Enterprise is another word for a for-profit business, organization or company.

Management is the coordination and administration of tasks / activities to achieve an objective.

 Enterprise Management
Enterprise management is a process which involves continuous planning, monitoring and assessing all the
aspects of an organization for the attainment of its objectives.

 4 Basic Functions of Enterprise Management:

1. Planning
It is a process to develop strategies to achieve desired objectives.

Three Main Approaches to Planning:

i. Strategic planning
• carried out by top management
• long timeframe of three years or more
• creates goals for the entire organization
• analyzes threats to the organization
• evaluates the organization’s strengths and weaknesses
• creates a plan of how the organization can best compete in its environment
ii. Tactical planning
• shorter-term planning of an objective that will take a year or less to achieve
• carried out by middle management
• aimed at a specific area or department of the organization such as its facilities, production, finance,
marketing, personnel
iii. Operational planning
• carried out by bottom level employees
• deals with day-to-day tasks
 2. Organizing
It involves allocating and coordinating resources in order to carry out the plans.

Organizing has the following characteristics:

i. Division of Labour – work is assigned to the employee who is specialised in that work
ii. Coordination – function of management to synchronize, control and integrate the efforts of
organization’s members and teams
iii. Objectives – objectives need to be specifically defined
iv. Authority-Responsibility Structure – the position of each manager and executive is specified, as per
the degree of the authority and responsibility assigned to them
v. Communication – the techniques, flow and importance of communication must be known to all the
members

3. Leading
Leading or Leadership is the action or ability of guiding a team or individual to achieve a certain goal through
direction and motivation.

Traits of a Good Leadership:

Leadership Styles:
i. Democratic / Participative Leadership – leader encourages each team member to participate in
decision-making by sharing their opinions
ii. Autocratic / Authoritative Leadership – leader has complete control and power to make decisions
without input from team members
iii. Laissez-Faire / Delegate Leadership – leader gives full power and freedom to the team to make
decisions
iv. Transformational Leadership – leaders and followers help each other to advance to a higher level of
morale and motivation
v. Transactional / Managerial Leadership – leader utilizes rewards and punishments to motivate and
direct his followers
vi. Coaching Leadership – involves recognizing team members' strengths, weaknesses and motivations to
help each individual improve
vii. Visionary Leadership – possess the keen ability to envision organization’s future and to rally employees
around a shared vision
viii. Pacesetting Leadership – leader sets the pace of their team, leading from the front and by example or
demonstration / summarized by the phrase ‘Do as I do, now.’
ix. Situational Leadership – choosing the right leadership style in the right situation for the right people
x. Affiliative Leadership – focuses on building team bonds, relationships and emotional connections, while
quickly resolving any team conflicts
xi. Servant Leadership – the leader’s goal is to serve their people rather than making organizational or
personal success
xii. Charismatic Leadership – leader utilizes his social skills, charm, interpersonal connection,
persuasiveness and vibrant personality to motivate others

Management vs Leadership
The easiest way to explain the difference is that ‘leaders inspire while managers oversee’.
However, leadership differs from management in several aspects as follows:

Management Leadership
Task-oriented People-oriented
Doing things right Do the right things
Event and tasks Attitude and behavior
Has employees Has followers
For efficiency For effectiveness
Reacts to change Promotes change
Rational thinking Inspirational and visionary
Cognitive intelligence Emotional intelligence
Relies on authority Is motivational
Push-approach Asks people
Plans activities Sets directions
Status quo Pull-approach
Directing and controlling Motivating and inspiring people
Counting value Creating value

4. Controlling
Controlling is the process of evaluating the execution of the plan and making adjustments to ensure that the
organizational goals are achieved.

Characteristics of Control:
• continuous process
• management process
• closely linked with planning
• tool for achieving organizational activities
• an end-to-end process
• compares actual performance with planned performance
• compares performance against standards
• point out the error in the execution process
• achieves the standard
• helps management to monitor performance
• action-oriented

Internal Controls
Internal control is a process, affected by an entity’s board of directors, management and other personnel,
designed to provide reasonable assurance of:

 the reliability and integrity of information

 the compliance with policies, plans, laws and regulations
 the safeguarding of assets
 the economical and efficient use of resources
 the accomplishment of established objectives and goals for operations

5 Major Components of Internal Control:

1. Control activities – policies and procedures must be established and executed to help ensure the actions
identified by management
2. Risk assessment – the entity must be aware of and deal with the risks it faces (both internally and
externally)
3. Information and Communications – this is the identification, retention and transfer of information in a
timely manner enabling personnel to execute their tasks
4. Monitoring – the entire control process must be monitored and modifications made as necessary
5. Control Environment – the control environment is the foundation for all other components of internal
controls and provides discipline and structure

Types of Internal Controls:

Preventive and Detective controls
Preventive controls attempt to stop an unwanted outcome before it happens. Examples include use of
passwords, approval, policies and procedures

Detective controls attempt to uncover errors or irregularities that may already have occurred. Examples
include reconciliations, monitoring of actual expenses vs. budget, prior periods and forecasts

Hard and Soft controls

Hard controls are formal and tangible. Examples include organizational structure, policies, procedures and
segregation of duties

Soft controls are informal and intangible. Examples include tone at the top, ethical climate integrity, trust and
competence

Manual and Automated controls

Manual controls are manually performed, either solely manual or IT-dependent, where a system-generated
report is used to test a particular control.

Automated controls are performed entirely by the computer system.

Key and Secondary controls
Key controls are those that must operate effectively to reduce the risk to an acceptable level.

Secondary controls are those that help the process run smoothly but are not essential.

 Factors affecting Enterprise Management:

Organization’s ↴

 Culture
 Structure
 Size
 Location
 Technology
 Internal Environment
 External Environment

 Some Challenges Businesses Facing Include:

• Maintaining a good reputation
• Meeting customer needs
• Keeping up with industry trends
• Digital adoption
• Regulatory compliance
• Automating business processes
• Balancing quality and growth
• Attracting and retaining talents

 14 Management Principles by Henri Fayol

1. Division of Work – based on skills and level of expertise
2. Authority and Responsibility – balance between authority and responsibility
3. Discipline – respect for agreements and follow the rules & regulations
4. Unity of Command – each subordinate have only one boss
5. Scalar Chain – clear line of authority, hierarchy
6. Equity – justice in management and loyalty in employees
7. Esprit de Corps – should strive to promote team spirit and authority
8. Initiative – employees should be given the necessary level of freedom to create and carry out plans
9. Centralization – decisions are made from top
10. Remuneration – appropriate remuneration for all employees to keep them motivated
11. Order – right resources, good social order and safe working environment
12. Stability of Tenure of Personnel – manager should strive to minimize turnover
13. Subordination of Individual Interest – put interests of the organization above personal interests
14. Unity of Direction – a set of activities with similar goals, should all follow the same strategy

(Mnemonic: DADU SEE I CROSS U)

 Max Weber's Ideal Bureaucracy

 Bureaucracy is an administrative governmental system with a hierarchical structure and complex and strict
rules and regulations.

Weber defines bureaucracy as a highly structured, formalized and an impersonal organization.

Weber’s ideal bureaucracy is characterized by the following:

I. Division of Labor – specific allocation of responsibility based on functional specialization
II. Formalized Rules – written policies, rules and regulations that guide employee’s behavior
III. Hierarchical Structure – clear line of authority from top to down
IV. Impersonality – promotion and selection of individuals based on their competence, training and
qualification

 Mintzberg’s Organizational Model

 Mintzberg’s Model of Building Blocks divides the organization into five basic parts:
1) Strategic Apex
2) Middle Line
3) Operating Core
4) Technostructure
5) Support Staff

Strategic Apex
 Includes top management
 setting strategy and objectives

Middle Line
 includes middle line managers
 ensuring communication up and down
 converting broad strategic plans into operational plans
 manage relationships with suppliers and customers

Operating Core
 bottom level workers
 do the basic work for producing and delivering goods or services

Technostructure
 includes professionals, i.e. accountants, researchers and personnel managers
 responsible for the development, innovation, marketing, human resources, finance, knowledge and assets

Support Staff
 workers that work in functions such as public relations, mailroom, catering services, legal counsel, press
relations, cafeteria and IT staff

 Mintzberg’s Organisational Structures

Based on his organisational model, Mintzberg described five categories of organisational structure, each of
which would rely on one specific part of the model:

i. Simple Structure Organization (Strategic Apex)

ii. Divisionalized Organization (Middle Line)
iii. Professional Organization (Operating Core)
iv. Machine Organization (Technostructure)
v. Adhocracy Organization (Support Staff)

*Only simple structure is based on centralization and all others are decentralized.

Simple Structure
 May be found in entrepreneurial company
 Direct control of strategic apex over the operating core
 No middle line
 Little or no support staff and technostructure
 Strategic apex might be the owner of the company
 Very flexible structure that can react quickly to changes

Divisionalized Structure
 Middle line is the dominant element
 Large group of powerful executive managers
 Each division led by a divisional manager
 Managers able to restrict the influence of the strategic apex on decision-making

Professional Bureaucracy
 Operating core is the dominant element
 Often found in entities where the operating core consists of highly-skilled professional individuals such
as investment bankers in a bank, programmers in a software firm, doctors in a hospital, auditors in an
auditing firm and lawyers in a professional practice

Machine Bureaucracy
 Techno-structure is the dominant element in the organisation
 Entity is controlled and regulated by a bureaucracy
 Difficult for the entity to react quickly to environmental change
 Suitable for organizations that operate in a stable business environment

Adhocracy Structure
 Support staff is the dominant element
 Complex and disordered organizational structure
 Making extensive use of teamwork and project-based work
 Organisation might establish working relationships with external consultancies and experts
 Operations Management
Operations refer to the activities required to produce and deliver a product or a service.
Operations Management is a field of business which deals with how a product is planned, created &
distributed efficiently and effectively.

 Challenges in Operations Management:

• Global focus
• Sustainability (Protect the environment)
• Rapid product development
• Mass customization
• Just-in-time performance
• Employees empowerment
• Material and Inventory management
• Supply-Chain management
• Capacity management
• Waiting-line methods
• Quality management
• Design of products
• Plant location selection
• Human resources and job design
• Inventory levels

 Operations Strategy
Operations Strategy is a set of decisions that an organization makes to produce and deliver goods. It is a
guiding principle used to plan, analyze and execute company's operations.

Operations, Business and Corporate Strategies:

 Corporate Strategy – is concerned with the overall objectives and scope of business to fulfil stakeholder’s
expectations.
 Business Strategy – is the combination of all the decisions taken and actions performed by the business
to accomplish business goals.
 Operations Strategy – is a set of decisions that an organization makes to produce and deliver goods.

 Porter's value chain

 Value chain is a series of consecutive steps that go into the creation of a finished product, from its initial
design to its arrival at a customer's door.

The elements of the value chain are broken down into nine activities of the business. These activities are
categorized into two groups:

1. Primary Activities
2. Support / Secondary Activities

Primary Activities
Primary activities are directly involved in creating and delivering the product or service. These include 5
activities:

1. Inbound logistics – includes all of the activities necessary to receive and store raw materials
2. Operations – include procedures for converting raw materials into finished products
3. Outbound logistics – include activities to distribute a final product to the consumer
4. Marketing and Sales – include strategies to enhance visibility and target appropriate customers — such
as advertising, promotion and pricing
5. Services – includes programs to maintain products and enhance the consumer experience — like
customer service, maintenance, repair, refund and exchange

Support Activities
They support the primary activities and include:
i. Procurement – concerns how a company obtains raw materials
ii. Technology development – this activity creates and improves the technology used in the production
process
iii. Human resources management – this activity manages the company’s workforce, involves hiring and
retaining employees
iv. Infrastructure – includes company systems and the composition of its management team — such as
planning, accounting, finance, administration, quality control etc.
Production is the action of making valuable things from components or raw materials.

 Production Methods
Production Methods fall into 3 Main Categories:
1) Job Production
2) Batch Production
3) Flow Production

Job production
In Jobbing or One-off production, workers making a single unique customized product for a single customer.

Examples: Constructing a building, composing a book, making a wedding dress or luxury car

Characteristics of Job Production:

• Single operation
• Skilled labor
• High capital investment
• Control of operations is simple
• Cost per unit is high
• Sometimes special machinery & special training is required
• High variety and low volume of products
• Large inventory of materials, tools and parts is required
• Detailed planning
• Variations in production
• Flexibility in financing is required

Batch production
In batch production, the products are made in specified groups within a time frame. A batch can go through a
series of steps in a large manufacturing process to make the final desired product.

Examples: Manufacturing of confections, motors or engines, medicines, tinned foods, hardware like nuts and
bolts

Characteristics of Batch Production:

• Work is of repetitive nature
• Same type of machines are arranged at one place
• Division of labor
• Continuous flow of material
• Maintenance of equipment and machinery is essential
• Possibility of large work-in-progress
• Detailed production planning and control
 • Each product within a batch is identical

Flow Production
Flow, Mass or Continuous production is defined by the continuous flow of goods along an assembly line.

Example: In a car manufacturer company the doors, engines, bonnets and wheels are added to a chassis as it
moves along the assembly line, manufacturers of food, beverage, paper, cement, clothes and oil refineries use
flow production method

Characteristics of Flow Production:

• Low-skilled labour
• Skilled technicians for assembly line maintenance
• Very less work-in-progress
• Pre-decided production planning and scheduling
• Full production system is designed to produce only one type of item
• No flexibility in the products
• High production volume
• Large amounts of robotics, machinery and equipment required
• Large stocks of raw materials or component parts required
• Machine set-ups remain unchanged for long period
• Production depends on market demand
• Shorter cycle time of production
• Perfectly balanced production lines
• Low cost per unit
• Coordinated work force
• Division of labor
• Weakness in any operation comes to the notice immediately
• Accuracy in product design and quality

 Optimized Production Technology (OPT)

The OPT method is based on the identification and removal of the bottlenecks in the production line.

Bottleneck is a point in a chain of processes, such that its limited capacity reduces the capacity of the whole
value-added chain.

Bottlenecks happen when work volume exceeds process capacity or bandwidth.

Theory of Constraints
Constraint is a thing that limits a system performance towards its goals.
Theory of Constraints (TOC) is a methodology for improving processes that focus on identifying and
correcting constraints or root causes of bottlenecks.

5 Steps of Theory of Constraints

Step 1: Identify the Constraint

Determine which part of your business process or stage in your manufacturing assembly has the biggest
bottleneck.

Step 2: Exploit the Constraint

Then you find ways to resolve the issue using the resources that you currently have.

Step 3: Subordinate Everything Else to the Constraint

Subordinate everything else to the constraint by avoiding changes anywhere that may overload the constraint.

Step 4: Elevate the Constraint

When the exploit and subordinate steps are successful in improving the constraint then it’s time to consider
elevating the constraint.

Step 5: Repeat by Finding the Next Constraint

You find the next constraint to solve and repeat all steps again.

Types of Computer-based Systems used in Enterprise Management:

1) Material Requirements Planning (MRP I)
2) Manufacturing Resource Planning (MRP II)
3) Enterprise Resource Planning (ERP)

 Material Requirement Planning (MRP I)

Material requirement planning is a software-based system that helps manufacturers to plan, schedule and
manage their materials inventory during the manufacturing process.

Functions and Benefits MRP:

• Forecast material requirements
 • Scheduling materials for future production
• Calculating purchase orders
• Automatically placing purchase orders
• Maintain stock levels of materials
• Time-saving
• Economic purchasing
• Improved ability to meet orders
• Reduced stock holding
• Close relationship with suppliers

 Manufacturing Resource Planning (MRP II)

Manufacturing resource planning is a software-based system for the effective planning of all resources of a
manufacturing company such as information, time, personnel, materials, machines and money etc. It is an
extension of MRP I.

Functions and Advantages of MRP II:

• All Benefits of MRP I plus↴
• Shop floor control
• Capacity planning
• Input/output control
• Financial requirements planning
• Equipment utilization scheduling
• Labour scheduling
• Improving customer experience
• Leading to more competitive pricing
• Production scheduling
• Sales forecast
• Distribution requirements planning

 Enterprise Resource Planning (ERP)

Enterprise Resource Planning (ERP) is a software-based system of integrated modules for managing,
automating and connecting all key business processes. It is an extension of MRP II.

Basic functions of ERP:

• Accounting / Financial Management
• Human Resources Management
• Customer Relationship Management

All other Functions of ERP:

• Supply chain management
• Sales and marketing
• Data analysis
• Integration of departments
• Inventory management
• Manufacturing management
 • Material requirements planning
• Business intelligence

Advantages of ERP:
• Cost savings
• Reduced risks
• Total visibility / data reliability
• Facilitates regulatory compliance
• Modifies supply chain management
• Easier access to management systems
• Improves reporting and planning
• More flexible modularity / scalability
• Simplified and streamlined operations
• Expands collaboration and workflows
• Standardizes and improves business processes
• Higher management performance
• Improved customer service
• Better competitiveness on the market
• Improves lines of communication
• Integrates all departments
• Encourages innovation
• Fast-track adoption of new technology
• Avoids data and operations redundancy
• Better accuracy and availability of information
• Improves operational efficiency

Disadvantages of ERP:
• Expensive to start
• Complex data conversion
• Slow implementation
• Require maintenance and upgrades
• Complicated systems
• Time consuming customization
• Requires thorough training
• Vendor dependence

 Understanding of Production Process

Production is the action of making valuable things from components or raw materials. It is a process of
transforming resources into the products.

Production planning is the process of deciding how a product will be manufactured, allocation of raw
materials and arrangement of workers and workstations to fulfill manufacturing orders on time before the
manufacturing process begins.

Steps Involve in Production Planning:

  Select the process
Select the process that best serves the needs of the company’s customers:

i. Make-to-order is a business production strategy in which customized product is produced to the

consumer’s specifications.
ii. Mass production is the manufacturing of large quantities of standardized products, often using assembly
lines or automation technology.
iii. Mass customization refers to a company's ability to efficiently mass produce products that meet
individual consumer needs.

 Capacity Planning
After choosing the production process, company has to decide the quantity of products that will be produced
after forecasting demand.

 Facilities Decisions
The facilities and equipment are the physical structures such as buildings, production equipment and
machines. After selecting the best production process, operations managers decide where the goods will be
manufactured, how large the manufacturing facilities will be and how those facilities will be laid out.

 Site Selection
In choosing a location, managers must consider several factors:
• Make sure the business location is within your budget
• Think about vendors and suppliers
• Find a safe location
• Where there is demand
• Think about recruiting efforts
• Sites with appropriate parking options
• Site’s image and history
• Potential for growth
• Competitors in the area
• Shipping costs for both raw materials and finished goods are low
• Skilled workers easily available

 Product Design
There will probably also be a separate section within operations that provides technical expertise. These
experts are responsible for new product design.

 Purchasing
The purchasing department is responsible for obtaining raw materials and parts from suppliers.

 Manufacturing
The production function converts the raw materials and assembles parts and components into finished
products according to design.
 Production Control
Once the production process begins, managers must continually schedule and monitor process activities.

 Quality Control
The operations manager is directly involved to ensure that goods are produced according to the quality
standards.

 Inventory Management
Finally, finished goods are sent to the warehouse from where they move to the sales store for sale to the
consumers.

 Plant Maintenance
Plant maintenance is defined as a set of activities that are necessary to keep machinery and types of
equipment in good operating conditions.

Objectives and Advantages of Plant Maintenance:

• Minimize production loss
• Keep equipment safe
• Improve product quality
• Increase functional reliability
• Maximize life of equipment
• Maximize production capacity
• Minimize total production cost
• Minimize breakdowns

Types of Plant Maintenance

Three main types of Plant Maintenance:
1. Breakdown / Corrective Maintenance
2. Predictive / Condition-based Maintenance
3. Preventive / Scheduled Maintenance

 Corrective Maintenance
Sometimes called Breakdown, Re-active or Run-to-Failure maintenance, is performed on the equipment that
has broken down and is unusable.
Causes of Equipment Breakdown:
• Not reading the operator's manual
• Improper maintenance
• Poor electrical connections
• Overrunning machines
• Not replacing worn parts
• Misaligned tighteners
• Weather-related issues
• Untrained operators
• Over-maintenance
• Neglected cooling system

Advantages of Corrective Maintenance:

• Short-term costs
• Minimum planning required
• Simple process
• Better solution in some cases

Disadvantages of Corrective Maintenance:

• Uncertain expense
• Can be extremely costly
• Production is affected (delayed or stopped)
• Leads to hurried maintenance
• Direct loss of profit
• Rescheduling of production
• Increased accidents
• Failure to recover overheads
• More wastage of material
• Faster plant deterioration
• Increased overtime

 Predictive Maintenance
Sometimes called Condition-based maintenance, is designed to help determine the condition of in-service
equipment in order to estimate when maintenance should be performed.

Features and Advantages of Predictive maintenance:

• Increased production capacity
• Reduced maintenance costs
• Increased lifespan of equipment
• Less machine failures
• Improved operator safety
• Reduced downtime for repairs
• Improved reliability
• Better product quality
Disadvantages of Predictive Maintenance:
• Data can be misinterpreted
• Planning and scheduling takes time
• Requires monitoring equipment
• Potential for over-maintenance

 Preventive Maintenance
Also known as Planned, Routine, Pro-active or Scheduled Maintenance is regularly performed on machine
assets to reduce the chances of their failure.

Two different types of Preventive maintenance:

Time-based: maintenance performed on equipment based on a calendar schedule

Usage-based: takes maintenance action when machine usage hits a certain benchmark

Functions and Advantages of Preventive maintenance:

• Increased production capacity
• Reduced maintenance costs
• Increased equipment lifespan
• Less machine failure
• Enhance operator’s safety
• Reduced stock of spare parts
• Reduced downtime for repairs
• Increase reliability
• Better product quality

Disadvantages of Preventive maintenance:

• Data can be misinterpreted
• Planning and scheduling takes time
• Requires monitoring equipment
• Potential for over-maintenance

Procedure of Preventive maintenance:

There is no ready-made preventive maintenance programme for any industry because all industries differ in
size, location, machinery, resources, layout and construction.

Major Features or Steps in Preventive Maintenance Programme:

1. Who should do PM?
Preventive maintenance may be taken care by:

• Production department
• Maintenance department
• A separate division of inspectors, crafts and supervisors
A perfect coordination between production department and PM personnel is essential for the success of the
preventive maintenance practice.

2. What should the size of a PM team be?

Approximate size of preventive maintenance team:
Nature of industry Manpower Required
PM : Total maintenance

Primary-metal industries 1 : 2.37 Men

Machinery manufacturers 1 : 2.69 Men

General manufacturing 1 : 10 Men

3. Where to start PM?

One should not apply PM to the entire plant at once. PM programme should be built up in pieces; when one
piece is finished, start the next.

4. What to inspect for?

After inspection one makes the list of machines and their parts needing PM and also makes a ‘Check-list’ to
ensure that no inspection point has missed.

5. How often to inspect-frequency?

The decision ‘how often to inspect’ is made in the light of past experience. If the cost of PM is greater than the
savings, one may go for reducing the frequency of inspections.

Frequency of inspections is decided upon Equipment’s↴

• Size
• Type
• Running hours
• Age
• Condition
• Value
• Location
• Safety requirements

6. Preventive maintenance records

Keep following records of the preventive maintenance programme for:

• Budgeting major overhauls

• Budgeting general maintenance costs
• Finding equipment reliability
• Determining frequency of inspections
• Preparing maintenance schedules
• Predicting equipment life
• Designing maintenance cost control systems
 • Equipment replacement analysis
• Carrying out cost reduction

7. Storage of spare parts

Spare parts are stored in order to reduce the loss of production time due to maintenance activity.

What spare parts to keep and how much to keep depends upon:

• The past experience

• Advice from plant manufacturers
• Cost of buying and storing spare parts
• Ease or difficulty with which the spare parts can be made available when required
• Whether spare parts are standard or not

8. Control of PM
A PM programme must remain under control at all times by reviewing of monthly reports of PM inspections.

Capacity is the ability of a system to produce output within the specific time period.
Capacity is defined under Three Categories:
1) Design / Theoretical capacity is the level of a manufacturer's production that would be attained if all of
its equipment and operations performed continuously at their optimum efficiency.

2) Effective Capacity is the maximum amount of work that an organization is capable of completing in a
given period due to constraints such as quality problems, delays, material handling, etc.

3) Actual Output is the rate which is actually achieved under the constraints of machine breakdowns,
delays, absenteeism, etc. It may be lower or equal to the Effective Capacity.

 Capacity planning
Capacity planning is a process that aims to balance customer demand with production capability.

Four major Capacity Strategies:

1) Chase Strategy
Chase Demand strategy sets production to meet the demand for products.

2) Lead Strategy
It is adding capacity in anticipation of a very high demand of product.
3) Match Strategy
It is adding capacity in small amounts in response to changing demand in the market.

4) Lag Strategy
It is a reactive strategy. This is used to add capacity only when the actual demand is observed and not based
on anticipation.

-------------------------------------------------------------------------------------------------

Some related things to Capacity Planning

Forecasting is the process of making predictions for the future demand, based on the data of past sales.

Level Capacity Plan is a strategy which allows the firm to maintain inventory levels of finished products
higher than expected in situations of demand variability.

Flexible Manufacturing
It is a highly automated manufacturing system that is designed to easily adapt to changes in the type and
quantity of the product being manufactured.

Queuing theory
This describes using mathematical methods for analyzing and predicting the delays and congestion of waiting
and queuing.

The objective is to identify ways to improve the process to make it quicker.

It applies in situations where obvious queues form.

-------------------------------------------------------------------------------------------------

 Quality management
Quality management is the act of overseeing all activities that must be accomplished to maintain a desired
level (meeting standards or customer requirements) of product’s excellence.

Quality Control and Quality Assurance

Quality Control focuses on the prevention of defects while Quality Assurance focuses on the identification of
defects in the finished product.

Quality Control is a proactive approach while Quality Assurance is a reactive approach.

Importance of Quality for an organization:
• Lower marketing costs
• Lower waste and defect rates
• Higher volume of sales
• Meeting standards
• Beat competition in the market
• Enhanced brand value
• Increased revenues and profits
• Supports overall customer satisfaction

 Garvin’s 8 Dimensions of Quality

1. Performance – describes the essential function of a product.
2. Features – are the secondary aspect of performance.
3. Reliability – is the ability of a product to perform as expected over time.
4. Conformance – is the degree to which a product conforms to its specifications and industry standards.
5. Durability – is the measurement of product useful life.
6. Serviceability – is the ease at which a user can repair a faulty product.
7. Aesthetics – refers to the appearance of a product.
8. Perceived Quality – is the overall opinion of customers towards the product.

 Costs of Quality
Four major types of Quality Costs are:
1) Prevention Costs
2) Appraisal Costs
3) Internal Failure Costs
4) External Failure Costs

Prevention Costs
Costs of the activities performed to prevent poor quality in products or services. For example the costs of:

 Employee training
 Robust and unique product design
 Incoming materials testing and inspection
 Equipment maintenance
 Statistical process control
 Quality improvement projects
 Audit of establishing product specifications
 New product development and testing

Appraisal Costs
These costs are incurred after making a product for quality inspection and testing. For example the costs of:

 Quality audits
  Sampling
 Maintenance of test equipment

Internal Failure Costs

Costs incurred when a product fails to conform to a quality specification before shipment to a customer. For
example the costs of:

 Rejected products
 Reworking of defective units
 Downtime
 Rework labor and overheads
 Re-inspection of reworked products
 Disposal of defective products
 Lower selling prices for sub-quality goods

External Failure Costs

Costs incurred when a product fails to conform to a quality specification after shipment to a customer. For
example the costs of:

 Returns
 Warranty claims
 Repairs
 Handling complaints
 Goodwill loss
 Shipping Damage due to Inadequate Packaging
 Loss of market share
 Penalties
 Redesigning

 Total Quality Management (TQM)

TQM program is a system in which an organization collectively makes efforts to enhance the quality of their
products.

Characteristics of TQM:
• Customer focused
• Involved employees
• Process oriented
• Mutually dependent systems
• Strategic approach
• Continuous improvement
• Data-driven decisions
• Effective communications
• Participation by all

TQM Tools
Five tools for TQM:
1) Quality Circles
2) Kaizen
3) 3M Theory
4) 5-S Practice
5) Six Sigma

 Quality Circles
A quality circle is a group of workers with a range of skills from all levels of the organisation. They meet
voluntarily on a regular basis to discuss quality issues and develop solutions to real problems.

Advantages of Quality Circles:

• Increase team spirit
• Enhance decision making ability
• Strengthen employees communication
• Creates Leadership skills
• Builds self-confidence
• Increase organizational sense
• Strengthen relationship between managers and the work force
• Creates employee motivation
• Cost reduction
• Increase productivity
• Improve quality
• Smooth working
• Increase safety
• Improve worker attitudes

 Kaizen
Kaizen is a Japanese term for the philosophy of continuous improvement in all areas of an organisation’s
operations. It can be described as a never ending improvement cycle.

The Cycle of Kaizen for Continuous Improvement:

i. Involve Employees
ii. Finding problems
iii. Find the solution
iv. Implement the solution
v. Analysis of results
vi. Standardize if results are optimal
vii. Cycle is repeated

Deming called this ‘Plan-Do-Check-Act (PDCA) Cycle’:

o Plan : Plan activities
o Do : Implement the plan
o Check : Check the results
 o Act : Improve the process

 3M Theory
3M is a Japanese concept derived to identify and eliminate non-value-added activities present in the
manufacturing process.

Toyota has developed its production system around eliminating three enemies of Lean production:

1) Muda = Waste
2) Mura = Unevenness
3) Muri = Overburden

 5-S Practice
The 5-S practice is an approach to achieving an organized, clean and standardized workplace for lean
production.

5-Ss are Japanese words but can be translated as follows:

Word Meaning Explanation
Seiri Structurise / Sort Eliminate unnecessary items
Seiton Systemize / Set-in-order Putting all necessary items in optimal place
Seiso Sanitise / Shine Clean workstation regularly
Seiketsu Standardize Create a consistent approach to tasks and procedures
Shitsuke Self-Discipline / Sustain Ensuring the first four steps are sustained and followed

 Six Sigma (6σ)

Six Sigma is a quality-control process that businesses use to eliminate defects and improve processes.

It emphasizes cycle-time improvements while reducing manufacturing defects to no more than 3.4
occurrences per million units. This is 99.9996% perfection.

Customers will have a reason to complain fewer than four times in a million.
Wastage increases as company moves from 6σ in backward direction i.e. σ5, σ4, σ3, ……...

Six Sigma follow two project methodologies, each with five phases:

DMAIC DMADV

Statistical Process Control

Statistical process control is a method used to continually monitor and chart a process, whilst it is operating to
warn when the process is moving away from the predetermined limits.

As per Six Sigma, the upper and lower limits will be three standard deviations away from the expected value.

All points outside the control limits should be investigated and corrective action taken.

 Key Writers on TQM

 14 points
Deming
 Development of TQM in japan
 14 steps
Crosby
 Zero defects approach
 Trilogy
Juran  Fit for purpose, i.e. does product fulfil the customer's needs?
 85% of quality problems due to systems rather than employees
 3 steps
Feigenbaum  Prevention is better than cure
 Design of systems and procedures should enhance quality
 Theory Z
Ouchi
 Japanese management style

 Deming’s 14 points on TQM

1. Create stability of purpose toward improvement
2. Adopt the new philosophy
3. Stop depending on inspections
4. Use a single supplier for any one item
5. Improve constantly and forever
 6. Use on-the-job training
7. Implement leadership
8. Eliminate fear
9. Break down barriers between departments
10. Get rid of unclear slogans
11. Eliminate management by objectives
12. Remove barriers to pride of workmanship
13. Implement education and self-improvement
14. Make transformation everyone's job

 Crosby’s 14 points for Improvement

1. Management commitment
2. Quality improvement team
3. Quality measurement
4. Cost of quality evaluation
5. Quality awareness
6. Corrective action
7. Zero defects program
8. Supervisor’s training
9. Zero defects day
10. Goal setting
11. Error cause removal
12. Recognition
13. Quality councils
14. Do it over again

 Juran’s Trilogy
1. Quality Planning – provides a system that is capable of meeting quality standards
2. Quality Control – is used to determine when corrective action is required
3. Quality Improvement – seeks better ways of doing things

 Ouchi's Theory Z
William Ouchi's Theory Z emerged after a comparative study between Japanese and American management
styles. Ouchi showed how American companies could be as successful as Japanese companies.

Features of Japanese Management Style:

• Strong company culture
• Long-term staff development
• Long-term employment
• Steady promotion
• General agreement / consensus in decisions
• Concern for the happiness and well-being of workers
• Individual responsibility
• Mutual trust
• Integrated organisation
 • Informal control system
• Coordination

 Feigenbaum's 3 Steps to Quality

i. Quality Leadership – strong focus on planning
ii. Management Quality Technology – involving the entire work force
iii. Organisational Commitment – supported by continuous training and motivation

 TOTAL QUALITY MANAGEMENT EXCELLENCE MODEL (TQMEX)

TQMEX is a sequential model which is easy to remember and simple to implement. Companies starting to
implement TQM should follow TQMEX step-by-step.

 International Organization for Standardization (ISO)

The most widely used external quality standards are those published by the International organisation for
standardization (ISO).

The ISO 9000 family is a set of five quality management systems standards that help organizations to ensure
that they meet customer and other stakeholder needs within statutory and regulatory requirements related to
a product.

There are three different quality standards that companies can be registered to ISO: 9001, 9002 and 9003 and
ISO 9000 and 9004 are a set of guidance standards.

Requirements include:
 A set of procedures that covers all key business processes
 Keeping adequate records
 Checking output for defects
 Facilitating continuous improvement

Benefits of being ISO certified:

• Organization image improvement
 • Increased Internal effectiveness and efficiency
• Enhance customer satisfaction
• Easy market entry for your products
• Easy approval on bank loans and business licenses
• Improved market share
• Achieve competitive advantage
• Professional culture development
• Enhance control over business
• Improved customer retention and acquisition
• Facilitating continuous improvement

Disadvantages of being ISO certified:

• Stakeholders do not have adequate understanding of ISO 9000 certification process
• Requires training before implementation of standards
• Heavy emphasis on documentation
• Lengthy registration process
• Requires greater accountability
• Too expensive for small companies
• Complicated certification process
• Not suitable for service industries

 SERVQUAL Model
The Service Quality or SERVQUAL Model is a method to capture and measure the service quality, experienced
by customers.

Servqual uses 22 questions to understand a respondent’s attitude about the service quality.
These questions are claimed to be reliable indicators of five distinct dimensions.

Dimension Questions Example of a restaurant

Reliability 5 Order processed accurately
Assurance 4 Waiting staff inspire confidence
Tangibles 4 Appearance of taste and food
Empathy 5 Restaurant guests are treated as individuals
Responsiveness 4 Staff response to queries

 Benchmarking
Benchmarking is a process of measuring the performance of a company's products, services or processes
against those of another business, considered to be the best in the industry.

Types of Benchmarking:
I. Competitive Benchmarking is a method of comparing performance in key areas with that of your
most successful competitors.
II. Internal benchmarking is a method of comparing performance in key areas in one part of the
organisation with the performance in another part of the organisation.
 III. Functional benchmarking involves comparing a function with the practices of an organisation known
to excel in that area.

Steps in Benchmarking Process:

i. Identify ‘what to benchmark?’
ii. Deciding the Benchmarking Organization or function
iii. Studying the superior process(s)
iv. Collect and analyze data
v. Determine the performance gap
vi. Create an action plan
vii. Implement the changes
viii. Analyze of results
ix. Keep the process continuous

Benefits of Benchmarking:
• Identify areas for improvement
• Set appropriate goals for your business
• Identify new trends and opportunities
• Improve company efficiency and effectiveness
• Discover new opportunities for rapid growth
• Cope up with competition
• Initiates technological upgradation

 Business Process Re-engineering (BPR)

BPR is the act of changing an organization's major functions with the goal of increasing efficiency, improving
product’s quality and decreasing costs.

Steps in BPR:
i. Put together a team of experts
ii. Analyze organization structure and processes
iii. Find problems and gaps
iv. Identify and analyze improvement opportunities
v. Define objectives and framework
vi. Redesign the process
vii. Implement changes and monitor

Benefits of BPR:
• Cost reduction
• Identify strengths, weaknesses, opportunities and threats
• Expands collaboration and workflows
• Standardizes and improves business processes
• Higher management performance
• Improved customer service
• Enhancement of productivity
 • Building a strategic view of operational procedures
• Better competitiveness on the market
• Simplified and streamlined operations
• Improves operational efficiency
• Improves lines of communication
• Reduced risks
• Encourages innovation
• Adoption of new technology

 Lean production
Lean production is a philosophy that aims to systematically eliminate wastes.

Wastes to be eliminated:
i. Transportation – delays in transportation or unnecessary handling
ii. Inventory – holding or purchasing unnecessary raw materials, work-in-progress and finished goods
iii. Effort – actions of people / equipment that do not add value
iv. Waiting – time delays / idle time, when value is not added to the product
v. Processing – unnecessary steps in operations that do not add value
vi. Units – production of a part that is scrapped or requires rework

Ways to reduce waste and costs in results:

• Efficient inventory management
• Reduce packaging materials
• Volume reduction by removing dangerous portion of waste
• Recycle materials regularly
• Minimum water usage
• Establish a prevention maintenance schedule
• Label and organize warehouse properly

Features and Benefits of Lean Production:

• Timely human force grooming
• Optimize the whole
• Create knowledge
• Eliminate all wastes
• Continuous improvement
• Flexible production processes

Disadvantages and Limitations of Lean Production:

• Cost may exceed benefit
• Requires a change in culture
• Equipment failure
• Delivery inconsistencies
• Employee’s dissatisfaction
• High cost of implementation
 • Customer dissatisfaction problems

Core Approaches to Lean Manufacturing

1) Kaizen
2) 5-S Practice
3) Six Sigma
4) Just-In-Time (JIT)
5) Total Productive Maintenance (TPM)
6) Cellular Manufacturing

*The first three methods have been discussed above.

 Just-In-Time (JIT)
Just-in-time is a management philosophy and not a technique.

Just-in-time is an inventory management method in which goods are received from suppliers only as they
are needed and Just-in-time manufacturing is a production model in which items are created to meet
demand, not created in surplus or in advance of need.

Objectives of JIT:
• Preventing over-production
• Waste elimination
• Reduce work-in-progress
• No capital tied-up in stocks
• Closer relationships with suppliers
• Increase in cash flow
• Reduction in inventory
• Improved quality
• Increased productivity
• Greater flexibility

 Total Productive Maintenance (TPM)

Total Productive Maintenance is a strategy that operates according to the idea that everyone in a facility
should participate in maintenance rather than only the maintenance team.

Advantages of TPM:
• Enhanced performance and output
• Lower operating costs
• Cleaner and healthier working environment
• Higher collaboration and sharing of knowledge between departments and teams
• Better compliance with environmental laws and guidelines
• Increased satisfaction among all stakeholders
• Reduced equipment downtime
• Strengthened workplace safety
 Cellular Manufacturing
Cellular manufacturing is a subsection of just-in-time manufacturing and lean manufacturing. It is a method of
producing similar products using cells, or groups of team members, workstations, or equipment to facilitate
operations by eliminating setup and unneeded costs between operations.

Human Capital is the economic value of the abilities and qualities of employee that influence productivity
such as worker’s knowledge, experience, skills, health etc.

Human capital is an intangible and most valuable asset of an organization.

 Human Resource Management (HRM)

Human Resources (HR) is used to describe both the ‘People’ who work in an organization and the
‘Department’ of a business that is responsible for all things workers-related includes recruiting, selecting,
hiring, orienting, training, deploying, appraising, promoting, paying and firing.

Human Resource Management is the strategic approach to the effective and efficient management of
people in an organization.

 Personnel Management Vs Human Resource Management

BASIS FOR COMPARISON PERSONNEL MANAGEMENT HUMAN RESOURCE MANAGEMENT
Concerned with the work force and their Focuses on the most effective use of the
Meaning
relationship with the entity manpower of an entity
Approach Traditional Modern
Treatment of manpower Machines or Tools Asset
Type of function Routine function Strategic function
Basis of Pay Job Evaluation Performance Evaluation
Management Role Transactional Transformational
Communication Indirect Direct
Labor Management Collective Bargaining Individual Contracts
Initiatives Piecemeal Integrated
Management Actions Procedure Business needs
Decision Making Slow Fast

Theories of Human Resource Management

# Theorist Theory
1. Taylor Scientific Management
2. Maslow Hierarchy of Needs
 3. Vroom Expectancy Theory
4. Herzberg Two Factors Theory
5. Handy Theory of Psychological Contracts
6. McGregor Theory X and Theory Y
7. Lawrence and Lorsche One Type of Contingency
8. Schein Four Categories of Worker

 Two broad classes of Motivation Theories

Content Theories
Content theories deal with individual needs and
are concerned with “What motivates people?”
Examples:
• Maslow's Hierarchy of Needs
• Alderfer's ERG Model
• Herzberg's Two-Factor Model
• McClelland's Needs Theory
Process Theories
Process theories deal with the Process of motivation
and are concerned with “How motivation occurs?”
Examples:
• Skinner's reinforcement theory
• Vroom's Expectancy Theory
• Adam's Equity Theory
• Locke's Goal Setting Theory

 Taylor's Scientific Management

Taylor says that workers are motivated by obtaining the highest possible remuneration.

By organizing work in the most efficient way, the organisation’s productivity will be increased and this will
enable the organisation to reward its employees with their desired remuneration.

Scientific Management consisted of four principles:

i. Work methods should be based on the scientific study of the task
ii. Select, train and develop the most suitable person for each job
iii. Managers must provide detailed instructions to workers
iv. Divide the work and responsibility between managers and workers

 Maslow's Hierarchy of Needs

Maslow's hierarchy of needs is a motivational theory comprising a five-tier model of human needs, often
depicted as hierarchical levels within a pyramid.
 # Needs Include
1. Basic / Physiological Air, Water, Food, Sleep, Clothes, Shelter
2. Safety / Security Health, Job, Emotional and Financial security
3. Social Family, Friendship, Intimacy, Trust, Acceptance
4. Esteem / Ego Self-respect and Respect from others
5. Self-fulfillment / Actualization The need to Achieve something Worthwhile in life

 Vroom’s Expectancy Model

Victor Vroom argues that when employees can make choices in their work, they will mostly choose that what
motivates them the most.

F = E x I x V
Motivational force = Expectancy x Instrumentality x Valence
Here,

Force = Strength of a person’s motivation

Expectancy = Can I hit my target if I work hard?
Valence = Will hitting my targets lead to rewards?
Instrumentality = Do I find the rewards desirable?

 Herzberg's Motivation Theory

It is also known as Motivation-Hygiene Theory, Two-Factor Theory or Dual-Factor Theory.

Herzberg’s needs-based theory identified two sets of factors on the basis that they motivate in different ways.

Motivating factors – which can encourage employees to work harder

Hygiene factors – these will not encourage employees to work harder but they will cause them to become
unmotivated if they are not present

Hygiene factors Motivating Factors

Company reputation Sense of achievement
Work environment Recognition of good work
Relationship with supervisor Career advancement (promotion)
Supervision Attraction of the job itself
Salary and benefits Ability to make their own decisions
Job security Change in work assignments
Company policies and administration Status
Working conditions Responsibility
Relationship with subordinates Incentive schemes

Herzberg went on to define three ways that management can attempt to improve staff satisfaction and
motivation:

i. Job Enrichment is the vertical expansion of a job. It is designed to have interesting and challenging tasks
which can require more skill and can increase pay.
ii. Job Enlargement is the horizontal expansion of a job. It involves the addition of tasks at the same level of
job, skill and responsibility.
iii. Job Rotation employees are shifted between two or more assignments or jobs at regular intervals of time
in order to expose them to all verticals of an organization.

 Handy's Psychological Contracts

Psychological contracts exist between the employee and the employer:

What do they want?
What are they willing to give?
Employee
Want their needs to be satisfied
Will offer their energies and
talents
Employer
Want employee to work hard
Will have a set of expectations for
each employee
Payment, benefits and other
outcomes, e.g. promotion

Three types of Psychological Contracts:

i. Coercive contracts – the individual is forced to work in the organisation without his consent
ii. Calculative contracts – in which the staff have a low commitment to the goals of the organization and a
high commitment to earnings and satisfaction
iii. Cooperative contracts – where the individual tends to identify with the goals of the organisation and
strive for their attainment

 McGregor's Theory X and Y

Theory X and Theory Y suggest two aspects of human behavior at work or two different views of individuals.

Theory X assumptions are Negative Theory Y assumptions are Positive

Lazy Naturally want to work
Don’t like the work Enjoy their work
Lack of self-motivation Self-motivated
Have no aspiration Ambitious
Avoid responsibility Seek responsibility
Resist change Ready for change
Disloyal Loyal
Require constant supervision Self-controlled
Desire only money Efficient
Lack of creativity Creativity widely spread
Self-centered Works organisation

 Lawrence and Lorsche’s Contingency Theory

Contingency theory is based on the idea that there is no one best way to manage a corporation.

One form of contingency theory was developed by Lawrence and Lorsche is:

Type of Organization’s Environment Management

 Detailed procedures
Stable
 Centralized decision making
Unstable  Decentralization
  Employee participation in decision making
 Less detailed procedures and fewer rules

Schein’s Categories of Employees

Schein categorizes individuals in terms of their primary motivation.

Categories of Employees:
Economic man – seeks to maximize personal utility or satisfaction

Social man – highly influenced by sociological factors

Self-actualizing man – living creatively and fully using his potentials

Complex man – cross-sectional in nature

 Practices Relating to Motivation

Incentive Schemes
These schemes are designed to motivate employees to strive towards a high level of productivity and
performance.

Any incentive scheme should be:

 Related closely to effort
 Agreed between employee and employer
 Understandable and simple to operate
 Beneficial to average workers

Most common incentive schemes are:

 Premium Bonus Plan
The basic idea of a premium bonus plan is to pay a basic time rate plus a portion of the time saved as
compared to some agreed allowed time.

 Piecework System
This system pays different rates at different activity levels of the employee.

 Points Reward System

It is derived from the scale of improvements made, such as the amount of cost reduction achieved.

 Commission
Typically paid to staff in sales functions, where the commission earned is a proportion of sales.

 Profit-Sharing Plan
It is a scheme in which a company allocates a share of profits to its employees.

 Total Reward Package

Total Reward describes all financial and non-financial benefits available to an employer that may be used to
attract, motivate and retain employees such as traditional benefits (e.g. health, vision, and dental insurance),
voluntary benefits (e.g. disability insurance, financial counseling and critical illness coverage), retirement plans
(e.g. fixed Annuities, employee’s retirement savings) etc.

Benefits of Employee Incentive Programs:

 Help to execute business strategy
 Better employee performance
 Make happier and satisfied employees
 Boost employee morale and motivation
 Reduce employee turnover
 Enhance employee engagement

Flexible Working Arrangements

These arrangements empower an employee to choose what time they begin to work, where to work and
when they will stop work.

Flexibility in working patterns can be achieved in many ways:

 Flextime
Flextime is a work arrangement that allows employees to choose the start and end time for their workday.

 Shift System
Shift work system is an employment practice designed to make use of or provide service across, all 24 hours of
the clock each day of the week (24/7).

 Compressed week
A compressed work schedule allows an employee to work a traditional 35-40 hour workweek in less than five
working-days.

 Job sharing
Job sharing is a form of regular part-time work where two people share the responsibilities of one full-time
position and split the hours between each other.

 Part-time Job
It is a type of job which is done for less than the normal amount of hours.

 Remote job
Also called Distance Working, Telework, Teleworking or Mobile Work, where technology has enabled
employees to work away from the office, usually at home.

Benefits of Flexible Working Arrangements for Employee:

• Reduce employee stress
• Employee satisfaction
 • Eliminate uneven workloads
• Allows students to have a better work-study balance
• Increased balance between professional and personal life
• Reduced office expenses
• Rush hours can be avoided
• Able to concentrate better

Disadvantages of Flexible Working Arrangements for Employee:

• It is not for everyone
• ‘Far from sight, far from mind’
• Communication difficulties
• Employee isolation

Advantages of Flexible Working Arrangements for Employer:

• Enhance employee engagement
• Reduced absenteeism
• Reduced overtime
• Reduced office expenses
• Increased productivity
• Increase in employee loyalty
• Better job recruitment and employee retention
• Reduces staff turnover
• Cost reduction

Disadvantages of Flexible Working Arrangements for Employer:

• Unclear boundaries
• Missed opportunities for collaboration
• Potential negative impact on customers
• Not practical for all employees and positions
• More complicated schedule management
• Some jobs do not work well with flexible scheduling
• Create an unhealthy relationship with work

Workforce Flexibility
Flexibility of workers means that being able to quickly adapt new circumstances as they arise.

 Functional flexibility
In functional flexibility employees have the ability to move between tasks as and when is required.

 Numerical flexibility
Numerical flexibility is the ability of a firm to adjust the quantity of labour to meet fluctuations in demand. For
example,

 Temporary workers
 Part time workers
  Overtime

Handy's Shamrock Organisation

Charles Handy’s Shamrock model advises a business to have three types of workers:

i. Core workers: full time, permanent staff, may be managers/professionals, central production staff
ii. Peripheral / Flex workers: temporary, flexible, part-time workers
iii. Contract workers: employed for a specific task, often for a certain time period (contractual work)

Arrangements for knowledge workers

Knowledge workers are people who create knowledge and produce new products and services for the
organisation to sell. For example:

• Researchers
• Inventors
• Chemists
• Architects

To ensure high motivation levels, an organization may have to consider carefully which projects should be
assigned to knowledge workers according their interests and goals.

 Human Resource Planning (HRP)

Human resource planning is a process that identifies current and future human resources needs for an
organization to achieve its objectives. It is a subset of HRM.

Objectives of HRP:
• Provide information
• Forecast human resource requirements
• Analyze current workforce
• Identify manpower gap
• Find training and development needs

4 Steps in Human Resource Planning

Stage 1: Analyzing present manpower capacity
• Audit of existing staff should be carried out to establish the current numbers and skills
• Also consider; staff turnover and absenteeism rate, overtime worked, periods of inactivity, staff potential

Stage 2: Forecasting future HR requirements

Stage 3: Identify the gap between supply and demand
Stage 4: Put plans into place to close the gap
• Adjustments for shortfall

Internal: Transfers, promotions, job enlargement, overtime, reduce labour turnover

External: consider suitability and availability of external human resources, recruitment

• Adjustments for surplus

Recruitment freeze, retirement, part time working, redundancy

Step Four of HRP (given above) includes number of plans will be created and used:
• Numbers and types of required people
Recruitment plan • Recruitment program
• Number and types of trainees required
Training and Development plan • Training programme
Redevelopment plan • Programme for transferring staff
Retention plan • Career development programmes

HRM in Different Types of Organisation

New forms of organisation have resulted in changing HR needs. For example:

Project Based Teams

Employees are organized into work-teams. HR implications:

• Multi-skilled employees are required

• Intensive training will be needed
• A movement away from traditional hierarchies to flatter structures

Virtual Organisations
In a virtual organisation, the employees are spread geographically and communicate via phone, email or the
internet.

The HR Cycle
Also known as the Human Resources Life Cycle or the Employee Life Cycle refers to the stages of an
employee’s time in a particular organisation and the shifting roles the Human Resources function played in
each of those stages.

The HR Cycle consists of Seven Stages:

 Recruitment
 Selection
 Hiring
 Training and development
 Performance appraisal
 Compensation package
 Decruitment

 Recruitment
The best recruitment campaign will attract an appropriate number of suitable applicants, be cost effective, be
speedy and show courtesy to all candidates.
Steps in Recruitment Process:
a. Job Analysis
b. Prepare Job Descriptions
c. Person Specifications
d. Advertise The Position

 Job Analysis
Job analysis is the procedure through which you determine the duties and nature of the jobs and the kinds of
people who should be hired for their goals.

There are many alternatives to recruitment, e.g.

 Promotion of existing staff
 Temporary transfers of existing staff
 Sharing out duties and responsibilities among existing staff
 Rotating jobs among staff
 Using external contractors

 Job Descriptions
Job description is a detailed and general written statement of a specific job, based on the findings of a job
analysis.

A job description provides information on the following elements:

 Job title
 Job identification (department, relationship to overall objectives)
 Job position in the organization
 Job location
 Job duties
 Process of supervision
 Identification of key difficulties
 Aspects of the job environment
 Wages / salary range
 Working conditions

 Person Specifications
A job specification document provides information on the following elements:

Candidate’s↴
 Qualification
 Experience
 Skills
 Knowledge
 Emotional characteristics

Rodger’s 7-Point Plan about Person Specifications Document

 # Category Example
Details of previous work experience and circumstances, e.g. family background, criminal
1 Background
record
2 Attainments Qualifications, experience
Acceptability, influence over others, steadiness, dependability, self-reliance, goals and
3 Disposition motivations
4 Physical make-up Appearance, speech, health and physique, body language
5 Interests General interests and hobbies
6 General intelligence Fundamental intellectual capacity
7 Special attributes Skills such as the ability to speak another language or IT skills

Fraser's 5-points plan about Person Specifications

# Category Example
1 Impact on others Appearance, speech, manners

2 Required qualifications Education, training, experience

3 Innate abilities Brain, comprehension, aptitude for learning

4 Motivation Determination and achievement

Emotional stability, ability to stand-up to stress, ability to get on with
5 Adjustment people

 Advertise the Position

It is important to know where suitable candidates may be found, how to make contact with them and to
secure their applications.

The following sources are available for advertisement:

Source Comment
 Free
Job Centre
 May not find a suitable candidate
 Reduces burden on employer
 May be a source of expertise
Recruitment Consultant
 Expensive
 May not understand the organisation's needs
 Can meet people face-to-face
Job Fair
 May not attract enough suitable candidates
 Good coverage for national jobs
National Press
 Advertisements are expensive and short-lived
 Useful for local staff
Local Newspaper  Cheaper than national
 May not attract sufficiently qualified people
 Good as long as target people are frequent internet users
Internet
 Cheaper
 Expensive
Radio and TV
 Produce a large number of suitable candidates
 Already degree of selection
Specialist Journals
 May contain many similar advertisements

 Selection
Selection is the process of putting right men on the right job.
Steps in a Selection Process:
a. Application Forms
b. Screening Applications
c. Selection Tests
d. Assessment Centers
e. Conducting Interviews
f. Checking References / Background Checking
g. Final Approval

 Collecting application forms

Application forms are used to obtain relevant information about the applicants and allow for comparison with
the person specifications of the job.

 Screening Application Forms

Screening is a process used to determine a job applicant's qualifications and potential for a position to which
they have applied.

 Selection Tests
These tests include:
• Intelligence tests
• Medical tests
• Aptitude tests
• Psychometric tests
• Written tests

 Assessment Centers
Assessment centers use a series of mock scenarios and exercises to find the right person for the role. For
example:

• Group discussions
• Presentations
• Questionnaires
• Simulations
• Games
• Role play
• Exercises
• Self-appraisal
• Peer rating
• Speeches

 Conducting Interviews
Once a short list has been drawn up after tests and assessment, the most common way of selecting a
candidate is interview.
The interview is a conversation between the candidate and the recruiter, allowing candidate to share his
thoughts and practice active listening.

Different Types of Interview

• Face-to-face interview

In Face-to-face interview, the interviewer directly communicates with the respondent in accordance with the
prepared questionnaire.

• Group interview

A group interview consists of a single interviewer, interviewing multiple candidates at the same time for the
similar job.

• Panel interview

A panel interview is when two or more interviewers take interview of a single candidate at the same time.

• Sequential / Serial interview

This is a series of interviews in which a candidate is progress by one interviewer to another during the
interview cycle and perhaps a half-dozen people in between.

• Problem solving interview

Problem solving interview are used to identify, test and measure candidate's approach to difficult and unusual
situations.

• Stress interview

In a stress interview, interviewer asks uncomfortable questions to the interviewee and puts him in an
awkward position to determine how the job applicant reacts under pressure.

• Structured and Unstructured interview

In a structured interview, the interviewer asks a particular set of standardized, patterned and pre-planned
questions which remains the same for every applicant.

In an unstructured interview, the interviewer is free to ask any type of questions.

Interview Biases
Interview bias occurs when the interviewer judges a candidate not only on their skills and competencies.

Common interview biases are:

• Similar-to-Me effect – when interviewer gives positive response to the candidate who is similar to him in
some aspects (e.g. similar interests, backgrounds, appearance)
• Cultural noise – when a candidate is trying to impress the interviewer rather than share their valid
preferences because the interviewer may not pick up him on them
• Contrast effect – when interviewer compares candidates to each other instead of comparing candidates to
a standard
• Stereotyping – when the interviewer assumes a candidate has specific traits because they are a member of
a group such as gender, religion, age, race etc.
• Halo effect – when an interviewer judges the candidate entirely off of one very good thing
• Horn effect – when the interviewer sees that a candidate has scored poorly in one area and believes that
he then will do poorly in all areas
• First impression – when candidates are judged based on what happens during the first few instants of the
interview
• Negative Emphasis – when the interviewer receives a small amount of negative information and uses it to
base their entire hiring decision off of it
• Central tendency – when an interviewer is holding out for the perfect candidate and therefore finds fault
with everyone else

 Checking References
Checking references is a process used to get more information about the candidates by contacting their
previous employers.

 Background Checking
• Education history (high school, university, etc.)
• Social media profiles
• True identity
• Past addresses
• Criminal records
• Employment history
• Credit reports
• Driving records

 Final Approval
When the hiring manager finds appropriate person for the job, he informs that a job offer letter will be
prepared for him or her.

 Hiring
a. Issuance of Job Offer Letter
b. Negotiation
c. Induction / Onboarding

 Issuance of Job Offer Letter

Once an eligible candidate has been found, the company sends a formal document to the candidate offering
them a job. It should contain the following elements:

 Job Title
 Employment Classification (position, exempt, non-exempt, full-time, part-time)
 Starting Date
 Working Location
 Working Schedule
 Basic Salary
 Perks and Benefits
 Bonuses and Commissions
 Paid Time Off (everything from planned vacations to sick days)
 Important Dates
  Company Policies and Culture
 Confidentiality Agreement and Non-Compete Clause
 Conditions and Contingencies
 Termination Conditions
 Instructions for Accepting the Offer

 Negotiation
It may be necessary to reach a mutually agreeable compromise over some aspects of the employment
contract, e.g. pay, hours of work, holiday allowance, etc.

 Induction / Onboarding
Induction or onboarding is the process for welcoming newly recruited employees and supporting them to
adjust to their new roles and working environments.

A good induction programme would typically include:

Aspects Examples
• Joining instructions
Pre-employment • Conditions of employment
• Company literature
• Emergency exits
Health and Safety • First aid facilities
• Protective clothing
• Site map
Organisation’s • Telephone and computer system
• Organisation chart
• Absence / sickness procedure
Terms and Conditions • Working time including hours, breaks and flextime
• Holidays
• Payment date and methods
Financial aspects • Benefits and pension
• Expense procedures
Training • Discuss training opportunities and agree training plans
• Organisation background
Culture and Values
• Mission and objectives

 Training and Development

Training is the process of teaching employees the basic skills that they need to perform their jobs.
Development refers to teaching managers and professionals to increase knowledge, skills and attitude
needed for future jobs.

Comparison Chart: Training Vs Development

Basic Terms Training Development
Period Length Short-term Long-term
Main Focus Present Future
Orientation Job-oriented Career-oriented
Motivation Trainer Self
Core Target To help employees to improve their To equip employees with skills for future
 performance challenges
Number of Individuals Many Only one
Depth of Knowledge Related to a job only All-rounded and long-lasting
Initiative Management Executive
Scope of Learning Limited to job Wider

Methods of Training and Development

Methods for individuals Methods for groups
• Courses • Lectures
• Computer-based training • Discussions and role plays
• Coaching / Mentoring • Business games
• Job rotation • Outdoor pursuits
• Project work

Indicators of Training Needs:

• Any gap between required and actual level of competence
• Introduction of new technology or any other changes
• Some quantitative indicators such as absenteeism, high labour turnover, Lack of motivation, etc.

Two Major Types of Training:

1. On-The-Job Training
2. Off-The-Job Training

On-The-Job Training
On-the-Job training is a method of imparting training to the employees when they are involved in the real
work activities at the workplace and learn through experience.

Methods of On-The-Job Training:

• Coaching / Mentoring – where a more experienced or skilled individual provides employee guidance
intended to help develop the individual's skills
• Job Instructor – where a new employee is trained step by step by a supervisor
• Temporary Promotion – where an individual is promoted into his superior’s position, whilst the senior is
absent, to gain experience about the demand of this position
• Committee Assignments – refer to the method in which the trainees are asked to solve an actual
organizational problem
• Job Shadowing – where one employee follows another more experienced colleague and observes how he
works in their role
• Job Rotation – in which employees are moved between two or more jobs in a planned manner and at
regular intervals

Off-The-Job Training
In Off-the-Job training, the workers learn their job roles away from the actual workplace.

Methods of Off-the-Job Training:

• Role-Playing Sessions – allows a learner to assume the role or tasks of a job by practicing or simulating real
working conditions under the guidance of a trainer
• Case Studies – can present a real-life situation, which lets trainees to consider what they would do
• E-Learning – in which delivery of training and learning through digital resources
• Group Discussions – where sets of people examine several empirical studies to find out commonalities to
derive the underlying general principles
• Day Release – is a system in which workers spend one day each week at a college in order to study a
subject connected with their work
• Block Release Courses – in which the workers are released from industry for a period of full-time
attendance at a college

Comparison Chart
Basis for Comparison On-The-Job Training Off-The-Job Training
Approach Practical Theoretical
Active participation Yes No
Location At the workplace Away from workplace
Principle Learning by performing By acquiring knowledge
Work disruption No Yes
Carried out by Experienced employees Professionals or experts
Cost Inexpensive Expensive
Suitable for Manufacturing firms Non-manufacturing firms

Benefits of Training for Individuals:

• Improve skills
• Increase confidence
• Prepare employees for higher responsibilities
• Build workplace relationships
• Increase employee motivation
• Enhance employee performance
• Improve workplace safety
• Job satisfaction

Benefits of Training for the Organization:

• Provide a framework to develop strengths
• Encourages innovation and risk acceptance
• Boosts adherence to quality standards
• Improve reputation of organization
• Innovation in strategies and products
• Reduced employee turnover
• Increase productivity
• Improve the quality of work
• Less supervision
• Flexible workforce
• Improving company culture

Steps in a Training Process:

 1. Training needs assessment
2. Define training objectives
3. Designing a training program
4. Implementation of the program
5. Evaluation and constant monitoring

Evaluation of Training
According to Kirkpatrick there are four levels at which training can be evaluated:
i. Reaction – did the participants like the training?
ii. Learning – did the participants learn the principles, facts and theories covered in the training?
iii. Behavior – did behavior change as a result of the training?
iv. Results – what benefits (e.g. reduced costs, better quality, job satisfaction) resulted from the training?

Kolb's Experiential Learning Cycle

Kolb's experiential learning cycle describes a four-stage process of how we acquire and embed new
knowledge. He believes that classroom learning is false and that actual learning comes from real life
experiences. These stages are:

i. Concrete Experience – actually doing the activity

ii. Reflective Observation – reflecting on performance in the activity, considering successes and failures
iii. Abstract Conceptualization – apply theory to the experience of doing the activity
iv. Planning Active Experimentation – consider theory and reflection to guide planning for subsequent
experiences

Or

i. The first step is where the person is learning something new

ii. Then the experience is reviewed
iii. Then the experience is accepted or rejected and
iv. The fourth step is when the person calculates how and when to apply what he has been learned

Honey and Mumford's Learning Styles

Honey and Mumford describe four different learning styles:

i. Activist – having an experience, continues to 'Reflector'

ii. Reflector – reviewing the experience, continues to 'Theorist'
iii. Theorist – concluding from the experience, continues to 'Pragmatist'
iv. Pragmatist – planning the next step, continues to 'Activist'

 Performance Appraisals
Appraisal is the systematic review and assessment of an employee's performance, potential and training
needs.

Benefits of Appraisal:
• Salary administration
• Performance feedback
• Retention or termination of personnel
• Identifying candidates for promotion
• Helps determine training
• Evaluates goals
• Addresses areas for improvement
• Guides current projects

6 Steps in Performance Appraisal:

1. Establish performance standards
2. Communicate performance standards to the employees
3. Measure actual performance
4. Compare actual performance with established standards
5. Discussing the results
6. Action plan development

Appraisal interview
Appraisal interview is a formal discussion process between an employee and his manager regarding
performance and other aspects of job role. The following are should have been read and copied for the
interview:

 Job Description Form

 Statement of Performance such as the rating sheet or the appraisal form
 Record Book which highlights the good and bad points of the employee’s performance over the review
period
 Comments page from clients, customers or other outside agencies
 Employee’s self-assessment form
 Employee’s file with background notes on attendance, timekeeping, personality, temperament and family
 Appraisal form for both parties to complete at interview

Conducting the interview

The following points should do while conducting the interview:

• Ask open questions, requiring more than a yes or no answer

• Ask closed questions only when clarification is needed
• Allow time for the appraisee to ask questions
• Refrain from asking same or confusing questions
• Encourage conversation with body language and appropriate cues
• Periodically summarize, reflect and check your understanding
• Build upon answers
• Refrain from talking too much
• Handle difficult or sensitive areas carefully
• Be tolerant of pauses and silences
• Listen carefully; making sure that the interviewee knows you are listening
• Keep the conversation from wandering off into irrelevant areas
• Manager to act as a counsellor rather than a judge or a critic

Action Plan Development

Action Plan may include:

• Providing feedback
• Training
• Rescheduling work
• Altering working methods
• Upgrading equipment

The Barriers to Effective Appraisal

Lockett suggests that appraisal barriers can be identified as follows:
• Differing views regarding performance
Confrontation
• Feedback is badly delivered
• Appraisal is seen as a one-sided process
Judgement • The manager reacts like judge, jury and counsel for the
prosecution
• An unproductive conversation
Chat
• No outcomes set
• Purely a 'form filling' exercise
Bureaucracy
• No purpose or worth
Annual event • A traditional ceremony, carried out once or twice a year
• No follow up
Unfinished Business • Points agreed are not actioned

Appraisal and Career Development

Appraisal has a clear link to career development. Career development sees the interaction of three concepts:
 Reward / Compensation Management
Reward refers to all the monetary, non-monetary and psychological payments that an organisation provides
for its employees in exchange for the work they perform.

Reward / Compensation Management, which comes under human resource management, is concerned
with the formulation and implementation of policies and strategies that aspire to reward employees
equitably, fairly and regularly in accordance with their performance and value to the company.

Objectives and Benefits of a Reward System:

• Create job satisfaction
• Attract and retain talent
• Allow personal growth
• Strong and positive company culture
• High-quality performance
• Compliant with laws and regulations
• Consistency and fairness
• Recognize factors other than job performance
• Motivation of performance
• Improve skills and increase knowledge
• Increase the level of efficiency and productivity
• Make better employer and employee relations
• Employees social recognition and status
• Reinforce desirable and applicable employee behavior
• Contribute to competitive advantage

Compensation Package
Compensation package refers to the combination of pay, benefits and perks that the employer offers to an
employee in exchange for employment.

Pay / Remuneration include:

• Basic pay
• Incentives / Bonuses
 • Premiums
• Commission

Benefits include:
• Paid time off (holidays, vacation, sick days)
• Disability insurance (short-term and long-term)
• Life and AD&D insurance
• Retirement savings plan
• Health insurance
• Supplementary pay
• Stock options and 401(k) plans
• Child-care and tuition assistance

Perks include:
• Flexible hours or remote work options
• Free lunches, snacks, coffee
• Summer Fridays
• Hotel suites
• Company car
• Employee discounts
• Entertainment (match or theater tickets)
• Gym membership
• Mobile phone/workstation/broadband Packages
• Free staff development courses
• Transport allowance
• House rent allowance

Types of Compensation
There are two types of compensation:

Direct compensation involves monetary payments to employees for time worked or results obtained, e.g.
basic pay, incentives, premiums, commission.

Indirect compensation refers to the various forms of non-monetary pay or expenditures made by an
employer offered to employees and is typically referred to as fringe benefits include benefits and perks.

 Decruitment
Decruitment is the procedure by which an organization decreases its workforce. There are various
decruitment options available to an organization:

 Firing – permanent involuntary termination

 Cutbacks / Layoffs – temporary involuntary termination; may last only a few days or extend to years
 Attrition / Whittling down – not filling openings created by voluntary resignations or normal
retirements
 Moves / Transfers – moving employees either laterally or downward; usually does not reduce costs but
can reduce intra-organizational supply-demand imbalances
 Reduced workweeks – having employees work fewer hours per week, share jobs or perform their jobs
on a part-time basis
 Early retirements – providing incentives to older and more senior employees for retiring before their
normal retirement date
 Job sharing – having employees share one full-time position

 Line Manager
A line manager is an employee who directly manages other employees and operations while reporting to a
higher-ranking manager.

Line managers’ activities typically include:

• Recruiting the right person for the job
• Training, coaching and mentoring new employees to get them up to speed at work
• Planning the goals, objectives and tasks of their department and communicating this to employees as
needed
• Effectively communication organizational goals set by the management to the employees
• Managing the resources within their control (e.g., staff time; finance) to fulfill the objectives set
• Ensuring compliance with organizational policy and legislation
• Providing blueprint, guidance and plan to their teams
• Scheduling regular meetings with staff members to discuss progress and any bottlenecks
• Measuring performance metrics against set expectations and taking corrective actions where necessary
• Ensuring quality standards are maintained at expected levels
• Evaluating employee performance and providing performance appraisals
• Motivating and engaging the employees in a timely manner so as to ensure productivity
• Providing reports on performance and goals to higher authorities
• Protecting employees’ health and physical condition
• Gaining creative cooperation and developing smooth working relationships

 Code of Conduct
A Code of Conduct is a defined set of organization’s norms, rules, responsibilities, principles, values and
employees’ expectations, behaviors and relationships that a business considers important and believes
necessary for its success.

A Code of Conduct should be:

• Easy-to-Understand – doesn’t include any technical or legal jargon
• Comprehensive – covers all important details
• Supported by Leadership – acknowledged and approved by the company’s senior management
 • Accessible – available to all employees, current investors and potential investors
• Visually Appealing – follows a style that is clean and reflective of your organization’s brand

Steps in drafting a Code of conduct:

i. Determine who will be included in the creation of your company’s code of conduct
ii. Consider any ethical issues that have occurred in the past
iii. Create an outline
iv. Discuss the draft with stakeholders
v. Compose the final draft
d

The Components must include in a Code of conduct are:

 Day-to-day business practices
 Dress code
 Privacy policy
 Mission statement and values
 Workplace policies and procedures
 Industry compliance and regulations
 Disciplinary actions
 Unacceptable behaviors and their consequences
 Employee rights
 Chain of command
 Disciplinary process
 Conflicts of interest
 Outside directorships and other outside activities
 Insider trading
 Corporate opportunities
 Discrimination and harassment
 Record-keeping and retention
 Gifts and entertainment
 Health and safety
 Confidentiality
 Protection and proper use of company assets
 Relationships with government personnel

 Ethical Code
A Code of Ethics sets ethical principles and ethical standards to which professionals aspire and by which
their actions can be judged.

Types of Ethics within Organizations:

• Personal ethics
• Professional ethics
• Organizational culture ethics
• Organizational system ethics
Benefits of an Organizational Code of Conduct:
• Define the company culture
• Smooth functioning of business
• Develop good relationship between business and society
• Enable healthy competition
• Attract and retain good employees
• Make loyal investors
• Increase team bond
• Enhance the strength of the management
• Builds and maintains a good reputation
• Compliance with laws and regulations
• Provides guidelines of employee behavior
• Outlines a company's principles and values
• Shows your company’s vision and mission
• Setting clear benchmarks
• Attracts investors and customers
• Increases employee loyalty and morale

 Reliable Human Resource Practices

Jeffrey Pfeffer proposes a set of best practices that can increase a company’s profit and can run business in
effective and efficient way.

7 Human Resource best practices by Jeffrey Pfeffer:

1. Providing job security to employees
2. Hiring the right people
3. Self-managed and effective teams
4. Fair and performance-based pay
5. Training in relevant skills
6. Reduction of status difference within organization
7. Making information easily accessible to those who need it

1. Providing job security to employees

Job Security is the assurance an employee has that they will be able to continue working their current job for
the foreseeable future.

Advantages of Job Security:

• Give more relaxed atmosphere in the workplace
• Greater employee engagement
• Reduced employee turnover rate
• Improves employee’s efficiency levels and productivity
• Reduced recruitment expenses
• Increase a company’s reputation
• Having experienced and loyal workforce
2. Hiring the Right People
‘Choose right candidate for the right job at the right time’ is one of the most important aspects of a successful
hiring process.

Selection instruments are used to uncover three key candidate characteristics:

Ability
 Is the person able to do the job?
 Does the person have the right technical and soft skills?
 Is the person smart enough to do the job well?

Trainability
 Can we train this person to improve his skills?
 Has the person the aptitude to learn and keep developing?

Commitment
 Will the person commit to his work and to the organization?
 Will we be able to retain this person once he is up to speed and fully productive?

3. Self-managed and effective teams

Self-managed team is a group of employees within an organization who share the responsibility of planning,
doing and executing their work without the supervision of a manager.

Advantages of Self-Managed Team:

• Greater employee engagement
• Lower overheads and maintenance costs
• Better and Informed decision-making
• Enhanced communication
• Increased motivation
• Reduced barriers to work
• Lower absenteeism
• Efficient operations
• High commitment
• Minimum supervision
• More discipline
• Members fill-in for each other when there are holidays or sickness
• Creative ideas are generated by the team
• Team members can hire and coach new team members
• Pay for performance is easier to administrate
• Trust and respect between team members
• Greater improvements in quality, speed, process and innovation

4. Fair and Performance Related Pay

Performance-based compensation is a type of compensation made to employees within a company based on
their performance and the achievement of specific goals.

Lepak & Snell (2002) offer a good model to assess how important individual employees are.

Benefits of Performance Related Pay:

• Improves goal setting
• Retains employees
• Employees are able to influence performance by changing their behavior
• Improves individual performance, productivity and quality of work
• Identifies poor performance
• Flexibility may help retain valued staff
• Boosts employee’s motivation and morale

5. Training in relevant skills

Training is the process of teaching employees the basic skills they need to perform their jobs.

70|20|10 rule:
The 70-20-10 rule reveals that individuals tend to learn 70% of their knowledge from challenging experiences
and assignments, 20% from developmental relationships and only 10% from coursework and training.

6. Reduction of status difference within organization

Every employee is a valuable member of the organization and should be treated in the same manner. In
Japanese organizations, this is expressed with common canteens, company uniform and similar sickness and
holiday entitlement.

7. Making information easily accessible to those who need it

Information sharing is essential if you want that your people to share their ideas. They need to have an
informed understanding of what’s going on in the business.

Benefits of Sharing Information within an Organization:

• Employees can get a sense of satisfaction and belonging
• Creates better customer experience
• Identifies and fills knowledge gaps
• Generates creative and innovative ideas
• Boosts efficiency and competence
• Cuts down costs and time
• Builds trust
• Enables better and faster decision making
• Find better ways of doing things
• Builds learning culture

Functions of a Reliable Human Resource Management:

• Improve employee retention
• Reduce compliance issues
• Building relationships
• Performance management strategy
• Improved safety and stability
• Protection from liabilities
• Better training and development
• Improved employee satisfaction
• Staff recruitment and selection

Market is a place where two or more parties can meet to engage in an economic transaction or in exchange
of goods, services and information.
Markets can be physical like a retail outlet or virtual like an e-retailer.

Marketing is the management process responsible for identifying, anticipating and satisfying customer
requirements profitably.

 Marketing Management
Marketing management is when you plan, organize, control and implement the marketing programs of an
organization.

 Marketing Management Philosophies

Five alternative concepts for designing a customer-driven marketing strategy:
1. Production Orientation
2. Product Orientation
3. Selling Orientation
4. Social Marketing Orientation
5. Marketing Orientation

1. Production Orientation Concept

This concept lays emphasis on ‘availability and affordability of products’.

Main focus:
Manufacture goods cheaply, quickly and in huge quantity

Disadvantages:
• Customers may not be interested in your products
• You don't have an established reputation
• Company stands and falls on the strength of the product
• Low cost may be associated with lower quality
• Production may exceed demand

2. Product Orientation Concept

Product concept lays emphasis on ‘quality of production’ rather than quantity of production.

Main focus:
Product’s good quality, adding features in product

Disadvantages:
The product may not fulfill the demand

3. Selling Orientation Concept

This concept stresses on ‘attracting and persuading customers’ to buy the product.

Main focus:
To sell whatever is produced by using intensive promotional techniques

Disadvantages:
• Loss of customer confidence
• Costs are high
• Not always sustainable in the long run
• Does not take account of customer preferences

4. Social Marketing Concept

The societal marketing concept is mainly concerned with meeting the needs of customers as well as working
towards protecting the environment, natural resources and overall well-being of the society.

Main focus:
Welfare of the society in a profitable way

*Holistic marketing
It describes that a business, like a human body, has different parts but it is only able to function properly when
all those parts work together towards the same objective.

The process of holistic marketing takes into account the considerations of customers, employees, suppliers
and the community as a whole when creating and implementing marketing strategies.

5. Marketing Orientation Concept

All of the approaches reviewed so far have potential drawbacks. The best approach that an organisation can
adopt is a Marketing Orientation. It is a ‘Customer-Centered Approach’.

Main focus:
Customer satisfaction

Benefits of the Marketing Orientation:

• Increases market share
• Fosters product innovation
• Customer feedback leads to continuous improvement
• Higher acceptance rate
• Customer satisfaction
• Improved brand image
• Greater ability to meet needs
• Improved product quality
• Healthier company culture
• Faster adaptation to change

 Understanding the Marketing Environment

A PESTEL is an acronym for a framework or tool used by marketers to analyze and monitor the Macro-
Environmental factors that have an impact on an organization. The letters stand for:
P-Political
E-Economic
S-Social
T-Technological
E-Environmental
L-Legal

Political Factors
Political factors are those driven by government actions and policies and influences over economy or industry.

Political factors include:

 Internal political issues and trends
 Regulation and de-regulation trends
 Trade restrictions and reforms, tariffs and also political stability
 Upcoming elections and changing leadership
 Tax and labor laws and policies
 Global alliances, diplomatic affairs and wars
 International regulations and industry standards

Economic Factors
Economic factors relate to the broader economy and may affect how a company prices their products or
influence the supply and demand model.

Economic factors include:

 Current and projected economic growth or decline
 Interest rates
 Job growth and unemployment
 Impact of globalization
 Inflation and wage rates
 Credit availability
 Fiscal policies
 Stock market trends
 Consumer behavior and confidence

Social Factors
Social factors can impact the industry environment by influencing peak buying periods, purchasing habits and
lifestyle choices.

Social factors include:

 Demographics (e.g age, gender, race, family size)
  Consumer attitudes, opinions and buying patterns
 Population growth rate
 Employment patterns
 Socio-cultural changes
 Ethnic and religious trends
 Cultural norms and expectations
 Health consciousness
 Consumer habits and lifestyles
 Immigration rates

Technological Factors
Technological factors consider the rate of technological development that could affect a market or industry
and consumer choices and buying power.

Technological factors include:

 New ways of producing goods and services
 New ways of distributing goods and services
 New ways of communicating with target markets
 Innovations in technologies
 Artificial Intelligence
 Rate of technological development
 Cybercrime trends and cybersecurity tools
 Evolution of infrastructure

Environmental Factors
These factors are mainly concerned with the effect of the surrounding environment and the influence of
ecological aspects.

Environmental factors include:

 Increasing scarcity of raw materials
 Pollution targets
 Carbon footprint targets
 Waste disposal laws
 Environmental protection laws
 Energy consumption regulations
 Climate change
 Recycling processes
 Waste disposal
 Weather and natural disasters

Legal Factors
An organisation must understand what is legal and allowed within the territories they operate in.
 Legal factors include:
 Health and safety
 Equal opportunities
 Advertising standards
 Consumer rights and laws
 Product labeling and product safety
 Access to materials, quotas, resources, imports / exports and taxation
 Privacy laws
 Trade and commerce policies
 Labor laws
 Industry regulation / de-regulation
 Infrastructure and public health legislation

 Market Planning Process

A company may currently have a sales, production or product orientation and may want to adopt a marketing
orientation. In order to do this, it will need to implement a marketing action plan.

The following components should be included in this plan:

Step 1: Situation Analysis
A number of techniques can be used e.g.

SWOT analysis is a strategic management technique used to help the organization identify its Strengths,
Weaknesses, Opportunities and Threats related to business competition or project planning.

A PESTEL is an acronym for a framework or tool used by marketers to analyze and monitor the Macro
(external)-Environmental factors that have an impact on an organization.

Step 2: Set its Corporate Objectives

The organisation may already have a mission statement and a set of corporate objectives in place.

Step 3: Set its Marketing Objectives

The organisation should decide what it wants to achieve based on its business objectives.

Marketing objectives should be SMART – Specific, Measurable, Achievable, Realistic and Time bound, e.g. to
achieve a 10% growth in sales in Europe in the next 12 months.

Step 4: Devise an appropriate Marketing Strategy

The organisation should consider the following:

I. Segmentation – the market should be segmented, e.g. by age, social class or income. The needs of each
segment should be established using market research.
II. Targeting – the most attractive segments in terms of profitability and growth should be targeted using an
appropriate marketing mix.
III. Positioning – an appropriate positioning strategy, e.g. differentiation or cost leadership should be chosen
for each market segment.
IV. Marketing Mix – the organisation should use the marketing mix to determine the correct strategy for
product, price, place and promotion.

Step 5: Plan the Marketing Mix

The marketing mix refers to the set of actions or tactics that a company uses to promote its brand or product
in the market.

Step 6: Implementation and Control

The marketing plan should then be implemented and monitored.

 Marketing Strategy
A Marketing Strategy refers to a business's overall game plan for reaching prospective consumers and
turning them into customers of their products or services.

This plan is STP model which includes:

1. Segmentation
2. Targeting
3. Positioning

 Segmentation
Market Segmentation is the process of dividing a broad consumer or business market into homogenous
groups to whom a separate marketing mix can be focused.

A Market Segment is a group of consumers with distinct, shared needs.

Kotler suggested that segments must be:

• Measurable – It must be possible to identify the number of buyers in each market segment.
• Accessible – It must be possible to reach the segment, e.g. some buyers in a market may be tied to
suppliers by long-term supply contracts. Therefore, this market is not accessible.
• Substantial – The cost of targeting a particular segment must be less than the benefit such as small
market segments may prove unprofitable.

Bases for Segmentation:

Demographic Geographic Psychographic Behavioral
 Age  Regions  Interests  Usage rate
 Gender  Population  Opinions  Product benefits
 Income  City size  Self-image  Brand loyalty
 Occupation  Climate  Activities  Price consciousness
 Education  Hobbies  Occasions or events
 Social class  Personality  User status (regular or
 Generation  Attitudes potential)
 Family size  Values
 Lifestyle
 Religion
Industrial Market Segmentation
It is a system to identify and categorize the diversified potential customers of B2B market into different
groups.

Different parameters for Industrial Market Segmentation are:

 Industry Type

Different types of industries form different types of industrial markets for B2B products. These industries are
thus segmented as automobiles, IT, chemicals, FMCG, textiles, iron & steel, services and so on.

 Geographic

B2B markets are segmented based on geographical locations, e.g. markets are segmented as local, regional,
domestic and international markets or are segmented as rural and urban

 Business Operations

Industrial market segmentation is also done based on the diverse nature of operations performed by the
industrial units. This includes manufacturing, assembling, distributing, retailing, consulting, etc.

 Consumption Rate or Size

Based on the annual consumption of resources and the size of orders processed, industries are segmented as
large, medium or small scale industries.

 Ownership

Based on ownership structure, industrial companies are classified as sole proprietorships, partnerships,
private, public, government or corporations.

 Buying Techniques

Different buying techniques adopted by different industrial buyers segments the industrial markets or
customers as tender or sealed-bidding, leasing, service contracts, direct purchasing and agency-approved
purchasing.

 Targeting
Targeting in the STP model refers to choosing the right segments to target and plan their marketing activities.

When evaluating potential target markets, the following aspects should be considered:

• Size of segment
• Growth potential
• Profit potential
• Degree of competition
• Accessibility
• Barriers to entry

Because the people in the different segments will have different needs and wants, the company has a choice
in terms of its marketing approach. It can go for:

• Concentrated Marketing (niche or target marketing) – involves a brand directing all effort and resources to
develop and market a product for one specific segment of the target audience
• Differentiated Marketing (segmented marketing) – the company makes several products each aimed at a
separate target segment
• Undifferentiated Marketing (mass marketing) – this is the delivery of a single product to the entire market
with very little concern for segmentation

 Positioning
Positioning is a strategic process that involves creating an identity / image of the brand or product within the
target customers’ mind.

Porter identified a number of potential strategies:

Perceptual Mapping
It is a diagrammatic technique used by marketers to visualize potential customer’s perceptions and opinions
about products or brands.

 Market Research
Market research is the process of determining the viability of a new service or product through research
conducted directly with potential customers.

There are two types of research data; Primary and Secondary

Primary data
Primary data is collected from the first-hand experience and is not used in the past.
Methods to collect primary data:
a. Interviews
b. Questionnaires and surveys
c. Observations
d. Documents and records
e. Focus groups
f. Experiment
g. Archival research

Secondary Data
Secondary data is the data that has been used in the past. The researcher can obtain data from the sources,
both internal and external, to the organization.

Internal sources of secondary data:

a. Organization’s records
b. Mission and vision statements
c. Financial statements
d. Organization’s magazines
e. Sales report
f. CRM software
g. Executive summaries

External sources of secondary data:

a. Government reports
b. Press releases
c. Libraries
d. Internet
e. Government records (e.g., census, tax records, social security information)
f. Trade magazines or business journals

Analyzing Market Research

The method will depend upon whether the data is:

 Quantitative – quantifiable from a sample of consumers

 Qualitative – opinions expressed by a sample of customers

Methods of Analysis - Quantitative Data

• Correlation analysis – marketers will be interested in the strength of the relationship between the two
variables, e.g. whether an increase in age resulted in an increase in demand for a product
• Regression analysis – identifying which variables have an impact of a topic of interest like advertisement
= increase in sales
• Variance analysis – used to monitor the impact of certain changes on performance

Methods of Analysis - Qualitative Data

• Forecasting
• Market Demand (Total Market Potential)
• Area Demand (Area Market Potential)
• Industry Sales and Market Share
• Survey of Buyers’ Intentions
• Sales Force Opinions
• Expert opinions
• Past sales analysis
• Market tests

 Marketing Action Plan - The Marketing Mix

Once the positioning strategy has been arrived at, the marketing mix will be formulated.

The Marketing Mix refers to the set of actions or tactics that a company uses to promote its brand or
product in the market.

Traditional Marketing Mix (4P's)

Product Quality, design, durability, packaging, range of sizes, after-sales service, warranties, brand
image, usage occasion, availability
Place How to transport and distribute the goods, where to sell the goods, sales and segmented
channels
Promotion Advertising, personal selling, public relations, sales promotion, sponsorship, direct marketing
(e.g. direct mail or telephone marketing)
Price Price level, discounts, credit policy, payment methods

Additional (3P's)
People Individuals on marketing activities, individuals on customer contact, recruitment, training and
skills, remuneration
Processes Customer focus, business-led, IT supported, process design and features
Physical Evidence It refers to everything your customers see when interacting with your business includes the
physical environment where you provide the product or service, the layout or interior design,
your packaging, your branding, etc.

Or
Products / Services: How can you develop your products or services?
Prices / Fees: How can we change our pricing model?
Place / Access: What new distribution options are there for customers to experience our product? E.g.
online, in-store, mobile etc
 Promotion: How can we add to or substitute the combination within paid, owned and earned media
channels?

Physical Evidence: How we reassure our customers? E.g. impressive buildings, well-trained staff, great
website

Processes: Are there internal process barriers in the way to delivering the best customer value?
People: Who are our people and are there skills gaps?
Partners: Are we seeking new partners and managing existing partners well?

 Product
A product can be a physical commodity, a service or an experience. It has two important roles in the marketing
mix:

• It plays a key role in satisfying the customer's needs

• Product differentiation is an important part of competitive strategy

Product Portfolios
A product portfolio is a collection of products or services an organization provides to its customers.

After determining the type of product(s) it will offer, the organisation needs to outline the variety and
assortment of those products.

Elements of a typical Product Portfolio:

i. Product Item: This is the individual product, e.g. a specific model of phone or a brand of washing powder.
ii. Product Line: This is a collection of product items that are closely related, e.g. The Campbell Soup
Company sells many types of soup.
iii. Product Mix: This is the total range of product lines that a company has to offer. It consists of:
iv. Width – the number of product lines, e.g. Apple sells computers, iPods, phones and accessories
v. Depth – the number of product items within each product line, e.g. Apple sells a large variety of iPods

Levels of Product
Three levels of product:
1. Core benefit
2. Actual product
3. Augmented product

Core benefit
The core benefit is the fundamental need that the customer satisfies when they
buy the product.

Actual product
The actual product is the product features and its design. Products typically have
 lots of features but very few actual / core benefits to the customer.

Augmented product
The augmented product is any non-physical parts of the product. Typically, the augmented product includes
such things as warranty and customer service.

Example:
An automobile offers personal transportation (core product), has many different features and attributes
(actual product) and may include a manufacturer's warranty or dealer's discounted service contract
(augmented product).

 Service Marketing
Service marketing means providing a service to their customers use to increase brand awareness and sales. In
fact, in service marketing, you are selling an ‘Experience’.

Types of Service Marketing

i. External marketing – means business promoting its offerings to the target markets i.e. between the
company and its customers
ii. Internal marketing – means promoting services within the organization i.e. between the company and
its employees
iii. Interactive marketing – occurs when employees and customers interact i.e. between the employees
and the customers

The factors that differentiate your service from a competitor are:

• Affordability – finding the right price range that your potential customers will consider acceptable for
your services
• Functionality – your service and value promise the best fit your customer’s needs
• Credibility – services are intangible, therefore, a large part of the customers’ buying decision will depend
on how much they trust you
• Experience – in the particular service you are offering number of years in the field for instance
• Convenience – how accessible and easy for your customers to use your services
• Variety – customers love the ability to choose so give them many options
• Self-service – how much of control your customer has over their service experience i.e. what they can and
cannot do for themselves

Core Challenges for Service Marketing / Differences between Services and

Products
1. Intangibility
Services are intangible and do not have a physical existence. Hence services cannot be touched, held, tasted or
smelt.

2. Perishability
Services cannot be stored, saved, returned or resold once they have been used, e.g. a customer dissatisfied
with the services of a barber cannot return the haircut that was rendered to him.

3. Heterogeneity / Variability
Each service is unique and cannot be exactly repeated even by the same service provider. While products can
be mass produced and be homogenous.

4. Simultaneity
This refers to the fact that services are generated and consumed within the same time frame, e.g. a haircut is
delivered to and consumed by a customer simultaneously unlike a takeaway burger.

5. Inseparability
It is very difficult to separate a service from the service provider, e.g. the barber is necessarily a part of the
service of a haircut that he is delivering to his customer.

6. Ownership
Consumers may find it hard to value a service since there is no transfer of ownership.

 Models for Investment Decisions

The organisation will need to decide how much funding to allocate to each product, e.g. for promotion,
further research and development, branding etc.

The following models should help the organisation with these investment decisions:

 Product lifecycle
 Boston Consulting Group (BCG) matrix

 Product lifecycle
A product's life cycle is usually broken down into five stages:
1. Development
2. Introduction
3. Growth
4. Maturity
5. Decline
The marketing mix will change over time as the product goes into different stages of its life.

Development Stage
It is the research phase before a product is introduced to the marketplace. This is when companies bring in
investors, develop prototypes, test product effectiveness and strategize their launch.

Introduction Stage
A small number of individuals will be prepared to pay a high price for a new innovative product, e.g. the latest
mobile phone model. The introduction stage is when a product is first launched in the marketplace. This
product life cycle stage involves developing a market strategy, usually through an investment in advertising
and marketing to make consumers aware of the product and its benefits.

Growth Stage
In this stage, prices may fall due to economies of scale and increased competitive pressure and the firm will
seek to differentiate its product and brand. Consumers have accepted the product in the market and are
beginning to truly buy in.

Maturity Stage
The maturity stage is when the sales begin to level off from the rapid growth period. At this point, companies
begin to reduce their prices so they can stay competitive amongst growing competition. The maturity stage of
the product life cycle is the most profitable stage, while the costs of producing and marketing decline.

Decline Stage
As the product takes on increased competition as other companies emulate its success, the product may lose
market share and begin its decline. The firm will look to exit the market and find profitable alternatives.

 BCG Matrix
The Boston Consulting group’s product portfolio matrix (BCG matrix) is designed to help with long-term
strategic planning to help a business consider growth opportunities by reviewing its portfolio of products to
decide where to invest, discontinue or develop products. It's also known as the Growth / Share Matrix.

This analysis classifies products into one of four categories with the following implications:

Market Growth Rate: It is the market in which the product is being sold growing quickly, slowly or not at
all? It is the rate at which a market's size is increasing.

Relative Market Share: Does the product have a high or a low share of the current market? It is the amount
of market share that a company has compared to its biggest competitor.

 Product Classifications
Products and services fall into two broad classes based on the types of consumers that use them:

1. Consumer Products
2. Industrial Products

1. Consumer Products
Consumer products or final goods are products that are bought by individuals or households for personal use.

Consumer goods further classified by:

a. Shopping Effort Involved
b. Durability

 Shopping Effort Involved category includes:

 Convenience products are consumer products that customers usually buy frequently, immediately and
with minimal comparison and buying effort.

Examples: laundry detergent, candy, magazines, fast food

 Shopping products refer to the items that the consumers purchase less frequently and compare with
available alternatives in the market. When buying shopping products, consumers spend much time and
effort in gathering information and making comparisons.

Examples: furniture, clothing, used cars, major appliances and hotel and airline services
 Specialty products are consumer products with unique characteristics or brand identification for which a
significant group of buyers is willing to make a special purchase effort.

Examples: specific brands of fancy products, luxury cars, professional photographic equipment and high
fashion clothing

 Unsought products are goods that the consumer does not know about or does not normally think of
buying and the purchase of which arises due to danger or the fear of danger and lack of desire.

Examples: funeral services, fire extinguishers and reference books

 Durability category includes:

 Fast-moving / Non-durable goods are products that are sold quickly and at a relatively low cost and
purchased on a regular basis.

Examples: Packaged, food, medicines, paper, fruits and vegetables

 Durable goods are generally defined as those whose expected lifetime is greater than three years.

Examples: Electronics, tools, furniture, appliances

2. Industrial Products
Industrial products are those purchased for further processing or for use in conducting a business.

Industrial products are classified into three groups:

a. Materials and parts
b. Capital items
c. Supplies and services

 Materials and Parts include raw materials and manufactured materials and parts.
Raw materials consist of farm products (wheat, cotton, livestock, fruits, vegetables) and natural products
(fish, lumber, crude petroleum, iron ore).

Manufactured materials and parts consist of component materials (iron, yarn, cement, wires) and
component parts (small motors, tires, castings).

 Capital items are industrial products that aid in the buyer’s production or operations including
installations and accessory equipment.

Installations consist of major purchases such as buildings (factories, offices) and fixed equipment
(generators, drill presses, large computer systems and elevators).

Accessory includes portable factory equipment and tools (hand tools, lift trucks) and office equipment
(computers, fax machines, desks). They have a shorter life than installations and simply aid in the production
process.

 Supplies and Services is the final group of industrial products.

Supplies include operating supplies (lubricants, coal, paper, pencils) and repair and maintenance items (paint,
nails, brooms).

Business services include maintenance and repair services (window cleaning, computer repair) and business
advisory services (legal, management consulting and advertising).

 Pricing
Factors Influencing Price; The 3 C's
Customers – how much are they willing to pay for the product?
Competitors – how much they charge for similar products?
Cost – the company will want to cover its cost and make a profit

Pricing strategies
The following pricing strategies are available:
1. Penetration Pricing strategy is used by businesses to attract customers to a new product by offering a
lower price during its initial offering.
2. Skim pricing / Price skimming / High-low Pricing is a product pricing strategy by which a firm charges the
highest initial price that customers will pay and then lowers it over time as demand decreases.
3. Premium Pricing is the practice of setting a high price to give the impression that a product must have high
quality.
4. Psychological Pricing is the practice of setting prices slightly lower than a whole number. This practice is
based on the belief that customers do not round up these prices so will treat them as lower prices than
they really are, e.g. $19.99.
5. Bundle Pricing is a pricing strategy where companies package separate products together and offer them at
a single reduced price.
6. Competitive Pricing consists of setting the price at the same level as one’s competitors. This method relies
on the idea that competitors have already thoroughly worked on their pricing.
7. Cost-plus / Markup Pricing is a simple pricing strategy where you decide how much extra you will charge
for an item over the cost (a markup is added to the cost of a product).
8. Dynamic / Surge / Demand / Time-based Pricing is a pricing strategy in which businesses set flexible prices
for products based on market demands.
9. Economy Pricing strategy involves shifting a high volume of the goods being sold for a low price.
10. Freemium Pricing is a mix of the words “free” and “premium”. It is the practice of offering a basic set of
services for free and enhanced features or content for a fee.
11. Loss-leader Pricing strategy prices a product lower than its production cost in order to attract customers
and sell other more expensive products.
12. Captive Pricing you developed a core product that requires accessories or add-ons and you sell a core
product at a low price and the essential accessories are sold at a high price to support the profit margins.
13. Value Pricing is customer-focused pricing, meaning companies base their pricing on how much the
customer believes a product is worth rather than according to the cost of the product or historical prices.
14. Promotional Pricing is a sales strategy in which a seller or a brand temporarily reduces the price of a
product or a service with the goal to attract more customers.
15. Geographical Pricing strategy sets different prices for the same products according to the buyers’
geographical locations.
16. Differential / Discriminatory / Flexible / Multiple / Variable Pricing strategy in which a company sets
different prices for the same product on the basis of differing customer type, time of purchase,
characteristics, buying behavior, purchasing patterns, etc.
17. Predatory Pricing is a method of pricing in which a seller sets a price so low that other suppliers cannot
compete and are forced to exit the market.
18. Target Pricing is a pricing strategy in which the selling price of the product is determined first and then the
cost is calculated by reducing the profit margin. The price which is used as starting target price is based on
the highest competitive price in the market which customer might want to pay for that product or service.

 Promotion
Promotion is a marketing tool which is used to communicate between the sellers and buyers.

Promotional Mix
A promotional mix is a combination of marketing methods including:
  Advertising is the paid presentation and promotion of ideas, goods or services by an identified sponsor in
a mass medium.

Examples: display ads on radio, television, billboards, mobile apps, motion pictures, social media websites,
etc

 Direct marketing consists of any marketing technique that relies on direct communication to individual
consumers rather than through a third party.

Examples: brochures and catalogs, in-store displays, posters, mobile messaging, email, banner ads,
promotional letters, mail, etc

 Sponsoring is the act of supporting an event, activity, contest or organization financially or through the
provision of products or services to generate publicity.
 Personal selling is also known as face-to-face selling in which one person who is the salesman tries to
convince the customer in buying a product.
 Sales promotion is a marketing strategy in which a business uses a temporary campaign or offer to
increase interest or demand in its product or service.
 Product placement is paying a studio or TV channel to include a product or service prominently in the
movie, show or music video.
 Public relation is marketing tool information about a firm's products and services carried by a third party
in an indirect way. This includes free publicity as well as paid efforts to stimulate discussion and interest.
 Digital marketing is the marketing of products or services to promote brands and connect potential
customers by using the internet and other forms of digital medium.
 Guerrilla marketing is a marketing tactic in which a company uses surprise or unconventional
interactions in order to promote a product or service.
 Viral marketing is a method of marketing whereby consumers are encouraged to share information
about a company's goods or services. Some examples include news on the latest products, special offers,
amusing videos or jokes with a strong product message.

 Distribution Channels
The word 'Place' is largely used to describe the process of distribution from the producer to the purchaser.

The process of distribution often involves one or more intermediaries.

Direct marketing avoids intermediaries, e.g. Dell sells computers directly to consumers.

Types of Intermediary
i. Retailers – buy the products for the purpose of reselling them to the end consumer.
ii. Wholesalers – purchase the product in bulk and resell it to retailers. The retailer will sell to the ultimate
customer.
iii. Agents and Brokers – do not take ownership of the product but arrange the exchange between the buyer
and seller in exchange for commission.

Distribution Strategies
The two best known distribution strategies are called ‘Pull and Push Promotion’:
Pull strategy means massive advertising to create consumer demand and this demand more or less forces
the retailers to include this product in their assortment.

Push strategy means that the producer does not try to create consumer demand through heavy advertising
but instead offers high margins to the trade channel members (retailers and wholesalers) and expects that in
return they will actively promote and market the product.

 Branding
Branding is the process of creating a strong, positive perception of a company and its products or services in
the customer’s mind.

A brand is a name, symbol, term or mark that enables customers to identify and distinguish the products of
one supplier from those offered by competitors.

The Chartered Institute of Marketing (CIM) identifies certain attributes of brands as follows:
• People use brands to make statements about themselves
• Good brands reduce the risk of poor product choice
• Brands can be a key asset for a business
• Brands are the reason consumers choose one company over another
• Although intangible, brands can be of substantial value
• Strong brands can positively influence share performance
• Brands can command higher prices

Brand equity
Brand equity is a marketing term that describes a brand's value. It is the premium that customers are prepared
to pay for a brand compared to a similar, generic product.

Characteristics of a Strong Brand:

• Consistency – this is crucial to the development of the brand, e.g. McDonalds managed to achieve
consistency through standardization
• Distinctive name – the name should have positive associations with the product
• Distinctive product features – these will help to prompt instant recognition
• Memorability – being memorable is one of the most important characteristics for personal branding.
Even if you are the world’s greatest blogger, when nobody remembers who you are 10 seconds later, your
personal branding has failed.
• Clarity – work hard to make sure that everything you produce shouts out loud exactly what you do, the
value that you offer and how you are unique. Don’t force people to think about it. Let the world know
exactly what it is about you and use as few carefully chosen words (called slogan or tagline) as possible.

Brand Management
Brand management is a process that entails various methods (logo, packaging, design, price, advertising, etc.)
to boost the perceived value of a specific brand or product. Brand management includes managing the
tangible and intangible characteristics of a brand. It is the development and implementation of a strategy with
the long-term objective of putting a brand at the forefront of consumer’s mind.
Benefits of Effective Brand Management:
• Grows business
• Creates brand awareness and recognition
• Increases pricing and value of product
• Attract talent
• Acquires customers easily
• Provides good reputation
• Increase the profitability
• Helps in facing competition
• Provides distinguished identity
• Promotes advertising
• Supports business during crises
• Increase the pride of employees
• Greater appeal and differentiation
• Improved customer loyalty and retention
• Increase employee engagement and alignment

Branding Strategies
Kotler identified 5 brand strategies:
1. Line extension
Product line extension is the use of an established product brand name for a new item in the same product
line, e.g. Ford Fusion and Ford Focus are both small cars.

2. Brand extension
Brand extension or brand stretching is a marketing strategy in which a firm marketing a product with a well-
developed image uses the same brand name in a different product category, e.g. Honda cars and motorcycles.

3. Multi-brands
Multi-brands mean having many different brands in the same product category.

4. New brands
New brands are created for new products or markets, usually because existing brands are not deemed
suitable.

5. Cobrands
Two brands are combined in an offer so the brands reinforce each other, e.g. dell Computers with Intel
Processors.

Porter’s Generic Strategies

Porter’s three generic strategies for dealing with the competitive forces:
Cost Leadership Strategy – reducing production costs while charging industry-average prices
Differentiation Strategy – development of unique products that differ significantly from those of
competitors
Focus Strategy – concentrate on a specific market, e.g. a particular buyer group, geographic area,
segment or product line

The Ansoff Model

The Ansoff Matrix, also called the Product / Market Expansion Grid, is a tool used by firms to plan and analyze
their strategies for growth.

Each box of the Matrix corresponds to a specific growth strategy.

Market Penetration – selling existing products into new markets

Market Development – increasing sales of existing products into an existing market
Product Development – introducing new products to an existing market
Diversification – entering a new market with altogether new products

 Buying Process
An organisation must understand the complex process by which buyers make purchasing decisions.

The Stages in the Buying Process

Research suggests that customers go through a Six Stages decision-making process in any
purchase.

Stage 1: Need Recognition

The consumer buying process starts off with the customer having a problem that can be solved by a product
or service.

Stage 2: Information Search

Once a need has been recognized, buyers will look for information regarding which products may satisfy their
needs.

Stage 3: Evaluation of Alternatives

After doing their research, consumers typically make a shortlist of brands or products for their needs and look
at specific solutions to their problems.

Stage 4: Decision to Purchase

At this point, consumers are deciding whether to buy that product or not. Even at this stage they can still drop
the purchase and walk away.

Stage 5: Purchase
When research has been completed, the customer has decided to make a purchase.

Stage 6: Post Purchase Evaluation

After buying the product, customers compare products with their expectations. There can be two outcomes,
either satisfaction or dissatisfaction.

Factors affecting buying decisions:

Cultural Social Personal Psychological
• Culture • References groups • Age and lifecycle stage • Motivation
• Subculture • Family • Occupation • Perception
• Social class • Roles and status • Economic situation • Learning
• Lifestyle • Beliefs and attitudes
• Personality

 Some other Marketing Types

 Internal Marketing
• Internal marketing is the process of motivating and training employees to support in the organisation's
external marketing activities.
• Employees’ efforts to achieve marketing goals should be recognized and rewarded.
• For the firm to deliver consistently high quality, everyone must practice a customer orientation. This will
require investment in employee quality and performance.
• Internal marketing will be of particular importance in service companies which tend to be more customer-
facing.

 Social Marketing
Social marketing is an approach used to develop activities aimed at changing or maintaining people’s behavior
for the benefit of individuals and society as a whole i.e.
• Encourages individuals to consume goods that have some benefits for themselves and society as a whole
(merit goods), e.g. fruit and vegetables, vaccinations against disease.
• Discourages individuals to consume goods that have negative impacts for themselves and society as a
whole (demerit goods), e.g. tobacco, alcohol.

Benefits of Social marketing to Business:

• Reduce Company Costs – many companies wrongly believe that social responsibility will increase costs
but it can actually reduce them.
• Change before new Legislation is Introduced – some companies may put new practices in place
before new legislation is introduced. This may help the company to gain from positive publicity.
• Competitive advantage – social marketing provides a competitive advantage for companies because
consumers prefer to buy products from businesses that are ethical and socially responsible.

 Contemporary Marketing
Contemporary Marketing refers to the theories that stress the importance of customer orientation versus the
traditional market orientation. It includes:

 Co-Creation
It is a process of developing a new product or service in teamwork with suppliers, customers, stakeholders,
experts and employees.

Or

Co-creation means businesses focus on the customer needs and requirements. It is a combination of owner
ideas and customer needs.

 Shared Value
Shared value focuses companies on the right kind of profits that create societal benefits rather than diminish
them.

 Corporate Social Responsibility (CSR)

Corporate social responsibility is a self-regulating business model in which a company takes steps to ensure
that there are positive social and environmental effects associated with the way the business operates.

This model helps a company be socially accountable to itself, its stakeholders and the public.

Different CSR strategies can help you make a positive impact on different groups of stakeholders, including:

Consumers – through fair and open business practices and good customer relations
Suppliers – by choosing your suppliers carefully, looking at their labour, health, safety and environmental
practices

Communities – through sponsoring local events, taking part in charity initiatives, volunteering

Four Types of Corporate Social Responsibility:

1. Environmental responsibility
Environmental responsibility initiatives aim to reduce pollution and greenhouse gas emissions and the
sustainable use of natural resources.

2. Human rights responsibility

Human rights responsibility initiatives involve providing fair labor practices (e.g., equal pay for equal work),
fair trade practices and disavowing child labor.

3. Philanthropic responsibility
Philanthropic responsibility can include things such as funding educational programs, supporting health
initiatives and supporting community beautification projects.

4. Economic responsibility
Economic responsibility initiatives involve improving the firm’s business operation while participating in
sustainable practices, e.g. using a new manufacturing process to minimize wastage.

Examples of Corporate Social Responsibility:

 Environmental management, e.g. waste reduction and sustainability
 Responsible sourcing, e.g. using only fair trade ingredients
 Improvement of working standards and conditions
 Contributing to educational and social programs
 Employee volunteering
 Socially responsible investment
 Development of employee and community relations

Benefits of CSR to companies include:

• Improves customers’ perception of brand
• Better brand recognition
• Positive business reputation
• Increased sales and customer loyalty
• Operational costs savings
• Better financial performance
• Greater ability to attract talent and retain staff
• Easier access to capital from investors
• Reduced regulatory burden
 Marketing in Not-for-profit Sector
A Nonprofit Organization is a legal entity, organized and operated for a collective, public or social benefit
other than generating profit and in which no part of the organization's income is distributed to its members,
directors or officers.

Nonprofit Marketing is the use of marketing methods to broadcast the mission of the organization to the
public, encourage donations and call for volunteers.

Marketing Channels for Nonprofit Organizations:

• Digital marketing – website marketing or online marketing, involves promoting an organization to online
audiences using the Internet and digital media.
• Social media marketing – uses social media platforms as a marketing tool.
• Content marketing – is used to attract, engage, and retain an audience by creating and sharing of online
material such as videos, blogs, articles, podcasts or other media.
• Pay-per-click – involves advertisers paying a fee each time when one of their ads is clicked.
• Traditional media marketing – uses offline media to reach an audience such as newspapers, magazines,
TV, radio and billboards.
• Partnership marketing – is collaboration with another organization to create a marketing campaign that
benefits both parties.
• Email marketing – is a marketing strategy where businesses send promotional messages to people in
mass quantities.
• Event marketing – is planning, organizing and executing an event for the purpose of promoting an
organization.

Steps in creating a Nonprofit Marketing Plan:

• Define your marketing goals
• Understand your target audience
• Develop a relevant marketing strategy
• Put your plan into action
• Analyze your marketing performance

Marketing Challenges for Nonprofit Organizations:

• Rely on volunteers
• Target audience is too broad
• Lack a consistent marketing staff
• Personalized communication at large Scale