Assignment-SMU-MK0018

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Q1. Discuss the different management orientations of a company. How does it affect international marketing? 
Ans: - Management Orientation: - Company management can be classified in terms of its orientation towards the world: ethnocentric, polycentric, egocentric, and geocentric. The form and substance of a company’s response to global business opportunities depend greatly on management’s assumptions or beliefs – both conscious and unconscious – about the nature of the world. The worldview of a company’s personnel can be described as ethnocentric, polycentric, egocentric, and geocentric. Management at a company with a prevailing ethnocentric orientation may consciously make a decision to move in the direction of geocentricism. The orientations- collectively known as the EPRG framework – are summarized.


(Orientation of Management and Company)

Effect on international marketing

International marketing is the process of focusing the resources and objectives of a company on marketing opportunities at international level.

Companies are engaged in international marketing for two reasons: firstly, to take advantage of opportunities of growth and expansion, and secondly, to eventually lose their domestic markets because they will be pushed aside by stronger and more competitive international competitors.

The basic goals of marketing are to create customer value and competitive advantage by maintaining focus. Company management can be classified in terms of its orientation towards the world: ethnocentric, polycentric, egocentric, and geocentric.

An ethnocentric orientation characterizes domestic and international companies that pursue marketing opportunities outside the home market by extending various elements of the marketing mix. A polycentric world view predominates at a multinational company, where country managers operating autonomously adapt the marketing mix.

Managers at international and transnational companies are egocentric or geocentric in their orientation and pursue both extension and adaptation strategies in international markets.

International marketing importance today is shaped by the dynamic interplay of several driving and restraining forces. The former include market needs and wants, technology, transportation improvements, costs, quality, international peace, world economic growth, and recognition of opportunities to develop leverage by operating internationally. Restraining forces include market differences, management myopia, organizational culture and national controls.

Q2:- Discuss how culture plays an important role in international marketing. Give some examples of advertisements which failed due to lack of cultural understanding.

Ans: - Culture is defined simply as the learned distinctive way of life of a society 

Elements of culture

There are too many human variables and different types of international business functions for an exhaustive discussion about culture. The main elements of culture are:

1. Attitudes and Beliefs: The set of attitudes and beliefs of a culture will influence nearly all aspects of human behavior, providing guidelines and organization to a society and its individuals.

2. Attitudes towards Time: Everywhere in the world people use time to communicate with each other. In international business, attitudes towards time are displayed in behavior regarding punctuality, responses to business communication, responses to deadlines, and the amount of time that is spent waiting in an outer office for an appointment.

3. Attitude towards Work and Leisure: People’s attitudes towards work and leisure are indicative of their views towards wealth and material

4. Attitude towards Achievement: In some cultures, particularly those with high stratified and hierarchical societies, there is a tendency to avoid personal responsibility and to work according to precise instructions received from supervisors that are followed by the latter.

5. Attitudes towards Change: The international manager must understand what aspects of a culture will resist change and how the areas of resistance differ among cultures, how the process of change takes place in different cultures and how long it will take to implement change.

6. Attitude towards Job: The type of job that is considered most desirable or prestigious varies greatly according to different cultures.

1. Lack of cultural or understanding may force the advertiser to withdraw his advertising campaign.

2. The choice of wrong media in the target market may fail the campaign because the message may not get through to target audience.

3. The advertising may not induce the target customer to act in a manner as desired by the sponsor. This may exist because of lack of knowledge about foreign cultural factors, which influence the consumers Attitude formation and consumer behavior.



Consider the following examples:

Coca Cola: • In India, the company had to change its marketing message when it was discovered that water was drunk at most meals and soft drinks were typically reserved for guests and special occasions • In Japan, ‗Diet Coke‘ was renamed ‗Coke Light‘ after the firm learned that the term ‗diet‘ carried an embarrassing connotation.


UPS: • In Spain, the brown trucks had to be repainted because they resembled the country‘s hearses

Q3:- Explain different types of cost based pricing. Types of cost based pricing. 

Ans:-

The cost oriented export pricing methods are based on costs incurred in the production of goods. A reasonable profit will be added to the base cost to arrive at the export pricing. Thus, cost oriented export pricing method may be:-

1. Full cost method

2. Variable cost or marginal cost method



1. Full Cost Method or Cost-plus Method: The most frequently used pricing method in export is cost-plus method. This method is based on the full cost or total cost approach. In arriving at the export pricing under this method the total cost of production of the article (fixed or variable) is taken into account. Over and above the fixed and variable cost incurred in the production of exportable article all direct and indirect expenses incurred for the development of product such as R&D expenses and other expenses necessary for the export of article such as transportation cost, freight, custom duties, risk costs etc. are included. Then a reasonable profit allowance is added to the cost and the value of all assistance received from any authority is deducted. The net result is the total export price for the commodity produced. Price per unit may be calculated by dividing the total price thus arrived by the number of units manufactured.

The various elements of cost forming part of the total costs are:

(a) Direct cost this includes variable costs, direct labor, variable production overhead and variable administrative overheads,

(b) Other costs directly related to exports. These include selling costs – advertising, special packaging, commission to overseas agents, export credit insurance, bank charges, inland freight, power charges, inland insurance, port charges, export duties, warehousing, documentation and so on. Total direct cost will, therefore, be (a) + (b).



2. Fixed Cost or Common Cost: These include production overhead, administrative overheads, publicity and advertisement, travel abroad and so on.

3. Freight and Insurance: This includes cost of freight and marine insurance up to the importer’s destination. This is also known as Cost Insurance Freight (CIF). The main advantage of this approach is that the exporter realizes the full cost in marketing the product in a foreign market.

4. Marginal Cost Pricing: Another common method of pricing in international trade is to determine the price on the variable cost or direct cost. Thus it is a variable or direct or marginal costs that set the price after a certain level of output is achieved i.e. the output at breakeven point.


Q4 Tobacco companies are targeting China as Chinese are heavy smokers. Which segmentation is this and what are the other international market segmentations? 
Ans: - Market segmentation is the process of subdividing a market into distinct subsets of customers that behave in the same way or have similar needs.

Each subset may conceivably be chosen as a market target to be reached with a distinctive marketing strategy

Behavioral segmentation

Behavioral segmentation focuses on whether people buy and use a product, as well as how often and how much they use it. Consumers can be categorized in terms of usage rates – for example, heavy, medium, light, and nonuser. Consumers can also be segmented according to user status: potential users, nonusers, ex-users, regulars, first-timers, and users of competitors‟ products. Although bottled water may be considered a luxury product in some high-income markets, Nestle is marketing bottled water in Pakistan where there is a huge market of nonusers who, despite their low

income, are willing to pay 18 rupees a bottle for clean water because of the widespread presence of arsenic poisoning in well water and the pollution of surface water. Tobacco companies are targeting China because the Chinese are heavy smokers



Geographic segmentation

Geographic segmentation is dividing the world into geographic subsets. The advantage of geography is proximity: Markets in geographic segments are closer to each other and easier to visit on the same trip or to call on during the same time window.



Demographic segmentation

Demographic segmentation is based on measurable characteristics of population such as age, gender, income, education, and occupation. A number of demographic trends, aging population, fewer children, and more women working outside the home, and higher incomes and living standards suggest the emergence of international segments.



Psychographic segmentation

Psychographic segmentation involves grouping people in terms of their attitudes, values, and lifestyles. Data are obtained from questionnaires that require respondents to indicate the extent to which they agree or disagree with a series of statements



Benefit segmentation

International benefit segmentation focuses on the numerator of the value equation. The B in V=B/P. This approach can achieve excellent results by virtue of marketer s superior understanding of the problem a product solves or the benefit it offers, regardless of geography.



Vertical versus horizontal segmentation

Vertical segmentation is based on product category or modality and price points. For example, in medical imaging there is X-ray, Computed Axial Tomography (CAT) scan, Magnetic Resonance Imaging (MRI), and so on.



Q5:- Write short notes on: 

a) E Marketing

b) Spot and forward rates

Ans:-

E-marketing: - E-marketing involves the marketing of products or services on the internet. The primary purpose of marketing an online business is the promotion of a good or service. E-marketing approaches to accomplish their objectives, Internet marketers use many approaches, some of which include:

*Banners: A banner ad is a boxed-in promotional message that often appears at the top of the web page.. Other names given to banners include side panels, skyscrapers, or verticals.

* Sponsorships: This is another common advertising approach on websites. The advertiser is given a permanent place on hosts’ website and pays a sponsorship fee to the host.

*Pop-up and Pop-under: When a visitor accesses a web page, sometimes a window appears either in front or underneath the web page, the visitor is viewing.

*Portal Use: Some portals give a prominent place to a company’s offer for a fee. When a visitor follows directed search, the marketers name appears prominently at or near the top of the list.

*E-mail: Companies send e-mails to Internet users to visit the company web site. It can be effective only when the target customer is appropriate otherwise it becomes “junk mail.”

*Interstitials: These ads appear on the computer screen while a visitor is waiting for sties contents to download.

* Push Technologies: Some companies provide screen savers to its website visitors that allow the firms to directly “hook” the visitor to their websites.

* Sales Promotions: Many companies effectively use sales promotions such as contests and sweepstakes to generate consumer interest.

Meaning and role of spot and forward rates Spot rates:-

Spot rates can be used to calculate forward rates. In theory, the difference in spot and forward prices should be equal to the finance charges, plus any earnings due to the holder of the security, according to the cost of carry model.

In finance, a spot contract, spot transaction, or simply "spot," is a contract of buying or selling a commodity, security, or currency for settlement (payment and delivery) on the spot date, which is normally two business days after the trade date. The settlement price (or rate) is called a "spot price" or "spot rate. "

Forward Rates:-

A spot contract is in contrast with a forward contract where contract terms are agreed now but delivery and payment will occur at a future date. The settlement price of a forward contract is called a "forward price" or "forward rate.” Depending on the item being traded, spot prices can indicate market expectations of future price movements. In other words, spot rates can be used to calculate forward rates. In theory, the difference in spot and forward prices should be equal to the finance charges, plus any earnings due to the holder of the security, according to the cost of carry model. If the underlying asset is trad-able, the forward price is given by:


Where F is the forward price to be paid at time


Q6:- Discuss the role and activities of World Bank. 
Ans:-

World Bank – IBRD

Origin: Conceived at the UN Monetary and Financial Conference at Bretton Woods (New Hampshire, USA) in July 1944, the IBRD, frequently called the World Bank, began operations in June 1946, its purpose being to provide funds, policy guidance and technical assistance to facilitate economic development in its poorer member countries. The Group comprises 4 other organizations.



Activities: The bank obtains its funds from the following sources: capital paid in by member countries; sales of its own securities; sales of parts of its loans; repayments; and net earnings. A resolution of the Board of Governors of 27 April 1988 provides that the paid in portion of the shares authorized to be subscribed under it will be 3%.

The Bank is self-supporting, raising most of its money on the world’s financial markets. In the fiscal year ending 30 June 1997 it achieved a net income of US$1, 285 m.; medium and long term borrowing equivalent of US$15,100 m. in 18 currencies; average medium to long term borrowing costs, after swaps, of 5.01%; financial returns on its investment folio of 5%; a reserves-to-loan ratio of 14%; and decline in its net administrative expenditure in real terms to a figure set at $1,177m.

The bank lends in the region of US$22,000m a year.

It acts as executing agency for a number of pre-investment surveys financed by the UN Development Program. Resident missions have been established in 64 developing member countries and there are regional offices for East and West Africa, the Baltic States and South-East Asia, which assist in the preparation and implementation of projects. The Bank maintains a staff college, the Economic Development Institute in Washington, D.C., for senior officials of member countries.

Role of World Bank

As a development institution, the World Bank supports two broad goals in South East Europe: (i) poverty reduction and (ii) economic and social development, the latter in support of the countries ambition to join the European Union. The central vehicle for supporting the national reform program of each country is the so-called Country Assistance Strategy (CAS). Based on an assessment of the country's priorities, past portfolio performance and creditworthiness, the CAS sets strategic priorities and determines the level and composition of financial and technical assistance that the Bank seeks to provide the country. The framework for poverty reduction and economic growth are the countries’ own Poverty Reduction Strategy Papers (PRSPs), developed by the government through a participatory consultation procedure.


[World Bank lending to South East Europe since 1999 (US $ million)]


[Lending commitments of the world bank’s active portfolio in South East Europe by sector as of June 2005 in US $ million]

Total US$ 3.2 billion

Assignment-SMU-MK0017

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Q1: What is e-mall? Explain the various types of online stores in an e-mall.

Ans:- “An e-mall is an online shopping center, in which there are many online, or virtual, stores”. The basic four types of online stores have been explained below:

1. General stores/malls

These are general stores that have a presence in the online market. They include stores like Junglee.com and infibeam.com which act as an interface between the buyer and seller. They are stores that have a variety of items for sale and are thus called general stores. They do not specialize in selling any one item.

2. Specialized stores/malls

The specialized stores would sell only specialized items. For example there are Websites selling only mobiles like themobilestore.com and Websites selling only property like 99acres.com.Thus, they specialize in their areas of product and are named as specialized stores.

3. Regional versus global store

Another classification of e-stores is regional and global stores. For example, in the tourism industry, e-stores like Airindia.in are among the local stores of India, while Airtel.com is a global e-store.

4. Pure online organizations versus click-and-mortar stores

The pure online stores sell their products only through the online stores. The best examples of these are Amazon.com and Makemytrip.com, which operate only through the Internet. Some stores are referred to as click-and mortar stores, which mean they have an online presence for selling and generating awareness among their customers but they mainly sell through the physical distribution system. One such example is Archies.com, which has physical presence in stores along with an online presence.

Q2: An electronic marketplace (e-marketplace) refers to a website created for common interest. It integrates the online and physical component of a company. Discuss the five kinds of partners in an e-marketplace.
Ans: - “An electronic marketplace, or e-marketplace, refers to a Web site and portals or a set of linked sites that are common interest to particular types of customers”. The e-marketplace model has come to be a very effective one, which integrates the online and physical component of a company. It has in many ways helped business partners to establish a dot.com strategy in their company. One crucial factor in this context is the costing. If businesses feel that each consumer has to be reached personally and physically, this would be very difficult. Thus, an electronic presence not only makes the process cost-effective, it also reaches the consumer timely. It is easier to establish a strong online presence than a physical store. Also, getting feedback from the consumer one-to-one is difficult but getting the same through a Website is easier. Another problem which companies face when delivering to the consumer is scheduling.

Another problem in this model is the pricing, in an e-business. Consumer pricing has always been a problem for business houses that have adopted the e-marketplace model.

However, the “e-marketplace marketplace and online technology” have not outdated the traditional selling. Thus, most of the e-business companies today are trying a mix of these two concepts. This is exactly what the e-market model means, which is followed today by large companies like Disney

There are five kinds of partners in an e-marketplace:

• Private

• Sell-side

• Buy-side

• Public

• Consortia

Private: Private e-marketplaces, which are owned and set up by individual companies to deal with their own suppliers and buyers. They could be sell-side and/or buy-side e-marketplaces. Private e-marketplaces are similar to public e-marketplaces in terms of function and infrastructure, but their use is restricted to the company and its employees.

Sell-side: The sell-side e-marketplace would be the operations of the e-market, wherein the products are actually being sold to the customers. Here, the operations of logistics and delivery are supreme.

Buy-side: The buy-side e-marketplace would be the interface of the e-marketplace where the consumers will buy the product. Thus, the payment, interaction, pricing would come under the buy side of the e-marketplace.

Public: Public marketplaces are independent Internet-based trading platforms, usually owned and/or managed by an independent third party. Such an e-marketplace represents a community of many buyers and sellers, and where every seller is given equal weight. These are also known as exchanges or third party marketplace.

Consortia: These are internet locations owned jointly by consortia of industry leaders, which allow other companies or individuals to get new suppliers or buyers for their products as well as develop trading networks which makes negotiating, settlement and delivery easier and more efficient.

Q3: Discuss the major legal and ethical issues in e-marketing.

Ans: - The Internet has led to a state that is popularly referred to as the ‘global village’. It has made distances smaller and brought people of different parts of the world closer to each other. It has also made it possible and convenient to conduct trade and commerce across different countries. But there are some legal and ethical concerns are also with e-marketing as follow;

Legal issue

Moreover, the laws of one country may not be applicable in others. Hence, it is felt that the Internet does not have the necessary legal safeguards to govern e-business.

There is a need to focus on legal and ethical issues such as site security, confidentiality and international issues in e-businesses. In India, many e-commerce firms are under the scanner for suspected FDI and foreign investment frauds.

Notice (privacy policy): E-business websites should put up clear and unambiguous notice stating the way they collect information from customers, what kind of information is collected, how including what information they collect, how they collect it and how they use it. They should also put a disclaimer to clarify whether they share the customer’s information with other sites.

Online fraud: Fraud has become common with the growth and proliferation of Websites and various online businesses, some of which are not as genuine as they claim. E-marketing fraud generally pertains to stocks and shares, where potential investors are deceived by false promises of easy profits. Other types of fraud includes fake companies selling counterfeit products, fake job offers and schemes, phishing, impersonation which are mainly aimed at extracting users’ personal information for unethical use.

Domain names: An important legal issue is that of Internet addresses, also known as domain names. There are often conflicts over the use of certain domain names, as two or more companies want to have the same domain name. This issue was addressed to some extent when several upper level domain names were added to .com in 2001.

URL squatter

Cyber squatting (also known as domain squatting), according to the United States federal law known as the Anti cyber squatting Consumer Protection Act, is registering, trafficking in, or using a domain name with bad faith intent to profit from the goodwill of a trademark belonging to someone else. The cyber squatter then offers to sell the domain to the person or company who owns a trademark contained within the name at an inflated price.


Ethical issues

Use of personal data: E-business Websites should notify the customers about the use of their personal data (such as e-mail ID) for purposes other than the business transaction. This includes internal use of the data, for example, to send promotional mails in future, or external uses (such as disclosing or selling the information to other sites or organizations entities).

Web tracking: E-business Websites keep track of their users through log files. These are analyzed and relevant information is extracted from these files. Programs like “Privacy Guardian”, “My Privacy” have been developed to protect user’s online privacy by deleting the information in the browser’s cache memory, as well as surfing history and cookies. They also work against spyware programs like Ad-Aware.


Q4:- Explain the factors that influence e-consumer’s buying behavior.

Ans:- “An e-marketing plan is a structure identifying the major steps to build an effective e-marketing strategy”. For example, popular fast food giant McDonald’s e-marketing strategy is to provide a low-priced product and good value in food category. This is nothing but a price-based differentiation strategy.


(Segmentation, Targeting and Positioning)

There are many factors that influence an e-consumer‘s buying behavior. So, generally, consumer behavior can be predicted by studying these factors.

* Culture refers to a set of attitudes and beliefs. But what is important is that how these attitudes and beliefs developed. As a person is growing up, he is influenced by his parents and other family members from whom he learns about morals, or a sense of right or wrong. Religion, culture, and social norms help shape a person’s opinions, attitudes and beliefs).

*People’s social class and economic status also affect their behavior. These parameters influence a person’s purchasing behavior.

*However, other factors like friends or role models may influence their choices of purchasing a product or service. *Consumers are also influenced by reference groups. These could be celebrities, immediate family members or opinion leaders.

*The economic environment has a crucial impact on consumer behavior. This factor becomes all the more relevant during a recession.

*Other factors including job security, marketing and advertising also influence consumers in purchasing a particular product or service. Apart from external factors, the person’s personality (extrovert or introvert) has an impact on the types of purchases made.


Types of buying behavior: There are four basic known types of buying behavior based on the different products that are purchased.

1. Complex buying behavior,

2. Habitual buying behavior,

3. Variety-seeking buying behavior, and

4. Dissonance reducing buying behavior


Q5:- Functions of E-marketing are represented by 2P+2C+3S formula (Personalization, privacy, customer service, community, site, security, and sales promotion). These functions form the framework of an e-marketing strategy. Discuss this formula with a diagrammatic representation.

Ans: - In contrast to traditional marketing, e-marketing is unique as it has a series of specific, relational functions that can be represented by “the 2P+2C+3S formula – (personalization, privacy, customer service, community, site, security and sales promotion)”. The above-mentioned functions of the e-marketing form the framework of an e-marketing strategy. These factors revolve around the concept of relational functions and they are necessary components of an e-marketing strategy in order for it to be efficient and deliver results. All the elements of the 2P+2C+3S model of e-marketing mix are moderating factors that apply to all the 4Ps separately.


(E-marketing 2P+2C+3S formula)

2Ps

*Personalization: This is an extremely important component of e-marketing, as it recognizes and establishes a direct, personal relationship with a customer. This way, some vital information about the customer is gathered which helps the company to customize its service to that particular customer.

*Privacy: This factor is closely related to personalization, that is, how the information about the individual user is obtained and stored. Also, who will be able to use it and for what purpose. Thus, before initiating an e-marketing strategy, the company must put in place a policy for the collection, storage and usage of the data.

2Cs

*Customer Service: This is a necessary feature in any transactional service, and any e-marketing programs will be incomplete without it.

*Community: The community refers to the groups of clients or customers who interact with the company. The larger the network and its reach, the better it is for the success of the e-marketing programs.

3S

*Site: Site refers to the location where the e-marketing activities take place. Generally, the site is the Website.

*Security: This is an essential element in the e-marketing mix, in order to ensure the security of the transactions over the Internet, which should not be accessible to any outsider.

Sales promotion: This is also commonly adopted in traditional marketing, and involves offers and discounts, etc, to attract customers and boost sales. In e-marketing, too, sales promotion is a good way to achieve a boost in sales in a short period.


Q.6. Discuss the selling methods and sales promotion of E-marketing.

Ans: - A) Selling Methods: - It comprises a body of methods used in the profession of selling, also known as personal selling. The major techniques used for selling are as follows:

1. Virtual Sales Staff: - The Virtual Sales and Marketing Team solution immediately provides a company with a senior team of sales and marketing professionals. It avoids the lengthy hiring process for sales and marketing staff. The following are different methods of carrying out virtual sales and marketing:

*Crowd sourcing: This is a process that involves outsourcing tasks to a distributed group of people. This process can occur both online and offline.

*Micro work: Micro work is a series of small tasks that have been broken out of a larger project and can be completed via the Internet. Micro work is considered the smallest unit of work in a virtual assembly line. This is a crowd sourcing platform where users perform small tasks.

*Crowd voting: This is a process of collecting opinions and judgment on a certain topic by a Website. For example Ink fruit in India allows crowd voting on t-shirt designs. It is also crowd sourcing, because designing is open to everyone.

*Wisdom of the crowd: With this method one collects large amounts of information and aggregates it to gain a complete and accurate picture of a topic, as per the idea that a group of people are often more intelligent than an individual.

*Crowd funding: This is the process of funding your projects by a multitude of people contributing a small amount each in order to attain a certain monetary goal.

*Crowd purchasing: This means to leverage the collective purchasing power to win the best possible deals. Group purchasing Websites like groupbuyingsite.com could be the best example here.

*Inducement prize contests: Web-based idea competitions, or inducement prize contests, often consist of generic ideas, cash prizes, and an Internet-based platform to facilitate easy idea generation and discussion.

2. Affiliate Marketing

Affiliate marketing is a performance-based marketing in which the company rewards one or more affiliates for the number of visitors or customers which have been brought by the affiliate’s own marketing efforts.

There are four key players involved in affiliate marketing: the merchant (or the ‘retailer’ or ‘brand’), the publisher (or ‘the affiliate’), the network (affiliate payments and offers), and the customer.


B) Sales Promotion

Sales promotion is one of the seven ways of enhancing sales. The other six parts are advertising, personal selling, direct marketing, publicity/public relations, corporate image and exhibitions. The most common devices used in sales promotion include incentive programs and loyalty programs.

1. Incentive Programs

Retention of existing customers is a very important aspect of any business. The membership cards which offer 10 per cent discount on every purchase of, say, more than ` 200 and the discounts on shopping over the net are some examples of incentives — which can be advertised over the Web.

2. Loyalty Programs

This is another way is promotions for retaining the online customer range from loyalty programs and feel-good approaches, such as thank-you notes and birthday cards.

Assignment-SMU-MK0016

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Q.1. Discuss the DAGMAR approach in setting objectives and measuring effectiveness of advertising.

Ans: - A) Meaning: - Defining Advertising Goals for Measured Advertising Results (DAGMAR) is a model devised by Russell H. Colley in 1961 in which advertising objectives can be set in a way that the results of an ad campaign can be measured and quantitatively monitored.

Colley has proposed that all commercial communication aimed at the ultimate objective of a sale should move a prospect through four levels of understanding:

1. Awareness – The prospect must be aware of the existence of the brand or company.

2. Comprehension – The prospect must understand what the product is and what it will do for him/her.

3. Conviction – The prospect must develop a mental disposition to buy the product.

4. Action – The prospect must stir him/her into action, that is, buy the product.



B) Explanation: - In addition to proposing the communication hierarchy, which is similar to the “hierarchical models of advertising effects”, Colley also set standards for what can be termed as a good objective. According to Colley, objectives should have the following features:


1. Concrete and measurable communication tasks – Colley proposed that communication objectives should precisely state the task to be achieved. For instance, clear misconception regarding price among non-users, develop conviction among the target audience that brand A has ingredient Y, etc. are precise or concrete tasks. The DAGMAR approach also requires that the objectives should be measurable and it should be possible to specify the measurement procedure. For instance, if the ad message communicates that brand X is the best on attribute Q, then a questionnaire may include the request, “rank the following brands on best Q attribute.” Measurement can be done by quantifying responses to mean percentage of the audience who rated brand X as the best on attribute Q.

2. Well-defined target audience – Objectives should clearly define the target audience for the communication based on the situation analysis for the product. If the target audience is not well defined, the entire promotional effort may go waste.

3. Benchmark and determination of degree of change sought – Colley proposed that objectives should be based on knowledge of the current status of response variables such as awareness, liking, attitude, purchase intention, etc.

4. Pre-determined time period – Objectives should clearly specify the time period in which the results are to be achieved. Gaining 50% awareness in a year is not the same as gaining it in two months. Campaigns that keep on running endlessly till results are achieved are a drain on the company’s resources.

The DAGMAR approach has been successful in presenting the case for communications-related objectives as opposed to sales-related objectives. The criteria laid down by Colley for a good objective have also made it easier to measure the effectiveness of campaigns.


Q.2. What is Gestalt psychology? Explain with examples how it resembles the way a person fits in the advertising message with his/her existing knowledge.

Ans: - (A) Gestalt psychology is the school of psychology founded in the 20th century that provided the foundation for the modern study of perception. Gestalt theory emphasizes that the whole of anything is greater than its parts. That is, the attributes of the whole are not deducible from analysis of the parts in isolation. The word Gestalt is used in modern German to mean the way a thing has been “placed,” or “put together.” There is no exact equivalent in English. “Form” and “shape” are the usual translations; in psychology the word is often interpreted as “pattern” or “configuration.”

The publication of Czech-born psychologist Max Wertheimer’s “Experimental Studies of the Perception of Movement” in 1912 marks the founding of the Gestalt school. In it Wertheimer reported the result of a study on apparent movement conducted in Frankfurt, Germany, with psychologists Wolfgang Köhler and Kurt Koffka. Together, these three formed the core of the Gestalt school.

(B) Gestalt is about patterns or configurations. Gestaltists believe that we categorize incoming stimuli into meaningful patterns. It occurs at the interpretation stage of the information processing chain. For example, looking at a picture of a man, woman and kids enjoying a picnic at a park, we perceive it as a family because we put the people together in the context. If the ‘parents’ from that advertisement were sitting on a rug together enjoying a glass of wine, we would perceive the setting as a romantic one.

Print message designs must be evaluated as a whole, rather than just a set of elements on a page. The purpose of design is to organise ideas into a format that will gain the audience’s attention. In simple terms, gestalt is the idea that when a person looks at a picture or design they see it as a ‘whole’ rather than as a set of elements.

**FIGURE AND GROUND PERCEPTION

• GROUPING

• SIMILARITY

• PROXIMITY

• CLOSURE

• SEMIOTICS

**PERCEIVED VALUE

There are three main types of consumer value:

• Intrinsic versus extrinsic

• self-oriented versus others-oriented

• Active versus reactive value.

Q.3. Advertising is a paid form of communication. It has gained its significance since it attempts to build a positive attitude towards a product. Explain the characteristics and objectives of advertising.
Ans:-

A) Definition of Advertising:- “The action of calling something to the attention of the public especially by paid announcements; or, to call public attention by emphasizing desirable qualities so as to arouse a desire to buy or patronize.”

B) Characteristics:-

1) The fact that it is “a paid form” of presentation emphasizes that advertising space or time must be purchased.

2) Its “non-personal” nature emphasizes the fact that it is not a direct or personalized presentation to one individual but to the masses.

3) “Presentation” signifies the format in which advertisements communicate.

4) “Promotion” indicates the objective of advertising.

5) “Identified sponsor” refers to the identification of the brand or the advertiser who is communicating.


C) Objectives: - Advertising objectives can be categorized based on whether their goal is to inform, persuade, remind or reinforce;

Inform – Let people know what the product is, where it would be available, what problem it would solve, etc. Informative advertising is most rampant in the introductory stage of the product or product category because maximum information has to be given when something is new.

Persuade – This becomes more important as the product grows or faces increasing competition. The advertiser now needs to give more reasons or enticements to lure consumers. One way of establishing superiority is by comparative advertising, where you evaluate your brand vis-à-vis a competitor’s brand directly or indirectly. The better-than-competitor claim can be made subtly by telling the consumer how your brand addresses his/her need and convincing him/her that no other brand does that in the same fashion. For example, a television commercial for Captain Cook persuaded consumers by depicting how its salt was better flowing compared to Tata Salt


Remind – This kind of advertising is widespread with mature products, that is, products that are well past their introduction and rapid growth phases. Everyone knows about the products – what they do, how beneficial they are, how they are different from other products, etc. There are hardly any new consumers who need to be persuaded. Hence, an advertiser needs to remind the consumer that his/her product exists and that it is there when he/she needs it. For example, with its witty, well-timed and creative print ads on current topics, the mature brand Amul Butter stays on top-of-the-mind.


Reinforce – This seeks to convince current consumers that they have made the right choice. By reinforcing key benefits and depicting satisfied consumers of the brand, an advertiser can reassure current consumers that they have indeed spent their money well.



Q.4. What is “above the line” and “below the line” activities with respect to marketing communications? Explain the concept in detail. 

Ans: - Media: - Media is a newly coined word that includes a huge number of activities and tools of paid mass communication which are used by the marketing and advertising industry as much as the entertainment world. Although media rates seem high, this is the cheapest cost per contact tool available today.

Marketing communication activities can also be loosely classified as “above the- line” (ATL) or “below-the-line” (BTL). The promotional activities carried out through mass media like television, radio, newspaper, etc. typically qualify as ATL, whereas BTL refers to forms of non-media communication, including non-media advertising, such as an event, a sponsorship, a sales promotion activity, point-of-purchase advertising, etc. BTL also involves some extent of interaction with the consumer.

Table A gives the reach of these media as estimated by IRS Q4, 2010, whereas Table B states their advertising shares.


[Table A: Media Reach]


[Table B: Advertising spends, Shares and Growth rates of leading Mass Media]

The most frequently used structured ATL mass media include the following:

1) Print- Newspapers, magazines, journals, weeklies, etc.

2) Television - Due to cable, DTH and satellite technology, television reaches out to more than 50% of the population.

3) Radio - Has declined and reaches out to less than 20% of the population.

4) Cinema - Is a popular medium for advertisers in a country that has the largest film industry in the world, releasing more than 800 films a year.

5) Internet - Is gradually gaining popularity with the increase in PC penetration, literacy and availability of Internet connection.

In the BTL segment, many incredibly innovative vehicles for advertising messages are thought up every day, which deliver results too, if only for the unexpectedness of it. For example, folk and rural media like storytelling, puppetry, and street plays & music and dance, etc. Now global Fast Moving Consumer Goods (FMCG) Multi-National Companies (MNCs) too have taken to these in a big way since there is immense growth in the rural markets.

Every advertising agency works out the best possible combination of media to be used for the assignment on hand, keeping in mind various considerations like the characteristics of various media, type of message and target audience, budget availability, communication objectives, media availability, etc. A “media mix” refers to the combination of various media that a media planner chooses to incorporate in the media plan.



Q5:- Describe the AIDA model of consumer response hierarchy with the help of diagram.

Ans: - The Awareness-Interest-Desire-Action (AIDA) model of consumer response hierarchy is one of the popular models.

It states that a consumer passes successively through the following four stages of response

1. Awareness – In this initial stage, most of the target audience is unaware of the product or brand and hence the communicator’s objective is to build awareness, maybe just name recognition of the product with simple messages, repeating the brand name or giving basic information about the product. In a relatively new product category, this function assumes the maximum importance. For example, the objective of Hutch’s takeover and change of name to Vodafone was to inform the audience about the change through quick reach and repetition. Thus, several 5–10 second spots were designed to ensure that the ads did not result in any monotony.

2. Interest – In this stage, consumers graduate from awareness about the product to interest in it. Marketers need to find out how consumers feel about their product. Are they favorably disposed? Do they like it? Do they find it interesting enough? Interest in the product can be created by showing some unique feature of the product, demonstrating how it works, presenting entertaining ads, fetching in popular celebrities, etc.

3. Desire – It is not enough to create just an interest in the product. Once the target audience is aware about and interested in the product, the function of advertising is to get them positively inclined towards buying it, that is, create in them a desire and preference for the advertised product. Desire can be built by showing how the product addresses a consumer’s specific needs and by creatively promoting quality, value and other significant features. For instance, Aqua guard arouses desires by giving rational benefits of using the product, such as clean water without germs.

4. Action – Advertising has not played its part until it has achieved the ultimate objective of spurring the target audience into action. In most cases, the desired action is to lead consumers to purchase the product. But in certain cases, it can also be to generate inquiries, lead to a retail visit; promote participation in a promotion, etc. Brand- or image-building advertising will not immediately lead to purchase action, but it will create a preference and desire that will ultimately translate into purchase. This is a long-term strategy.

(Traditional Consumer Response Hierarchy Model)

Q6:- Describe some of the strategies for effective marketing and advertising in rural market.

Ans: - Literacy is still poor in rural areas and no complicated selling message or print media can be tried. Advertising must use very basic means such as wall painting and hoardings with visually powerful images. Although satellite technology has taken television to the remotest corners of the country, household ownership of it is still low. Therefore, exposure is often through community televisions, which means image building through sustained campaigns may not be possible. In fact, reach of most media is still inadequate in rural areas.

A rural marketing strategy will succeed if all the above factors are kept in mind. Therefore, advertising must keep in mind the decision, purchase and usage pattern that are peculiar to rural areas. Some strategies have been standardized by now.

These include:-

1. Small packages – Indians in general and rural people in particular are highly price conscious and demand value for money. Rural people not only have small budgets, they have even worse storage facilities in their small homes. Therefore small packaging, even single use packets, sell well. The runaway success of shampoo sachets is a textbook example. Lux sells 50 paisa sachets and is doing well.

2. Strong visual images – Brand names that are easy to remember and symbols in gaudy colors with images of animals, birds, flowers or children are more successful. Villagers do not read brand name and buy by recognizing the symbol on the package. Ghari detergent with a clock and fertilizer having a farmer with a heap of wheat on his head has been very successful.

3. Free containers – By nature Indians are frugal and rural people even more so. Buying kitchen containers is not a standard norm even in well to- do urban homes and a nice and sturdy reusable container for storage of other food items is still a great attraction. Therefore a product that comes in a reusable container instead of a plastic bag will sell better.

4. Door delivery – In spite of India’s huge size and remoteness, taking the product to the customer’s home, when tried, has been successful. Small savings picked from homes and petty businesses every evening by banks is as successful in rural areas as in urban markets.

Assignment-SMU-MB0053

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Q1. “Environment scanning is an important part of international business”. Explain your view on this statement and discuss what factors need to be scanned.                                      
Ans: - Environment scanning is one essential component of the global environmental analysis. Environmental monitoring, environmental forecasting and environmental assessment complete the global environmental analysis. The global environment refers to the macro environment which comprises industries, markets, companies, clients and competitors. Consequently, there exist corresponding analyses on the micro-level. Suppliers, customers and competitors representing the micro environment of a company are analyzed within the industry analysis.
It can be defined as ‘the study and interpretation of the political, economic, social and technological events and trends which influence a business, an industry or even a total market’. The factors which need to be considered for environmental scanning are events, trends, issues and expectations of the different interest groups. Issues are often forerunners of trend breaks. A trend break could be a value shift in society, a technological innovation that might be permanent or a paradigm change factors:


• Economic Factors: It refers to the economic conditions under which a business operates and takes into account all factors that have affected it. It includes prime interest rate, legislation concerning employment of foreigners, return of profits, safety of country, political stability and so on.

• Political Factors: It influences the economic and legal environment in which the business operates to a larger extent, especially in contract law and rules on advertising and consumer protection. It also affects the business practices, restrictions on market entry, tariffs charged and ability to repatriate profits.

• Legal Factors: International businesses confront different sets of laws in various countries of operation. IB must not only abide by the domestic laws of each nation but also by the supranational laws which impose obligations beyond those of national legal systems.

• Demographic Factors: It helps firm understand the various demographic factors such as gender; age; religious background and ethnicity. Firms use demographic environments to identify target markets for specific products it wishes to cater.

• Socio-Cultural Factors: The cultural and social norms of people differ worldwide in all key markets. The customers/consumers of a particular country/region become conditioned to accept certain things as per conditioned behavior. The increasingly competitive international business environment necessitate the exporters/companies doing business overseas to customize their organizational policies keeping in mind the local cultural norms.

Q2. What is FDI? Why is it considered as the best option for a developing country like India? 
Ans: - FDI is an important component of a country's national financial accounts. “Foreign direct investment is an investment by foreign investors into the assets of the host country’s structures, real estate, roads, ports, rail, plants and machinery, equipment, financial institutions such as opening a new bank/insurance company and sometimes in organizations like investment in Indian Premier League (IPL) by foreign counties”. FDI is a form of foreign direct investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up. In addition to building new facilities, most parent companies also create new long-term jobs in the foreign country by hiring new employees. FDI investments are most welcome in any country of the world, be it developed or developing as the primary target of green field investments is to create new production capacity and jobs, transfer technology and know-how in the host country. A Greenfield investment starts with bare ground and builds up from there. FDI does not include foreign investment into the stock markets of host countries that is separately treated as portfolio investment. FDI for any country of the world is thought to be more useful and beneficial than the investment being made in the equity/stocks of host country companies. FDI in contrast is for long term, durable and is generally more useful. It is completely unaffected by the conditions in the host country.

Benefits of Foreign direct investment (FDI):-
• You will achieve economies of scale and scope in production, marketing, finance, research and development, transportation and purchasing.
• You will have greater control of all aspects of the business.
• You will be able to implement the best long-term strategy.
• Commitment to the market will be solid.
• Vendor financing is often available.
• You can work with the relevant authorities from the beginning.
• You will have control over your brand.
• You will have control over your staff.
• There will be press opportunities.
• Provides maximum design flexibility to meet project requirements
• New facility will reduce required maintenance
• Can be designed to meet current and future needs
• Opportunity to improve corporate image
• Suitable for either lease or own option

   

Q3. Regional integration is helping the countries in growing their trade. Discuss this statement. Describe in brief the various types of regional integrations.


Ans: - “Regional integration can be defined as the unification of countries into a larger whole”. It also reflects a country’s willingness to share or unify into a larger whole. The level of integration of a country with other countries is determined by what it shares and how it shares. Regional integration requires some compromise on the part of participating countries. It should aim to improve the general quality of life for the citizens of those countries.

Different types of regional integration are:

1. Preferential trading agreement

Preferential trading agreement is a trade pact between countries. It is the weakest type of economic integration and aims to reduce taxes on few products to the countries who sign the pact. The tariffs are not abolished completely but are lower than the tariffs charged to countries not party to the agreement.

2. Free trade area

Free Trade Area (FTA) is a type of trade bloc and can be considered as the second stage of economic integration. It comprises of all countries that are willing to or agree to reduce preferences, tariffs and quotas on services and goods traded between them. Countries choose this kind of economic integration if their economical structures are similar. If countries compete among themselves, they are likely to choose customs union.

3. Custom union

Custom Union is an agreement among two or more countries having already entered into a free trade agreement to further align their external tariff to help remove trade barriers. Custom union agreement among negotiating countries may encompass to reduce or eliminate customs duty on mutual trade. Under customs union agreement, countries generally impose a common external -tariff (CTF) on imports from non-member countries. Such common external tariff helps the member countries to reap the benefits of trade expansion, trade creation and trade diversification.

4. Common market

Common market is a group formed by countries within a geographical area to promote duty free trade and free movement of labour and capital among its members. Common markets levy common external tariff on imports from non-member countries.

A single market is a type of trade bloc, comprising a free trade area with common policies on product regulation, and freedom of movement of goods, capital, labor and services, which are known as the four factors of production.

A common market is the first step towards a single market. It may be initially limited to a FTA with moderate free movement of capital and services, but it is not capable of removing the other trade barriers.



5. Economic union

Economic union is a type of trade bloc and is instituted through a trade pact. It comprises of a common market with a customs union. The countries that are part of an economic union have common policies on the freedom of movement of four factors of production, common product regulations and a common external trade policy.

The purpose of an economic union is to promote closer cultural and political ties while increasing the economic efficiency between the member countries.


6. Political union

A political union is a type of country, which consists of smaller countries/nations. Here, the individual nations share a common government and the union is acknowledged internationally as a single political entity. A political union can also be termed as a legislative union or state union.


Q4. Write short note on:
a) Licensing
b) Joint Venture
Ans:-

a) Licensing

Licensing is a contractual agreement in which a licencor allows a licensee to use patents, trademarks, trade secrets, technology and other non-material assets in return for royalty payments or other forms of compensation. The duration of the licensing agreement and the amount of royalties a company can receive is commercially negotiated between the two parties i.e., the licencor and the licensee. There are no governmental restrictions on royalty remittances abroad. However, in many countries these elements of licensing are regulated by the government.

Important areas of concern in licensing are:
1. Analysis of assets offered by a firm for license,
2. Pricing of the assets,
3. Whether to grant only the right to make the product or to grant the right to use and sell the product,
4. The right to sub-license.

Licensing is fraught with danger because it has the potential to create a competitor, if there is none or increase the number of competitors, if there is already one or more. Hence, licensors should be careful enough to protect their competitive advantage and to ensure a sustainable
competitive advantage; the only price the licensor should be willing to pay is in the form of continuous innovation. Else, the licensor may become history.



b) Joint Venture

Joint ventures are market entry options whereby firm and another company or firm in target market may join together to form a new incorporated company for business operations in that market. In joint ventures, both the parties are supposed to provide capital and resources in the agreed proportion and accordingly they will represent and share profits and losses. Joint venture is manifested with the following common objectives for market entry in globalized era. They are:

1. Market entry into potential market.
2. Risk/reward sharing between parties.
3. Technology sharing between parties.
4. Joint product development between parties.
5. Conforming to government regulations. 

6. Possible advantages from political connections.

Q5. Explain the top-down and bottom-up approach of planning.

Ans: - Top-down planning

Top-down planning is a common strategy that is used for project planning. It helps maintain the decision making process at the senior level. Goals and allowances are established at the highest level. Senior-level managers have to be very specific when laying out expectations because the people following the plan are not involved in the planning process. It is very important to keep the morale of the employees high and motivate them to perform the job. Since employees are not included in any of the decision making processes, they are motivated only through fear or incentives.

Top-down planning helps:

1. Determine all the goals at the initial stage of the process.

2. Identify the lack of ground level staff participation.

3. Estimate the inflexibility.

4. Find how management imposes the processes.

5. Determine the lack of motivation.

6. Find whether the staffs feel that their input is valued or not.

Bottom-up planning

Bottom-up planning is commonly referred to as tactics. With bottom-up planning, an organization gives its project deeper focus because each organization has a huge number of employees involved, and each employee is an expert in their own area. Team members work side-by-side and contribute during each stage of the process. Plans are developed at the lowest levels, and then passed on to each of the subsequent higher levels.

Bottom-up planning helps:

1. as there are no long term vision here.

2. Encourage teamwork.

3. Estimate flexibility.

4. Determine whether team motivation is of high level.

5. Identify whether the project is team driven.

6. Find whether the staff feels valued or not.


Q6. Discuss the importance of ethics in international business.

Ans: - “Ethics is significant in all areas of business and plays an important role in ensuring a successful business”. The role of business ethics is evident from the conception of an idea to the sale of a product. In an organization, every division such as sales and marketing, customer service, finance, and accounting and taxation has to follow certain ethics. The importance of international business ethics has been rising steadily along with the growth of international business. Technologies like the Internet have made international business all the more viable, and many companies can only find the desirable growth and profit they seek by expanding into new markets. This means that just as business ethics domestically have grown in importance along with the power and significance of major businesses, so must international business ethics take centre stage as a major concern of the modern era.

Public image – In order to gain public confidence and respect, organizations must ascertain that they are honest in their transactions. The services or products of a business affect the lives of thousands of people. It is important for the top management to impart high ethical standards to their employees, who develop these services or products.
A company that is ethically and socially responsible has a better public image. People tend to favor the products and services of such organizations. This in turn will help gain investors’ trust-a company that practices good ethical creates a positive impression among its stakeholders.

Management’s credibility with employees – Common goals and values are developed when employees feel that the management is ethical and genuine. Management’s credibility with employees and public are interrelated. Employees feel proud to be a part of an organization that is respected by the public. Generous compensations and effective business strategies do not always guarantee employ loyalty, organizational ethics is equally significant. Thus, companies benefit from being ethical because they attract and retain good and loyal employees.

Better decision-making – Decision made by an ethical management is in the best interest of the organization, its employees, and the public. Ethical decisions take into account various social, economic and ethical factors.

Profit maximization – Companies that emphasis on ethical conduct are successful in the long run, even though they lose money in the short run. Hence, a business that is inspired by ethics is a profitable business. Costs of audits and investigation are lower in an ethical company.

Protection of society – In the absence of proper enforcement, organizations are responsible to practice ethics and ensure mechanisms to prevent unlawful events. Thus, by propagating ethical values, a business organization can save the resources of the government and protect the society from exploitation.

Assignment-SMU-MB0052

Q1. Coming Soon.

Q2. Differentiate between mission and vision of a company? Explain with examples.

Ans: - A business is not defined by its name, statutes or articles of incorporation. It is defined by the business mission. Only a clear definition of the mission and the purpose of the organization make possible clear and realistic business objectives.

This emphasizes the need for organizations to take their mission statement seriously and formulate it properly. The mission statement of a company is variously called a statement of philosophy, a statement of beliefs, a statement of purpose and, a statement of business principles. A mission statement is many in one. It embodies the business philosophy of a company’s decision makers, implies the image the company wishes to project for itself, reflects the company’s self-concept; indicates the company’s principal product or service areas and, the customer needs the company seeks to satisfy.

Mission statement should serve seven different purposes or objectives are:

1. To ensure unanimity of purposes within the organization

2. To develop a basis or standard for allocating organizational resources

3. To provide a basis for motivating the use of the organization’s resources

4. To establish a general culture or organizational climate; for example, to suggest a business-like approach

5. To facilitate the translation of objectives and goals into jobs and responsibilities and assignment of tasks to responsible segments within the organization

6. To serve as a focal point for those who can identify themselves with the organization’s purpose and business

7. To specify organizational purposes and inspire translation of these purposes into goals in such a way that cost, time and performance parameters can be assessed and controlled.

A clear distinction exists between the two. Mission is concerned more with the present; the vision more with the future. The mission statement answers the question: ‘What is our business?’ The vision statement answers the question: ‘What do we want to become or, which way should we be going?’ The mission statement focuses on the present strategic thrust, while the vision statement outlines the strategic path. All visionary companies have a vision statement.

Most progressive companies develop both a mission statement and a vision statement. Indian Oil Corporation (IOC) is a good example. Vision and mission statements of IOC4 are:

• Vision: Indian Oil aims to achieve international standards of excellence in all aspects of energy and diversified business with focus on customer delight through quality products and services.

• Mission: Maintaining national leadership in oil refining, marketing and pipeline transportation.



Q3. Explain in detail Porter’s four generic strategies.
Ans: - Porter (1985) evolved the theory that there are four
generic strategic options available to companies. These are:

1. Cost leadership strategy
Cost leadership strategy is based on exploiting some aspects of  the production process, which can be executed at a cost significantly lower than that of competitors. There can be various sources of this cost advantage:

i. lower input costs, (e.g., the price paid by New Zealand timber
mills for the logs produced by the country’s highly efficient
forestry industry or cheap source of high quality bauxite for
National Aluminum Company (NALCO) in India from its mines);


ii. In-plant production costs, (e.g., lower labor costs enjoyed
by Japanese companies locating their video assembly operations in Thailand);


iii. lower delivery cost because of proximity of key markets, (e.g., the practice of major beer producers in Europe to locate micro-breweries in or around major metropolitan cities).


2. Focused cost leadership
Focused cost leadership exploits the same advantages as in cost leadership strategy, but the company occupies a specific niche or niches serving only a part of the total market. For example horticulture enterprise, which operates an onsite farm shop, offers low-priced fresh vegetables to the inhabitants in the
immediate neighborhood area. Porter has mentioned that cost leadership and focused cost leadership represent a ‘low scale advantage’ because it is quite likely that eventually a company’s capabilities will be eroded by rising costs (labour cost in particular) or its market position will be challenged by an even lower cost producer of goods, (e.g., Russia’s post-Perestroika entry in the world arms market offering
extremely competitive prices).

3. Differentiation strategy

Differentiation strategy is based on offering superior performance, and Porter argues that this is a ‘high scale
advantage’ because, first, the producer can usually command a premium price for its product and, second, competitors are less of a threat, because to be successful, they must be able to offer an even higher performance product.


4. Focused differentiation strategy

Focused differentiation, which is typically a strategy of smaller and most specialist companies, is also based on superior performance. The only difference is that in this strategy, a company specializes in serving the needs of a specific market or markets. For, e.g., the Cray Corporation supplies ‘super computers’ to the aerospace and defense industries.

Q4. Coming Soon.






Q5. Define the term ‘industry’. List the types of industries. How do you an industry analysis?

Ans: - An industry can be broadly defined as ‘the group of firms producing products that are close substitutes for each other’.1 There is, however, a great deal of controversy over an appropriate definition of industry. The debate or controversy mostly centers on ‘how close substitutability needs to be in terms of product, process or geographic market boundaries’.

Definition of an industry should not be thought to be same as definition of the business in which a company wants to compete. Industry may be broadly defined or narrowly defined. If industry is broadly defined, it does not follow that business should also be broadly defined without focus.

Industries broadly classified into five categories are as follows:

1. Fragmented industry

2. Emerging industry

3. Mature industry

4. Declining industry

5. Global industry

Understanding industry structure and formulating competitive strategies imply industry analysis. But, conducting a proper industry analysis is a very big task. To conduct such an analysis, the industry analyst has to find answers too many important questions:

• What should be the starting point?

• Which types of data one looks for?

• Should one look for only published or secondary data?

• Or, should one also generate primary data from industry observers (participants)?

• What are the analytical techniques to be used for data processing and analysis?

Industry analysis should follow a number of logical or strategic steps. These are shown below:

Step 1: Determine or specify the objective or objectives so that there is no lack of focus.

Step 2: Collect and scan through available published or secondary data.

Step 3: Identify data or information gaps for generation of primary data.

Step 4: Generate primary data (through survey, interviews, meetings, etc.,) to fill the data information gap.

Step 5: Process/tabulate various data

Step 6: Prepare a general overview of the industry using the processed/ tabulated data/information.

Step 7: Prepare specific sect oral analysis—technology, product, marketing pattern, competition analysis.

Step 8: Draw inferences or conclusions to complete the analysis.

Q6.  What is meant by ‘structure of an organization’? Describe the five major structural types or forms of an organization.

Ans: - Structure of an organization defines the levels and roles of management in a hierarchical way. One can also say that an organizational structure spells out the way tasks, functions and responsibilities are allocated for implementing a policy or strategy. These also imply that an organizational structure facilitates or constrains how processes and relationships work. Major structural types or forms are:

1. Entrepreneurial structure

This is the most elementary form of structure. The entrepreneurial structure represents an organization which is owned and managed by a single individual—the entrepreneur. Some call it a simple structure and contend that this is no formal structure at all. This is the way most small businesses operate. The owner-entrepreneur assumes/discharges most of the responsibilities of management with some manager(s)/staff assisting him/her.

2. Functional structure

As an organization increases in size with expansion of business, the simple entrepreneurial system outlives its utility as a structural form. A functional structure is based on differentiation and allocation of primary functions such as production, marketing, finance, and HR along with certain delegation of powers. The functional structure is most commonly used by medium and large organizations with narrow or limited product range.

3. Divisional structure

A divisional structure arises primarily because of inadequacy of a simple functional structure to deal with the complexities of business as an organization grows very large. The more common form of divisionalization is on the basis of product or business. Divisionalization gives focus on different divisions with separate product/market strategies.

4. SBU structure

Divisions closely approximate strategic business units (SBUs) in all large multi-business organizations. The fundamental factor in the SBU structure is to identify independent product/market segment which requires distinct strategies. Each of these product/market segments also face a different environment, and, therefore, more is the need for separate strategies. In many companies, particularly in the public sector, the earlier divisional structure has been replaced by an SBU structure to give more focus on individual business and clearly define the role of corporate parents.

5. Matrix structure

Matrix structure is a need-based or project-based structure which does not follow the conventional lines of hierarchy or control. We can call it a combination structure—combination of different divisions or functions—designed to form a project team for launching a new product, development of a new market or geographical operations. In the matrix structure, a project manager is appointed to coordinate and manage project activities. Matrix structures need not be adopted only by very large complex organizations; these can be used by many professional organizations, like construction companies, consultancy organizations, etc.

6. Project-based structure

Some strategic analysts make a distinction between a matrix structure and a purely project-based structure. Most matrix structures are also project based, but, many of these structures have indefinite life like international trading operations of multinational companies. A project structure is one in which teams are created for specific purposes or projects, the project team undertakes the assigned work, and immediately on completion, the team is dissolved. Project based structures are more temporary than matrix structures.