offer some discount over such price, in certain conditions.

According to Peter Drucker, “aim of marketing is to know and understand the customers so well that
the products or services fit him and sell on their own”. Objective of marketing is to understand the
customers so well that the goods and services may be created very close to what they desire to buy.

1.2 Marketing Orientation

Business organisations are established for generating revenue and profit by providing goods and
services to the customers for meeting their needs and wants. Therefore, the business management
has an orientation for meeting customers’ requirements when numbers of competing organisations
are attempting to address to the customers’ needs and wants.

Thus, the business is planned, organised and managed with marketing orientation. Goods and
services are created based on market information regarding customers’ requirements. Business
strategies are planned keeping in view the marketing environment and competitors’ business plans.

1.3 Social Issues and Emergent Philosophies

As business is oriented towards meeting customers’ requirements, business have social relevance. It
is said that that every business organisation has responsibilities towards the society. Business firms
take their inputs and resources form the society, and sells their produce in the society. Therefore,
they must ensure that their activities do not cause any type of harm or adverse effect on natural
resources and to the environment.

Business is conducted through social network comprising of various stakeholders namely customers,
suppliers, employees/workers, financiers, and other segments of society. Therefore, business
organisations are expected to build social and ethical considerations in their marketing practices.
They are expected to create balance between (i) profit earned, (ii) customer satisfaction provided,
and (iii) other issues of societal interest.

It has been noticed that industrialisation and associated business have caused adverse effect on the
environment in form of ‘environmental pollution’ and ‘global warming’. Further, natural resources
have been exploited in a manner that there is now increased risks of floods, land-slides, and erosion
of glaciers etc.

Thus numbers of social issues and concerns are now being discussed openly where enough damaged
has been caused due to unplanned business activities. Henceforth, a common view is emerging
world-over that business companies firms have corporate social responsibilities (CSR) which they
must address and comply.

1.4 Customers and Competitor Orientation

As business runs around the customers, business firms make considerable efforts in understanding
customers’ needs and wants, which they wish to satisfy through their business efforts. Markets may
have other organisations who are providing same or similar goods and services for meeting the same
need and want of the customers. They are called the competitors operating in the market.

Thus, the business is organised in a particular market for meeting the needs and wants of the
customers, where other firms are also competing to satisfy the customers. This is shown in the figure
given on the next page.

MARKETS
CUSTOMERS COMPETITORS

Figure: Customer & Competitor Orientation in the Market

As seen in the figure above, markets are influenced by competitors and competitors. Market
provides a platform for business firms to supply their goods and services to the customers who are
interested to buy these in exchange of money. Other business firms also attempt to meet the same
‘wants and needs’ of the customers, and are therefore called the competitors. The customers have
choice to buy the good and services from any of the business firm. The competing firms try to
improve their offerings for the customers, by providing better quality and/or changing lesser price.

1.5 Efficiency and Effectiveness

In the marketing drive, the business firms compete on the basis of: (i) quality, and (ii) price. This dual
objective can be achieved only when business related operations are executed by eliminating the
avoidable efforts and activities. This refers to efficiency of business operations. Here efficiency
means doing the right things (and not doing the avoidable). Therefore, business firms must be
efficient in their marketing activities.

As market has competitors selling the same or similar goods and services. “Doing the right thing” is
not the complete answer for success. Business firms must ensure that their marketing efforts are
successful in attracting the customers to buy its goods and services. This is possible only if
customers find the “right things in business offering of a firm”, as required and valued by the
customers. This is called “being effective”. Therefore, business firms must also “do the things right”
for being effective in winning the customers.

Therefore, two attributes essential for business firms to succeed in marketing operations are:
• Efficiency in business operations and activities; and
• Ensuring effectiveness in attracting the customers, inspite of competitors’ efforts and
strategies.

1.6 Satisfying Customers’ Needs and Wants

The term “needs” refers to be “basic requirements of the customers as humans”. For example, the
customers need food, clothes, shelter etc to survive. There are other needs like needs for education,
relaxation, travelling and entertainment.

There may be many ways for satisfying a need. Different persons may prefer different ways for
need-satisfaction. Such preferred ways to satisfy a need is what a particular customer wants (to

satisfy his needs). This becomes the “wants” of the customer. For example, food is what a customer
needs when hungry. But a customer may want “burger” to satisfy his hunger. Thus, food is the need
of the customer, but burger is what he wants. Thus, ‘wants’ are shaped by customers’ background,
social grouping/customs, nationality & ethnic habits. Wants are not fixed and may change over a
period of time.

Therefore, customers buy a product or service when they feel some need or unfulfilled want. As
marketing & sales are based on some goods & services, which must be created taking in view the
needs & wants of the customers. But different products and services may satisfy the needs & wants
of different persons in a different way. Therefore, business firms create their goods and services in
such a way that these satisfy the needs & wants of maximum number of the customers, among
whom their products/services are proposed to be sold. However, rather than using the term
“satisfying”, degree of satisfying is more relevant in real life situation. Therefore, business firms
aim at achieving maximum degree of “customer satisfaction” through their goods and services.

1.7 Value and Satisfaction

A customer likes to buy a product or service when, in his opinion, it delivers value (usefulness) to
him and provides adequate satisfaction of his needs and wants. The primary criteria is delivering
satisfaction to the customer or providing adequate degree of satisfaction.

Satisfaction refers to high degree of satisfaction to the customer. But relative satisfaction or degree
of satisfaction is not easy to determine or to measure. Therefore, another term “value” is used to
understand the customers’ perception with respect to the goods or services. Customers’ value is the
term used more often in this regard for purpose of clarity.

Value is measured through customer’s perception of quality, service, and price. Value is perceived
to be getting increased when higher level of quality and service are provided. It is perceived to be
decreasing when price is increased.

Thus, value can be defined as the ratio between ‘what the customer gets’ and ‘what the customer
pays for it’. The customer gets some benefits and bears some cost. Value is the ratio of the benefits
and the costs.

1.8 Exchange Relationships

A customer needing and wanting a product or service approaches a person offering it. Generally, he
can not get the product or service for free; he has to give something needed by the seller, to get it.
Thus marketing or sale is an exchange process.

Successful marketing is therefore outcome of an exchange relationship between at least two parties.
It involves exchange of goods or services between two set of parties in exchange of something
valued by the party giving the products or services.

The exchange relationship has following conditions which must be acceptable to the parties
involved:
• At least two parties are involved;
• Each party has some thing which is valued by the other party;
• Both parties are able to communicate to each other regarding what they need; and what
they are willing to give in exchange for what they are getting;

• Both parties are free to accept or reject the exchange-offer on their own, without any
outside pressure; and
• Each party believes that the exchange-deal is best in their interest at that time, place
and situation.

1.9 Development of Marketing Function Over the Years

Marketing Concept: Traditionally, marketing has been the process of: (i) organising promotional
campaign for goods & services in various markets, (ii) creating demand for these, and (iii) organising
the sale & delivery to the customers through market intermediataries and retailers. In pre 1960
period, “marketing concept” was focussed on providing the products and services for which market-
demand could be created by reaching out to the customers. For higher sales, market experts used to
advise their organisations to produce ‘better quality products’. The internal efforts used to define
“better products”.

The New Marketing Concept: In post 1960 era, the focus started shifting to the customers. The
objective of the new marketing concept was two-folds: (i) firstly to identify the ‘needs’ and ‘wants’
of the target customers; and (ii) secondly to supply the required types of products and services to
the customers. Business organisations made big investments in ‘market research’ to identify the
needs, wants and preferences of the customers. This was called ‘understanding the voice of the
customers’. Products and services were designed and produced for satisfying the requirements of
the customers.

Strategic Marketing Concept: In the post-1990 era, many new “product producing organisations”
entered the market and the competition became very intense. Technology was also advancing and
was changing the products very rapidly. The competition shifted on business strategies. Thus, a new
era of marketing came into being. The focus shifted from ‘customers’ and ‘requirements of
customers’ to the “competitive environment of business”. Many more issues namely, competition,
governmental regulations, and the business environmental forces also became relevant for market-
success. Rather than mere focusing on profitability, the marketing-objective has now shifted to
providing benefits to the stakeholders.

1.10 Limitations of the Marketing Concept

The marketing concept apparently describes the marketing process and its main constituents; and
presents an overall picture of the process activities and events. This provides a general explanation
regarding marketing of products and services, created by the business organisation. But it does not
provide the complete picture and explaination regarding all factors influencing the marketing
process.

The actual process may involve more players and forces operating in the market(s), which may
influence the exchange-process. For example, one product may be selling well at one time, but the
market environment may change suddenly which may have adverse effect on sale of the product
under consideration.

UNIT 2 ELEMENTS OF MARKETING PROCESS
2.1 Marketing Objectives

2.2 Constraints
2.3 Options
2.4 Business Environment
2.5 SWOT Analysis
2.6 Plans to Include Target Markets and Marketing Mix
2.7 Scope of Marketing
2.8 Integrated Marketing
2.9 Marketing Audit

2.1 Marketing Objectives

Every business firm has certain objectives for undertaking its marketing operations. Such objectives
are derived from its vision and mission. The firm sets objectives both for near & long terms.

The business firm evolves its marketing objectives through its overall goals & objectives.
Traditionally, marketing objectives used to be expressed in terms of profitability of operations,
meeting customers’ needs & wants, gaining competitive advantage over the competitors, and
increasing market share etc.

The marketing objectives may be expressed in two ways:
• Firstly, the marketing objectives may be expressed in terms of what marketing-results
are desired in comparison with the competing firms. For example, it may be in terms of
its market-share, market leadership, cost leadership, and competitive advantage etc.
• Secondly, marketing objectives may be set in terms of absolute achievement levels
desired to be achieved. For example, the firm may like acquire cost reduction; or may
introduce high quality products and services at affordable prices.

The business organisation prepares its business plans and evolves the business strategies to meet its
objectives. Thus, all business operations and activities are designed and planned to realise its
objectives. In modern time rather than mere focusing on profitability, the marketing-objectives are
shifting to providing benefits to the customers and other stakeholders.

2.2 Constraints

The business related plans and operations need support in terms of management commitment,
organisational resources (human resource, money capital, plant & machinery, and time), favourable
conditions (like governmental policies, legal restrictions), and environmental conditions & demands
etc. Constraint refers to something which you need and desire to have; but circumstances are such
that you can not get it due to non availability of favouring factors.

A business firm can not expect or assume that all factors will be favourable to support its business
operations. For examples, its competitors are also trying to achieve a dominant position for
themselves in the market. Other factor to be always considered is feasibility or availability of
required resources for business organisations.

Therefore, in real life condition the business firm has to face some “limitations” of supporting factors
in terms of market environment, competitors’ policies & strategies, and requirement of quality-
resources etc. Non availability of desired level of supporting factors is referred as the constraints
under which the business firm has to operate.

2.3 Options

Sometime, one needs to take some action. There may be numbers of possible ways for taking action.
These are called the options for taking the action, though only one option may be exercised at one
time, i.e. it may be possible to take the action only in one of the available alternatives called options.

In marketing, the term ‘option’ is used for the alternatives available for using various strategies. The
business organisations may like to adopt various marketing strategies, but its options may be limited
to few strategies keeping in view its organisational capabilities and external environmental factors.
Thus, the business organisation has to identify the feasible business options or the strategy options.

When more than one option is available for taking actions, a selection has to be made. In such
situation, each option is evaluated in terms of costs and the likely benefits. The costs may include
the resources required, particularly the human resource with specific speciality requirement, or the
funds requirement, or even the time required. The benefits may include the degree of success in the
desired areas, and achievement of position of advantage in the market.

2.4 Business Environment

An organisation conducts its business with other organisations. It buys raw materials and unfinished
goods from the suppliers. It sells its goods and services to the customers. Other organisations are
also selling similar goods and services and therefore they are called its competitors. Many persons,
namely the employees, suppliers, investors, managers, society people etc are supporting the
business and are called its stakeholders. It has to comply with the laws and regulations made by the
government. Thus, there are many factors external to it, but these have deep effects on its
operations and its business. Such factors constitute its environment under which it operates.

Business environment refers to the sum total of all factors which are external to the organisation
but affect its business operations. These factors are beyond its control of the business organisation.
The environment poses out certain conditions for business, under which the organisations should
carry out their business activities. The business environmental factors may vary, to some extent,
from country to country. These factors are not static, but are dynamic by nature. These factors
change with time; some change little where as some factors change much with change of time.

Business environment of an organisation has five components, namely political environment,
economic environment, social & cultural environment, technological environment, and legal
environment.

As the nature of business of each organisation may be different from that of other organisations, the
environmental factors influencing it may be different from those influencing other organisations. For
example, a ‘thermal power plant company’ and a ‘fishing company’ conduct different types of
businesses, having different relevant factors (political, legal, technological and social environment in
nature) influencing their business. Therefore, organisation-specific analysis of environment is very
useful for business planning and in particular for strategic planning of business operations including
marketing.

2.5 SWOT Analysis

The diagnosis of a firm’s strengths and weaknesses can be fruitful only if the environmental factors
and market conditions are considered along with the internal capabilities. This approach involves
matching of internal capabilities with the external opportunities and threats, and is known as
SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis. Organisations perform a SWOT
analysis to understand their internal and external environments so that an effective business
strategy can be formulated for the organisation.

Generally the changing environment poses certain opportunities and threats for the organisation.
Therefore organisations plan to take two prong actions.
• Firstly, the organisation should analyse the opportunities and threats to identify the
different ways in which these may affect the organisation.
• Secondly, (i) the organisation has to capitalise on its strengths to engage the
environment, (ii) while it should attempt to not allow its weakness in causing some
damage.

Therefore, an effective strategy for an organisation should capitalise on the opportunities, and
neutralise the threats by minimising the weaknesses.

Using SWOT analysis technique involves three steps:
• Objective-setting for the organisation;
• Identifying its Strengths, Weaknesses, Opportunities and Threats;
• Identify possible ways & means for taking the ‘four steps’ for: (i) maximising the
strengths, (ii) minimising the weaknesses, (iii) capitalising on the opportunities, and (iv)
protecting the organisation from the threats posed by the environment.

The answers regarding ways and means for taking the above ‘four steps’ provide the necessary
information for strategy formulation for the organisation.

2.6 Plans to Include Target Markets and Marketing Mix

While planning for marketing of goods and services, one has to take decisions on two important
issues:
• The markets where the business organisation may have some kind of advantage in
selling, or in influencing the customers to buy its products and services. The business
organisation will like to aim at concentrating the marketing campaign in such markets.
Therefore, such markets are called the target markets, meaning where the marketing-
organisation should spend more efforts and resources.
• The business organisation must also identify the marketing strategy in terms of (i) which
goods and services have some kind of competitive advantage over the competitors’
products and services, (ii) keeping the own quality and competitors’ items, what price
should be fixed for goods and services of the organisation; (iii) how in which manner the
organisation plan and implement promotion or advertisement for its goods and services
among the potential customers in the selected target markets, and (iv) at what places
should the business organisation open its marketing & sales outlets so as to attract

maximum numbers of potential customers. The combination of above four factors

namely product, price, promotion and place is called the marketing-mix for optimal
marketing planning.

2.7 Scope of Marketing

Marketing is concerned with creation of products & services for the customers, promoting these
among the potential customers, generating demands, and delivering/selling these to the
customers. Marketing specialists are also responsible for helping the production function to create
products/services matching closely to ‘what is desired and valued by the customers’. They have a
role to stimulate the demand for firm’s products and services among the customers.

In the modern time, the scope of marketing includes all actions in various functional areas
(departments) and all activities which influence the process of satisfying customers’ needs &
wants in most efficient and effective manner. Today, it may even encompass supporting
recruitment and training of specialist manpower for the marketing efforts (for creating products,
pricing/discounting, promotion, and physically delivering the products and services to the customers
at their place of choice).

However, the technical activities of functional departments are outside the scope of marketing.
For example, planning and acquiring the production-resources including technical manpower, plant
& machinery, test equipment, and raising the money capital are not included/considered under the
scope of marketing. However, identifying product-specifications and features which are desired
and valued by the customers is inside the scope of marketing. Therefore, such distinctive difference
has to be kept in view while discussing or deciding on the scope of marketing.

2.8 Integrated Marketing

‘Integrated marketing concept’ is based on the fact that all business activities of an organisation
are oriented towards ‘meeting the requirements of the customers’. Therefore, all resources are
integrated together in the tasks for meeting the needs & wants of the customers. When all
functional departments are working together and supporting one another to serve the interests of
the customers, the total effort is called integrated marketing.

The above stated approach of ‘integrated marketing’ requires proper training and coordinated
awareness drive among the motivated employees of various departments to ensure that products
and services are produced, marketed and delivered by the organisation in such a way that these
efforts are successful in satisfying the customers. Everyone looks towards his contribution towards
providing customer satisfaction. This approach is called integrated marketing.

2.9 Marketing Audit

Marketing audit involves examination of activities of an organisation and its business environment. It
is defined as a “comprehensive, systematic and independent examination of:
• marketing environment; and
• the objectives, strategies and activities of the organisation
to (i) identify its marketing related problems & opportunities; and (ii) recommend a plan of action to
improve the organisation’s marketing performance”.

Marketing audit has five important characteristics:

• Marketing audit should be carried out by an independent agency.

• It examines all aspects marketing activities of the organisation;
• It involves holistic analysis of all aspects of the marketing environment, marketing
objectives, strategies, marketing systems, and specific activities.
• The audit report includes making recommendations regarding the “improvements
needed” and also “action-plan for implementing improvements”.
• The audit should be conducted at periodic intervals so that problem-issues, if any, can
be addressed in a timely manner.

UNIT 3 BENEFITS AND COSTS OF MARKETING

ORIENTATION FOR AN ORGANISATION
3.1 Marketing and Competitive Advantage

3.2 Building Customer Satisfaction
3.3 Desired Quality
3.4 Service and Customer Care
3.5 Relationship Marketing
3.6 Customer Retention
3.7 Customer Profitability

Marketing orientation has considerable benefits for a marketing organisation. The benefits are (i)
proper understanding of customers’ needs, (ii) building customer satisfaction, (iii) building quality
desired by the customers, (iv) planning & designing service and customer care support facilities, (v)
developing relationship marketing, (vi) developing competitive advantage in the market, (vii)
ensuring customer retention and (viii) building ‘life-time value’ with the customers. The costs include
financial cost for these additional efforts, but these bring much benefit in terms of increased level of
business success for the organisation.

3.1 Marketing and Competitive Advantage

As discussed in Unit-1 earlier, the business runs around the customers. The business firms make
considerable efforts in understanding customers’ needs and wants, which they wish to satisfy
through their business efforts. Markets have other competitors who are also providing same or
similar goods and services for the customers.

Thus, the markets are influenced by competitors and competitors. Market provides a platform for
business firms to supply their goods and services to the customers who are interested to buy these
by paying money. Other business firms also attempt to meet the same ‘wants and needs’ of the
customers. The customers have choice to buy the good and services from any of the business firm.
Further, the competing firms try to improve their offerings to attract the customers by giving better
quality at lesser price.

Therefore to succeed in the market competition, a business organisation should plan to deliver some
superior features in their products and services so that the customers may feel attracted to buy its
products and services. This is called competitive advantage in the market over the competitors. It
refers to not only building high values in own products and services, but also having higher value for
the customers in comparison to the competitors. It basically means having some distinctive
features valued by the customers, which the competitors may not be able to match or imitate
easily.

Marketing advantage refers to advantages enjoyed by a business firm over its competitors in terms
to other Ps of marketing i.e. price, promotion and place. Business firms have definite pricing strategy
for their products and services. Some firms attempt to follow strategy of cost leadership so that they
are able to fix lower prices if required. The advertisement and promotional thrusts and campaign of
a firm has potential for earning the advantageous image for the products & services in the minds of
the customers. Further, the distribution channels and retail outlets may also be selected to attract
more customers.
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3.2 Building Customer Satisfaction.

As per Kotler, satisfaction “is a person’s feelings of pleasure or displeasure appointment resulting
from comparing a product’s perceived performance in relation to the customer’s expectations”. The
customer feels satisfied if the performance is perceived to be equal to or more than his/her
expectations; otherwise he is dis-satisfied.

Therefore, a detailed customers’ survey should be carried out to identify and clearly understand the
expectations of the target-customers from the product or service. Further, all product attributes do
not contribute equally towards customers’ satisfaction. Therefore, key attribute-factors or the
dominant attribute-factors need to be identified through the survey based market study.

High customer satisfaction is necessary so that the customer feels an emotional bond with the
product or service, which may result into a loyal customer. Another concept is of a delighted
customer. When the product is used by the customer, who finds the performance to be much more
than what he or she had expected, the customer is delighted with product performance. Such
repeated experiences make the customer a delighted customer. He has very high satisfaction with
the product. Such delighted customers are likely to remain loyal to the particular product.

3.3 Desired Quality

Customers have some expectations from the product. If the product meets these expectations, it is
said to be of high quality. Thus, quality has a close relation with the customers’ expectations and
the actual performance of the product in the hands of the customers.

Traditionally, quality meant meeting the specifications i.e. conforming to the prescribed
performance attributes. This was called conformance quality. For example, a product is required to
be meeting certain performance standard which is specified in writing for the product producer or
the supplier. The product is said to have good quality if it meets these specified performance
standards.

In real-use situations, it has been observed that some of the ‘expectations’ of the customers are
generally not known or not documented earlier. Some of these become known only after the
customer has used the product. These are called latent requirements. For example, a product may
last for considerable time during its use by the customer. This was earlier not included in the quality
attributes. Now in modern time, the definition of quality has undergone a change.
Anything and everything ‘valued by the customer’ in a product or service is said to be included in
the ‘quality’ desired by the customer. Thus, this defines the term desired quality.

Market research professionals have reported that when a customer has been using a product or
service for some (long) time, his expectations from the product or service tend to increase. The
customer uses many other products and services where he has new experiences and he desires the
same or similar good feelings (or good experience/performance) from this product as well. This
tends to raise his or her level of expectations from the product or services, thus raising the level of
desired quality. For example, ease of handling, safety in usage, durability, after-sales service, after-
use sale price are associated with usage of the product or service, and are of great value to the
customers. Therefore, such issues are also discussed and complied while designing and creating a
product or a service for the target customers. If these requirements are found to be meeting
through a product or the service, the customer feels more delighted than otherwise.
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3.4 Service and Customer Care

Another attribute closely linked with usage of the product or service by the customers is the “service
and customer care”. Customer’s association with a product or service continues / lasts till it is being
used by the customer. The customers feel the delivered-quality to be lacking, if these ‘supports’
are not provided to the customers, during the period of life-time usage. This is a further extension
to the “concept of delivered quality”.

The term ‘service’ is a wide ranging term meaning provisioning of all kind of support to the actual
user of the product or service during its life time of usage. Generally “product-related service”
refers to support provided by the manufacturer or the selling organisation to the customers in
maintaining and repairing the product during its usage life-time. The cost of servicing is also
relevant, some business organisations quote reasonably low price while selling a product, but charge
high price for after-sales services. This creates dis-satisfaction among the customers.

A related concept is customer-care, meaning that the business organisation values its customers,
even its potential future customers, and has provided for dedicated qualified staff to handle their
quarries and guiding them to avail different types of services from the organisation, including the
after-sales service. Their moto is “caring for the customers”, and therefore this service is generally
called customer care service by the customer care department.

3.5 Relationship Marketing

A business organisation has mutually satisfying long-term relationships with its stakeholders
including customers, suppliers, distributers for developing, creating, maintaining and retaining the
business. They act as business partners working under beneficial relationship of promising and
delivering good quality items at fair prices over time to other parties. This is called relationship
marketing.

Such relationship is useful as various entities are involved in the marketing network for creating and
marketing of goods and services to the customers. In this relationship chain, they have common
interest of enriching the ‘business’ through delivering satisfaction to the ultimate customer.
Customer relationship is quoted very often, but relationship marketing with other partner entities of
business is crucial for market success in the competitive market environment.

3.6 Customer Retention

As mentioned above, customer relationship marketing is the backbone of successful business, as the
business is oriented towards meeting the need & wants of the customers. Therefore, the
relationship marketing has two major focus: (i) firstly to attract the customers and secondly (ii) to
retain the existing customers.

Generally, it is noticed that far greater efforts and costs are incurred in attracting and gaining a new
customer than in retaining an existing customer. Therefore, building relationship with the customers
and ensuring high degree of customer satisfaction is the key to the success in customer retention. A
loyal customer stays longer with the business organisation. Further, he talks good about its products
and services to other potential customers, thus helping in acquiring new customers.
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A satisfied customer is easy to retain by continued satisfying service. He is less likely to try the
competitors’ products and services. Rather, he will bring new ideas to the organisation and will cost
much less to serve in comparison with the new customers.

3.7 Customer Profitability

Different customers bring different level of business to the organisation and contribute differently to
the firm’s profitability. The term profitable customer is used for a person or a buying entity who,
over times, makes number of purchases and provided repeated revenue stream (cash-inflow) to the
organisation, which brings net profit to the organisation. Thus “customer profitability” refers to the
net profit being earned from retained customer repeatedly over time. The degree of profitability
may differ from customer to customer.

Therefore, in addition to analysing customer satisfaction, modern organisations are also analysing
customer profitability. They group their customers into ‘highly profitable customers’, ‘moderately
profitable customers’, and ‘low profitable customers’. This is called customer profitability analysis
(CPA). This is not permanent labelling as an existing ‘low profitability customer’ may bring more
business in future, and may even become ‘highly profitable customer’ in the coming future.

It is generally noticed that about 20% of the customers bring about 80% of the profitability for the
business organisation. Therefore, most organisations pay high attention and provide dedicated
special services to their highly profitable customers. Some organisations have coined names like
platinum customers and gold customers for their highly profitable customers.
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PART-II BUSINESS ENVIRONMENT & INTERNATIONAL

MARKETS
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UNIT 4 MACRO AND MICRO ENVIRONMENTAL FACTORS

INFLUENCING MARKET DECISIONS
4.1 The Business Environment

4.2 Internal and External Environment
4.3 Composition of External Environment
4.3.1 Economic Environment
4.3.2 Socio-Cultural Environment
4.3.3 Political Environment
4.3.4 Legal Environment
4.3.5 Technological Environment
4.4 Techniques for Environmental Analysis
4.4.1 Competitors’ Analysis
4.4.2 Customers’ Analysis
4.4.3 Porter’s “Five Forces Method” for Competitive Analysis
4.4.4 Boston (BCG) Growth/Market-Share Analysis Matrix
4.4.5 Analysis of External Environment: PESTEL Analysis
4.4.6 SWOT Analysis to Identify Organisational Competencies

4.1 The Business Environment

An organisation conducts its business with other organisations. It buys raw materials and unfinished
goods from the suppliers. It sells its goods and services to customers. Other organisations are also
selling similar goods and services and therefore they are called its competitors. Many persons,
namely the employees, suppliers, investors, managers, society people etc are supporting the
business and are called its stakeholders. It has to comply with the laws and regulations made by the
government. Thus, there are many factors external to it, but these have deep effects on its
operations and its business. Such factors constitute its environment under which it operates.

Business environment refers to the sum total of all factors which are external to the organisation but
affect its business operations. These factors are beyond its control of the business organisation. The
environment poses out certain conditions for business, under which the organisations should carry
out their business activities. The business environmental factors may vary, to some extent, from
country to country. These factors are not static, but are dynamic by nature. These factors change
with time; some change little where as some factors change much with change of time.

4.2 Internal and External Environment

Though the terminology of “environment” was coined to refer to environment external to business
organisation, but this term has also been extended to the internal situation and conditions of the
organisation also, where it is called the internal environment. Thus, the environment may be viewed
in two different manners: external environment and the internal environment. For example, an
organisation works under the framework of business laws made by the Government, specific
technological conditions, and social expectations. These factors relate to environment external to
business organisation and therefore constitute external business environment for the organisation.
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The business-firms have to accept these external situations/conditions as ‘given’ and adapt
themselves to find their business success while working within these specific laws or conditions.

Internal environmental factors refer to organisation structure, management policies, organisational
culture, and wage structure etc. These are specific to an organisation, and the management can take
suitable actions to change these factors. These factors are not completely beyond control of the
business firms, but any such desired change may take some time to be fully implemented.

One major and most important characteristics of modern business environment is that it is a
competitive environment. The nature of competition in an industry, as well as the profitability of a
firm, is often more directly influenced by developments in the competitive environment. The
underlying factors of competitive environment are: competitors, customers and the suppliers.

4.3 Composition of External Environment

The environment of any organisation is the sum-total of all conditions, events and influences that
surround and affect it. Many factors relating to money supply, market condition, competitors,
suppliers, technologies, government guidelines & legislations, and social practices are external to the
business firm, and constitute its external business environment. Important segments of external
environment are:
• Economic environment,
• Social environment,
• Political environment,
• Legal environment, and
• Technological environment.

4.3.1 Economic Environment

The economic environment consists of macro-level factors related to means of production and
distribution of wealth which have impact on the business of all organisations operating under it. The
business sector has economic relations with the government, the capital market, banks, and the
financial institutions, which together influence the trends and structure of the economy.

For any business firm, the economic system is influenced by: (i) socio-political setup; (ii)
Governmental guidelines & regulations; (iii) capital market(s); and (iv) market situations etc. In most
countries, the Government is the manager of the economy and its policies influences the functioning
of the economy.

The market system of the economic environment consists of factors emerging out of competitive
interactions of large number of business organisations. Some of the important factors influencing
the market system are as described below:
• Product factors such as demand, features, design, price, promotion, distribution, and
availability of substitute products or services.
• Customer factors such as needs, preferences, perceptions, values, bargaining power,
buying behaviour, and satisfaction of customers.
• Marketing intermediary factors such as middlemen, distribution channels, customer
services, logistics, delivery systems, and the financial intermediaries.
• Competitor-related factors such as different types of customers, entry & exit of
major competitors, nature of competition, and relative strategic positioning of major
competitors.
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4.3.2 Socio-Cultural Environment

Socio-cultural environment comprise of factors related to human relationships within the society. It
also covers the social relationships and behaviour of groups of people, which have a bearing on the
business of an organisation. Some of the important factors operating in the social environment are:
• Socio-cultural attitudes and values of local people;
• Demographic characteristics of the workforce;
• Socio-cultural issues & problems;
• Educational levels of the workforce;
• Prevailing work ethics; and
• Family structure of workforce.

4.3.3 Political Environment

Political processes and legislation influence the business related regulations with which the industry
must comply. As the case with many factors in the general environment, changes that benefit one
industry may cause certain damage to others. Government legislation can have a significant impact
on the performance of business firms.

The significance of political conditions in business operations may be seen in terms of stable political
regulations and conversely by reference to the impact of political instability, unrest and threat to law
and order.

4.3.4 Legal Environment

Most countries have numbers of legislations formulated by their Parliaments/Governments which
govern the manner in which the business should be conducted , and to ensure the rights and
welfare of the employees and society in general.

Such legislations and regulation include business related laws, employment laws, employee welfare
related laws, fair competition related laws, and environment protection laws. These are binding,
without exception unless so specified clearly, on all business entities operating in the country.

4.3.5 Technological Environment

Technology is an essential ingredient of the business process. It is needed for raw material
processing, design of products & services, and as part of the production process. Rising technology
has revolutionised the manner in which the business is being conducted.

Transportation and communication necessary for business, have advanced due to new technology.
Quality of many products has improved, though their prices have come down. It has become
possible due to use of advanced technology. Thus, ‘changes’ in technology have direct influence on
business.
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4.4 Techniques for Environmental Analysis

Analysis and appraisal of environment of business is carried out using different tools & techniques
for different factors of the environment. Some commonly used analysis tools are described in
following sections.

4.4.1 Competitors’ Analysis

Competitors’ analysis focuses on each company with which the organisation competes directly.
According to Porter, the purpose of conducting a competitor analysis is to:
• Determine each competitor’s probable reaction to the industry and environmental
changes;
• Anticipate the response of each competitor to the likely strategies of other firms; and
• Develop a profile of the ‘nature’ and ‘success’ of the possible strategic changes, which
each competitor might undertake.

A competitor response profile can be prepared on the basis of the four components of competitor
analysis, namely (i) future goals of the competitors; (ii) current business strategies of competitors;
(iii) the key assumptions that the competitor makes about itself and about the industry, and (iv)
capabilities of competitors in terms of strengths & weaknesses.

Based on a thorough analysis of these components, a response profile can be prepared for each
competitor that can help in predicting their strategic moves; which can be ‘defensive’ or ‘offensive'
by nature. The information collected in the response profile is a vital input for formulation of
business strategy of an organisation.

4.4.2 Customers’ Analysis

The customers’ analysis is carried out specifically in response to a particular product/service or for a
group of products/services in a particular market at a given time. It basically caters to finding
answers to following questions:
• What are the specific ‘needs’ of the customers?
• What are their ‘preferences’ among similar products /services?
• What are their preferences to the ‘specific features’ offered in different
products/services?
• What product ‘quality’ they are looking for meeting their general/routine requirements?
• What product/service ‘quality’ will ‘delight’ the customers?
• What ‘price’ they are willing to pay for respective quality of products/services?
• What product-support they are looking for?

Collection of above information with respect to a product/service or a group of product/service
helps a firm to evolve their marketing strategy for the product(s)/service(s) for a particular market.
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4.4.3 Porter’s “Five Forces Method” for Competitive Analysis

Porter’s Five Forces Model is a popular and effective technique for analysing the competitive
environment in an industry. It describes the competitive environment in terms of five basic
components of competitive forces as given below:
• The threat from the firms likely to enter the market as ‘new entrants’.
• The bargaining power of the buyers in the market.
• The bargaining power of the suppliers in the market.
• The threat of substitute products & services available in the market.
• The rivalry among the competitors in the industry.

Each of these ‘forces’ affects the ability of a firm to compete in a given market. When these forces
operate together, they determine the profit potential for a particular industry. It helps a firm to
assess its future position in the industry and provides the rationale for increasing or decreasing the
resource commitment in future time. This model is illustrated in the figure given below.

Threat from Firms Likely to

Enter the Market

Industry
Competitors Buyers’ Bargaining
Suppliers’

Bargaining Power Having Rivalry Power

among

Themselves

Substitute Products & Services
available in the Market

Figure: Porter’s Five-Forces Model of Industry Competition

Threat from Firms Likely to Enter the Market: The industry competition is primarily decided by the
business firms operating in the market. But the competition may become stiffer, if new firms enter
the market and join the competition. Therefore, a business firm must continuously analyse the
threats of increased competition due to entry of new competitors in the market.

Suppliers’ Bargaining Power: The suppliers also contribute to industry competition as they support
the competiting firms producing the products and services. They have power to bargain for better
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payment terms for their suppliers to the manufacturing firms. However, if the number of supplier
firm increases, such bargaining power looses its effective sgtrengths, the reverse is also true.

Buyers’ Bargaining Power: The buyers of the customers also influence the competition. If the
number of buyers increased suddenly or in a short time, the manufacturing firms may raise price of
their goods and services.

Substitute Products & Services available in the Market: Similar or substitute products if available in
the market can be used by some of the customers in satisfying their needs & wants. Then the
competitors feel lesser demand for their products and services. therefore, in such a case the,
competitive pressure becomes weaker than before.

Competitors Having Rivalry among Themselves: It refers to the intensity of competitive pressure felt
by the competing firms. Higher is this intensity of competitive rivalry, lesser may be the prices, and
better may be the quality and services for the benefit of the customers.

4.4.4 Boston (BCG) Growth/Market-Share Analysis Matrix

The key purpose of portfolio models is to assist the firm in achieving a balanced portfolio of
business for optimal market share. A firm’s strategic business unit (SBU) is plotted on a two-
dimensional grid. The horizontal axis represents the ‘relative market-share’ and the vertical axis
represents ‘industry growth rate’. There are four quadrants in the BCG grid, as shown in the figure
on next page.

Each circle represents one of the strategic business-unit (SBU) of the firm. The size of circle
represents the relative size of the business unit in terms of revenues. The BCG model is based on
the application of two interrelated concepts: (i) the experience curve and (ii) the growth share
matrix. As per the experience curve, the unit cost of production reduces when level of production
rises. This is due to concept of ‘economy of scale’. The four quadrants of the grid are described
below (on next page).

The ‘Star’ (high growth/high market share) business units operate in high growth industries, and
enjoy high growth rate. The ‘Question Marks’ (high growth/low market share) business units are also
operating in high growth rate industries, but have lesser market share as compared to the star units.

The ‘Cash Cows’ (low growth/high market share) business units operate in low growth rate
industries, but have high market share like the star units. The ‘Dogs’ (low growth/low market share)
business units operate in low growth rate industries and also have relatively lesser market share.
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Stars Question Marks
12% -

Industry Growth -
Rate

8% -

6% - Cash Cows Dogs

4% -

2% -
0% ! ! ! ! ! ! !

. 8.0 4.0 2.0 1.0 0.5 0.25 0.125

Relative Market Share of the Firm

Figure: An Example of ‘Boston Consultancy Group (BCG) Portfolio Matrix’

Relative market share, by definition, is the market share of the concerned business unit divided by
the market share of the most dominant competitor. It reflects the unit’s competitive position and
indicates the rate of cash generation. It is learning from the experience curve that if a business unit
enjoys market share relative to its competitors, then its cash earnings/profits will also be
correspondingly higher.

4.4.5 Analysis of External Environment: PESTEL Analysis

As discussed earlier, business environment of an organisation has five components, namely political
environment, economic environment, social & cultural environment, technological environment,
and legal environment. The word PESTLE is formed by taking first alphabet of the five components of
the business environment. It is a technique for examining environmental factors influencing the
business operations of an organisation. It can be called environmental audit or environmental
scanning with respect to a particular organisation.

As the nature of business of each organisation may be different from that of other organisations, the
environmental factors influencing it may be different from those influencing other organisations. For
example, a ‘thermal power plant company’ and a ‘fishing company’ conduct all together different
types of businesses, having different relevant factors, from political, legal, technological and social
environment segments, influencing their business. Therefore, ‘organisation specific analysis’ is more
appropriate for business planning and in particular for strategic planning for the organisation.
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4.4.6 SWOT Analysis to Identify Organisational Competencies

The diagnosis of a firm’s strengths and weaknesses can be by fruitful only if the environmental
factors and market conditions are considered along with the internal capabilities. This approach
involves matching of internal capabilities with the external opportunities and threats, and is known
as SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis. Organisations perform a
SWOT analysis to understand their internal and external environments so that an effective business
strategy can be formulated for the organisation. Therefore, an effective strategy for an organisation
should capitalise on the opportunities, and neutralise the threats by minimising the weaknesses.

STRENGTHS : WEAKNESSES :

List of ‘Strengths’ of the Organisation List of ‘Weaknesses’ of the Organisation

OPPORTUNITIES : THREATS :

List of ‘Opportunities’ for the Organisation List of ‘Threats’ for the Organisation

Figure: Typical Lay-Out of SWOT Matrix

A typical lay-out of the SWOT matrix for an organisation is shown in the figure, given above.
The SWOT analysis is usually done with the help of the template in the form of a four-cell matrix,
each cell of the matrix representing: Strengths, Weaknesses, Opportunities and Threats. Filling up of
the matrix is done through a brainstorming workshop of managers.

Using SWOT analysis technique involves three steps:

• Objective-setting for the organisation;
• Identifying its (i) strengths and weaknesses in terms of organisational internal
capabilities, and (II) opportunities and threats to the organisation posed by the changing
external business environment.
• Identify possible ways & means for taking the ‘four steps’ for: (i) maximising the
strengths, (ii) minimising the weaknesses, (iii) capitalising on the opportunities, and (iv)
protecting the organisation from the threats posed by the environment.

The answers regarding ways and means for taking the above ‘four steps’ provide the necessary
information for strategy formulation for the organisation.
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The SWOT analysis has several advantages in terms of preparation and usage: (i) flexible and
adaptable in different situations, (ii) simple to use, (iii) low cost, (iv) facilitates development of
strategy-options, and (v) useful for strategic analysis.
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UNIT 5 INTERNATIONAL MARKETS & GLOBALISATION
5.1 Development of International Markets

5.2 Concept of Global Business
5.3 Globalisation of Business
5.4 Conduct of International Business
5.5 Entering and Competing in Different Markets
5.6 Trade Partnerships for Entering the International Market
5.7 Policies & Regulations

5.1 Development of International Markets

Traditionally, marketing was limited to the local regions. Trade between distant locations was very
limited due to non availability of easy and cost effective facility for transportation of goods and
people. With development of transport facilities, ‘trading & business elated activities’ also started
taking place among distant locations. Gradually, it crossed the national boundaries and
goods/products of domestic markets were carried by “adventurous traders” to other countries.
Thus, export-marketing developed. With development of transportation facilities across land and
sea, trade among distant locations and across national boundaries became common.

Traders bringing goods of one country used to carry back foreign goods to their home country. Thus,
it led to ‘exports’ and ‘imports’ as part of the business. This was the stage of export marketing,
when the term “imports-exports business” became common. Thus, business organisations started
operating in the “international markets”.

Soon ‘outsourcing’ became common wherein rather than finished goods being exported or
imported, raw materials or components for specific goods were procured from places, across the
national boundaries. It led to rise of market-intermediaries, who specialised in export or import of
such outsourced products or materials.

The outsourcing-business flourished as it facilitated availability of materials and products of better
quality at lower prices. Soon, business firms started marketing their products and services among
foreign markets where they had competitive advantage. This led to the term “international
business”. Thus, international markets developed in a formal manner.

International Marketing refers to conduct of commercial marketing transactions between business
organisations of two or more countries. The transaction can be between private organisations,
government to government, or between a government and other private organisation. The motive
of private organisation is profit generation (i) through exporting to other countries by selling at
profit; and (ii) by importing from foreign country and then again selling at profit in the home
country.

International business has to comply with the laws of the home country as well of the country
from where goods or services are exported. As the business aims to meet the needs and
requirements of the society as a whole, it has direct relevance to the social cultural beliefs, practices
and expectations. Therefore, international business has social responsibilities as well, and has to
take care of the social expectations and also the legal requirements of the country where goods are
exported.
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5.2 Concept of Global Business

Global business is a further development of international business. The business horizon is not
limited to few countries, but business firms have focus on the markets of many countries where
their goods and services can have strategic advantage. Even the focus of ‘production activities’ is not
limited to one or few countries.

Materials and parts may be outsourced from distant lands if these meet the quality requirements
at lesser price than the home country. Further, even the production and assembly facilities may be
set up in foreign countries; from where the products and services may be exported to the markets of
other countries.

Thus, the main difference is the globalisation of business operations, rather than limiting to
exporting raw materials or the finished goods. Thus, the concept of globalisation refers to the
business operations of an international company by exploiting the inter-dependence of markets
among various countries.

5.3 Globalisation of Business

The ‘globalisation approach’ refers to thinking not in terms of few countries, but thinking across
the “globe” or across the world; that means extending the outreach to many countries where local
conditions favour profitable business.

The term 'globalisation' has its roots in the verb “globalise”, which means having linkages and
operations across the ‘globe’. It therefore refers to “international inter-dependence of business” and
close relationships between different economic and social systems spread across different countries.

Globalization of business refers to exchange/marketing of goods and services on global-basis across
the national boundaries. It involves export of goods, services, and technology. Along with flow of
goods and services, the flow of capital and knowledge also takes place, with approval of the
governments concerned.

Thus, globalization is the process of internationalisation of business operations through exchange of
(import and export of) raw materials, finished products, services, capital, ideas, and labour
workforce. Globalization facilitates development of resource synergy through specialization. The
domestic economy gains as its products, services, and the human workforce gets leveraged
through the demands among other countries. In modern times, the infrastructure for
transportation, communication, and travelling has developed world over. This has facilitated fast
growth of globalisation.

5.4 Conduct of International Business

An organisation is said to be involved in international business when its conducts its business
operations in two or more countries for revenue generation with profit motive. The objective is to
meet global wants and needs, while earning some profit of the company.
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International operations are guided by motive of marketing in other countries for achieving higher
levels of revenue from other country to realise a lower cost structure. International companies
generally establish manufacturing facilities in other countries to attain economies of scale at
substantially cheaper costs. Other common ways of international business is through horizontal
expansion into new geographic markets. Secondly, fast growing economies offer attractive business
opportunities to global firms to meet the rising requirements of the local population by selling their
products & services.

The business operations of an international company may take one or more forms, as described
under:

• Make in home country, and export to other countries (marketing done by the importing
business company);
• Make in home country; and export & market in other countries through own efforts;
• Make in home country and establish warehouses in foreign country for global marketing
in different countries;
• Contract out or outsource component/products from other countries providing cost
advantage; and
• Set up manufacturing facilities abroad in different countries, for undertaking global
marketing.

An international organisation has to succeed against the global competition. Therefore, cost and
quality are two major guiding factors. Most firms adopt cost-minimisation strategy and establish
manufacturing in other countries having cheap labour and minimal problems relating to trade tariffs
or environmental hassles.

Manufacturing in other countries is governed by number of considerations, as given under:

• It must lead to reduction in manufacturing time or cost;
• It must adhere to the required quality standards both in terms of (i) meeting the
performance standards, and (ii) product dependability in the hands of the user (meaning
reliability in operations, and ruggedness in operation & handling);
• Delivery and price dependability;
• Flexibility in changes in product specification or manufacturing similar products; and
• It must be closer to the markets where the product is to be sold.

An international business firm has to meet the local legislations, rules, guidelines, and the
expectations of the markets where it does the business. The foreign business environment has its
usual components: economic environment, political environment, social environment, legal
environment and technological environment. It must satisfy the demands set up by various
components of the local business environment.

5.5 Entering and Competing in Different Markets

The ‘international firm’ has to compete with other local and global competitors. A company, when
entering a market as a “new entrant” faces number of challenges. The important factors (and
challenges) to be kept in view before entering a foreign market are:

• Industry analysis in the country of business;
• Market competition in the local market;
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• Competitors’ analysis;
• Strategy of the competing firms,
• Economy of scale as well as economy of scope of the competing firms; new business firms
likely to enter the market in near future;
• Governmental policies regarding the business in products selected;
• Customers’ (& Users’) analysis including their requirements, preferences and bargaining
style/power;
• Factors likely to offer competitive advantage to the ‘international firm’;
• Likely reactions (after entry in foreign market) from existing competitors for example price
reduction etc;
• Sociological factors which may influence acceptance of a foreign product in the local
market;
• Consumers’ reaction to the packaging and delivering styles adopted by the international
firm; and
• Capital investments required for establishing facilities for manufacturing, testing & clearing,
storage, transportation, advances to be given to retailers in direct or indirect forms, and for
advertising & promotion for the product.

The international firm has to evolve its competitive business strategies for success in the markets of
the country selected for its operations.

5.6 Trade Partnerships for Entering the International Market

An interesting development in international business has been the business related collaboration
between two or more organisations who may have been competing earlier. When desiring to enter
into business in a new country, a business organisation has to make a choice between two
alternatives:
• should the organisation enter into new business by own efforts and risks, or
• should the organisation look for a suitable partner who understands the local business
issues and is also willing to share the risks and benefits of the new business.

Collaboration provides opportunity for entering into business in a particular country where one of
the potential partners may not be fully conversant with local business related regulations &
practices, which may be necessary for doing business there.

Trade partnerships and alliances provide opportunity for a business organisation to extend its
operations globally. Such trade partnerships are known by different names such as:

• collaborative business agreement,
• strategic partnership, and
• strategic alliance.

Such partnerships provide to the business firms an opportunity to have legal “business linkages”
between them, aiming to achieve mutually agreed objectives through joint efforts. The common
characteristics of such partnerships are:

• Such partnerships are based on ‘contractual agreement’ and do not involve equity
participation;
• The “business unit” is a joint property as per the terms of the contract of partnership;
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• Both partners may transfer resources to the “partnership unit” (as per the contract for
partnership) which may include funds, manpower, technology and equipment.
• The contract for partnership is signed for a definite period of time; and can be extended
based on mutual agreement otherwise it comes to an end after that time.

5.7 Policies & Regulations

International business has to follow the laws and regulations of the country in which business
operations are carried out. There can be specific laws providing guidelines regarding certain types of
businesses, which have to be adhered by all business organisations including the international
company. Such laws of the country, where business is desired, have to be carefully understood and
followed in spirit.

Such laws may relate to following broad areas:
• Business Laws;
• Competition Laws;
• Employment Laws;
• Environmental Laws; and
• Laws & regulations related to business ethics.
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PART-III MARKETING PRACTICES
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UNIT 6 MARKETING MIX: McCARTHY’S 4Ps
6.1 The Changing ‘Marketing-Thrust’

6.1.1 The Customer Concept
6.1.2 The Societal Marketing Concept
6.1.3 The Changing ‘Marketing-Thrust’
6.2 4Ps - the Four Pillars of Marketing
6.3 B2C and B2B Markets
6.4 Service and Product Marketing
6.5 Additional 3Ps of Marketing Mix

6.1 The Changing ‘Marketing-Thrust’

The old marketing concept was focussed on ‘selling the product(s) made by the organisation’. The
objective was to find customers for the goods and services produced by the organisation. Thus,
marketing was reactive in nature. Producing goods or services was the primary function. Thereafter,
the task of finding customers was left to the marketing department.

The new concept of marketing emerged in the post 1960 period, which changed the way the
business was planned and conducted. Rather than ‘finding customer for the product or service’, the
focus shifted on “producing products/services which may satisfy the needs, wants, requirements and
preferences of the customers”.

Thus, marketing function has been developing around the customers. The way of doing business has
changed in a big way. Mission statements and marketing slogans got changed; and were redrafted in
terms of the customers. The catchy slogans everywhere are:
• the customer is the king;
• the customer always comes first;
• find “wants” and meet them;
• love thy customers; and many more.

The new rules of marketing, developed in post 1960 period, were:
• first, find the target-market(s);
• identify the needs and wants of the customers;
• work with the ‘design-teams’ to develop products & services for meeting the customers’
requirements;
• work with the ‘production-team’ to produce high-quality products and services for the
customers;
• supply the products/services where the customers are located;
• market to satisfy the needs and wants of the customers;
• if possible, ‘provide little extra’ to delight the customers.

Thus, a new concept of integrated marketing was evolved. All people in the organisation were
supporting marketing function for producing products and services which may satisfy the
requirements of the customers. The “customers were at the top” and every body worked directly or
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indirectly to satisfy the customers. Multi-functional teams of specialists were working towards the
marketing-success. Such teams typically involved people from marketing, logistics/supply-chain,
production, design, costing, finance, personnel, and general administration departments.


The advancements in computer and information technology have enabled the business
organisations to track buying behaviour & preferences of past customers. Therefore, in addition to
attending to the customer segments, modern organisations are sending specific offers and messages
to individual customers. The organisations collect and compile information regarding past purchases
made by them, specific preferences and any special requirement. The organisations respond to such
customers by offering exactly what they like to buy, thus gaining customers’ loyalty. They thus focus
on ‘customer life-time value’.

This approach does not work well for all business organisations, but to those who are able to track
their individual customers with their strong IT infrastructure. It helps the organisation to capture
customers’ attention and loyalty, get more loyal customers though “word of the mouth”.


These days, leading business organisations are paying attention to societal concerns, namely
environmental issues, saving resources like water and electricity, avoiding wastage of all types,
public health issues, supporting child education, and helping/supporting the societal population in
their nearby areas regions.

Such organisations try to act in the long-term interest of the society in which they are running their
business. This raises their brand image and wins support from the customers. This helps in wining
more customers and more business.

The societal marketing concept assumes that business organisations should meet the requirements
of their target customers, and provide higher degree of customers’ satisfaction as compared to their
competitors.

For above objectives, business organisations are adopting many new practices and taking new
initiatives. Some of these are:
• Integrated Marketing Practices: Marketing, today, is every body’s business. It is not
restricted to those working in the marketing department. All decisions and actions
should be oriented towards meeting customers’ requirements.
• Customer Relationship based Marketing: Traditionally, business firms focussed on most
profitable products, and customers. Now, they are valuing the long term relationship
with the customers as having large numbers of ‘loyal customers’ leads to higher
profitability in the long term.
• More Varieties & Choices: Rather than offering standardised products & services,
business firms are providing more varieties and choices to suit the personal preferences
of their target customers.
• Customer Lifetime Value: Some customers need certain products over a long period of
time. In such a case, some business organisations supply such products at a lower price
than regular sale price. Some companies track the buying behaviour and preferences of
their past customers; and send messages, offers, and information regarding their new
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products and services. Their aim is to capture the customers’ business over a long time.
Such customers may like to buy more products from same company in future.

6.1.3 The Changing ‘Marketing-Thrust’

The old marketing concept was focussed on ‘selling the product(s) made by the organisation’. The
objective was to find customers for the goods and services produced by the organisation. Thus,
marketing was reactive in nature. Producing goods or services was the primary function. Thereafter,
the task of finding customers was left to the marketing department.

The new concept of marketing emerged in the post 1960 period, which changed the way the
business was planned and conducted. Rather than ‘finding customer for the product or service’, the
focus shifted on “producing products/services which may satisfy the needs, wants, requirements and
preferences of the customers”.

Thus, a new concept of integrated marketing was evolved. All people in the organisation were
supporting marketing function for producing products and services which may satisfy the
requirements of the customers. The “customers were at the top” and every body worked directly or
indirectly to satisfy the customers. Multi-functional teams of specialists were working towards the
marketing-success. Such teams typically involved people from marketing, logistics/supply-chain,
production, design, costing, finance, personnel, and general administration departments.


The advancements in computer and information technology have enabled the business
organisations to track buying behaviour & preferences of past customers. Therefore, in addition to
attending to the customer segments, modern organisations are sending specific offers and messages
to individual customers. The organisations collect and compile information regarding past purchases
made by them, specific preferences and any special requirement. The organisations respond to such
customers by offering exactly what they like to buy, thus gaining customers’ loyalty. They thus focus
on ‘customer life-time value’.

This approach does not work well for all business organisations, but to those who are able to track
their individual customers with their strong IT infrastructure. It helps the organisation to capture
customers’ attention and loyalty, get more loyal customers though “word of the mouth”.


These days, leading business organisations are paying attention to societal concerns, namely
environmental issues, saving resources like water and electricity, avoiding wastage of all types,
public health issues, supporting child education, and helping/supporting the societal population in
their nearby areas regions.

Such organisations try to act in the long-term interest of the society in which they are running their
business. This raises their brand image and wins support from the customers. This wins more
customers and more business for them.

The societal marketing concept assumes that business organisations should meet the requirements
of their target customers provide higher degree of customers’ satisfaction as compared to their
competitors.
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6.2 4Ps - the Four Pillars of Marketing

Under the new marketing concepts of post 1960 era, the focus shifted from the ‘product’ to the
‘customer’. Profitability was still the objective, but the means of achieving the objective had been
expanded. Focus had shifted to the entire ‘marketing mix’ or the ‘four Ps of Marketing’, namely
product, price, promotion and place. These are also called the “four pillars of marketing”. These 4 Ps
are the set of factors or tools used by a business organisation in planning and organising its
marketing campaign in an identified target market to realise its marketing objectives.
There are number of variables under each of the Ps. Every marketing campaign or strategy for a
target market is formulated in terms of the four Ps of marketing. These are:

(a) Product: Its variables include product variety & quality, specific design & technology used for
manufacture, product features to cater for niche markets, brand name, packaging, after-
sales service and customer-care etc.
(b) Price: Its variables include manufacturing cost, bough-out items cost, material cost,
overhead costs, finance costs, idling resource costs, depreciation costs, the price quoted to
the customers, discount offered, payment time-period, and terms & conditions of credit.
(c) Promotion: Its variables include advertising, public relations, direct marketing, trial-offers,
marketing communications, customer life-time value servicing, etc.
(d) Place: Its variables include distribution channels, retailing locations, market-coverage,
reaching-out to the customers, etc

Once market-analysis is carried out and the desired market for one’s products & services is decided,
the strategic planning focuses on deciding these four Ps of marketing. The starting point is to
identify what product should be marketed, and what should be the product’s specifications, design
& usability features, and its total quality features keeping in mind the competitors’ products (already
being supplied by the customers and also those which are likely to be introduced in the market in
the near future).

Secondly its “price” has to be decided in comparison with the price of the competitor’s products. It is
also necessary to establish the feasibility of the proposed price. The pricing policy is governed by the
all types of costs incurred in creating, and distributing the product among the customers. If required,
cost-reduction strategy is also formulated and carefully implemented without degrading the product
quality for the customers.

Thirdly, the “place” has to be decided where the marketing campaign is likely to be most profitable
for the organisation. ‘How to reach-out to the customers’ has also to be planned. Therefore,
distribution channels are planned accordingly.

Advertising and promotional campaign is started soon after the “place” decision is taken. In fact,
product promotion starts much earlier to the entry of the product in the market.
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6.3 B2C and B2B Markets

E-business: The advancement in information technology, electronic communication, and Internet
technologies has facilitated the modern business companies to create “web-sites” as the medium to
inform the customers about their products and services. They create Intranets to facilitate
organisation-wide internal communication, information sharing, and uploading & downloading of
information. Extranets are being established with major suppliers, and distributors to coordinate
transactions, order received, orders pending to be delivered etc.

E-commerce: Business organisations have gone a step ahead of e-business. They are using such web-
sites as platform for conducting business, for (i) providing information regarding different products
and services being offered, (ii) making transactions, (iii) accepting payment electronically, and (iv)
arranging delivery of product at the location desired by the customers. Thus, e-commerce has now
become fairly advanced and is facilitating e-marketing of products & services. It means that product
selection, purchase-decision, placing order & closing transaction, and making & accepting financial
payments has now become possible over e-commerce web-sites.

Internet domains namely B2C (business to customers) and B2B (business to business) are the basic e-
commerce domains on the Internet, which are described below.

(a) B2C (Business to Customers) Internet Domain

B2C Marketing refers to providing internet based marketing platform linking the businesss
organisations and the customers. Such sites are basically virtual marketing sites (rather than
the physical marketing shops) where the customers can search for information regarding the
products and services being offered, and get further information regarding their prices,
discount being offered if any, and the likely delivery time.

Some sites facilitate the customer in making comparison between two or more products and
services before making the selection. The customers can select the products & services and
place orders. Most of the sites facilitate electronic payment against the goods/services
ordered by the customers. In some cases, the customers do have the option to make
“payment on delivery”.

(b) B2B (Business to Business) Internet Domain

B2B Marketing refers to providing Internet based marketing platform linking the main
business organisation with its partner organisations like the suppliers, distributors. Major
application has been in revolutionising the suppliers-customer relationship in a business
organisation. Each organisation has business-situations where some persons and
departments are supplying material and goods to other departments/persons. This linkage is
presented and viewed on the Internet site, where the order information and order-handling
position is presented for purpose of coordination and expediting wherever necessary.

Further, B2B sites also link institutionalised purchasers and business suppliers. For example,
there are suppliers web sites, material test-house web sites etc. In a way, it has made the
markets more efficient and also transparent. A purchaser is able to see and examine/analyse
the product information from different suppliers.
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6.4 Service and Product Marketing

Business organisations offer variety of goods and services to the customers. These may be provided
in number of ways as mentioned under:-
• Goods for satisfying needs & wants of customers as independent offering not needing
any kind of service to the customers.
• Goods which need service & repairs as after-sales support to the customers during their
usage.
• Goods & accompanying service may be offered to the customer as a combined package,
for example restaurants offering food with service.
• Goods may be forming minor component and accompanying service forming the major
part for customer satisfaction, for example a passenger booking air-ticket with an airline
is interested to go from one place to other. But he also needs service from the air-crew
in terms on on-flight supply of food, drinks, newspaper and magazines etc. Here both
the goods and the service are equally important for the customer.
• There can be offerings which are purely service based, for example, car-servicing, visit to
a beauty parlour, medical consultation with a doctor etc.

Though the products and services are generally marketed in similar ways, but there are some
distinct features which call for different kind of stress or emphasis in marketing of products/goods
and services. These aspects are described below:
• An important aspect with service-marketing is that the service is intangible in nature
and is not a physical entity like a good. A product or good can be seen, handled, and felt
before purchase, but a service can only be experienced while acquiring it or buying it.
• A product/good can be manufactured before, stored and delivered to the customers as
and when required and at any desired place. This is not possible in case of services which
have to be produced, delivered and consumed simultaneously at the same place.
Services can not be manufactured and stored for delivery at a later time.
• Goods can be sold and provided with standard features and quality, delivering same
level of benefits to all customers. This may not be possible in case of service. “Service-
quality” delivered at different time by the same team can vary in quality and the end-
result, through such difference can be controlled by using standardised procedures. For
example, a cook may not be able to cook a dish with exactly same quality each time.
There may be some minor variation in quality and manner of delivery.

6.5 Additional 3Ps of Marketing Mix

With rise of the service sector, the post 2000’s period has seen a shift from 4Ps to 7Ps where three
elements have been added namely (i) people, (ii) physical evidence and the (iii) process or process
management.

Earlier, service sector was not as strong as the product manufacturing sector. But since 2000’s, the
marketing of services has become equally important as share of service sector had been rising fast.
Now business organisations are planning the ‘marketing mix’ for service related products in a careful
manner.

The services are created and delivered through a specific process by the people. Therefore, two
new factors became very important in deciding the marketing mix. These are: (i) the process
through which the services are created, and (ii) the people who deliver the service to the customers.
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Thirdly, presentation of services or the physical evidence of service is also important for creating
positive favourable impression on the customers.

Thus, the traditional marketing-mix of 4Ps (namely product, price, promotion and place) got three
additional Ps of marketing, namely:
• the people,
• physical evidence, and
• the process or the process-management.

The People: Most services are created and delivered by the people. Therefore, due care has to be
taken to ensure standardised contribution by everyone involved. The employees are required to be
motivated, competent, dedicated, quality oriented, capable of problem solving as it occurs, and
having caring attitude towards the customers. Therefore, they have to be carefully selected, trained,
provided sufficient experience and motivation to deliver high degree of customer satisfaction.

Physical Evidence: Services are delivered through set of activities which are seen and observed by
the customers. Good and bad aspects of service-delivery get impacted in the minds of the customer
as “physical evidences”. Such impression lasts for a long time. For example, presentation of service
in an airline or in a restaurant is very essential as it makes a strong impact of the customers watching
the service delivery.

Process or Process Management: Services are created through a specific “process” involving a set of
activities being executed by different persons. The concept of process is very important for building
& controlling the quality and value to the customers. It is therefore essential that such process
should be carefully designed and established to work as efficient and effective process delivering the
‘desired quality’ of services. As the process is mostly handled by people, the process management is
equally important as a value creation proposition.
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UNIT 7 MARKET SEGMENTATION, TARGETTING AND

POSITIONING
7.1 Introduction to Market Segmentation

7.2 Basis for Segmenting the Markets
7.3 Market Segmentation Process
7.4 Benefits of Segmentation
7.5 Market Targeting
7.6 Target Marketing Strategies
7.7 Product Positioning
7.7.1 Definition and Meaning
7.7.2 Relationship to Segmentation and Positioning
7.7.3 Influence Over Marketing-Mix Factors
7.7.4 Repositioning

7.1 Introduction to Market Segmentation

Mass Marketing: Traditionally, business firms used to mass-produce their products and used to carry
out mass promotion among the customers. The products were offered for sale at select locations.
Interested customers could come to such outlets to purchase the products of their requirements.
The weakness of this approach was that most customers wanted the product different than what
was offered on sale. Therefore, only a small percentage of visiting people were buying the product.
Thus, it involved large efforts and time for selling a product. The marketing & sale costs were
enormous. Thus the product had to be sold at price being the sum of cost of manufacturing and the
cost of making sales of the product. The manufacturing organisations wanted to find an easy way to
identify their potential customers and to reach-out to them.

Segment Marketing: All customers in the market do not have same needs and wants. However, a
business organisation can manufacture and offer in the market only a few goods and services.
Therefore, it becomes necessary for the business firm to identify customers who have wants &
needs for the goods & services being offered by it. Such groups of customers who have same or
similar needs and wants are said to constitute a market segments. The total market may have large
number of segments of customers needing and wanting different set of goods and services.

A market segment has number of customers who have same or similar needs & wants; and
therefore same or similar products can satisfy their needs & wants. Thus, it becomes easier for
business firms to design, produce and distribute goods & services to satisfy such group of customers.
Further, the cost of promotion and distribution also comes down and product’s selling price can be
reduced resulting in higher sale revenue and higher profitability for the business firm.

7.2 Basis for Segmenting the Markets

Market segmentation basically refers to the division of customers into meaningful buyer groups i.e.
division of markets into sub-markets where the customers having similar demands can be served
more efficiently and effectively to the advantage of the organisation producing the
products/services.
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Segmentation Strategies: Attempts are generally made to search for market segments on the basis
of possible similarities in the customer population. Some possible basis for segmentation of market
may be geographical, demographical, psychological or behavioural in nature.

(a) Geographical Segmentation: As per this basis of segmentation, the total market may be
divided into different geographical regions namely east, west, north, south, province,
countries, and continents etc. This ‘basis’ assumes that customers all geographical
regions may not have same wants and needs. However, customers in a particular
geographical region may have lesser variations in their needs and wants. Their needs
and wants may not be exactly same; but may have some variations which may be easy
to identify.

(b) Demographical Segmentation: Customers in different geographical groups may have
different needs and wants, but may have large similarities in a particular demographic
group. For example, children of age of 1 to 3 years have same or similar wants and needs
for “Baby Food”; and persons of age group 50 to 60 years may have similar needs of
“Food Supplement” as body develops certain similar types of nutrient deficiencies in this
age group. Similarly, young women of age group 15 to 20 years may have same likings
and preferences for informal dresses and for party dresses.

(c) Psychological Segmenting: Here the customers are divided and examined into various
groups on basis of some observable similarities. Persons among geographical or
demographical segments can have different psychological parameters and attributes for
example life style, personality, and values, etc.

(d) Behavioural Segmenting: This segmenting is arrived by dividing the customers into
different groups on the basis of response of group members towards the product,
namely their knowledge of the product, or their attitude towards using it, or their belief
regarding benefits of using the product. For example, members of such group may have
need for the product on certain important occasions, or agreeing on the benefits
accruing from use of the product etc.

7.3 Market Segmentation Process

There may be various segments visible in the market, but a proper systematic process is necessary to
ensure that the segment is clearly identifiable, attractive and profitable for purpose of marketing.
Further, a segment has to be assessed for ability to attract the customers, and gaining competitive
advantage for the business organisation. Therefore, the process of market segmentation involves
number of basic steps, as discussed below.

Step-1: Basis of market segmentation is similarities in needs and wants of the people is the
particular segment. Therefore, market segmentation process is generally based on need-analysis of
the people in the population, and grouping together the people having same or similar needs and
wants.

The hierarchy of attributes used by customers in making selection of particular product or service for
fulfilling a given need can also be used as criteria for segmentation. For example, young women
need to buy fancy clothes for party purpose. They may select on various basis, namely conventional
or modern trendy clothes, or on the basis of new attractive design etc. The customers may then be
grouped on the basis of their selection criteria to identify market segmentation.
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Step-2: Once a possible basis of segmentation is understood, the individual segments need to be
clearly identified in terms of easily understood variable, namely geographical, demographical and
psychological variables (basis of region, age group, life style, personality etc). This facilitates clear
identification of particular segments by all persons involved in the marketing campaign.

Step-3: Next step is to assess merits of the particular from business-marketing point of view. Here
two actions are necessary. (a) Firstly, it is necessary to ensure that the segment is attractive for
launching marketing campaign. The relevant points for assessment include physical viability of
assessing the particular segment, possibility of market growth in future, and strength of other
competitors operating in the segment. (b) The second issue for assessing the segment is the likely
profitability of marketing campaign.

Step-4: Possibility of creating “value proposition” for the customers in the segment, and assessing
the feasibility of making a unique pricing strategy for the particular segment.

Step-5: Possibility of evolving a viable marketing-mix for the particular segment giving marketing and
competitive advantage for the business organisation.

If positive answers are received in respect to the above five steps, the segment is selected for trial
marketing.

7.4 Benefits of Segmentation

• Major benefit from market segmentation is identification of groups of customers having
same or similar wants and needs and those who will prefer same or similar solution for
satisfying their needs and wants.
• The foremost benefit of market segmentation is that the business firm is alert to the
needs of different buyer groups and is therefore in a better position to spot, identify and
compare marketing opportunities in the overall market.
• Knowing the response of the customers, the business firm is in a better possible to make
fine-adjustments in its product and the marketing campaign.
• Segmentation of market facilitates pitching of promotional campaign directly to
potential customers, thus reducing the costs involved in advertisement and promotion
for the products and services.
• Distribution channels may be designed and implemented in focussed manner,
minimising the costs involved.
• By identifying variations in needs and wants, the products and services may be created
with appropriate variations so that the specific needs & wants may be matched more
closely with the products & services offered in the market.
• As products and services can be created in more focussed manner, it is possible to
reduce the costs involved production and distribution activities, thus enhancing
profitability.

A business firm desiring to plan its marketing campaign has to identify various segments in the
market which may provide business opportunities to it. Thereafter, the business the firm should
decide which segment(s) offer it attractive and profitable marketing opportunities. These are
called target segments.
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7.5 Market Targeting

Targeting refers to selecting which market segment to serve by launching the marketing campaign.
A target market is defined as the customer-group who is most likely to buy a company’s product or
services. There are different types of target market strategies as well. They are focussing of an entire
market with one marketing mix, concentrating on one segment, and targeting many segments with
multiple marketing mixes.

Once market segments are identified, it remains for management to decide on the ‘target segment’
in which the firm will like to launch its marketing campaign. A firm decides to select the market
segment on consideration of number of factors:
• The overall attractiveness of the segment for business planning,
• Its impact of the organisation’s objectives and availability of required resources.
• The selected segment should have attractive characteristics namely its size, possibility of
future growth, profitability of operations, and low marketing risk.
• Further, it must match with the organisational goals and objectives and be able to offer
superior value to the customers.

The steps involved in defining/selecting the target market are as under:
• Understand the Needs & Wants of customers for which solution is being offered.
• Understand & build a pictorial description of customers in the market. Describe them as
a consumers and buyers. Understand the solutions they are desiring and preferring for
their needs and wants.
• Identify niche markets, if any in your market.
• Does the company has the right type of people, experience/expertise and other
resources to service the segment for their needs and wants?

7.6 Target Marketing Strategies

Three approaches are generally followed for market segmentation strategy selection: (i)
undifferentiated marketing, (ii) differentiated marketing, and (iii) concentrated marketing.

(a) Undifferentiated Marketing: A firm with single or limited products, does not find advantage
in serving segments with differences in demand for the product in various market segments.
Such firm may prefer to design its product so as to cater to the common needs of the
consumers. It will like to adopt a market segments with maximum numbers of customers.
The product and the marketing campaign is the developed accordingly to cater for the
largest segment of the market. Such approach helps the firm in achieving cost economy due
to mass production and standardised marketing approach and policy.

(b) Differentiated Marketing: If the variations in ‘needs’ and ‘wants’ of different segments is
not large, some firm may like to serve all segments of the market but adopt product design
where number of variations are possible to cater to different segments. The marketing
campaign may also have some variations to cater for different segments. This enables the
firm to achieve higher sale revenue and deeper positioning of its products in all segments.
However this approach may increase the cost of production and of sales promotion.
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(c) Concentrated Marketing: The firm may decide to serve one or selected few market
segments where it is more feasible to fine-tune the product to the specific needs and wants
of the customers. This will facilitate gaining a substantial market-share in these market
segments, rather than spreading the marketing efforts thinly over many segments.

Factors Influencing Choice of Strategy: The internal competencies and resource position of the firm
plays the deciding factor in selecting the segmented buyer groups. Following considerations are
generally made:
• Resource Availability/Constraints: Serving the entire market requires large resources. A
firm with limited availability of resources, may not be able to serve the entire market. In
such cases, following concentration marketing may be the more suitable.
• Product Homogeneity: Some products have homogenous constitution, like the motor
coolant fluid. The requirement is same in all parts of the market. Therefore
undifferentiated marketing strategy may be more appropriate while operating in few
segments.
• Market Homogeneity or Heterogeneity: Market segmentation does not serve any
purpose if the customers have similar needs, wants and preferences. In such cases, the
undifferentiated marketing is more suited option.
• Competitors’ Marketing Strategy: If the other competitors in the market are following
differentiated marketing policy, then a newly entering firm has lso to adopt the same
strategy.

7.7 Product Positioning

Positioning refers to position one’s goods & services vis-a-vis the competitor’s offering (good and/or
service) by implementing the chosen image & appeal to the chosen segment. Basically, positioning
involves implementing the targeting, as decided.

7.7.1 Definition and Meaning

Positioning is defined as “the act of planning, evolving and communicating a certain image for one’s
products/services that may occupy a distinctive place in the mind of the customers of the target
market”. Successful positioning is able to create a ‘customer-focussed value proposition’, based on
which the customers/consumers may prefer to buy the products/services being offered.

In involves a deeper analysis of the products/services being offered in a particular target market by
various competitors. Based on the attributes of one’s product/service, a distinct and attractive
“value proposition” is defined, which the consumers/customers are likely to accept. Further, it may
call for some fine adjustment in the product/service, so that it may match with the value proposition
being communicated. For example, a firm offering ‘low cost product’ with ‘reasonably good quality’
may position its product with respect to those of its competitors through the value proposition of
“offering quality product with value for money”.

7.7.2 Relationship to Segmentation and Targeting

Product positioning to influence the customers to buy one’s product/service, is the result of a three
stage “STP Process”, of segmentation-targeting-positioning:
• First, analyse and understand the different customer groups who may have similar
requirements and preferences for the products/services. (Market Segmentation.)
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Segmentation

• Targeting Positioning
Second, identify and select the customers (target market) who are most likely to buy the
products/services the company is planning to offer in the market. (Target Marketing.)
• Third, optimise one’s products/services for the consumers/customers of the selected
customers and communicate accordingly to them so that they distinguish the
product/services from those offered by the competitors, and buy these. (Positioning)

Decide Decide Decide Decide

Product & Pricing Distribution Promotional

Features Channel Strategy

Segmentation: It aims at identifying different groups of customers and finding out what kinds of
customer with different needs exist. Three approaches are generally used for marketing to the
identified groups of similar customers (segments):
• Undifferentiated strategy where all customers are treated as the same, with firms not
making any specific efforts to satisfy particular groups. This may work when the product
is standardised one where one competitor really can not offer much that another can
not.
• Differentiated strategy, for example; full ticket airlines have business class seats where
wider and more comfortable seating are provided and may options of high quality food
and drinks are provided. Such customers are willing to pay higher prices for premium
services. But full seating-capacity can not be filed up by such premium customers,
therefore economy class seats are also provided, where seats are not that wide &
comfortable, and standard food is served to the customers.
• Concentrated strategy, where one firm chooses to focus on one of several segments
that exist, while leaving the other segments to other competitors, For example, some
low-cost Airlines focus on price-sensitive consumers, who will forgo meals and the
assigned seating for low prices.

7.7.3 Influence Over Marketing Mix Factors

The second part of figure shown for the STP model in the above section, is reproduced again, as it is
relevant to show that ‘positioning’ is implementing through designing the marketing-mix (according
to positioning decided).
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Positioning
Decide Decide Decide Decide

Product & Pricing Distribution Promotional
Features Channel Strategy

‘Positioning’ influences the decision regarding
the ‘Marketing-Mix’

(Product) (Price) (Place – Distribute) (Promotion)

Figure: ‘Positioning’ is implemented though evolving the ‘Marketing-Mix’ accordingly

7.7.4 Repositioning

Repositioning of a product calls for changing the “consumer perception” about the product. This
may become necessary in cases where the existing positioning of the product has become less
attractive as compared to the ‘positioning’ of competitors’ products. For being effective in
repositioning, it is essential that customer perception of one’s product/service is analysed relative to
that of competitors’ products/services.

Repositioning calls for introducing or re-launching the product in new design/packaging with better
facilities for the customers and simultaneously attempting to introduce a new image about one’s
product in the mind of the customers. Such an exercise may require considerable amount of time
and money for modification of product & packaging, and for advertising and other promotional
activities. It can not be introduced suddenly as the consumers may not accept a new image
suddenly.

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PRINCIPLES OF MARKETING

1 | P a g e © 247Campus.co.uk. ALL RIGHTS RESERVED

1 ELEMENTS OF MARKETING CONCEPT 6

2 ELEMENTS OF MARKETING PROCESS 11

3 BENEFITS AND COSTS OF MARKETING ORIENTATION FOR A SELECTED

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PART-II BUSINESS ENVIRONMENT & INTERNATIONAL MARKETS

4 MACRO AND MICRO ENVIRONMENTAL FACTORS INFLUENCING

5 INTERNATIONAL MARKETS & GLOBALISATION 30

PART-III MARKETING PRACTICES

6 MARKETING MIX: McCARTHY’S 4Ps 36

3 | P a g e © 247Campus.co.uk. ALL RIGHTS RESERVED

6.3 B2C and B2B Markets 40

7 MARKET SEGMENTATION, TARGETTING AND POSITIONING 43

4 | P a g e © 247Campus.co.uk. ALL RIGHTS RESERVED

5 | P a g e © 247Campus.co.uk. ALL RIGHTS RESERVED

UNIT 1 ELEMENTS OF MARKETING CONCEPT

1.1 Introduction to Marketing

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7 | P a g e © 247Campus.co.uk. ALL RIGHTS RESERVED

Figure: Customer & Competitor Orientation in the Market

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10 | P a g e © 247Campus.co.uk. ALL RIGHTS RESERVED

UNIT 2 ELEMENTS OF MARKETING PROCESS

2.1 Marketing Objectives

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maximum numbers of potential customers. The combination of above four factors

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• Marketing audit should be carried out by an independent agency.

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UNIT 3 BENEFITS AND COSTS OF MARKETING

3.1 Marketing and Competitive Advantage

PART-II BUSINESS ENVIRONMENT & INTERNATIONAL

UNIT 4 MACRO AND MICRO ENVIRONMENTAL FACTORS

4.1 The Business Environment

Threat from Firms Likely to

Relative Market Share of the Firm

Using SWOT analysis technique involves three steps:

UNIT 5 INTERNATIONAL MARKETS & GLOBALISATION

5.1 Development of International Markets

PART-III MARKETING PRACTICES

UNIT 6 MARKETING MIX: McCARTHY’S 4Ps

6.1 The Changing ‘Marketing-Thrust’

6.4 Service and Product Marketing

UNIT 7 MARKET SEGMENTATION, TARGETTING AND

7.1 Introduction to Market Segmentation

Decide Decide Decide Decide

Decide Decide Decide Decide

(Product) (Price) (Place – Distribute) (Promotion)

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