Month: December 2021

Management Notes

The 7 Tactics of Marketing mix: Product, Service, Brand, Price, Incentives, Communication and Distribution

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The marketing mix refers to the set of actions, or tactics, that a company uses to promote its brand or product in the market. The 4Ps make up a typical marketing mix; Price, Product, Promotion and Place. However, nowadays, the marketing mix increasingly includes several other Ps like Packaging, Positioning, People and even Politics as vital mix elements.

Product

Product refers to anything that’s being sold; A physical product, service or experience.

No matter how you position yourself as a brand, your product or service is always going to be at the centre of your strategy and therefore it will influence every aspect of the marketing mix. When you think of your product, consider factors such as its quality, specific features, packaging and the problem that it will solve for your customers.

Service

A service business is one in which the perceived value of the offering to the buyer is determined largely by the services provided to him than the products offered. This includes the business of all intangible services delivered to the customer.

Some of the tangible services where both the goods and services are provided to the customer, like restaurants and supermarkets, also come under the purview of the services marketing.

‘A service is any activity or benefit that one party can offer to another, which is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product.’ :Kotler, Armstrong, Saunders and Wong

‘Services are economic activities that create value and provide benefits for customers at specific times and places as a result of bringing about a desired change in or on behalf of   the recipient of the service.’ :Christopher Lovelock

Brand

The term brand refers to a business and marketing concept that helps people identify a particular company, product, or individual. Brands are intangible, which means you can’t actually touch or see them. As such, they help shape people’s perceptions of companies, their products, or individuals. Brands commonly use identifying markers to help create brand identities within the marketplace. They provide enormous value to the company or individual, giving them a competitive edge over others in the same industry. As such, many entities seek legal protection for their brands by obtaining trademarks.

People often confuse logos, slogans, or other recognizable marks owned by companies with their brands. While these terms are often used interchangeably, they are distinct. The former are marketing tools that companies often use to promote and market their products and services. When used together, these tools create a brand identity. Successful marketing can help keep a company’s brand front and center in people’s minds. This can spell the difference between someone choosing your brand over your competitor’s.

A brand is considered to be one of the most valuable and important assets for a company. In fact, many companies are often referred to by their brand, which means they are often inseparable, becoming one and the same.4 Coca-Cola is a great example, where the popular soft drink became synonymous with the company itself. This means it carries a tremendous monetary value, affecting both the bottom line and, for public companies, shareholder value

Price

the habit of continually examining and reexamining the prices of the products and services you sell to make sure they’re still appropriate to the realities of the current market. Sometimes you need to lower your prices. At other times, it may be appropriate to raise your prices. Many companies have found that the profitability of certain products or services doesn’t justify the amount of effort and resources that go into producing them. By raising their prices, they may lose a percentage of their customers, but the remaining percentage generates a profit on every sale. Could this be appropriate for you?

Incentives

The words ‘loyalty’ and ‘incentive’ are often used interchangeably. However, an incentive program is not quite the same thing as a loyalty program.

A customer loyalty program is designed to reward existing users for their transactions and give them a compelling reason not to switch to competing brands.

On the other hand, consumer incentive programs focus on delivering sales growth when your customer achieves a target by rewarding them.

Such programs include gift cards and coupons, just like loyalty programs. Still, they may also offer more valuable rewards like merchandise or travel vouchers to further appeal to buyers and win their emotional attachment.

Communication

Marketing Communication can be defined as the methodologies and tactics adopted by the companies to convey the messages in a unique and creative manner to their existing and prospective customers about their offerings of products and services. The messaging communication is either direct or indirect in nature with an intention to persuade the customers to indulge in the purchase of the products and services.

The various channels and platforms of marketing communication include Google promotions, print advertisements, television commercials, social media marketing, PR exercises, blogging, content marketing, and participation in trade fairs and exhibitions amongst others.

Marketing communication is made of two terms marketing and communication. Before we learn about what marketing communication is, let us first learn about marketing and communication separately. Marketing consists of activities which a company takes to increase the sales of the products.

Distribution

Distribution (or place) is one of the four elements of the marketing mix. Distribution is the process of making a product or service available for the consumer or business user who needs it. This can be done directly by the producer or service provider or using indirect channels with distributors or intermediaries. The other three elements of the marketing mix are product, pricing, and promotion.

Decisions about distribution need to be taken in line with a company’s overall strategic vision and mission. Developing a coherent distribution plan is a central component of strategic planning. At the strategic level, there are three broad approaches to distribution, namely mass, selective and exclusive distribution. The number and type of intermediaries selected largely depend on the strategic approach. The overall distribution channel should add value to the consumer.

There are three approaches to Distribution:

Mass distribution (also known as an intensive distribution): When products are destined for a mass market, the marketer will seek out intermediaries that appeal to a broad market base. For example, snack foods and drinks are sold via a wide variety of outlets including supermarkets, convenience stores, vending machines, cafeterias and others. The choice of distribution outlet is skewed towards those that can deliver mass markets in a cost efficient manner.

Selective distribution: A manufacturer may choose to restrict the number of outlets handling a product. For example, a manufacturer of premium electrical goods may choose to deal with department stores and independent outlets that can provide added value service level required to support the product. Dr. Scholl orthopedic sandals, for example, only sell their product through pharmacies because this type of intermediary supports the desired therapeutic positioning of the product. Some of the prestige brands of cosmetics and skincare, such as Estee Lauder, Jurlique and Clinique, insist that sales staff are trained to use the product range. The manufacturer will only allow trained clinicians to sell their products.

Exclusive distribution: In an exclusive distribution approach, a manufacturer chooses to deal with one intermediary or one type of intermediary. The advantage of an exclusive approach is that the manufacturer retains greater control over the distribution process. In exclusive arrangements, the distributor is expected to work closely with the manufacturer and add value to the product through service level, after sales care or client support services. Another definition of exclusive arrangement is an agreement between a supplier and a retailer granting the retailer exclusive rights within a specific geographic area to carry the supplier’s product.

University of Mumbai BMS Notes

Difference between Marketing Planning and Strategic planning

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The Purpose of Strategic Planning

Strategic planning is designed to provide an organization, its divisions, departments or even individual players with a game plan or road map to achieve specific goals and objectives. Strategic planning identifies internal and external effects and opportunities to consider in the creation of strategies and tactics. From a marketing standpoint, strategic planning might help to identify new market opportunities as well as new competitive threats.

The Planning Process

A number of steps are involved in any strategic planning process, including a strategic marketing planning process. These steps include identifying the overall planning goal, selecting team participants and gathering data related to the internal and external environment.

They can include conducting a SWOT (strengths, weaknesses, opportunities and threats) analysis, developing specific objectives, creating strategies and tactics, and designing a measurement and reporting process. In many organizations, the overall strategic plan provides direction for the creation of sub-plans, including a strategic marketing plan.

A marketing plan includes:

  • An introduction with in depth description of long term aims and objectives.

Introduce the business, brand and product with the objectives to be achieved in the long run

  • Marketing summary

Sum the marketing strategies and overview into a summary.

  • Market landscape

Describe the targeted market and industry

  • SWOT Analysis

Explore your strengths, weaknesses, opportunities and threats and keep a record of analysis for future reference.

  • Specific aims & objectives

Highlight specific and short term aims and objectives

  • Brand policy & plan

Aims and objectives related to building brand identity and strategy

  • Promotional plan

Aims and objectives for overall promotional campaigns

  • Engagements, time limits and financial plans

Defined actions, deadlines to carry out actions to accomplish the objectives and the budget necessary for implementing the actions.

Goals, Objectives, Strategies and Tactics

The components of a strategic marketing plan include goals, objectives, strategies and tactics, according to Opportunity Marketing.com. Goals are broad and provide general direction in terms of what the marketing organization would like to achieve, for instance an increased market share.

Objectives are tied to goals and provide more specific, measurable outcomes; for example, increase market share in a specific geographic area for a specific product, by a certain amount or by a specific date. Strategies and tactics indicate how goals and objectives will be met.

Strategies are broad: for instance, implement a social media strategy. Tactics are more specific and indicate the individual tasks to achieve the strategies for instance, set up a Twitter account or establish a YouTube channel.

The Important Role of Measurement

It is not enough to strategize a plan must include some form of measurement and a process for monitoring and reviewing results. An overall strategic plan might outline broad objectives for marketing; the marketing plan would detail more specific objectives for the marketing department to monitor and report on.

The results achieved whether they fall short or exceed expectations provide input used to consider changes or adjustments in the plan. Ongoing measurement and reporting can help to ensure the strategic plan continues to achieve measurable results.

Using digital analytical tools, such as those that come free with most websites, help businesses track where potential customers are coming from and what they’re searching for. Administering and analyzing sales reports and customer surveys also help manager learn what they are doing right and wrong.

Marketing Strategy

Sometimes the terms are used interchangeably, but they actually mean two different things.

Marketing Strategy: Shaped by your business strategy, your marketing strategy should explain the problem and how you will overcome it. It’s the offering you deliver, how you will deliver it, and why your marketing efforts will help you achieve your company’s mission and strategic goals. Once you have your strategy, only then will you be able to develop an effective marketing plan.

Marketing Plan: Driven by your marketing strategy, your marketing plan is the execution. It’s the roadmap of marketing efforts that help you achieve your marketing goals. Your plan should include detailed campaigns of what you will do, where you will do it, what they will cost, how and when you will implement them, and how you will track success.

If you have your marketing strategy, are your plans working to meet those goals? If not, this may be the reason why you’re not seeing your desired results.

The difference between marketing strategy and marketing plan comes down to purpose and application.

Marketing strategy is driven by your business strategy: What do you want? Where you will play? How you will win? A marketing plan includes goal-driven activities and tactics to help you achieve the strategy.

University of Mumbai BMS Notes

Marketing as a Value Creation process

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Value-creation and value-delivery is the main task of marketing. Marketing in its entirety is a value “Creating and Value-Delivering Process. The whole bunch of tasks involved in marketing, serve the purpose of value delivery. They actually form a sequence leading to value delivery.

Marketing planning, buyer analysis, market segmentation and targeting are concerned with value selection. Product development, manufacturing, service planning, pricing, distribution and servicing, are concerned with value creation & value delivery. Personal selling, advertising, publicity and sales promotion are concerned with value communication. Activities like market research and market control assess the effectiveness of the value delivery process, the level of satisfaction the customer has actually received and how it compares with the firm’s intention as well as with other competing offers for the purpose of enhancing value.

Ingraining an ‘Organizational Capability’ for innovation in creation of value is indispensable while competing in global markets. The basic questions underlying value creation are: who, which segments to serve (or not serve); what product or service to globalise; how to serve them through appropriate supply chains, channels and market-based assets, or organisational capabilities; and finally where (which geographical markets) to serve. Once firms are clear on the value proposition, they may delve on any of the below suitable strategies in isolation of other strategies or a combination thereof. These strategies are generic and not prescriptive. They are, however, routinely observed and often implemented by resource-endowed firms. Taking the automobile industry as an example, Henry Ford’s focus on productivity led to a business model where the competitive advantage of lower costs and prices resulted in greater market share and, subsequently, even greater economies of scale.

But, these advantages dissipated over time as other manufacturers adopted assembly lines and like Alfred Sloan, the founder of General Motors, the automotive market competition from cost/price minimisation to differentiation and branding. It was no longer enough to have any car as long as it was a black Model T Ford. Customers could start with a Chevrolet, get an Oldsmobile as families grew and income increased, migrate further to a stylish Buick, and finally to a Cadillac when one foot was in the grave. This use of differentiation and branding allowed GM to capture higher prices and margins as customers moved through their lifecycle but collapsed decades later when in the name of efficiency and cost management GM used the same chassis (platform) across Chevy, Olds and Buicks. In effect their new business model failed to understand what made GM great in the first place. European companies such as BMW and Daimler-Benz, not having the same scale as the US market, relied on product performance and premium pricing. The Japanese, who were late entrants in the global market, focused on longevity (reliability and quality) to deliver value and eventually solutions such as service guarantees and extended warranties to enhance customer switching costs and loyalty. These business model innovations evolved over decades in the automotive market. But they now occur over but a few months in consumer electronics sectors such as the smartphone market. Failure to innovate to do things better is a free gate pass to exit.

In any marketing situation, one can discern four distinct steps in the value providing process:

  • Value selection.
  • Value creation/Value Delivery
  • Value communication.
  • Value enhancement.

Value Selection

It is obvious that selecting the value to be offered is the first step in the value delivering process. Everything else follows. Only after selecting the value to be offered, can the firm proceed with production, sales and promotion. What needs to be specifically understood here is that the firm finds out what constitutes value in the estimation of the customer and accepts it as the value to be offered. Value selection is thus not only the first step in the sequence but also the most crucial one.

Value Creation / Value Delivery

This constitutes the bulk of the marketing job. What the firm has promised to provide the customer has to be actually provided. The product offering must actually carry the benefits the firm has promised and it must be reached to the customer in the most satisfying manner. Value creation/value delivery signifies the successful execution of the firms promise. Most firms fumble here because they promise to provide all sorts of things, but they fail deliver; their products fail to carry the value they were supposed to carry. The entire firm with all the functions and activities is involved in this step. In creating and delivering the product with all the associated benefits, which the firm has decided to offer, there is a role for technology, design and engineering finance management and the organizational set-up

On Marketing Concept, in this article we outlined up on the idea of integrated management action. What is required in value creation and delivery is integrated management action with marketing taking center stage.

Value Communication

After selecting the value to be offered and deciding how the value has to be created /delivered, the firm tries to communicate the value to the customer. In this step, there are actually two components. The firm works out a value proposition and then communicates it to the customer.

Making a Value Proposition

In a marketing endeavor, what the firm offers to the customer is not a mere physical product; it offers a value proposition. The product offer consisting of the best possible benefits/value is put forward as a value proposition, explaining how the offer matches the customers requirement s and how it works out to be the best among all the competing offers.

Communicating the Value Proposition

The firm then, communicates the value proposition to the customer. It explains the uniqueness of its offer through a well-formulated marketing communication mix. The customers exercise of assessing the value of the offer actually starts from this stage.

Value Enhancement

The firm also continuously and proactively enhances the value. It collects feedback from the consumer about his level of satisfaction with the product and upgrades the value. It actually is a non-stop job for the firm to search for the customers satisfaction level and augment the offer. Competing products, including substitute products, keep attacking the value proposition of the firm.

Expectations of customers too keep changing. The firm has to search for the new expectations of the customers, locate product gaps/ benefits gaps and keep making new and better offers to the customer to stay ahead of the competition in value rankings.

Sales promotion gimmicks do not normally serve the purpose of sustained value addition. Sales promotion measures like consumer deals and trade deals result in just a temporary shift in the value-cost equation in favor of the consumer. When the deals are withdrawn, consumers turn away from the product.

What is needed is a sustained and ongoing effort, not short-lived big bangs. The effort must be lasting value addition, which normally accrues only though factors like enhancement of the functional utility/ convenience of the product.

University of Mumbai BMS Notes

The G-STIC frame work for Marketing Planning: Goal-Strategy Tactics

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Strategic Planning

Strategic planning is a buzz word that is thrown around a lot, but unless you know how to develop and implement a strategic plan, the term is useless. It’s important to understand that strategic plans will differ greatly among practices and therefore, a “Cookie cutter” approach will not be beneficial. In this post, I would like to offer a few tips to driving successful strategic planning and implementation. 

  1. Involve your entire staff

It is important that everyone in the practice be included in the process in some way. By collecting the insight of the people on the front lines, the plan will likely be more accurate, practical, and actionable. Also, by being inclusive, everyone will feel that they are an important part of a team and they will be more inclined to drive the implementation.

  1. Conduct a situation analysis

Begin by looking at internal and external factors. Internally, explore your operations, human resources, and finances budget, profits, revenues, and debt. Externally, look at your competitors, market condition, and the economy. Lastly, conduct a thorough SWOT analysis; Strengths, Weaknesses (internally), and Opportunities and Threats (externally). This assessment will be the basis for your strategic plan. Figure out what you do well and what needs to be improved to build your practice and create a sustainable competitive advantage.

  1. Develop business objectives

These goals should be SMART: Specific, Measurable, Actionable, Realistic, and Time-driven.  Potential goals can be focused on sales, profits, growth, or image and positioning.  

  1. Develop an overall strategy

Your strategy should support your objectives. These will drive your tactics and determine how you will execute. During this phase, you should examine the variables that may affect your strategy and determine if they are controllable or uncontrollable. Typically, the internal variables will be controllable and the external variables will be uncontrollable.

  1. Create control measures

Lastly, you will create key control measures that will measure the success of the initiative. It may help to think of this step in terms of who does what… when… and how. Implementing control measures will help keep strategic planning a process instead of simply a document.

The G-STIC Framework

Designing the Tactics

Tactics are the set of activities that are used to execute a specific strategy. These tactics are defined by seven elements, commonly referred to as the marketing mix. These are the key decisions that build on the marketing strategy.

  • Product: It’s key functional characteristics. Implies transfer of ownership.
  • Service: Also reflects functional characteristics, but does not transfer ownership. Services are inseparable from service providers.
  • Brand: Create a unique set of associations that enhances the product/service value beyond simply the functional benefits.
  • Price: The amount of money the business charges for the product/service
  • Incentives: Tools used to enhance the value for customers, collaborators, and/or employees. Can be monetary or non-monetary.
  • Communication: Informs current and potential clients about the offering. Can include elements from the other six marketing mix variables.
  • Distribution: The channels by which the client receives the offering.

I: Defining the Implementation Plan

Implementation is the logistics of executing the offerings strategy and tactics. There are three main components.

Business Infrastructure: Refers to the organizational structure. Involves identifying the business unit in charge of the offering, and identifying key personnel and collaborators.

Business Processes: Depict the activities involved in designing and managing the offering (flow of information, goods, and money).

Implementation Schedule: Identifies the sequence and time frame for tasks to be performed.

C: Identifying Controls

Controls serve two functions: to evaluate a business’s progress toward its goals and to analyze the changes in the business’s environment.

  • Performance Evaluation: Monitors the business’s progress toward reaching goals and maximizing performance.
  • Environmental Analysis: Monitors the environment to be sure that the action plan remains optimal.

G: Setting a Goal

This is a pivotal part of the strategic planning process. Without a clearly defined goal, the other elements of the value creation process, and the overall success of the business, are doomed for failure.

There are two decisions involved with goal setting: identifying the focus of the businesses actions and setting specific benchmarks for measuring the business’s performance. The focus determines the key element of a business’s success and often includes elements such as net income, sales revenues, and market share. Benchmarking looks at the goal and defines its temporal and quantitative aspects.

S: Developing a Strategy

A strategy outlines the activities that are needed to accomplish the business’s goals. This element is characterized by two key decisions: Identifying target customers and developing a value proposition.

The markets in which a business’s offerings compete can be best illustrated by the 5-C framework.

  • Customers: Potential buyers who have needs that the business’s offerings aim to fulfill
  • Company: The business managing the offering
  • Collaborators: Entities that work with the business to create value for target customers
  • Competitors: Business’s whose offerings target the same customers
  • Context: Relative aspects of the environment in which the business operates

Target Market

Identifying your target market involves two key decisions: Selecting which clients to serve and identifying actionable methods for reaching these clients. Selecting which clients to serve, also known as strategic targeting, is done based on the businesses ability to fulfill a client’s needs in a way that is beneficial to the client, business, and collaborators. Often, a client’s needs are not easy to see, so a business will need to identify observable characteristics that can be used to reach the client, also known as tactical targeting. These characteristics may include demographic, psychographic, geographic, and behavioral factors.

Value Proposition

As you have probably noticed, mutually beneficial value is a major theme in almost all discussions about marketing. True business success is achieved if a business creates a product offering that provides a client with more value than the competition’s offering in a way that creates value for the business and the collaborators. The value proposition is simply a definition of the value that the offering creates. This value proposition includes all of the benefits and costs associated with the offering. The next step is to define the positing strategy, which highlights the most important benefit of the offering. The most important benefit should be poignant and serve to differentiate the product in the mind of the client.

Implementation & Control

Implementation control is aimed at assessing whether the plans, progammes and policies are actually guiding the organization towards its predetermined objectives or not.

If the resources that are committed to a project at any point of time would not benefit an organization as envisaged, corrective steps should be undertaken immediately.

Implementation control is designed to assess whether the overall strategy should be changed in light of unfolding events and results associated with incremental steps and actions that implement the overall strategy.”

Strategic implementation control does not replace operational control. Unlike operations control, strategic implementation control continuously questions the basic direction of the strategy.

Types of Implementation Control

The two basis types of implementation control are:

  1. Monitoring strategic thrusts (new or key strategic programs)

Two approaches are useful in enacting implementation controls focused on monitoring strategic thrusts:

  • One way is to agree early in the planning process on which thrusts are critical factors in the success of the strategy or of that thrust
  • The second approach is to use stop/go assessments linked to a series of meaningful thresholds (time, costs, research and development, success, etc.) associated with particular thrusts.
  1. Milestone Reviews

Milestones are significant points in the development of a programme, such as points where large commitments of resources must be made. A milestone review usually involves a full-scale reassessment of the strategy and the advisability of continuing or refocusing the direction of the company. In order to control the current strategy, must be provided in strategic plans.

Implementation Control Measures

As you begin to implement a business strategy, you must use implementation control measures to assess whether or not your plan needs adjustment. Common types of implementation control include setting performance standards, measuring actual performance, analyzing the reasons your staff failed to meet specific performance standards, and developing a plan to correct performance deviations. Implementation control also includes things such as budgets, schedules, and milestones that the company is trying to achieve.

The process of the implementation of the marketing plan

During the process of the implementation of the marketing plan managers must ensure efficient use of capital, human and marketing resources of the company. Selection of the strategy has a significant impact on the subsequent functioning of the company, because its organizational structure must be adapted to strategy. Strategic marketing effectiveness largely depends on the level of involvement of executive leadership in the implementation of marketing tasks. In the implementation of the marketing plan very important factor are the skills, attitudes and behaviours of the staff.

Quality of management depends on:

  • Leadership: Top management involvement in the planning process,
  • Coordination: To ensure harmonious cooperation between the organizational units,
  • Communication: Vertical and horizontal information flows,
  • Human resources: Personnel selection, training and evaluation,
  • Organizational resources:  IT systems, buildings, management methods,
  • Motivating: The creation of incentive climate in which staff undertake actions to achieve the purpose of the company,
  • Organizational structure: Relations between organizational units, processes, and formalization,
  • Organizational culture: Market focus, values, customer orientation of personnel,

Marketing plan control process

Marketing plan control process includes the following phases:

  • Setting the values of indicators, which are the subject of observation and measurement (e.g. sales volume, market share, stock rotation, etc.)
  • Determining the tolerance ranges from planned values,
  • Measurement of the values of indicators,
  • Comparison of planned values to actual values, to determine deviations and give explanation of their causes,
  • Formulation of proposals to eliminate the detected deviations or change of values of indicators.

Types of controls in marketing plan implementation

The essential types of marketing control are:

  • Control of the annual plan: Performed by mid-level management (method: analysis of sales, market share, financial indicators, etc.)
  • Control of profitability: Performed by marketing controller (method: the profitability of the product, area, customer segment, etc.)
  • Control of efficiency: Performed by marketing executives, line managers and HR departments (method: the effectiveness of the sales staff, advertising, sales, promotion, distribution)
  • Strategic control: Performed by top management or marketing auditor (method: ranking of the effectiveness of marketing, marketing audit, evaluation of marketing excellence, an overview of the ethical and social responsibility of the enterprise)

Problems with implementation and evaluation of effective control systems are often caused by:

  • High cost of implementation (IT software and hardware, data acquisition, human costs),
  • Strict control may reduce motivation, decrease creativity and innovation.
University of Mumbai BMS Notes

Role of Business models in Marketing Management

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A business model is a framework for how a company will create value. Ultimately, it distills the potential of a business down to its essence. It answers fundamental questions about the problem you are going to solve, how you will solve it, and the growth opportunity within a given market.

Creating a business model is essential, whether you are starting a new venture, expanding into a new market, or changing your go-to-market strategy. You can use a business model to capture fundamental assumptions and decisions about the opportunity in one place, setting the direction for success.

There are many types of business models. Each one varies considerably based on the type of organization and offering. For example, a manufacturing company will have a very different model than an advertising agency. Even within a specific industry, business models vary. Here are a few common business models used by technology companies:

  • Subscription
  • Transactional
  • Freemium
  • Affiliate
  • Retail sales

Most businesses end up using a combination of business models to reach their customers and grow over time.

Business model Importance

You need a clear path to build something meaningful. The process of building a business model establishes a plan for how you will realize your vision. It lays out the strategy behind a new undertaking or investment and provides a framework for tracking progress.

Creating a business model requires deep thought and analysis. Company and product builders must think from the outside in, focusing on market needs and what matters most to customers. Once built, sharing your business model across the organization encourages alignment. This keeps everyone accountable for what they are working on and why, as well as guiding investments of time and resources.

Uses of business models

Companies across every industry and at all stages of maturity use business models. Some rely on lengthy processes and build complicated models, while others move quickly to articulate the basics. Having the discipline to work through this planning tool forces internal alignment.

For established enterprises, a business model is often a living framework that is reviewed and adapted every year based on changes with customers, employees, and the market. For companies launching new products or entering new markets, a business model can help get them off to the right start and ensure that early product and marketing decisions are tied back to the strategy.

Role of Business models in Marketing Management

A business model plays a vital role in the success of any company, as it explains how that business will earn revenue. For entrepreneurs, a business model aids in acquiring investors and establishing partnerships.

Significance

For aspiring entrepreneurs, developing a business model forces you to thoroughly think about the overall business plan. According to an article written for Bloomberg Business Weekly by business professional Gwen C. Edwards, topics an effective business model should address include the type of product or service being offered, how to draw revenue from the product or service, and what advantages and disadvantages the company has compared to others in the same industry.

Types

Many types of business models exist, from the basic pay-for-product model to advertising and e-business methods. Various business models can be blended together in a business plan. For instance, in addition to traditional practices, a retail store might sell advertising on the store website in order to accumulate extra revenue.

Considerations

Chris Brogan, the president of the media marketing agency New Marketing Labs, advises on his website to be on the lookout for new elements that you can implement into your business model. Methods Brogan recommends for doing this include reading business books and discussing industry-related ideas with other professionals.

Most businesses prepare a blueprint for how the company will conduct its operations. Such blueprints are typically referred to as a model. These templates serve many purposes and come in a variety of forms, including business and a revenue models. Despite the similarities between a business and revenue model, the two outlines serve different functions and outline distinct aspects of the business.

Business Model Identification

The “Harvard Business Review on Business Model Innovation” charts four basic tenets of a business model: how the company creates and delivers value to its customers, the ways in which the company will earn a profit, which key components will be utilized and which key processes the company will incorporate. Key components include staff and human resources, machinery and technology as well as branding efforts. Business operations such as manufacturing and training make up the business’s key processes. Each business model differs depending on the organization’s size, industry and expectations.

Revenue Model Identification

A revenue model is a subset component of a business model. The revenue model focuses on answering the question of how the business will generate revenue and, ultimately, how the company will be profitable. The revenue model depends on the industry. For example, a website might employ a contextual advertising model, which means the business generates money by users clicking on third-party ads within the page content. A baseball stadium, on the other hand, may have a revenue model that includes raising money from ancillary goods such as team apparel and dining outlets.

Differences

Michael Hitt, author of “Creating Value” states that a revenue model and business model are similar but separate outlines. Hitt explains that a business model’s goal is to outline how the business generates value, whereas a revenue model specifies how the business allocates the created value. Thus, a business model explains the company’s strategy, operations and management tactics. The revenue model draws from these explanations to outline how the company will earn money.

The choice of model depends on circumstance. Companies draft a business model and present it to financial institutions in order to get a loan. Venture capitalists typically view a business model in order to make decisions to invest in the company. On the other hand, corporations review their revenue model to make financial forecasts. Companies also inspect their revenue model to see if it’s relevant in lieu of any changes in operations. For instance, the revenue model could need modification if the cost of production rises or wages change.

University of Mumbai BMS Notes

Identifying the Market The Five C Framework

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Market for product is big and diverse making it difficult for companies to be able to satisfy every customer. Companies need to identify a certain set of customer within a market and work towards satisfying them. This set of identification is market segment. Companies further need to understand the intricacy of how this segment behaves and operates. An approach known as target marketing is gaining prominence where companies identify the market segment on similar needs and wants, select one of the market segments and then focus in developing products and marketing program.

Earlier business operation was in the form of mass marketing. In mass marketing companies produce a product in large quantities and serve this product to as many consumers as possible. This made sense as markets were developing and not much variety was on offering. Now product offerings have under gone radical change thanks to advertising and communication reach. Therefore, companies look forward to marketing at segment, niches, local and individual level.

In segment marketing companies identify consumer with similar needs and wants. For example, an airline is looking forward to providing no frills’ connectivity between metro cities on US east coast compare. This segment is within airline industry but needs of customer is different. T target audience is low budget travelers. However, customers within the segment look for different attributes, for example, lunch or beverages as part of travel. Here companies can offer this by charging the customer.

In niche marketing, companies target limited customer set. A niche market is worth exploring where customers are willing to pay a premium for product, entry barriers are high and market has growth potential. In local marketing, customers are local neighborhood, trading stores, etc. For example, many banks prefer local marketing for better understanding of client and provide them right type of service. In individual marketing, companies look forward to satisfying needs and wants of individual customer. Internet is facilitating the process of individual marketing, where in customer log on to the site and creates products from available options. This process is not feasible for high technology products like automobiles.

The Five C Framework

  1. Customers

Company customers are the key focus areas of the business. To make the customer happy you should really understand your target market and customers’ needs and wants. Try to find out information through market research i.e.

  • Market segmentation
  • Market size and growth
  • What are you selling
  • Do u really selling what they need?
  • Consumers decision making process
  • Preference where they shop
  • Quantity and frequency for their purchase
  • Consumer preferences, attitude and trends
  1. Competitors

It is a very important analysis and determine the future of the business.

  • Who are your primary competitors?
  • Any substitute available for your products?
  • Segmentation, Targeting and Positioning?
  • Competitors activities and market share
  • What are competitors strengths and weaknesses?
  1. Company or Corporation
  • Company culture
  • Goals and objectives
  • Product Line and Brand Image
  • Your Strengths and Weaknesses
  • Level of technological advancement
  1. Collaboratives

All those parties have outside but have shared interest in the company. your business operation can affect them both positively and negatively.

  • Suppliers
  • Distribution channels
  • Key opinion leaders
  • Third parties
  1. Climate

Company climate means macro environmental factors. PESTLE analysis tool is a good way to analyze this company environment.

  • Political factors. Government rules and regulations that affect your business environment
  • Economic factors. It is the interest rate, economic crisis, inflation, trade cycle all these economic factors affect the business operations.
  • Socio-Cultural factors. social beliefs customs, attitudes and preferences are the social factors of a business.
  • Technological factors. How you are technologically advanced and fulfilling your customer needs and want through automatic processes and communication infrastructure etc.
  • Legal factors. corporations must comply with law and regulation if not will affect your business operation.
  • Environmental factors. How your business is affecting the surrounding environment whether your business fulfilling the environmental regulations or not.

While performing 5 C’s of marketing analysis company can gather information from websites, annual reports, different industries reports. Government websites are also a good source of information. By this way, a company can identify opportunities to provide value to target customers.

Management Notes

Strategic Decision: Nature of Strategy and the Marketing Strategy Interface

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Strategic decisions are the decisions that are concerned with whole environment in which the firm operates, the entire resources and the people who form the company and the interface between the two.

Characteristics/Features of Strategic Decisions

  • Strategic decisions have major resource propositions for an organization. These decisions may be concerned with possessing new resources, organizing others or reallocating others.
  • Strategic decisions deal with harmonizing organizational resource capabilities with the threats and opportunities.
  • Strategic decisions deal with the range of organizational activities. It is all about what they want the organization to be like and to be about.
  • Strategic decisions involve a change of major kind since an organization operates in ever-changing environment.
  • Strategic decisions are complex in nature.
  • Strategic decisions are at the top most level, are uncertain as they deal with the future, and involve a lot of risk.
  • Strategic decisions are different from administrative and operational decisions. Administrative decisions are routine decisions which help or rather facilitate strategic decisions or operational decisions. Operational decisions are technical decisions which help execution of strategic decisions. To reduce cost is a strategic decision which is achieved through operational decision of reducing the number of employees and how we carry out these reductions will be administrative decision.

Nature of Strategy

Based on the above definitions, we can understand the nature of strategy. A few aspects regarding nature of strategy are as follows:

  • Strategy is a major course of action through which an organization relates itself to its environment particularly the external factors to facilitate all actions involved in meeting the objectives of the organization.
  • Strategy is the blend of internal and external factors. To meet the opportunities and threats provided by the external factors, internal factors are matched with them.
  • Strategy is the combination of actions aimed to meet a particular condition, to solve certain problems or to achieve a desirable end. The actions are different for different situations.
  • Due to its dependence on environmental variables, strategy may involve a contradictory action. An organization may take contradictory actions either simultaneously or with a gap of time. For example, a firm is engaged in closing down of some of its business and at the same time expanding some.
  • Strategy is future oriented. Strategic actions are required for new situations which have not arisen before in the past.
  • Strategy requires some systems and norms for its efficient adoption in any organization.
  • Strategy provides overall framework for guiding enterprise thinking and action.

Marketing Strategies

Marketing strategy is the total and unbeatable instrument or a plan shaped and designed specifically for attaining the marketing objectives of a firm. A marketing mission and objectives tell us as to where we want to go and marketing strategy provides us with the grand design for reaching out there.

The borrow the words of Prof. Jerome Mc Carthy “strategy is the all important part of marketing. The one time planning decision the most crucial decision that determines what business the company is in and the general strategy, it will follow may be more important than has ever been realized”

In the words of Mr. Robertson and Yoram Wind, “there are three generic strategies for achieving success in the competitive market place. The first of these is to gain control over the supply or distribution, the second competitive cost advantage and the third product differentiation; marketing as a discipline is critical component of all these three strategies. Marketing performs a boundary role function in the firm’s selection of an appropriate strategy; marketing spares the customer interface and provides the assessment of needs which must ultimately guide all strategy development”.

To quite Michael E. Porter “marketing strategy has mainly one aim to cope up with competition; these are five major and vital forces that decide the nature and intensity of competition the threat of new entrants, bargaining power of customers, bargaining power of suppliers, threat of substitute products and jockeying among the existing contest arts ; the collective strength of these forces determine the ultimate profit potential, of an industry; the strategists goal is to find a position in the industry where his company can best defined itself against these forces or can influence them in his favour; strategy can be viewed as building defences against competitive forces.

In the final analysis marketing strategy stands for competitive marketing actions that are bound to evoke a response from competition. That is why a successful marketer needs to have a comprehensive strategy to tackle competition at any cost.

However, one cannot go to the extent of “any cost” unless one works according to a plan and that is competitive strategy for thumping success in marketing. It is but, therefore, natural that competitive strategy has to be one that will evoke the much sought after competitive advantage. Having given the competitive advantage, the said strategy should give a sustainable competitive edge.

It warrants the thorough investigation and analyses of competition before one hope to have a competitive advantage. Thus competitive investigation, scanning and analysis consist of two things namely, the “long-term profit- opportunity” and owns one’s competitive position.

The ways of out beating competition are:

  1. Reducing competition

Perhaps this is the simplest way of fighting out. It sounds well in theory; however in practice it means acquisition of smaller or weaker units which are in competition. Thus, Hindustan Lever acquired TOMACO and Broke Bond acquiring Kissan and Lipton.

  1. Joining competition

This is another way out to mitigate competition which is gaining ground. The best example is that of joint venture of Procter and Gamble and Godrej Soaps.

  1. Pre-empting competition

This is another way which is a proactive approach, which is very effective particularly when it is backed by competitive analysis. The example of pre-empting competition is that of.

  1. To create barriers

This implies forbidding others from entry in the line based on very strong financial and muscle power. Good many companies spend heavily barring others to just think of such extravagance a luxury or a dream for them. The example of this kind is that of.

  1. To differentiated the products

It pays to differentiate the products. One must not hesitate to differ his own product with a new to provide better value for the money paid by the customers. It is not only ideal but practical. That is majority of the companies to do it. The examples are good many but we can take toiletotries of all companies.

  1. To improve the speed of response

The competitive edge can be further sharpened than one thinks. There are certain manufactured products where speed of response as well as quick source is of top significance.

Though the companies are aware of keeping pace with changing technological tempo they should be well ahead of the same. Quality in consonance with technology has much valid response if it catches the required speed.

  1. To divest from regular activities

Instead of moving in the same grow; it should more out of it. The firm should divest out of focus activities. This makes available much wanted scarce recess in the focused activities.

  1. To improve efficiency

It is but natural that there is close alliance between important efficiency and the competitive edge. This helps the marketer to distinguish his products though reduced cycle of line and reduced costs.

To restate, a competitive marketing strategy should be such that will give sustainable competitive advantage. One has to be therefore proactive and quick in one’s responses and one should be willing to invest in long-term profits.

Nature of Marketing Strategies

The exact nature of strategy is self evident from the definitions we have gone through.

The nature is clearly spoken by the following points:

  1. They are dynamic

The concept of marketing strategy is relative as it is designed to meet the changing demands of a situation. Each situation and event needs a different strategy that is why strategies are revised and recast very frequently to cope up with the changes in a given situation or event.

  1. They are futuristic

A marketing strategy is forward looking. It orients towards future. A marketing strategy is designed to bring out the organization from a ditch of degression to the path of progress for better change in the coming times.

  1. They are complex

A marketing strategy is a very complex plan impounding in its compound other plans or firms of plans which area must to achieve the organizational goals. It is a compendium or complex of plans within plan to out beat the strength and vitality of others in the line are allied activities.

  1. They provide direction

Marketing strategies provide a set direction in which human and physical resources will be allocated and deployed for achieving organisational goals in the face of change environmental pressure, stress and strains and constraints and restraints.

  1. They are all covering

Marketing strategies involve the right combination of factors governing the best results. In fact strategic planning warrants not only the isolation of various elements of a given situation but a judicious and critical evaluation of their relative importance.

  1. They are a link between the unit and environment

The strategic decisions that are basically related with likely trends in the changing marketing changes in govt., policies, technological developments, ecological change over’s, social and cultural overtones. Then, the ever-changing environment which is external to the organization has impact on it because unit is the sub-systems of supra-system namely environment.

  1. They are interpretative

Marketing strategies are the interpretative plans formulated to interpret and give meaning to other plans in the spot-light of a specific situation or situations. They demand an adjustment of plans in anticipator of the reactions of those who will be influenced. Strategic decisions are the result of a complex and intricate process of decision making.

  1. They are Top Management Blue-print

Marketing strategies their formulation is the basic responsibility of top management. It is because, it is top management that spells out the missions, objectives and goals and the policies and strategies are the ways to reach them. Thus, top management is not only to say to where to go but how best to go the terminal point.

Essentials of Marketing Strategies

Any marketing strategy to be worth calling as successful or effective must enjoy certain extras which can be called as essentials or requisites of it.

The basic guidelines, used to call a strategy a successful one used by experts are:

  1. It is consistent

A marketing strategy to be effective is to be consistent with the overall and specific objectives and policies and other, strategies and tactics of the marketing organization. Interval consistency is an essential ingredient of a good strategy as it identifies the areas where the strategic decisions are to be made imminently or in the long run.

  1. It is workable:

Any strategy however laudable and theoretically sound is meaningless unless it is able to meet the ever changing need of a situation. In this business world contingency is quite common and the strategy that strikes at the head to contribute to the progresses and prosperity of marketing organization.

  1. It is suitable

A strategy is emergent of situations or environment. It is the subservient of changing environment of business world. It is but natural that any strategy not suiting to .the environment can impound the marketing organization in the compounds of danger, digress and frustration.

  1. It is not risky

Any strategy involves risks as uncertainty is certain; what is important is that the extent of the risk involved or associated with strategy is reasonably low as compared to its pay-off or returns. It is because; a high risk very strategy may threaten the survival of the marketing organization, let alone its success, if calculations go fit.

  1. It is resource based

A sound strategy is one which is designed in the background of the available resources at its command. A strategy involves certain amount of risk which can hardly be segregated. A strategic decision warrants commitment of right amount of resources to the opportunity and reservation of sufficient resources for an anticipated or “Pass through” errors in such demands of resources.

  1. It has a time horizon

The statement “a stitch in time saves nine” that aptly applies to the concept of strategy. A sound strategy is time bound to be used at the nick of the hour and tick of the opportunity. It has an appropriate time horizon. This time this is costlier than money and its horizon banks on the goals to be achieved.

The time should be long enough to permit the organization to make adjustments and maintain the consistency of a strategy.

University of Mumbai BMS Notes

Implications of unethical behavior for financial reports

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Accounting rules and regulations exist to ensure that financial statements are useful to their end users in their financial decision-making. For financial statements to be useful, the information presented therein must be accurate, faithful to the financial circumstances and be produced in time to help the decision-making process. Poor ethics in accounting result not only in increased incidences of criminal activities, but also hurt the business through harming its reputation and rendering their financial statements untrustworthy and thus useless.

Due to a series of recent corporate collapses, attention has been drawn to ethical standards within the accounting profession. These collapses have caused a widespread disregard for the reputation of the accounting profession. To combat the criticism and prevent unethical and fraudulent accounting practices, various accounting organizations and governments have developed regulations and guidelines aimed at improved ethics within the accounting profession.

Personal Consequences

Once caught and tried, accountants so unethical as to commit crimes related to their profession are punished. Depending on the specific circumstances of the case, this can result in prison time, financial costs and other legal punishments to the accountants found guilty. Not only is this devastating for said accountant, it is also devastating on both friends and family, particularly the family.

Criminal Activities

Poor ethics amongst a business’ accountants means that those persons are more willing to break the rules to benefit either themselves or their business illegally. For example, an unethical accountant granted too much control and too little oversight from superiors can embezzle from the business and conceal the evidence. In contrast and comparison, an unethical accountant working at the behest of the business can manipulate the data to commit a number of crimes including fraud and tax evasion.

Business Reputation

Poor ethics can also inflict damages on the business’ reputation and trustworthiness of its stakeholders, such as customers and business partners. The absence of trust ensures that the business finds it difficult to conduct business with others. This damage to a business’ reputation is particularly devastating to accounting firms who rely heavily on that reputation to remain in business. Arthur Andersen LLP effectively perished as a business because of its poor conduct in the Enron scandal.

Usefulness of Financial Statements

Each time that an unethical accountant deliberately breaks the rules and regulations to manipulate the information presented on the financial statements to illegal advantage, those financial statements become less and less useful. Since financial statements must remain accurate and truthful to help end users in making their financial decisions, financial statements tainted deter the decision-making process. Erroneous figures cast all other figures into doubt and end users simply become unable to trust the information presented.

Guidance to help CPAs solve ethical dilemmas not explicitly addressed in the code. Even though this guidance is for CPAs, it makes sense for anyone facing an ethical dilemma:

  • Recognize and consider all relevant facts and circumstances, including applicable rules, laws or regulations,
  • Consider the ethical issues involved,
  • Consider established internal procedures, and then
  • Formulate alternative courses of action.
  • After weighing the consequences of each course of action, you select the best course of action based on your own judgment.
University of Mumbai BMS Notes

Introduction, Meaning of Ethical Behaviour in Accounts

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Accounting ethics is primarily a field of applied ethics and is part of business ethics and human ethics, the study of moral values and judgments as they apply to accountancy. It is an example of professional ethics. Accounting was introduced by Luca Pacioli, and later expanded by government groups, professional organizations, and independent companies. Ethics are taught in accounting courses at higher education institutions as well as by companies training accountants and auditors.

Due to the wide range of accounting services and recent corporate collapses, attention has been drawn to ethical standards accepted within the accounting profession. These collapses have resulted in a widespread disregard for the reputation of the accounting profession. To combat the criticism and prevent fraudulent accounting, various accounting organizations and governments have developed regulations and remedies for improved ethics among the accounting profession.

Ethical behaviors can be identified in both individual relationships and work relationships. The concept can also be applied to corporations as entities. It evaluates the moral implications of actions being taken on each of the previously mentioned contexts. An ethical behavior is essential for a society to function properly. Individuals that behave unethically will normally loss other people’s confidence and their unethical behavior should be also punished by the law.

The nature of the work carried out by accountants and auditors requires a high level of ethics. Shareholders, potential shareholders, and other users of the financial statements rely heavily on the yearly financial statements of a company as they can use this information to make an informed of the decision about investment. They rely on the opinion of the accountants who prepared the statements, as well as the auditors that verified it, to present a true and fair view of the company. Knowledge of ethics can help accountants and auditors to overcome ethical dilemmas, allowing for the right choice that, although it may not benefit the company, will benefit the public who relies on the accountant/auditor’s reporting.

Most countries have differing focuses on enforcing accounting laws. In Germany, accounting legislation is governed by “tax law”; in Sweden, by “accounting law”; and in the United Kingdom, by the “Company law”. In addition, countries have their own organizations which regulate accounting. For example, Sweden has the Bokföringsnämden (BFN – Accounting Standards Board), Spain the Instituto de Comtabilidad y Auditoria de Cuentas (ICAC), and the United States the Financial Accounting Standards Board (FASB).

Principles and rules

“When people need a doctor, or a lawyer, or a certified public accountant, they seek someone whom they can trust to do a good job not for himself, but for them. They have to trust him, since they cannot appraise the quality of his ‘product’. To trust him they must believe that he is competent, and that his primary motive is to help them.” John L. Carey, describing ethics in accounting

The International Financial Reporting Standards (IFRS) are standards and interpretations developed by the International Accounting Standards Board, which are principle-based. IFRS are used by over 115 countries or areas including the European Union, Australia, and Hong Kong. The United States Generally Accepted Accounting Principles (GAAP), the standard framework of guidelines for financial accounting, is largely rule-based. Critics have stated that the rules-based GAAP is partly responsible for the number of scandals that the United States has suffered. The principles-based approach to monitoring requires more professional judgment than the rules-based approach.

There are many stakeholders in many countries such as The United States who report several concerns in the usage of rules-based accounting. According to recent studies, many believe that the principles-based approach in financial reporting would not only improve but would also support an auditor upon dealing with client’s pressure. As a result, financial reports could be viewed with fairness and transparency. When the U.S. switched to International accounting standards, they are composed that this would bring change. However, as a new chairperson of the SEC takes over the system, the transition brings a stronger review about the pros and cons of rules- based accounting. While the move towards international standards progresses, there are small amount of research that examines the effect of principle- based standards in an auditor’s decision- making process. According to 114 auditing experts, most are willing to allow clients to manage their net income based on rules- based standards. These results offer insight to the SEC, IASB and FASB in weighing the arguments in the debate of principles- vs. rules based- accounting.

Advantages of Accounting Ethics

If the person does not follow it, then the person will be liable for the punishment as decided by the governing bodies. This creates fear in the mind of the person and leads to follow up appropriately.

As the different rules and guidelines are set by the governing bodies that govern the action of the person associated with the accounting profession, this prevents the misuse of the information available of the client with the accountant, auditor, or any other accounting person.

The businesses which pay proper attention to accounting ethics always do better when compared with the other businesses as it creates the right image in the eyes of the customers and the other parties and thereby helps in increasing the business in the long run.

There is decreased legal liability. This is so because almost all the things are taken care of well in advance by the concerned persons so that they are liable for any legal actions.

It creates a better Professional Environment as everyone has the proper mindset of maintaining a high level of ethical standards. Also, respect is given to that person who follows the ethics accurately in the place where they are working.

Disadvantages of Accounting Ethics

As the person is required to know every aspect that he has to follow and also to update the information regularly for any changes if taken place, it requires lots of efforts and time of the person.

As the proper training should be given to everyone associated with accounting for providing the information on the different rules and guidelines to be followed for accounting ethics, such training involves a considerable cost.

When a person tries to follow the accounting ethics, there are high chances that it will not get the support from the management of the company. Management will try to find and work with the person who follows the rules and guidelines which provide the benefit to the company.

Important:

As the different rules and guidelines are set by the governing bodies that govern the action of the person associated with the accounting profession, this prevents the misuse of the information available of the client with the accountant, auditor, or any other accounting person.

There are various rules and guidelines which are required to be followed by everyone who is associated with accounting. Some of these rules include the rule of non-acceptability of the contingent fees like setting the audit fees based on the net profits of the clients, Confidentiality where the auditors have to keep all the information of its clients confidential and are not allowed to disclose it to any outsider, duty concerning the reporting of the breach of the rules by anyone, etc.

University of Mumbai BMS Notes

Need of ethical behavior in accounting profession

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Accounting is a representation of the business processes with numbers. In order to provide stakeholders with an accurate picture of the business operations from a financial perspective, the bookkeeping needs to be honest and accurate. While accountants adhere to ethical guidelines, the topic of ethics has become more important than ever as the corporate world has been littered with financial scandals from Enron in 2001 to Satyam Computer Services in 2009. As accountants, it is our responsibility to represent the information in a way that truly shows what is going on in the company. Failure to do so can lead to serious consequences for the company and its stakeholders.

Financial planning

It is the duty of the accountants to provide information that helps facilitate planning for the future of the business. In addition to accuracy, the information needs to be provided in a timely manner so that the company can make sound judgments based on the numbers. Failure to do so can result in missed opportunities and higher costs for the organisation.

The Code of Ethics helps companies ensure that there is no misrepresentation of the numbers or information provided to the stakeholders in the company. The rules and regulations stated on the document by the governing body need to be followed by every accounting process in the organisation to ensure that accurate and reliable information is presented to the users of the information. Decision-making doesn’t always come down to a ‘yes’ or ‘no’ and there is always a grey area. Ethics gives accounting companies more clarity in this area of doubt.

The company’s reputation

The code of Ethics states that accountants need to abide by all the rules and regulations listed by the governing body. This will help the company maintain professionalism and ensure that the financial statements are a fair and accurate representation of the company’s position. Failure to comply with the Ethics code can affect the reputation of the company and could even land them in legal trouble.

In the U.K companies need to comply with the U.K GAAP which is a regulatory body that states how financial statements should be prepared in the U.K. The goal of the GAAP is to standardise accounting practices and ensure that all companies maintain integrity and professionalism when it comes to preparing financial statements.

The integrity of the employees

The Ethics code ensures that all members of the company demonstrate integrity and honesty in their work with clients and other professional relationships. The ethics code also prevents accountants from associating themselves with any information that could be misleading or damaging to the client or the organisation.

The European Union has regulations to protect the privacy of the clients with the General Data Protection Regime (GDPR). This is a set of privacy regulations that is applicable to all companies that store or process the client’s personal information. The policies include the right to receive a copy of the information retained by the company, data breach notifications and the requirement of each company to name the individuals who are in charge of protecting the client’s personal information. This helps ensure that the integrity of the client’s personal information is retained and there are no unsolicited leaks. If companies or individuals fail to comply with the rules and regulations listed under GDPR, it could result in serious consequences. Therefore, it is essential for companies to maintain the integrity of the employees and ensure that they abide by GDPR rules.

It is inherent to the accounting profession

Accounting and ethics go hand in hand with the accounting profession. As accountants, it is important that we make neutral, unbiased decisions that help the client. If the company benefits from the sale of one financial product over another, it could lead to bias and misrepresentation of information for the client. As part of the ethics code, it is important that the information provided is not subject to any external influence.

In India, companies have to comply with Ind AS which stands for Indian Accounting Standards. These policies provide companies with principles for recognition, measurement and treatment of accounting transactions in the financial statements. The goal of Ind AS is to bring consistency to the accounting principles and practices followed by companies.

Tax payments

All companies have a legal obligation to represent accurate financial information on their tax forms. Some companies can provide inaccurate information to the tax authority to reduce their financial burden. However, they can face perjury and high fines if they get caught. The Code of Ethics ensures that accurate information is provided when filing taxes and keeps you in the clear.

Professional ethics:

Independence and Objectivity

Ethics and independence go hand in hand in the accounting profession. A critical component of trust is making unbiased decisions and recommendations that benefit the client. Conflicts of interest, for example, demand exposure under independence guidelines. Benefiting from the sale of one financial product over another could lead to a bias that skews financial advice to a client.

To remain objective and independent, it is also necessary to ensure that recommendations are not subject to outside influence. An accountant’s professional judgment is compromised if they subordinate their judgment to someone else’s.

Confidentiality

Disclosure of financial information or revealing the disposition of a potential merger by an accounting professional without express permission violates the trust that is the foundation of a professional relationship unless there is a legal or professional reason to do so.

Professional Behavior

Ethics require accounting professionals to comply with the laws and regulations that govern their jurisdictions and their bodies of work. Avoiding actions that could negatively affect the reputation of the profession is a reasonable commitment that business partners and others should expect.

Integrity

Demonstrating integrity means being straightforward and honest in all business and professional relationships. Upholding integrity requires that accountants do not associate themselves with information that they suspect is materially false or misleading or that misleads by omission.

Professional Competence

As technology, legislation and best practices change, a professional accountant must remain up to date. To exercise sound judgment, an accountant must stay abreast of developments that could affect a decision’s outcome.

Practicing due care means recognizing your skill level and not suggesting that you have expertise in an area where you do not. Consulting with other professionals is a standard practice that helps to bond a network of individuals and generate respect.

Similar guidelines also apply to accounting professionals who supervise others. These accountants must ensure that the subordinates receive proper training and guidance as they carry out their responsibilities.

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