Market structure

Increased motivation is more likely to occur when work meets the needs of individuals for learning, self realization, and personal growth. By responding to personal needs – the desire for responsibility, recognition, growth, promotion, and more interesting work – managers have altered condition in the workplace and consequently, many employees are motivated to perform more effectively.

In an attempt to both the fundamental or personal needs of workers, innovative management approaches, such as job enrichment and job enlargement, have been adopted in many organizations. Job enrichment gives workers authority in making decision related to planning and doing their work. A worker might assume responsibility for scheduling work-flow, checking quality of work produced, or making sure deadlines are met. Job enlargement increases the number of tasks workers perform by allowing them to rotate positions or by giving them responsibility for doing several job. Rather than assembling just the component of a automobile, factory workers might be grouped together and given responsibility for assembling the entire fuel system.

By improving the quality of work life through satisfaction of fundamental and personal employee needs, managers attempt to direct the behaviour of toward the company goal.

 

Managing Productivity

 

Productivity has become a day-to-day concern for managers because productivity indicates the overall efficiency of their firms. The unit of output can be anything:

• money
• units of products
• customers served
• whatever is meaningful to the organization

What managers attempt to do is to produce more output with less input. It means making more from what you have and working smarter rather than harder.

Today’s work force devotes only 40 hours to manufacturing. The other 60 hours go to completing forms, filing reports, processing payrolls and exchanging information, etc. Managers today must make some important choices. On the one hand, they are faced with bad news about foreign competition, increased costs of energy and raw materials, increasing government regulation and the changing nature of the labour force. On the other hand, technology and capital investment are not always the optimal solution to productivity problems. This means that better management may be the key to improved productivity.

The One-Minute Manager was written by Kenneth Blanchard, a professor of management at the University of Massachusetts, and the internationally known management consultant, which co-author Spencer Johnson, a medical doctor and the author of dozens of books in medicine and psychology. In the firs six months, more than half a million copies were sold.

The purpose of this book is to propose a new management style that consists of three steps, each of which takes one minute to perform. The first step is one-minute goal setting, each in which manager and employee agree on goals and transfer them to written form. Each goal is to be written in 250 words or less on one piece of paper so that it can be read in one minute. The second step is one-minute praising in which the manager congratulates the employee for a job well-done, tells him or her specifically what was good about performance and what it means for the organization. After that a handshake and some encouragement bring the one-minute praising to a conclusion. The third step is a one-minute reprimand in which the manager tells the employee specifically what was wrong with performance and how he or she fells about it, taking care to separate the value of the employee from the one mistake that instigated the criticism.

MARKETING PLANNING

 

STRATEGIC PLANNING

Strategic planning is the process of developing and maintaining a strategic fit between the organisation's goals and capabilities and its changing market opportunities. It relies on developing a clear company mission, supporting objectives, a sound business portfolio, and co-ordinated functional strategies.

At the corporate level, the company first defines its overall purpose and mission. This mission is then turned into detailed supporting objectives that guide the whole company. Next, top management decides what portfolio of businesses and products is best for the company, and how much support to give each one. Each business and product unit must in turn develop detailed marketing and other functional plans that support the company-wide plan.

When management senses that the organisation is drifting, it must renew its search for purpose. It is time to ask: What is our business? Who is the customer? What is value to the customer? What will our business be? What should our business be?

Companies traditionally defined their business in product terms such as. 'We manufacture video games', or in technological terms such as, 'We are a chemical-processing firm'. But some years ago, 'Theodore Levitt proposed that market definitions stated in terms of particular customer groups or needs were better.

Management should avoid making its mission too narrow or too broad. Mission statements should be specific, realistic, and motivating. As an illustration, the International Minerals and Chemical Corporation is in many businesses including the fertilizer business. The fertilizer division does not say that its mission is to produce fertilizer. Instead, it says that its mission is to 'fight world hunger'. This mission leads to a hierarchy of business objectives, marketing objectives and, finally, marketing strategy.

The mission of lighting world hunger leads to the company's prime business objective of 'increasing agricultural productivity'. This in turn leads to 'researching new fertilizers which promise higher yields'. But research is expensive and requires improved profits to plough back into research programmes. So a major objective becomes 'to improve profits'.

Profits can be improved by increasing sales or reducing costs. Sales can be increased by enlarging the company's share of the US market and by entering foreign markets. These became the company's current marketing objectives.

Marketing strategies must be developed to support these marketing objectives. To raise its US market share, the company will increase its product's availability and promotion. To enter new foreign markets, the company will cut prices and call on large farms abroad. These are the broad marketing strategies.

 

MARKET RESEARCH

 

AN OVERVIEW OF THE MARKET RESEARCH PROCESS

This section briefly describes the four steps in the market research process, firstly defining the problem and the research objectives, secondly developing the research plan, then implementing the plan, and finally interpreting and presenting the findings.

Defining the problem and research objectives is often the hardest step in the research process. The manager may know that something is wrong, but not the specific causes. For example, managers of a discount retail chain store hastily decided that falling sales were caused by poor advertising. When the research showed that the current advertising was reaching the right people with the right message, the managers were puzzled. It turned out that the stores themselves were not providing what the advertising promised.

When the problem has been carefully defined, the research objectives must be set. The research may be exploratory — in order to gather information to better define the problem. It may be descriptive — in order to describe market potential, customer attitudes, etc. Sometimes, it may be causal — to test hypotheses about cause-and-effect relationships: for example, would a 10 per cent decrease in price lead to significantly higher sales or not?

The second step involves developing a plan for collecting the information. The information may be available in the form of secondary data — i.e. it already exists somewhere or it needs to be collected specifically for this project — primary data.

Primary data collection calls for decisions about the research approaches, contact methods, sampling plan and research instruments.

There are three main research approaches: the observational approach involves gathering information by observing relevant people, actions and situations. For example, a museum checks the popularity of certain exhibits by noting the floor wear around them. This approach is most suited where the objective is exploratory.

For descriptive research, surveys are best suited. These can be structured using formal lists of questions asked of all respondents in the same way or unstructured where the interview is guided by the respondent's answers.

Finally for causal research, an experimental approach is most effective. Experiments involve selecting matched groups of subjects, giving them different treatments, controlling unrelated factors and checking for differences in group responses.

We will look at contact methods in more detail in Part 2. Briefly, information can be gathered either by mail, telephone or personal interview.

Another decision which has to be made concerns the sampling plan. A sample is a segment of the population selected to represent the population as a whole. There are three variables here: firstly the sample unit, i.e. who is to be sampled? Secondly the sample size, i.e. how many should be surveyed? Thirdly the sampling procedure, i.e. how should the people be chosen: at random, at convenience, on the basis of prejudgement?

Finally, in developing the research plan, a choice must be made in terms of the research instruments. The most common is the questionnaire. In preparing the questionnaire, the market researcher must decide what questions to ask, the form of the questions (e.g. open/closed, multiple choice), the wording of the questions and their ordering. Although questionnaires are the most common instrument, mechanical instruments such as a galvanometer can be used: this instrument measures the strength of a subject's interest or emotions aroused by and exposure to an advert or a picture.

Once all these decisions have been made concerning the research plan, the researcher must then put it into action. The implementation phase is generally the most expensive and the most subject to error. The fieldwork must be monitored closely to make sure the plan is correctly implemented.

The last phase is the interpretation and reporting. The researcher should/try not to overwhelm managers with statistics, but to present the major findings that are useful in the decisions faced by the management.

 

THE MARKET ENVIRONMENT

 

Excellent companies take an outside-in view of their business. They monitor the changing environment and continuously adapt their businesses to their best opportunities. The marketing environment comprises the 'non-controllable' actors and forces that affect a company's markets and marketing.

COMPETITORS

The major actors in a company's micro-environment are the company itself, suppliers, market intermediaries, customers and competitors. We will briefly define what we mean by these actors and then look in more detail at competitors.

The company

All of the departments within a company (e.g. finance, production, human resources) have an impact on the marketing department's plans and actions.

The suppliers

Developments in the supplier environment, such as prices and availability of raw materials, have a substantial impact on a company's marketing operations.

The market intermediaries

Middlemen such as agents, wholesalers and retailers, are powerful and important actors. In some cases they can dictate terms and even, if treated badly, bar the manufacturer from certain markets.

Customers

(The behaviour of consumers will be looked at in more detail in the next unit.)

Competitors

A company's marketing system is surrounded by a host of competitors. The best way for a company to grasp the full range of its competition is to take the viewpoint of a buyer. Let us consider the case of a chocolate bar manufacturer. Suppose a person has been working hard and needs a break. The person asks, 'What do I want to do now?'

Among the possibilities that pop into his or her mind are socialising, exercising and eating. We will call these desire competitors. Suppose the person's most immediate need is to eat something. Then the question becomes, 'What do I want to eat?' Different foods come to mind, such as potato chips, candy, soft drinks, and fruit. These can be called the generic competitors in that they represent different basic ways to satisfy the same need. At this point the person decides on candy and asks, 'What type of candy do I want?' Different candy forms come to mind such as chocolate bars, licorice, and sugar drops. They all represent product form competitors. Finally the consumer decides on a chocolate bar and faces several brands such as Hershey, Nestle and Mars. These arc the brand competitors.

Unfortunately company executives tend to focus primarily on the brand competitors and on the task of building brand preference. In fact, companies arc myopic if they focus only on their brand competitors. The real challenge is to expand their primary market (in the above case the candy market) rather than simply fight for a larger share in a fixed-size market.

 

DEMAND, SUPPLY AND MARKET EQUILIBRIUM

Price in a market is determined by supply and demand forces.

The needs of producers and consumers are best met at a point called the market equilibrium. Market equilibrium occurs when the supply and demand for a product are equal and the prices charged for the product are relatively stable. The market equilibrium is established by combining the supply and demand curves for a product on the same graph. The point at which these two curves intersect is called the equilibrium point.

The demand for a product is the amount of a good that people are willing to buy over a given time period at a particular price. For most goods and services the amount that consumers wish to buy will increase as price falls.

The desired demand is the information showing the amount of the product that consumers are willing to buy at different prices - not what they actually do buy. The demand for a product is not only influenced by price. An individual may be influenced by factors such as personal tastes, the size of income, advertising and the cost and availability of credit. The total market demand will be affected by the size and age distribution of the population and government policy.

States of Demand

Marketing managers might face any of the following states of demand.

Negative demand. Marketers must analyse why the market dislikes the product, and whether product redesign, lower prices, or more positive promotion can change the consumer attitudes.

No demand. Target consumers may be uninterested in the product. The marketer must find ways to connect the product's benefits with the market's needs and interests.

Latent demand. Consumers have a want that is not satisfied by any existing product or service. The marketing task is to measure the size of the potential market and develop effective goods and services that will satisfy the demand.

Falling demand. Sooner or later, every organization faces falling demand for one of its products. The marketer must find the causes of market decline and restimulate demand by finding new markets, changing product features, or creating more effective communications.

Irregular demand. Demand varies on a seasonal, daily, or even hourly basis, causing problems of idle or overworked capacity. Marketers must find ways to change the time pattern of demand through flexible pricing, promotion, and other incentives.

Full demand. The organization has just the amount of demand it wants and can handle. The marketer works to maintain the current level of demand in the face of changing consumer preferences and increasing competition. The organization maintains quality and continually measures consumer satisfaction to make sure it is doing good job.

Overfull demand. Demand is higher than the company can or wants to handle. The marketing task, called demarketing is to find ways to reduce the demand temporarily or permanently. Demarketing involves such actions as raising prices and reducing promotion and service. Demarketing does not aim to destroy demand, but only to reduce it.

Demand is concerned with the buying side of the market. Supply is concerned with the firm's or producer's side of the market. Unlike demand, the quantity supplied of a good will increase as price rises.

Production decisions are affected by the costs of production and productivity. In figuring the costs of production, business owners are concerned with fixed costs and marginal costs.

Supply

The supply of a product is not only influenced by price. Supply will be affected by anything that helps or hinders production or alters the costs of production.

The prices of goods and services are continually changing and so is the amount that is bought and sold. In winter the price of tomatoes tends to be a lot higher than in the summer and fewer tomatoes are bought in the winter. Similarly, the price of turkey tends to increase at Christmas and so too does the number of turkeys bought. These changes can be explained by an increase in demand. To show the effect of an increase in demand on the market equilibrium consider what happens if there is a successful advertising campaign which increases demand by 20 units per week at each and every price.

Changes in the market equilibrium can also come about as a result of a decrease in demand, an increase in supply or a decrease in supply.

Changes in the costs of production can affect the supply of goods. Producers must pay the cost of production, which may change over time.

Production Costs

Production costs are generally divided into fixed costs, variable costs, and total costs. Producers also calculate the average total costs and marginal costs of production. Analyzing these costs of production helps producers determine production goals and profit margins.

Fixed costs. The costs that producers incur whether they produce nothing, very little, or large quantities are their fixed costs. Total fixed costs are called overhead. Fixed costs include interest payments on loans and bonds, insurance premiums, local and state property taxes, rent payments, and executive salaries. The significance of fixed costs is that they do not change as output changes.

Variable costs. The costs that change with changes in output are variable costs. Unlike fixed costs, which are usually associated with such capital goods as machinery, salaries, and rent, variable costs are usually associated with labor and raw materials. Variable costs reflect the costs of items that businesses can control or alert in the short run.

Total costs and average total costs. The sum of fixed and variable costs of production is the total costs. At zero output, a firm's total costs are equal to its fixed costs. Then as production increases, so do the total costs as the increasing variable costs are added to the fixed costs.

Producers are equally concerned with their per unit production costs. The average total costs of production are the sum of the average fixed costs and the average variable costs. Each of these average costs is calculated by dividing the cost by the total units produced.

Marginal costs. One final measure of costs is marginal costs, i. e. extra costs incurred by producing one more unit of output. Marginal costs are an increase in variable costs because fixed costs do not change. Marginal costs allow the business to determine the profitability of increasing or decreasing production by a few units.

Many economic factors affect the supply of a product. The major influence, however, is price because the quantity of a product offered for sale varies with its price. Profit is the key consideration when producers determine a supply schedule.

Words and Expressions

alter v — изменять(ся); менять(ся); видоизменять

availability of credit - размер кредита, разрешенного к получению

curve n — кривая (линия); дуга

demand curve - кривая спроса

falling demand - понижающийся спрос

fixed costs - фиксированные расходы

full demand - полноценный спрос

graph n - график, диаграмма

hinder v - задерживать, затруднять, мешать, препятствовать

incur costs - нести издержки

insurance premium - страховые взносы

intersect v - пересекаться; перекрещиваться

irregular demand - неравномерный спрос

latent demand - скрытый спрос

marginal costs - предельно высокая себестоимость

market equilibrium - равновесие рынка

negative demand - отрицательный спрос

overfull demand - завышенный спрос

overhead costs - накладные расходы

profit margin - размер прибыли

property tax - налог на доход с недвижимого имущества

short run - короткий период времени

supply curve - кривая предложения

supply schedule - схема/график предложения

total costs — валовые/суммарные издержки

variable costs - переменные издержки на единицу продукции

 

9 семестр

 

BUYER BEHAVIOUR

 

CONSUMER BUYER BEHAVIOUR

The marketer needs to know what people are involved in the buying decision and what role each person plays. For many products, it is fairly easy to identify the decision-maker. Men normally choose their own shoes and women choose their own make-up. However, other products and especially new ones may well involve a decision-making unit of more than one person.