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Marketing Management Unit -I
Marketing – Definitions - Conceptual frame work – Marketing environment : Internal and
External - Marketing interface with other functional areas – Production, Finance, Human
Relations Management, Information System. Marketing in global environment – Prospects and
Challenges
Definition
The term Market is derived from the Latin word “Marcatus” which means merchandise, trade or
a place where business is conducted. Marketing is total system of interacting business activities
designed to plan, price, promote and distribute want satisfying products and services to present
and potential consumers”.
FUNCTIONS OF MARKETING
The functions are as follows
Buying - people have the opportunity to buy products that they want.
Selling - producers function within a free market to sell products to consumers.
Financing - banks and other financial institutions provide money for the production and
marketing of products.
Storage - products must be stored and protect ed until they are needed. This function is
especially important for perishable products such as fruits and vegetables.
Transportation -products must be physically relocated to the locations where
consumers can buy them. This is a very important function. Transportation includes rail road,
ship, airplane, truck, and telecommunications for non-tangible products such as market
information.
Processing - processing involves turning a raw product, like wheat, into something the
consumer can use -- for example, bread.
Risk-Taking - insurance companies provide coverage to protect producers and
marketers from loss due to fire, theft, or natural disasters.
Market Information - information from around the world about market conditions, weather,
price movements, and political changes, can affect the marketing process. Market information is
provided by all forms of telecommunication, such as television, the internet, and phone.
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Grading and Standardizing - Many products are graded in order to conform to
previously determined standards of quality. For example, when you purchase No. 1 Potatoes,
you know you are buying the best in the market.
Core Concepts of Marketing
1. Need: A human need is a state of felt deprivation of some basic satisfaction. e.g. people require food,
clothing, shelter, safety, belonging & esteems.
2. Wants:Wants are the forms taken by human needs has they are shape by culture & individual
personality people have almost unlimited wants but unlimited resources. People choose product
that provide the most value & satisfaction for their money.
Example: - a human being needs food but wants the burger, French rice, & soft drink.
3. Demand:It is the desire backed with purchasing power of the commodity. Wants become demands when
supported by the purchasing power.
4. Product:Product is anything that can be offered to a market that might satisfy want or need. It is a bundle
of utilities consisting of various features and accompanying services.
5. Value:
Value is a central marketing concept. It reflects the sum of tangible and intangible benefits and
costs to customers. It is the relation between cost and benefit. It is the relation between what we
give and what we get. Value increases with quality and services.
Value = Benefit deriving from a product
--------------------------------------Cost of acquiring the product
6. Exchange, Transaction and Relationship
The essence of marketing is a transaction an-exchange intended to satisfy human needs and
wants. Marketing emerges when people decide to satisfy needs and wants through exchange.
Exchange is a the act of obtaining a desired product from someone by offering something in
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return. Exchange is the social concept of marketing. Whether exchange actually takes place
depends upon whether the two parties are agreed to the terms and conditions of exchange. When
the exchange is completed it is called as transaction.
7. Markets :
In marketing, the term market refers to the group of consumers or organizations that is interested
in the product, has the resource to purchase the product, and is permitted by law and other
regulations to acquire the product.
8. Marketers:One that sells goods or services in or to a market, especially one that markets a specified
commodity.
5. Satisfaction: Satisfaction reflects a person’s judgments of a product’s perceived
performance in relationship to expectations. If performance falls short of expectations, person is
dissatisfied and disappointed. If it matches expectations, the customer is satisfied. If it exceeds
them, the customer is delighted.
6. Segmenting: Dividing the market preferences into one group is called segmentation. Different
levels of segmentation 1. Segment Marketing 2. Niche Marketing 3. Local Marketing 4.
Individual Marketing
Bases for Segmentation
1. Geographic Segmentation
2. Demographics Segmentation
3. Psychographic Segmentation
4. Behavioral Segmentation
7. Targeting: It can be defined as a concentrating resources and efforts on partic
market segment and segments. Eg: Mercedes for high end people.
8. Positioning: It deals with creating image in the minds of the customers. Eg: Maggi- in
2minutes. Volvo for safety.
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Scope of Marketing
Marketing people are involved in marketing 10 types of entities: goods, services, experiences,
events, persons, places, properties, organizations, information, and ideas.
Goods. Physical goods constitute the bulk of most countries’ production and marketing effort.
The United States produces and markets billions of physical goods, from eggs to steel to hair
dryers. In developing nations, goods— particularly food, commodities, clothing, and housing—
are the mainstay of the economy.
Services. As economies advance, a growing proportion of their activities are focused on the
production of services. The U.S. economy today consists of a 70–30 services-to-goods mix.
Services include airlines, hotels, and maintenance and repair people, as well as professionals
such as accountants, lawyers, engineers, and doctors. Many market offerings consist of a variable
mix of goods and services.
Experiences. By orchestrating several services and goods, one can create, stage, and market
experiences. Walt Disney World’s Magic Kingdom is an experience; so is the Hard Rock Cafe.
Events. Marketers promote time-based events, such as the Olympics, trade shows, sports events,
and artistic performances.
Persons. Celebrity marketing has become a major business. Artists, musicians, CEOs,
physicians, high-profile lawyers and financiers, and other professionals draw help from celebrity
marketers.
Places. Cities, states, regions, and nations compete to attract tourists, factories, company
headquarters, and new residents.5 Place marketers include economic development specialists,
real estate agents, commercial banks, local business associations, and advertising and public
relations agencies.
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Properties. Properties are intangible rights of ownership of either real property (real estate) or
financial property (stocks and bonds). Properties are bought and sold, and this occasions a
marketing effort by real estate agents (for real estate) and investment companies and banks (for
securities).
Organizations. Organizations actively work to build a strong, favorable image in
the mind of their publics. Philips, the Dutch electronics company, advertises
with the tag line, “Let’s Make Things Better.” The Body Shop and Ben & Jerry’s
also gain attention by promoting social causes. Universities, museums, and performing arts
organizations boost their public images to compete more successfully for audiences and funds.
Information. The production, packaging, and distribution of information is one of society’s
major industries.
Ideas. Every market offering has a basic idea at its core. In essence, products and
services are platforms for delivering some idea or benefit to satisfy a core need.
Selling Vs Marketing
Selling is another important term often used in confuse way. Selling narrow in its scope than
that of marketing. These two terms are basically different from one another. The points of
distinction between them are given.
SELLING
MARKETING
Emphasis
Emphasis is on the product
Emphasis is on the customers needs
orientation
Internal- company (Sellers)
External-Market orientation.
orientation.
Needs
Emphasis is on the sellers
Emphasize is on the buyers needs.
needs
Scope
Narrow in scope
Wider in scope
Aim of production
Produces what is easy for
Produces what the customers need.
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the firm
Merchandises sold
Sells what the firm
Sells what the customers needs.
produces
Place of customer in the
Customer is only the last
Customer is the first as well as the
link
link in the business
last link in the business.
Conduct of Market Surveys
Market surveys are not
Market surveys are conducted.
conducted.
Planning period
Customer Satisfaction
Planning is made for the
Planning is made for the long
short period
period.
Difficult to get customer
Easy to get customer satisfaction.
satisfaction.
Nature of Marketing
What are the characteristics of marketing?
The Characteristics of marketing are as follows
1. Specialized Business Functions
The business environment has undergone tremendous change in social, economic,
political and cultural aspects. The management of a firm, therefore has to develop a
particular organization with a view to absorbing new ideas, new approaches and new
market demands.
2. Socially Desirable Function
It requires constant interaction with the various strata of society. It is instrumental in
manipulating the factors of production, distribution, promotion and price and also in
influencing the patterns of consumption and consumer attitudes.
3. Integrative Function
It integrates and combines the other business functions like production, finance,
personnel, R and D, etc., with a view to accomplishing the organizational objectives.
4. Reflects the Business Mission
Marketing reflects the business mission of the firm before the public and society.
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5. Adaptation to Environment Variables
It is said that change is not only basic law of economics. Marketing which is the art of
distributing the product and services among the various claimants, has also only one basic
law change.
6. Universal Function.
It has a universality in the sense that it can be applied to both profit motive and non-profit
motive organizations. A profit seeking business unit is dependant on marketing . The
institutions like hospital school, university, or political association also practice
marketing in popularizing the services offered by them.
Importance of Marketing.
Importance of Marketing to the society

Delivery of standard of living to the society.
Marketing is to produce goods and services for the society according to their needs and
tastes at reasonable price. Marketing discovers needs and wants of the society, produces
the goods and services according to those needs create demand for those goods and
services encourages customers to use them and thus, improves the standard of living of
the society.

Decreases in Distribution Cost.
Marketing aims at reducing the cost of distribution as far as possible so that the
commodities might be within the research of maximum number of consumers.
It
increases the level of consumption in the society. Reduction in the cost of distribution
directly affects the price of the commodity and it will be reduced.

Increase in Employment Opportunities
Employment opportunities are directly affected by the development of marketing.
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
Protection against Business slump
Marketing helps in protecting society. Marketing includes the discovery of new markets
for the goods, modifications and alterations in the quality of product and development of
alternative uses of the product. It reduces the cost of distribution and maintains the level
of sales volume.

Increase in National Income
Marketing activities creates, maintains and increases the demand for goods and services
in the society. It results in the increased level of production and it increases the scope
and area of marketing. This increases the National Income.
IMPORTANCE OF MARKETING TO THE FIRM

Helps in Business Planning and Decision Making
In today’s economy production is planned according to the sales forecast. A firm will
produce what it can sell or as much quantity as it can sell and not what and how much it
can produce. Thus marketing decisions affect the business decisions. All other activities
such as planning, production, purchase finance or design revolves around the marketing
decisions.

Helpful in increasing Profit
Marketing helps in increasing the business profits by reducing the selling cost. More
over it increases the demand by advertisement and sales promotion activities.

Helpful in Communication between Firm and society
Marketing also provides information to the firm of the competitors, price policies,
production policies, advertising and sales promotion policies, and distribution policies. It
helps the firms in framing its own policies or marking necessary adjustments therein
accordingly. Further more, marketing provides extensive information of the product
regarding its quality, price, utility, and place of availability to the society. Thus society
comes to know about the new product.
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IMPORTANCE OFMARKETING IN DEVELOPED ECONOMY
Marketing is the key of activities for industrial growth and expansion. Truly, speaking,
developed countries are in greater need of efficient marketing .Developed countries take
the help of improved techniques of marketing and make possible efforts to capture the
market.
IMPORTANCE OF MAREKTING IN DEVELOPING ECONOMY
Marketing helps in developing countries. A rapid development is possible only by
adopting the modern methods of marketing. An effective marketing system alone can
bring the fruits of production to the people.
IMPORTANCE OF MARKETING IN A SELLER’S OR BUYERS’S MARKET.
Every firm tries to sell its goods to the consumers. They produce goods according to the
taste and preference of the consumers. The buyers would like to buy the quality goods
according to the taste and preference. Thus the importance of sellers and buyers are great
indeed.
MARKETING ORIENTATIONS OR CONCEPTS:
The marketing function or activities are conducted by various companies based on six
alternative concepts or orientations. They are,
1. The Production Concept
2. The Product Concept
3. The Selling Concept
4. The Marketing Concept
5. The Customer Concept
6. The Societal Marketing Concept
1. The Production Concept
The production concept believes that consumers will flavour products that are
readily available at reasonable prices. Improvement in production and distribution efficiency will
be the focus for managements under this concept. When the demand for a product exceeds
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supply, manufactures have to increase production. When the product’s cost is too high, the
management has to bring it down to affordable levels. In the example of Ford car model T,
Hendry Ford believed that if cost is reduced, more people would buy it. Ford did not have any
concern about customer’s preferences and joked that the customer can have any colour for the
car, provided it was black.
The production concept, though useful in some situations, could result in ‘marketing myopia’,
according to Theodore Levitt. Companies following this concept focus too narrowly on their own
activities and lose sight of the real objective of customer’s need satisfaction.
In India, for example, the Indian Telephone Industry (ITI) earlier had a monopoly,
and was producing only black coloured telephone instruments. At present, due to competitors
entering the market, we can have any colour for our instruments. Similarly, household electrical
appliances like fridge, washing machine, geyser, microwave oven etc., were available only in
white colour (and were, therefore, called ‘white goods’). Now we have a choice of different
colours.
2. Product Concept
The product concept believes that consumers will flavour products that offer the
most in quality, performance, and innovative features. Continuous improvements in product and
quality are essential for companies that follow this concept. They believe that if they build a
better mouse trap, the world will beat a path to their door. Actually, the consumers may be
wanting in better solution to the mouse problem and not a better mousetrap. So, product concept
may also lead to marketing myopia.
3. The Selling Concept
The selling concept believes that consumers will not buy enough of the company’s
product unless it undertakes pressure selling tactics and heavy promotion efforts. Buyers are
believed to have a buying inertia. This concept is especially used for unsought goods which
buyers normally do not think of buying, like life insurance, cemetery plots, etc. When companies
face excess production, they follow this concept to sell what they make, without caring for
customer’s needs or satisfaction.
4. The Marketing Concept
The marketing concept believes that achieving the company’s objectives depends on
understanding the needs and wants of target markets and delivering the desired satisfaction in a
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better way than what the competitors are doing. Focus on customer and value is considered the
path to successful sales and company profits in this concept. The customer is considered THE
KING and the company produces and markets what the customer wants.
Start
Focus
Factory
Means
Existing
Products
Selling and
Promoting
Ends
Profits
through
sales volume
Inside Out – Selling Concept
Market
Customer
Needs
Integrated
Marketing
Profits through
customer
satisfactionn
Outside In – Marketing Concept
5. The Customer Concept
Many companies are today moving beyond the marketing concept to the customer
concept. These companies shape separate offers, services, and messages to individual customers,
based on their individual preferences. They hope to achieve profitable growth through capturing
a larger share of each customer’s expenditures by building high customer loyalty and focusing on
customer lifetime value. One-to-one marketing has become possible through advances in factory
customization, computers, the Internet and database marketing software. Examples: Barbie
Dolls, Levi Strauss Jeans, Dell Computers.
6. The Societal Marketing Concept
This concept believes that organization should determine the needs, wants and
interests of target markets. It should then deliver superior value to the customers in a way that
maintains or improves the consumer’s and the society’s well-bring. The social marketing
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concepts calls on markets to balance three considerations in setting their marketing politics:
company profits, consumer wants, and society’s interests or human welfare.
Society
(Human welfare, environment)
Societal
Marketing
concept
Consumers
Company
(Needs, wants, satisfaction) (Sales volume, profits, growth)
Originally, most companies based their marketing decisions largely on short-run
company profit. Eventually, they recognized the long-run importance of satisfying consumer
wants, and the marketing concept emerged. Now many companies are beginning to think of the
society’s interests when marketing their marketing decisions.
MARKETING INTERFACE WITH OTHER FUNCTIONAL AREAS
Companies which believe in the Marketing Concept believe in integrating the needs and
wants of the target customers with all the functional areas like production, finance, human
resources management, and R & D. Such companies understand that all functional areas are
equally important, and that marketing performs the role of integration. This is known as
integrated marketing. Such a strategy will create a synergy within the company which will
contribute to business success. This is important in today’s competitive marketing environment
because the responsibility of marketing the product or service and also of expanding or
maintaining market share rests on every functional area in the company. If marketing and other
functional areas work at cross purpose, the company’s performance will be affected drastically.
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Marketing interface ensures that this does not happen, by linking the flow of objectives from
corporate goals to influence every functional area’s objective formulation and implementation, as
shown in the figure below:
Corporate Goals
Marketing
Objectives
Financial
Objectives
Production
Objectives
R&D
Objectives
Human Resources Management
More than the integrative function, marketing function today has to perform the role of
providing a competitive advantage (a strength which is more than the competitor which is
considered important and valuable by the customers) to the company. The marketing division has
to scan the market environment, identify the market opportunities, and lead change within the
company to help the policy makes prepare strategies for success. To ensure this, the marketing
information system (MkIS) should serve the corporate objectives and provide the much needed
diagnostic support to corporate strategy formulation. Marketing function therefore, is today
critical in integrating customers with the company and helping the top management evolve
successful strategies for increasing growth and profitability.
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Best Practices of Marketing Interface
Some of the best practices followed by successful companies who have developed good
marketing interface with other functional areas are given below:
Production

Production people, especially in B2B companies visit the factories of their clients to
understand requirements.

They invite customers to visit and study their own factories.

They willingly work overtime to meet promised delivery schedules to clients.

They search for ways and means to produce high quality goods faster and at low cost,
with zero defects.

They meet customer’s requirements for ‘customisation’ where possible.
Materials / Purchase Department

They proactively search for the best suppliers.

They strive to build long=term relationships with fewer but more reliable, highquality suppliers.

They don’t compromise quality for price savings.
Finance Department

They prepare periodic profitability audit reports on products, market segments, sales
territories, order sizes, channels, and individual customers.

They prepare bills and invoices tailored to customer needs and answer customer
queries courteously and quickly.

They understand and support marketing budgets and expenditures like advertising,
sales promotion campaigns, discounts, etc., that produce long-term customer
preferences and brand loyalty.

The tailor the financial package to the customer’s financial requirements.

They make fast decisions on customer creditworthiness.
R & D Department

They spend time meeting customers and listening to their problems.
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
They encourage and welcome the involvement of marketing, production and other
departments to each new project.

They benchmark competitor’s products and seek ‘best of class’ solutions.

They solicit customer reaction and suggestions as the project progresses.

They continuously improve and refine the product on the basis of market feedback.
Distribution Department

They set a high standard for service delivery time meet this standard consistently.

They operate a knowledgeable and friendly customer service department that can
answer questions, handle complaints, and reduce problems in a satisfactory and
timely manner.
Sales Department

They acquire specialized knowledge about the client’s industry, especially in B2B
marketing.

They strive to give the client best solution.

They only make promises that they can keep.

They provide feedback on customer’s needs and suggestions to the production and R
& D departments.

They strive to retain customers loyal for a long period of time.
Marketing Department

They study the customer needs and wants in well-defined market segments.

They allocate marketing effort in relation to the long-term profit potential of the
targeted segment.

They measure brand image and customer satisfaction on a continues basis.

They continuously gather and evaluate ideas for new products, product
improvements, and service quality.

They persuade and motivate all company departments and employees to be customercentred.
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Human Resource Management

Human Resource Management (HRM) is an integrative general management that
involves identifying the organization’s demand for human resources with particular
skills and abilities. As for the introduction of the new products or services, it is
necessary for HRM department to know about it. Once the new products or services
are introduced, marketing has the responsibility to inform the HRM department
punctually and sufficiently. The information for HRM department should be
concerned with the new skills and experience needed for the new workers at present.
The characteristics of the human resources like skill, quality, moral, commitment,
attitude etc., could contribute to the strength and weakness of a marketing
organization. The involvement, initiate etc,. Of people at different levels may vary
from organization thus it is essentially required to manage personal issues in order to
meet and exceed marketing objectives.
Information System
An information system, as a discipline, focuses on exploring the interface
between management, information science, and computer science.
The major functional areas in many companies are the production/operations,
marketing, human resources, accounting, and finance departments.
Marketing information provides input to marketing decisions including product
improvements, price, and packaging changes, copywriting, media buying,
distribution, and so forth.
MEANING AND CONCEPTS
The marketing environment is composed of a microenvironment and a environment. The
microenvironment consists of the following actors close to the company that effect its ability to
serve its customers: (1) The company (2) The suppliers (3) The marketing intermediaries (4) The
customer markets (5) The competitors (6) The public. The macro environment consist of the
following larger societal forces that effect the microenvironment: (1) Demographic (2) Economic
(3) Natural (4) Technological (5) Political (6) Legal (7) Cultural
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MICROENVIRONMENT
Marketing management’s job is to build relationship with customers by creating customer
value and satisfaction. Marketing success will require working closely with other departments of
the company, suppliers, marketing intermediaries, customers, competitors, and various publics,
which combine to make up the company’s value delivery network.
1. The Company
In the company, marketing managers, in formulating plans, must take into account the
other groups such as top management, finance, R & D, purchasing, manufacturing and
accounting. All these groups constitute a company’s microenvironment for the planners. They
should think about the consumers and work in harmony to provide customer value and
satisfaction.
2. The Suppliers
Suppliers form an important link in the company’s overall customer value delivering
system. They provide the resources needed by the company to produce its goods and services.
Developments in the supplier environment can have a substantial effect on the company’s
marketing operations. Price changes, supply shortages, labour strikes, and other events can
interface with the fulfilment of delivery promises to customer and lose sales in the short run and
damage customer relationship in the long run.
3. The Marketing Intermediaries
Marketing intermediaries are firms that aid the company in promoting, selling and
distributing its goods to the final buyers. They include middlemen, physical distribution firms,
marketing service agencies and financial intermediaries. Middlemen are business firms that help
the company find customers and / firms assist the company in stocking and moving goods from
the factory to their destinations. Warehousing firms store and produce goods; transportation
firms move goods. Marketing service agencies-marketing in targeting and providing its products
to the right markets. Financial intermediaries include banks, credit companies, insurance, etc.,
that help with the buying and selling of goods, and also insure against risks involved.
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4. The Customers
Customers of the company belong to consumer markets, industrial
markets, reseller
markets, government markets, and international markets. The tastes and preferences of customers
keep on fluctuating. Customers brand loyalty also keeps changing. Only by studying the market
demand and customer-related factors on a regular basis can marketers carry out their business
activities successfully. Neglecting to watch customer preferences will be disastrous.
5. The Competitors
The company’s marketing system is surrounded and affected by a host of competitors.
These competitors have to be identified, monitored, and outmanoeuvred to gain and maintain
customer loyalty. Industry and competition constitute a major component of the
microenvironment. Development of marketing plans and strategy is based on knowledge about
competitors’ activities. Competitive advantage building also depends on understanding the
status, strength and weakness of competitors in the market. Competitive advantage is a superior
or distinctive competence ( in terms of customer value) of the company relative to competition in
a specific area.
6. The Publics
The company must also acknowledge a large group of publics that take an interest,
whether welcome or not, in its method of doing business. A public can facilitate or impede the
ability of an organization to accomplish its goals. Most organization establish public relations
(PR) departments to plan constructive relations with various publics. Every company is
surrounded by seven types of publics, as given below:
1. Financial – banks, stock brokers, financial institutions
2. Media – newspapers, magazines, radio, TV
3. Government – Government departments
4. Citizen-action – consumer organizations, environment groups
5. Local – neighbourhood residents, community groups
6. General – general public – public – opinion – public image
7. Internal – workers, officers, board of directors
MACRO ENVIRONMENT
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The company and all of the other actors operate in a large macro environment of forces
that shape opportunities and pose threats to the company. These uncontrollable consist of
demographic, economic, technological, political, legal, and cultural factors.
Company
1. Demographic Environment
Since people make up markets, marketers are interested in the size of the population, its
geographic distribution, density, mobility trends, age distribution, birth, marriage and death rates,
and racial, ethnic and religious structure. Marketers have to keep track of changing age and
family structures, geographical population shifts, educational characteristics, and population
diversity. For example, the teenagers’ market and working women’s market have created
marketing opportunities in India, which is recent development.
Examples: Mobile phones, Two wheelers, Cosmetics, Jeans and fast food.
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2. Economical Environment
Markets require buying power as well as people. The economic environment consists of
factors that affect consumer purchasing power and spending patterns. Total buying power is a
function of current income, prices, savings, and credit availability. The monetary policy changes,
prevailing interest rates, business cycles, changes in income levels, etc., are important factors
affecting marketing. Marketing should be aware of four main trends in the economic
environment. They are:
1. Slowdown in real income growth
2. Continued inflationary pressure
3. Low savings
4. Changing consumer expenditure patterns
3. Natural Environment
The natural environment involves the natural resources that are needed as inputs by
marketers or those that are affected by marketing activities. Environmental concerns have grown
steadily in recent years. Marketers should be aware of trends like shortage of raw materials,
increased pollution, and increased governmental intervention in natural resources management.
Companies will have to understand their environmental responsibility and commit themselves to
the ‘green movement’.
4. Technological Environment
The technological environment is the most dramatic force now shaping our destiny.
Technological discoveries and developments create and threats in the market. The marketer
should watch the trends in technology. Many of today’s common products were not available
100 years ago or even 30 years ago. E.g.:- automobiles, airplanes, TV, Xerox, personal
computers, CD players, cell phones, etc. Marketers need to know how new technologies can
serve human needs. Even the common man has now changed his lifestyle and product
preferences. He has become an ‘innovator’. In Kerala, the boat operators were some of the first
to start using mobile phones. Today, cell phones have become so popular and common that even
lower income group of the society like auto-drivers, vegetable vendors, hawkers and domestic
servants uses them.
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5. Political Environment
Marketing decisions are strongly affected by development in the political environment.
The form of government adopted by the country and political stability are important factors to be
reckoned with by marketers. The political environment consists of laws, government agencies,
and pressure groups that influence or limit various organizations and individuals in a given
society. Substantial number of laws has been enacted to regulate business and marketing - to
product companies from each other, to product consumers from unfair trade practices, to product
the larger interests of society against unbridled business behaviour. Changing government
agency enforcement and growth of public interest groups also bring in threats and challenges.
Example: Liberalisation, Globalisation, Decontrol, Delicencing, FDIPolicy
6. Legal Environment
Marketers have to function within the legal framework prevailing in the country. There
has been much legislation passed in India to control or guide businesses and industry. There are
legal regulations on products, prices, distribution and promotion. For example, liquor and
cigarette advertising has been banned. So marketers come up with surrogate ads which indirectly
promote brands. There are legal measures to product consumers and control trade. Marketers
have to understand the legal environment and adapt to its forces.
7. Cultural Environment
The cultural environment is made up of institutions and other forces that affect a
society’s basic values, perceptions, preferences, and behaviours. People grow up in a particular
society that shapes their basic beliefs and values. They absorb a world view that defines their
relationships with others. Culture is the unified result of factors like religion, language, education
and upbringing. The following cultural characteristics can affect marketing decision-making:
Persistence of core cultural values – These are deep-rooted and do not change easily. For
example, ethnocentrism, i.e., affinity to local-made products and aversion to foreign goods.
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Shifts in secondary cultural values – These are more amenable to change and can be
moulded and manipulated easily. E.g., the influence of film stars, models and celebrities on our
young people’s trend in hair styles, fashion of dresses and even lifestyles.
Marketers have a keen interest in anticipating cultural shifts in order to spot new
marketing opportunities or threats.
MARKETING IN GLOBAL ENVIRONMENT
Meaning and Definition of Global Marketing
Globalization means integrating the Economy of a country with the Global/World
Economy. It means our economy is open to foreign direct investment by providing facilities to
foreign companies to invest in different fields of Indian industry/commerce. MNCs have
freedom to import foreign capital. Indian companies can either into foreign collaborations in
India and set up joint ventures abroad.
International/Global Marketing across the national frontiers. It refers to the strategy,
process, and implementation of the marketing activities in the international area.
Global marketing brings countries closer due to economic needs and facilities
understanding and co-operation among them. It is essentially a constructive economic and
commercial activity, which is useful and beneficial to all participating countries. International
marketing act as an instrument of global growth and development.
According to Johansson, “Global marketing activities coordinated and integrated across multiple
country markets”.
Characteristics of Global Marketing
Characteristics of Global Marketing are discussed below:
1. Large Scale Operations: International transaction is always conduced in large or bulk
quantity. It is not conducted on a retail business, but on the wholesale basis such as
transportation, handling and warehousing.
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2.
Dominance of Multinationals: Multinational corporations dominate the international
marketing scene. Such enterprises have worldwide contacts. They conduct business
operations more efficiently and economically. They adopt global approach, which is
necessary in international marketing. Multinational corporations usually market their
products in large number of countries and thereby dominate developing countries. Along
with these, industrially developed countries like U.S.A and Japan supply goods to all
countries and earn huge profits due to massive production capacity and thereby dominate
international marketing.
3. International Restrictions and Trading Blocs: International marketing is not free like
internal marketing. There are various restrictions of barriers both traffic and non-traffic
because of the protective policies followed by different countries. Foreign exchange
regulations also impose various restrictions on import and exports. The scope of
international marketing is also restricted due to various restricted due to various trading
blocs like CMEA, ASEAN and LAFTA. These blocs impose artificial barriers on free
movement of goods and services among the countries. The growth of international
marketing is adversely affected due to such trade restrictions.
4. Sensitive Character: International marketing is highly sensitive and flexible in
character. A product may suddenly become unfavourable or due to some political and
economic reasons the market may come down. The use of advanced technology or the
introduction of new products by a competitor may affect the sale.
5. Marketing Research: International marketing requires marketing research in the form of
marketing surveys, product surveys and product testing, as it is highly competitive.
6. Importance of Advanced Technology: International marketing is extremely dynamic
and competitive. Competition like USA, Japan and Germany has a dominating position in
international marketing because of the use of advanced technology in production and
marketing of goods. They are able to capture the world market due to their superior
quality goods at competitive prices. Expansion of international marketing is basically due
to the growth of modern technology. In belief, technological development in the base of
present international marketing.
7. Keen and Acute Competition: International marketing is highly competitive. Moreover,
this competition is between developed and developing countries, which are unequal
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partners. World markets are dynamic and this makes it necessary to use competitive
techniques for export promotion.
8. Specialized Institutions: International marketing is risky and complicated. It requires
lengthy procedures and formalities. Both professional and financial experts are necessary
for dealing with various aspects of International marketing. Therefore specialized
institutions like indent houses, exchange banks and export houses are established world
over for effective participation in international marketing.
9. Long Term Planning: International marketing requires long term marketing planning.
Because of social, economic and political factors, the marketing situation in different
countries changes. Thus a comprehensive and dynamic marketing programme can be
prepared through such planning.
10. Develops Cultural Relations and Maintains World Peace: International marketing
brings different countries closer and also develops cultural relations among them. Finally,
international marketing brings different interdependence among the countries of the
world. This situation ensures cordial relations among the nations of the world and also
ensures world peace.
International Marketing, even though it has certain distinct characteristics, is essentially
similar to domestic marketing in terms of certain technical attributes. Marketing can be
conceived as an integral part of two process, viz., technical and social. The technical process
includes non-human factors such as product, price, cost, brand, etc. Behaviour pattern of
customers and the given characteristics of a society, such as customers, attitudes, values, etc.
Functions of Global marketing
1) Choosing the Basic Route: A properly conceived entry strategy is the starting point.
There are five basic routes to enter a foreign market:
i.
Exports,
ii.
Licensing of technology and know-how,
iii.
Multinational trading,
iv.
Joint venture,
v.
Full-fledged global operation.
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2) Market Selection and Product Selection: The opportunities afforded by the various
overseas markets must be carefully evaluated, keeping in view the resources, distinctive
capabilities and constraints of the firm. ‘Market segmentation’ and ‘market targeting’ are
concepts as useful in international marketing as they are in domestic marketing. Through
careful market selection, the opportunities can be fully exploited and the risk involved in
international business minimized.
3) Selection of Distribution Channels: Choice of the right distribution channels in the
selected foreign markets is the next task. Some of the possible alternatives in this regard
are:
i.
Appointing an importing house of the buying country as the sole dealer/marketing
agency.
ii.
Appointing a few selected importers instead of a sole importer.
iii.
Going through an export house of one’s own country.
iv.
Operating one’s own branches in the foreign countries.
v.
Operating subsidiary companies in foreign countries.
vi.
Tie-up with a multinational marketing firm.
Each of the alternatives has its associated advantages and limitations. The
choice
mainly depends on the scope and scale of the marketing operations envisaged by the firm.
4) Pricing: Basically, the principles and techniques of pricing are the same in domestic and
international marketing. Firms, which have only a short-term interest in the foreign
markets, may opt for a ‘cost plus’ pricing strategy. But firms with long-term interests
cannot blindly follow this strategy. Instead, they have to necessarily adopt a marketoriented pricing policy.
The point is that the firms have to take into account the conditions in each country and in
each distinct market segment and formulate appropriate pricing policies. In some other
countries, government agencies function as sole buying and distributing agents. In yet
other countries, multinational price agreements are operating for selected items. The
international marketer has to adjust his pricing policies to all such factors.
5) Marketing Communications: In domestic marketing, a marketer is appealing to people
who are better known to him, using a known language, known symbols and familiar
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media. But in international marketing, he has to tackle unfamiliar people, strange
languages and imagery, unfamiliar media and unfamiliar purchase motivations. He has to
use symbols and images that will be understood by them and will appeal them.
Broadly, the media choice has to be from among:
i.
Transnational media offering multinational coverage,
ii.
National media of the chosen country,
iii.
Local media in chosen market segments.
6) Mastering the Procedural Complexities: The international businessman is required to
master a variety of procedural complexities covering a variety of areas like export-import
licences, customs, foreign exchange, modes of payment, documentation (invoices and
other documents), shipping/air freight procedures, insurance regulations, quality
regulations and packaging regulations.
7) Organizational Adaptations: The shift from domestic to international marketing
involves a great deal of organizational adjustments as well. An international marketing
organization needs people with a good deal of knowledge in fields such as finance and
currency, international banking, taxation, tariffs and quotas. In addition to people
proficient in such technical aspects, international marketing also requires certain changes
in management attitudes, outlook and approaches.
8) Handling Business Ethics: Ethical aspects of business also pose problems to the
international business firm. What passes as an accepted business custom in one country
may be an instance of gross violation of business tradition in another.
Business practices and customers in different national markets differ considerably; hence no
universally acceptable guidelines can be fixed in this respect.
Benefits of Global/International Marketing
Benefits of global/international marketing are an important aspect which is discussed
below:
1) Survival: Most countries do not have sufficient market size, resources, and opportunities
to feed themselves and hence they must trade with others to survive. For instance,
European countries are relatively small in size and hence without foreign markets,
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European firms would not have sufficient economics of scale to allow them to be
competitive with U.S. firms. International expansion is also necessary when foreign firms
entered a domestic market.
2) Growth of Overseas Markets: Developing countries in Latin America(Brazil or
Argentina) and Asia/Pacific region (India or Indonesia) are experiencing the strongest
economic growth, in spite of economic and political problems and hence are excellent
markets for global companies. For example, even America companies cannot ignore than
the vast potential of international markets, as the world market is more than four times
larger than U.S market. For Amway Corp, a privately held U.S manufactures of
cosmetics, soaps, and vitamins, Japan represents a larger market than the United States.
3) Sales and Profits: Foreign markets constitute a large share of the total business of many
firms that have wisely cultivated markets abroad. According to the U.S Department of
Commerce, foreign profit of American firms rose at a compound annual rate of 10.8%
between 1982 and 1991, almost twice as fast as domestic profits of the same companies.
The lion’s share of sales revenue of the Indian software (like Infosys, TCS, Wipro,
Satyam) and ITES companies (like Daksh, Spectramind) comes from American and
European companies.
4) Diversification: Demand for most products is greatly affected by cyclical factors (such
as recession) and seasonal factors (such as climate), thus causing fluctuations in sales and
revenue generation. One way to diversify a company’s risk is to consider foreign markets
as a solution for variable demand, so that various markets can even out fluctuations. Cold
weather, for instance, may hamper ice-cream consumption. But not all countries enter the
winter season at same time, and some countries are relatively hotter throughout the year.
Hence, it is preferable for ice-cream companies to venture in many countries across the
globe in order to ensure year round sales.
5) Employment: Trade restrictions, such as the high tariffs caused by the 1930 SmootHawley Bill, which forced the average tariff rates across the board to climb above 60%
contributed significantly to the infamous Great Depression and created widespread
unemployment again. Unrestricted trade on the other hand improves the world’s GNP
and enhances employment generally for all nations. Importing foreign ownership can
provide benefits to a nation.
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6) Standards of Living: Trade efforts countries and their citizen’s higher standards of living
than otherwise possible. Without trade, product shortages force people to pay more for less.
Products taken for granted, such as coffee and bananas, may become unavailable overnight.
Life in most countries would be much more difficult were it not for the many strategic metals
that must be imported. Trade also makes it easier for industries to specialize and gain access
to raw materials. A diffusion of innovations across nation’s boundaries is a useful by-product
of international trade. A lack of such trade would inhibit the flow of innovative ideas.
Prospects of Global Marketing
Internal marketing involves the managements of marketing not only to but also to some
extent in foreign countries. To a great extent repeat sales in international marketing is
managed in foreign countries. Thus, other related areas of international marketing include
prospects as shown in figure aside.
Prospects Of Global
Marketing
Exporting
Importing
Re-exporting
Management of
International
1) Exporting: Selling to foreign markets. The exporter various activities, other than
exporting the goods and services. These activities are:
i.
Establishing: A branch in foreign market for processing, packaging or assembling
the goods according to the needs of the markets. Sometime complete
manufacturing is carried out by the branch through direct investments.
ii.
Joint Ventures and Collaborations: International marketing includes establishing
joint ventures and collaboration of foreign countries with some foreign firms for
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manufacturing and/or marketing the product. Under these arrangements, the
company works in collaboration with the foreign firm in order to exploit the
foreign markets.
iii.
Licensing Arrangements: The Company under the system establishes licensing
arrangements with the foreign term whereby foreign enterprises are granted the
right to use the exporting company’s know-how, viz., patents, processes or
trademarks according to the terms of agreement with or without financial
investment.
iv.
Consultancy Services: Offering consultancy services are also covered in
international marketing scope. The exporting company offers consultancy
services by undertaking turnkey projects in foreign countries. For this purpose,
the exporting company sends its consultants and experts in foreign countries who
guide and direct the manufacturing activities on the spot.
v.
Technical and Managerial Know-how: The scope of international marketing also
includes the technical and managerial know-how provided by the exporting
company guide and trains the technicians and managers of the importing
company.
2) Importing: Buying from abroad. An import of a good occurs when there is a change of
ownership from a non-resident to a resident; this does not necessarily imply that the good
in question physically crosses the frontier. However, in specific cases national accounts
impute changes of ownership even though in legal terms no change of ownership takes
place (e.g., cross border financial leasing, cross border deliveries between affiliates of the
same enterprise, goods crossing the border for significant processing to order or repair).
Also smuggled goods must be included in the import measurement.
Imports of services consist of all services rendered by non-residents to residents. In
national accounts any direct purchases by residents outside the economic territory of a
country are recorded as imports of services; therefore all expenditure by tourists in the
economic territory of another country are considered as a part of the imports of services.
Also international flows of illegal services must be included.
3) Re-exporting: Importing semi-finished goods and exporting final goods. In short reengineering for commodities for export. Re-exports consist of foreign goods exported in
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the same state as previously imported, from the free circulation area, premises for inward
processing or industrial free zones, directly to the rest of the world and from premises for
customs warehousing or commercial free zones, to the rest of the world.
4) Management of International Operations: It consist of following points:
i.
Operating marketing and sales facilities abroad.
ii.
Establishing production or assembly facilities in foreign countries.
iii.
Organization and formation of trade block and settlement of external payment.
iv.
Creating licensing and joint venture arrangements.
v.
Offering management contact (consultancy) and undertaking turnkey projects
abroad.
vi.
Foreign exchange Arrangement and Management.
vii.
Understanding country-wise and commodity-wise tones of marketing- by case to
case.
viii.
Monitoring operation of marketing practices of multinationals and other agencies.
Development of e-marketing.
ix.
Promotional and development role of agencies engaged in marketing practices.
x.
National global polices for international marketing.
Thus, the scope of international marketing is not static but fully dynamic; it depends upon global
level changes, national level changes, policy level changes and organizational level changes.
International marketing dynamism differs from country to country trade block-to-block and
company-to-company.
Challenges in Global Marketing
What make international marketing strategy different from the domestic is differences in
the marketing environment. The important special problems in international marketing are given
below:
1. Self-Reference Criterion: The primary obstacles to success in international marketing
are a person’s Self-Reference Criterion (SRC) and an associated ethnocentrism. SRC is
an unconscious reference to one’s own cultural values, experiences, and knowledge as a
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basis for decisions. Closely connected is ethnocentrism, i.e., the notion that one’s own
culture or company known best how to do things.
2. Political and Legal Differences: The political and legal environment of foreign markets
is different from that of the domestic. The complexity generally increases as more
number of countries is included in the company’s business portfolio. It should also be
noted that the political and legal environment is not exactly the same in all the states of
India.
3. Cultural Differences: Cultural differences constitute one of the most difficult problems
in International marketing. Many domestic markets, however, are also not free from
cultural diversities.
4. Economical Differences: The economic environment may change from country to
country.
5. Differences in the Currency Unit: The currency unit varies from nation to nation. This
is may sometimes cause problems of currency convertibility besides the problems of
exchange rate fluctuations. The monetary system and regulations may also vary.
6. Differences in the Language: An international marketer often encounters problems
arising out of the differences in the language. Even when the same language is used in
different countries, the same words or terms may have different meanings or
connotations. The language problem, however, is not something peculiar to the
international marketing.
7. Differences in the Market Infrastructure: The availability and nature of the marketing
facilities available in different countries may vary widely. For example, an advertising
medium which is very effective in one market may not be available or may be
underdeveloped in another market.
8. Trade Restriction: Trade restrictions, particularly import controls, from a very important
problem which an international marketer faces.
9. High Costs of Distances: When the markets are far removed by distance, the transport
cost becomes high and the time required for affecting the delivery tends to become
longer. Distance tends to increase certain other costs also.
10. Differences in Trade Practices: Trade practices and customs may differ between
markets.
VSA School of Management II Semester MBA – Marketing Management Unit – I Notes