Month: January 2021

“The aggregate of all the forces, factors and institutions which are external to and beyond the control of an individual business enterprise but which exercises a significant influence on the functioning and growth of individual enterprises.”

In other words, Business Environment refers to the total of all the things external to the firm and industry which affect their organization and operations.

Organisation structure means such things as composition of board of directors, the number of independent directors, the extent of professional management and share -holding pattern. The nature of organisational structure has a significant influence over decision making process in an organisation. An efficient working of a business organisation requires that its organisation structure should be conducive to quick decision making. Delays in decision making can cost a good deal to a business firm.

The board of directors is the highest decision making body in a business organisation. It takes general policy decisions regarding direction of growth of business of the firm and supervises its overall functioning. Therefore, the managerial capability of the board of directors is of crucial importance for the functioning of a business firm and for achievement of its overall mission and objectives.

For efficient and transparent working of the board of directors in India it has been suggested that the number of independent directors be increased. Many private corporate firms in India are managed by family members of their promoters which is not conducive to the efficient working of these firms.

Internal Environment

It is therefore highly desirable to increase the extent of professional management of private corporate companies. The share holding pattern has also an important implication for business management. In some Indian companies the majority of shares is held by the promoters of the company themselves.

In some others share-holding pattern is quite diversified among the public. In India financial institutions such as UTI, LIC, GIC, IDBI, IFC etc. have large share holdings in promi­nent Indian corporate companies and the nominees of these financial institutions play a critical role in making major business policy decisions of these corporate companies.

Technically, shareholders elect directors who make up the board of directors. The directors then appoint company’s top managers who take various business decisions. However, most of the sharehold­ers delegate the voting rights to the management or do not attend the general body meeting.

Thus, most of the shareholders regard ownership of the company as a purely financial investment. However, in recent years in developed countries like the United States the shareholders have come to wield a great influence.

The bankruptcy of business giants such as Enron, World Com. in the United States have created great awareness as well as mistrust among shareholders. In the last few years there has been frequent law suits filed by shareholders against directors and managers for ignoring the interests of shareholders or in fact cheating them by not declaring dividends. That is why there is worldwide debate on proper corporate governance of business firms.

Nature of Business Environment

• Aggregative: Business Environment is the totality of all the external forces which influences the working as well as decision making of an enterprise.
• Inter-Related: Different elements of Business Environment are Inter-related and inter-dependent. A change in one element affects the other elements. For instance, Economic Environment affects the Non-Economic Environment which in-turn influences or affects the Economic conditions.
• Relative: Business Environment is a Relative Concept. It differs from country to country an even region to region.so, Business Environment depends upon the region or country in which Business is operated or conducted.
• Inter-Temporal: Business Environment is also an inter-temporal concept as it changes overtime. In the short run, Business Environment may remain static but in the long run, it does change. so, Business Environment is more or less dynamic in nature.
• Uncertain: Business Environment is largely uncertain because it is very difficult to forecast the future environment. Further, when the environment changes very fast, uncertainty increases.

Market Research

It is important for businesses to know and understand preferences of their consumers. Conducting research is one of the best ways of achieving customer satisfaction, reduce customer churn and elevate business.

Benefits of an Efficient Market Research

• Make well-informed decisions: The growth of an organization is dependent on the way decisions are made by the management. Using market research techniques, the management can make business decisions on the basis of obtained results that back their knowledge and experience. Market research helps to know market trends, hence to carry it out frequently to get to know the customers thoroughly.
• Gain accurate information: Market research provides real and accurate information that will prepare the organization for any mishaps that may happen in the future. By properly investigating the market, a business will undoubtedly be taking a step forward, and therefore it will be taking advantage of its existing competitors.
• Determine the market size: A researcher can evaluate the size of the market that must be covered in case of selling a product or service in order to make profits.
• Choose an appropriate sales system: Select a precise sales system according to what the market is asking for, and according to this, the product/service can be positioned in the market.
• Learn about customer preferences: It helps to know how the preferences (and tastes) of the clients change so that the company can satisfy preferences, purchasing habits, and income level. Researchers can determine the type of product that must be manufactured or sold based on the specific needs of consumers.
• Gather details about customer perception about the brand: In addition to generating information, market research helps a researcher in understanding how the customers perceive the organization or brand.
• Analyze customer communication methods: Market research serves as a guide for communication with current and potential clients.
• Productive business investment: It is a great investment for any business, because thanks to it they get invaluable information, it shows researchers the way to follow to take the right path and achieve the sales that are required.

Product research

A product is any object which has an identifiable physical existence. According to Philip Kotler “A product is a bundle of physical service and provides satisfaction to the buyer.” Product planning is the starting point of all marketing decisions. Products which are marketed include physical goods, services, and ideas.

Physical goods are consumer, consumer-durable and industrial goods and services are of varied types, i.e., courier, Air lines, transport, communication and hospitality and tourism etc. Idea can be thought, patent and information etc.

Product research is essentially concerned with satisfying the need of the consumer in the best possible way by giving him the most optimum product. Product research would set out to position the product on its attributes in a manner that the desired benefits are perceived by the customer.

Product Research Product research includes the study of the following dimensions:

1. Raw Materials used in various proportions in the final mix.
2. Attributes of the product.
3. Saleable points of the product.
4. Product Planning.
5. Product Appraisal.
6. Product Classification.
7. Product Design.
8. Product Development.
9. Product Branding or Trademarks.

Product research should cover the decision-making on the following:

1. Which product should the company produce?
2. Should company expand or simplify the product line?
3. What brand, package and label should be used for each product?
4. How should the product be designed?
5. How should the product be priced?
6. In what quantities should each item be produced?

Sales Research

Marketing management depends heavily on Sales Control Research (Sales Research) for formulating marketing policies, planning and controlling marketing operation. Sales Control Research is the identification and measurement of all those variables which individually and in combination have an effect on sales.

Sales Control Research comprises substantial proportion of research work conducted by various companies’ marketing research departments. This encompasses the marketing studies pertaining to sales forecasting, market potentials, market share analysis, and determination of market characteristics and sales analysis.

Marketing intelligence is responsible for examining published information maintaining full records of sales and customer activity by the maintenance of company records and by means of field research and information supplied by salesmen and advertising agencies provides a balanced information flow to formulate suitable and effective marketing strategies.

Market analysis is undertaken to reveal a set of geographical sales potential the maximum possible sales opportunities, for all sellers of product or service in a specific area. Market potentials refer to total sales possibilities and sales forecast refers to possible units of sale of a product by a seller.

It may be noted that market potential is not the same thing as sales potential and sales forecast. Generally, the industry sales forecast will be less than its sales potential. Likewise, a company’s sales force cost will be less than its sales potential. The former is a point estimate of the future sales, while the latter represents a boundary condition which the sales might reach in an ideal solution.

In the latter sense, sales potential is to firm what market potential is to an industry or product class: both represent maximum demand response and are boundary conditions. Depending upon the sales potential existing in each sales territory, we can design the trade channels keeping in view the sales potential figures.

Consumer/Customer Research

Customer research focuses on understanding your customers by focusing on exploring their attitudes, needs, motivations and behavior as the relate to your business. This ultimately helps you better identify, understand, analyze and retain your customers.

1. Primary Customer Research

Primary research is any type of research that you conduct directly with your target customers. Its greatest advantages are that you can target it to groups or segments of your customers and specifically tailor the content to your research needs. Primary customer research includes:

Online surveys. Increasingly popular and relatively low cost, online surveys are widely used by retailers to capture insights from existing and potential customers. They can be conducted using your own customer database, or you can use third-party consumer survey panels that include your customers. If you use a consumer research panel you will have to include a question to identify your shoppers.

Mail surveys. Once the gold standard, mail surveys have fallen out of favor for quicker, less expensive options. Printed surveys are mailed and sent back in a pre-paid envelope. Response rates (the proportion of people sending back a completed survey) are often very low and the turn-around time for mail surveys to be returned is long.

Telephone interviews. Although they provide faster feedback than mail surveys, the effectiveness will be limited by the available phone numbers, particularly since you can’t solicit to cell phone numbers without permission. In addition, potential customers are often wary of being called and may be reluctant to give anything other than short answers.

Face-to-face surveys (often store exit interviews). Personal interviews conducted face-to-face (often as the customer exists the store) can be on the more expensive side, but they can also provide detailed insights from your customers. They require coordination with Store Operations, which might require more up-front time for planning.

Focus groups. Focus groups bring together a small group of consumers to discuss their opinions about products, brands, shopping and other relevant subjects. You might think of them as customer panel research. They’re a good way to get a sense of customer preferences and attitudes. However, because a focus group involves only a small number of customers, it can be challenging to apply the results to your entire customer base.

Online bulletin boards. With this consumer research example, customers opt into a three-day “group conversation” led by a professional moderator who poses questions to participants and probes answers for more details. This is an effective tool to drill down into specific issues, but is based on a small sample.

Ethnographic. This type of customer research involves observing customers in their actual environment, which might be their home, a store or online. Watching how consumers behave provides many insights, but can leave questions unanswered.

Sales data. You can analyze your transactional data to glean insights on customers. It’s a form of customer behavior research, and it can be conducted in conjunction with other types of customer market research to give you a comprehensive analysis of your customers. Learn more about customer analytics and analysis.

Customer quizzes. Another increasingly-popular survey tactic is to place a short pop-up survey on your website. This can help confirm a hypothesis you have about your target market or help define a product issue. Remember to keep it short pop-up surveys are most successful when you stick to one question.

2. Secondary Customer Research

Secondary research is data that has been compiled and organized by a third party, typically data aggregators or large customer market research companies who focus on specific industries and types of data. This includes “syndicated research,” which is research that is independently conducted, published and sold by a market research firm.

Secondary research typically measures consumer attitudes, product and brand preferences, media consumption habits, and demographic and lifestyle characteristics. It’s usually based on large research projects conducted on a national level. The results aren’t limited to your customers, although you can select demographics and other data to help you mirror your customers as much as possible.

Some secondary customer research examples include industry trends by retail-specific market research companies, such as NPD; media consumption reports by data aggregators, such as Simmons; and shopping behavior tracking by retail specialists, such as Kantar.

Since the same research results can be purchased by several companies, the cost of performing secondary research can be less expensive. These reports are useful for tracking consumer trends and providing comparisons. However, they don’t provide the same level of actionable insights on your customers as primary research, which is designed to find the “why” of a purchase and to project what could occur in the future.

3. Quantitative Customer Research

When conducting primary customer research, you can gather two basic types of information: qualitative or quantitative.

Quantitative research provides statistical information on your customers for example, the age of your customers, where they shop and whether they are aware of your brand. The most common tool used for quantitative research today is online surveys. The goal is to reach enough customers to make the results statistically reliable so you can project them across your entire customer base and have confidence in the results.

4. Qualitative Customer Research

Qualitative research examines people’s feelings and attitudes towards your product or service, and what motivates them. Focus groups are the most common tool used for qualitative research.

These are more-in-depth interviews that are open-ended and have a smaller number of participants than quantitative research. While the interviews provide in-depth information, the results should be used directionally since they aren’t broad enough to project across your entire customer base.

It’s wise to consider using a professional moderator for qualitative research. This person can help keep the conversation on track and help ensure that all participants have been heard, preventing the conversation from being dominated by a few.

Production Research

The purpose of production research is to gather information on the content of production related issues. The methods of production research could be primary research; this means researching via books and setting up focus groups to gather people’s opinions. Through this type research information is gathered to support producers to make informed decisions.

Production research is essential when planning to develop a new game idea. Production research helps to provide content, research commercial viability and plan the post production process. To perform production research the developer or producer will employ trained researchers to gather the suitable information for the area they are looking for e.g., financial or locations. Production research also includes advertising and where it might be placed to gain the best possible reaction from the audience. It will help to gain information on income and outgoing costs.

Income: The Company can gain income by hosting publicity stunts, sponsorship and merchandise. Celebrities can help to advertise products globally as they are well known in many parts of the world to get the advertising wider spread.

Outcome: The costs include the price to advertise and the distribution amongst appropriate media.

The micro environment of the organisation consists of those elements which are controllable by the management.

Normally the micro environment does not affect all the companies in an industry in the same way, because the size, capacity, capability and strategies are different. For example, the raw material suppliers are giving more concessions to large sized companies. However, they may not give the same concessions to small companies.

Like the same, the competitors do not mind about the rival company if it is compared to the small, but he will be very much conscious if the rival him is large. Sometimes micro environment of the various firms in an industry is almost the same. In such a case, response of these firms to their micro environment may differ as each firm will attempt to achieve a higher success level.

Micro Environment of Business

1. Competitors:

The competitive environment consists of certain basic things which every firm has to take note of. No company, howsoever large it may be, enjoys monopoly. In the original business world a company encounters various forms of competition. The most common competition which a company’s product now faces is from differentiated products of other companies.

For example, in the Colour Television Market, Philips TV faces competition from other companies like Videocon, Onida, BPL and others. This type of competition is called brand competition. It is found in all durable product markets.

The consumer wants to purchase a two-wheeler, the next question in his mind is with gear or without gear, 100 cc or more than that, self starter or kick starter, etc. This type is otherwise known as ‘Product form competition’.

Philip Kotler is of the opinion that the best way for a company to grasp the full range of its competition is to take the viewpoint of a buyer. What does a buyer thinks about that which eventually leads to purchasing something? So, tracing of the consumer mind set will help to retain the market share for all the firms.

2. Customers:

According to Peter. F. Drucker, “There is only one valid definition of business purpose, that is to create a customer.” The business enterprises aim to earn profit through serving the customer demand. It now thinks more in terms of profitable sale rather than more sales volume for its sake. Today marketing of a firm begins and also ends with the customers.

Now a days, a business firm to be successful, must find customers for its products. This is the reason the customers thus constitute the most important element in the micro environment of business. Products sales depend mainly on the degree of consumer satisfaction.

In fact, this is a reason that gives more importance to customer satisfaction surveys. Now every business firm set-up systems to regularly watch customer attitude and customer satisfaction, because today it is universally accepted that the satisfaction of customers is the base for company’s success. Normally the customers are not in a same group, they are individuals, business enterprises, institutions and government.

From the company’s point of view it is always better to have customer from various groups and legions for that easily sustains demand for the company’s product.

3. Suppliers:

Regarding the suppliers, the organisation can think of availing the required material or labour according to its manufacturing programme. It can adopt such a purchase policy which gives bargaining power to the organisation.

According to Michael Porter, “the relationship between suppliers and the firm epitomises a power equation between them. This equation is based on the industry conditions and the extent to which each of them is dependent on the other.”

Suppliers are either individuals or business houses. They combined together; provide resources that are needed by the company. Now the company necessarily should go for developing specifications, searching for potential suppliers, identifying and analysing the suppliers and thereafter choose those suppliers who offer best mix of quality, delivery reliability, credit, warranties and obviously low cost.

The development in the supplier’s environment has a substantial impact on the operations of the company. In recent trends companies can lower their supply cost and increase their product quality.

4. Public:

Literally word ‘public’ refers to people in general. According to Philip Kotler, “A public is any group that has an actual or potential interest in or impact on a company’s ability to achieve its objectives.” The environmentalists, consumer protection groups, media persons and local people are some of the well-known examples of publics.

The company has a duty to satisfy the people at large along with competitors and the consumers. It is an exercise which has a larger impact on the well-being of the company for tomorrow s stay and growth. Create goodwill among public, help to get a favourable response for a company. Kotler in this regard has viewed that.

“Companies must put their primary energy into effectively managing their relationships with their customers, distributors and suppliers. Their overall success will be affected by how other publics in the society view their activity. Companies would be wise to spend time monitoring all their public understanding their needs and opinions and dealing with then constructively.”

In the modern business public have assumed important role and their presence in the micro environment of business.

5. Marketing Intermediaries:

Market intermediaries are either individuals or business houses who come to the aid of the company in promoting, selling and distributing the goods to the ultimate consumers. They are Middlemen (wholesalers, retailers and agents), distributing agencies, market service agencies and financial institutions. Most of the companies find, it is too difficult to reach the consumers. In such a cases the agents and distribution firms help to reach the product to the consumer.

Any type of intermediary the company must take into active consideration, the following aspects:

(i) The company has also to constantly review the performance of both middlemen and others helping its efforts periodically. If necessary, it may take recourse to replacement of those who no longer perform at the expected level.

(ii) Middlemen come into being to help overcome the discrepancies in quantities place, time, assortment and possession that would otherwise exist in a given condition.

(iii) It is advantageous and also efficient to work through the established Marketing channels instead of creating one and thus going for experiments.

(iv) The manufacturer has to decide the most cost-effective method of intermediaries to reach the product to consumer that will help to increase the profit.

6. Workers and Their Union:

As per the production function theory, the labour gets more importance. He is also one of the pillars of the company. The organised labours is highly secured their position compare to unorganised workers So, the workers now prefer to join labour unions which invariably resort to collective bargaining and thereby makes them less vulnerable to employer’s exploitation.

On the other hand, Trade Unions are a major component of a modern business. Trade Union of workers is an organisation formed by workers to protect their interests, improve their working conditions etc.

All Trade Unions have objectives or goals to achieve, which are contained in their constitution, and each has its own strategy to reach those goals Trade Unions are now considered a sub-system, which seeks to serve the specific sub-group’ s interest (i.e. workers’) and also considers itself a part of the organisation.

From the point of view of the company, industrial relation is more important to improve the company, otherwise conflict between labour and management leads to Sick Unit.

Need, Wants and Demands

Marketing is the process of fulfilling the needs and wants of the consumers. This is why people get attracted to this process. All the people have almost the same needs but their wants happen to be different.

Human wants the other marketing concept means the conversion of needs to some tangible product or service. This conversion depends on the personality of the individual or his culture.

If wants for specific products are backed by purchasing power and willingness to buy, we call them demands. You know that wants are unlimited where resources are limited, and hence people always buy those goods that provide them maximum satisfaction. It implies that people do not buy and cannot afford to buy everything they want.

For example, many persons want the latest model Toyota car, but only a few will be willing and able to buy one of these cars.

As a marketer, you should, therefore, identify basically how many people would actually be willing and able to buy your product, not how many want it, since this is less important to you.

Transactions

Whereas exchange is the core concept of marketing, a transaction is marketing’s unit of measurement. The transaction is a trade between two parties that involves at least two things of value, agreed-upon conditions, a time of the agreement, and a place of agreement.

A transaction takes place if an agreement is reached between two parties involved in the exchange. You should know that unless two parties negotiate and move toward an agreement, they are not engaged in exchange, and hence, an exchange is not an event; rather, it is a process.

The basic unit of exchange is a transaction, and it consists of a trade of values between two parties involved in the exchange. It means that both parties get something out of a transaction.

In the barter transaction, both parties receive goods or services as the trade of value, not money. Transactions lead marketers gradually to relationship marketing.

Transfer

Transfer involves obtaining something without any offer or offering anything without any return. For example, Mr. X gives gift to Mr. Y. Transfer is a one-way process. But pure transfer is hardly found in practice. One transfers something with some unexpressed expectations. Offer of money to beggar is to get the favour of God.

Donor gives donations and receives honour, appreciation, and special invitation, or even special influence in administration. Gift is rewarded in terms of gratitude, a good behaviour, saying, “thank you” or with the expectation that the receiver of the gift will offer the same in the future. Almost all transfers are same as transactions. Transfer and transaction both are important for marketer.

Exchanges

Marketing takes place when people decide to satisfy needs and wants through exchange. Exchange is the act of obtaining a desired object from someone by offering something in return.

The exchange has many benefits;

• People don’t have to depend on others, and they must not necessarily possess the skills to produce everything they need.
• They can decide to produce things which they excel in and trade them for other goods produced by others.
• So, the exchange makes it possible to produce much more than it would have made with any other alternative system.

Several conditions must exist for an exchange to take place.

There should be at least two parties in exchange, and each must have something of value to the other.

Each party must have the desire to deal with other parties, and each must have the freedom to accept or reject the other’s offer.

Finally, each party must have the ability to communicate and deliver.

In reality, marketing emerges when people decide to satisfy their needs and wants through an exchange, we mean obtaining something (the desired object) by offering something in return from someone. In the contemporary world, the exchange is the only recognized way through which an individual can obtain his desired object, and hence it is considered the core concept of marketing.

Exchange cannot take place in isolation. Several conditions must be met for an exchange to take place.

• At least two parties must participate,
• Each must have something of value to the other,
• Each must also want to deal with the other party,
• Each must be free to accept or reject the other’s offer, and,
• Each of them must be able to communicate and deliver