NAME: MEENAKSHI

MBA-II semester

MB0030

Marketing Management

SET 1
Q.1 Explain the meaning of marketing and its importance in business.

Ans.: Marketing is a set of business activities that facilitate movement of goods

and services from producer to consumer. It is an ongoing process of discovering
and translating consumer needs into products and services, creating demands for
them, serving the customer and his demand through a marketing programme of
promotion and distribution to fulfill the company’s marketing goals in a
competitive environment.
It is evident that customer, his needs and wants are very important aspects of
today’s marketing.
Customer focus is the very essence of marketing and his viewpoints should be
taken into account while making marketing decisions.
In this era of rapid changes, it is marketing which keeps the business in close
contact with its economic, political, social and technological environment and
informs it of events and changes that can influence its activities.
American Marketing Association (AMA) offers the following definition of
Marketing.( AMA 2004)
Definition: Marketing is an organization function and a set of process for
creating, communications and delivering value to customers and for managing
customer relationships in ways that benefit the organization and its stake
holders.
The Chartered Institute of Marketing defines Marketing as:
Marketing is the management process responsible for identifying, anticipating
and satisfying customer requirements, profitably.
Having understood what a Market is and what is Marketing, we will now look what
is an exchange and the exchange process.

Importance of Marketing.

Peter Drucker, the famous management thinker in one of his classic articles has
said “Marketing is everything”. All other activities in the organization are support
services to the marketing strategy that the company pursues. Marketing is
important not only to the company but to the consumers and society and to the
economy.
Consumer stands to benefit from marketing activities. He has more alternatives
to choose from, improved and better quality products are available and he is able
to buy goods at convenient locations. Thanks to much improved customer
service, a consumer is able to complain and expects his complaint to be attended
in reasonable time. He can now buy with credit or debit card or cash or on
installments.
For the society as a whole, marketing is important because it acts as a change
agent making people use latest products and improves the standard of living of
the people. As we know, the main objective of marketing is to produce products
and services for the society as per their needs and tastes, and while doing so it
creates demand for these goods and services, encourages them to use them,
thus leading to higher demand and sales. This higher demand allows the
company to achieve economies of scale in both production and distribution
resulting in decrease in production and distribution costs which can be used to
reduce prices to consumers.
For a company in any business, marketing is considered to be the most important
activity. It helps an organization to keep abreast of changes taking place in the
market and consumer tastes and
Preferences through market research. Based on this reliable data, it responds to
these changes by rectifying any drawbacks in its products or changing its
competitive strategy. Thus the company’s decision-making and planning are not
based on just hunches but on sound market information. The firm that follows
such practices is sure to prosper under all conditions. Marketing provides an
effective channel of communication to the company with its consumers by way of
advertising and sales promotion. Marketing thus brings revenue and earns
goodwill for the company.
Successful operation of marketing activities creates, maintains and increases the
demand for goods and services in the economy. It results in the increased level of
production. This, in turn, increases the national income, which is beneficial to the
economy. Marketing operations require the services of intermediaries such as
wholesalers, retailers, transporters, and service provides for storage, finance,
insurance and advertising. These services provide employment in large numbers.

Q.2 Explain the relevance of BCG matrix and GE matrix with examples.

Ans.: BCG matrix:

1. SBU: FMCG
Industry growth rate: 24% (AC Nielson retail audit report 2007)
Company growth rate: 50% (the Hindu business line 19th January 2008)
Company’s market share: 8% (outlook business)
Largest competitor share: HUL: 54% (outlook business)
Relative market share= 0.14

2. SBU: Paper board

Industry growth rate: 7.2% (the Hindu business line 27Th May 2007)
Company growth rate: 11% (the Hindu business line 19Th January 2008)
Company’s market share: 55%
Largest competitors share: BILT 35%
ITC’s FMCG segment analysis shows that though it is market leader in some
categories their overall relative market share is 0.14. Company is in the high
growth low relative market share area i.e. questioning mark position. ITC should
invest heavily to convert its SBU position into star.
ITC’s Paperboard industry is in low growth and high market share category i.e. in
cash cow segment.
It should plan for investing the cash generated from this position into other
businesses.

GE matrix:

1 Management can use the GE business matrix to classify SBU’s on the basis of
two factors
a. Market attractiveness: Market size, entry barriers, competitors, technology and
profit margin are some factors used to analyze the market attractiveness.
b. Business position can be determined on the basis of market share, SBU size,
R&D capabilities and cost controls
Each cell in the model represented by the particular strategy namely, invest
strategy, protect strategy, harvest strategy and divest strategy

2 Invest strategy: In this position SBU

a. Should receive ample resources
b. Should support by well financed marketing efforts.
3 Protect strategies: SBU’s in this position should
a. Allocate the resources selectively.
b. Develop strategies which help in maintain its market position.
c. Generate cash needed by other SBU’s.

Business position

High Medium Low

Invest Invest Protect

Invest Protect Harvest
Protect Harvest Diverst

4. Harvest strategy: SBUs should not receive substantial new resources and if
required, sell them.

5. Divest strategy: SBUs which falls into this category should not receive any
resources and sell i or shut it as early as possible.
Axis components:

a. Market Growth rate: the rate at which market is growing.

b. Relative Market Share: market share of the SBU dived by the market share of the largest
competitor.

Model Components:

These groups are explained below:

Dogs:

Low Market Share / Low Market Growth. In these areas, SBU’s market presence is weak, so it's going
to take a lot of hard work to get noticed. Also, you won't enjoy the scale economies of the larger
players, so it's going to be difficult to make a profit.

Cash Cows:

High Market Share / Low Market Growth Here, SBU’s are well-established, so it's easy to get
attention and exploit new opportunities. However it's only worth expending a certain amount of effort,
because the market isn't growing and your opportunities are limited. here we can say cash cow can be
milked.

Stars:

High Market Share / High Market Growth Here SBU’s are well-established, and growth is exciting!
These are fantastic opportunities, and you should work hard to realize them.

Question Marks (Problem Child)

Low Market Share / High Market Growth These are the opportunities no one knows what to do with.
They aren't generating much revenue right now because you don't have a large market share. But, they
are in high growth markets so the potential to make money is there. Here there are two choices, either
to invest heavily to bring it to star position or divest or liquidate from that position. Question Marks
might become Stars and eventual Cash Cows, but they could just as easily absorb effort with little
return. These opportunities need serious thought as to whether increased investment is warranted.
Key Points

The Boston Matrix is an effective tool for quickly assessing the options open to you, both on a
corporate and personal basis. With its easily understood classification into "Dogs", "Cash Cows",
"Question Marks" and "Stars", it helps you quickly and simply screen the opportunities open to you,
and helps you think about how you can make the most of them.

Limitations:

As any other marketing theories in the field, the BCG matrix model is not perfect either. There are
according problems of this theory. Some limitations concerning the particular use of BCG include:

1. Only two dimensions – market share and product or service growth rate, are employed. These are
the first limitations.
2. How to define market and how to get data about market share are also problems.
3. High market shares don’t always necessarily lead to profit at all times. It is not the only success
factor.
4. Low share or niche businesses can be profitable too, which means in the real world some Dogs can
be more profitable than cash Cows.
5. The model cannot reflect the growth rates of the general market and market growth is not the only
indicator for market attractiveness.
6. The model also neglects the effects of synergy between different business units.

The GE screen matrix is essentially a derivation of the Boston Consulting Group’s Boston growth
matrix. It was developed by McKinsey and Co. for General Electric as it had been recognized that the
Boston Consulting Group matrix was not flexible enough to take broader issues into account The GE
matrix cross-references market attractiveness and business position using three criteria for each – high,
medium and low. The market attractiveness considers variables relating to the market itself, including
the rate of market growth, market size, potential barriers to entering the market, the number and size of
competitors, the actual profit margins currently enjoyed, and the technological implications of
involvement in the market. The business position criteria look at the business’s strengths and
weaknesses in a variety of fields. These include its position in relation to its competitors, and the
business’s ability to handle product research, development and ultimate production. It also considers
how well placed the management is to deploy these resources. The matrix differs in its complexity
compared with the Boston Consulting Group matrix. Superimposed on the basic diagram are a number
of circles. These circles are of variable size (see Figure 22). The size of each represents the size of
each market. Within each circle is a clearly defined segment which represents the business’s market
share within that market. The larger the circle, the larger the market, and the larger the segment, the
larger the market share.
Q.3 what do you mean by MIS? Explain its benefits, types and components.

Ans.: MIS: Philip Kotler defines MIS as “a system that consists of people,
equipment and procedures to gather, sort, analyze, evaluate and distribute
needed, timely and accurate information to marketing decision makers.
Its characteristics are as follows:
1. It is a planned system developed to facilitate smooth and continuous flow of
information.
2. It provides pertinent information, collected from sources both internal and
external to the company, for use as the basis of marketing decision making.
3. It provides right information at the right time to the right person.
A well designed MIS serves as a company’s nerve centre, continuously monitoring
the market environment both inside and outside the organization. In the process,
it collects lot of data and stores in the form of a database which is maintained in
an organized manner. Marketers classify and analyze this data from the database
as needed.
With the advent of Computer Technology, MIS has taken a step further to provide
managers direct access to the databases. This system called Marketing
Decision Support System (MDSS) links a decision maker to relevant
databases and analysis tools, thereby allowing him to gain deep insights into
needs and trends of customers with the help of sophisticated statistical analysis.
Today companies organize the information in databases such as customer
database, product database, and field sales database and combine them to be
stored in a huge database called Data Warehouse. The process of searching
through information in data warehouse to identify meaningful patterns that guide
decision making is called Data Mining.

Benefits of MIS
Various benefits of having a MIS and resultant flow of marketing information are
given below:
1. It allows marketing managers to carry out their analysis, planning
implementation and control responsibilities more effectively.
2. It ensures effective tapping of marketing opportunities and enables the
company to develop effective safeguard against emerging marketing threats.
3. It provides marketing intelligence to the firm and helps in early spotting of
changing trends.
4. It helps the firm adapt its products and services to the needs and tastes of the
customers.
5. By providing quality marketing information to the decision maker, MIS helps in
improving the quality of decision making.

Types of Marketing Information

A Marketing Information System supplies three types of information.
1. Recurrent Information is the data that MIS supplies periodically at a weekly,
monthly, quarterly, or annual interval. This includes data such as sales, Market
Share, sales call reports, inventory levels, payables, and receivables etc. which
are made available regularly. Information on customer awareness of company’s
brands, advertising campaigns and similar data on close competitors can also be
provided.
2. Monitoring Information is the data obtained from regular scanning of
certain sources such as trade journals and other publications. Here relevant data
from external environment is captured to monitor changes and trends related to
marketing situation. Data about competitors can also be part of this category.
Some of these data can be purchased at a price from commercial sources such as
Market Research agencies or from Government sources.
3. Problem related or customized information is developed in response to
some specific requirement related to a marketing problem or any particular data
requested by a manager.
Primary Data or Secondary Data (or both) are collected through survey Research
in response to specific need. For example, if the company has developed a new
product, the marketing manager may want to find out the opinion of the target
customers before launching the product in the market. Such data is generated by
conducting a market research study with adequate sample size, and the findings
obtained are used to help decide whether the product is accepted and can be
launched.

Components of MIS

1. Internal Records System

2. Marketing Intelligence System
3. Marketing Research System
4. Analytical Marketing System

Internal Records System

This includes information on (i) Order to payment cycle and (ii) sales information
systems.
Order to payment cycle has a system which records, the timing and size of
orders placed by consumers, the payment cycle followed by consumers and the
time taken to fulfill the orders, in the shortest possible time. Customers place
order through sales people and companies dispatch the goods and receive
payments directly or through bank. A proper record system pertaining to order –
to – payment cycle management helps mangers to decide on production and
dispatch schedule, inventory and accounts receivable schedule and also logistics
and distribution management schedules,
Marketing Information System

Sales Information Systems record everything in the sales Department,

starting from Sales Call reports to prospects history to Sales territory and quota
information for better sales planning and forecasting purpose.

Marketing Intelligence System

This is a set of procedures and sources used by managers to obtain everyday
information about developments in the marketing environment. This system
supplies ‘happenings’ data unlike Internal Records System which supplies
‘results’ data. Marketing managers collect data from published sources like
books, magazines and journals; by talking to customers, intermediaries and sales
personnel. Some companies appoint specialists to gather consumer and
competitor information, who does mystery shopping to monitor the performance
of their own or competitor’s dealers. Competitor information can also be obtained
by buying their product, attending their press conferences, trade shows and
reading their annual reports. Companies purchase commercial information from
outside suppliers and market research agencies like IMRB, ORG – MARG to obtain
competitive data on their sales, advertising expenditures etc., besides their own.

Marketing Research System

This is the third component of MIS. Marketing Research provides information to
marketing manager when he/she encounters marketing problems. This may
involve conducting Marketing Research survey by collecting primary data. These
surveys may be conducted by the marketing department itself or it can hire
services of an external marketing research agency.

Analytical Marketing Systems

Also known as Marketing Decision Support systems (MDSS), this is a coordinate
collection of data, systems, tools and techniques with supporting software and
hardware by which an organization gathers and interprets relevant information
from business and environment and turns it into a basis for marketing action. All
the data which is generated through the other three systems described above are
stored in a data base. The storage and retrieval capability of decision support
system allows the collection and use of a wide variety of data throughout the
company. Senior managers can access the data base and continually and monitor
sales, markets, performance of the sales people and other marketing systems as
well.

Q.4.Suppose you need to conduct a small marketing research in your neighborhood

regarding the purchase and use of toothpastes, what will be your approach in the
process.

Ans.: A Toothpaste that uses 'concentrated' rare herbs and oils so effectively for soothing
troubled gums, protecting teeth and adding 'extended' freshness that you'll even wonder why
you EVER used mouthwash…
Reviews: “Since I began using your Pepsodent toothpaste, I've had the best checkups that I've
ever had. The person who cleans my teeth is very impressed with my gums and has begun
using Herbodent herself and is recommending it to her other patients. "

------------------------------
"I can't believe it but after less than a month, my gums are not bleeding. I was using another
product from the dentist's office and it did not help at all, but your toothpaste really, really
worked for me. I am very happy! I am going to need a lifetime's supply! "

Recognizing the power of nature's gifts, Health and Yoga recommends a natural based, herbal
toothpaste which has been manufactured using extracts and oils of natural ingredients.
In fact, with fluoride in toothpastes and alcohol in mouthwashes being increasingly linked to
oral cancer by scientists worldwide, the switch to natural-based tooth and gum cleansers and
mouth fresheners is not only suggested but actually encouraged…even more so for children
with their delicate gums and susceptible teeth.

Pepsodent Complete Care Enamel-Safe Whitening Toothpaste

New and Improved! Complete Protection for Strong Enamel and Healthy Gums

• Promotes Healthy Teeth and Gums

• Special Formula to Help Control Tartar
• Fights Cavities. Gently Removes Plaque and Stains to Whiten Teeth
• Contains Enamel-Strengthening Fluoride for Effective Cavity Protection
• Smooth Mint Flavor in a convenient 6 oz tube

Active Ingredients: Sodium Fluoride (0.24%) (Purpose: anticavity toothpaste)

Inactive Ingredients: Sorbitol, Water, Hydrated Silica, PEG 32, Sodium Lauryl Sulfate, SD Alcohol
38B, Flavor, Cellulose Gum, Zinc Citrate Trihydrate, Sodium Saccharin, Titanium Dioxide

Q. 5Explain the consumer buying decision process with respect to new products. Give
examples.

Ans.: Consumer buying decision process for new products.

The buyer’s decision for existing products and new products varies. You already
seen in the existing product buying decision process consumers have the option
to search for the information and evaluate them. In the new product such options
don’t exist. Therefore we should understand how consumer comes to know about
the product. Kotler defined this process as adoption process.
According to Philip Kotler Adoption is ‘The mental process through which an
individual passes from first hearing about an innovation to final adoption
Adoption process

1. Awareness: the consumer became aware of the product but lacks information
about it.
2. Interest: As know previous information available consumer shows interest to
get the information about the product.
3. Evaluation: After receiving the information consumer analyzes the benefits of
new products over any existing products or substitutes and decides whether to
buy or not.
4. Trial: The consumer tries the new product on a small scale to improve his or
her estimate of its value.
5. Adoption: In this stage consumer decides to make full and regular use of the
product.

Adoption rate:

The adoption of new product varies from individual to individual.

1. 2.5% of the consumers adopt any new product that enters to the market.
These consumers are status conscious people. Marketer should highlight how the
new product will bring the esteem to the consumer.
2. 13.5% of the customers fall into the early adopter categories. In this categories
customer observed the advantage of the new product and the moment the price
of the product falls into the affordable category they buy the product.
3. The next group is the biggest one in the adoption process. These group
customers are attracted towards the benefits of the product. They make sure that
there are no technical or general problems associated with the product. This
group contains 34% of the total customers.
4. This group consist 34% of customers. The group looks for the quality product
at the affordable prices
5. The final group is called as laggards. These are traditional and price conscious
people. They often take lot of time to adoption of the product.

Q. 6. Explain the different consumer behavior models.

Ans.: Consumer behavior models.

The influence of social sciences on buyer behavior has prompted marketing

experts to propound certain models for explaining buyer behavior. Broadly, they
include the economic model, the learning model, the psychoanalytical model and
the sociological model.

1) The Economic Model: According to the economic model of buyer behavior,

the buyer is a rational man and his buying decisions are totally governed by the
concept of utility. If he has a certain amount of purchasing power, a set of needs
to be met and a set of products to choose from, he will allocate the amount over
the set of products in a very rational manner with the intention of maximizing the
utility or benefits.

2) The Learning Model: According to the learning model which takes its cue
from the Pavlovian stimulus response theory, buyer behavior can be influenced
by manipulating the drives, stimuli and responses of the buyer. The model rests
on man’s ability at learning, forgetting and discriminating. The stimulus response
learning theory states that there develops a bond between behavior producing
stimulus and a behavior response (S. R. Bond) on account of the conditioning of
behavior and formation of habits. This theory may be traced to Pavlov and his
experiments on salivating dogs. Pavlov’s experiments brought out associations
by conditioning.
In his well known research with dogs, a bell was rung every time food was served
to a dog.
Eventually, the dog started salivating each time upon hearing the bell though no
food was served.
The dog’s behavior is conditioned; It is related to behavior producing stimulus
(bell ringing) and behavior response (salivation). The S.R. bond so established
causes a set pattern of behavior learnt by the object – dog. In terms of consumer
behavior, an advertisement would be a stimulus whereas purchase would be a
response.
Learning Process: According to the stimulus response theory, learning is
dependent on drive, cue (stimulus), response and reinforcement.

Drive: Drive may be defined as any strong stimulus that impels action. It arouses
an individual and keeps him prepared to respond. The drives may be classified as
primary drives and secondary drives. Primary drives are based upon innate
physiological needs such as thirst, hunger, pain avoidance, and sex. The
secondary drives are based upon learning. They are not innate and are derived
from the primary drives. These include the desire for money, fear, pride, rivalry,
etc.

Cue: Cue or stimulus may be defined as any object in the environment perceived
by the individual.
The aim of the marketing man is to find out or create the cue of sufficient
importance that it becomes the drive stimulus or elicits other responses
appropriate to his objective. Here, the objective is to find out those conditions
under which a stimulus will enhance the chances of eliciting a particular kind of
response.

Response: Response is an answer to a given drive or cue. When a man feels

thirsty, he attempts to get water at any cost. Here attempt to get water is a
response to the primary drive of thirst.
“Response also includes attitudes, familiarity, perception and other complex
phenomena.”
Responses may be generalized or discriminatory. Generalized response refers to
a uniform response to similar though not identical stimuli. Discriminatory
response refers to the selective response to similar stimuli. Undifferentiated
products such as cigarettes and detergents normally elicit generalized consumer
responses but by huge advertising outlays companies try to induce consumers to
perceive differences in brands and to make discriminatory responses.
Reinforcement: Reinforcement or reward means reduction in drive and stimulus.
It has been defined as “environmental events exhibiting the property of
increasing the probability of occurrence of responses they accompany.” Thus,
when consumption of a product or a brand of product leads to satisfaction of the
initiating need (drive/stimulus) there is reinforcement. If at some later date the
same needs are aroused, the individual will tend to repeat the process of
selecting and getting the same product or brand of product. Each succeeding
time that product or brand brings satisfaction, further reinforcement takes place,
thus, further increasing the possibility that in future also, the same product or
brand will be bought. This type of behavioral change, increasing possibility that
an act will be repeated, is called learning; Reinforcement increases the rapidity
and vigor of learning.

3) The Psychoanalytical Model: The psychoanalytical model draws from

Freudian Psychology.
According to this model, the individual consumer has a complex set of deep-
seated motives which drive him towards certain buying decisions. The buyer has
a private world with all his hidden fears, suppressed desires and totally subjective
longings. His buying action can be influenced by appealing to these desires and
longings. The psychoanalytical theory is attributed to the work of eminent
psychologist Sigmund Freud. Freud introduced personality as a motivating force
in human behavior.
According to this theory, the mental framework of a human being is composed of
three elements, namely,

1. The id or the instinctive, pleasure seeking element. It is the reservoir of the

instinctive impulses that a man is born with and whose processes are entirely
subconscious. It includes the aggressive, destructive and sexual impulses of man.
2. The superego or the internal filter that presents to the individual the behavioral
expectations of society. It develops out of the id, dominates the ego and
represents the inhibitions of instinct which is characteristic of man. It represents
the moral and ethical elements, the conscience.
3. The ego or the control device that maintains a balance between the id and the
superego. It is the most superficial portion of the id. It is modified by the influence
of the outside world. Its processes are entirely conscious because it is concerned
with the perception of the outside world.
The basic theme of the theory is the belief that a person is unable to satisfy all
his needs within the bounds of society. Consequently, such unsatisfied needs
create tension within an individual which have to be repressed. Such repressed
tension is always said to exist in the subconscious and continues to influence
consumer behavior.

4. The Sociological Model: According to the sociological model, the individual

buyer is influenced by society or intimate groups as well as social classes. His
buying decisions are not totally governed by utility; He has a desire to emulate,
follow and fit in with his immediate environment.

5. The Nicosia Model: In recent years, some efforts have been made by
marketing scholars to build buyer behavior models totally from the marketing
man’s standpoint. The Nicosia model and the Howard and Sheth model are two
important models in this category. Both of them belong to the category called the
systems model, where the human being is analyzed as a system with stimuli as
the input to the system and behavior as the output of the system. Francesco
Nicosia, an expert in consumer motivation and behavior put forward his model of
buyer behavior in 1966.
The model tries to establish the linkages between a firm and its consumer – how
the activities of the firm influence the consumer and result in his decision to buy.
The messages from the firm first influence the predisposition of the consumer
towards the product. Depending on the situation, he develops a certain attitude
towards the product. It may lead to a search for the product or an evaluation of
the product. If these steps have a positive impact on him, it may result in a
decision to buy. This is the sum and substance of the ‘activity explanations’ in the
Nicosia Model. The
Nicosia Model groups these activities into four basic fields. Field one has two
subfields the firm’s attributes and the consumer’s attributes. An advertising
message from the firm reaches the consumer’s attributes. Depending on the way
the message is received by the consumer, a certain attribute may develop, and
this becomes the input for Field Two. Field Two is the area of search and
evaluation of the advertised product and other alternatives. If this process results
in a motivation to buy, it becomes the input for Field Three. Field Three consists
of the act of purchase. And Field Four consists of the use of the purchased item.

SET 2

Q.1 a. Give a short note on bases of Segmentation.

b. Analyze the pricing methods with relevant examples.

Ans. 1a: Bases of Segmentation.

1.

1) Geographic segmentation: Dividing the market into different geographical

units such as nations, states, regions, cities or neighborhoods. The company can
operate in one or a few
Geographic areas or operate in all but pay attention to local variations. For
example, Bennett,
Coleman and co Ltd divided markets according to geographical units for their
tabloids. In
Bangalore the tabloid is known as Bangalore Mirror where as it is Mumbai Mirror
in Mumbai.

2) Demographic Segmentation: In demographic segmentation the market is

divided into groups on the basis of variable such as age, family size, family
lifecycle, gender, income, occupation, education, religion, race, generation,
nationality and social class. Demographic variables are the most popular bases
for distinguishing customer groups. One reason is that consumers’ wants,
preferences and usage rates are often associated with demographic variables.
Demographic variables are easy to measure. Even when the target market is
described in no demographic terms, the link back to demographic characteristics
is needed in order to estimate the size of the target market and the media that
should be used to reach it efficiently. Some of the demographic variables used
are:

a) Age and Lifecycle

Stage: Consumers’ wants and abilities change with age. On the basis of age, a
market can be divided into four parts viz., children, young, adults and old. For
consumers of different age groups, different types of products are produced. For
instance, different types of readymade garments are produced for consumers of
different age groups.
A successful marketing manager should understand the age group for which the
product would be most suited and determine his marketing policy, pricing policy,
and advertising policy
etc., accordingly.
For example, HUL launched ‘pepsodent kids’ for small children.

b) Gender: Gender segmentation has long been applied in clothing, hairstyling,

cosmetics and magazines. For example, Emami segmented its personal care
business on the basis of gender. For women, it is having Emami naturally fair, and
for men it is fair and handsome.
c) Income: Income segmentation is a longstanding practice in such product and
service categories as automobiles, clothing, cosmetics and travel. However,
income does not always predict the best customers for a given product.
For example, Baja Auto limited, a leading automobile company, different bikes
for different commuters. For entry level (less than Rs35000) it is Bajaj CT 100, for
mid segment (greater than Rs35000 but less than Rs60000) it is pulsar and for
the upper segment greater than Rs
60000 Avenger and Eliminator are positioned.

3) Psychographic Segmentation: In Psychographic segmentation, buyers are

classified into different groups on the basis of lifestyle or personality and values.
People within the same demographic group can exhibit very different
psychographic profiles.

a) Lifestyle:
People exhibit different lifestyles and goods they consume express their
lifestyles.
Many companies seek opportunities in lifestyle segmentation. But lifestyle
segmentation does not always work.
b) Personality: Marketers have used personality variables to segment the
markets. They endow their products with brand personality that corresponds to
consumer personalities.

c) Social Class: It has a strong influence on preference in cars, clothing, home

furnishings, leisure activities, reading habits etc. Many companies design
products and services for specific social classes.

Behavioral Segmentation or Consumer Response Segmentation:

In behavioral segmentation, buyers are divided into groups on the basis of their
knowledge or attitude towards the use of, or response to a product. Some
marketers believe that behavioral variables are the best starting points for
constructing market segments.

a) Occasions: According to the occasions, buyers develop a need, purchase a

product or use a product. It can help firms expand product usage. A company can
consider critical life events to see whether they are accompanied by certain
needs. For example, Tanishq a TATA enterprise offers schemes and promotions
for Akshaya Thrutiya (auspicious day to purchase jewellary)

b) Benefits: Buyers can be classified according to the benefits they seek. For
example, Peter
England, a madhura garment brand positioned its wrinkle free trousers on the
basis of benefits.

c) User Status: Markets can be segmented into nonusers, potential users, first
time users and regular users of a product. Each market segment requires a
different marketing strategy. The company’s market position will also influence
its focus. Market leaders will focus on attracting potential users, whereas smaller
firms will try to attract current users away from the market leader. For example,
Kishkinda resort near Hampi classifies its customers according to this
characteristic. Resort believes that locals falls into nonuser category, affluent
class who comes to Hampi as potential users, foreigners as first time users rich
people near Hampi who frequently come there as regular users.

d) Usage Rate: Markets can be segmented into light, medium and heavy
product users. Heavy users are often a small percentage of the market but
account for a high percentage of total consumption. Marketers prefer to attract
one heavy user rather than several light users and they vary their promotional
efforts accordingly.
For example, Alan Paine textile brand, offered 4 cotton trousers for Rs 999.
Company is interested in getting profit from sales volume.

Ans. b: I. Cost plus pricing: The method of adding markup to the total cost of
the product
Procedure for calculating cost plus pricing:
a. Find out the variable cost per unit and fixed cost.
b. Estimate the number of units the company is intended to sell.
c. Calculate the Unit cost by the following formula
Fixed costs
Unit cost = Variable cost +Unit sales
d. Find out the required mark up( desired return on sales)
e. Calculate the price by the following formula.
Unit cost
Price= (
1Desired return on sales)
Problem: Company X would like to sell 75,000 units in the year 2008. The fixed
cost of the company is Rs 2 Lakh and variable cost is Rs 5 per unit. Company
wants 30 % profit after sales. Calculate the Price of the product to achieve
desired sales and profit.
Solution:
Unit cost= VC+ (FC/ unit sales)
= 5+ (200,000/75000)
= 7.67
Price = Unit cost/ (1desired return on sale)
= 7.67/ (10.3)
= 10.85 Approx Rs 11/unit.

• Advantages of cost plus pricing:

1. Sellers are more certain about the cost than the demand.
2. If all the companies in the industry use this method price become standard.
3. It is fairer to both buyers and sellers.

• Disadvantages of cost plus pricing:

1. It ignores the demand and competition
2. If fewer units are sold then fixed cost will be spread to less number of units.
This leads to higher unit cost and higher final price.

II. Break even pricing:

The firm determines the price at which it will make the target profit.
Procedure to calculate the break even volume:
1. Find out the total fixed cost of the company.
2. Determine the price on which company would like to sell
3. Calculate the variable cost per unit.
4. Determine the break even volume by the following formula
Break even volume= Fixed cost/ (Price variable cost)

• Procedure to identify breakeven price

1. Determine the unit demand needed to break even at a given price.
2. Find out the expected unit demand at given price.
3. Find out the total revenue at a given price.
4. Calculate the total cost (assuming fixed cost and total of variable cost)
5. Determine the profit from the following formula
Profit= Total revenue – total cost.
Assume:
Fixed cost: Rs 1,000,000
Price: Rs 20
Variable cost: Rs 12
BEV = 1,000,000/ (2012)
=125,000.

Q.2 Explain the benefits and demerits of the different types of advertising media. How
will a marketer decide on the suitable media for his/her products?

Ans.: Merits and demerits of advertising media:

Newspapers

Advantages

• Your ad has size and share, and can be as large as necessary to communicate as much of a
story as you care to tell.
• The distribution of your message can be limited to your geographic area.
• Split-run tests are available to test your copy and your offer.
• Free help is usually available to create and produce your ad.
• Fast closings. The ad you decide to run today can be in your customer's hands two days from
now.

Disadvantages

• Clutter. Your ad has to compete for attention against large ads run by supermarkets and
department stores.
• Poor photo reproduction limits creativity.
• A price-oriented medium. Most ads are for sales.
• Short shelf life. The day after a newspaper appears, it's history.
• Waste circulation. You're paying to send your message to a lot of people who will probably
never be in the market to buy from you.
• A highly visible medium. Your competitors can quickly react to your prices.

Magazines

Advantages

• High reader involvement means more attention will be paid to your advertisement.
• Less waste circulation. You can place your ads in magazines read primarily by buyers of your
product or service.
 • The smaller the page (generally eight and half by eleven inches) permits even small ads to
stand out.

Disadvantages

• Long lead times (generally 90 days) mean you have to make plans a long time in advance.
• The cost for space is higher in addition to higher creative costs.

Yellow Pages

Advantages

• Everyone uses the yellow pages.

• Ads are reasonably inexpensive.
• You can easily track your responses.

Disadvantages

• All of your competitors are listed so you run the ad as a defensive measure.
• Ads are not very creative since they follow certain formats.

Radio

Advantages

• A universal medium. Can be enjoyed at home, at work, and while driving. Most people listen
to the radio at one time or another during the day.
• Permits you to target your advertising dollars to the market most likely to respond to your
offer.
• Permits you to create a personality for your business using only sounds and voices.
• Free creative help is usually available.
• Rates can generally be negotiated.
• Least inflated medium. During the past ten years, radio rates have gone up less than other
media.

Disadvantages

• Because radio listeners are spread over many stations, to totally saturate your market you have
to advertise simultaneously on many stations.
• Listeners cannot refer back to your ads to go over important points.
• Ads are an interruption to the entertainment. Because of this, radio ads must be repeated to
break through the listener's "tune out" factor.
• Radio is a background medium. Most listeners are doing something else while listening, which
means your ad has to work hard to be listened to and understood.
• Advertising costs are based on ratings which are approximations based on diaries kept in a
relatively small fraction of a region's homes.

Television
Advantages

• Permits you to reach great numbers of people on a national or regional level.

• Independent stations and cable offer new opportunities to pinpoint local audiences.
• Very much an image-building medium.

Disadvantages

• Ads on network affiliates are concentrated in local news broadcasts and on station breaks.
• Creative and production costs can quickly mount up.
• Lead time can result in items being sold out before ad runs.
• Most ads are ten or thirty seconds long, which limits the amount of information you can
communicate.

Direct Mail

Advantages

• Your advertising message is targeted to those most likely to buy your product or service.
• Your message can be as long as necessary to fully tell your story.
• You have total control over all elements of creation and production.
• A "silent" medium. Your message is hidden from your competitors until it's too late for them
to react.

Disadvantages

• Long lead times required for creative printing and mailing.

• Requires coordinating the services of many people: artists, photographers, printers, etc.
• Each year over 20% of the population moves, meaning you must work hard to keep your mail
list up to date.
• Likewise, a certain percentage of the names on a purchased mailing list is likely to be no
longer useful.

Telemarketing

Advantages

• You can easily answer questions about your product/service.

• It's easy to prospect and find the right person to talk to.
• Cost effective compared to direct sales.
• Highly measurable results.
• You can get a lot of information if your script is properly structured.

Disadvantages

• Many business use telemarketing.

• Professionals should draft the script and perform the telemarketing in order for it to be
effective.
• Can be extremely expensive.
 • Most appropriate for high-ticket retail items or professional services.

Specialty Advertising (balloons, sandwich boards, key charms, etc.)

Advantages

• Can be attention grabbers if they are done well.

• Can give top-of-mind awareness.
• Gets your name in front of people.

Disadvantages

• Difficult to target your market.

• Can be an inappropriate medium for some businesses.
• Difficult to find items that are appropriate for certain businesses.
• Decisions involved in developing advertisement programs

• Determining the advertisement objectives: Marketing management should

determine the objectives of advertisements in the initial phase of the
program. The objectives of advertisements are
i. Provide the information about advertisements and create awareness about the
product.
ii. Highlight the uniqueness of company’s products over competitors.
iii. Reminding about the product and facilitating the thinking about the product.
• Determining the advertisement budget: We discussed four important
techniques used in setting up communication budget in the beginning of
this unit. In this section we will discuss the factors that influence the
advertisement budget decisions.
i. The product stage in the product life cycle: In the introduction stage of product
life cycle Company spends more money on consumer to inform about the product
and to create the awareness.
ii. The market share of the company: If the share of the company is high, it tries
to defend by heavy advertisement and if it is low and market is attractive
organizations promote company’s product heavily.
• Developing advertisement strategy: Advertisement strategy depends on
two important factors. They are developing messages and choosing proper
media.
I) Message development:
• Message should be developed only after preparing the complete target
profile.
• Understand what interests target customer.
• Message should answer the objectives of the program.
• Message should be simple and can be understood by anybody.
• Use more interactive communication tools.
ii) Selecting advertising media:
• Assess how many target customers should view the communication
message.
• Point out how many times a target customer will expose to the
advertisement.
 • Evaluate the impact of advertisement message on the target audience.
• List out the media habits of the target customers.
• Find the suitable media for type of product organization have.
• Prepare cost sheet and choose optimum media.
• Choose particular media vehicle (Zee channel, Times now, Prajavani,
Hindu
Etc…)
• Decide how many times advertisement should be given in the year and
also decide the continuity of advertisement.
• Allocate the media execution strategy on the basis of prime time and non
prime time or seasonal and non seasonal decisions.
• Evaluating advertising: Communication department is interested in
identifying whether the message given is effectively reaching the
consumer and inducing them to purchase the product. Therefore they
critically evaluate the advertisements through various methods. Some of
the important methods through which advertisements evaluated are
recognition method (showing the advertisement and asking whether thy
have seen it before), aided recall (asking people to tell the brand they
remember) and unaided recall (asking people if they can remember seeing
any ads within an identified product category).

Q.3 Write a note on new product development and product mix.

Ans.: New Product Development

New products are essential for existing firms to keep the momentum and for new
firms they provide the differentiation. New product doesn’t mean that absolutely
new to the world. It may be modification, or offered in the new market, or
differentiate from existing products. Therefore it is necessary to understand what
are new products?
New Products are
a. They are really innovative: Google’s Orkut a networking site which
revolutionized social networking. In this site people can meet like minded people;
they can form their own groups and many more.
b. They are very different from the others: Haier launches path breaking 4-Door
Refrigerators First time in India
c. They are imitative; These products are not new to the market but new to the
company. For example, cavin Kare launched ruche pickles. This product is new to
cavin kare but not to the market.

New product development process:

Stage 1: Idea generation: new product idea can be generated either from the
internal sources or external sources. The internal sources include employees of
the organization and data collected from the market. The external source
includes customers, competitors and supply chain members. For example,
Ingersoll rand welcomes new ideas from the General public

Stage 2: Idea screening: Organization may have various ideas but it should find
out which of these ideas can be translated into concepts. In an interview to Times
of India, Mr. Ratan Tata, chairman
TATA group discussed how his idea saw many changes from the basic version. He
told that he wanted to develop car with scooter engine, plastic doors etc... But
when he unveiled the car so many change were there in the product. This shows
that initial idea will be changed on the basis of market requirements.
Stage 3: concept development:
Concepts used for Tata Nano car are
Concept 1: low end 'rural car,' probably without doors or windows and with plastic
curtains that rolled down, a fourwheel
Version of the auto rickshaw
Concept 2: a car made by engineering plastics and new materials, and using new
technology like aerospace adhesives instead of welding.
Concept 3: Indigenous, in-house car which meets all the environment standards
Stage 4; Concept testing: at this stage concept was tested with the group of
target customers.
Stage 5: Marketing strategy development: The marketing strategy development
involves three parts.
The first part focuses on target market, sales, market share and profit
goals.TATA’s initial business plan consisted sales of 2 Lakh cars per annum. The
second part involves product price, distribution and marketing budget strategies.
TATA’s fixed Rs. 1 Lakh as the car price, and finding self employed person who
works like agent to distribute the cars. The final part contains marketing mix
strategy and profit goals.
Stage 6: business analysis: it is the analysis of sales, costs and profit estimated
for a new product to find out whether these align with company mission and
objectives.
Stage 7: Product development:
TATA nano car development (source; business world nanolution)
1. Tried to outsource the product from allover the world.
2. Development of ‘mule’ or prototype with 20bhp.
3. Designing the small engine
4. Thermodynamic simulations and final engine
5. Development of MPFI with help of Bosch.
6. Cost reduction and negotiating with vendors.
7. Sona Koyo and Rane Group came up with hollow steering shafts, saving cost
and cutting weight. Sharda Motors and Emcon designed the exhaust system and
MRF tweaked the tyres to bear extra weight on rear wheels.
Stage 8: test marketing:
1. The product is introduced into the realistic market
2. The 4P’s of marketing are tested.
3. The cost of test marketing varies with the type of product.
Stage 9: commercialization: In this stage product is completely placed in the
market and aggressive communication program is carried out to support it.

Product mix: The number of product line and items offered by marketer to the
consumer
A company’s product mix has four different dimensions. They are product mix
width, product mix length, and product mix depth and product mix consistency.

Product mix width: The total number of product line that company offers to the
consumers.
Product mix length: The total number of items that company carries within its
product line.
Product line depth: The number of versions offered of each product in the line.
For example, Jyothy laboratories’ Jeeva Natural is offered in three versions i.e.
Coconut Milk with
Milk Protein, Coconut Milk with Jasmine and Coconut Milk with Kasturi Manjal, and
is presented in
75gm packs.
Product mix consistency: If company’s product lines usage, production and
marketing are related then product mix is consistent else it is unrelated.
Incase of Jyothy laboratories, all six product lines are FMCGs. Hence it is having
consistent product mix. But ITC Company’s cigarette and cloth product line are
totally unrelated.

Q.4. Select any brand of toilet soap and evaluate its positioning strengths or
weaknesses in terms of attributes, benefits, values, brand name and brand equity.
Also, examine how competitive brands influence the marketing strategies of the
selected soap.

Ans.: Brand managers use three levels of positioning strategies to get the mind
share of the customer.
Product attributes Ingredients: the product speaks about the innovative
 Ingredients that company offers in the product. In the
gore example the company explains the It’s gentle cleansing qualities are enhanced with
calming chamomile and witch...

Benefit: Caring Lux Soap

Beliefs and values Beauty Soap Lux Soap

Brand name: Brand provides the image to the product. Brand manager should
be careful while selecting proper name for the brand. There are six suggestions
from the Philip Kotler to create a successful brand name. They are
1. It should suggest something about the product benefits and qualities; Frooti or
appy Fizz
2. It should be easy to pronounce, recognize, and remember: Amul, Kissan, and
Ruchi
3. The brand name should be distinctive: cello, VIP
4. It should be extendable: Aashirwad Wills
5. The name should be easily translated into foreign language: Mr. White.
6. It should be capable of registration and legal protection

Competitive brand influence:

For example, Hindustan Unilever uses different brand names for their home and
personal care category. The above example shows us that HUL have breeze,
Dove, Liril Lux, Lifebuoy and Pears in the bath soap segment itself.
It helps company to come out with new features in the product or product
category. Organizations adopt this strategy to avoid brand cannibalization in the
given category. The major disadvantage of this strategy is none of the brands will
enjoy major market share and result in lesser profitability. In case of Hindustan
Unilever company had more than 100 brands and was forced to reduce it to 30
power brands. Other brands were not adding enough profit for the company.
New brands: The strategy of coming out with new brand for new category
products. In this strategy, company believes that existing brands can not be
extended to the new category. The new brand strategy requires huge resources
to build it. The new category if it already had some brands of other companies,
investment requirement will go up. For example, Hindustan Unilever launched
Pure it in the water purifier category. The category and brand is new to the
company.

Q. 5As a salesperson in a fast moving consumer goods company, what kind of

training and development methods do you feel are required? How important is training
for sales force and how can it be evaluated?

Ans.: Training Methods:

For imparting training to the salesman, different methods are being used.
Broadly, these methods may be divided into two:
1. Group Training

(a) Lecture Method: An expert or a lecturer speaks to trainee salesmen about

the various aspects of selling. It consists of oral talk in a classroom. This system is
widely used. The trainees listen to the lectures. The instructor invites questions
and answers from them. To make the lecture more interesting, visual aids,
demonstration, suitable examples may be added. This system is more
economical, and is the easiest and quickest in imparting theoretical training to a
group of salesman. But it is difficult to evaluate the effectiveness of lecture
method. This method can be used more effectively in continuing sales training
Programme to provide new information or changes in the policies of the firm. This
may include seminars, demonstration etc., by expert salesmen.

(b) Audiovisual
Method: In order to supplement the lecturing (telling) method, training programs
include the use of visual aids, such as films, slides, posters etc., and are capable
of making, them more interesting.

(c) Discussion Method: This is a good method. Here an actual case or an

imaginary case is given as a problem to be solved, to the different groups. The
case or the problem may be typed or printed. Each group is asked to understand
the problem and draw a conclusion. After this, the different conclusions or
suggestions are analyzed collectively, under the leadership of the instructor, in
drawing generalizations from each case or problem. This type of training enables
the salesmen in correcting their own views. It is suitable for a small group. It is
slow and costly.
(d) Conference Method: Sales conferences and sales meeting are a kind of ‘get
together’ of all the concerned staff, weekly, fortnightly or monthly. The thoughts
of various persons are pooled in the conference. Meetings or conferences have
motivating effects as the participants are given chances for creative thinking and
to express their views. To make the conference more interesting, dramas,
demonstrations etc., are included. Topics like, sales policies, facing competition,
publicity ideas, dealings with complaints etc., are dealt with. And these will
facilitate the participants in broadening their outlook and ideas. But this type of
meetings or conferences is not suitable for new recruits.

(e) Role Playing Method: Role playing is a newly developed method. The sales
trainees are made to act out roles in contrived problems. The trainer explains the
situation of the problem and assigns the role of salesman and customers of
different characters to the sales trainees. Each one has to act the assigned role.
The trainer watches the role played by each and discusses their weaknesses and
strong points. A few may be selected to act the play, while others may watch it.
Thus, the salesman have chance to see and understand the ideas in different
situations. It is not suitable for new recruits.

(f) Panel Method: Members in the panel group may be permanent. The
members, who are experts in the panel, discuss the problems, and solutions are
passed to the sales trainee groups, who may have further discussion. This system
is ineffective.

(g) Round Table method: It is similar to the discussion method. It consists of

few members. The salesmen sit around a table along with a good discussion
leader. They deal with the problems of actual cases. Every participant takes part
freely in discussing the problems and solutions.
Exchanges of new ideas take place advantageously.
(H) Brain Storming Method: Under this method, more or less, similar to round
table conference, persons sit around the table. The leader presents the problems
for discussion. The sales trainees have to understand the problems and find the
solutions. The solutions are analyzed by the leader or tested by the panel of
experts. This method practically fetches no value.

2. Individual Training
(a) On the job
Training: Under this method, a new salesman is placed under an experienced or
senior salesman who trains him. First the coach explains the sales techniques
under different situations. He also takes the trainee along with him on his rounds
and gives him chances to observe the dealings with the customers. Doubts of the
trainee are also clarified. Then the coach along with the trainee calls on
customers the sales trainee is allowed to deal with the customer and the coach
observes the performance. If any weak point or shortcoming is found in the sales
trainee, they discuss how to overcome them. After some time, the sales trainee
becomes a trained and independent salesman. This system is good for traveling
salesman.
(b) Sales Manual: It is a complied textbook. It contains details of the firm and
products, job description, sales policies, opinions or reports required for reference
purposes etc. Generally, it contains many problems with suggestive solutions. A
copy of the book is given to a salesman to go through it and understand the
ideas. It works as a ready beckoner.

(c) Initial or Break-in

Training: New recruits are given an orientation training so as to know about the
company and its products. He may be allowed to work for some time in the firm
itself to gain sufficient information about the products. After that he is sent to
work in his field.
Apart from the above, salesman can also be sent to specialized educational
institutions. The training cost is borne by the firm. There are many institutions in
India which impart theoretical training along with practical work. Doors are open
and firms can send their new recruits for training.
Correspondence courses are also available for initial training. In certain cases,
one can undergo training while one is fully employed. This is suitable for
salesmen who are widely scattered. There are many firms which have permanent
training departments like colleges.
It is important to note that even the trained or experienced salesmen need
periodic training, called refresher training or follow up training. This is because of
the changes in products, sales policies, changes in consumers and market,
government policies, new developments, new ideas etc.

Evaluation of Training: Having trained the salesmen, the marketing manager

must evaluate the usefulness or effectiveness of training, individually and
collectively on the basis of the performance of the sales personnel. Money, effort
and time have been spent on training. Therefore, it is natural to expect returns.
Evaluation can be made on the basis of performance of sales executive in terms
of sales volume, sales profitability, order size, expenses etc., between, before and
after training periods.

Importance of Training:
1. To prepare the salesman to discharge his job efficiently.
2. To tell him what to do.
3. To guide him how to demonstrate.
4. To allow him to practice or perform it.
5. To check him in his performance.
• Motivating: In this stage organization identify the attributes that motivates
the sales executive to perform well. Some executive may require money
and others may status or control. Here organizations draw two types of
incentives. They are financial incentives and non financial incentives. In
financial incentives salary package, flexible expenses and fringe benefits
serves as motivators. The non financial incentives include promotion,
recognition and awards are included to motivate the sales executives.
• Evaluating: Companies are interested to know whether sales executives
are achieving the quotas set for them. To know this they ask sales
executives to send the different sales reports. It may be call reports,
expense reports, loss order report, travel plan and expenditure and so on.
These reports information are compared against the set standards. On the
 basis of evaluation report incentives are announced, if required sales
executives are motivated and trained.
• Compensation: sales executives are compensated on three methods. They
are direct salary, direct commission and combined plans. In Direct salary
method sales executives are given fixed salary per month. In case of
direct commission sales executives will be working on commission basis
only. For example, Life insurance agents get straight commission. The
combined method is mixture of straight salary and straight commission
method. In this method sales executives are paid fixed salary and also
commission on the sales they make. For example, BMTC pays its
conductors fixed salary and also 2% of commission on total tickets sold in
a day.

Q. 6What is International Marketing? What are the various strategies to enter

International markets? Explain.

Ans.: Nature of International Marketing Concept

International marketing is defined as “The performance of business activities
designed to plan, price, promote and direct the company’s flow of goods and
services to consumers or users in more than one nation for a profit”.
A company that wants to sell their product in other than domestic market should
understand the environmental factors, consumer behavior, market forces and
other characters relevant to the international market. After understanding the
definition several questions may arise in your mind like why marketer should go
the international market? And what is the difference between international
marketing and domestic marketing. As we discussed in the introduction part
companies enter into the international market to tap the potential, to support the
customer requirements or to avoid the unprofitable domestic market.

International Marketing: The marketing concept is the idea that a firm should
seek to evaluate market opportunities before production, assess potential
demand for good, determine the product characteristics desired by the
consumers, predict the prices consumers are willing to pay and then supply
goods corresponding to the needs and wants of target markets. Adherence to
marketing concept means the firm conceives and develops products to satisfy
consumer wants. For international marketing this means the integration of the
international side of the company’s business with all aspects of its operations and
the willingness to create new products and adapt existing products to satisfy the
needs of world markets. Products may have to be adapted to suit the tastes,
needs and other characteristics of consumers in specific regions, rather than it
being assumed that an item which sells well in one country will be equally
successful elsewhere.

International Market Entry Strategies

Organizations that plans to go for international marketing should answer some
basic questions like
a. In how many countries the company would like to operate?
b. What are the types of countries it plans to enter?
To answer the above questions companies evaluate each country against the
market size, market growth, and cost of doing business, competitive advantage
and risk level.
To answer the above questions companies evaluate each country against the
market size, market growth, and cost of doing business, competitive advantage
and risk level.

Once the market is found to be attractive companies should decide how to enter
this market.
Companies can enter international market from any one of the following
strategies. They are
a. Exporting
b. Licensing
c. Contract manufacturing
d. Management contract
e. Joint ownership
f. Direct investment
Exporting is the techniques of selling the goods produced in the domestic
country in a foreign country with some modifications. For example, Gokaldas
textiles export the cloths to different countries from India. Exporting may be
indirect or direct. In case of indirect exporting, company works with independent
international marketing intermediaries. This is cost effective and less risky too.
Direct exporting is the techniques in which organization exports the goods on its
own by taking all the risks. Maruti udyog limited India’s leading car manufacturer
exports its cars on its own.
Company can also set up overseas branches to sell their products. Adani exports
another leading exporter from India has international office in the Singapore.
Licensing: According to Philip Kotler licensing is a method of entering a foreign
market in which the company enters into an agreement with a license in the
foreign market, offering the right to use a manufacturing process, trademark,
patent, or other item of value for a fee or royalty’. For example, torrent
pharmaceuticals has license to sell the cardiovascular drugs of Chinese
manufacturer Tasly.
Licensing may cause some problems to the parent company. Licensee may
violate the agreement and can use the technology of the parent company.
Contract manufacturing: company enters the international market with a tie
up between manufacturer to produce the product or the service. For example,
Gigabyte technology has contract manufacturing agreement with Dlink India to
produce and sell their mother boards. Another significant manufacturer is TVS
electronics; it produces key boards in its own name as well as for other
companies too.
Management contracting: In this type a company enters the international
market by providing the know how of the product to the domestic manufacturer.
The capital, marketing and other activities are carried out by the local
manufacturer hence it is less risky too.
Joint ownership: A form of joint venture in which an international company
invest equally with a domestic manufacturer. Therefore it also has equal right in
the controlling operations. For example,
Barbara a lingerie manufacturer has joint venture with Gokaldas images in India.
Direct Investment: In this method of international market entry Company
invest in manufacturing or assembling. The company may enjoy the low cost
advantages of that country. Many manufacturing firms invested directly in the
Chinese market to get its low cost advantage. Some governments provide
incentives and tax benefits to the company which manufactures the product in
their country.
There is government restriction in some countries to opt only for direct
investment as it produces the jobs to the local people. This mode also depends
on the country attractiveness. It may become risky if the market matures or
unstable government exists.