Unit 1

Intro: Marketing is the process of performing market research, selling products

and/or services to customers and promoting them via advertising to further
enhance sales.[1] It generates the strategy that underlies sales techniques, business
communication, and business developments.[2] It is an integrated process through
which companies build strong customer relationships and create value for their
customers and for themselves.[2]

Marketing management definition

What is Marketing? The term marketing has changed and evolved over a
period of time, today marketing is based around providing continual benefits to the customer,
these benefits will be provided and a transactional exchange will take place.

The Chartered Institute of Marketing define marketing as 'The management process responsible
for identifying , anticipating and satisfying customer requirements profitably'

If we look at this definition in more detail Marketing is a management responsibility and should
not be solely left to junior members of staff. Marketing requires co-ordination, planning,
implementation of campaigns and a competent manager(s) with the appropriate skills to ensure
success.

Marketing objectives, goals and targets have to be monitored and met, competitor strategies
analysed, anticipated and exceeded. Through effective use of market and marketing research an
organisation should be able to identify the needs and wants of the customer and try to delivers
benefits that will enhance or add to the customers lifestyle, while at the same time ensuring that
the satisfaction of these needs results in a healthy turnover for the organisation.

Philip Kotler defines marketing as 'satisfying needs and wants through an exchange process'

Within this exchange transaction customers will only exchange what they value (money) if they
feel that their needs are being fully satisfied, clearly the greater the benefit provided the higher
transactional value an organisation can charge.

P.Tailor of www.learnmarketing.net suggests that 'Marketing is not about providing products or

services it is essentially about providing changing benefits to the changing needs and demands
of the customer (P.Tailor 7/00)'

Marketing concepts
Marketing strategy[1][2] is a process that can allow an organization to concentrate
its limited resources on the greatest opportunities to increase sales and achieve a
sustainable competitive advantage.[3] A marketing strategy should be centered
around the key concept that customer satisfaction is the main goal[citation

Product marketing deals with the first of the "7P"'s of marketing, which are Product, Pricing,
Place, and Promotion, Packaging, Positioning & People.

Product marketing, as opposed to product management, deals with more outbound marketing
tasks. For example, product management deals with the nuts and bolts of product development
within a firm, whereas product marketing deals with marketing the product to prospects,
customers, and others. Product marketing, as a job function within a firm, also differs from other
marketing jobs such as marketing communications ("marcom"), online marketing, advertising,
marketing strategy, etc.

A Product market is something that is referred to when pitching a new product to the general
public. The people you are trying to make your product appeal to is your consumer market. For
example: If you were pitching a new video game console game to the public, your consumer
market would probably be the adult male Video Game market (depending on the type of game).
Thus you would carry out market research to find out how best to release the game. Likewise, a
massage chair would probably not appeal to younger children, so you would market your product
to an older generation.

Product distribution (or place) is one of the four elements of the marketing mix.
An organization or set of organizations (go-betweens) involved in the process of
making a product or service available for use or consumption by a consumer or
business user.

A service is the intangible equivalent of an economic good. Service provision is often an

economic activity where the buyer does not generally, except by exclusive contract, obtain
exclusive ownership of the thing purchased. The benefits of such a service, if priced, are held to
be self-evident in the buyers willingness to pay for it. Public services are those society pays for
as a whole through taxes and other means.

By composing and orchestrating the appropriate level of resources, skill, ingenuity,and

experience for effecting specific benefits for service consumers, service providers participate in
an economy without the restrictions of carrying stock (inventory) or the need to concern
themselves with bulky raw materials. On the other hand, their investment in expertise does
require consistent service marketing and upgrading in the face of competition which has equally
few physical restrictions. Many so-called services, however, require large physical structures and
equipment, and consume large amounts of resources, such as transportation services and the
military.

Retail consists of the sale of goods or merchandise from a fixed location, such as a
department store, boutique or kiosk, or by mail, in small or individual lots for direct
consumption by the purchaser.[1] Retailing may include subordinated services, such
as delivery. Purchasers may be individuals or businesses. In commerce, a "retailer"
buys goods or products in large quantities from manufacturers or importers, either
directly or through a wholesaler, and then sells smaller quantities to the end-user.
Retail establishments are often called shops or stores. Retailers are at the end of
the supply chain. Manufacturing marketers see the process of retailing as a
necessary part of their overall distribution strategy. The term "retailer" is also
applied where a service provider services the needs of a large number of
individuals, such as a public utility, like electric power.

Brand management is the application of marketing techniques to a specific

product, product line, or brand.

Account-based marketing (ABM), also known as key account marketing, is a

strategic approach to business marketing in which an organisation considers and
communicates with individual prospect or customer accounts as markets of one.
The popularity of this approach is growing, with companies such as BearingPoint,
HP, Kilroy Travels, Progress Software and Xerox reported to be leading the way[1].

Marketing ethics is the area of applied ethics which deals with the moral
principles behind the operation and regulation of marketing. Some areas of
marketing ethics (ethics of advertising and promotion) overlap with media ethics.

Marketing effectiveness is the quality of how marketers go to market with the

goal of optimizing their spending to achieve good results for both the short-term
and long-term. It is also related to Marketing ROI and Return on Marketing
Investment (ROMI).

Market research is any organized effort to gather information about markets or customers. It is
a very important component of business strategy.[1] The term is commonly interchanged with
marketing research; however, expert practitioners may wish to draw a distinction, in that
marketing research is concerned specifically about marketing processes, while market research is
concerned specifically with markets.[2]
Market Research is the key factor to get advantage over competitors. Market research provides
important information to identify and analyze the market need, market size and competition.

Market research,as defined by the ICC/ESOMAR International Code on Market and Social
Research, includes social and opinion research, [and] is the systematic gathering and
interpretation of information about individuals or organizations using statistical and analytical
methods and techniques of the applied social sciences to gain insight or support decision making.
[3]

Market segmentation is a concept in economics and marketing. A market segment is a sub-set

of a market made up of people or organizations with one or more characteristics that cause them
to demand similar product and/or services based on qualities of those products such as price or
function. A true market segment meets all of the following criteria: it is distinct from other
segments (different segments have different needs), it is homogeneous within the segment
(exhibits common needs); it responds similarly to a market stimulus, and it can be reached by a
market intervention. The term is also used when consumers with identical product and/or service
needs are divided up into groups so they can be charged different amounts.The people in a given
segment are supposed to be similar in terms of criteria by which they are segmented and different
from other segments in terms of these criteria. These can broadly be viewed as 'positive' and
'negative' applications of the same idea, splitting up the market into smaller groups.

Examples:

• Gender
• Price
• Interests

While there may be theoretically 'ideal' market segments, in reality every organization engaged
in a market will develop different ways of imagining market segments, and create Product
differentiation strategies to exploit these segments. The market segmentation and corresponding
product differentiation strategy can give a firm a temporary commercial advantage.

Market dominance is a measure of the strength of a brand, product, service, or

firm, relative to competitive offerings. There is often a geographic element to the
competitive landscape. In defining market dominance, you must see to what extent
a product, brand, or firm controls a product category in a given geographic area.

Pricing is the process of determining what a company will receive in exchange for its products.
Pricing factors are manufacturing cost, market place, competition, market condition, and quality
of product. Pricing is also a key variable in microeconomic price allocation theory. Pricing is a
fundamental aspect of financial modeling and is one of the four Ps of the marketing mix. The
other three aspects are product, promotion, and place. Price is the only revenue generating
element amongst the four Ps, the rest being cost centers.

Pricing is the manual or automatic process of applying prices to purchase and sales orders, based
on factors such as: a fixed amount, quantity break, promotion or sales campaign, specific vendor
quote, price prevailing on entry, shipment or invoice date, combination of multiple orders or
lines, and many others. Automated systems require more setup and maintenance but may prevent
pricing errors. The needs of the consumer can be converted into demand only if the consumer
has the willingness and capacity to buy the product. Thus pricing is very important in marketing.

Evolution of marketing

Refer book

Marketing mix
The term "marketing mix" was coined in 1953 by Neil Borden in his American
Marketing Association presidential address. However, this was actually a
reformulation of an earlier idea by his associate, James Culliton, who in 1948
described the role of the marketing manager as a "mixer of ingredients", who
sometimes follows recipes prepared by others, sometimes prepares his own recipe
as he goes along, sometimes adapts a recipe from immediately available
ingredients, and at other times invents new ingredients no one else has tried.[1] A
prominent marketer, E. Jerome McCarthy, proposed a Four P classification in 1960,
which has seen wide use. The Four P's concept is explained in most marketing
textbooks and classes.

Four P's
Elements of the marketing mix are often referred to as the "Four P's":

• Product - It is a tangible object or an intangible service that is mass produced

or manufactured on a large scale with a specific volume of units. Intangible
products are service based like the tourism industry & the hotel industry or
codes-based products like cellphone load and credits. Typical examples of a
mass produced tangible object are the motor car and the disposable razor. A
less obvious but ubiquitous mass produced service is a computer operating
system. Packaging also needs to be taken into consideration. Every product is
subject to a life-cycle including a growth phase followed by an eventual
period of decline as the product approaches market saturation. To retain its
competitiveness in the market, product differentiation is required and is one
of the strategies to differentiate a product from its competitors.

• Price – The price is the amount a customer pays for the product. The business
may increase or decrease the price of product if other stores have the same
product.
• Place – Place represents the location where a product can be purchased. It is
often referred to as the distribution channel. It can include any physical store
as well as virtual stores on the Internet.
• Promotion represents all of the communications that a marketer may use in
the marketplace. Promotion has four distinct elements: advertising, public
relations, personal selling and sales promotion. A certain amount of crossover
occurs when promotion uses the four principal elements together, which is
common in film promotion. Advertising covers any communication that is
paid for, from cinema commercials, radio and Internet adverts through print
media and billboards. Public relations are where the communication is not
directly paid for and includes press releases, sponsorship deals, exhibitions,
conferences, seminars or trade fairs and events. Word of mouth is any
apparently informal communication about the product by ordinary
individuals, satisfied customers or people specifically engaged to create word
of mouth momentum. Sales staff often plays an important role in word of
mouth and Public Relations (see Product above).
Any organization, before introducing its products or services into the market; conducts a market
survey. The sequence of all 'P's as above is very much important in every stage of product life
cycle Introduction, Growth, Maturity and Decline.

[edit] Extended Marketing Mix (3 Ps)

More recently, three more Ps have been added to the marketing mix namely People, Process
and Physical Evidence. This marketing mix is known as Extended Marketing Mix.

• People: All people involved with consumption of a service are important. For
example workers, management, consumers etc. It also defines the market
segmentation, mainly demographic segmentation. It addresses particular
class of people for whom the product or service is made available.
• Process: Procedure, mechanism and flow of activities by which services are
used. Also the 'Procedure' how the product will reach the end user.
• Physical Evidence: The marketing strategy should include effectively
communicating their satisfaction to potential customers.

[edit] Four Cs (1) in 7Cs compass model

A formal approach to this customer-focused marketing mix is known as the Four Cs
(Commodity, Cost, Channel, Communication) in “7Cs compass model.” Koichi Shimizu
proposed a four Cs classification in 1973. [2] [3]

This system is basically the four Ps [4] renamed and reworded to provide a customer focus. The
four Cs Model provides a demand/customer centric version alternative to the well-known four Ps
supply side model (product, price, place, promotion) of marketing management.The Four Cs
model is more consumer-oriented and attempts to better fit the movement from mass marketing
to symbiotic marketing.

1. Commodity:(Original meaning of Latin: Commodus=convenient)the product

for the consumers or citizens.a commodity can also be described as an raw
material such as; oil,metal ores and wheat, the price of these tend to change
on a daily basis, due to the demand and supply of these commodities.
2. Cost:(Original meaning of Latin: Constare= It makes sacrifices)producing
cost, selling cost, purchasing cost and social cost.
3. Channel:(Original meaning is a Canal)Flow of commodity : marketing
channels.
4. Communication:(Original meaning of Latin:Communio=sharing of meaning)
marketing communication : It doesn't promote the sales.

(Framework of ７ Cs compass model)

• (C1): Corporation and competitor : The core of 4Cs is corporation and

organization, while the core of 4Ps is customers who are the targets for
attacks or defenses.
• (C2) : Commodity, (C3) : Cost, (C4) : Channel, (C5) : Communication
 • (C6) : Consumer (Needle of compass to Consumer)

The factors related to customers can be explained by the first character of four directions marked
on the compass model: N = Needs, W = Wants, S = Security and E = Education (consumer
education).

• (C7) : Circumstances (Needle of compass to Circumstances )

In addition to the customer, there are various uncontrollable external environmental factors
encircling the companies. Here it can also be explained by the first character of the four
directions marked on the compass model --- N = National and International C, W=Weather, S =
Social and Cultural C, E = Economic (Circumstances).

[edit] Four Cs (2)

Robert F. Lauterborn proposed a four Cs(2) classification in 1993.[5] The Four Cs model is more
consumer-oriented and attempts to better fit the movement from mass marketing to niche
marketing. The Product part of the Four Ps model is replaced by Consumer or Consumer
Models, shifting the focus to satisfying the consumer needs. Another C replacement for Product
is Capable. By defining offerings as individual capabilities that when combined and focused to a
specific industry, creates a custom solution rather than pigeon-holing a customer into a product.
Pricing is replaced by Cost reflecting the total cost of ownership. Many factors affect Cost,
including but not limited to the customer's cost to change or implement the new product or
service and the customer's cost for not selecting a competitor's product or service. Placement is
replaced by Convenience. With the rise of internet and hybrid models of purchasing, Place is
becoming less relevant. Convenience takes into account the ease of buying the product, finding
the product, finding information about the product, and several other factors. Finally, the
Promotions feature is replaced by Communication which represents a broader focus than simply
Promotions. Communications can include advertising, public relations, personal selling, viral
advertising, and any form of communication between the firm and the consumer.

Trends & Lessons of Marketing in 21st Century

People say marketing is as old as the Mankind. Marketing came into existence when the first
barter took place. Barter later on evolved into the art of selling. According to some,
Marketing first came into existence in 17th century in Japan. Peter Ducker believes that
marketing was invented in 1935 in Japan by the Mitsai family who settled in Tokyo as
merchant and opened the first departmental store offering a large assortment of products to
their customers. They had only a vague idea of quality, product category or process of
marketing.

Lot of water has flown down the Ganges since then and marketing has evolved as a major
discipline over the years. It all started with the production concept, evolved as the selling
concept, graduated into the marketing concept and post graduated into the social marketing
concept. Each phase of evolution brought along with it various marketing concepts and
strategies befitting the dynamic needs environment and market situations prevailing. The
organization, which adapted to changes, survived strategies over the years and which failed
to do so succumb to the competition. The marketers have evolved various strategies over
the years essential for the survival and success of their organization.

The post liberalization world has become place where there is a cut throat competition
between the organizations and only the fittest is going to survive. This makes marketing
more special & the Marketers have the tough task ahead, they will have to workout
strategies for marketing the offerings of their company to much aware, more knowledgeable
customer having so many alternative offers from the competitors, thus marketing strategy
has today become the lifeline of any & perhaps every business, it is the ultimate battlefield
for any company to prove their endurance in market. Eventually the companies with-
planned & strategically designed marketing strategies emerge as winners.

The following are the major trends, shifts & challenges that the marketer and
business people will need to take into consideration for formulating the Marketing strategy.

Operational Symbiosis of Marketing with other Functions:

At the operational level after a series of clashes with production and other functions,
marketing is gradually getting integrated with other Major function that are responsible of
creating value for the customers. In the current situation, R&D, Design, and production
should work in collaboration with marketing to assess. Customer needs and deliver
products/services to satisfy the same. This simply means that marketers will have to have a
good understanding of the functioning of other departments as well.

Be Different/be what you are:

The future will belong to those who manage uniqueness in their projects by being different.
There is no point in trying to imitate others, in the past; avenues were limited for
advancement in life. In the age of the individual, it is enough to be what you are and bring
out the best in you. In the same way, companies that are different and innovative will be
successful.

Discount Effect:

Promotions, discounts are now known as the basic workhorse of marketing programme.
Price promotions can increase sales in only three ways: Growing the category, switching &
purchase acceleration. Price promotion can indeed benefit total category sales through
brining down prices & added visibility through displays & other marketing activities.
Consumers today seem to have a plethora of options to buy into, amongst products and
services of every kind. Choices so unlimited, that brand need to shout high above the
decibel levels of parity product advertising. Parity distribution and 'Just-There' display and
Merchandising. Price seems a key "P" to use. Using it innovatively makes it that much more
of a creative exercise to lure in the customers. The available price to discount is the same in
the hands of every competitor in the organized segment. How you get a better "bang for the
buck" is the important issue to consider. How you spend that money to create that much,
more excitement in the heart of the consumer to loosen his purse at your outlet instead of
in the den of your competitor. Discount & offers plays a major role to attracting customer
throughout the year especially on festivals. The offers that worked well were the offers that
had the consumer drooling and itching to run out and make that necessary and unnecessary
purchase on festivals and occasions.

Profit from Complaints:

No one likes to hear complaints, but in this era of cut-throat competition effective handing
of complaints can be the life blood of any business. Complaints can be the educators of your
business. Most dissatisfied customers do not complain. Complaints are not made because
people think it is not worth the time & effort. They do not know how or where to complain
or they believe the company would be indifferent to them so a company needs to welcome
complaints as a second chance to keep a customer. Keeping this in mind most of companies
are now searching for effective customer satisfaction performance program where they area
take opinion of customers, finding out what were the causes of the dissatisfaction, if any
and what it would take to put things right.

Plethora of Ps:

As the four Ps (Price, Place, Product, Promotion) was found inadequate to meet the new
developments in the market place, a plethora of new Ps was added to the marketing
strategy literature. Boomes and Bitner added the following "3Ps" to the traditional "4Ps"
of marketing to make them relevant specially for making of services. There 3 Ps are

* Participants or People
* Physical Evidence
* Process

This fifth "P" People is also relevant to industrial products. Philip Kotler added the following
"2Ps" for entry into restricted markets.

In present scenario, multinational companies had to manage public opinion and local politics
to enter restricted market like China, Russia, India etc.

According to the opinion of some marketing strategist in this present era of globalization
some other 'P's are also relevant, these are.

* Position
* Profit
* Plan
* Performance
* Pace & Passions
* Patience

Customer Satisfaction to Customer Value Management:

The word value too often means cheap. It should mean satisfaction .Value should always
measure in terms of total benefits & total cost. Value for money is cheap but added value is
expensive. The meaning of term Value Marketing is more than the price cutting, low
margins, giving extra quantity & low budgets. Increased international competition makes
the market wider but tougher & marketers are continuously trying for enhancing the
customer value. Customer satisfaction typically used to be monitored by the marketers and
they used to take the credit when it wept up and had to accept the blame when it went
down. But the fact is that consumers will choose that company which offers better value for
their money. Providing better value to customers is the job of the whole organization. This
is a function of strategic importance, which cannot be left in the hands of a few marketing
people. This has been managed by a team of cross-functional experts and monitored the top
management.

The Rise of Sports Marketing:

With television broadcasting and savvy sports agents as allies, sport has become an
important vehicle for marketers to hawk their products. The sports marketing industry that
includes broadcasting, endorsement, sponsorship, merchandising and ideas is growing in
stature and relevance. Sport marketing is a sub-section of advertising, assimilating the use
or association of sports with brands to promote the brand. It includes creatively using sports
to promote recall, use or brand attributes, as per Pitch – Group M estimate, the annual size
of sports marketing business in the country is Rs. 900 crore. Sportspersons display
attributes that people & brand would love to stand for. Determination, humor, style and
flamboyance and attributed that marketers covet in order to establish a connect with
consumers.

A Shift Towards One-On-One Marketing:

While the earlier paradigm aimed at meeting the needs of segments of consumers, the new
paradigm treats every customer as unique. The development of technology has made it
possible to address the needs of individual customers, the day may not be very far off when
a customer wanting to buy a toilet soap may have to put his/her hand into a scanner which
will sense the skin complexion and pop out a pouch of liquid soap that is ideally formulated
to suit his/her skin.

Virtual Marketing:

Everything can be sold on the Net. With visionaries we will soon find villages connected to
computer networks. No marketer can afford to ignore this medium. Most of the people who
surf the net for fun are not computer literate.

Standard of Living to Quality of Living:

There was a time when people felt it very important to acquire a car, TV, fridge, mobile and
a washing machine for the house. A number of people may be planning to add an air-
conditioner and a PC to their house-hold items. All these add to the physical comforts. But
after getting all these people look for improvements in the quality of their living. Spiritual
pursuit, environmental protection and universal brotherhood are things that really interest
that really interest people who have attained a standard of living.

Innovation is central to Marketing:

Innovation is more than creativity; it is the commercial realization of creativity. Consumers

like what they have but also crave change. The word "New, Improved, Better" can
influence the customer preference. Innovation is the life blood of Marketing. Creative ideas
are valuable but the greater part is harnessing them to profitable productive change.

Emphasis on Personal Selling:

Now personal selling is an organic part of the business fuelling not only customer
relationships but stimulating the marketing functions with feedback from the market.
Network marketing firms such as Amway, Tupperware etc. are using organized personal
selling efforts in very innovative manner.

Retailing: The new marketing Mantra:

Call it by any name; it's the last point of return for any marketer. The modern trade calls it
the last & the most vital leg of the value chain. You guessed it right; I am talking about
retailing as an arm of marketing, which is the final point of fruition for all marketing
activities. The strength and potential of the sector is evident from its sheer size, which is
pegged at a whopping Rs. 9.0 lakh crore. The modern trade has now six types of retail
formats like supermarkets, department stores, discount stores, and convenience store,
hypermarket & health / pharma chains.

Get closer to the customers:

Getting close to the consumers is no longer a management jargon but a reality and a
survival strategy in the times of tough competition. All the touch points with customer i.e.
pre purchase, during the purchase and post purchase need to be carefully handled to satisfy
customer expectations.

Emancipation of Women:

Women are now gaining their rightful place in society. This is going to lead to greater
demand for products like beauty-aids, heat-and-eat stuff, healthcare and fitness for women,
which could be exploited by marketers in the new millennium. Now women are more net-
savvy than men.

E – Business Center:

Education is one big business that cannot be ignored by marketers; it is not just the primary
education, but the life-long education that has become necessary for survival in the modern
ever-changing world. It is getting delivered more and more through the net which allows
the learner to plan his course at his pace and have a one-to-one interaction with instructors
through e-mail. Eventually education will become guru centric from the current institute-
centric mode.

Soul selling:

Even with all the material comforts, people have a sense of loneliness and certain
hollowness inside; this is where soul selling comes to play. There are powerful preachers
who come on the Radio, TV and Internet and appeal to your soul, of course in return for a
donation. Religion as big business and is expected to grow further in future. If you can't be
a preacher, sponsor a preacher to sell your products.

Rural Migration:

With comforts, communication and connectivity made available in the rural areas why would
anyone want to live in the congested, unhygienic and polluted big cities. Companies selling
farmhouses and plantations exploit this desire for the green rural environment, with
connectivity established through satellites; rural area will become attractive locales for ever
setting up of business organizations.

Eminent management thinker Peter Druker has once said, "Business is the creation of its
customers" but in the present business scenario creating customers in not the end point,
but more & more companies are striving for retaining them & convert them as their
advocates, marketing strategies play an important role in this regard.

The Marketing Environment

What is the marketing environment?

The marketing environment surrounds and impacts upon the organization. There are three key
perspectives on the marketing environment, namely the 'macro-environment,' the 'micro-
environment' and the 'internal environment'.

The micro-environment
This environment influences the organization directly. It includes suppliers that deal directly or
indirectly, consumers and customers, and other local stakeholders. Micro tends to suggest small,
but this can be misleading. In this context, micro describes the relationship between firms and
the driving forces that control this relationship. It is a more local relationship, and the firm may
exercise a degree of influence.

These are internal factors close to the company that have a direct impact on the organisations strategy.
These factors include:
Micro Environmental Factors

Customers
Organisations survive on the basis of meeting the needs, wants and providing benefits for their
customers. Failure to do so will result in a failed business strategy.

Employees
Employing the correct staff and keeping these staff motivated is an essential part of the strategic planning
process of an organisation. Training and development plays an essential role particular in service sector
marketing in-order to gain a competitive edge. This is clearly apparent in the airline industry.

Suppliers
Increase in raw material prices will have a knock on affect on the marketing mix strategy of an
organisation. Prices may be forced up as a result. Closer supplier relationships is one way of ensuring
competitive and quality products for an organisation.

Shareholders
As organisation require greater inward investment for growth they face increasing pressure to move from
private ownership to public. However this movement unleashes the forces of shareholder pressure on the
strategy of organisations. Satisfying shareholder needs may result in a change in tactics employed by an
organisation. Many internet companies who share prices rocketed in 1999 and early 2000 have seen the
share price tumble as they face pressures from shareholders to turn in a profit. In a market which has
very quickly become overcrowded many havel failed.

Media
Positive or adverse media attention on an organisations product or service can in some cases make or
break an organisation.. Consumer programmes with a wider and more direct audience can also have a
very powerful and positive impact, hforcing organisations to change their tactics.

Competitors
The name of the game in marketing is differentiation. What benefit can the organisation offer which is
better then their competitors. Can they sustain this differentiation over a period of time from their
competitors?. Competitor anlaysis and monitoring is crucial if an organisation is to maintain its position
within the market.

Micro Environmental Factor/Stakeholder

Analysis

B. MARKETING MACRO ENVIRONMENT

The macro-environment
This includes all factors that can influence and organization, but that are out of their direct
control. A company does not generally influence any laws (although it is accepted that they
could lobby or be part of a trade organization). It is continuously changing, and the company
needs to be flexible to adapt. There may be aggressive competition and rivalry in a market.
Globalization means that there is always the threat of substitute products and new entrants. The
wider environment is also ever changing, and the marketer needs to compensate for changes in
culture, politics, economics and technology.

The Company’s Macro environment

The company and all of the other actors operate in a larger macro environment of
forces that shape opportunities and pose threats to the company. There are six
major forces (outlined below) in the company’s macro environment. There are six
major forces (outlined below) in the company’s macro environment.
a. Demographic.
b. Economic.
c. Natural.
d. Technological.
e. Political.
f. Cultural.

a. Demographic Environment

Demography is the study of human populations in terms of size, density, location,

age, sex, race, occupation, and other statistics. It is of major interest to marketers
because it involves people and people make up markets. Demographic trends are
constantly changing. Some more interesting ones are.

1). The world’s population (though not all countries) rate is growing at an explosive
rate that will soon exceed food supply and ability to adequately service the
population. The greatest danger is in the poorest countries where poverty
contributes to the difficulties. Emerging markets such as China are receiving
increased attention from global marketers.
2). The most important trend is the changing age structure of the population. The
population is aging because of a slowdown in the birth rate (in this country) and life
expectancy is increasing. The baby boomers following World War II have produced a
huge “bulge” in our population’s age distribution. The new prime market is the
middle age group (in the future it will be the senior citizen group). There are many
subdivisions of this group.
a). Generation X--this group lies in the shadow of the boomers and lack obvious
distinguishing characteristics. They are a very cynical group because of all the
difficulties that have surrounded and impacted their group.
b). Echo boomers (baby boomlets) are the large growing kid and teen market. This
group is used to affluence on the part of their parents (as different from the Gen
Xers). One distinguishing characteristic is their utter fluency and comfort with
computer, digital, and Internet technology (sometimes called Net-Gens).
c). Generational marketing is possible, however, caution must be used to avoid
generational alienation. Many in the modern family now “telecommute”--work at
home or in a remote office and conduct their business using fax, cell phones,
modem, or the Internet In general, the population is becoming better educated. The
work force is be-coming more white-collar. Products such as books and education
services appeal to groups following this trend. Technical skills (such as in
computers) will be a must in the future. The final demographic trend is the
increasing ethnic and racial diversity of the population. Diversity is a force that
must be recognized in the next decade. However, companies must recognize that
diversity goes beyond ethnic heritage. One the important markets of the future are
that disabled people (a market larger any of our ethnic minority groups).

b. Economic Environment

The economic environment includes those factors that affect consumer purchasing
power and spending patterns. Major economic trends in the United States include:
1). Personal consumption (along with personal debt) has gone up (1980s) and the
early 1990s brought recession that has caused adjustments both personally and
corporately in this country. Today, consumers are more careful shoppers.
2). Value marketing (trying to offer the consumer greater value for their dollar) is
a very serious strategy in the 1990s. Real income is on the rise again but is being
carefully guarded by a value-conscious consumer.
3). Income distribution is still very skewed in the U. S. and all classes have not
shared in prosperity. In addition, spending patterns show that food, housing, and
transportation still account for the majority of consumer dollars. It is also of note
that distribution of income has created a “two-tiered market” where there are those
that are affluent and less affluent. Marketers must carefully monitor economic
changes so they will be able to prosper with the trend, not suffer from it.

c. Natural Environment

The natural environment involves natural resources that are needed as inputs by
marketers or that are affected by marketing activities. During the past two decades
environmental concerns have steadily grown. Some trend analysts labeled the
specific areas of concern were:

1). Shortages of raw materials.

Staples such as air, water, and wood products have been seriously damaged and
non-renewable such as oil, coal, and various minerals have been seriously depleted
during industrial expansion.

2). Increased pollution

is a worldwide problem. Industrial damage to the environment is very serious. Far-
sighted companies are becoming “environmentally friendly” and are producing
environmentally safe and recyclable or biodegradable goods. The public response to
these companies is encouraging. However, lack of adequate funding, especially in
third world countries, is a major barrier.

3). Government intervention

in natural resource management has caused environmental concerns to be more

practical and necessary in business and industry. Leadership, not punishment,
seems to be the best policy for long-term results. Instead of opposing regulation,
marketers should help develop solutions to the material and energy problems facing
the world.

4). Environmentally sustainable strategies.

The so-called green movement has encouraged or even demanded that firms
produce strategies that are not only environmentally friendly but are also
environmentally proactive. Firms are beginning to recognize the link between a
healthy economy and a healthy environment.

d. Technological Environment

The technological environment includes forces that create new technologies,

creating new product and market opportunities.
1). Technology is perhaps the most dramatic force shaping our destiny.
2). New technologies create new markets and opportunities.
3). The following trends are worth watching:
a). Faster pace of technological change. Products are being technologically
outdated at a rapid pace.
b). There seems to be almost unlimited opportunities being developed daily.
Consider the expanding fields of health care, the space shuttle, robotics, and
biogenetic industries.
c). The challenge is not only technical but also commercial--to make practical,
affordable versions of products.
d). Increased regulation. Marketers should be aware of the regulations concerning
product safety, individual privacy, and other areas that affect technological
changes. They must also be alert to any possible negative aspects of an innovation
that might harm users or arouse opposition.

e. Political Environment

The political environment includes laws, government agencies, and pressure groups
that influence and limit various organizations and individuals in a given society.
Various forms of legislation regulate business.
1). Governments develop public policy to guide commerce--sets of laws and
regulations limiting business for the good of society as a whole.
2). Almost every marketing activity is subject to a wide range of laws and
regulations. Some trends in the political environment include:

1). Increasing legislation to:

a). Protect companies from each other.
b). Protecting consumers from unfair business practices.
c). Protecting interests of society against unrestrained business behavior.

2). Changing government agency enforcement. New laws and their enforcement will
continue or increase.

3). Increased emphasis on ethics and socially responsible actions. Socially

responsible firms actively seek out ways to protect the long-run interests of their
consumers and the environment.
a). Enlightened companies encourage their managers to look beyond regulation and
“do the right thing.”
b). Recent scandals have increased concern about ethics and social responsibility.
c). The boom in e-commerce and Internet marketing has created a new set of social
and ethical issues. Concerns are Privacy, Security, Access by vulnerable or
unauthorized groups.

f. Cultural Environment

The cultural environment is made up of institutions and other forces that affect
society’s basic values, perceptions, preferences, and behaviors. Certain cultural
characteristics can affect marketing decision-making. Among the most dynamic
cultural characteristics are:

1). Persistence of cultural values. People’s core beliefs and values have a high
degree of persistence. Core beliefs and values are passed on from parents to
children and are reinforced by schools, churches, business, and government.
Secondary beliefs and values are more open to change.

2). Shifts in secondary cultural values. Since secondary cultural values and beliefs
are open to change, marketers want to spot them and be able to capitalize on the
change potential. Society’s major cultural views are expressed in:
a). People’s views of themselves. People vary in their emphasis on serving
themselves versus serving others. In the 1980s, personal ambition and materialism
increased dramatically, with significant implications for marketing. The leisure
industry was a chief beneficiary.
b). People’s views of others. Observers have noted a shift from a “me-society” to
a “we-society.” Consumers are spending more on products and services that will
improve their lives rather than their image.
c). People’s views of organizations. People are willing to work for large
organizations but expect them to become increasingly socially responsible. Many
companies are linking themselves to worthwhile causes. Honesty in appeals is a
must.
d). People’s views of society. This orientation influences consumption patterns.
“Buy American” versus buying abroad is an issue that will continue into the next
decade.
e). People’s view of nature. There is a growing trend toward people’s feeling of
mastery over nature through technology and the belief that nature is bountiful.
However, nature is finite. Love of nature and sports associated with nature are
expected to be significant trends in the next several years.
f). People’s views of the universe. Studies of the origin of man, religion, and
thought-provoking ad campaigns are on the rise. Currently, Americans are on a
spiritual journey. This will probably take the form of “spiritual individualism.”

The Global Marketing Environment

Global marketing Environment is a complex term to explain because it is covering all the issues
of world that are continuously changing. To explain the true present picture of the Environment
it's necessary to go through the most up-to-date literature and study the current changes. This
chapter is giving the idea about the today's marketing and changes & challenges of the sub
environmental forces.

Today's Marketing

The changing behavior of customers and proliferation of new marketing channels setups the new
issues in the business world. In international market competition it's becoming harder and harder
to maintain the life time relation with customers. Selling quality product and service in
affordable price is not enough to gain the customer loyalty there are also many other dimensions
of care. These all changes make profit secondary and modify organizations to customer-focused
organizations and born the new theories and approaches.

Today's marketing has come out with the circle of 4P's (Product, Price, Place and Promotion) and
in the broader sense it is taking as an organizational function. The modified form of marketing is
to provide greater value to customer and develop and maintain a healthy relationship.

According to the American Marketing Association today's Marketing is:

"Marketing is an organizational function and a set of processes for creating, communicating and
delivering value to customers and for managing customer relationships in way that benefit the
organization and its stakeholders."(Keefe, 2004)

The Intermediate and Macro Environment

The global marketing environment comprises the intermediate and the macro environment. The
intermediate environment contains those factors which are semi-controllable through contracts
and they will be categorized as suppliers, Distributors, facilitators and shareholders. For example
in software industries the different vendors, application sellers, temporary specialist staffs and
subcontractors etc are part of intermediate environment. The macro environment is made up of
those factors and forces which are generally uncontrollable. (Lee, 2005)

For the Global strategic marketing planning to evaluate and investigate the threats, opportunities
and for risk assessment usually organizations used the PESTLE analysis here PESTLE stands for
Political, Economic, Social, Technological, Legal, and Environmental Factors. (These macro
environmental forces are also shown in above figure). Mostly external auditor is used to audit the
impact of these forces.

Some countries have more relaxed and easy polices for import and export.

Countries history of friendly relation and healthy business deals have also a positive impact in
the future trades. Similarly if countries have better infrastructure for trading polices and
legislations it also goes in the favor of the international traders. It helps to minimize the time and
provide the secure dealings and especially newcomers feel comfortable to trade in such
environment. With all these reasons the fresh literature tells us about the twelve factors
involvement in the international trading.

In 2005 according to the Geri Clarke the HELPS FREDICT is a more complete framework for
the international marketing environmental analysis.

H History F Financial

E Economic R Rules- International Trade

L Language E Environment

P Politics D Demographic

S Social I Infrastructure

C Culture

T Technology

Changes and Challenges

In 1998 article in the Economist Magazine Sums it up nicely:

"Marketing has become a complex art. Technology and trade have increased the potential for
global brands. The fragmentation of audiences and rising costs of television and print advertising
are making other media attractive. And direct marketing and the internet are rewriting all the
marketing rules."

55 years back, the television invention opens the new ways of the mass marketing and with the
visual demonstration many local brand and now take the status of the world class brand. This
technology changes the language of the advertising. In old age mostly people preferred to buy
things from market search and mainly radio transmitted about the market affairs and new coming
products. Then TV gave the new confidence to its viewers and globally advertised the real
market position. The visual demonstration also teach the people and guide them correctly and it
also answered the question that why they need and want this specific product. Now World Wide
Web is taking the position of the TV and Similarly the Digital TV and the Smart mobile are
writing the new rules of the marketing.

Today mobile and pager is the basic need of people and every one is in range just because of a
small piece of technology. Here telecommunication was playing an important role. Now in the
end of 20th century, the emergence of internet and telecommunication introduce m-commerce.
First mobile companies simply provide an updates information like weather reports, games
online information, latest movies and songs information etc just to provide better services and to
satisfy customer. From that time the m-commerce became the part of our life and no one feel this
addition of the new business technique, today banks and other financial services are also
providing mobile commerce services and this tiny device has become the source of market
transactions. This was the small overview of emergence of the technology.

On the other hand the destructive incidents like 9/11 and 7/7 etc. and other country wars (War
against terrorism) are destroying the developed markets and the investors are feeling fear to
invest money in these risky areas.

The customer buying behavior and its quality perception is also changing and now he is
demanding the rich added value products and services. The multinational companies and chain
store also create a strong competition globally and it's becoming more difficult to retain a long
term relation with existing customer.

However the last decade of the twentieth century bought major changes that redefine the role and
concept of marketing. The rapid change of market made customer more sophisticated and value
added demanding. Products/service development and management has changed radically, the
internet and third party securities made more easy transactions and virtualized payment and
distribution channels introduce new way to approach market (O'Connor, 2001).

International marketing occurs when a business directs its products and services
toward consumers in more than one country. While the overall concept of marketing is
the same worldwide, the environment within which the marketing plan is implemented
can be drastically different. Common marketing concerns—such as input costs, price,
advertising, and distribution—are likely to differ dramatically in the countries in which a
firm elects to market. Furthermore, many elements outside the control of managers,
both at home and abroad, are likely to have a large impact on business decisions. The
key to successful international marketing is the ability to adapt, manage, and coordinate
a marketing plan in an unfamiliar and often unstable foreign environment.

Businesses choose to explore foreign markets for a host of sound reasons. Commonly,
firms initially explore foreign markets in response to unsolicited orders from consumers
in those markets. In the absence of these orders, companies often begin to export to:
establish a business that will absorb overhead costs at home; seek new markets when
the domestic market is saturated; and to make quick profits. Marketing abroad can also
spread corporate risk and minimize the impact of undesirable domestic situations, such
as recessions.

While companies choosing to market internationally do not share an overall profile, they
seem to have two specific characteristics in common. First, the products that they
market abroad, usually patented, have high earnings potential in foreign markets; in
other words, the international sale of these products should eventually generate a
substantial percentage of the products' total revenue. Also, these products usually have a
price or cost advantage over similar products or have some other attribute making them
novel and more desirable to end users abroad. Second, the management of companies
marketing internationally must be ready to make a commitment to these markets. They
must be willing to educate themselves thoroughly on the particular countries they
choose to enter and must understand the potential benefits and risks of a decision to
market abroad.

MODERN U.S. HISTORY OF

INTERNATIONAL MARKETING
Marketing abroad is not a recent phenomenon. In fact, well-established trade routes
existed three or four thousand years before the birth of Christ. Modern international
marketing, however, can arguably be traced to the 1920s, when liberal international
trading was halted by worldwide isolationism and increased barriers to trade. The
United States furthered this trend by passing the Smoot-Hawley Tariff Act of 1930,
raising the average U.S. tariff on imported goods from 33 to 53 cents. Other countries
throughout the world imposed similar tariffs in response to the United States' actions,
and by 1932 the volume of world trade fell by more than 40 percent. These protectionist
activities continued throughout the 1930s, and the Great Depression, to which many say
protectionism substantially contributed, was deeper and more widespread than any
other depression in modern history. Furthermore, according to the United Nations,
this protectionism undermined the standard of living of people all over the world and
set the stage for the extreme military buildup that led to World War II.

One result of the Great Depression and World War II was strengthened political will to
end protectionist policies and to limit government interference in international trade.
Thus, by 1944 representative countries attending the Bretton Woods Conference
established the basic organizational setting for the post-war economy, designed to
further macroeconomic stability. Specifically, the framework that arose created three
organizations: the International Trade Organization (ITO), the World Bank, and the
International Monetary Fund (IMF).

Although negotiations undertaken for the ITO proved unsuccessful, the United States
proposed that the commercial policy provisions that were originally be included in the
ITO agreements should be temporarily incorporated into the General Agreement on
Tariffs and Trade (GATT). In 1947, 23 countries agreed to a set of tariff reductions
codified in GATT. Although GATr was at first intended as a temporary measure, because
ITO was never ratified, it became the main instrument for international trade
regulation. GATT was succeeded by the World Trade Organization (WTO), which
was established in January 1995 after GATT officially ended in April 1994. The WTO's
main function has been to resolve trade disputes, and it developed procedures for
handling trade disputes that were much improved over the GATr procedures. In its first
18 months the WTO settled more than 50 trade disputes.

In the 1960s and 1970s, world trading patterns began to change. While the United States
remained a dominant player in international trade, other less developed countries began
to manufacture their own products. Furthermore, the United States became more
reliant than ever on imported goods. For example, by 1982 one in four cars sold in the
United States was foreign-made and more than 40 percent of electronic products were
produced or assembled abroad. To make matters worse, the United States consistently
imported a sizable portion of its fuel needs from other countries. All of these elements
created a U.S. dependency on world trade.

As free market policies continued to be the dominant political force concerning trade
around the world, a host of new markets opened. Specifically, in the late 1980s, Central
and Eastern European markets opened with the dissolution of the Soviet Union. By the
1990s, world trade began with China, as well as with countries in South America and the
Middle East—new markets that looked quite promising. In spite of the changes in the
world trade arena, the United States, Japan, and Europe continued to play a dominant
role, accounting for 85 percent of the world's trade.

Interestingly, while the trend of opening new world markets continued, there was
another trend toward regional trade agreements. These agreements typically gave
preferential trade status to nations that assented to the terms of a pact over those
nations that did not participate. Two examples are the creation of a unified European
Market and the ratification of the North American Free Trade Agreement
(NAFTA). Created in 1958, and renamed most recently in 1993, the European Union
(EU) is a regional organization designed to gradually eliminate customs duties and
other types of trade barriers between members. Imposing a common external tariff
against nonmember countries, EU countries slowly adopted measures that would unify
and, theoretically, strengthen member economies. Member nations include Belgium,
France, Germany, Great Britain, Italy, Luxembourg, the Netherlands, Denmark, Ireland,
Greece, Spain, and Portugal.

Comprised of Canada, the United States, and Mexico, NAFTA was passed by the U.S.
House and Senate in November 1994. In total, 360 million consumers are subject to the
agreement, with spending power of about $6 trillion. Therefore, NAFTA is 20 percent
larger than the EU.

With non-European multinational corporations facing tariff barriers put up by the EU,
the most attractive international markets were those emerging in the developing
countries of Asia, Russia, and Latin America. According to Christopher Miller, professor
of international marketing at the Thunderbird Graduate School of International
Management, "There's nowhere else to go. With the advent of the EU, it's harder and
harder for non-European companies to get into Europe. Anyone within the boundaries
has no tariffs, and those outside it have more barriers." In emerging markets, companies
could expect to achieve 30 to 40 percent growth rates, according to Miller.

DEVELOPING FOREIGN MARKETS

There are four general ways to develop markets on foreign soil. They are: exporting
products and services from the country of origin; entering into joint venture
arrangements with one or more foreign companies; licensing patent rights, trademark
rights, etc. to companies abroad; and establishing manufacturing plants in foreign
countries. A company can commit itself to one or more of the above arrangements at
any time during its efforts to develop foreign markets. Each method has distinct
advantages and disadvantages and, thus, no single method is best in all instances.

Companies taking their first steps internationally often begin by exporting products
manufactured domestically. Since the risks of financial losses can be minimized,
exporting is the easiest and most frequently used method of entering international
markets. Achieving export sales can be accomplished in numerous ways. Sales can be
made directly, via mail order, or through offices established abroad. Companies can also
undertake indirect exporting, which involves selling to domestic intermediaries who
locate specific markets for the firm's products or services. While having numerous
benefits, exporting can place constraints on marketing strategies. The exporter often
knows little about typical consumer-use patterns or, if using an intermediary, may have
little influence over product pricing.

International licensing occurs when a country grants the right to manufacture and
distribute a product or service under the licenser's trade name in a specified country or
market. Common examples are granting foreign firms rights to technology, trademarks,
and patents. Although large companies often grant licenses, this practice is most
frequently used by small and medium-sized companies. Often seen as a supplement to
manufacturing and exporting activities, licensing may be the least profitable way of
entering a market. It can be advantageous, however, because it allows domestic firms to
avoid certain obstacles. To illustrate, companies can use licenses when their own money
is scarce, when foreign import restrictions forbid other ways of entering a market, or
when a host country is apprehensive about foreign ownership.

Two particular types of licensing are franchising and management contracts. Similar to
franchising domestically, world franchising occurs most often in fast foods, soft drinks,
hotels, and car rentals. The major benefit of this type of license is the ability to
standardize foreign operations with minimal investment. A second type of licensing
arrangement is referred to as a management contract, often resulting from external
pressures from a host government. This contract can occur when the host government
nationalizes strategic industries for political or economic purposes. Rather than banish
the company completely, the country hires the foreign owner to manage the firm and to
give technical and managerial knowledge to the local population.

A third way to enter a foreign market is through a joint venture arrangement, whereby a
company trying to enter a foreign market forms a partnership with one or more
companies already established in the host country. Often, the local firm provides
expertise on the intended market, while the multinational firm is better able to
accomplish general management and marketing tasks. Use of this method of
international investing has accelerated dramatically in the past 20 years. The biggest
incentive to entering this type of arrangement is that it reduces the company's risk by
the amount of investment made by the host-country partner. Other potential advantages
to a joint venture arrangement are that: (1) it may allow firms with insufficient capital to
expand internationally; (2) it may allow the marketer to use the partner's preexisting
distribution channels; and (3) it may let the marketer take advantage of special skills
possessed by the host country partner. While this method of market entry often results
in the loss of total control over business operations, it is the only method of foreign
investment that some host governments (especially less developed countries) will allow.

A company can also expand abroad by setting up manufacturing operations in a foreign

country. This method is optimal when the foreign demand for a product justifies the
costly investment required. Other benefits to manufacturing abroad can be the
avoidance of high import taxes, the reduction of transportation costs, the use of cheap
labor, and better access to raw materials. When a company chooses to manufacture
abroad, the markets of the host country are serviced by that particular manufacturing
facility. Moreover, often products from the same facility are sent to other countries—
even back to the original home country—for distribution.

INCREASED UNCERTAINTIES
ASSOCIATED WITH MARKETING
ABROAD
Although firms marketing abroad face many of the same challenges as firms marketing
domestically, international environments present added uncertainties which must be
accurately interpreted. Like domestic marketing, international marketing requires
managers to make decisions that are within the firm's control, such as which product to
market, what price it should command, the optimal promotion strategy, and the best
distribution channels. Furthermore, like firms marketing domestically, firms marketing
internationally must be prepared to react to factors in the home country which might
affect their ability to do business. Examples include domestic politics, competition, and
economic conditions.

International marketers face a host of issues that are out of their direct control, both at
home and abroad. For instance, although domestic policies on foreign trade cannot be
controlled by individual businesses, firms marketing abroad must be aware of how
domestic policies help or hinder foreign trade activities. Firms marketing abroad must
also be prepared for uncertainties presented solely by the business environment in the
host country as well. Four very important issues to note in a host country are its laws,
politics, economy, and competition. Other issues are the host country's geography,
infrastructure, currency, distribution channels, state of technological development, and
cultural differences.

The legal and political environments of the host countries are two of the most important
variables faced by international marketers. First, companies operating abroad are bound
by both the laws of host and home countries; moreover, legal systems around the world
vary in content and interpretation. These laws can affect many elements of marketing
strategies, particularly when they are in the form of product restrictions or
specifications. Also, politics can be a huge concern for companies operating abroad and
is, perhaps, the most volatile aspect of international marketing. Unstable political
situations can expose businesses to numerous risks that they would rarely face at home.
When governments change regulations, there are usually new opportunities for both
profits and losses, and firms must usually make modifications to existing marketing
strategies in response. For instance, the opening of Central and Eastern Europe
presented both high political risks and huge potential market opportunities for
companies willing to take the risks.

Economic conditions, per capita gross national product (GNP), and levels of
economic development vary widely around the world. Before entering a market,
firms marketing abroad must be aware of the economic situation there; the economy—
not to mention individual standards of living—has a huge impact on the size and
affluence of a particular target market. Furthermore, marketers must educate
themselves on any trade agreements existing between countries as well as on local and
regional economic conditions. Being aware of economic conditions and the likely
direction that those conditions will take can help marketers better understand the
profitability of potential markets. For example, many companies had to reevaluate
international marketing strategies as international financial crises affected the
economies of Southeast Asia, Russia, and Latin America in 1997-98.

Competition overseas can come from a variety of sources as well. Further, it has the
potential to be much fiercer than competition at home. Often, if a market is ready to
accept foreign goods, numerous manufacturers—both indigenous and foreign based—
will be willing to risk entry into that market. Making the situation more intense, the
governments of many other countries may subsidize manufacturers to help them enter a
particular market.

Obviously, the more foreign markets in which a firm enters, the more of these
uncontrollable events the firm must consider. To make the situation more interesting,
the solutions to problems occurring in one country are often inapplicable to problems
occurring in a second country because of differences in the political climates, economies,
and cultures. The uncertainty of different foreign business environments creates the
need to closely study the environment within each new market entered.

Companies that are truly global competitors employ a long-term international

marketing strategy to overcome the uncertainties associated with conducting business
abroad. Their long-term strategies enable them to weather short-term economic or
political crises, such as the peso devaluation in Mexico. Such companies are prepared to
make increased investments during downturns, and as a result they are better prepared
when economic conditions improve.

SEPARATING CULTURAL VALUES

Culture is a very important aspect of international marketing because the elements that
compose it affect the way consumers think. The language a population speaks, the
average level of education, the prevailing religion, and other social conditions affect the
priorities the inhabitants have and the way they react to different events.

With this in mind, it is easy to see that managers of firms operating only in the domestic
market are often able to react to many market uncertainties correctly and automatically
because they intuitively understand the culture and the impact of changing conditions.
In foreign markets, however, this is not the case. Because they were not raised in the
country in which they are trying establish a market, managers abroad often do not fully
understand the culture and lack the proper frame of reference. Thus, decisions that they
would make automatically at home could be dramatically incorrect when operating
abroad. Unless special efforts are made to understand the cultural meanings for
activities in each foreign market, managers will likely misinterpret the events taking
place and risk making the wrong decisions.

This problem is so real that some authorities in international marketing believe that
unconscious references to a firm's domestic cultural values contribute to most
international business problems. To overcome these potential disastrous decisions,
firms must understand the cultural factors existing in both their domestic country and
the host country. Business problems and goals must be defined in terms of the host
country's culture. Being able to separate home-country norms from those in the host
country can be a very challenging task. Often, the influence of one's own culture is
underrated.

American multinational corporations have been in the forefront of developing

international brands that cut across local cultural differences. Companies such as Coca-
Cola, IBM, and McDonald's have created international brands to sell their products to
large market segments worldwide. Other American examples of global icons include
Intel, MTV, CNN, and Disney. The advertising and marketing campaigns that built these
international brands took a universalist approach, building on the American tradition of
assimilation. However, as culturally diverse emerging markets become more important
to international marketing, campaigns targeted to specific cultures will appear more
frequently.

Global factors

• Global factors such as the opening up of new markets making trade easier. The
entry of Bulgaria and Rumania into the European Union might make it easier to enter
that market in terms of meeting the various regulations and provide new expansion
opportunities. It might also change the labour force within the UK and recruitment
opportunities.

This version of PESTEL analysis is called LoNGPESTEL. This is illustrated below:

LOCAL NATIONAL GLOBAL

POLITICAL Provision of services by UK government policy World trade
local council on subsidies agreements e.g.
further expansion of
the EU
ECONOMIC Local income UK interest rates Overseas economic
growth
SOCIAL Local population Demographic change Migration flows
growth (e.g. ageing
population)
TECHNOLOGICAL Improvements in local UK wide technology International
technologies e.g. e.g. UK online services technological
availability of Digital TV breakthroughs e.g.
internet
ENVIRONMENTAL Local waste issues UK weather Global climate change
LEGAL Local licences/planning UK law International
permission agreements on human
rights or environmental
policy

In "Foundations of Economics" we focus on the economic environment. We examine issues such

as the effect of interest rate changes, changes in exchange rates, changes in trade policy,
government intervention in an economy via spending and taxation and economic growth rates.
These can be incredibly important factors in a firm's macro-environment. The growth of China
and India, for example, have had massive effects on many organisations. Firms can relocate
production there to benefit from lower costs; these emerging markets are also providing
enormous markets for firms to aim their products at. With a population of over 1 billion, for
example, the Chinese market is not one you would want to ignore; at the same time Chinese
producers should not be ignored either. However, the relative importance of economic factors
compared to other factors will depend on the particular position of a business. Exchange rate
fluctuations may be critically important to a multinational but less significant to a local window
cleaner. Rapid economic growth or economic decline may be very significant to a construction
business that depends heavily on the level of income in the economy but may be slightly less
significant to a milk producer whose product is less sensitive to income. So whilst the economy is
important to all firms on both the supply side (e.g. unemployment levels affect the ease of
recruitment) and demand side (e.g. income tax affects spending power) the relative importance
of specific economic factors and the relative importance of the economy compared to, say,
regulation or social trends will vary. Whilst we hope this book provides a good insight into the
economy and the possible effects of economic change on a business these must be considered in
the light of other macro and micro factors that influence a firms' decisions and success.

A multinational corporation (MNC) or enterprise (MNE),[1] is a corporation or an enterprise

that manages production or delivers services in more than one country. It can also be referred to
as an international corporation. The International Labour Organization (ILO) has defined[citation
needed]
an MNC as a corporation that has its management headquarters in one country, known as
the home country, and operates in several other countries, known as host countries.

The Dutch East India Company was the first multinational corporation in the world and the first
company to issue stock.[2] It was also arguably the world's first megacorporation, possessing
quasi-governmental powers, including the ability to wage war, negotiate treaties, coin money,
and establish colonies.[3]

The first modern multinational corporation is generally thought to be the East India Company.[4]
Many corporations have offices, branches or manufacturing plants in different countries from
where their original and main headquarters is located.
Some multinational corporations are very big, with budgets that exceed some nations' GDPs.
Multinational corporations can have a powerful influence in local economies, and even the world
economy, and play an important role in international relations and globalization.

Market imperfections
It may seem strange that a corporation can decide to do business in a different country, where it
does not know the laws, local customs or business practices.[1] Why is it not more efficient to
combine assets of value overseas with local factors of production at lower costs by renting or
selling them to local investors?[1]

One reason is that the use of the market for coordinating the behaviour of agents located in
different countries is less efficient than coordinating them by a multinational enterprise as an
institution.[1] The additional costs caused by the entrance in foreign markets are of less interest
for the local enterprise.[1] According to Hymer, Kindleberger and Caves, the existence of MNCs
is reasoned by structural market imperfections for final products.[5] In Hymer's example, there are
considered two firms as monopolists in their own market and isolated from competition by
transportation costs and other tariff and non-tariff barriers. If these costs decrease, both are
forced to competition; which will reduce their profits.[5] The firms can maximize their joint
income by a merger or acquisition, which will lower the competition in the shared market.[5] Due
to the transformation of two separated companies into one MNE the pecuniary externalities are
going to be internalized.[5] However, this does not mean that there is an improvement for the
society.[5]

This could also be the case if there are few substitutes or limited licenses in a foreign market.[6]
The consolidation is often established by acquisition, merger or the vertical integration of the
potential licensee into overseas manufacturing.[6] This makes it easy for the MNE to enforce
price discrimination schemes in various countries.[6] Therefore Hymer considered the emergence
of multinational firms as "an (negative) instrument for restraining competition between firms of
different nations".[7]

Market imperfections had been considered by Hymer as structural and caused by the deviations
from perfect competition in the final product markets.[8] Further reasons are originated from the
control of proprietary technology and distribution systems, scale economies, privileged access to
inputs and product differentiation.[8] In the absence of these factors, market are fully efficient.[1]
The transaction costs theories of MNEs had been developed simultaneously and independently
by McManus (1972), Buckley & Casson (1976) Brown (1976) and Hennart (1977, 1982).[1] All
these authors claimed that market imperfections are inherent conditions in markets and MNEs
are institutions that try to bypass these imperfections.[1] The imperfections in markets are natural
as the neoclassical assumptions like full knowledge and enforcement do not exist in real markets.
[9]

[edit] International power

[edit] Tax competition

Multinational corporations have played an important role in globalization. Countries and

sometimes subnational regions must compete against one another for the establishment of MNC
facilities, and the subsequent tax revenue, employment, and economic activity. To compete,
countries and regional political districts sometimes offer incentives to MNCs such as tax breaks,
pledges of governmental assistance or improved infrastructure, or lax environmental and labor
standards enforcement. This process of becoming more attractive to foreign investment can be
characterized as a race to the bottom, a push towards greater autonomy for corporate bodies, or
both.

However, some scholars for instance the Columbia economist Jagdish Bhagwati, have argued
that multinationals are engaged in a 'race to the top.' While multinationals certainly regard a low
tax burden or low labor costs as an element of comparative advantage, there is no evidence to
suggest that MNCs deliberately avail themselves of lax environmental regulation or poor labour
standards. As Bhagwati has pointed out, MNC profits are tied to operational efficiency, which
includes a high degree of standardisation. Thus, MNCs are likely to tailor production processes
in all of their operations in conformity to those jurisdictions where they operate (which will
almost always include one or more of the US, Japan or EU) that has the most rigorous standards.
As for labor costs, while MNCs clearly pay workers in, e.g. Vietnam, much less than they would
in the US (though it is worth noting that higher American productivity—linked to technology—
means that any comparison is tricky, since in America the same company would probably hire
far fewer people and automate whatever process they performed in Vietnam with manual
labour), it is also the case that they tend to pay a premium of between 10% and 100% on local
labor rates.[10] Finally, depending on the nature of the MNC, investment in any country reflects a
desire for a long-term return. Costs associated with establishing plant, training workers, etc., can
be very high; once established in a jurisdiction, therefore, many MNCs are quite vulnerable to
predatory practices such as, e.g., expropriation, sudden contract renegotiation, the arbitrary
withdrawal or compulsory purchase of unnecessary 'licenses,' etc. Thus, both the negotiating
power of MNCs and the supposed 'race to the bottom' may be overstated, while the substantial
benefits that MNCs bring (tax revenues aside) are often understated

[edit] Market withdrawal

Because of their size, multinationals can have a significant impact on government policy,
primarily through the threat of market withdrawal.[11] For example, in an effort to reduce health
care costs, some countries have tried to force pharmaceutical companies to license their patented
drugs to local competitors for a very low fee, thereby artificially lowering the price. When faced
with that threat, multinational pharmaceutical firms have simply withdrawn from the market,
which often leads to limited availability of advanced drugs. In these cases, governments have
been forced to back down from their efforts. Similar corporate and government confrontations
have occurred when governments tried to force MNCs to make their intellectual property public
in an effort to gain technology for local entrepreneurs. When companies are faced with the
option of losing a core competitive technological advantage or withdrawing from a national
market, they may choose the latter. This withdrawal often causes governments to change policy.
Countries that have been the most successful in this type of confrontation with multinational
corporations are large countries such as United States and Brazil[citation needed], which have viable
indigenous market competitors.

[edit] Lobbying

Multinational corporate lobbying is directed at a range of business concerns, from tariff

structures to environmental regulations. There is no unified multinational perspective on any of
these issues. Companies that have invested heavily in pollution control mechanisms may lobby
for very tough environmental standards in an effort to force non-compliant competitors into a
weaker position. Corporations lobby tariffs to restrict competition of foreign industries. For
every tariff category that one multinational wants to have reduced, there is another multinational
that wants the tariff raised. Even within the U.S. auto industry, the fraction of a company's
imported components will vary, so some firms favor tighter import restrictions, while others
favor looser ones. Says Ely Oliveira, Manager Director of the MCT/IR: This is very serious and
is very hard and takes a lot of work for the owner.pk

Multinational corporations such as Wal-mart and McDonald's benefit from government zoning
laws, to create barriers to entry.

Many industries such as General Electric and Boeing lobby the government to receive subsidies
to preserve their monopoly.[12]

[edit] Patents

Many multinational corporations hold patents to prevent competitors from arising. For example,
Adidas holds patents on shoe designs, Siemens A.G. holds many patents on equipment and
infrastructure and Microsoft benefits from software patents.[13] The pharmaceutical companies
lobby international agreements to enforce patent laws on others.

[edit] Transnational Corporations

A Transnational Corporation (TNC) differs from a tranditional MNC in that it does not identify
itself with one national home. Whilst traditional MNCs are national companies with foreign
subsidiaries,[14] TNCs spread out their operations in many countries sustaining high levels of
local responsiveness.[15] An example of a TNC is Nestlé who employ senior executives from
many countries and try to make decisions from a global perspective rather than from one
centralised headquarters.[16] However, the terms TNC and MNC are often used interchangeably.

[edit] Micro-multinationals
Enabled by Internet based communication tools, a new breed of multinational companies is
growing in numbers.[17] These multinationals start operating in different countries from the very
early stages. These companies are being called micro-multinationals. [18] What differentiates
micro-multinationals from the large MNCs is the fact that they are small businesses. Some of
these micro-multinationals, particularly software development companies, have been hiring
employees in multiple countries from the beginning of the Internet era. But more and more
micro-multinationals are actively starting to market their products and services in various
countries. Internet tools like Google, Yahoo, MSN, Ebay and Amazon make it easier for the
micro-multinationals to reach potential customers in other countries.

Service sector micro-multinationals, like Facebook, Alibaba etc. started as dispersed virtual
businesses with employees, clients and resources located in various countries. Their rapid growth
is a direct result of being able to use the internet, cheaper telephony and lower traveling costs to
create unique business opportunities.

Low cost SaaS (Software As A Service) suites make it easier for these companies to operate
without a physical office.

Hal Varian, Chief Economist at Google and a professor of information economics at U.C.
Berkeley, said in April 2010, "Immigration today, thanks to the Web, means something very
different than it used to mean. There's no longer a brain drain but brain circulation. People now
doing startups understand what opportunities are available to them around the world and work to
harness it from a distance rather than move people from one place to another."

[edit] Criticism of multinationals

Main article: Anti-corporate activism

File:Adbusters NY Billboard.jpg

Anti-corporate activism in New York

The rapid rise of multinational corporations has been a topic of concern among intellectuals,
activists and laypersons who have seen it as a threat of such basic civil rights as privacy. They
have pointed out that multinationals create false needs in consumers and have had a long history
of interference in the policies of sovereign nation states. Evidence supporting this belief includes
invasive advertising (such as billboards, television ads, adware, spam, telemarketing, child-
targeted advertising, guerrilla marketing), massive corporate campaign contributions in
democratic elections, and endless global news stories about corporate corruption (Martha Stewart
and Enron, for example). Anti-corporate protesters suggest that corporations answer only to
shareholders, giving human rights and other issues almost no consideration.[19] Films and books
critical of multinationals include Surplus: Terrorized into Being Consumers, The Corporation,
The Shock Doctrine, Downsize This, Zeitgeist: The Movie and others.

New Product adoption process?

The Buyer Decision Process for new products? Or New Product adoption process?
good, services or idea that is perceived by some potential customers as new.
Adoption Process :-

The mental process through which an individual Passes from first hearing about an
innovation to final adoption.

Consumer go through five stages in the process of adopting new product.

1. Awareness

2. Interest

3. Evaluation

4. Trial

5. Adoption

01. Awareness :- The consumer becomes aware of the product but lacks information
about it.

02. Interest :- The consumer seeks information about the new product.

03. Evaluation :- Consumer consider whether trying the new product makes sense.

04. Trail :- The consumer tries the new product on a small scale to improve his or
her estimate of its value.

05. Adoption :- Consumer decides to makes full and regular use of the new product.

This model suggests that the new products marketer should think about how to help
consumer move through these stages.