Marketing Management - An Introduction: After Reading The Unit, You Will Understand

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Marketing Management - An Introduction

INTRODUCTION:
The apex body in United States of America for the Marketing functions, American Marketing
Association (AMA) defines marketing as, “Marketing consists of those activities involved in
the flow of goods and services from the point of production to the point of consumption”. The
AMA has since amended its definition to read as:
“Marketing is an organizational function and a set of processes for creating, communicating,

and delivering value to customers and for managing customer relationships in ways that
benefit the organization and its stakeholders.” Hence, it can be summarised that marketing is
basically meeting unfulfilled needs for target markets, identifying those unfulfilled needs and
planning how to meet them through products, services, and ideas. It also includes
communicating the value to them along with the price. It also includes which is affordable
and profitable and also distributing the products so that customers have appropriate
accessibility and have quick and easy delivery. Marketing is thus, the process of planning
and executing the conception, pricing, promotion, and distribution of ideas, goods and
services to create exchanges (with customers) that satisfy individual and organizational
objectives.
LEARNING OBJECTIVES:
After reading the unit, you will understand:
The evolution of marketing as a discipline

The reasons why marketing is considered important in this era
To assess the various marketing approaches and principles
MARKETING MANAGEMENT:
Marketing has evolved into a very important functional area in management basically due to
the increasing supply and lower demand over the years. This is primarily through the
competitive intensity in every sphere of the market. When competition increases, as you
know, every firm wants to be heard in the market. This will make the firms to be different than
the competitors. Hence, marketing becomes a very important functional area for every firm
where the competition is very high.
In a business firm, marketing generates the revenues that are managed by financial people
and used by the production people in creating products or services. The challenge of
marketing is to generate that revenue by satisfying consumers wants at a profit and in a
socially responsible manner. Marketing is not limited to business. Whenever you try to
persuade somebody to do something you are engaging in marketing.
file://C:\OldD\mba\Madras Univ\2nd Semester\Marketing Management\unit_I... 10/20/2010

Thus marketing has a broad societal meaning. In fact, the societal view is more truly
descriptive of marketing today. Moreover, modern business marketing activities are to a
large extent, a consequence of the societal view of marketing.
The essence of marketing is a transaction; an exchange intended to satisfy human needs or

wants. Consequently, marketing occurs any time on societal limit striving to exchange
something of value with another social unit. Marketing consists of all the activities to facilitate
the exchange.
Within this societal perspective, then (1) the makers (2) what they are marketing and (3) their
potential markets all assume broad dimensions. The category of marketers might include, in
addition to business firms, such diverse social units as (a) a political party trying to market its
candidate to the public (b) the director of an art museum providing new exhibits to generate
greater attendance and financial support (c) a labor union marketing its idea to members and
to company management and (d) professors trying to make their courses interesting for
students.
In addition to the range of items normally considered as products and services, what is being
marketed might include (a) ideas such as reducing air pollution or contributing to the red
cross (b) people such as a new football coach or a political candidate and (c) places such as
industrial plant sites or a place to go for a vacation.
In a broad sense markets include more than the direct consumers of products services and
ideas. Thus a state university’s market includes the legislators who provide funds, the
citizens living near the university who may be affected by university activities and the alumni.
A business firm’s market may include government regulatory agencies, environmentalists,
and local tax assessors.
Definition of Marketing
As you already know there are many definitions for marketing. Some definitions focus on
marketing as the process involved in satisfying the needs of a particular market, while other
definitions lean more toward defining marketing in terms of its most visible functional areas,
such as advertising and product development. There probably is no one best way to define
marketing, though whatever definition is used should have an orientation that focuses on
satisfying customers. Therefore, we will define marketing as follows:
Marketing consists of the strategies and tactics used to identify, create and maintain
satisfying relationships with customers that result in value for both the customer and the
marketer.
Let’s examine this definition in a little more detailed manner by focusing on a few of the key

terms.
Strategies and Tactics - Strategies are best explained as the direction the marketing effort
will take over some period of time, while tactics are actionable steps or decisions made in
order to follow the strategies established. For instance, if a strategy is to enter a new market,
the tactics may involve the marketing decisions made to carry this out. Performing strategic
and tactical planning activities in advance of taking action is considered critical for long-term
marketing success.
Identify - Arguably the most important marketing function involve efforts needed to gain
knowledge of customers, competitors, and markets. We will see throughout this course
material, how marketing research is utilized in all decision making areas.
Create - Competition forces marketers to be creative people. When marketers begin new
ventures, such as building a new company, it is often based around something that is new
(e.g., new product, new way to distribute a product, new advertising approach, etc.). But
once the new venture is launched, innovation does not end. Competitive pressure is
continually felt by the marketer, who must respond by devising new strategies and tactics
that help the organization remain successful.
Maintain - Today’s marketers work hard to insure their customer’s return to purchase from
them again. Long gone are the days when success for a marketer was measured simply in
how many sales they made each day. Now, in most marketing situations, marketing success
is evaluated not only in terms of sales figures but also by how long a marketer can retain
good customers. Consequently, marketers’ efforts to attract customers does not end when a
customer makes a purchase. It continues in various ways for, hopefully, a long time after the
initial purchase.
Satisfying Relationships - A key objective of marketing is to provide products and services

that customers really want and to make customers feel their contact with the marketer is
helping to build a good relationship between the two. In this way, the customer is made to
feel as if she/he is a partner in the transaction and not just a source of revenue for the
marketer. In recent years, this has led to the concept of Customer Relationship Management
(CRM), which has emerged as a strategic approach that insures that everyone in an
organization, not just the marketer, understands the importance of customers. Maintaining
close and consistent relationships with customers through all points of customer contact is
crucial but difficult to do well. We’ll see in later sections technology plays a key role in
carrying out CRM, so that nearly anyone in a an organization that comes into contact with a
customer (e.g., sales force, service force, customer service representatives, accounts
receivable, etc.) has the necessary information and is well prepared to deal with the
customer.

Value for Both Customer and Marketer - Value refers to the perception of benefits
received for what someone must give up. For customers value is most often measured by
how much they feel they are getting for their money, though the value one customer feels
she/he obtains may differ from the perception of value from another customer even though
they purchase the same product. On the other side of the transaction, the marketer may
measure value in terms of how much profit they are making for the marketing efforts and
resources expended. For a successful marketing effort to take place both the customer and
the marketer must feel they are receiving something worthwhile in return for the efforts.
Without a strong perception of value it is unlikely that a strong relationship can be built.
Throughout this tutorial we will emphasize value and show the ways in which the marketer
builds value into the solutions they offer.
Other definitions for marketing include:
American Marketing Association (AMA): “Marketing is the process of planning and

executing the conception, pricing, promotion and distribution of ideas, goods and
services to create exchanges that satisfy individual and organizational goals.”
World Marketing Association (WMA): “Marketing is the core business philosophy
which directs the processes of identifying and fulfilling the needs of individuals and
organizations through exchanges, which create superior value for all parties.”
Chartered Institute of Marketing (CIMU) [United Kingdom]: “Marketing is the
management process for identifying, anticipating and satisfying customer requirements
profitably.”
The functions of marketers:
In order to reach the goal of creating a relationship that holds value for customers and for the
organization, marketers use a diverse set that includes (but is not limited to) making
decisions regarding:
Target Markets – those markets identified as possessing needs the marketer believes
can be addressed by its marketing efforts
Products/Services – a tangible or intangible solution to the market’s needs
Promotion – a means for communicating information about the marketing
organization’s solution to the market
Distribution – means used to allow the market to obtain the solution.
Pricing – ways for the marketer to adjust the cost to the market for the solution
Services – additional options that enhance the solution’s value
Each option within the marketer’s set is tightly integrated with all other options so that a
decision in one area could and often does impact decisions in other areas. For instance, a
change in the price of a product (e.g., lowering the price) could impact the distribution area
(e.g., increases shipments, generates higher traffic).
Additionally, options within the toolkit are affected by factors that are not controlled by the
marketer. These factors include economic conditions, legal issues, technological

developments, social/cultural changes, and many more. While not controllable, these
external factors must be monitored and dealt with, since, these can potentially cause
considerable harm to the organization. Ignoring outside elements also can lead to missed
opportunities in the market especially if competitors are the first to take advantage of the
opportunities. As part of the strategic and tactical planning process discussed above it would
be wise for marketers to pay close attention to the environment outside the organization.
EVOLUTION OF MARKETING MANAGEMENT:
The evolution of marketing is composed of a series of responses to major external

challenges. Pre- industrial marketing, based around craft production and personal
relationships with local customers, was challenged by the urbanization and mechanization of
the industrial revolution. The industrial era created expanding markets which required an
emphasis on production, logistics and selling, to get the goods to the customer. In the late
1950s, the challenge of increasingly saturated and competitive markets led to the birth of an
explicit marketing philosophy. Marketing is a relatively latest discipline having emerged in the
early 1900s. Prior to this time, most issues that are now commonly associated with
marketing were either assumed to fall within basic concepts of economics (e.g., price setting
was viewed as a simple supply/demand issue), advertising (well developed by 1900), or in
most cases were simply not yet explored (e.g., customer purchase behavior, importance of
distribution partners). Led by marketing scholars from several major universities, the
development of marketing was in large part motivated by the need to dissect in greater
detail, relationships and behaviors that existed between sellers and buyers. In particular, the
study of marketing lead sellers to recognize that adopting certain strategies and tactics could
significantly benefit the seller/buyer relationship. In the older days of marketing (before the
1950s) this often meant identifying strategies and tactics for simply selling more products
and services with little regard for what customers really wanted. Often, this led companies to
embrace a “sell-as-muchas- we-can” philosophy with little concern for building relationships
for the long term.
But starting in the 1950s, companies began to see that old ways of selling were wearing thin
with customers. As competition grew stiffer across most industries, organizations looked to
the buyer side of the transaction for ways to improve. What they found was an emerging
philosophy suggesting that the key factor in successful marketing is to understand the needs
of customers. The famous “marketing concept” suggests that marketing decisions should
flow from first knowing the customer and what they want. Only then should an organization
initiate the process of developing and marketing products and services. The marketing
concept continues to be at the root of most marketing efforts, though the concept does have
its own problems (e.g., doesn’t help much with marketing new technologies) a discussion of
which is beyond the scope of this tutorial. But overall marketers have learned they can no
longer limit their marketing effort to just getting customers to purchase more. They must have

an in-depth understanding of who their customers are and what they want.
THE ROLE OF MARKETING
As we’ve seen the key objective of an organization’s marketing efforts is to develop

satisfying relationships with customers that benefit both the customer and the organization.
These efforts lead marketing to serve an important role within most organizations and within
society.
At the organizational level, marketing is a vital business function that is necessary in nearly
all industries whether the organization operates as a for-profit or as a not-for profit.
For the for-profit organization, marketing is responsible for most tasks that bring revenue
and, hopefully, profits to an organization. For the not-for-profit organization, marketing is
responsible for attracting customers needed to support the not-for-profit’s mission, such as
raising donations or supporting a cause. For both types of organizations, it is unlikely they
can survive without a strong marketing effort. Marketing is also the organizational business
area that interacts most frequently with the public and, consequently, what the public knows
about an organization is determined by their interactions with marketers. For example,
customers may believe a company is dynamic and creative, based on its advertising
message.
At a broader level marketing offers significant benefits to society. These benefits include:
Developing products that satisfy needs, including products that enhance society’s
quality of life
Creating a competitive environment that helps to lower product prices
Developing product distribution systems that offer access to products to a large
number of customers and many geographic regions
Building demand for products that require organizations to expand their labor force
Offering techniques that have the ability to convey messages that change societal
behavior in a positive way (e.g., anti-smoking advertising)
THE MARKETING CONCEPT
The marketing concept is the philosophy that firms should analyze the needs of their
customers and then make decisions to satisfy those needs, better than the competitors.
Today, most firms have adopted the marketing concept, but this has not always been the
case. In 1776 in The Wealth of Nations, Adam Smith wrote that the needs of producers
should be considered only with regard to meeting the needs of consumers. While this
philosophy is consistent with the marketing concept, it would not be adopted widely until
nearly 200 years later. To understand the marketing concept better, it is worthwhile to put it
in a perspective by reviewing other philosophies that once were predominant. While these
alternative concepts prevailed during different historical time frames, they are not restricted

to those periods and are still practiced by some firms today.
The Production Concept
The production concept prevailed from the time of the industrial revolution until the early
1920’s. The production concept was the idea that a firm should focus on those products that
it could produce most efficiently and that the creation of a supply of low-cost products would
in and of itself create the demand for the products. The key questions that a firm would ask
before producing a product were:
Can we produce the product?
Can we produce enough of it?
At the time, the production concept worked fairly well because the goods that were produced
were largely those of basic necessity and there was a relatively high level of unfulfilled
demand. Virtually, everything that could be produced was sold easily by a sales team whose
job was simply to execute transactions at a price determined by the cost of production.
The Sales Concept
By the early 1930’s however, mass production had become commonplace, competition had
increased, and there was little unfulfilled demand. Around this time, firms began to practice
the sales concept (or selling concept), under which companies not only would produce the
products, but also would try to convince customers to buy them through advertising and
personal selling. Before producing a product, the key questions were:
Can we sell the product?
Can we charge enough for it?
The sales concept paid little attention to whether the product actually was needed; the goal
simply was to beat the competition to the sale with little regard to customer satisfaction.
Marketing was a function that was performed after the product was developed and produced,
and many people came to associate marketing with hard selling. Even today, many people
use the word “marketing” when they really mean sales.
The Marketing Concept
After World War II, the variety of products increased and hard selling no longer could be
relied upon to generate sales. With increased discretionary income, customers could afford
to be selective and buy only those products that precisely met their changing needs, and
these needs were not immediately obvious. The key questions became:

What do customers want?
Can we develop it while they still want it?
How can we keep our customers satisfied?
In response to these discerning customers, firms began to adopt the marketing concept,
which involves:
Focusing on customer needs before developing the product
Aligning all functions of the company to focus on those needs
When firms began to adopt the marketing concept, they typically set up separate marketing
departments with the objective of realizing profit by successfully satisfying the customer
needs. Often these departments were sales departments with expanded responsibilities.
While this expanded sales department structure can be found in some companies today,
many firms have structured themselves into marketing organizations having a company-wide
customer focus. Since, the entire organization exists to satisfy customer needs, nobody can
neglect a customer issue by declaring it a “marketing problem” - everybody must be
concerned with customer satisfaction. The marketing concept relies upon marketing research
to define market segments, their size, and their needs. To satisfy those needs, the marketing
team makes decisions about the controllable parameters of the marketing mix.
THE MARKETING MIX (THE 4 P’S OF MARKETING)- AN INTRODUCTION
The term “marketing mix” became popularized after Neil H. Borden published the article in
the year 1964, ‘The Concept of the Marketing Mix’. Borden began using the term in his
teaching in the late 1940’s after James Culliton had described the marketing manager as a
“mixer of ingredients”. The ingredients in Borden’s marketing mix included product planning,
pricing, branding, distribution channels, personal selling, advertising, promotions, packaging,
display, servicing, physical handling, and fact finding and analysis.
E. Jerome McCarthy later grouped these ingredients into the four categories that today are
known as the 4 P’s of marketing, depicted below:
Marketing decisions generally fall into the following four controllable categories:
Product
Price
Place (distribution)
Promotion

These four P’s are the parameters that the marketing manager can control, subject to the
internal and external constraints of the marketing environment. The goal is to make decisions
regarding the four P’s with a focus on the customers in the target market so as to create
perceived value and generate a positive response.
Product/Service
What does the customer want from the product/service? What needs does it satisfy?
What features does it have to meet these needs?
Are there any features you’ve missed out?
Are you including costly features that the customer won’t actually use?
How and where will the customer use it?
What does it look like? How will customers experience it?
What size(s), color(s), and so on, should it be?
What is it to be called?
How is it branded?
How is it differentiated from your competitors?
What is the most it can cost to provide, and still be sold sufficiently profitably? (See
also Price, below).
Place
Where do buyers look for your product or service?

If they look in a store, what kind? A specialist boutique or in a supermarket, or both? Or
online? Or direct, via a catalogue?
How can you access the right distribution channels?
Do you need to use a sales force? Or attend trade fairs? Or make online submissions?
Or send samples to catalogue companies?
What do you competitors do, and how can you learn from that and/or differentiate?
Price
What is the value of the product or service to the buyer?

Are there established price points for products or services in this area?
Is the customer price sensitive? Will a small decrease in price gain you extra market
share? Or will a small increase be indiscernible, and so gain you extra profit margin?
What discounts should be offered to trade customers, or to other specific segments of

your market?
How will your price compare with your competitors?
Promotion
Where and when can you get across your marketing messages to your target market?
Will you reach your audience by advertising in the press, or on TV, or radio, or on
billboards? By using direct marketing mail shot? Through public relation? On the
Internet?
When is the best time to promote? Is there seasonality in the market? Are there any
wider environmental issues that suggest or dictate the timing of your market launch, or
the timing of subsequent promotions?
How do your competitors do their promotions? And how does that influence your
choice of promotional activity?
Limitations of the Marketing Mix Framework
The marketing mix framework was particularly useful in the early days of the marketing
concept when physical products represented a larger portion of the economy. Today, with
marketing more integrated into organizations and with a wider variety of products and
markets, some authors have attempted to extend its usefulness by proposing a fifth P, such
as packaging, people, process, etc. Today, however, the marketing mix most commonly
remains based on the 4 P’s. Despite its limitations and perhaps because of its simplicity, the
use of this framework remains strong and many marketing textbooks have been organized
around it.
Summary
In the current context, there is very high competition among the marketers in India and that
has been necessitated due to the fact that consumerism is on the high and the importance of
marketing is known to people. An interaction between business and industry in a global
perspective has become imperative because of the need to upgrade regional technologies
and maintain the competitive edge in the international markets.
Today’s consumer is more demanding than yester-years’. He is not content with the second
best in technology and is reluctant to pay for a product or a service just because it comes
from a particular region or a country. This, understandably, has led to business and industry
across the world to make use of technologies and resources worldwide to upgrade their
products and services. In this Liberalisation-Privatisation-Globalisation era to become an
integral part of the global system, nations are opening up their economies at a rapid rate,
which were hitherto protected from world markets. The removal of artificial barriers to trade
has made it possible for innovative companies to go in search of new markets across
borders with improved efficiency and greater competitive strength. This has forced the Indian
companies to be competitive on the marketing front.

Review Questions
1. State whether true or false? Marketing is defined as both a philosophy and set of activities.
2. KY Systems is a company that uses computers to generate new product prototypes. It has
generated loyal business clients by providing the best customer support in the industry. The
company also provides direct sales consultation that gives its salespeople intimate
knowledge about what exactly its customers want. This partnership between KY Systems
and its customers entails relationship marketing. State whether true or false?
3. Which one of the following statements by a company chairman best reflects the marketing
concept?
A. We have organised our business to make certain that we satisfy customer needs
B. We believe that the marketing department must organise to sell what we produce.
C. We try to produce only high quality, technically efficient products
D. We try to encourage company growth.
4. Which of the following is an example of a problem that may arise in the implementation of
the marketing concept?
A. By satisfying one segment in society, a firm contributes to the dissatisfaction of other

segments.
B. Consumers do not understand what the marketing concept is.
C. Dealers do not support the marketing concept.
D. A product may fit the needs of too many segments.
5. The marketing concept is a philosophy that states that an organization should try to satisfy
customers’ needs and at the same time:
A. Increase market share.
B. Increase sales.
C. Achieve the organization’s goals.
D. Always produce high quality products

Have you understood

1. Today we have an unmanageable surplus of food grains, but regrettably, no integrated
approach to agriculture, procurement & food processing, to take advantage of such
bounty or capabilities. More worrying is the fact that public investment in Agriculture
has been declining in real terms through the 1980s & most of the 1990s. Enhancement
of public investment in agriculture is a catalyst for private sector investment, but cash
strapped state Govts. look to the centre for financial support & policy directives. Public
investment must go on a priority basis to non - green revolution products & dryland
areas. The private sector has watched passively from the sidelines. Well known
solutions to the problems of Indian agriculture require political will and commitment to
increase productivity beyond subsistence. Do you agree? Is there any scope for
marketing?
2. Researchers at Rohan Industries spent considerable time, effort, and money

developing a bluish windshield that would let in filtered sunlight but block out the heat.
Little market research was done, but the scientists were convinced this new product
would be significantly better than existing windshields even though they were more
expensive and of a different color than the current models on the market. What do you
think is the orientation of the company? Do you think it is right? Justify. ¨ Kumar owns a
small laboratory that makes bifocal contact lenses. His company is growing fast, and
there are many things he does not understand about his customers. Should Kumar
who is 25, take a marketing course? State yes or no? justify your answer.
Marketing Environment
INTRODUCTION:
The Business environment surrounds and impacts upon the organization. There are three
key perspectives on the environment, namely the ‘macro-environment,’ the ‘micro-
environment’ and the ‘internal environment’. Micro - 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. Micro - environment includes all factors that can influence the 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. Keeping this in mind the environmental influences needs to be studied and you
will have the inputs in all the forces that influence the organization in its quest for effective
marketing.
After reading the unit, you will understand:
The need for scanning the environment

The environmental influences and why marketing has to be proactive
The impact created by each influence on the organizations
MARKETING ENVIRONMENT:
Environmental scanning helps in assessing the impact the environment could create on the
business. The grounded theory proposed comprises three main components: the categories
(the core category and the subsidiary categories), the principal relationships among them,
and the contextual factors that shape the categories and relationships. From an internal
perspective, these factors include corporate history and culture. From an external
perspective, these contextual factors include the overall economic, social, cultural and
political conditions that characterize modern India and shape, at least to a certain extent, the
organizations operating in that reality. The core category identified was that of environmental
scanning, to which a set of subsidiary categories were related. According to Aguilar,
environmental scanning refers to the exposure to and acquisition of “information about
events and relationships in a company’s outside environment, the knowledge of which would
assist top-management in its task of charting the company’s future course of action.” This
interrelated set of categories contributes to understanding how contextual factors - external
and internal to the organization, influence the scanning activity, and also how, perceived
environmental change affects strategic change. The task of explaining variance among
companies resides with a few key relationships among those categories. Now, let us see
each environment in detail.
SOCIAL ENVIRONMENT:
Indian society is multifaceted to an extent perhaps unknown in any other of the world’s great
civilizations. Virtually, no generalization made about Indian society is valid for all of the
nation’s multifarious groups. Comprehending the complexities of Indian social structure has
challenged scholars and other observers over many decades. The ethnic and linguistic
diversity of Indian civilization is more like the diversity of an area as variable as Europe than
like that of any other single nation-state. Living within the embrace of the Indian nation are
vast numbers of different regional, social, and economic groups, each with different cultural

practices. Particularly noteworthy are differences between social structures in the north and
the south, especially in the realm of kinship systems.
Throughout the country, religious differences can be significant, especially between the
Hindu majority and the large Muslim minority; and other Indian groups—Buddhists,
Christians, Jains, Jews, Parsis, Sikhs, and practitioners of tribal religions—all pride
themselves on being unlike members of other faiths.
Urban-rural differences can be immense in the Indian Society. Nearly 74 percent of India’s
population dwells in villages, with agriculture providing support for most of these rural
residents. In villages, mud-plastered walls ornamented with traditional designs, dusty lanes,
herds of grazing cattle, and the songs of birds at sunset provide typical settings for the social
lives of most Indians. In India’s great cities, however, millions of people live amidst
cacophony of roaring vehicles, surging crowds, jammed apartment buildings, busy
commercial establishments, loudspeakers blaring movie tunes—while breathing the poisons
of industrial and automotive pollution.
CULTURAL ENVIRONMENT:
A society’s culture includes its values, its ethics and the material objects produced by its
people. It is the accumulation of shared meanings and traditions among members of a
society. A culture can be described in terms of its ecology (the way people adapt to their
habitat), its social structure and its ideology (including people’s moral and aesthetic
principles). Culture refers to the set of values, ideas and attitudes that are accepted by a
homogeneous group of people and transmitted to the next generation. Subculture refers to
the norms and values of subgroups within the larger or national culture. African American,
Hispanics, and Asians represent sizable subcultures. It is inappropriate to think in terms of
stereotypes when marketing to these subcultures. Afro - Americans represent the largest
racial/ethnic subculture in the united states. While price-conscious, they are motivated by
product quality and choice. India consists of people who are either Aryans and Dravidians to
a large extent. Current research indicates that stereotypes are misleading. Christians are the
subculture in India where as in United States, it is the culture by itself. Asians are the fastest
growing subculture in the United States. The growth of this subculture is due primarily to
immigration. Like Hispanics, Asians represent a diverse subculture including Chinese,
Japanese, Asian-Indians, and many other nationalities. Two groups of Asians have been
identified:
(1) Assimilated
Assimilated Asians are conversant in English and exhibit buying patterns very much like
“typical” American consumers.

(2) Non-assimilated
Non-assimilated Asians cling to their native languages and customs.
Culture is part of the external influences that impact the consumer. That is, culture represent
influences that are imposed on the consumer by other individuals. The definition of culture
offered by Engel is “that complex whole which includes knowledge, belief, art, morals,
custom, and any other capabilities and habits acquired by man personally as a member of
society.” From this definition, the following observations can be made:
Culture, as a “complex whole,” is a system of interdependent components.
Knowledge and beliefs are important parts.
Culture has several important characteristics:
(1) Culture is comprehensive. This means that all parts must fit together in some logical
fashion. For example, bowing and a strong desire to avoid the loss of face are unified in their
manifestation of the importance of respect.
(2) Culture is learned rather than being something we are born with.
(3) Culture is manifested within boundaries of acceptable behavior. For example, in

American society, one cannot show up to class naked, but wearing anything from a suit and
tie to shorts and a T-shirt would usually be acceptable. Failure to behave within the
prescribed norms may lead to sanctions, ranging from being hauled off by the police for
indecent exposure to being laughed at by others for wearing a suit at the beach.
(4) Conscious awareness of cultural standards is limited. A hardcore south indian can be
easily distinguished when handling a fork and knife in eating out in north India.
(5) Cultures fall somewhere on a continuum between static and dynamic depending on how
quickly they accept change. For example, Indian culture has changed a great deal since the
1950s, while the culture of Saudi Arabia has changed much less.
It should be noted that there is a tendency of outsiders to a culture to overstate the similarity
of members of that culture to each other. In India, there is a great deal of heterogeneity
within our culture; however, people often underestimate the diversity within other cultures.
For example, in Latin America, there are great differences between people who live in
coastal and mountainous areas; there are also great differences between social classes.
Subculture refers to a culture within a culture. For example, Afro - Americans are, as
indicated in the group name, Americans; however, a special influence of the Afro - American

community is often also present. For example, although this does not apply to everyone, Afro
- Americans tend to worship in churches that have predominantly Afro - American
membership, and the church is often a significant part of family life.
Different perspectives on the diversity in U.S. culture exist. The “melting pot” metaphor
suggests that immigrants gradually assimilate after they arrive. Therefore, in the long run,
there will be few differences between ethnic groups and instead, one mainstream culture that
incorporates elements from each will result. The “salad bowl” metaphor, in contrast, suggests
that although ethnic groups will interact as a whole (through the whole mix of salad) and
contain some elements of the whole (through the dressing), each group will maintain its own
significant traits (each vegetable is different from the others). The “melting pot” view
suggests that one should run integrated promotions aimed at all groups; the “salad bowl”
approach suggests that each group should be approached separately.
Subculture is often categorized on the basis of demographics. Thus, for example, there is the
“teenage” subculture and the “French- Indian” subculture in Pondicherry and “Portugese-
Indian” subculture in Goa. While being part of the overall culture, these groups often have
distinguishing characteristics. An important consequence is that a person who is part of two
subcultures may experience some conflict. For example, teenage native Indians experience
a conflict between the mainstream teenage culture and the orthodox Indian ways. Values are
often greatly associated with age groups because people within an age-group have shared
experiences. For example, it is believed that people old enough to have experienced the
American Depression are more frugal because of that experience.
Regional influence, both in the United States and other areas, is significant. Many food
manufacturers offer different product variations for different regions. Joel Garreau, in his
book, ‘The Nine Nations of North America’, proposed nine distinct regional subcultures that
cut across state lines. Although significant regional differences undoubtedly exist, research
has failed to support Garreau’s specific characterizations. Let us look at some of the
subcultures prevailing in India.
ECONOMIC ENVIRONMENT:
Business fortunes and strategies are influenced by the economic characteristics and
economic policy dimensions. The economic environment includes the structure and nature of
the economy, the stage of development of the economy, economic resources, the level of
income, the distribution of income and assets, global economic linkages, economic policies
etc. A widely used classification of economies is on the basis of per capital income, i.e., the
average annual income per person. Accordingly, countries are broadly classified as low
income, high income economies and the middle income economies. Low income economies
are those economies with very low per capital income. All economies with per capital $755 or

less in 2000 are regarded as low income economies. There are 63 low income economies in
2000. High income economies are countries with very rich income per capital. Those with a
per capital GNP of $ 9266 or above in 2000 fall in the category of high income economies.
There are mainly two categories of high income economies, namely, industrial economies
and oil exporters. Middle income economies fall in between the low income and high income
economies. The middle income economies are subdivided in to lower middle income and
upper middle income economies. In 2000, there are 92 middle income economies (54 lower
middle incomes and 38 upper middle incomes. The low income economies are sometimes
referred to as third world (the high income and middle income economies representing the
first and second worlds.). Low income is just an indication of deprivation people in
developing countries. Low income prevents access to basic necessities, not only better and
modern amenities. The term recession is depression in an economy which leads to
stagnation and poor incomes. Within the category of low income economies, for example,
sometimes a special category name that has least developed economies is identified. Most
of the least developed economies suffer from one or more of the following constraints: a very
low GNP per capita, land locked remote insularity, desertification and exposure to natural
disasters. According to the Human Development Report there are more than 40 least
developed countries in 1999. There are, on the other hand, developing economies such as
the Asian countries.
They are sometimes referred to as newly industrializing economies. Now Peoples Republic
of China is regarded as a newly industrializing economy.
The most comprehensive indicator of the level of economic activity of an economy is its
aggregate output, i.e., the total annual output of finished goods and services, known as gross
national product (GNP), which is defined as the total market value of all final goods and
services produced in an economy during a given time period (usually a year). GNP is a
monetary measure of total output. It excludes transfer payments (like buying and selling of
bonds and securities, gifts taxes, or welfare payments) and secondhand sale of goods, as
these are a part of current production. In order to avoid double-counting. GNP excludes the
production contribution of housewives, the efforts of self-help in a productive process by
members of households, or improvement in product quality not reflected in price changes.
Similarly, social cost of environmental pollution is not deducted from total output. Yet, GNP is
till the best measure of nation’s total output.
There are three ways to look at the level of economic activity. viz., the output, income and
expenditure. Depending upon the way we look at them, we call them gross national product
(GNP), gross national income (GNI) and gross national expenditure (GNE), where;
GNP – Sum of the market value of all final goods and services in an economy during a
given time period;
GNI – Sum of the money incomes derived from activities involving current production in

an economy during a given time period; and

GNE – Sum of all that is spent of currently produced goods and services by all types of
buyers in an economy during a given period.
Thus, national income can be measured by any of the three ways:
(i) As an aggregate of goods and services produced during a year;
(ii) As an aggregate cost of factor services in the economy during a year;
or
(iii) As an aggregate of expenditure on consumption, saving and investment during a year.
The national income data can also be quite helpful for business. In order to undertake long-
term investments and to formulate business policies it is quite essential for a dynamic
management to do a thorough analysis of changes occurring in the national income. Since
national income reveals, on the one hand, the structure of the economy and, on the other,
the possible directions of change in the future economic policy of the government, national
income data in the hands of an expert managerial economist can prove a life-line for
business. It is quite vital for a firm, aspiring to capture or retain leadership in business, as it is
perhaps one of the most essential ingredients for any business forecasting exercise. The
national income data can also be successfully used for determining the product
diversification programme and undertaking technological innovations. National income
statistics is, thus, a wealth of information, but its usefulness depends on keenness to
observe and probe as well as patience to analyse.
BUSINESS CYCLES:
The effect of upswings and downswings in economic activity is felt quite intensely because of
the ever increasing business activity and the strong inter-relations between different sectors
of an economy and between various economies. The ill effects of the wide swings in
business activity were almost ravaging during the Great Depression of 1930s. it was also
noticed that after depression there was no ‘natural recovery’ of the economic activity.
Artificial measures to be adopted for this purpose needed a scientific understanding of the
swings in the activity. Business cycle or trade cycle refers to the fluctuations in economic
activity occurring regularly in the capitalist societies. In a business cycle there are wave-like
fluctuations in four inter-linked economic variables: aggregate employment, income, output
and price level. When the values of these economic variables over time are plotted on a
graph, we get a wave-like figure, which is given the name of a ‘cycle’. According to Keynes,
“A trade cycle is composed of periods of good trade characterized by rising prices and low
unemployment percentages, alternating with periods of bad trade characterized by falling
prices and high unemployment percentages”.

Mitchell gives even a more explicit idea of what a business cycle is when he says, “Business
cycles are a type of fluctuations found in the aggregate economic activity of nations that
organize their work mainly in business enterprises. A cycle consists of expansions, and
revivals which merge into the expansion phase of the next cycle. This sequence of change is
recurrent but not periodic…” in short one can observe that:
(1) Business cycles are the wave-like fluctuations in economic activity as reflected in the
basic economic variables like employment, income, output and price level.
(2) These fluctuations are cyclical in nature. One must distinguish between secular trend,
random fluctuations, seasonal changes and cyclical fluctuations. The secular trend
represents long run changes in business activity which occur slowly and are spread over a
number of years. Such long-run changes are the results of factors like improvement in
production techniques, change in population, etc, which occur suddenly and are
unpredictable. Effect of these events on the economy is limited to the period of occurrence of
the event, as there is no regularity in their occurrence. Thus, neither the secular trend nor the
random variations in economic activity can form the part of business cycle. The seasonal
changes, which are short-run oscillations with regularity, can be confused with the cyclical
fluctuations. But the basic difference between the two is that seasonal variations repeat
themselves each year (e.g., demand for heavy woolen clothes, light woolen clothes and
cotton clothes, and so on, depending on the season each year), while the cyclical
fluctuations have a longer life span. The seasonal fluctuations, therefore, have easier
predictability and adjustability in business than the cyclical fluctuations.
(3) The sequence of changes in business cycle (i.e., recovery, prosperity, depression and
recession) recurs frequently and in a fairly similar pattern.
(4) The rhythm or the periodicity between the cycles need not be similar.
(5) Business cycles are a type of fluctuations found in the aggregate economic activity and
not in any single firm or industry. In fact, it connotes the cyclical changes in overall economic
environment affecting all the business entities.
Business cycles, the periodic booms and slumps in economic activities, are generally
compared to ‘ebb and flow’. The ups and downs in the economy are reflected by the
fluctuation in aggregate economic magnitudes, including production, investment, prices,
wages, bank credits, etc. The upward and downward movement in these magnitudes show
different phases of business cycles. Basically, there are only two phases in cycle, viz.,
prosperity and depression. However, considering the intermediate stages between prosperity
and depression, the various phases of trade cycle may be enumerated as follows:
1. Expansion of economic activities,

2. Peak of boom or prosperity,
3. Recession, the downtrend,
4. Trough, the bottom of depression, and
5. Recovery and expansion.
In a stagnated economy, depression begins when growth rate turns negative i.e., total
output, employment, prices, bank advances, etc., decline during the subsequent periods.
The span of depression spreads over a period during which growth rate stays below the
secular growth rate or below the zero growth rate in a stagnated economy. Trough is the
phase during which the down-trend in the economy slows down and eventually stops, and
the economic activities once again register an upward movement with a lapse of time.
Trough is the period of most sever strain on the economy. When the economy registers a
continuous and rapid upward trend in output, employment, etc., it enters the phase of
recovery though the growth rate may still remain below the steady growth rate. And when the
growth rate crosses the line of steady growth rate, the economy once again enters the phase
of expansion and prosperity,. If economic fluctuations are not controlled by the government,
business cycles continues to recur.
Recovery:
This is the phase of revival of demand for goods and services. The economic activity as a
whole increases slowly, although the general prices start rising. The upward movement of
business activity is slow, production picks up, construction activity is revived and there is a
gradual rise in employment. This is a period when the industrialists and the businessmen
repay the loans taken by them from the banks earlier and the frozen stocks held by the
banks are released. Stocks of goods remain below the normal with the shopkeepers. Once
the recovery starts, it results in a snowballing process for investment. The result is that
demand orders pour in and the producers get stimulus and encouragement to produce more.
The sellers stop their conservative period in general favoring expansion in business activity.
The capital equipment is replaced. Banks are liberal in the matter of advances. The prices
recover and tend to reach the normal. The speed, with which the expansion of business
activity takes place in response to a given initial increase in investment, would depend upon
the multiplier effect.
Prosperity:
During this phase there is a rapid cumulative movement of prices, employment, income and
production. The prices and general business activity is above the normal. Total output starts
growing at a rapid pace due to higher investment and employment. Prices of finished

products rise faster than the increase in wage-rate, raw material prices and interest rate.
Consequently, producers stand to gain. Prices of all the commodities do not rise to the same
extent. The sequence of general price rise generally begins with increase in security prices,
which then passes on to raw material prices, wholesale prices, wages of unskilled labour,
retail prices and finally the interest rates.
Recession:
When the business cycle takes a downward turn from the state of prosperity, the state of
recession is said to have set in. During the phase of prosperity, production increases with
every increase in commodity prices. As more and more of unemployed labour, capital and
raw material are employed, interest rate, wages and other costs rise with increasing rapidity.
Simultaneously, the banks suddenly discover that they have expanded their deposits a little
too far. The ratio of cash reserves to total deposits falls. The banks become reluctant to
advance loans in the interest of their safety and statutory requirements. In order to meet their
obligations, the sellers would, therefore, have to unload their stocks in the market. Due to
unloading of stocks by many firms, the prices start declining. Profit margins decline further
because costs start overtaking prices.
Business psychology becomes depressed and the boom bursts. There is a struggle for
solvency among the businessmen. Some firms close down while others reduce production,
leading to reduction in investment, employment, income and demand. This process is
cumulative. This phase of business cycle is characterized by fall in prices, commercial panic,
restriction and calling back loans by banks, a sharp increase in interest rate and fall in
investment. Soon the production falls, unemployment increases and inventory stocks get
accumulated. There is a collapse of confidence. If not controlled in the beginning by timely
monetary and fiscal measurers by government which can sustain investment at a high level,
recession may give way to even a more grave situation, called depression.
Depression:
If unchecked, depression is a natural consequence of the recessionary crisis. Gradually, the

process of falling prices, demand and employment gather momentum. Decrease in price
follows the same sequence as does the price increase in case of the state of boom. In this
phase, general demand for goods and services falls faster than the production of goods,
though this is more in case of capital goods than consumer goods. Producers find selling
prices falling faster than their costs. Producers suffer losses because by the time the goods
are ready for sale the prices are found to have fallen further, with the result that producers
are not able to recover their full cost. Businessmen get panicky, and start releasing their
stocks, which hastens the decline in prices. The phenomenon of over-production appears
and workers in large numbers are thrown out of work. There are accumulated reserves with

banks. Demand for credit is at its lowest, resulting in idle funds with the banks. In general,
the bottom of depression is reached when liquidation of accumulated stocks is completed.
Depression is, thus, characterized by low prices, idle funds with banks, mass unemployment
and slack trade.
Levels of the economy:
Two types of policies are pursued by State to combat the inflationary and deflationary
tendencies in the economy. These are called stabilization policies, which mainly include : (i)
Monetary policy and (ii) Fiscal policy.
1. Monetary policy. It refers to the credit control measures adopted by the central bank of
an economy (in India, the Reserve Bank of India). These are of two kinds :
Quantitative or selective controls. Quantitative or general controls include bank rate

variations, open market operations and varying reserve ratios. They aim at regulating the
overall level of credit in the economy through the commercial banks. Bank rate is the
minimum lending rate at which the central bank discounts bills and securities held by
commercial banks, borrow less from the Central bank. On the other hand, commercial banks
raise their lending rate. This reduces the money supply in the economy. Reduction in money
supply reduces demand for goods and services in the economy, resulting in the check on
price rise. Open market operations refer to the sale and purchase of securities by the central
bank. When the central bank aims to control inflation it sells securities in the open market,
thereby reducing reserves of commercial banks. This reduces credit in the market. The
reduction in money supply helps in checking price rise. Changes in reserve ratio can help
combat inflation. The portion of deposits which a commercial bank has statutorily to keep
with the central bank as deposit is called the reserve funds. In order to reduce credit by the
commercial banks, many a time the central bank increases the percentage of such deposits.
Increase in reserve ratio reduces the bank advances, thereby reducing demand for goods
and services, and checks price rise. Selective credit controls are used to encourage or
discourage specific types of credit for particular purposes. In order to check the speculative
activity in the economy, the central bank changes the margin requirements to be charged by
the commercial banks on those activities.
In recessionary conditions, the State should use monetary policies in the opposite direction
to control recessionary forces. The central bank should lower the bank rate, thus, making
borrowing by commercial banks cheaper. Commercial banks in turn would lower their lending
rate, resulting in greater demand for credit. This would encourage investment, output,
employment, income and demand. Consequently, prices would start rising. Similarly, while
operating in the open market, the central bank should buy securities, thereby raising money
supply in the economy, whose impact would also be an increase in investment, output,

employment, income and price. The central bank can also use the instrument of reserve ratio
to combat encourage greater lending, thus reviving economic activity. Lastly, when recession
is in some specific sectors of economy the central bank can use some selective credit control
measures, particularly lowering margin requirements, which would help in encouraging
greater business activity.
2. Fiscal policy. Fiscal policy refers to the deliberate changing of taxes and government
spending for the purpose of keeping the actual GNP close to the potential full employment
GNP. If the potential GNP is exceeded it causes inflation, while if the actual GNP falls short
of the potential it causes recessionary conditions.
When inflation is due to excess purchasing power in relation to the amount of goods and
services available in the economy, the basic remedy for controlling inflationary conditions is
to drain away excess purchasing power. In such a case, fiscal policy should aim at taking
rupees out of the income-expenditure stream. As a result of this policy the aggregate
demand will reduce, leading to control of price rise. There are two approaches for
accomplishing this: (1) To restrain or reduce government spending and create a surplus
budget (where tax revenue exceeds government expenditure). The cutback on government
expenditures would reduce aggregate demand originating in the public sector; and its
spillover effect on the rest of the economy would also dampen aggregate demand. (2) To
increase taxes on business and consumers without increasing government expenditure.
Obviously, its impact would also be to create surplus budget and dampen the aggregate
demand. Depending on which of the approaches are used, there will be differential impact on
public and private sectors. However, both these approaches can also be used
simultaneously.
To combat recessionary conditions, just the opposite kind of fiscal policy measures need to
be adopted. The government should aim to generate fiscal deficit by either increasing
government expenditure (keeping tax revenues constant) or decreasing taxes (keeping
government expenditure constant) or both. We know that in recession the economy suffers
from unemployment as well as low level of output and aggregate demand. To give boost to
aggregate demand, there is a need to pump purchasing power in the economy. By
increasing aggregate demand, the unused capacity and unemployed labour can be
employed. Again, the impact of the increase in government expenditure will be felt through
resurgence of demand in the public sector and that of the cutback on taxes through the
private sector.
Indicators of Economic Development:
Inflation:

Inflation has attracted sufficient attention of economists and policy makers. India is pursuing
a policy of planned economic development. One of the prime considerations in the strategy
of growth has been to ensure that growth takes place in an environment of price stability,
which was considered crucial for both steady growth and even distribution of the gains of
growth. Any increase in prices was likely to affect investment planning and income
distribution in the economy. Hence, efforts to contain and or avoid the same were an integral
part of the planning process. The transmission of inflationary impulses in the economy is
affected by various factors e.g., the differences in sectoral relations in the economy, nature
of markets, both of products and services, the extent of linkages between these markets, the
pattern of income and asset distribution, levels of concentration of corporate and
tradeunion’s power and the effectiveness of the intermediation of financial institutions, rate of
growth in nominal wages and labour productivity, structure of capital formation and, finally,
the rate of development, etc. Inflation is defined as the persistent rise in the general price
level. The question arises as to what should constitute the appropriate measure to reflect
the general price level. In order to analyse the general price level, percentage annual
changes in (i) Wholesale Price Index (WPI), (ii) Gross Domestic Product (GDP) at market
prices, deflator, (iii) GDP (at factor cost) deflator and (iv) cost of living index (CLI) for
industrial workers are usually considered. Because of wide coverage, the GDP deflator (both
at market prices and factor cost) should be considered as the most appropriate index of
inflation because the deflator covers commodities as well as services, whereas the other two
indexes reflect movement only in commodity prices with different ‘Baskets’. Inflation rate has
dropped from being among 10% during 1991 to 5.91% during 2004.
Emergence of Consuming Class:
The Indian middle class has been an enigma to most marketers who have tried to assess its
buying patterns. Although, this market has not proved to be the made-to order goldmine that
the global players originally viewed it as, it is fast shedding the conservative tag. Increased
disposable income levels, as well as the shaking out of the taboo associated with consumer
loans has resulted in middle class families paying more and opting for CTVs. As the number
of channels increases, so does the strife amongst family members on which programme to
watch. TV manufacturers can convince them to go in for a second TV set. Two colour TVs
may seem too much of a luxury to bank balance conscious middle class families, but a new
B&W TV may do just fine. This could be another market for the B&W makers to address.
B&W manufacturers should look at increasing production and cost efficiencies to sustain in
the market. A very low priced B&W TV is sure to find a substantial market among the poorer
classes. With increased impetus on cost cutting, faster rotating models and a little help from
the Government on the duties front, the B&W industry can protect itself from blackening out.
The governement’s reform policies have already started to pay off. $1.6 billion in U.S
investment projects has been approved since the introduction of economic reform – twice the
amount of investment in India during the preceding 40 years. This beginning of liberalization

although so very recent, has already meant an impetus and growth in the rise of the standard
of living among the middle class. By the year 2000, India is projected to have a population of
one billion, and while India’s per capita income i.e.,average income is quite low ($330USD),
India has a growing middle class. An estimate of 200 million Indians have an annual income
comparable to those in the United States and Canada. Globally, except for China nowhere
will the new middle class be larger than in India. Amounting to hundreds of million of people,
this new middle class (with a major political base and buying ability) while modern in many
respect, being entrepreneurial and professional, will also have the traditional caution of their
past generation towards the 21st century. The growth in the earning ability and thus a rise in
the standard of living amongst middle class will also mean an end to the “Brain Drain”
phenomena happening in most developing countries. Brain Drain being a phenomena when
some of the best students and technicians in a developing country after being subsidized in
their education by their own government migrate to a developed country, to seek a better
standard of living. A quick survey amongst numerous American Engineering and Technical
Universities would probably illustrate this “Brain Drain” both amongst faculties as well as
students.
With the birth of the new middle class, their buying power and their technical saviness and
an almost virtual end to the “Brain Drain” phenomena, the third world will be the place for the
growth of new technology. Bleeding technologies once mainly a factor of the developed
world, will be happening in this so called once called third world, as the third world will be
where consumerism will abound. The rise of telecommunication will occur in this newfound
consumer land. Since 1990s, India’s $1.1 billion computer equipment market has been
growing at the rate of 31 percent annually more than any other information technology
sector. India already is the world’s leading exporter in software. There will also be a major
trend (already existing) in the rise of programming farms, where Indian programmers would
write the back - end and the front - end developed elsewhere. This philosophy of outsourcing
work would not only exist in programming but amongst numerous technical and scientific
endeavors.
The scale of economic expansion in India (as well as in China) cannot be underestimated.
By the year 2025 India could be in the top five, with an economy as large, or almost as large,
as that of Japan and Germany. Moreover, it is estimated that across the third world two to
three billion will emerge from poverty to enjoy middle-class affluence in coming years. As we
stand today at the threshold of a new century, we stand at the beginning of a new industrial
revolution. An industrial revolution that will take place in the third world countries with the
help of developed countries by way of monetary investment, transfer of technology,
implementation of management and marketing strategies. As the dynamics of global
economics continue to change, so will major companies that will be at its core be an agent of
that change or be its very victim. Those that see and seize the opportunities will win; those

that fail to recognize the intensity of global competition will lose.
Foreign Direct Investment:
Foreign direct investment is a key ingredient in economic growth. It can impact the host
economy through a variety of channels: by adding to investable resources and capital
formation; by transferring technology, skills, innovative capacity, and organizational and
managerial practices between countries; and by accessing international marketing networks.
FDI contributes to a significant share of the domestic investment, employment generation,
exports etc. FDI inflow into India touched $4.26 billion in 2003 as compared to $3.44 billion in
2002. With a 24% increase in FDI inflow, India has become one of the top 10 FDI
destinations among the developing countries while it is fourth among the Asian economies.
FDI inflow into the country would further increase with the recovery of the global economy.
Foreign Direct Investment (FDI) is permited as under the following forms of investments:
1. Through financial collaborations.
2. Through joint ventures and technical collaborations.
3. Through capital markets via Euro issues.
4. Through private placements or preferential allotments.
5. Through GDRs (Global Depository Receipt) is treated as Foreign Direct Investment

(EURO issues).
FDI is not permitted in the following industrial sectors:
1. Arms and ammunition.
2. Atomic Energy.
3. Railway Transport.
4. Coal and lignite.
5. Mining of iron, manganese, chrome, gypsum, sulphur, gold, diamonds, copper, zinc.
Politico-legal environment:
India suffered political instability for a few years due to the failure of any party to win an
absolute majority in the parliament. However, political stability has returned since the
previous general elections in 1999. However, political instability did not change India’s

economic course though it delayed certain decisions relating to the economy. The political
divide in India is not one of policy, but essentially of personalities. Economic liberalization
(which is what foreign investors are interested in) has been accepted as a necessity by all
parties including the Communist Party of India (Marxist). Thus, political instability in India, in
practical terms, posed no risk to foreign direct investors because no policy framed by a past
government has been reversed by any successive government so far. You can find a
comparison in Italy which has had some 45 governments in 50 years, yet overall economic
policy remains unchanged. Even if political instability is to return in the future, chances of a
reversal in economic policy are next to nil.
As for terrorism, no terrorist outfit is strong enough to disturb the state. Except for Kashmir in
the north and parts of the northeast, terrorist activity is either non-existent or too weak to be
of any significance. It would take an extreme stretching of the imagination to visualise a
Bangladesh-type state-disrupting revolution in India or a Kuwait-type annexation of India by a
foreign power. Hence, political risk in India is practically nonexistent.
A country’s economic policy environment must be conducive for firms to achieve efficiencies
that will enable them to be globally competitive. It is also widely accepted that taxation policy
can have strong incentive effects on corporate decisions. CII interacts closely with different
levels of government to put forward industry’s viewpoint. CII’s large membership enables it to
be the most impartial and representative industrial body, with a high level of credibility with
the government and key regulatory bodies. In order to achieve the objective of influencing
government policy, they undertake extensive research, interact with key government officials
and disseminate information through publications, seminars and events. With a large
network of offices across the country, they are able to track policy issues in detail at the
regional level. CII also interacts closely with the Members of Parliament - the policy makers -
across political parties to raise awareness about the need for reforms, the need for change to
keep up with an extremely competitive global economy. This has helped to keep up the flow
of economic legislation passing through the parliament.
Among the critical contingencies faced by every business firm, is the need to manage its
social and political environment. Both the social and the economic performance of the firm
can be affected in significant ways by managerial strategies and tactics; firms and their
managers can be active players in efforts to improve their social and economic bottom lines.
The corporate social performance of a firm and its economic results are characteristically
intertwined. Both in the short and the long run, failures to attend to social performance issues
can produce less than optimal economic results. Sometimes these issues present
themselves in crises that demand swift, effective managerial intervention. These very
practical concerns accompany the manager’s role as a moral citizen who must successfully
manage a complex set of ethical issues. The private corporation is only one of the means by
which economic activity and social endeavor in general may be organized. Private managers

are likely to have significant interaction with their public counterparts, not only in the context
of public regulation, as in the United States, but also in the contexts of a variety of public
enterprises. Such enterprises are far more common in the global economy than in our
domestic one. We shall therefore examine the characteristic behaviors of public and of
private enterprises. The corporation is a relatively recent invention. Ever since it evolved in
the last century, it has made active use of the benefits that only government can provide. Far
from being seen purely as a history of conflict, the tradition of business government relations
should be understood more often as a history of mutual benefit.
We shall look at the functioning of legislatures and the decision-making processes of

regulatory agencies from the perspective of participation by business.
Participants in public policy - making typically include a constellation of actors, including

legislative committees, regulatory agencies and other government bodies, public and private
interest groups, courts, and so on. We shall examine the processes by which influence is
exerted in this system, including a look at the behaviors and strategies/ tactics of interest
groups and the means by which firms make strategic use of the opportunities presented to
them in this system.
Government in this country is often characterized by rigid hierarchies, redtapism,

complicated procedures, sluggish decision-making and lack of accountability. Little wonder
then, interaction with Government usually turns out to be cumbersome, perplexing and
pathetically slow. Public access to Government services is usually clumsy and complicated.
In a paper-based system, locating a correspondence or file in a Government department can
be a truly frustrating experience. The problem gets further compounded in case of multiplicity
of agencies. The advent of Information Technology (IT) as a tool leveraging the delivery of
services is universally acknowledged now. In today’s world, e-governance has actually given
an opportunity of a paradigm shift in the process of delivery of government services to the
public.
Sweeping transformations have taken place in IT with the convergence of computing and
communication technologies. The advent of the Internet has thrown open numerous
possibilities. Groupware technology can also offer dramatic improvements in the intra-
government synchronization, optimisation of government resources, and decision support
systems to boost the efficiency and efficacy of the public policy. The major contributions of
groupware in improving organizational performance include online collaborative work,
electronic community development, knowledge management and workflow applications. In
such a scenario, information will be more directly accessible to decision-makers and flow
smoothly across departments through a common database and compatible systems inter-
linked under a secure high-speed networked environment.

In addition to a tangible improvement in the functioning of the administration, the

government-public interface shall undergo a radical change for the better.
The near absence of IT in a large number of government departments today offers both a
massive challenge and an outstanding opportunity to use state-of-the-art technologies to
shape the country’s future. Developments around the globe are taking place at a
breathtaking pace, and unless we urgently take steps to plan for this new world of technology
in this millennium, the government itself may shortly face the peril of becoming lesser
relevant. Wrapped in a mystic enigma, government processes at present give enormous
discretion and power to the administration, with ample scope of its misuse. In such a
scenario, a properly conceived, developed and deployed model of e-governance will provide
a rare opportunity to the government to reinvent itself and evolve on an on-going basis. It will
redefine the public-government relationship and the business-government interface. By
enabling improved connectivity and communication between all stakeholders, e-governance
truly has the potential to propel the country on the path of overall advancement. Such a
thriving model of e-governance shall also reinforce India’s emergent status of a global IT
superpower.
With the rapid pace of change in the IT industry, there has been a shift in focus from the
traditional inputs of a production process to the processes involved in the creation, storage,
dissemination and use of information. An IT-driven system of s- Governance works better,
costs less, and is capable of servicing citizens’ needs as never before. Analogous to e-
commerce, which allows businesses to transact with each other more efficiently (B2B) and
brings customers closer to businesses (B2C), Governance aims to make the interaction
between government and citizens (G2C), government and business enterprises (G2B), and
inter-agency relationships (G2G) more friendly, convenient, transparent and inexpensive.
The resulting benefits are a higher revenue growth and reduced costs. With the advent of the
Internet, the ‘citizen as a shareholder’ can now provide several inputs to the government’s
policy-making process, while the ‘citizen as a customer’ can demand better services from his
government.
Governments across the globe are trying to make this a reality through implementation of
information technology initiatives. However, undertaking such initiatives without focusing on
long-term goals will result in ‘islands of excellence’ and render a myopic vision of e-
governance.
Public policy and its implications:
Developing an appropriate public policy towards the industrial sector has been an important
task for Indian policy makers for a long time. When India moved away from an inward looking
industrialization strategy to a more ‘open’ economy in 1991, industrial firms needed to

restructure themselves to retain competitiveness. Much of these restructuring is needed to

correct the inefficiencies created by operating in a protected market.
For India to become a major player in world trade, an all encompassing, and comprehensive
view needs to be taken for the overall development of the country’s foreign trade. While
increase in exports is of vital importance, we have also to facilitate those imports which are
required to stimulate our economy. Coherence and consistency among trade and other
economic policies is important for maximizing the contribution of such policies to
development. It was felt that the Exim Policy with its limited focus may not be able to meet
our objectives. Thus, while incorporating the existing practice of enunciating an annual Exim
Policy, it is necessary to go much beyond and take an integrated approach to the
developmental requirements of India’s foreign trade. This is the context of the new Foreign
Trade Policy.
Trade is not an end in itself, but a means to economic growth and national development. The
primary purpose is not the mere earning of foreign exchange, but the stimulation of greater
economic activity. The Foreign Trade Policy is rooted in this belief and built around two major
objectives. These are:
To double our percentage share of global merchandise trade within the next five years;
and
To act as an effective instrument of economic growth by giving a thrust to employment
generation. The two-fold objective of the policy is proposed to be achieved by adopting,
among others, the following strategies:
Unshackling of controls and creating an atmosphere of trust and transparency to
unleash the innate entrepreneurship of businessmen, industrialists and traders.
Simplifying procedures and bringing down transaction costs.
Neutralizing incidence of all levies and duties on inputs used in export products, based
on the fundamental principle that duties and levies should not be exported.
Facilitating development of India as a global hub for manufacturing, trading and
services.
Identifying and nurturing special focus areas which would generate additional
employment opportunities, particularly in semi-urban and rural areas, and developing a
series of ‘Initiatives’ for each of these.
Facilitating technological and infrastructural upgradation of all the sectors of the Indian
economy, especially through import of capital goods and equipment, thereby
increasing value addition and productivity, while attaining internationally accepted
standards of quality.
Avoiding inverted duty structures and ensuring that domestic sectors are not
disadvantaged in the Free Trade Agreements/Regional Trade Agreements/ Preferential
Trade Agreements that enter into in order to enhance exports.
Upgrading infrastructural network, both physical and virtual, related to the entire
Foreign Trade chain, to international standards.
Revitalising the Board of Trade by redefining its role, giving it due recognition and
inducting experts on trade policy.
Activating embassies as key players in export strategy and linking commercial wings
abroad through an electronic platform for real time trade intelligence and enquiry
dissemination.

There is an inherent contradiction in the attitude and policy of the government as regards the
private sector. The government has continuously emphasised the important role assigned to
the private sector in the mixed economy of India and the steps it had taken to encourage the
private sector. At the same time, the government had taken various measures, both direct
and indirect, which do not help the private sector to develop freely and rapidly but which
actually restrict and hamper its growth. We may highlight here some of the problems of the
private sector.
Procedural delays. In all developing countries —India is no exception-there are too many
regulations imposed by the government on the private sector and too many procedural
delays. It is estimated on an average, it takes 7 years “from the conceptual stage to the
production stage for any significant investment to take place in India.”
Decisions which used to be taken at one time at a low level of government bureaucracy are
concentrated in the hands of the top bureaucracy, or with the ministers and in some cases
even with the cabinet. There is no delegation of decision-making and in fact, even the
smallest decisions are taken at the top level, resulting in avoidable delay, cost escalation,
and higher burden on the consumers.
Unrealistic controls. The government is influenced by contradictory motives, as for

instance, the protection of the consumers (price controls) and the prevention of concentration
of wealth and income (capacity restraint). The price controls imposed by the government on
many of the goods do not give proper incentive for additional production. Actually, the
government should encourage competition among the rival firms and increased production
would automatically bring down the prices. On the other hand, price controls under
conditions of shortage tend to perpetuate shortage, rise of black markets and possible
shifting of investment from controlled items to the production of non-controlled items. In this
connection, the system of dual pricing has been found to be much better than unrealistic
price controls. At one time, licensing of capacity was meant to bring about organised growth
and prevent monopolistic tendencies, hi - practice, however, it has emerged as something
unique in the whole world. While attempt is made to increase capacity to create more
employment and produce more, India is the only country in the world which penalizes
increase in production. Capacity restraint is indeed anti-investor and anti-consumer. Since
1980, and more recently after the resumption of power by Mr. Rajiv Gandhi there has been a
welcome trend of regularising excess capacity in scheduled industries, removal of
restrictions on creation of new capacities, abolition of unnecessary controls and liberalization
of controls wherever they cannot be abolished.
Reservation for the small sector. The government has generally worked on the
assumption that small industries are in conflict with large ones which always stifle the growth
of the small and cottage sector. Accordingly, the government has attempted to help the small

sector in many ways. One method is to provide excise exemption or impose, a lower rate of
excise duties for goods produced in the small sector. Another method is to reserve certain
products in the small sector and prevent the large sector from producing such goods. As a
result of such measures, the complementarity of the two sectors in the process of growth has
been lost, while it may not be desirable to continue reservations or differential excise duties
for government. Unfortunately, considerable controversy has been created in the definition of
the joint sector and the industries that should be brought under this sector. Part of this blame
goes to the Dutt Committee Report which used the term “joint sector” for the first time and
gave not one but three concepts of joint sector:
(a) Existing private enterprises belonging to the large industrial houses should be brought
under the joint sector by public financial institutions converting their loans into equity. “In that
case we would like to emphasise that they should be clearly treated as belonging to the joint
sector and not to the private sector.”
(b) The joint sector would include those industrial units in which both public and private
investments had already taken place and where the state has already been taking an active
part in direction and control.
(c) A large sized industrial unit in Schedule B and C categories, necessitated on account of
technical and economic advantages of large scale, should necessarily be in the joint sector
to prevent concentration of economic power. In this case, the joint sector should be treated
as belonging to the public sector, for a large portion of the cost would be provided by the
government and public financial institutions though, of course, private parties too would be
permitted to have equity participation.
Lessons for Marketers:
The most striking feature of contemporary India is the rise of a confident new middle class. It
is full of energy and drive and it is making things to happen. In terms of political power, it is
erstwhile middle class that has climbed to the top in the social hierarchy of modern societies.
It has transformed itself into the ruling class by acquiring control over the levels of state
power. Property no more rules, even indirectly, these days. Nor does labour in the ”peasant
and workers” states. It is the “knowledge” group comprising not only politicians and
bureaucrats but also business executives, company directors, factory mangers, scientists
engineers, technocrats, bankers, journalists, intellectuals lawyers, doctors, teachers and
many others belonging to liberal profession and “services” sector, that does so. That group
or class constitutes the political class and a section of it the ruling elite. The two key
attributes distinguishing the class from other social classes are its possession of education or
knowledge in the broad sense of the term and leadership qualities that help to put the class
at the top in all walks of social life.

The social climb that this class has experience has gone coincided with meta morphical
change that the society in western countries has undergone in socioeconomic political and
ideological fields. The concept of democracy secularism, human rights, social security, social
justice and welfare state are all parts of middle class philosophy and ideology. Since the
thought and ideology of the middle class has come to acquire universal appeal, this has
helped put the class in commanding position vis-àvis the rest of society. It has cast that class
in the leadership role and vested it with decision making regulation co-ordination and
controlling power in terms of various types of social activity and relations. This class has
come to constitute the elite in the modern societies. A part of it forms the governing elite, the
rest becoming non-governing elite. The governing elite by virtue of its control over the levels
of power in the state machinery, an exercise of all political powers on behalf of the state is
able to influence production and distribution of income and wealth class relation, social
change, and the political and economic development of the society it governs. The governing
elite itself, of course, does not have absolute freedom of action. It’s exercise of power is
moderated by the consideration of its continuing to be in possession of power against the
challenge that the non - governing elite poses to it in the matter. The struggle for power
between the governing and non-governing elites is a constant feature of the modern state
and the society. The struggle is intra-class and not-inter-class. The masses do not compete
for power with the elite. It is the different sections of the elite who do so among themselves.
The battles are fought and struggles waged in the name of ideology, national interest and
welfare of the masses. Professions about promoting these interests is not a masks worn by
the elites contending for political power; a degree of genuineness is always there. That
degree differs from one society to another depending upon the level of consciousness
reached among the masses. The most developed that consciousness is and more enlighten
the masses are the more difficult it would be for the elite to mislead them by catch phrases,
empty slogan and ideological swearing. In advanced society, the class as well as self-
interest of the elite will coexist with those of the society as a whole. The elite circulation will
still be there and may even be more pronounced than in a comparatively less developed
society, but it will waste on the account, that the governing elite gives of itself, when in
power, that on the relative manipulative abilities of the contending elites. The competition for
power among the elite will thus become a social instrument material advancement. That
gives the democratic system of the government an edge over dictatorship and absolute
monarchy in which cases power is monopolised by a single individual assisted by his coterie
or collectively by a cohesive oligarchy. This will augur well for the marketers in the Indian
context.
Modern technology has made the job of the marketer easier. Here are a few tools that is in
use today for improving marketing processes, and building brand value:
SMS

One can locate the nearest pizza outlet or log on to a Website to check out the specifications
of the new car you plan to buy.
i-Seminars
Seminars on the internet instead of physical seminars is better for the customer regarding
travel, time and expense.
E-marketing
No snail mailing, only e-mails; interactive web information (no printing of brouchers) and Web
banners.
e-Surveys
Online market surveys of customers help in deciding product strategies, which result in a
greater possibility of acceptance of the final product or service, adding to the the brand value
of the organization.
Online billboards
Online billboards made of super-large plasma displays allow for time-sharing and instant
message revision.
Superior design tools
Better tools like Photoshop and illustrator allow a designer to do things that would have
required very expensive design workstations a decade or two ago.
Touch-screen kiosks
Touch sreen kiosks used to market and showcase brands at shopping malls have changed
the way a consumer can feel and experience a product on the shop floor.
Analysis tools
Better data mining technologies coupled with cheaper storage has accelerated the pace of
research, so that one can narrow down on one’s target and focus better. At every point of
influence, not just marketing but also awareness, acquisition, education, conversion, sale,
service, support-role of technology has changed our processes and efficiencies.
The Indian electronics and hardware industry has been lagging behind the impressive
performance of the software sector. Most of the hardware requirements of the burgeoning

software and telecom sectors are met by imports. The Indian government has recognised the
need to increase domestic output and formulated the Electronic Hardware Technology Park
(EHTP) scheme that offers various concessions for companies that manufacture either
electronic goods or components.
Summary:
There is a perceptible change in the mind set of the consuming class in India as it is evident
from the social, cultural, political, technological and economic environments as discussed in
this unit. However, one change which is fast sweeping the country is the advent of internet.
The medium of the internet and the development of e-commerce are progressing extremely
fast on a global basis. However, while the internet acts as a faster and less costly platform
for consumers and businesses it has inadvertently increased the importance of customer
satisfaction. By making transactions faster and easier it had enabled the customer to switch
just as quickly between e-businesses, causing the element of competition to take on a new
diversion. It is very important to achieve customer satisfaction to get good financial
performance in services in the physical world, and the same can be said of e-commerce
where a customer can be lost if unable to access a website or if the experience proves
unsatisfactory.
Review Questions
1. The marketing environment is best described as being:
A. Composed of controllable variables.
B. Composed of variables independent of one another.
C. An Indirect influence on marketing activity.
D. Dynamic and changing
2. If the Kellogg Company decides to build a new cereal plant because it anticipates the next
five years will bring low unemployment and increase in buying power, it is forecasting a
period of:
A. Depression
B. Prosperity
C. Recovery
D. Austerity

E. Recession
3. Coca Cola markets its soft drink to members of Generation Y who love extreme sports and
are risk-takers. If Coca cola Dew began lobbying politicians and engaging in advocacy
advertising to support continued use of high fructose corn syrup and caffeine in products
targeted toward young people, the company would be engaging in:
A. Mass Marketing
B. Environmental Management
C. Target Marketing
D. Market Segmentation.
4. Ramji Systems have developed Movie Mask, a system that acts as a video censor by
interfering with the playback process so that supposedly offensive material never appears on
the television screen. For movie production companies, the Movie Mask is a(n) ________
factor in their external environment.
A. Technical
B. Economic
C. Social
D. Political
Have you understood?

1. A marketing manager for a small computer manufacturer is analyzing the potential
effects of political, legal, social, and economic forces on the firm’s operations. Develop
an environmental analysis for him.
2. To effectively monitor changes in the marketing environment, marketers must engage

in what activities?
3. Conduct an evaluation of the consumption pattern of the Indian middle class.
4. Do you think all these MNC’s rushing to India is based on the growing economic clout
of India? Justify your answer.
Marketing Interface with other Functional areas of Management

INTRODUCTION:
As you are aware, marketing is a dynamic discipline. The nature of marketing is such that it
will have to liason with various departments and cannot function in isolation. The significance
of marketing department has changed in India since the liberalization wave was unleashed.
Marketing has certain objectives and that will deliver the best possible results for the
organization. Hence, it is important that there exists an excellent co-ordination between
marketing and other functions.
When you finish this unit, you should be able to understand:
The scope and functions of marketing.

The importance of marketing.
The nature and objectives of marketing management.
The coordination between marketing and other departments.
MARKETING MANAGEMENT
Marketing management is an important operative function (as distinct from managerial
function) of management. It performs all managerial functions in the field of marketing. It is
responsible for planning, organizing, directing and controlling the marketing activities. It is
required to build up appropriate marketing-mix to achieve the objectives of the business.
According to E.W. Cundiff and R.R still, “Marketing management is concerned with the
direction of purposeful activities towards the attainment of marketing goals.” The basic goals
of marketing are satisfaction of needs of customers and generation of revenue for the
business. Most of the big business enterprises organize the marketing activities separately
under the charge of a marketing manager. The marketing manager looks after various
aspects of marketing to achieve the objectives of marketing, viz., creation of customers and
satisfaction of their wants and earning of profits.
Marketing management attempts to contribute to the organizational objectives. It deals with

planning, organizing, directing and controlling the activities related to the marketing of goods,
ideas and services to satisfy the customer’s needs and contribute to organizational
objectives. The nature of marketing management is illustrated in the following points.
(i) Marketing management is a functional area of management. As a managerial function, it

includes analysis, planning, implementation and control of activities concerned with
development and distribution of products for satisfying the needs of the customers.
(ii) Marketing management is goal directed. It attempts to satisfy the needs of customers by

offering them need satisfying products and thereby generate revenue for the business.
(iii) Marketing management determines the appropriate marketing mix of the firm. Product
design, its promotion, its pricing and its distribution are properly harmonized so that goods
are accepted by the customers.
(iv) Marketing management is a specialized job. Efficient handling of marketing activities

require specialized knowledge of markets, products, consumer’s tastes and behaviour,
government policies, and business environment.
(v) Marketing management is the marketing concept in action. It includes all activities which
are necessary to know the needs of customers and supplies goods and services to satisfy
the needs of the customers. The marketing concept is based on the philosophy that all
activities of the business enterprises should be oriented towards the satisfaction of
requirements or needs of the customers
NATURE OF MARKETING
1. Marketing is customer-focused. Marketing intends to satisfy and delight the customer.

The activities of marketing must be directed and focused at the customer. Marketers can
remain in customer mind if they are provided value for what they spend. Customer focus can
optimize costs for the customer while allowing the organization to focus on its core
competencies. Today’s customer makes constant trade-offs between quality, price, and
benefits. Thus, marketers must allow customers to dictate product specifications and quality
standards. Marketing efforts must be directed at meeting customer needs, not market
shares. For this, marketers must track customer needs on a continuous basis.
2. Marketing must deliver value. Marketer have to track customer needs and deliver the
product as per their requirements. This is not an end in itself. The company must satisfy the
following equation with resultant value above all.
The corporate strategy must be aimed at delivering greater customer value than competitors.
The corporate planning, processes, and people must be re-configured around the customer.
1. Marketing is business. When customer is the focus of all activities marketer need not
search customers to seek response to his products. Customer group is decided for whom the
product is prepared and presented.

2. Marketing is surrounded by customer needs. Marketing starts with the identification of

customer needs and requirements. These are turned into probable features that might satisfy
the basic needs. The portable form of product is made out and presented before the
customer for approval. The customer suggests changes or improvements in the portable
product and the final product is brought before the customer. Fig .1.illustrates the point.
Figure .1 Marketing and customer needs
1. Marketing is a part of total environment. Total environment may be defined as the

combination of all resources and institutions which are directly related to the production and
distribution of goods, services, ideas, places and persons for the satisfaction of human
needs. However, it is better to look at remote and immediate environment of any marketing
organization as shown below in Fig.2

1. Marketing Systems Affect Company Strategy. Marketing has its own sub-systems
which interact with each other to form complete marketing system that is responsive to
company marketing strategy. Through the sub-systems (marketing Information system,
Marketing Planning system, Marketing Organisation and Implementation System and
Marketing Control System) shown in Fig.4, the company monitors and adapts to the total
marketing environment. The interaction between marketing sub-systems and environment
has been discussed in detail in the chapter marketing environment.
2. Marketing as a Discipline. The subject of marketing has emerged out of the business
which has derived its existence from economics. After emerging from business, marketing
has got its strength from related areas-law, psychology, anthropology, sociology, statistics,
mathematics because the related problems impinge heavily on consumer behaviour, legal
aspects of marketing, research on consumer needs, advertising media, pricing, promotion
methods, etc. thus, marketing as a discipline stands tested as an art and a science. Fig. 3
illustrate the point.

Fig.5 Marketing as Science and Art
1. Marketing creates mutually beneficial relationships. The customer is the focus of all
marketing activities. But, during the last decade, the focus has shifted to the way of doing
business, i.e., the strategic aspects of marketing. Here, the means of marketers are their
knowledge and experience, and the end result is in the form of mutual beneficial relationship.
Thus, marketing is everything that results in the mutually beneficial relationships with the
customer. For example, if social contribution can help enhance company image, help to
aged, children and disabled would definitely attract the consumer confidence in the
organization because of its assumption of social responsibility. Thus, customer might
differentiate between Coke and Pepsi, Whirlpool and Godrej refrigerators, etc.
SCOPE AND FUNCTIONS OF MARKETING
The scope of marketing can be understood in terms of functions that a marketing

manager/director/department performs. In most of the business enterprises, marketing

department is set up under supervision of the marketing manager. The major purpose of this
department is to generate revenue for the business by selling want satisfying goods and
services to the customers. In order to achieve this purpose, the marketing manager performs
the following functions:
i. Marketing research
ii. Product planning and development
iii. Buying and assembling
iv. Selling
v. Standardization, grading and branding
vi. Packaging
vii. Storage
viii. Transportation
ix. Salesmanship
x. Advertising
xi. Pricing
xii. Financing
xiii. Insurance

Fig. 6. Functions of Marketing
The functions of marketing may be classified into four categories as shown in the above
Figure.
A. FUNCTIONS OF RESEARCH
A1. Marketing Research
It means the intelligence service of the organization. Marketing research helps in analyzing
the buyer’s habits, relative popularity of a product, effectiveness of advertisement media, etc.
its major task is to provide the marketing manager with timely and accurate information so
that better decisions can be made. The scope of marketing research is very wide. It may
cover all the areas of business which have bearing on the marketing function. In the words of
W.J.Stanton, “Marketing research is the systematic search for and analysis of facts related to
a marketing problem. Its emphasis is shifting from fact finding, information gathering activity
to a problem solving and action recommending function”.
A2. Product Planning and Development
A product is something which is offered by a business firm to customers to satisfy their

needs. It has great importance in all other areas of marketing management. For instance,
marketing research is mainly directed towards knowing the needs of the customers and
increasing the sale of the product; and storage and transportation activities depend upon the
nature of the product. Therefore, it is necessary to plan and develop products which meet the
specifications of then customers. Products are the foundation of any marketing programme.
The success of marketing department depends upon the nature of the product offered to the
customers. The product must be so designed and developed that it meets the requirements

of the customers.
Product planning and development involves a number of decisions, namely, what to

manufacture or buy? How to have its packaging? How to fix its price and how to sell it? The
design, quality, colours, size and other features of the product can be determined by
conducting marketing research. The product department will be guided by the requirement of
the users.
B. FUNCTIONS OF EXCHANGE
B1. Buying and Assembling
Pro-curement of raw materials, semi-finished or finished products has gained great

importance for the modern industrial and commercial enterprises. Raw materials are
purchased for production by the industrial enterprises and finished goods are purchased for
resale by the commercial enterprises. Whatever, may be the case, the marketing department
plays an important role. It is the marketing department which will supply the information
regarding the needs and tastes of the customers. Co-ordination between purchasing officials
and the marketing officials will help in purchasing right types of materials or goods at right
time and in right quantities.
Purchasing is different from assembling. Purchasing involves determination of requirements,

finding the sources of supply, placing the order and receiving the goods. But, assembling
means collection of goods already purchased from different sources at a common point. It is
also used in another sense. Raw materials are purchased and assembled in order to
produce goods and services.
B2. Selling
This is an important aspect of marketing under which ownership of goods is transferred from
the seller to the buyer. Sale may take the form of : (i) a negotiated sale, and (ii) an auction
sale. In case of negotiated sale, the terms and conditions between the buyer and the seller
are arrived at by bargaining or haggling. But in case of an auction sale, there is no scope for
negotiation between the seller and the buyer. The buyers assemble at the place of auction
and bid against one another for the goods on sale. The goods are sold to the highest bidder.
Negotiated sale may take the following forms, namely, (a) sale by inspection ,(b) sale by
sample, (c) sale by description, (d) sale by grade, and (e) sale by brand.
C. FUNCTIONS OF PHYSICAL TREATMENT
C1. Standardization, Grading and Branding.

Standardization means setting up of specifications of a product. Grades of agricultural

products are based on these specifications and standards. Industrial goods are given brand
names by their manufactures to convey to the customers that their goods conform to certain
well-defined standards. These activities promote the sale of products.
C2. Packaging
Packaging is traditionally done to protect the goods from damage in transit and to facilitate
easy transfer of goods to customers. But, now it is also used by the manufacturer to
establish his branded products as distinct from those of his rivals. Author activity connected
with packaging is labeling. Labeling means putting identification marks on the package. The
label is an important feature of a product. It is that part of a product which contains
information about the producer and the product. A label may be a part of a package or may
be a tag attached directly to the product. The label is used to communicate brand, grade and
other information about the product.
Packaging has become one of the essential services of modern marketing. It acts as a multi-
purpose arrangement. It gives protection to goods on its route from manufacturer to
consumer. It even protects the goods during its life with the user. Packaged goods are
generally more convenient to handle. Packaging also gives individuality to a product. It
makes easier for the consumer to identify a product by looking at its package.
Packaging facilitates the sale of a product. It acts as a silent salesman of the manufacturer,
particularly at a place where there is a widespread use of self-services, automatic vending
and other self-selection methods of retail selling. Sometimes, packages are duly sealed to
ensure products of right quality to the consumers. In the absence of sealing, duplicate
products may be distributed to the consumers by unscrupulous dealers.
C3. Storage
Goods are generally produced in anticipation of the demand. They have to be stored
properly in warehouses to protect them from any damage which may be caused by ants,
rats, moisture, sun, theft, etc.
Storage of goods in warehouses has become an indispensable service these days.

Producers, manufacturers, traders, mercantile agents, importers and exporters engaged in
business have to store their goods in warehouses. Goods are produced or procured well in
advance of the demand. They are stored in warehouses till they are actually sold in the
market. Thus, warehousing creates time utility. In addition, modern warehouses perform
certain marketing services also such as grading, packaging, labeling, etc.
C4. Transportation

Modern organizations produce on a large scale to cater to the requirements of customers

scattered throughout the country. This calls for transportation of goods from the place of
production to the place of consumption. Transportation provides the physical means which
facilitate the movement of persons, goods and services from one place to another.
Transport plays a significant part in the economic, social and political development of a
country. Rapid industrialization and exchange of goods and services cannot take place
unless sufficient facilities for transportation are available.
It is with the help of various means of transport that raw materials are transported from the
place of their production to the industrial centres where they are converted into finished
products. It is again transportation that facilitates the movement of goods from the producers
to the users. By doing so, transportation removes the distance problem and creates place
utility.
Transportation creates time utility in goods and services because speedy transport
minimizes the time of their transit. Transporation leads to regional specialization. A region
may specialize in the production of those goods and services for which it is most suited. This
leads to production of goods and services in different regions at the lowest possible cost.
Transportation also plays a crucial role in the price mechanism. It tends to equalize and
stabilize the prices of various commodities by moving them from the areas where they are
surplus to those areas where they are in short supply.
D. FUNCTIONS FACILITING EXCHANGE
D1. Salesmanship
Personal selling is an important method of selling goods. It is widely used in retail marketing.
Salesmanship or personal selling involves direct and personal contact of the seller or his
representative with the purchaser. It is the oldest known form of selling and is the most
important and recognized method of selling.
The art of salesmanship has undergone a big change. The attitude of salesman towards the
customers and vice versa has also changed. This change has gone hand in hand with the
changing concept of ethical standard in business. Earlier, caveat emptor (let the buyer
beware) ruled a sales transaction, but now the satisfaction of customer is more important. A
salesman finds out what his customer needs and does his best to meet it from the
merchandise at his disposal. Selling has become a science of human relations and an art of
getting along with people so effectively that sales resistance may be reduced to the
minimum.
D2. Advertising

Advertising has become an important function of marketing in the competitive world. It helps
to spread the message about the product and thus promote its sale. It facilitates creation of a
non-personal link between the advertiser and the receivers of the message. The importance
of advertising has increased in the modern era of large-scale production and tough
competition in the market. Business firms use several media of advertisement to sell their
products. These include newspapers, magazines, radio, television, cinema halls, hoardings,
window displays, etc.
D3. Pricing
Determination of price of a product in an important function of a marketing manager. Price of

product is influenced by the cost of product and services offered, profit margin desired,
prices fixed by the rival firms and government policy.
A sound pricing policy is an important factor for selling the products to the customers. The
price policy of a firm should be such that it attracts all types of customers different means. A
good price policy helps in determining the varieties of a product to be made or procured so
as to satisfy the demands of various kinds of customers.
D4. Financing
Financing and marketing functions of a business are inter-linked with each other. The
marketing department has an important say on policies of the finance department in regard
to cash and credit sales. Financing of customer purchasing has become an integral part of
modern marketing. The provision of goods to the customers on credit basis is an important
device to increase the volume of sales. A manufacturer has to provide credit facilities to
wholesalers and retailers. As a matter of fact, credit is the lubricant that facilitates the
operation of the marketing machine.
D5. Insurance
A large number of risks are involved in exchange of goods and services. Insurance helps to
cover these risks. It facilitates the smooth exchange of goods by covering risks in storage
and transportation.
Loss or damage to goods or property may arise due to fire, theft, natural calamities like flood
or earthquake and so on. People employed in business firms are also liable to the risks of
injury or loss of life due to accidents in the work-place.
Business firms are able to provide for protection against these risks by insurance companies.
They can cover the risks on payment of a nominal premium and recover the loss, if any,
arising out of the risk.

SIGNIFICANCE OF MARKETING
Marketing Affects Our Lives
Customer is the revolving force of marketing. Customer decides what products suit their
needs. The choice of one product over another sets the pace of marketing action. For eg.,
because of changed social perception about the role of women, higher percentage of women
tend to move out of their homes. This changed role of women has resulted into need for
crèches, household domestic help, expanded need for communication facilities because of
separation of mother and child, more security inside house where the child is mostly alone,
home entertainment equipments like TVs, VCRs, video games, personal computers, etc., so
that the child does not move out of home and also the parents could entertain themselves
when they are back from work.
As a result of women venturing out of home, there is expanded need for day care centres,
maids/robots, telephone, steel grills, alarm system, personal security device, TV, VCR video
games, personal computers, etc., Table 3 helps to gauge as to how marketing affects our
lives.
Table 2. Effect of Marketing on Our Lives.
Marketing Satisfies our needs.
Once it is ascertained that marketing affects our lives in many ways, the immediate question
arises: How it satisfies our needs? Here, the product is the main propeller of the marketing
activities. However, not only that the product should satisfy customer needs and wants, it
should also remove hindrances between the marketers and customers by creating utilities for
them by adding value to the product.
By removing these hindrances, marketing ensures free and smooth exchange of goods and
services from marketers to customers.
1. Form Utility. Customer expects that their needs should be fulfilled with appropriate goods

or services with particular features/attributes/style/shape/size etc. Form utility supplies them

all by converting the raw form of products into meaningful final products. Thus, customers
force marketers to direct production department in terms of specific customer needs
satisfaction. For example, Whirlpool advertises its refrigerators by showing a man asking
different customers to, explain their requirements. The final product comes up as per the
customer’s requirements.
2. Person Utility. The marketers and ultimate customers are not always situated at the
same place, so that the customers could buy the products and services for their consumption
or usage. At times, there is a big gap between the producers and the ultimate customer,
marketing helps to remove the hindrance of person by means of trade. Trade, as part of
marketing, plays a major role in establishing contact between producers as providers of
goods and services and customers as users or consumers of those goods and services to
satisfy their needs. Various traders, namely, wholesalers, retailer and mercantile agents
operate to provide person utility.
3. Exchange Utility. In case of goods and services, the person utility clears the way for their
proper exchange. Marketing helps to bring together the producers of goods ready to sell their
goods for money and the consumers of those goods ready to part with their money
(purchasing power), thus removing the hindrance of exchange. Moreover, with money as the
medium of exchange, payment for goods and services is made through banks. Further,
banks offer finance trade in ways more than one. Thus, exchange utility is provided by
money, banking, and finance.
4. Place Utility. Goods may be produced at a place where advantages of location other than
the market may be available whereas the buyers of such goods may be situated at a far off
place. The barrier of distance between the place of production and the market where these
products can be sold is removed by different means of transport. Besides transporting goods
from the place of production to that of consumption, the services of insurance to cover the
risk of loss during transit and storage and packaging to protect goods against damage and
pilferage are also aimed at removing hindrance of place. Thus, place utility brings the
producer of goods and services closer to the customer.
5. Time Utility. Goods, in modern times, are produced in anticipation of demand and as
such they are to be stored as long as the demand for the same comes up. Such stored
goods are to be released as and when, demand materializes. This function of storage and
preservation is performed by warehouses which remove the hindrance of time by balancing
the time lag between production and consumption, thus creating time utility. During this
process of storage, insurance plays its role by removing the risk of loss or damage through
theft or fire.

6. Knowledge Utility. A producer may find it difficult to sell his products unless and until he
brings it to the knowledge of the prospective consumers the utility and the distinctive features
of his products. Advertising and salesmanship help to remove the hindrance or lack of
knowledge on the part of the prospective buyers by bringing to the notice of the customer,
the utility of buying the goods and services offered.
Marketing Generates Revenue for the Business Firm.
Marketing is a basic function of all business firms. According to Peter Drucker, “It is in
marketing that we satisfy individual and social values and needs, be it through producing
goods, supplying services, fostering innovation for creating satisfaction.” Marketing is an
important activity these days, particularly in the competitive economies. Marketing generates
revenue for the business enterprises. No firm can survive in the long-run unless it is able to
market its products. In fact, marketing has become the nerve-centre of all human activities.
Efficient marketing management is a pre-requisite for the successful operation of any

business enterprise. A business organization is differentiated from all other human
organizations by the fact that it makes and sells products or service.
Marketing is the beating heart of the business organziation. The chief executive of a
business organization cannot plan, the production manager cannot produce, the purchase
officer cannot purchase, and the financial controller cannot budget until the basic marketing
decisions have been taken. Many departments in a business enterprise are essential for its
growth, but marketing is still the sole revenue producing activity. Marketing function is rightly
considered to be the most important operative function of management.
Role of Marketing in Economic Development
Marketing is the kingpin that sets the rate of progress of the economy. The marketing
organization, if more scientifically organized, makes the economy strong and stable. The
lesser the stress on the marketing function, the weaker will the economy be.
Underdeveloped marketing is a sign of underdeveloped economy.
An underdeveloped economy is characterized by many shortages and is a seller’s market.

Selling effort is not needed much. As a result, business firms do not feel the need for
changing their marketing methods and practices. The other reasons for the unsystematic
marketing in an underdeveloped economy are heavy dependence upon agriculture, old
methods of production, over-population, lower income and lower standard of living. Since,
marketing is consumer oriented, it can bring about many positive changes in the
underdeveloped economies.
Marketing enables a nation to improve the standard of goods and services and consequently

business values. Consumer gets the top-most priority. Quality of goods, store display,
advertisement, packaging, etc. are all directed towards the satisfaction of the consumer.
Marketing helps in improving the standard of living.
Marketing provides better standard of living by offering a wide variety of goods and services
with freedom of choice, and by providing the customer a higher standard of living, because it
meets the consumer’s physical as well as emotional needs. Marketing generates
employment both in production and in distribution area.
A large number of people are employed by modern business houses to carry out the
functions of marketing. Marketing also gives an impetus to further employment facilities. In
order to ensure that the finished product reach the customer, it passes through wholesalers
and retailers and in order to man these numerous establishments, many people get
employed. In the absence of marketing, the level of employment would not have increased.
Marketing helps in developing economic resources. Since a business firm generates revenue
and earns profits by carrying out marketing functions, it will engage in exploiting more and
more economic resources of the country to earn more profits. Therefore, marketing should
be given the greatest importance if the national resources are to be exploited fully. Marketing
determines the needs of the customers and sets out the pattern of production of goods and
services necessary to satisfy the needs of the customers. Marketing also helps the traders to
explore the export market.
Objectives of Marketing
Marketing management is concerned with those activities which are necessary to determine
and satisfy the needs of customers so as to achieve the objectives of business. Thus, the
basic goal of marketing management is to achieve the objectives of the business. A business
aims at earning reasonable long-term profits by satisfying the needs of customers. In the
light of this statement, we may state the objectives of marketing management as follows:
1. To create customers for the business: The marketing manager must attract customers to
buy the firm’s products and services. This will facilitate increased sales. New customers may
be attracted through advertisement and sales promotion activities such as distribution of
samples, display of goods, etc.
2. To satisfy the needs of the customers: The marketing manager must study the demands
of customers before offering them any goods or services. Selling the goods or services is not
that important, as the satisfaction of the customer’s needs. Modern marketing begins and
ends with the needs of customers.
3. To determine marketing-mix that will satisfy the needs of the customers: Product, pricing,

promotion and physical distribution should be so planned as to meet the requirements of

different kinds of customers.
4. To generate adequate profits for the business: The marketing department is the only
department which generates revenue for the business. Sufficient profits must be earned as a
result of sales of need-satisfying products. If the firm is not earning profit, it will not be able to
survive in the market. Moreover, profits are also needed for the growth and diversification of
the firm.
5. To earn goodwill for the business: To build up the public image of a firm over a period is
another objective of marketing. The marketing department provides quality products to
customers at reasonable process and thus creates its impact on the customers. The
marketing manager attempts to raise the goodwill of the business by initiating image building
activities such as sales promotion, publicity and advertisement, high quality, reasonable
price, convenient distribution outlets, etc. If a firm enjoys goodwill in the market, it will
increase the morale of its sales-force. They will show greater loyalty and will develop a sense
of service to the customers. This will further enhance the reputation of the business.
6. To raise standard of living of the people: Marketing management attempts to raise the
standard of living of the people by providing them better products at reasonable prices. It
facilitates production and distribution of a wide variety of goods and services for use by the
customer.
Coordination Between Marketing And Other Functions:
The persons interacting with the customer are commonly known as sales managers,
advertising managers, sales promotion managers, marketing researchers, product
managers, brand managers, customer-service managers, etc. The person producing the
product is known as production manager. The person recruiting people into the organziation
is known as personnel manager.
The person dealing with financial aspects is known as finance manager. The task of the
marketing management is to coordinate with other departments and expect reciprocal co-
ordination from other departments. Thus, if sales people feel that the product is not up to the
mark, the marketing management should order a probe by the marketing research
department which invariably should include representation from production department.
Otherwise, it would mean that sales persons were unable to sell the product and therefore
put blame on the defects in the product. In essence, there should be proper coordination
between the marketing and other departments.
Achieving Coordination

Marketing concept forces business firms to use an integrated approach in their operations.
Each firm should coordinate the activities of purchase, production, finance, personnel and
marketing departments to satisfy the needs and expectations of customers. Thus, marketing
should not be considered merely as a fragmented assortment of marketing functions. Each
and every department has to contribute for the satisfaction of customers and this needs
proper co-ordination between the functioning of all departments.
Coordination with Purchase and Production Departments
Marketing department is responsible for sales forecasts which are communicated to all the
departments of the firm. It has to prepare the time schedules, for the production and the
purchase departments to inform them, the dates by which goods are to be manufactured and
made ready for delivery. It informs the purchase and production departments of the
introduction of new substitutes and any change in the prices of competitive goods. It also
communicates about the quality of goods committed by it, to the customers. Information is
also to be given in case of urgent orders so that the purchase department is able to proceed
immediately for the purchase of materials required to execute the urgent orders.
Since marketing department is in touch with the present and prospective customers, it should
gather information about the change in taste or needs of the people and pass it on to the
purchase and production departments. This will enable the purchase department to purchase
right types of materials. The purchase department should inform the marketing department
about the changes in the cost of raw materials to facilitate the latter in fixing competitive
prices. There should always be harmonious relations between the purchasing and marketing
departments. The marketing department must take assistance from the purchase department
in calculation of pricing of job contracts and in submitting bids or quotations so that adequate
profit margin is assured of such proposals.
Coordination with Finance Department
Every enterprise maintains a separate department known as finance department, which is

responsible for managing the funds of the enterprise. There should be harmony of
relationship between the marketing and finance departments because the marketing
department can’t extend unlimited credit to the customers and credit collections are to be
made by the finance department. The finance department should help the marketing
department to determine pricing, cash discount and credit policies under different conditions.
So far as revenues are concerned, finance is dependent on the marketing policies and
programmes, and their administration.
Total sales revenues as well as their timing significantly affect the cash flow of the business.
Product pricing, customer credit policies, terms and conditions of sales including trade, cash

and quantity discount, all have a vital bearing on the finances of the company. On the other
hand, availability of funds plays a crucial role in the planning and operation of marketing
programmes. All promotional activities including advertising, sales promotion, etc., are
dependent on the size of the budget. Customer credit and sales administration policies are
also closely related to the firm’s financial policies.
Coordination with Human Resource/Personnel Department
Coordination between marketing and human resource departments is important for matching
the total organization effort with market opportunity. The effectiveness of marketing, as of
any other function, depends on the quality of its personnel..
Marketing needs sincere, aggressive and innovative kinds of people. It’s personnel should
also be adept in interpersonal and communication skills. The personnel specialist can be of
great assistance to the marketing manger in the recruitment, selection, training, development
and maintenance of a high quality of sales force and other marketing personal. A suitable
incentive scheme is also important to motivate the sales-force. The personnel manager can
provide expert advice to the marketing manager in designing an effective incentive scheme.
Summary
To sum up, an attempt should be made to develop integrated marketing in the firm to serve
the customers better. The marketing department can’t achieve the marketing goals
independently; it has to seek the co-operation of all other departments, namely, purchase,
production, finance, legal, personnel, etc. All these departments must focus on the customer
to achieve integrated marketing.
Review Questions
1. All of the following are marketing management tasks except:
A. Marketing planning.
B. Organising marketing activities.
C. Coordinating marketing activities.
D. Project development and analysis
2. Which one of the following is an example of a customer in an organizational market?
A. A homemaker who buys detergent

B. A consumer who hires a solicitor
C. A shop owner who buys pencils for use in his shop
D. A plant manager who buys petrol for her personal car
3. An aggregate of people who, as individuals, have needs for products in a product class
and have the ability, willingness and authority to purchase such products is called as:
A. Market segment
B. Target market
C. Customer group
D. Market
Have you understood

1. What according to you is the problem area between marketing and finance department?
Comment.
2. Explain the relevance of marketing concept to a monopoly organization? Comment.
3. Discuss the provisions in the organizations’ policy which could prove to be a benefit for an
organization.
A company for aysm into the states of Orissa, Bihar and Jharkhand for marketing its
toothpaste, what support the entire organization should give? Explain.

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Marketing Management - An Introduction

“Marketing is an organizational function and a set of processes for creating, communicating,

The evolution of marketing as a discipline

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The essence of marketing is a transaction; an exchange intended to satisfy human needs or

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Satisfying Relationships - A key objective of marketing is to provide products and services

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Other definitions for marketing include:

American Marketing Association (AMA): “Marketing is the process of planning and

The functions of marketers:

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EVOLUTION OF MARKETING MANAGEMENT:

The evolution of marketing is composed of a series of responses to major external

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THE ROLE OF MARKETING

As we’ve seen the key objective of an organization’s marketing efforts is to develop

THE MARKETING CONCEPT

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to those periods and are still practiced by some firms today.

The Production Concept

Can we produce the product?

Can we produce enough of it?

The Sales Concept

Can we sell the product?

Can we charge enough for it?

The Marketing Concept

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What do customers want?

Can we develop it while they still want it?

How can we keep our customers satisfied?

Focusing on customer needs before developing the product

Aligning all functions of the company to focus on those needs

THE MARKETING MIX (THE 4 P’S OF MARKETING)- AN INTRODUCTION

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Where do buyers look for your product or service?

What is the value of the product or service to the buyer?

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Limitations of the Marketing Mix Framework

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C. We try to produce only high quality, technically efficient products

D. We try to encourage company growth.

A. By satisfying one segment in society, a firm contributes to the dissatisfaction of other

B. Consumers do not understand what the marketing concept is.

C. Dealers do not support the marketing concept.

D. A product may fit the needs of too many segments.

A. Increase market share.

C. Achieve the organization’s goals.

D. Always produce high quality products

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Have you understood

2. Researchers at Rohan Industries spent considerable time, effort, and money

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The need for scanning the environment

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Non-assimilated Asians cling to their native languages and customs.

Culture, as a “complex whole,” is a system of interdependent components.