Unit-1

1.1 Introduction
We use a large variety of goods and services in our daily life. These include items like
toothpaste, toothbrush, soap, oil, clothes, food items, telephone, electricity and many
more. How do all these goods and services reach our home? Obviously the business
houses who produce the goods and services have to ensure that these are to be sold, and
so they have to make the consumers/users aware of their products and place them at
points convenient to the consumers. This involves a number of activities such as product
planning, pricing, promotion, use of middlemen (wholesalers, retailer etc.) for sale,
warehousing, transportation etc. All these activities taken together are termed as
Marketing. In this lesson, we will learn about the concept of marketing, its importance,
objectives and functions.
DEFINATIONS :-

1.(AMA) Board of Directors,

Marketing is the activity, set of institutions, and processes for creating,

communicating, delivering, and exchanging offerings that have value for
customers, clients, partners, and society at large.

2. Dr. Philip Kotler defines

Marketing as the science and art of exploring, creating, and delivering

value to satisfy the needs of a target market at a profit. Marketing identifies
unfulfilled needs and desires. It defines measures and quantifies the size of
the identified market and the profit potential. It pinpoints which segments
the company is capable of serving best and it designs and promotes the
appropriate products and services.

1.1.2 Nature of Marketing:

Nature of Marketing evolves from its multidisciplinary coverage of activities
which is as follow:
1. Dynamic Process: Marketing is an ongoing activity which does not stop at any
step. After finding customers needs and wants it needs to develop such products or
services which can satisfy these needs and after this there is need to advertising,
promotion, distribution, etc the process goes on.

2. Customer Oriented: Marketing is customer oriented. Marketing is the process of

finding needs and wants of customers and satisfying those needs profitably.

3. All Encompassing: Marketing is all encompassing, it is not a single process it

includes production planning, research, advertising, financial management,
budgeting, selling, etc.

4. Integrating: It integrates all the departments of an enterprise be it production,

finance, IT, HR, etc.

5. Creative: Marketing is creative in nature, it looks out for new ideas, views and
activities and solves problems or encash opportunities in a creative way.

1.1.3 Scope of Marketing:

Marketing has a very wide scope it covers all the activities from conception of ideas to
realization of profits. Some of them as discussed as below:

1. Product Planning: It includes the activities of product research, marketing research, market
segmentation, product development, determination of the attributes, quantity and quality of
the products.

2. Branding: Branding of products is adopted by many reputed enterprises to make their

products popular among their customer and for many other benefits. Marketing manager has
to take decision regarding the branding policy, procedures and implementation programs.

3. Packaging: Packaging is to provide a container or wrapper to the product for safety,

attraction and ease of use and transportation of the product.

4. Channels of Distribution: Decision regarding selection of most appropriate channel of

distribution like wholesaling, distribution and retailing is taken by the marketing manager
and sales manager.
5. Sales Management: Selling is a part of marketing. Marketing is concerned about all the
selling activities like customer identification, finding customer needs, persuading customer
to buy products, customer service, etc.

6. Advertising: Advertisement decisions like scope and time of advertisement, advertisement

message, selection of media, etc comes into marketing.

7. Finance: Marketing is also concerned about the finance, as for every marketing activity be it
packaging, advertising, sales force budget is fixed and all the activities have to be completed
with in the limit of that budget.

8. After Sales services: Marketing covers after sales services given to customers, maintaining
good relationships with customers, attending their queries and solving their problems.

1.1.4 Core Concepts of marketing

Philip Kotler, the eminent writer, defines modern marketing as, Marketing is social
and managerial process by which individuals and groups obtains what they needs
and wants through creating and exchanging product and value with others. Careful
and detailed analysis of this definition necessarily reveals some core concepts of
marketing

Needs: Existence of unmet needs is precondition to undertake

marketing activities. Marketing tries to satisfy needs of
consumers. Human needs are the state of felt deprivation of some
basic satisfaction. A need is the state of mind that reflects the
lack-ness and restlessness situation.
 Needs are physiological in nature. People require food,
shelter, clothing, esteem, belonging, and likewise. Note that
needs are not created. They are pre-existed in human being.
Needs create physiological tension that can be released by
consuming/using products

Wants:

Wants are the options to satisfy a specific need. They are

desire for specific satisfiers to meet specific need. For
example, food is a need that can be satisfied by variety of
ways, such as sweet, bread, rice, sapati, puff, etc. These
 options are known as wants. In fact, every need can be
satisfied by using different options.

Maximum satisfaction of consumer need depends upon

availability of better options. Needs are limited, but wants are
many; for every need, there are many wants. Marketer can
influence wants, not needs. He concentrates on creating and
satisfying wants.

Demand:

Demand is the want for specific products that are backed by the
ability and willingness (may be readiness) to buy them. It is always
expressed in relation to time. All wants are not transmitted in
demand. Such wants which are supported by ability and willingness
to buy can turn as demand.

Marketer tries to influence demand by making the product

attractive, affordable, and easily available. Marketing management
concerns with managing quantum and timing of demand. Marketing
management is called as demand management.

Product:

Product can also be referred as a bundle of satisfaction, physical and psychological

both. Product includes core product (basic contents or utility), product-related features
(colour, branding, packaging, labeling, varieties, etc.), and product-related services
(after-sales services, guarantee and warrantee, free home delivery, free repairing, and
so on). So, tangible product is a package of services or benefits. Marketer should
consider product benefits and services, instead of product itself.

Marketer can satisfy needs and wants of the target consumers by product. It can be
broadly defined as anything that can be offered to someone to satisfy a need or want.
Product includes both good and service. Normally, product is taken as tangible object,
for example, pen, television set, bread, book, etc.

However, importance lies in service rendered by the product. People are not interested
just owning or possessing products, but the services rendered by them. For examples,
we do not buy a pen, but writing service.

Similarly, we do not buy a car, but transportation service. Just owning product is not
enough, the product must serve our needs and wants. Thus, physical product is just a
vehicle or medium that offers services to us

Utility (value), Cost, and Satisfaction:

Utility means overall capacity of product to satisfy need and want. It is a guiding
concept to choose the product. Every product has varying degree of utility. As per
level of utility, products can be ranked from the most need-satisfying to the least need-
satisfying.

Utility is the consumers estimate of the products overall capacity to satisfy his/her
needs. Buyer purchases such a product, which has more utility. Utility is, thus, the
strength of product to satisfy a particular need.
 Cost means the price of product. It is an economic value of product. The charges a
customer has to pay to avail certain services can be said as cost. The utility of product
is compared with cost that he has to pay. He will select such a product that can offer
more utility (value) for certain price. He tries to maximize value, that is, the utility of
product per rupee.

Satisfaction means fulfillment of needs. Satisfaction is possible when buyer perceives

that product has more value compared to the cost paid for. Satisfaction closely
concerns with fulfillment of all the expectations of buyer. Satisfaction releases the
tension that has aroused due to unmet need(s). In short, more utility/value with less
cost results into more satisfaction.

Exchange, Transaction, and Transfer:

Exchange is in the center of marketing. Marketing management tries

to arrive at the desired exchange. People can satisfy their needs and
wants in one of the four ways self-production, coercion/snatching,
begging, or exchanging.

Marketing emerges only when people want to satisfy their needs

and wants through exchange. Exchange is an act of obtaining a
desired product from someone by offering something in return.
Obtaining sweet by paying money is the example an exchange.
Exchange is possible when following five conditions are satisfied:

i. There should be at least two parties

ii. Each party has something that might be of value to the other party

iii. Each party is capable of communication and delivery

iv. Each party is free to accept or reject the exchange offer

v. Each party believes it is desirable to deal with the other party

Transaction differs from exchange

Exchange is a process, not event. It implies that people are
negotiating and moving toward the agreement. When an agreement
is reached, it is transaction. Transaction is the decision arrived or
commitment made.

For example, Mr. X pays Rs. 25000 and obtains a computer. There
are various types of transactions, such as barter transactions,
monetary transactions, commercial transactions, employment
transactions, civic transactions, religious or charity transactions.

Transaction involves following conditions:

i. At least two things of value

ii. Agreed upon conditions

iii. A time of agreement

iv. A place of agreement

v. A law (legal system) of contract to avoid distrust

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

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

Relationships and Network:

Todays marketing practice gives more importance to relation

building. Marketing practice based on relation building can be said
as relationship marketing. Relationship marketing is the practice of
building long-term profitable or satisfying relations with key parties
like customers, suppliers, distributors, and others in order to retain
their long-term preference in business.

A smart marketer tries to build up long-term, trusting, and win-win

relations with valued customers, distributors, and suppliers.
Relationship marketing needs trust, commitment, cooperation, and
high degree of understanding.

Relationship marketing results into economical, technical, social,

and cultural tie among the parties. Marketing manager is
responsible for establishing and maintaining long-term relations with
the parties involved in business.

Network is the ultimate outcome of relationship marketing. A

marketing network consists of the company and its supporting
stakeholders customers, employees, suppliers, distributors,
advertising agencies, colleges and universities, and others whose
role is considered to be essential for success of business. It is a
permanent setup of relations with stakeholders. A good network of
relationships with key stakeholders results into excelling the
marketing performance over time.

Market, Marketing, Marketer, and Prospect:

In marketing management, frequently used words are markets, marketing, marketer,

and prospects. A market consists of all potential customers sharing a particular need or
want who might be willing and able to engage in exchange to satisfy this need or
want.

Marketing is social and managerial process by which individuals and groups obtain
what they need and want through creating and exchanging product and value with
others.
Marketer is one who seeks one or more prospects (buyers) to engage in an exchange.
Here, seller can be marketer as he wants other to engage in an exchange. Normally,
company or business unit can be said as marketer.

Prospect is someone to whom the marketer identifies as potentially willing and able
to engage in the exchange. (In case of exchange between two companies, both can be
said as prospects as well as marketers).

Generally, consumer or customer who buys product from a company for satisfying his
needs or wants can be said as the prospect.

Importance of marketing:-

Marketing management has gained importance to meet increasing competition and the
need for improved methods of distribution to reduce cost and to increase profits.
Marketing management today is the most important function in a commercial and
business enterprise.

The following are the other factors showing importance of the marketing
management:

(i) Introduction of new products in the market.

(ii) Increasing the production of existing products.

(iii) Reducing cost of sales and distribution.

(iv) Export market.

(v) Development in the means of communication and modes of transportation within

and outside the country.
(vi) Rise in per capita income and demand for more goods by the consumers.

MARKETING MANAGEMENT

Meaning:

Marketing management facilitates the activities and functions which are involved in
the distribution of goods and services.

According to Philip Kotler, Marketing management is the analysis, planning,

implementation and control of programmes designed to bring about desired exchanges
with target markets for the purpose of achieving organizational objectives.

It relies heavily on designing the organisations offering in terms of the target markets
needs and desires and using effective pricing, communication and distribution to
inform, motivate and service the market. Marketing management is concerned with
the chalking out of a definite programme, after careful analysis and forecasting of the
market situations and the ultimate execution of these plans to achieve the objectives of
the organisation.

Further, their sales plans to a greater extent rest upon the requirements and motives of
the consumers in the market. To achieve this objective, the organisation has to pay
heed to the right pricing, effective advertising and sales promotion, distribution and
stimulating the consumers through the best services.
To sum up, marketing management may be defined as the process of management of
marketing
programmes for accomplishing organisational goals and objectives. It involves
planning, implementation and control of marketing programmes or campaigns.

Importance of Marketing Management:

Marketing management has gained importance to meet increasing competition and the
need for improved methods of distribution to reduce cost and to increase profits.
Marketing management today is the most important function in a commercial and
business enterprise.

The following are the other factors showing importance of the marketing
management:

(i) Introduction of new products in the market.

(ii) Increasing the production of existing products.

(iii) Reducing cost of sales and distribution.

(iv) Export market.

(v) Development in the means of communication and modes of transportation within

and outside the country.
(vi) Rise in per capita income and demand for more goods by the consumers.

MARKETING FUNCTIONS

Gathering and Analyzing Market Information:

Gathering and analyzing market information is an important function of marketing.

Under it, an effort is made to understand the consumer thoroughly in the following
ways

(a) What do the consumers want?

(b) In what quantity?

(c) At what price?

When do they want (it)?

(e) What kind of advertisement do they like?

(f) Where do they want (it)?

What kind of distribution system do they like? All the relevant information about the
consumer is collected and analysed. On the basis of this analysis an effort is made to
find out as to which product has the best opportunities in the market.

2. Marketing Planning:
In order to achieve the objectives of an organization with regard to its marketing, the
marketeer chalks out his marketing plan. For example, a company has a 25% market
share of a particular product.

The company wants to raise it to 40%. In order to achieve this objective the marketer
has to prepare a plan in respect of the level of production and promotion efforts. It will
also be decided as to who will do what, when and how. To do this is known as
marketing planning.

3. Product Designing and Development:

Product designing plays an important role in product selling. The company whose
product is better and attractively designed sells more than the product of a company
whose design happens to be weak and unattractive.

In this way, it can be said that the possession of a special design affords a company to
a competitive advantage. It is important to remember that it is not sufficient to prepare
a design in respect of a product, but it is more important to develop it continuously.

4. Standardization and Grading:

Standardization refers to determining of standard regarding size, quality, design,

weight, colour, raw material to be used, etc., in respect of a particular product. By
doing so, it is ascertained that the given product will have some peculiarities.

This way, sale is made possible on the basis of samples. Mostly, it is the practice that
the traders look at the samples and place purchase order for a large quantity of the
product concerned. The basis of it is that goods supplied conform to the same standard
as shown in the sample.
Products having the same characteristics (or standard) are placed in a given category
or grade. This placing is called grading. For example, a company produces commodity
X, having three grades, namely A. B and C, representing three levels of quality;
best, medium and ordinary respectively.

Customers who want best quality will be shown A grade product. This way, the
customer will have no doubt in his mind that a low grade product has been palmed off
to him.

Grading, therefore, makes sale-purchase easy. Grading process is mostly used in case
of agricultural products like food grains, cotton, tobacco, apples, mangoes, etc.

5. Packaging and Labelling:

Packaging aims at avoiding breakage, damage, destruction, etc., of the goods during
transit and storage.

Packaging facilitates handling, lifting, conveying of the goods. Many a time,

customers demand goods in different quantities. It necessitates special packaging.
Packing material includes bottles, canister, plastic bags, tin or wooden boxes, jute
bags etc.

Label is a slip which is found on the product itself or on the package providing all the
information regarding the product and its producer. This can either be in the form of a
cover or a seal.

For example, the name of the medicine on its bottle along with the manufacturers
name, the formula used for making the medicine, date of manufacturing, expiry date,
batch no., price etc., are printed on the slip thereby giving all the information
regarding the medicine to the consumer. The slip carrying all these is details called
Label and the process of preparing it as Labelling.

6. Branding:

Every producer/seller wants that his product should have special identity in the
market. In order to realise his wish he has to give a name to his product which has to
be distinct from other competitors.

Giving of distinct name to ones product is called branding. Thus, the objective of
branding is to show that the products of a given company are different from that of the
competitors, so that it has its own identity.

For instance, if a company wants to popularise its commodity X under the name of
777 (triple seven) then its brand will be called 777. It is possible that another
company is selling a similar commodity under AAA (Triple A) brand name.

Under these circumstances, both the companies will succeed in establishing a distinct
identity of their products in the market. When a brand is not registered under the trade
Mark Act, 1999, it becomes a Trade Mark.

7. Customer Support Service:

Customer is the king of market. Therefore, it is one of the chief functions of marketer
to offer every possible help to the customers. A marketer offers primarily the
following services to the customers:

(i) After-sales-services

(ii) Handling customers complaints

(iii) Technical services

(iv) Credit facilities

(v) Maintenance services

Helping the customer in this way offers him satisfaction and in todays competitive
age customers satisfaction happens to be the top-most priority. This encourages a
customers attachment to a particular product and he starts buying that product time
and again.

8. Pricing of Products:

It is the most important function of a marketing manager to fix price of a product. The
price of a product is affected by its cost, rate of profit, price of competing product,
policy of the government, etc. The price of a product should be fixed in a manner that
it should not appear to be too high and at the same time it should earn enough profit
for the organization.

9. Promotion:

Promotion means informing the consumers about the products of the company and
encouraging them to buy these products. There are four methods of promotion: (i)
Advertising, (ii) Personal selling, (iii) Sales promotion and (iv) Publicity. Every
decision taken by the marketer in this respect affects the sales. These decisions are
taken keeping in view the budget of the company.

10. Physical Distribution:

Under this function of marketing the decision about carrying things from the place of
production to the place of consumption is taken into account. To accomplish this task,
decision about four factors are taken. They are: (i) Transportation, (ii) Inventory, (iii)
Warehousing and (iv) Order Processing. Physical distribution, by taking things, at the
right place and at the right time creates time and place utility.

11. Transportation:

Production, sale and consumption-all the three activities need not be at one place. Had
it been so, transportation of goods for physical distribution would have become
irrelevant. But generally it is not possible. Production is carried out at one place, sale
at another place and consumption at yet another place.

Transport facility is needed for the produced goods to reach the hands of consumers.
So the enterprise must have an easy access to means of transportation.

Mostly we see on the road sides private vehicles belonging to Pepsi, Coca Cola,
LML, Britannia, etc. These private carriers are the living examples of transportation
function of marketing. Place utility is thus created by transportation activity.

12. Storage or Warehousing:

There is a time-lag between the purchase or production of goods and their sale. It is
very essential to store the goods at a safe place during this time-interval. Godowns are
used for this purpose. Keeping of goods in godowns till the same are sold is called
storage.
For the marketing manager storage is an important function. Any negligence on his
part may damage the entire stock. Time utility is thus created by storage activity.

MARKRTING MANAGEMENT PROCESS

The marketing management process goes through various stages to ensure the success
of a product in an organization. A company is generally in the blind about any new
product. In a tough business environment, with a customer who knows everything
beforehand because of presence of online portals and websites, it is tough to plan and
launch a new product or a marketing strategy. Just like movie stars waiting in
anticipation for their movies to be released, companies wait in anticipation when a
new product is launched. This new product can rock or it can fail in the market. The
marketing management process ensures that whatever happens, the product is given
its best chance to survive and thrive in the market.

Conduct market research: The very first step in the marketing management
process starts with conducting a market research. As previously mentioned, if a
product is a new launch, then the company is likely to be in the blind for the future
propects of the product. They do not know what product the market needs, should
they go for a new product or do a product extension, what will be the expected
turnover increase from the new product, etc.

Such questions are answered by market research. Thus, to even start thinking of
launching a new product, market research is necessary.

Develop a marketing strategy Before making a marketing strategy, you need to

know the market. As market research has already been done, marketing strategy forms
the second step in marketing management process. The marketing strategy takes
several points in consideration. Simple things such as segmentation, targeting and
positioning are a part of Marketing strategy. However, tough things like deciding the
marketing mix as well as getting the positioning strategy right are also involved. Core
competencies like financials and production are also to be analysed during the
marketing strategy stage. Taking all these things in consideration, a marketing strategy
is formed.

Make a marketing plan After marketing strategy, a written marketing plan is made.
This is the third and a very important step in marketing management process. A
written marketing plan is made to analyse where the company is and where it wants to
reach in a given time period. The marketing plan actually puts the plan on paper and
the marketer can anytime refer to the marketing plan to analyse whether he is on track
or not. The marketing plan itself has some pointers which are most important.

Situation analysis Business environment analysis, Internal analysis (SWOT

analysis), USPs, core competencies.
Strategic plan A time related strategic plan outlining the pros and cons of the
strategy.
Financials Sales forecasts. Expenses forecast. Working capital etc.
Implementation Operations. Customer loyalty. Brand building. Consumer
behavior. Product and pricing decisions.
Follow up After implementation, follow up is done to ensure marketing
strategy is on track.

Feedback and control Step 1, 4 and 5 are inter related. Once a product is in the
market, customers might give further ideas for the improvement of the product. These
ideas are usually considered by the marketing department and a market research is
conducted to find the validity of the ideas. If the idea is valid, another product can be
developed or another marketing strategy implemented.

On the other hand, if the product is not received positively, then the control
mechanism needs to fall in place and implement an alteration process for the product
or in the worst case scenario take the product out of the market before it affects the
brand.

The four steps above complete the marketing management process. With the world
becoming a small place due to advent of the internet, the marketing management
process has become simpler.

Feedback can be obtained online through simple questions, Marketing strategy can be
changed by keeping an online brand watch and market research can be done through
social networks. However, this does not change the grueling process which traditional
marketing companies like FMCG, Electronics and Automobiles have to adopt.

PRODUCTION CONCEPT

In this way, such a company will concentrate mainly on the large scale production of
goods. Similarly, some other company can have a different idea. It may have an idea
that if the quality of the product is improved, there will be no difficulty in selling the
product.

Under the marketing management philosophy, we shall study the following five
concepts:

(1) Production Concept

(2) Product Concept

(3) Selling Concept

(4) Marketing Concept

(5) Societal Marketing Concept

Production Concept

Those companies who believe in this philosophy think that if the goods/services are
cheap and they can be made available at many places, there cannot be any problem
regarding sale.

Keeping in mind the same philosophy these companies put in all their marketing
efforts in reducing the cost of production and strengthening their distribution system.
In order to reduce the cost of production and to bring it down to the minimum level,
these companies indulge in large scale production.

This helps them in effecting the economics of the large scale production.
Consequently, the cost of production per unit is reduced.

The utility of this philosophy is apparent only when demand exceeds supply. Its
greatest drawback is that it is not always necessary that the customer every time
purchases the cheap and easily available goods or services.

Product Concept

Those companies who believe in this philosophy are of the opinion that if the quality
of goods or services is of good standard, the customers can be easily attracted. The
basis of this thinking is that the customers get attracted towards the products of good
quality.

On the basis of this philosophy or idea these companies direct their marketing efforts
to increasing the quality of their product.

It is a firm belief of the followers of the product concept that the customers get
attracted to the products of good quality. This is not the absolute truth because it is not
the only basis of buying goods.

The customers do take care of the price of the products, its availability, etc. A good
quality product and high price can upset the budget of a customer. Therefore, it can be
said that only the quality of the product is not the only way to the success of
marketing.

3. Selling Concept

Those companies who believe in this concept think that leaving alone the customers
will not help. Instead there is a need to attract the customers towards them. They think
that goods are not bought but they have to be sold.

The basis of this thinking is that the customers can be attracted. Keeping in view this
concept these companies concentrate their marketing efforts towards educating and
attracting the customers. In such a case their main thinking is selling what you have.

This concept offers the idea that by repeated efforts one can sell-anything to the
customers. This may be right for some time, but you cannot do it for a long-time. If
you succeed in enticing the customer once, he cannot be won over every time.
On the contrary, he will work for damaging your reputation. Therefore, it can be
asserted that this philosophy offers only a short-term advantage and is not for long-
term gains.

4. Marketing Concept

Those companies who believe in this concept are of the opinion that success can be
achieved only through consumer satisfaction. The basis of this thinking is that only
those goods/service should be made available which the consumers want or desire and
not the things which you can do.

In other words, they do not sell what they can make but they make what they can sell.
Keeping in mind this idea, these companies direct their marketing efforts to achieve
consumer satisfaction.

In short, it can be said that it is a modern concept and by adopting it profit can be
earned on a long-term basis. The drawback of this concept is that no attention is paid
to social welfare.

5. Societal Marketing Concept

This concept stresses not only the customer satisfaction but also gives importance to
Consumer Welfare/Societal Welfare. This concept is almost a step further than the
marketing concept. Under this concept, it is believed that mere satisfaction of the
consumers would not help and the welfare of the whole society has to be kept in mind.

For example, if a company produces a vehicle which consumes less petrol but spreads
pollution, it will result in only consumer satisfaction and not the social welfare.
Primarily two elements are included under social welfare-high-level of human life and
pollution free atmosphere. Therefore, the companies believing in this concept direct
all their marketing efforts towards the achievement of consumer satisfaction and
social welfare.

In short, it can be said that this is the latest concept of marketing. The companies
adopting this concept can achieve long-term profit.

MARKET ENVIRONMENT:

In order to correctly identify opportunities and monitor threats, the company must
begin with a thorough understanding of the marketing environment in which the firm
operates. The marketing environment consists of all the actors and forces outside
marketing that affect the marketing managements ability to develop and maintain
successful relationships with its target customers. Though these factors and forces
may vary depending on the specific company and industrial group, they can generally
be divided into broad micro environmental and macro environmental components. For
most companies, the micro environmental components are: the company, suppliers,
marketing channel firms (intermediaries), customer markets, competitors, and publics
which combine to make up the companys value delivery system. The macro
environmental components are thought to be: demographic, economic, natural,
technological, political, and cultural forces. The wise marketing manager knows that
he or she cannot always affect environmental forces. However, smart managers can
take a proactive, rather than reactive, approach to the marketing environment.

Below mentioned are the nature and characteristics of marketing environment:

1. Micro & macro faces

2. Volatile orientation

3. External orientation

4. Comprises of opportunities & threats

5. Potentially relevant

6. Affects the managing of target markets

1. Micro & macro faces: The marketing environmental forces may be grouped as
micro environment, i.e., companys immediate environment, and all macro
environment i.e., the larger societal forces, such as political, legal, cultural, natural
and economic forces. These factors may also be classified in terms of internal and
external environment factors also. From this angle, companys culture, marketing
strategy, technical capacity, managerial skills and abilities, structures and processes,
finance and sales force are internal environmental forces and micro and macro
environments are its external environmental forces. Globalization of business had
added another external dimension to marketing environment, and that is
multinational competitors. All these factors come to make the marketing
environment more complex in nature.

2. Volatile orientation: Marketing environment is volatile, is of a fast changing and

of undependable nature. Changing customer income, technological innovations,
changing government rules and policies, changing social values and beliefs, and
shifting consumer values and preferences, are examples of changing market
environment. Uncertainty is the basic element of marketing environment.

3. External orientation: The marketing environment is outside the function of

marketing management i.e., marketing planning, implementation and control. The
environmental forces do not fall within marketing function. They are largely
uncontrollable.

4. Comprises of opportunities & threats: The marketing environment has both some
opportunities that may be availed by a company as well as certain threats or problems
which have to be faced and overcome by it. The internal strength of the marketing
department of a company prove helpful in availing the opportunities and successfully
dealing with threats or problems. On the other hand, its weaknesses may prove fatal to
even the survival of the company as a whole.
5. Potentially relevant: The market environment is highly relevant and influencing to
marketing decision making in a company. However, the potentially relevant
environment is different for different companies. For example, the potentially relevant
environment for an electronic appliances firm is very different from that for a soap or
food item producer.

6. Affects the managing of target markets: The marketing environment affects the
marketing managers ability to serve the target customers and thereby influences the
continuity and closeness of relationship with them. It acts as a constraining force
against the managerial skills and abilities.

The marketers have following advantages, despite its cost, by scanning the marketing
environment.

Customer delights when marketers are able to know the stated, unstated, secret and
real needs of the customers and presents the product.

Adapting to the uncontrollable environment becomes easy.

Marketer is able to know the organizational strengths, capabilities and related

opportunities.

Marketer is able to appropriately remove weaknesses, and counter threats from the
environment.

Marketing mix strategy can be properly formulated.

Trendy products can be brought out in market.

First mover advantage by looking at unmet needs.

Competitors moves can be anticipated and countered

FACTORS AFFECTING RHE MARKET ENVIRONMENT

Various factors affecting marketing function.

The environmental factors that are affecting marketing function can be classified into :

1) Internal environment and

2) External environment

Internal Environment of Marketing:

This refers to factors existing within a marketing firm. They are also called as
controllable factors, because the company has control over these factors :

a) it can alter or modify factors as its personnel, physical facilities, organization and
function means, such as marketing mix, to suit the environment.

There are many internal factors that influence the marketing function, they are :

Top Management: The organizational structure, Board of Director,

professionalization of management..etc..Factors like the amount of support the top
management enjoys from different levels of employees, shareholders and Board of
Directors have important influence on the marketing decisions and their
implementation.

Finance and Accounting: Accounting refers to measure of revenue and costs to help
the marketing and to know how well it is achieving its objectives. Finance refers to
funding and using funds to carry out the marketing plan. Financial factors are
financial polices, financial position and capital structure.

Research and Development : Research and Development refers to designing the

product safe and attractive. They are technological capabilities, determine a company
ability to innovate and compete.

Manufacturing : It is responsible for producing the desired quality and quantity of

products.Factors which influence the competitiveness of a firm are production
capacity technology and efficiency of the productive apparatus, distribution logistics
etc.,

Purchasing : Purchasing refers to procurement of goods and services from some

external agencies. It is the strategic activity of the business.
Company Image and Brand Equity : The image of the company refers in raising
finance, forming joint ventures or other alliances soliciting marketing intermediaries,
entering purchase or sales contract, launching new products etc.

In organization, the marketing resources like organization for marketing, quality of

marketing, brand equity and distribution network have direct bearing on marketing
efficiency. They are important for new product introduction and brand extension, etc..

External Environment of Marketing.

External factors are beyond the control of a firm, its success depends to a large extent
on its adaptability to the environment.
The external marketing environment consists of :

a) Macro environment, and

b) Micro environment

a) Micro environment: The environmental factors that are in its proximity. The
factors influence the companys non-capacity to produce and serve
the market.Thefactors are :

1) Suppliers: The suppliers to a firm can also alter its competitive position and
marketing capabilities. These are raw material suppliers, energy suppliers, suppliers of
labor and capital.According to michael Porter, the relationship between suppliers and
the firm epitomizes a power equation between them. This equation is based on the
industry condition and the extent to which each of them is dependent on the other.

The bargaining power of the supplier gets maximized in the following situations:

a) The seller firm is a monopoly or an oligopoly firm.

b) The supplier is not obliged to contend with other substitute products for sale to the
buyer group.

c) The buyer is not an important customer.

d) The suppliers product is an important input to the buyers business and finished
product.
e) The supplier poses a real threat of forward integration.

2) Market Intermediaries: Every producer has to have a number of intermediaries

for promoting, selling and distributing the goods and service to ultimate consumers.
These intermediaries may be individual or business firms. These intermediaries are
middleman (wholesalers, retailers, agents etc. ), distributing agency market service
agencies and financial institutions.

3) Customers : The customers may be classified as :

1) Ultimate customers: These customers may be individual and householders.

2) Industrial customers: These customers are organization which buy goods and
services for producing other goods and services for the purpose of other earning
profits or fulfilling other objectives.

3) Resellers: They are the intermediaries who purchase goods with a view to resell
them at a profit. They can be wholesalers, retailers, distributors, etc.

4) Government and other non-profit customers: These customers purchase goods

and services to those for whom they are produced, for their consumption in most of
the cases.

5) International customers: These customers are individual and organizations of

other countries who buy goods and services either for consumption or for industrial
use. Such buyers may be consumers, producers, resellers, and governments.

6 )Competitors: Competitors are those who sell the goods and services of the same
and similar description, in the same market. Apart from competition on price, there are
like product differentiation. Therefore, it is necessary to build an efficient system of
marketing. This will bring confidence and better results.

7) Public: It is duty of the company to satisfy the people at large along with its
competitors and the consumers. It is necessary for future growth.The action of the
company do influence the other groups forming the general public for the company. A
public is defined as any group that has an actual or potential interest in or impact on a
companys ability to achieve its objective. Public relations are certainly a broad
marketing operation which must be fully taken care of.
Macro Environment:

Macro environment factors act external to the company and are quite uncontrollable.
These factors do not affect the marketing ability of the concern directly but indirectly
the influence marketing decisions of the company.

These are the macro environmental factors that affect the companys marketing
decisions :

a) Demographic Forces: Here, the marketer monitor the population because people
forms markets. Marketers are keenly interested in the size and growth rate of
population in different cities, regions, and nations ; age distribution and ethnic mix ;
educational levels; households patterns; and regional characteristics and movements.

b)Economic Factors: The economic environment consists of macro-level factors

related to means of production and distribution that have an impact on the business of
an organization.

c) Physical Forces: Components of physical forces are earths natural renewal and
non-renewal resources. Natural renewal forces are forest, food products from
agriculture or sea etc. Non- renewal natural resources are finite such as oil, coal,
minerals, etc. Both of these components quite often change the level and type of
resources available to a marketer for his production.

d) Technological Factors: The technological environment consists of factors related

to knowledge applied, and the materials and machines used in the production of goods
and services that have an impact on the business of an organization.

e) Political and Legal Forces: Developments in political and legal field greatly affect
the marketing decisions. sound marketing decision cannot be taken without taking into
account, the government agencies, political party in power and in opposition their
ideologies, pressure groups, and laws of the land. These variables create tremendous
 pressures on marketing management. Laws affect production capacity, capability,
product design, pricing and promotion. Government in almost all the country
intervenes in marketing process irrespective of their political ideologies.

f) Social and Cultural Forces: This concept has crept into marketing literature as an
alternative to the marketing concept. The social forces attempt to make the marketing
socially responsible. It means that the business firms should take a lead in eliminating
socially harmful products and produce only what is beneficial to the society. These are
numbers of pressure groups in the society who impose restrictions on the marketing
process.

MARKETING INFORMATION SYSTEM

A system that analyzes and assesses marketing information, gathered continuously

from sources inside and outside an organization. Timely marketing information
provides basis for decisions such as product development or improvement, pricing,
packaging, distribution, media selection, and promotion. See also market
information system.

A marketing information system (MIS) is a set of procedures and methods designed

to generate, analyze, disseminate, and store anticipated marketing
decision information on a regular, continuous basis. An information system can be
used operationally, managerially, and strategically for several aspects of marketing.

A marketing information system can be used operationally, managerially, and

strategically for several aspects of marketing

We all know that no marketing activity can be carried out in isolation, know when we
say it doesnt work in isolation that means there are various forces could be external
or internal, controllable or uncontrollable which are working on it. Thus to know
which forces are acting on it and its impact the marketer needs to gathering the data
through its own resources which in terms of marketing we can say he is trying to
gather the market information or form a marketing information system.
This collection of information is a continuous process that gathers data from a variety
of sources synthesizes it and sends it to those responsible for meeting the market
places needs. The effectiveness of marketing decision is proved if it has a strong
information system offering the firm a Competitive advantage. Marketing Information
should not be approached in an infrequent manner. If research is done this way, a firm
could face these risks:
1. Opportunities may be missed.
2. There may be a lack of awareness of environmental changes and competitors
actions.
3. Data collection may be difficult to analyze over several time periods.
4. Marketing plans and decisions may not be properly reviewed.
5. Data collection may be disjointed.
6. Previous studies may not be stored in an easy to use format.
7. Time lags may result if a new study is required.
8. Actions may be reactionary rather than anticipatory.
The total information needs of the marketing department can be specified and satisfied
via a marketing intelligence network, which contains three components.

1.Continuous monitoring is the procedure by which the changing environment is

regularly viewed.
2. Marketing research is used to obtain information on particular marketing issues.
3. Data warehousing involves the retention of all types of relevant company records,
as well as the information collected through continuous monitoring and marketing
research that is kept by the organization.

Depending on a firms resources and the complexity of its needs, a marketing

intelligence network may or may not be fully computerized. The ingredients for a
good MIS are consistency, completeness, and orderliness. Marketing plans should be
implemented on the basis of information obtained from the intelligence network.

An Marketing Information System offers many advantages:

 1. Organized data collection.
2. A broad perspective.
3. The storage of important data.
4. An avoidance of crises.
5. Coordinated marketing plans.
6. Speed in obtaining sufficient information to make decisions.
7. Data amassed and kept over several time periods.
8. The ability to do a cost-benefit analysis.

The disadvantages of a Marketing information system are high initial time and labor
costs and the complexity of setting up an information system. Marketers often
complain that they lack enough marketing information or the right kind, or have too
much of the wrong kind. The solution is an effective marketing information system.

The information needed by marketing managers comes from three main sources:

1) Internal company information E.g. sales, orders, customer profiles,

stocks, customer service reports etc

2) Marketing intelligence This can be information gathered from many sources,

including suppliers, customers, and distributors. Marketing intelligence is a catchall
term to include all the everyday information about developments in the market that
helps a business prepare and adjust its marketing plans.

It is possible to buy intelligence information from outside suppliers (e.g. IDC, ORG,
MARG) who set up data gathering systems to support commercial intelligence
products that can be profitably sold to all players in a market.
(3) Market research Management cannot always wait for information to arrive in
bits and pieces from internal sources. Also, sources of market intelligence cannot
always be relied upon to provide relevant or up-to-date information (particularly for
smaller or niche market segments). In such circumstances, businesses often need to
undertake specific studies to support their marketing strategy this is market research.

MARKETING DECISION SYSTEM

Decision Support Systems have evolved over the past three decades
from simple model-oriented systems to advanced multi-function
entities. During the 1960s, most Decision Support Systems were
fairly based on powerful (and expensive) mainframe computers
which provided managers with structured, periodic reports. MIS
theory developments during the 1970s saw Decision Support
Systems evolve into more elaborate computer-based systems that
supported production, promotion, pricing, marketing and some
logistical functions. By early 1980s Decision Support Systems
enjoyed more interests from academics and the framework for
Decision Support Systems was greatly expanded by the end of the
decade. It was only during the 1990s that a paradigm shift occurred
in Decision Support Systems and more complex systems, which
incorporated, advanced database technology and client/server
capabilities, were emerging from many areas in business processes.
As many organizations started to upgrade their network
infrastructure, object oriented technology and data warehousing
started to make its mark on Decision Support Systems. The rapid
expansion of the Internet provided additional opportunities for the
scope of Decision Support Systems and consequently many new
innovative systems such as OLAP and other web-drive systems were
developed.13

1.2 Systems definition and description

According to Sprague and Watson (1996) conceptual models or frameworks are
crucial to understanding a new and/or complex system. They define DSS broadly as an
interactive computer based system that help decision-makers use data and models to
solve ill-structured, unstructured or semi-structured problems. 3

DSS provides varying analysis without much programming effort and is usually
directed towards non-technical users/managers. Managers main uses for a DSS
includes searching, retrieving and analyzing decision relevant data to allow them to
summarize main points which assist them in making more informed and educated
decisions. Users often search for correlations between data without rewriting the
underlying MIS or software application and most DSS allows graphic capabilities,
which not only allows trend analysis and reporting for top executives, but also assists
managers in mapping out conjoint analysis and alternative scenarios to answer what
if queries. Consequently, DSS supports both tactical and strategic decisions and are
employed to leverage managers expertise in a certain field.

DSS varies in scope some are intended for multiple users (more common nowadays)
and other are stand-alone units (common in the past). In addition to that, DSS can
take on many different forms and can be used in many different ways, i.e. some DSS
focus on models, others on data and others on communications. 5 The better the
manager understands the different categories, scope and uses of DSS, the better he
will be able to specify requirements for a DSS that he wants to implement or buy.

Thus, in order to comprehend the intricate complexities of what services a DSS can
provide, we first have to look at the stand-alone units that supports the DSS. Although
DSS can be dissected into many different components, I will mainly concentrate on a
few important aspects of its design.
Having summarized the most important functions of a DSS, it should be remembered
that a DSS is only as good as the individual components that it consist of: DSS is built
on top of a transaction system, a database and a data model, all of which provides the
DSS with data and information that is processed and presented to the user in a
simplified form.

The fist important aspect of DSS is that they provide information which are used in
the decision making process. The emphasis here is not on the quantity of information,
but rather the quality. There are multiple factors that qualify information as having
good quality (such as timeliness, relevant, accurateness, consistency, unbiased, etc.)
but the important consideration factor is how information is used in order to attain a
certain goal.

It is a common notion that information can be (and often is) misinterpreted, leading
to inaccurate conclusions which adversely affects the quality of the decision making
process inside an organization (as is humoristically depicted in figure 1).

Figure 1
Managers often postpone difficult decisions and request more information without
really attempting to comprehend the information that is already available to them.
They falsely rely on the assumption that information should give them guidance, in
stead of realizing that their understanding of relevant information will help them
formulate their own ideas, which should be based on both a intricate understanding of
the information, the necessary knowledge available around them and ultimately their
intuition that is develop based on experience. This curvilinear relationship between
information and comprehending information is depicted in figure 2*. The graph
suggests that the quantity of information is only useful up to a certain point,
afterwhich more information becomes redundant/obsolete.

Thus, the user should try to digest the current information available to him/her first
and resist the temptation to seek more information without first understanding the
current information. Only as the user gains new insights and breakthrough
thinking, additional information should be sought where relevant. To make a good
decision, one needs not only information about the specific instance, but also an
understanding of the domain. In other words, one needs a set of principles, models,
templates or other abstractions. Better understanding enables the identification of
what information is relevant and consequently, less information is required because
the irrelevant components can be ignored. This not only decreases the complexity of
the decision process, but also decreases the processing load on the manager and leaves
him with more time to focus on critical and situation-relevant information segments.

Figure 2*
A successful business makes good decisions, implements them
well - and then learns from the experience and abstractions in
order to do better next time. These abstractions are then re-
usable for making new decisions with different information,
facilitating the process of knowledge management and ultimately
enhancing the overall quality of decision making inside the
organization.

Unlike information, which often relates only to specific instances,

knowledge is contend-rich and re-usable and should thus be
captured whenever possible to provide a point of reference for
future similar scenarios.
 2. Many types of Decision Support Systems

3.

As mentioned earlier, DSS can be classified in many different categories. Amongst

the common ones are the following:

2.1 Data driven DSS

These DSS has file drawer systems, data analysis systems, analysis information
systems, data warehousing and emphasizes access to and manipulation of large
databases of structured data

2.2 Model driven

The underlying model that drives the DSS can come from various disciplines or
areas of specialty and might include accounting models, financial models,
representation models, optimization models, etc. With model drive DSS the
emphasize is on access to and manipulation of a model, rather than data, i.e. it uses
data and parameters to aid decision makers in analyzing a situation. These systems
usually are not data intensive and consequently are not linked to very large
databases.

2.3 Knowledge driven

These systems provide recommendation and/or suggestion schemes which aids the
user in selecting an appropriate alternative to a problem at hand. Knowledge
driven DSS are often referred to as management expert systems or intelligent
decision support systems. They focuses on knowledge and recommends actions to
managers based on an analysis of a certain knowledge base. Moreover, it has
special problem solving expertise and are closely related to data mining i.e. sifting
through large amounts of data to produce contend relationships.

2.4 Document driven

These systems help managers retrieve and mange unstructured documents and web
pages by integrating a variety of storage and processing technologies to provide
complete document retrieval and analysis. It also access documents such as
company policies and procedures, product specification, catalogs, corporate
historical documents, minutes of meetings, important correspondence, corporate
records, etc. and are usually driven by a task-specific search engine. 2

2.5 Communication driven

This breed of DSS is often called group decision support systems (GDSS). They
are a special type of hybrid DSS that emphasizes the use of communications and
decision models intended to facilitate the solution of problems by decision makers
working together as a group. GDSS supports electronic communication,
scheduling, document sharing and other group productivity and decision enhancing
activities and involves technologies such as two-way interactive video, bulletin
boards, e-mail, etc.

(See table 1 in appendix section for a overview of an expanded Decision Support

Systems framework)

2.6 Inter- and Intra-organization DSS

These systems are driven by the rapid growth of Internet and other networking
technologies such as broadband WANs, LANs, WIP, etc. Inter-organization DSS
are used to serve companies stakeholders (customers, suppliers, etc.), whereas
intra-organization DSS are more directed towards individuals inside the company
and specific user groups. The latter, because of their stricter control, are often
stand-alone units inside the firm.

2.7 New breeds of DSS

Hybrid Systems, which are combinations units using aspects of more than one
different type of DSS. A very popular example is Web based DSS, which can be
driven by a combination of different models such as document-driven,
communication driven and knowledge drive.
Web-based DSS are computerized systems that delivers decision support
information or decision support tools to a manager or business analyst using a
"thin-client" Web browser like Netscape Navigator or Internet Explorer.

On-line Analytical Processing (OLAP) - a category of software technology that

enables analysts, managers and executives to gain insight into data through fast,
consistent, interactive access to a wide variety of possible views of information
that has been transformed from raw data to reflect the real dimensionality of the
enterprise as understood by the user.

Designed for managers looking to make sense of their information, OLAP tools
structure data hierarchically the way managers think of their enterprises, but
also allows business analysts to rotate that data, changing the relationships to
get more detailed insight into corporate information.

OLAP and web-based Decision Support Systems are by far the more popular
Decision Support Systems these days. Their definition and functionality
extends far beyond the scope of this paper and consequently we will not
explore these systems in detail. Many other Decision Support Systems are on
the market today, but to explore all of them would, for now, be a farcical
objective
: