Month: July 2020

We use this method of construction for computation of index price. As a result, the total cost of any commodity in any given year to the total cost of any commodity in the base year is in percentage form.

Simple Aggregative Price Index – (∑ P_n/ ∑ P₀) * 100

Where

∑P_n = Sum of the price of all the respective commodity in the current time period.
∑P_o = Sum of the price of all the respective commodity in the base period.

The simple aggregative index is very simple to understand. However, there is a serious defect in this method. The first commodity, here, has more influence than the rest two. This is so because the first commodity has a high price than the rest.

Furthermore, if we anyhow change the units, the index number will also go through a change. This is one of the biggest flaws of this methods. Use of absolute quantities turn the tables around. Therefore, considering independent values for the three years would be a better option.

To construct a simple price index, compute the price relatives and average them. Add the price relatives and divide them by the number of items. Table illustrates the construction of a simple index of wholesale prices.

Price index in 1980 = Prices in 1980 / Prices in 1970 x 100

Or ∑P₁/P₀ x 100 = 870/500 x 100 = 174

Using arithmetic mean, price index in 1980 = ∑R/N = 870/5 = 174

The preceding table shows that 1970 is the base period and 1980 is the year for which the price index has been constructed on the basis of price relatives. The index of wholesale prices in 1980 comes to 174. This means that the price level rose by 74 per cent in 1980 over 1970.

Consumer Price Index is also known as the cost of living index.

It represents the average change in price over a period of time, paid by a consumer for a fixed basket of goods and services.

Uses of CPI:

• It indicates the changes in the consumer prices.
• It evaluates the purchasing power of money.
• It is also used for comparison purposes.

Limitations of CPI;

• CPI focuses on a fixed basket, as consumer behaviour cannot be predicted, we can’t be very sure about CPI value to be relevant.
• Quality is not considered while calculating the CPI.
• Inflation effects are not taken into consideration as the basket is fixed.

CPI can be computed using 2 methods:

• Aggregate Expenditure method

CPI = (Total expenditure in current year/Total expenditure in base year)*100; which means;

CPI = Σp1q0/Σp0q0 * 100

• Family Budget method

CPI =  ΣWP/ ΣW

Where P = p1/p0 * 100

The frequency is the number of times an event occurs within a given scenario. Cumulative frequency is defined as the running total of frequencies. It is the sum of all the previous frequencies up to the current point. It is easily understandable through a Cumulative Frequency Table.

Cumulative Frequency is an important tool in Statistics to tabulate data in an organized manner. Whenever you wish to find out the popularity of a certain type of data, or the likelihood that a given event will fall within certain frequency distribution, a cumulative frequency table can be most useful. Say, for example, the Census department has collected data and wants to find out all residents in the city aged below 45. In this given case, a cumulative frequency table will be helpful.

Cumulative Frequency Curve

A curve that represents the cumulative frequency distribution of grouped data on a graph is called a Cumulative Frequency Curve or an Ogive. Representing cumulative frequency data on a graph is the most efficient way to understand the data and derive results.

There are two types of Cumulative Frequency Curves (or Ogives) :

• More than type Cumulative Frequency Curve
• Less than type Cumulative Frequency Curve

A frequency polygon is a graphical form of representation of data. It is used to depict the shape of the data and to depict trends. It is usually drawn with the help of a histogram but can be drawn without it as well. A histogram is a series of rectangular bars with no space between them and is used to represent frequency distributions.

Steps to Draw a Frequency Polygon

• Mark the class intervals for each class on the horizontal axis. We will plot the frequency on the vertical axis.
• Calculate the classmark for each class interval. The formula for class mark is:

Classmark = (Upper limit + Lower limit) / 2

• Mark all the class marks on the horizontal axis. It is also known as the mid-value of every class.
• Corresponding to each class mark, plot the frequency as given to you. The height always depicts the frequency. Make sure that the frequency is plotted against the class mark and not the upper or lower limit of any class.
• Join all the plotted points using a line segment. The curve obtained will be kinked.
• This resulting curve is called the frequency polygon.

Note that the above method is used to draw a frequency polygon without drawing a histogram. You can also draw a histogram first by drawing rectangular bars against the given class intervals. After this, you must join the midpoints of the bars to obtain the frequency polygon. Remember that the bars will have no spaces between them in a histogram.

Question 1: Construct a frequency polygon using the data given below:

Answer: We first need to calculate the cumulate frequency from the frequency given.

We now start by plotting the class marks such as 54.5, 64.5, 74.5 and so on till 94.5. Note that we will also plot the previous and next class marks to start and end the polygon, i.e. we plot 44.5 and 104.5 as well.

Then, the frequencies corresponding to the class marks are plotted against each class mark. Like you can see below, this makes sense as the frequency for class marks 44.5 and 104.5 are zero and touching the x-axis. These plot points are used only to give a closed shape to the polygon. The polygon looks like this:

Declaration and payment of dividend under Companies Act 2013

Dividend: Sec 2(35) provides the definition of dividend which states that dividend includes any “interim dividend”. Where in simple terms, dividend can be defined as the sum of money paid by a company, to its shareholders, out of the profits made by a company, in the proportion to the amount paid-up on the shares held by them (Sec-51).

Note: Preference shareholders are always paid dividend in preference to the equity shareholders.

Well, subject to the provisions of Companies Act, 2013, All Companies, except those companies which are registered under sec-8 (i.e. Non-profit organizations) can declare dividend.

Under Companies Act 2013, Chapter VIII containing sections, which deals with the provisions related to declaration and payment of dividend. Section 123 to 127 deals with the provisions related to the declaration and payment of dividend.

Conditions required to be satisfied for declaration of dividend

1) Depreciation: Before the declaration of dividend, a company shall provide depreciation to all its depreciable assets, in accordance with the rates or useful life, as the case may be provided in Schedule – II of Companies Act -2013.

2) Transfer to Reserves: A company may, before the declaration of any dividend in any financial year, transfer such percentage of its profits for that financial year, as it may consider appropriate to the reserves of the company.

3) Set off of previous year losses and depreciation: A company shall not declare dividend unless carried over previous losses and depreciation not provided in previous year or years, are set off against profit of the company for the current year.

4) Free Reserves: A company shall not declare or pay dividend out of its reserves, other than free reserves.

Payment of Dividend

According to the provisions of Companies Act 2013, No dividend shall be payable except by way of cash, where dividend payable in cash can also be paid through cheque, warrant or in any electronic mode, to the shareholder who is entitled to the dividend.

Condition: A company who has committed any default in compliance with the provisions of sec 73 and 74 relating to the acceptance and repayment of deposits would be barred to declare dividend.

Interim Dividend

According to the provisions of section 123(3), Board of directors of a company may declare interim dividend during any financial year, out of the profits made by the company during such financial year or out of previous year undistributed profits (subject to Companies (Declaration and Payment of Dividend) Rules, 2014).

As per Section 2(35) “dividend includes interim dividend” signifies that the provisions of Companies Act 2013, applicable to the final dividend to the extent possible, shall also applicable on interim dividend.

Unpaid Dividend Account (Sec 124)

There are some cases wherein, dividend declared by the company has not been paid or claimed and in case where such dividend remained unpaid or unclaimed within 30 days from the date of declaration; company shall take the following necessary steps:

(a) Open a special account with a scheduled bank to be called “Unpaid dividend account of …………………….(Company Limited/Company( Private) Limited”

(b) Transfer the unpaid or unclaimed amount of dividend within a period of 7 days from the expiry of such 30 days, to the special account.

In case of default: If the company committed any default, in transferring such amount to the special account with in the specified time, company shall be liable to pay interest @ 12% p.a. from the date of such default.

Punishment for failure to distribute dividend (Sec 127)

According to the provisions of sec- 127 of the companies act – 2013, if a company fails to pay the dividend, within a period of 30 days from the date of its declaration, to the shareholders who are entitled to the dividend then-

Exceptions to sec- 127: Following are the situation under which, no offence shall be deemed to have been committed, namely:

(a) Where the dividend could not be paid by reason of the operation of any law;

(b) Where a shareholder has given directions to the company regarding the payment of the dividend and those directions cannot be complied with and the same has been communicated to him:

(c) Where there is a dispute regarding the right to receive the dividend

(d) Where the dividend has been lawfully adjusted by the company against any sum due to it from the shareholder

(e) Where, for any other reason, the failure to pay the dividend or to post the warrant within the period under this section was not due to any default on the part of the company.

The various communication devices are used to educate, inform and generate awareness about the merchandise and the services offered by the retailer. These efforts also aim at building store image. The most common modes used for promotion are advertising, sales promotion, personal selling, public relations and publicity.

Retailers usually employ a combination of various elements of promotion mix to achieve promotional and business objectives. The degree and the nature of usage of each of the promotion methods depend on the objectives of the retail firm, product, market profile and availability of resources. Small retailers generally depend on point-of-purchase material provided by the companies which provide the merchandise.

Promotion mix employed by the retailers should be compatible with the desired store image, provide scope for modification if need arises and fit within the budget allocation. Therefore, various retail promotion methods can be compared on the basis of degree of control, flexibility, credibility and cost associated with them.

The four important types of retail marketing mix are discussed below:

1. The ‘Product’ Mix

The basic components of product mix are:

(ii) Packaging

(iii) Brand

(iv) Product Item

(v) Product line

The various product mix strategies are:

(i) Launching new products from time to time

(ii) Alteration of Existing Products

(iii) Eliminate an entire line or reduce assortment within it

(iv) Trading Up

(v) Trading Down

(vi) Product life cycle management

The retail product mix is device so as to develop an appropriate promotion strategy for the store depending on the target market to be reached. Once the target market is identified and positioning strategy defined, the retailers employ various tools of product mix to reach out to consumers. These efforts also aim at building store image.

Retailers usually employ a combination of various elements of product mix to achieve promotional and business objectives. The degree and the nature of usage of each of the promotion methods depend on the objectives of the retail firm, product, market profile, and availability of resources.

2. The ‘Price’ Mix

Price has always been one of the most important variables in retail buying decision. It is the factor which makes or mars a retail organization. It is also the easiest and quickest element to change. Pricing helps an organization to achieve its objective. This is particularly significant for new market entrants who need to first establish a brand and then enjoy increasing profits as the brand gets market acceptability. For a customer, price is the main reason to visit a particular store.

A pricing strategy must be consistent over a period of time and consider retailer’s overall positioning, profits, sales and appropriate rate of return on investment. Lowest price does not necessarily neet be the best price, but the lowest responsible price is the best right price. The difference between price and cost is the profit, which can be very high when the salesperson wants to exploit an urgent situation.

To survive in the retail business, retailers need to seek cash flow, profitability and overall growth in order to consolidate their market position. But pricing cannot be determined in isolation. Costs and operating expenses are equally important while establishing the retail price.

Servicing pricing pursues the ‘doctrine of pricing of goods’, therefore, they are either cost-based or market based. Within this, these pricing can be profit oriented, government controlled, consumer oriented or competition oriented. Pricing needs certain considerations before actually determining it. The market position of the product, consumer perception and stage of the product life cycle, competitor’s strategy and overall marketing strategy needs to be considered.

The components of price mix are:

(i) Organizational objectives

(ii) Competition

(iii) Cost and profit

(iv) Credit terms

(v) Discount etc.

(vi) Fixed and variable costs

(vii) Pricing options

(viii) Pricing policies

(ix) Proposed positioning strategies

(x) Target group and willingness to pay

3. The ‘Place’ Mix

The retailer should keep in mind the fact that his ‘product’ should be available near the place of consumption so that the consumers can easily buy it. If the brand preferred by the consumer is not easily available at a convenient location, he may buy some other brand in the same product category.

Hence, the retailer has to ensure that the product is available to the target consumers whenever required. There are two major components of place: marketing channels and physical distribution (logistics management). Channel decisions affect considerably the elements of marketing mix and involve a long term commitment of resources.

Intermediaries involved in channel network are independent (at times contractual) organizations hence their needs must be taken into account while evaluating channel alternatives. The success of marketing efforts, to a large extent depends on the sound distribution network.

Physical distribution involves transportation, warehousing, material handling, bulk packaging etc. Some of these activities are carried out by intermediaries. A considerable coordination is required among various channels to seek maximum results of marketing operations.

Following are the components of a retail price mix:

(i) Distribution channels

(ii) Intermediary

(iii) Distance Factor

(iv) Inventory Level

(v) Transportation

(vi) Warehousing and Storage

4. The ‘Promotion’ Mix

After deciding upon the budget, retailer should determine the appropriate promotional mix a combination of advertising, public relations, personal selling and sales promotion. Small retailers having limited funds may use store displays, hoardings, direct mail, flyers and publicity methods to attract customer traffic, while on the other hand, retailers having no bar on finance, may use print or television media for their sales promotion activities.

The retail promotion mix varies from retailer to retailer and nation to nation depending upon technological advancement, nature of competition and availability of finance etc. Retailers design a promotional mix in compliance with store’s objectives such as positioning of the organization, attracting customers, increasing sales turnover, clear out seasonal merchandise, announcing special events and educating public about the organization and its offerings.

Retailers generally spend their promotional budget on developing advertisement campaigns and on other sales promotion activities. A retailer has a variety of sales promotion methods to promote its goods and services. Therefore, promotion mix used by the retailer should be compatible with the desired store image, budget allocation and flexible enough to modify whenever need arises.

These various promotional vehicles may by compared on the basis of following issues:

(i) Cost of the method

(ii) Its reach

(iii) Degree of flexibility

(iv) Credibility

(v) Control over media

A product is something that is manufactured for sale in the market. Customer needs are met by the usage of products. Product is one of the main components of marketing all marketing activities revolve around the product. Products can be tangible or intangible. Tangible products are known as goods while intangible products are called services.

The term product can be understood in narrow as well as broad sense. In a narrow sense, it is a set of tangible physical and chemical attributes assembled in an identifiable and readily recognizable form.

In a broader sense, it recognizes each separate brand as a separate product. A product can be defined as- “A good, idea, method, information, object, or service that is the end result of a process and serves as a need or want satisfier. It is usually a bundle of tangible and intangible attributes (benefits, features, functions, uses) that a seller offers to a buyer for purchase.”

Ordinarily speaking, product or goods is a word which means any commodity which can be recognised by its certain shape, quality or quantity e.g., car, book, watch, clothes etc. Actually this meaning of the product is narrow in sense. The word ‘Product’ is taken in wider perspective in marketing. Here, every brand is considered a separate product i.e., Lux and Lifebuoy both are soaps, but are treated as separate products. In narrow sense, these will be considered as merely soaps.

Every business firm undertakes the function of product selling, though it may or may not be visible. A laundry firm provides the clothes-washing service. This function is similar to product selling which a retailer performs. Firms while selling their products, sell services too which are related to their products. A consumer buys a product because he gets psychological and physical satisfaction from that product.

Thus a seller not only sells his products rather he enters into marketing of such psychological and physical satisfaction. For example, a person while purchasing a product does not bother about the inputs by which that product is manufactured. He is rather interested in the fact as to what utility or satisfaction, he will gain by using that product. In this context, the ideas of George Fisk are worth describing. According to him, “Product is a cluster of psychological satisfaction.”

Definition of product in Marketing

A product is what a seller has to sell and what a buyer has to buy it satisfies the needs of customers. Customers purchase products because they are capable of realizing some benefits to the purchaser. A marketer can satisfy the needs and wants of his customers by ‘offering something’ in exchange for money. And this ‘offering’ is basically a product. The product is one of the important elements of the 4Ps of the marketing mix. It consists of a bundle of tangible and intangible attributes that satisfies consumers.

Product is an important component in market­ing-mix. Other elements of marketing-mix i.e. price, promotion and place are complemen­tary to it. A product is central to the marketing operations in an organization. Most of the time prod­uct fails not because of poor quality but because they fail to meet the expectations of the customers.

It is not just a bundle of physical attributes, but a bundle of perceived benefits which satisfy consumer’s needs. Hence, utmost care should be taken to handle product decisions. A bad product not only generates bad name for the firm but also affects negatively the price set for the product, dissuades the channel members and reduces the believability of the promotional measures.

In a narrow sense, “A product is a set of tangible physical attributes in an identifiable form” (W.J. Stanton). But in marketing, product is used in a broader form.

According to W. Alderson “A product is a bundle of utilities consisting of various product features and accompanying services”.

According to Philip Kotler “A product is anything tangible or intangible that can be offered to a market for attention, acquisition use or consumption that might satisfy a need or want”.

According to Cravens, Hills and Woodruff “Product is anything that is potentially valued by a target market for the benefits or satisfactions it provides, including objects, services, organizations, places people and ideas”.

From the above definitions, it is clear that product has the want satisfying attributes which drive a customer to purchase the product. It is nothing but a package of problem solving devices and is something more than a physical product. This is because a product encompasses a number of social and psycho­logical attributes and other intangible factors which provide satisfaction to the consumer.

Products can be anything. It can be physical product (e.g. fan, cycle etc.), service (e.g. haircuts, property deals etc.), place (e.g. Agra, Delhi etc.), person (e.g. Late M.F. Hussain etc.), Organization (e.g. Helpage India, Rajiv Gandhi foundation etc.) and idea (e.g. Family Planning, safe driving etc.).

Alderson defines, “A product is a bundle of utilities consisting of various product features and accompanying services”.

Stanton defines, “A product is a set of tangible and intangible attributes, including packaging, colour, price, manufacturer’s and retailer’s services, which the buyer may accept as offering satisfaction or wants or needs”.

According to Philip Kotler, “A product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need. It includes physical objects, services, persons, places, organization and ideas”.

Concept of Product

Product refers to a good or service that satisfies the needs and wants of customers. It is offered in the market by an organization to earn revenue by meeting the requirements of customers. Product is an asset of an organization and referred as the backbone of marketing mix.

According to Peter Drucker, “Suppliers and especially manufacturers have market power because they have information about a product or a service that the customer does not and cannot have, and does not need if he can trust the brand. This explains the profitability of brands.”

It is very important for an organization to understand the needs of customers. For example, some customers use mobile phones for talking; whereas, some use mobile phones for talking as well as business purposes, such as teleconferencing. Needs of the customers depend on their purchasing power.

For example, a customer whose basic need is surfing over the Internet may opt for a simple computer; whereas, a software engineer may need a high configuration computer. Therefore, when the level of need increases then the level of product also increases.

Features of a Product

(i) Tangibility

Products are tangible in nature, customers can touch, seen or feel a products. For example, car, book, computer etc.

(ii) Intangible Attributes

Service products are intangible in nature, services like, consultancy, banking, insurance etc. The product may be combination of both tangible and intangible attributes like restaurants, transportation, in case of a computer it is a tangible product, but when we will talk of its free service provided by dealer, then the product is not only a tangible item but also an intangible one.

(iii) Associated Attributes

The attributes associated with product may be, brand, packaging, warranty, guarantee, after sales services etc.

(iv) Exchange Value

Irrespective of the fact that whether the product is tangible or intangible, it should be capable of being exchanged between buyer and seller for a mutually agreed price.

(v) Customer Satisfaction

A product satisfies the customer needs and wants of customers, value of products is also determined by the level of satisfaction given by a product after purchase.

Characteristics of Product

1. It can be a single commodity or a service; a group of commodities or a group of services; a product service combination, or even a combination of several products and services.
2. Its meaning is determined by the needs and desires of the consumer. The purpose of a product is to satisfy some need of the consumers. The buyers purchase problem-solving and time for creativity when they purchase a computer system.
3. It may be durable such as those that are expected to deliver a stream of satisfaction over a period of time,
4. Products may be luxuries which might be needed as a symbol of prestige and status such as car, a well- furnished bungalow in a posh colony or necessities which are needed to keep the body and soul together, such as bread, milk, sugar, etc.
5. It may be an agricultural, mineral, forest or semi­-manufactured or manufactured product.