Category: Management Notes

Marketing Environment is the combination of external and internal factors and forces which affect the company’s ability to establish a relationship and serve its customers.

The marketing environment of a business consists of an internal and an external environment. The internal environment is company-specific and includes owners, workers, machines, materials etc. The external environment is further divided into two components: micro & macro. The micro or the task environment is also specific to the business but external. It consists of factors engaged in producing, distributing, and promoting the offering. The macro or the broad environment includes larger societal forces which affect society as a whole. The broad environment is made up of six components: demographic, economic, physical, technological, political-legal, and social-cultural environment.

Importance of Environment Analysis

1. It helps in marketing analysis.
2. It can assess the impact of opportunities and threats on the business.
3. It facilitates the company to increase general awareness of environmental changes.
4. It is possible to develop effective marketing strategies on the basis of analysis.
5. It helps to capitalize the opportunities rather than losing out to competitors.
6. It facilitates to understand the elements of the environment.
7. It helps to develop best strategies, in the light of analyzing “what is going around the company”.

MARKETING ENVIRONMENT IN INDIA

India is one of the largest consumer markets in the world, with its population of middle-class consumers expected to reach 200 million in 2020 and 475 million in 2030. But it is a complex and diverse consumer market, and it is vital to tailor your marketing strategies and even your products to local preferences. In addition to intense competition from both small and large local retailers and international companies, you must consider the diversity of cultural backgrounds, differing levels of wealth and sophistication, and the sheer size of both the population and land mass.

The best way to deal with the complexities of the Indian market for marketing and advertising purposes is to invest in and hire local knowledge. Both Indian and international companies specialise in marketing in India. A comprehensive marketing plan that considers core elements such as your brand, stakeholder management, public relations, media (including digital and social media), and your product/brand value proposition is critical.

Be aware, however, that you will need to continually reassess your marketing strategy and plan. The Indian socio-economic environment is constantly evolving and changing, which in turn impacts on consumer choices. You should be particularly mindful of factors.

Brand Awareness

Indian middle-class consumers place strong importance on brands, particularly luxury brands. Status is a key factor  many people will buy luxury goods not because they necessarily like them, but because they are representations of success. Make sure you have a specific strategy focusing on brand localisation, brand building and awareness creation. New entrants to the market with a recognised brand may wish to consider a product launch or media conference to announce their arrival in India.

Price Consciousness

For everyday commodities, price is an important consideration for Indian consumers, particularly at the lower-middle class and lower- income levels. As opposed to status items on which wealthier Indian consumers are willing to spend more, non-status items are likely to be chosen based on price.

Demographic Dynamics

India’s middle and upper- middle income households in larger cities are demanding quality across a wide range of products and services, especially those that focus on health and wellness, as well as education. The rural consumer market in India, comprising 700 million people, is largely underserviced at the moment for health and wellness goods and services, education and other consumer goods and services, leaving ample opportunity for growth.

Logistics

As explored earlier in this guide, India is still a developing country with a less sophisticated logistics supply chain than in Australia and many of Australia’s traditional, more developed export markets. Less-developed infrastructure in some poorer regions in particular may cause delays in getting goods to markets and consumers.

Product and Service adaptations

You may need to adapt your product to meet Indian preferences or requirements. Adapting to local regulations, tastes and cultural preferences vastly improves your chances of success.

Brand Marketing and Advertising

Language, culture and symbolism need to be considered when marketing and advertising in India. Generally, you canpreserve your English company name when trading in India. However, if you choose to adopt a name with a more local flavour, seek trusted advice before you register the name. Advertising is subject to some regulation in India. Enforcement of these regulations is not as strict as in some other countries unless an advertisement incites public outrage.

The four major ingredients of the marketing-mix are described below:

1. Product

A product is any good or service that consumers want. It is a bundle of utilities or a cluster of tangible and intangible attributes. Product component of the marketing- mix involves planning, developing and producing the right type of products and services. It deals with the dimensions of product line, durability and other qualities.

Product policy of a firm also deals with proper branding, right packaging, appropriate colour and other product features. The total produce should be such that it really satisfies the needs of the target market. In short, product-mix requires decisions with regard to

• Size and weight of the product
• Quality of the product
• Design of the product
• Volume of output
• Brand name
• Packaging
• Product rang
• Product testing
• Warranties and after sale services, etc.

2. Price

Price is an important factor affecting the success of a firm. Pricing decisions and policies have a direct influence on sales volume and profits of business. Price is, therefore, an important element in the marketing-mix. In practice, it is very difficult to fix the right price. Right price can be determined through pricing research and test marketing.

A lot of exercise and innovation is required to determine the price that will enable the firm to sell its products successfully. Demand, cost, competition, government regulation, etc. are the vital factors that must be taken into consideration in the determination of price. Price-mix involves decisions regarding base price, discounts, allowances, freight payment, credit, etc.

3. Promotion

Promotion component- of the marketing-mix is concerned with bringing products to the knowledge of customers and persuading them to buy. It is the function of informing and influencing the customers. Promotion-mix involves decisions with respect to advertising, personal selling and sales promotion. All these techniques help to promote the sale of products and to fight competition in the market.

Advertising is a major tool used to communicate a message (called advertising copy) through; newspapers, magazines, radio, television and other media of advertising. Advertising component of the promotion-mix requires several decisions with regard to the theme of advertising, the media to be used, the advertising budget, etc. Large firms employ advertising agencies and specialists to run advertising campaigns and to prepare individual advertisements.

Personal selling is an effective means of communication with consumers. It involves direct face-to-face contact between salesmen and consumers. Sales managers plan, direct and control the efforts of individual sales persons.

Advertising cannot aim directly at the prospect to win his patronage. Therefore, personal selling is required to complement advertising. Personal selling is particularly useful when the product is of a technical nature or where goods are to be sold to industrial and commercial establishments.

Sales promotion consists of all forms of communication with the customers except advertising and personal selling. Free samples, prize contests, premium on sale, displays, shows and exhibitions, etc. are the main techniques of sales promotion.

No single method of promotion is effective alone and, therefore, a promotional campaign usually involves a combination of two or more promotional methods. Growing competition and widening market have made simultaneous use of more than one promotional method all the more necessary.

Combination of two or more methods in a single promotional campaign requires an effective blending of promotional inputs so as to optimize the expenditure on each. There is no one ideal promotional-mix that fits all situations. While devising a promotional-mix nature of product, type of customers, the promotion budget, stage of demand, etc. should be taken into consideration.

4. Place

This element of the marketing-mix involves choice of the place where products are to be displayed and made available to the customers. It is concerned with decisions relating to the wholesale and retail outlets or channels of distribution.

The objective of selecting and managing trade channels is to provide the products to the right customer at the right time and place on a continuing basis. In deciding where and through whom to sell, management should consider where the customer wants the goods to be available.

A manufacturer may distribute his goods through his own outlets, he may employ wholesalers and retailers for this purpose. Irrespective of the channel used, management must continuously evaluate channel performance and make changes whenever performance falls short of expected targets. In addition, management must develop a physical distribution system for handling and transporting the products through the selected channel.

In the determination of distribution-mix or marketing logistics, a firm has to make decisions with regard to the mode of transporting of goods to middlemen, use of company vehicles or a transporter, the route over which the goods are to be moved, type of warehouses where the goods are to be stored, etc.

Managerial economics is a discipline which deals with the application of economic theory to business management. It deals with the use of economic concepts and principles of business decision making. Formerly it was known as “Business Economics” but the term has now been discarded in favour of Managerial Economics.

Managerial Economics may be defined as the study of economic theories, logic and methodology which are generally applied to seek solution to the practical problems of business. Managerial Economics is thus constituted of that part of economic knowledge or economic theories which is used as a tool of analysing business problems for rational business decisions. Managerial Economics is often called as Business Economics or Economic for Firms.

“Managerial Economics is economics applied in decision making. It is a special branch of economics bridging the gap between abstract theory and managerial practice.” – Haynes, Mote and Paul.

“Business Economics consists of the use of economic modes of thought to analyse business situations.” – McNair and Meriam

“Business Economics (Managerial Economics) is the integration of economic theory with business practice for the purpose of facilitating decision making and forward planning by management.” – Spencerand Seegelman.

“Managerial economics is concerned with application of economic concepts and economic analysis to the problems of formulating rational managerial decision.” – Mansfield

Nature of Managerial Economics

(i) The primary function of management executive in a business organization is decision making and forward planning.

(ii) Decision making and forward planning go hand in hand with each other. Decision making means the process of selecting one action from two or more alternative courses of action. Forward planning means establishing plans for the future to carry out the decision so taken.

(iii) The problem of choice arises because resources at the disposal of a business unit (land, labour, capital, and managerial capacity) are limited and the firm has to make the most profitable use of these resources.

(iv) The decision making function is that of the business executive, he takes the decision which will ensure the most efficient means of attaining a desired objective, say profit maximisation. After taking the decision about the particular output, pricing, capital, raw-materials and power etc., are prepared. Forward planning and decision-making thus go on at the same time.

(v) A business manager’s task is made difficult by the uncertainty which surrounds business decision-making. Nobody can predict the future course of business conditions. He prepares the best possible plans for the future depending on past experience and future outlook and yet he has to go on revising his plans in the light of new experience to minimise the failure. Managers are thus engaged in a continuous process of decision-making through an uncertain future and the overall problem confronting them is one of adjusting to uncertainty.

(vi) In fulfilling the function of decision-making in an uncertainty framework, economic theory can be, pressed into service with considerable advantage as it deals with a number of concepts and principles which can be used to solve or at least throw some light upon the problems of business management. E.g are profit, demand, cost, pricing, production, competition, business cycles, national income etc. The way economic analysis can be used towards solving business problems, constitutes the subject-matter of Managerial Economics.

Thus in brief we can say that Managerial Economics is both a science and an art.

Scope of Managerial Economics

The scope of managerial economics is not yet clearly laid out because it is a developing       science. Even then the following fields may be said to generally fall under Managerial Economics:

• Demand Analysis and Forecasting
• Cost and Production Analysis
• Pricing Decisions, Policies and Practices
• Profit Management
• Capital Management

These divisions of business economics constitute its subject matter.

Recently, managerial economists have started making increased use of Operation Research methods like Linear programming, inventory models, Games theory, queuing up theory etc., have also come to be regarded as part of Managerial Economics.

1. Demand Analysis and Forecasting

A business firm is an economic organization which is engaged in transforming productive resources into goods that are to be sold in the market. A major part of managerial decision making depends on accurate estimates of demand. A forecast of future sales serves as a guide to management for preparing production schedules and employing resources. It will help management to maintain or strengthen its market position and profit base. Demand analysis also identifies a number of other factors influencing the demand for a product. Demand analysis and forecasting occupies a strategic place in Managerial Economics.

2. Cost and production analysis

A firm’s profitability depends much on its cost of production. A wise manager would prepare cost estimates of a range of output, identify the factors causing are cause variations in cost estimates and choose the cost-minimizing output level, taking also into consideration the degree of  uncertainty in production and cost calculations. Production processes are under the charge of engineers but the business manager is supposed to carry out the production function analysis in order to avoid wastages of materials and time. Sound pricing practices depend much on cost control. The main topics discussed under cost and production analysis are: Cost concepts, cost-output relationships, Economics and Diseconomies of scale and cost control.

3. Pricing decisions, policies and practices

Pricing is a very important area of Managerial Economics. In fact, price is the genesis of the revenue of a firm ad as such the success of a business firm largely depends on the correctness of the price decisions taken by it. The important aspects dealt with this area are: Price determination in various market forms, pricing methods, differential pricing, product-line pricing and price forecasting.

4. Profit management

Business firms are generally organized for earning profit and in the long period, it is profit which provides the chief measure of success of a firm. Economics tells us that profits are the reward for uncertainty bearing and risk taking. A successful business manager is one who can form more or less correct estimates of costs and revenues likely to accrue to the firm at different levels of output. The more successful a manager is in reducing uncertainty, the higher are the profits earned by him. In fact, profit-planning and profit measurement constitute the most challenging area of Managerial Economics.

5. Capital management

The problems relating to firm’s capital investments are perhaps the most complex and troublesome. Capital management implies planning and control of capital expenditure because it involves a large sum and moreover the problems in disposing the capital assets off are so complex that they require considerable time and labour. The main topics dealt with under capital management are cost of capital, rate of return and selection of projects.