BUSINESS ADMINISTRATION

NOTES FOR CSS & PMS

 MANAGEMENT PORTION
WHAT IS MANAGEMENT
Simply speaking, management is what managers do. However, this simple statement doesn’t tell us
much. We define management as the process of coordinating and integrating work activities so that
they are completed efficiently and effectively with and through other people. Let’s look at some
specific parts of this definition.

FOUR MANAGEMENT FUNCTIONS

Planning: determining organizational goals and the means for achieving them. Management function
that involves the process of defining goals, establishing strategies for achieving those goals and
developing plans to integrate and coordinate activities.

Organizing: deciding where decisions will be made, who will do what jobs and tasks, and who will
work for whom Management function that involves the process of determining what tasks are to be
done. Who is to do them, how the tasks are to be grouped, who reports to whom, and where decisions
are to be made.

Leading: inspiring and motivating workers to work hard to achieve organizational goals
Management function that involves motivating subordinates, influencing individuals or teams as they
work, selecting the most effective communication channels, or dealing in any way with employee
behavior issues.

Controlling: monitoring progress towards goal achievement and taking corrective action when
needed. Good managers are those who assure themselves to perform these functions well.
Management function that involves monitoring actual performance, comparing actual to standard and
taking corrective action, if necessary.

Assurance
Quality function which demands from every manager that he/she ensures that prior management
support and management processes are in place before POLC management functions are executed.

MANAGEMENT ROLES:
Managers fulfill a variety of roles. A role is an organized set of behaviors that is associated with a
particular office or position.

Dr. Henry Minzberg, a prominent management researcher, says that what managers do can best be
described by looking at the roles they play at work. The term management role refers to specific
categories of managerial behavior.

There are three types of roles which a manager usually does in any organization.

Interpersonal roles are roles that involve people (subordinates and persons outside the organization)
and other duties that are traditional and symbolic in nature. Interpersonal roles grow directly out of
the authority of a manger’s position and involve developing and maintaining positive relationships
with significant others. The three interpersonal roles include being a figurehead, leader, and liaison.

 The figurehead performs symbolic legal or social duties.

 The Leader builds relationships with employees and communicates with, motivates, and
coaches them.
 The liaison maintains a network of contacts outside the work unit to obtain information.

Informational roles involve receiving, collecting, and spread information. Informational roles
pertain to receiving and transmitting information so that managers can serve as the nerve centers of
their organizational units. The three informational roles include a monitor, disseminator, and
spokesperson.

 The monitor seeks internal and external information about issues that can affect the
organization.
 The disseminator transmits information internally that is obtained from either internal or
external sources.
 The spokesperson transmits information about the organization to outsiders.

DECISIONAL ROLES revolved around making choices. Decisional roles involve making
significant decisions that affect the organization. The four decisional roles include entrepreneur,
disturbance handler, resource allocator, and negotiator.

 The entrepreneur acts as an initiator, designer, and encourager of change and innovation.
 The disturbance handler takes corrective action when the organization faces important,
unexpected difficulties.
 The resource allocator distributes resources of all types, including time, funding, equipment,
and human resources.
 The negotiator represents the organization in major negotiations affecting the manager’s areas
of responsibility

MANAGEMENT SKILLS
Managers need three types of key skills to perform the duties and activities associated with being a
manager.

 Technical skills are skills that reflect both an understanding of and a proficiency in a
specialized field. Technical skills include knowledge of and proficiency in a certain
specialized field, such as engineering, computers, accounting, or manufacturing. These skills
are more important at lower levels of management since these managers are dealing directly
with employees doing the organization’s work. This is the lower level of management .
 Human skills are associated with a manager’s ability to work well with others both as a
member of a group and as a leader who gets things done through others. Because managers
deal directly with people, this skill is crucial! Managers with good human skills are able to get
the best out of their people. They know how to communicate, motivate, lead, and inspire
 enthusiasm and trust. These skills are equally important at all levels of management. This is
the middle level management.
 Conceptual skills are skills related to the ability to visualize the organization as a whole,
discern interrelationships among organizational parts, and understand how the organization fit
into the wider context of the industry, community, and world. Conceptual skills are the skills
managers must have to think and to conceptualize about abstract and complex situations.
Using these skills, managers must be able to see the organization as a whole, understand the
relationships among various submits, and visualize how the organization fits into its broader
environment. This is the higher level of management.

HISTORICAL BACKGROUND OF MANAGEMENT

There are many examples from past history that illustrates how management has been practiced for
thousands of years.

 The Egyptian pyramids and the Great Wall of China are good examples of projects of
tremendous scope and magnitude that employed tens of thousands of people. How was it
possible for these projects to be completed? The answer is management.
 Other examples of early management practices can be seen through assembly lines,
accounting systems, and personnel functions as just a few of the processes and activities in
organizations at that time that are also common to today’s organizations.
 Adam Smith, author of the classical economics doctrine, The Wealth of Nations, argued
brilliantly about the economic advantages that division of labor (the breakdown of jobs into
narrow, repetitive tasks) would bring to organizations and society.
 The Industrial Revolution can be thought of as possibly the most important pre-twentieth
century influence on management. The introduction of machine powers, combined with the
division of labor, made large, efficient factories possible. Planning, organizing, leading, and
controlling became necessary.

THE ENVIRONMENT:
The impact of the external environment on a manager’s actions and behaviors cannot be
overemphasized. There are forces in the environment that play a major role in shaping managers’
endeavors. The environment is defined as outside institutions and forces outside the organization that
potentially affect an organization’s performance. Types of Environments are;

 External Environment
 Internal Environment

External Environment
‘Major forces outside the organization with potential to influence significantly a product or service’s
likely success is called its external environment.’

Types of external environments:

The insights derived from systems theory have helped to highlight the importance of a managed
interaction between an organization and its external environment. Two major divisions have been
made in the external environment:

 The Mega Environment

 The Task Environment

The Mega Environment

The mega-environment, or general environment as it is sometimes called, is that segment of the
external environment that reflects the broad conditions and trends in the societies within which an
organization operates.

Major Elements of the Mega Environment

1. The technological element of the mega-environment reflects the current state of knowledge
regarding the production of products and services.

a. Technology is a particular state of knowledge. It is not “things.” A computer, for

instance, is an artifact or an example of technology and is not technology itself.

b. Research indicates that technology tends to evolve through periods of incremental

change punctuated by technological breakthroughs that either enhance or destroy the
competence of firms in an industry.

c. Numerous publications (such as Business Week, Forbes, etc.) and on-line services (such
as LEXIS/NEXIS) provide information regarding technological and other environmental
elements.

2. The economic element of the mega-environment encompasses the systems of producing,

distributing, and consuming wealth.

a. In a capitalist economy, economic activity is governed by market forces and the means
of production are privately owned by individuals, either directly or through corporations.

b. In a socialist economy, the means of production are owned by the state and economic
activity is coordinated by state plan.

c. In practice, countries tend to have hybrid economies, incorporating elements of

capitalism and socialism.

d. Organizations are influenced in any given economic system by a variety of economic

conditions over which they have little control, such as inflation and interest rates.

3. The legal-political element of the mega-environment includes the legal and governmental systems
within which an organization must function.

a. Organizations must operate within the general legal framework of the countries in which
they do business.
 b. Organizations are subject to an increase in lawsuits filed by customers or employees.

c. The political issues which affect organizations include those which influence the extent
of government regulation.

4. The socio-cultural element of the mega-environment includes the attitudes, values, norms, beliefs,
behaviors, and associated demographic trends that are characteristic of a given geographic area.

a. The socio cultural element is of particular importance to multinational corporations.

b. Socio cultural trends can result in important shifts in demand for products.

5. The international element of the mega-environment includes the developments in countries outside
an organization’s home country that have the potential impact to the organization. International
factors far beyond the direct influence of a particular organization can have profound effects on its
ability to operate successfully.

a. Fluctuations of the dollar against foreign currencies influence the ability of an

organization to compete in international markets.

b. Free-trade agreement, such as the NAFTA, GATT can affect an organization either
positively or negatively.

The Task Environment

The task environment is that segment of the external environment made up of specific outside
elements (usually organizations) with which an organization interfaces in the course of conducting its
business. The task environment depends on the products and services the organization offers and the
locations where it conducts business. The organization may be more successful in affecting its task
environment than it is its mega-environment.

Elements of the Task Environment:

1. An organization’s customers and clients are those individuals and organizations that
purchase its products and/or services. It is becoming increasingly important to stay in
touch with customers’ needs.
2. An organization’s competitors are other organizations that either offers of have a high
potential of offering rival products or services.

a. Organization needs to keep abreast of who their competitors are and what
they are doing.

b. Ways to track what competitors are doing include obtaining information

from commercial data bases, specialty trade publications, news clippings
from local newspaper, help-wanted ads, published market research reports,
business reports, trade shows, public filings, advertisements, and personal
contacts.
 3. An organization’s suppliers are those individual organizations that supply the resources
(such as raw materials, products, or services) the organization needs to conduct its
operations.

4. An organization’s labor supply consists of those individuals who are potentially

employable by the organization.

a. Organization may have to shift their location if labor supplies dry up in

some areas and increase in others.

5. Various government agencies provide services and monitor compliance with laws and
regulations at local (e.g., consumer affairs), state or regional (e.g., health department), and
national (e.g., CBR) levels.

MANAGERS AS DECISION MAKERS:

Although we know about the decision-making process, we still don’t know much about the manager
as a decision maker. In this session, we’ll look at how decisions are made, the types of problems and
decisions managers face, the conditions under which managers make decisions, and decision-making
styles.

The nature of managerial decision making:

Decision making is the process through which managers identify organizational problems and
attempt to resolve them. Decision makers face three types of problems.

1. A crisis problem is a serious difficulty requiring immediate action.

2. A non-crisis problem is an issue that requires resolution, but does not simultaneously have
the importance and immediacy characteristics of crises.

3. An opportunity problem is a situation that offers a strong potential for significant

organizational gain if appropriate actions are taken.

a. Opportunities involve ideas that could be sued, rather than difficulties that must be
resolved.

b. Non-innovative managers tend to focus on problems rather than upon opportunities.

THE DECISION-MAKING PROCESS:

A decision is a choice made from two or more alternatives. The decision-making process is defined
as a set of different steps that begins with identifying a problem and decision criteria and allocating
weights to those criteria; moves to developing, analyzing, and selecting an alternative that can resolve
the problem; implements the alternative; and concludes with evaluating the decision’s effectiveness.

Steps in an effective decision-making process

A. The first step is to identify the organizational problem, i.e., discrepancies between a current
state or condition and what is desired.
 1. The scanning state involves monitoring the work situation for changing
circumstances that may signal the emergence of a problem.

2. The categorization stage entails attempting to understand and verify signs that there
is some type of discrepancy between a current state and what is desired.

3. The diagnosis stage involves gathering additional information and specifying both
the nature and the causes of the problem.

B. The generation of alternative solutions step is facilitated by using the four principles
associated with brainstorming.

1. Don’t criticize ideas while generating possible solutions

2. Freewheel, i.e., offer even seemingly wild and outrageous ideas in an effort to
trigger more usable ideas from others.

3. Offer as many ideas as possible to increase the probability of coming up with an

effective solution.

4. Combine and improve on ideas that have been offered.

C. The choice of an alternative step comes only after the alternatives are evaluated
systematically according to six general criteria:

1. Feasibility is the extent to which an alternative can be accomplished within related

organizational constraints, such as time, budgets, technology, and policies.

2. Quality is the extend to which an alternative effectively solves the problem under
consideration.

3. Acceptability is the degree to which the decision makers and others who will be
affected by the implementation of the alternative are willing to support it.

4. Costs are the resource levels required and the extent to which the alternative is
likely to have undesirable side effects.

5. Reversibility is the extent to which the alternative can be reversed, if at all.

6. The ethics criterion refers to the extent to which an alternative is compatible with
the social responsibilities of the organization and with ethical standards.

D. Finally, the implementing and monitoring the chosen solution step must be planned to
avoid failure of the entire effort.

1. Implementation requires careful planning.

a. The amount of planning depends upon whether the projected changes are
minor or major.
 b. Irreversible changes require a great deal of planning.

2. Implementation requires sensitivity to those involved in or affected by the

implementation.

a. Affected individuals are more likely to support a decision when they are able
to participate in its implementation.

b. If Participation is not feasible, individuals should be kept informed of the

changes.

3. Monitoring is necessary to ensure that things are progressing as planned and that the
problem that triggered the planning process has been resolved.

Models of Decision Making:

Rational Model:
According to the rational model of decision making, managers engage in completely rational decision
processes, ultimately make optimal decisions, and possess and understand all information relevant to
their decisions at the time they make them (including all possible alternatives and all potential
outcomes and ramifications).

Rational Model Step by Step:

Defining Problem by gathering relevant information:

Step 1 is identifying a problem. A problem is defined as a discrepancy between an existing and

a desired state of affairs. Some cautions about problem identification include the following:

1. Make sure it’s a problem and not just a symptom of a problem.

2. Problem identification is subjective.

3. Before a problem can be determined, a manager must be aware of any

discrepancies.

4. Discrepancies can be found by comparing current results with some standard.

5. Pressure must be exerted on the manager to correct the discrepancy.

6. Managers aren’t likely to characterize some discrepancy as a problem if they

perceive that they don’t have the authority, money, information, or other resources needed to
act on it.

Step 2 is identifying the decision criteria. Decision criteria are criteria that define what is relevant and
important in making a decision.
Step 3 is allocating weights to the criteria. The criteria identified in Step 2 of the decision-making
process aren’t all equally important, so the decision maker must weight the items in order to give
them correct priority in the decision.

Step 4 involves developing alternatives. The decision maker now needs to identify viable alternatives
for resolving the problem.

Step 5 is analyzing alternatives. Each of the alternatives must now be critically analyzed. Each
alternative is evaluated by appraising it against the criteria.

Step 6 involves selecting an alternative. The act of selecting the best alternative from among those
identified and assessed is critical. If criteria weights have been used, the decision maker simply
selects the alternative with the highest score from Step 5.

Step 7 is choosing a course of action and implementing the alternative. The chosen alternative must
be implemented. Implementation is conveying a decision to those affected by it and getting their
commitment to it.

Step 8 involves evaluating the decision effectiveness. This last step in the decision-making process
assesses the result of the decision to see whether or not the problem has been resolved.

DECISION-MAKING STYLES
Managers have different styles when it comes to making decisions and solving problems. One
perspective proposes that people differ along two dimensions in the way they approach decision
making.

1. One dimension is an individual’s way of thinking—rational or intuitive. The other is

the individual’s tolerance for ambiguity—low or high.

2. These two dimensions lead to a two by two matrix with four different decision-
making styles.

a. The directive style is one that’s characterized by low tolerance for ambiguity
and a rational way of thinking.

b. The analytic style is one characterized by a high tolerance for ambiguity and
a rational way of thinking.

c. The conceptual style is characterized by an intuitive way of thinking and a

high tolerance for ambiguity.

d. The behavioral style is one characterized by a low tolerance for ambiguity

and an intuitive way of thinking.

3. Most managers realistically probably have a dominant style and alternate styles,
with some relying almost exclusively on their dominant style and others being more flexible
depending on the situation.
GROUP DECISION MAKING:
A. Decisions on all levels of organization are frequently made by groups. Group decision
making has several advantages and disadvantages over individual decision making.

1. Some advantages of group decision making include:

a) Groups bring more diverse information and knowledge to bear on the question under
consideration.

b) An increased number of alternatives can be developed.

c) Greater understanding and acceptance of the final decision are likely.

d) Members develop knowledge and skill for future use.

2. Group decision making has several disadvantages when compared to individual decision making.

a) Group decision making is more time consuming.

b) Disagreements may delay decisions and cause hard feelings.

c) The discussion may be dominated by one or a few group members.

d) Groupthink is the tendency in cohesive groups to seek agreement about an issue at the
expense of realistically appraising the situation.

B. Managers can enhance group decision-making processes by taking steps to avoid the pitfalls
of group decision making.

1. Individuals should be involved only if they have information and knowledge relevant to the
decision.

2. The composition of the group should reflect the diversity of the broader workgroup.
Heterogeneous groups have been found to be more effective over time than groups with the same
nationality and ethnic backgrounds.

3. Two tactics are available to avoid group-think

a. Devil’s advocates are individuals who are assigned the role of making sure than the
negative aspects of any attractive decision alternatives are considered.

b. Dialectical inequity is a procedure in which a decision situation is approached from

two opposite points of view.

C. Several groupware software packages are now available to enable managers to make use of recent
advances in information technology that enables groups to utilize computers in their decision making.

1. Teleconferencing enables groups to “meet” electronically-either by conference phone

hookups or through computer networks.
 2. Group decision support systems are new specialized computer-based information systems
which support groups working on less well defined problems.

3. Computer aids to group decision making seem to increase creativity. However, face-to-face
meeting still tend to show stronger consensus and satisfaction among members of the group.

WHAT IS PLANNING?
Planning involves defining the organization’s goals, establishing an overall strategy for achieving
these goals, and developing a comprehensive set of plans to integrate and coordinate organizational
work. The term planning as used in this chapter refers to formal planning. The quality of the planning
process and appropriate implementation probably contribute more to high performance than does the
extent of planning.

WHY DO MANAGERS PLAN?

Planning is important and serves many significant purposes.

1. Planning gives direction to the organization.

2. Planning reduces the impact of change.

3. Planning establishes a coordinated effort.

4. Planning reduces uncertainty.

5. Planning reduces overlapping and wasteful activities.

6. Planning establishes objectives or standards that are used in controlling.

HOW DO MANAGERS PLAN?

Planning is often called the primary management function because it establishes the basis for all other
functions. Planning involves two important elements: goals and plans.

The Role of Goals and Plans in Planning

1. Goals—desired outcomes for individuals, groups, or entire organizations.

2. Goals are objectives—the two terms are used interchangeably.

3. Types of goals.

a. Financial performance versus strategic goals

b. Stated versus Real.

1) Stated goals are official statements of what an organization says, and what it
wants its various stakeholders to believe, its goals are.

2) Real goals are those that an organization actually purses. Questions and
Answers
Differentiate between goals and plans.

Goals are desired outcomes for individuals, groups, or entire organizations. Plans are documents that
outline how goals are going to be met and that typically describe resource allocations, schedules, and
other necessary actions to accomplish the goals.

What are the different types of goals?

Organizations may utilize financial and/or strategic goals, stated and/or real goals.

Describe each of the different types of plans.

Strategic plans apply to the entire organization, establish the organization’s overall goals, and seek to
position the organization in terms of its environment. Operational plans specify the details of how the
overall goals are to be achieved. Long-term plans are plans with a time frame beyond three years.
Shortterm plans cover one year or less. Specific plans are clearly defined and leave no room for
interpretation.

Directional plans are flexible plans that set out general guidelines. Single-use plans are one-time
plans specifically designed to meet the needs of a unique situation. Standing plans are ongoing plans
that provide guidance for activities performed repeatedly and include policies, rules, and procedures.

TYPES OF PLANS
Plans can be described by their breadth, time frame, specificity, and frequency of use.

a. Breadth: strategic versus operational plans. Strategic plans are those that are organization
wide, establish overall objectives, and position an organization in terms of its environment.
Operational plans are plans that specify details on how overall objectives are to be achieved.

b. Time frame: short-term versus long-term plans. Short-term plans are plans that cover one
year or less. Long-term plans are those that extend beyond three years.

c. Specificity: specific versus directional plans. Specific plans are those that are clearly
defined and leave no room for interpretation. Directional plans are flexible plans that set out general
guidelines.
FACTORS THAT INFLUENCE CONTINGENCY PLANNING
Contingency plans address “what if” questions regarding events or issues that can affect ongoing
business operations. They can focus on ways to deal with major disasters such as a fire or flooding.
They can also focus on ways the business plans to deal with issues such as key employee absences or
supply chain disruptions. A variety of factors influence contingency planning and should be
considered before finalizing plans.

Probability
The probability that an event or issue will occur is a factor that helps in prioritizing the contingency
planning process. Probability assessments start by organizing events or issues into one of three or
more probability ranges such as high or nearly certain, moderate or possible and low or improbable.
For example, the probability that at some point your business will face a power outage is high while
the probability the business will face a public relations crisis may be low. After establishing
probability priorities, add the business processes that will be impacted by each event or issue.

Impact
The impact an event or issue can have on business operations is a major factor influencing
contingency planning. The Federal Emergency Management Authority recommends completing a
business impact analysis to predict and assess the consequences of disruptions to specific business
functions. Consequences can be tangible or intangible and include lost or delayed sales, increased
expenses, customer dissatisfaction or defection and delays in achieving business goals and objectives.
The results of a thorough impact analysis are then compared against the business’ available physical,
financial and human resources to get information vital to creating effective contingency plans.

Order
The order in which contingency plan steps must take place also influences contingency planning.
Establishing order can help to ensure the contingency plan isn’t missing important details. Order
starts with an estimate of how long it will take to get the business back to how it normally functions
after a triggering event occurs. It continues by working backwards to determine what steps must be
taken according to weeks, days or hours.

Risk Mitigation
Risk mitigation efforts influence contingency planning by reducing the chance that an event or issue
will occur and by reducing negative effects if the event or issue does take place. Proactive measures
can focus on business processes and include improving internal controls to prevent fraud and secure
computer networks or cross-training to ensure critical processes flow smoothly in the event a key
employee becomes ill or separates from the business. Proactive measures can also include ensuring
the building complies with building codes, fire and safety regulations. Taking steps to ensure the
business has adequate liability and loss of income insurance is another way to mitigate risk.

THE CONCEPT OF STRATEGIC MANAGEMENT

Strategic management is a process through which managers formulate and implement strategies
geared to optimizing goal achievement, given available environmental and internal conditions.
Strategic management is that set of managerial decisions and actions that determines the long-run
performance of an organization. It entails all of the basic management functions—planning,
organizing, leading, and controlling.

PURPOSES OF STRATEGIC MANAGEMENT

1. One reason strategic management is important is because it’s involved in many of the
decisions that managers make.

2. Another reason is that studies of the effectiveness of strategic planning and management
have found that, in general, companies with formal strategic management systems had higher
financial returns than those companies with no such systems.

3. Strategic management has moved beyond for-profit organizations to include all types of
organizations, including not-for-profit.

Strategic management is important to organizations because it

1. Helps organizations identify and develop a competitive advantage, a significant edge over
the competition in dealing with competitive forces.

2. Provides a sense of direction so that organization members know where to expend their
efforts.

PROCESS OF STRATEGIC MANAGEMENT

The strategic management process is more than just a set of rules to follow. It is a philosophical
approach to business. Upper management must think strategically first, then apply that thought to a
process. The strategic management process is best implemented when everyone within the business
understands the strategy.

1. The Plan Phase of Strategic Management

A. High-level Goal Setting
I. Vision Statement
II. Focus Areas
III. Corporate Level Strategic Objectives
B. Strategic Analysis & Understanding Your Environment
I. Internal Strategic Analysis
II. External Strategic Analysis
III. BONUS: SWOT Analysis
C. In-Depth Strategy Formulation
I. Business Level Strategic Objectives
II. Projects
III. KPIs
2. The Manage Phase of Strategic Management
D. Meeting Structures
E. Strategy Reporting
F. Strategic Communication
 G. Common Pitfalls of Strategic Implementation

3. The Track Phase of Strategic Management

A. Track Progress Against Strategic Outcomes
B. Implementing KPIs
C. Applying Strategic Frameworks
D. Iterating Strategy
E. The Final Word: Strategic Management = Culture

We mentioned above that the main elements of a typical strategic management process
include strategic planning followed by implementation, and finally strategic tracking and
iteration.
Plan >> Manage >> Track.
1: The Plan Phase of the Strategic Management Process
The first part of the strategic management process involves figuring out what you want to
accomplish, and how you're going to get there. The Plan phase can be further broken down into the
following subsections:
1.1: High-Level Goal Setting
High-level goal setting encompasses the process of defining what you want to achieve in the big-
picture sense. It's distinct from strategy formulation which is where you'll come up with tactics,
which we'll cover a little later on. Goal setting has three main elements:
A Vision Statement
It all starts with a vision. The organizations which are most successful are those who are able to
clearly articulate what they're trying to achieve. They'll also stand almost dogmatically behind that
vision throughout everything they do. Briefly, the main reasons why defining your vision is so critical
for the strategic management process are:
1. It gets all parties on the same page about what the organization is ultimately trying to achieve.
2. It helps to create an identity around your brand, product, people and customers.
3. It serves as the anchor-point against which to 'sense check' your actual deliverables when you
get to the strategy formulation stage (1.3).
There is a reason why defining your vision is the first thing you should do in your strategic
management process. Every single step that follows should flow back to delivery of this vision. Your
vision is what's going to keep you honest and consistent as you move through the strategic
management journey.
Focus Areas
Focus Areas should take your vision, and break it down into (usually) 3 to 5 areas of focus that
should in theory get you to your vision. For example, your vision might be to "Put a computer on
every desk in the world" (Microsoft, in the 1980s) - and your corresponding Focus Areas might be:
 An intuitive user experience
 Affordability
 Customer experience
Focus Areas are the first step on your path to turning your vision statement into reality.
Set Corporate Level Strategic Objectives
Finally, you'll want to conclude your goal setting by creating corporate level strategic objectives.
Specifically, we're talking about Strategic Objectives that will sit underneath each of your Focus
Areas and provide strong direction for the actual strategy formulation which will happen at a business
unit level (e.g. you have different businesses under an umbrella company E.g. Virgin) and functional
level (i.e. individual functions or departments within a business E.g. Marketing).
Corporate level strategic objectives should begin to add some actual outcomes to your strategic plan
rather than just areas you want to focus.
1.2 Strategic analysis & understanding your environment
Now that you've got a high level vision for your organization, it's time for a quick reality check. You
need to make sure that you have the capabilities to actually execute on that vision. You also need to
make sure that your vision is one that is compatible with the external realities of the world.
Internal Strategic Analysis
Let's start by looking inward, at our own capabilities. We do this by performing an internal strategic
analysis. Ask yourself questions such as:
1. Do we have the necessary people and skill set to deliver against our goals?
2. Do we need or have the necessary capital to fund our ambitions?
There are a range of tools that you can use to perform an effective internal analysis - but the key is to
be brutally honest about your own capabilities so that you can either solve your deficiencies or adjust
your goals accordingly.
External Strategic Analysis
Moving on to the external strategic analysis side of things, here we need to turn our gaze outside of
the organization to things like:
1. The macro-economic environment
2. Our competitors
3. Regulations and compliance
4. Customer trends
5. Market trends
In other words, we need to consider factors which are potentially outside of our control and how they
will affect the viability of our goals.
SWOT Analysis
One of the most famous ways of doing both internal and external strategic analyses, is through
a SWOT Analysis. This technique forces you to go through an exercise which considers:
Strengths: What are you good at? What skills do you have as an organization? You should be looking
to amplify these skills throughout your strategic management process.
Weaknesses: What aren't you good at? Why have you failed in the past? You should be looking
either to solve for these weaknesses or worst-case, avoid situations where they could hurt you.
Opportunities: What are the unique opportunities that you can exploit in the market? Which of the
strengths that you've outlined give you an edge and how will you utilize them? You should be
looking to rapidly capitalize on these types of opportunities.
 Threats: What aspects are there in your environment that could hurt your ability to exploit
opportunities? Are there are any macro or micro economic issues that you need to be aware of? You
should be looking to mitigate for these threats wherever possible.
Generally speaking - understanding your strengths and weaknesses are internal strategic analysis
exercises. Understanding your opportunities and threats involves looking outside of your organization
- at things like the economic and political climate, competitors, market dynamics, etc.
1.3 In-Depth Strategy Formulation
Once you have a clear set of goals including a vision, as well as a good understanding of your
environment, you're ready to move onto in-depth strategy formulation. This is where you craft a
detailed plan about how you're actually going to achieve your goals.
Strategic Objectives
Note that we already started to write strategic objectives at a corporate level as part of goal setting
(see above) - but you need to now repeat this at a business level and a functional level throughout
your organization.
Specifically, that means that each of your business units should look at the Objectives that were
written at a corporate level, and then craft their own set of corresponding Objectives that they will
strive towards within their business unit.
Note that 'business unit' will mean something slightly different depending on the size of your
organization. Large corporations may define business units at a product level, whilst medium-sized
organizations might define them as departments such as 'marketing'.
Projects
Think of 'Projects' as the specific things that you will do to deliver against your Objectives. Projects
should be extremely specific deliverables, with deadlines and a series of tasks underneath them that
are tangible and assigned to individuals for maximum accountability.
Some strategic plans use alternative words to describe Projects such as 'Actions' or 'Initiatives' - that's
fine, so long as they're specific and have clearly defined implementations!
KPIs
The last key component of strategy formulation is a strong set of KPIs for each of your Objectives.
KPIs are there to help you measure whether or not you're achieving your Objectives.
Ideally, your strategy formulation should incorporate two different kinds of KPIs:
 Leading KPIs - These are early indicators that your Objective is likely to be reached.

 Lagging KPIs - These are definitive measures of whether or not you've reached your Objective, and
can only be measured after you've finished implementing a good number of your contributing
Projects.
2: The Manage Phase of the Strategic Management Process
Now that you have a plan, it's time to start the hard work of strategy implementation...
Meeting Structures
One of the most important things that you need to do when setting up an effective strategy
implementation process, is to determine how 'the strategy' will integrate with the existing structures
 in your business. 'Meetings' are a manifestation of those structures, so it's useful to ask yourself the
following questions:
1. How often you will meet to discuss the strategy.
2. What format those discussions will take, and supported by what reports.
3. Who will be involved in those discussions?
4. What information do you need to capture as part of managing the goals in your plan to make
the governance process effective.
Strategy Reporting
So now you've decided when you're going to meet to discuss the strategy, the next question is what
reporting tools will you use (and specifically what kind of Strategy Snapshots or Dashboards will you
use).
You'll want to match your strategic reporting against the meeting structures that you outlined
previously. For example:
Your quarterly board meeting might involve the use of a high level 'Board Dashboard' Whilst your
weekly team meeting might require a much more detailed 'Project Dashboard approach.
Strategic communication
Strictly speaking, you'll also want to consider the communication of your strategy as part of strategy
formulation. But people often forget that communication is just as important to strategy
implementation as it is to formulation.
At a minimum, you'll want your strategic communication to include:
1. An initial deep-dive into the new strategy for your entire organization.
2. Quarterly all-hands updates on the progress of your corporate level strategy.
3. An annual review with all employees to talk about any changes to the strategy as you perform
your strategy iteration (see below).
Be sure to check out our article on how to get strategic communication right - it's packed with tips to
help you perfect this tricky part of the strategy implementation process.
Common Pitfalls
Strategy implementation is hard, and is the reason why many strategies fail to materialize. To help,
we've compiled some of the more common pitfalls we see in the strategy implementation process:
 Lack of Accountability
The lack of a single named individual for ownership of goals, projects and KPIs. Teamwork is
awesome, but by naming one clear 'Goal Owner' you avoid any confusion about who ultimately is
responsible for delivering the different aspects of your strategic plan.

 Poor Reporting
Inconsistent reporting structures and processes. You need to implement regular meetings throughout
the organization that focus specifically on the outcomes of the strategy. This includes reviewing the
KPIs and project statuses regularly and in a consistent format throughout every level of the business.

 Poor Data
The lack of easy data availability. This is really more of an excuse than an issue in most cases, but
nevertheless should be addressed. You need to give people a set of tools where they can access the
 KPI data (both lead and lag) that has been created to measure the success of the strategy.

 Misalignment of Reward to Strategic Success

Linking reward to strategic success. How many times have you been at an organization where the
'end of year review process' involves a box-ticking exercise against a list of goals that you created in
some HR system, simply because you were told by your boss that you had to? There needs to be a
clear linkage between the success of the organization's strategy and the reward and recognition given
to employees.
By tackling the four common pitfalls above, you'll be going a long way towards ensuring the success
of your strategy implementation.
3: The Track Phase of the Strategic Management Process
With implementation underway, we need to turn to the final phase of the strategic management
process, which is strategy execution...Tracking your strategy needs to start on the same day the
implementation does. Not only that, but you need to have considered the mechanisms for how you'll
be tracking your strategy as far back as phase 1! More specifically, you should already have a clear
set of KPIs for each of your Strategic Objectives. Let's dive in...
3.1 Track progress against strategic outcomes
Sometimes, it's easy to get lost in implementation, since it can be a long and challenging process to
move your organization towards a place where it's consistently delivering strategic Projects and KPIs.
In fact, sometimes it takes so long, that the organization forgets to revisit their Strategic Objectives to
see if all their implementation work is actually moving the needle towards their ultimate goals!
To be able to efficiently analyze the progress of your strategic plan, you need to do a number of
things:
Implement KPIs
We've mentioned this a couple of times, and that's because it's absolutely critical. As part of your
strategy formulation, you need to ensure that each of your Strategic Objectives has at least 1 KPI
against it. This will tell you whether or not you're making progress against that part of your strategy.
More specifically, you need to ensure that you have at least one lagging KPI for each Strategic
Objective, mostly likely supported by a number of leading KPIs alongside. If you're not 100% clear
about the difference between leading and lagging KPIs, check out this article which we wrote
recently on that very topic.
Automate Reporting
Once you've got your KPIs in place, it's time to do whatever it takes to automate reporting against
them. That means setting up live integrations between the data source (e.g. your CRM system) and
your dashboard / tracking tool of choice (e.g. Cascade). Automating reporting against your KPIs is a
critical part of the strategic management process as it forces your organization to be accountable for
the results of your strategic efforts, and removes the 'king of excuses' around the lack of availability
of data.
Implement a Strategy Tracking Tool
Whilst on the subject of tools, you should consider implementing a platform that makes tracking of
your strategy very easy. That tool should integrate seamlessly with your data sources and be available
for as many people in the organization as possible to access. This is a #ShamelessPlug, but this is the
very reason we built our own platform, Cascade - and I can hand-on-heart say that without Cascade,
we wouldn't have been able to grow our business as rapidly as we have done. There are other tools
out there which can deliver the same thing, so whatever you do, don't miss out on this critical step.
3.2 Iterate the strategy
Right at the top of the page, you may remember that we had a graphic of the Plan > Manage > Track
process that was actually a wheel. The reason why is simple: because the strategic management
process is never-ending. It's a culture which defines your organization, rather than something which
you do once and move on from. That means constant iteration, constant test-and-learn and constant
frank assessments. Assessments of your strategy should include what has gone well, what has not -
and what needs to be changed.
Remember those regular strategy meetings that you set up in stage 2.1? They're the perfect
opportunity to make tweaks to elements of your plan that aren't working out the way you'd hoped.
That doesn't mean making huge changes to your strategy every month. That would be a disaster and
would seriously hurt the credibility of your strategic management process. Rather this is about
making small micro-adjustments to keep your plan realistic and relevant. Tweaking a KPI here,
adding a new project there, etc. We wrote an article around how exactly to iterate on your strategic
plan - so check that out for more information on this
To be effective in your implementation of a strategic management process, you also need to commit
to certain core values in your organizational culture:
Transparency: You need to be willing to be open with your employees and colleagues. If people feel
as though you're only giving them half the story when it comes to the strategy or the results, it's
unlikely that they'll fully embrace the new strategic management process.
Empowerment: You'll also need to be willing to trust people to formulate and execute on their own
parts of the strategy. Micro-managing every level of the strategic plan is going to be increasingly
unworkable as your organization grows.
Collaboration: It sounds obvious, but your strategic management process can only succeed when
coupled with a culture of collaboration and sharing. People need to be willing (and also have the
tools) to share information efficiently and with clarity

DESIGNING ORGANIZATIONAL STRUCTURE

Organizing – arranging and structuring work to accomplish an organization’s goals.

Organizational Structure – the formal arrangement of jobs within an organization.

Organizational chart – the visual representation of an organization’s structure. ฀

Organizational Design – a process involving decisions about six key elements:

Work Specialization

Departmentalization

Chain of Command

Span of Control

Centralization and Decentralization

• Formalization
Work specialization – dividing work activities into separate job tasks.

• Early proponents of work specialization believed it could lead to great increases in

productivity.

• Overspecialization can result in human diseconomies such as boredom, fatigue,

stress, poor quality, increased absenteeism, and higher turnover.

Departmentalization

The basis by which jobs are grouped together

• Functional – Grouping jobs by functions performed

• Product – Grouping jobs by product line

• Geographical – Grouping jobs on the basis of territory or geography

• Process – Grouping jobs on the basis of product or customer flow

• Customer – Grouping jobs by type of customer and needs

DEPARTMENTALIZATION TRENDS
Increasing use of customer departmentalization. Cross-functional team – a work team composed of
individuals from various functional specialties.

CHAIN OF COMMAND
Chain of Command– the continuous line of authority that extends from upper levels of an
organization to the lowest levels of the organization—clarifies who reports to whom.

Authority–

The rights inherent in a managerial position to tell people what to do and to expect them to do it.

• Acceptance theory of authority . The view that authority comes from the willingness of
subordinates to accept it.

Line authority – authority that entitles a manager to direct the work of an employee.

Staff authority – positions with some authority that have been created to support, assist, and advise
those holding line authority.

Responsibility – the obligation or expectation to perform.

Unity of command – the management principle that each person should report to only one manager.
DELEGATION
Delegation is the assignment of authority to another person to carry out specific duties, allowing the
employee to make some of the decisions. Delegation is an important part of a manager’s job, as it can
ensure that the right people are part of the decision-making process.

SPAN OF CONTROL
Span of control – the number of employees who can be effectively and efficiently supervised by a
manager.

CENTRALIZATION AND DECENTRALIZATION

฀ Centralization – the degree to which decision-making is concentrated at the upper levels of the
organization.

฀ Decentralization – the degree to which lower-level employees provide input or actually make
decisions.

฀ Employee empowerment – giving employees more authority (power) to make decisions.

FORMALIZATION
The degree to which jobs within the organization are standardized and the extent to which employee
behavior is guided by rules and procedures.

– Highly formalized jobs offer little discretion over what is to be done.

– Low formalization means fewer constraints on how employees do their work.

VERTICAL ORGANIZATION STRUCTURE

A vertical organization structure is one that relies on managers to command and control their
employees' work. A business owner is typically at the top of a vertical chain of command. There are
advantages and disadvantages to a vertical structure. The main benefit is that there are clearly defined
roles and responsibilities. The main drawback is that the roles sometimes get so set in stone they can
hamper creativity and innovation. A small business owner should be aware of all facets of a vertical
organization structure to decide if it's the right model for her company.

Top-Down Management
If an entrepreneur is on top, he gets to transmit his ideas down the chain of command. He relies on
managers in the middle to communicate and implement his directives. Vertical structures are
characterized by centralized decision-making, which might not include significant input from lower-
level managers and workers. Businesses can get around this problem by encouraging workers to send
new ideas via email to the business owner.

Rules and Relationships

Rules typically govern the levels of authority in a vertical structure. Employees use an organizational
chart to understand the reporting relationships. Managers use organizational rules, often set by the
owner, to understand how much authority they have. To some degree, managers are responsible for
all employees below them in the vertical structure. At the bottom, line managers supervise the work
of their line workers.

Competitive Advantage
Although small businesses do not operate in a context like the military, where vertical control is
essential for survival, some businesses find ways to keep a vertical structure and maintain their
competitive advantage. Reporting relationships might stay the same, but managers can change their
approach to management. They develop a culture in which employees feel respected and included,
and where the structural boundaries do not deter the flow of ideas and communication. They set a
high value on people, not products. If employees are treated as equals and their ideas are used, they're
less likely to feel hampered by their positions in the vertical hierarchy.

Changing
Vertical structures are efficient because of their clear reporting relationships, but they often aren't
flexible enough to survive in evolving markets. In these cases, a small business owner should
implement an organizational change -- or at least a significant shift in how the company operates --
by getting the initial support of managers and technical experts. If managers and experts support the
structural change and contribute their ideas to the planning phase, they can more effectively lead their
employees through the process of the change.

WHAT IS A HORIZONTAL ORGANIZATION?

A horizontal structure differs from a vertical structure in that there are fewer structural layers. Each
department consists of several lateral functional areas overseen by an individual known as a product
manager or process leader who reports to top management. For example, the product development
department may consist of the lateral functional areas of market analysis, research, product planning
and product testing. The product manager is responsible for the end result.

Advantages: Freedom and Autonomy

Employees may attain greater satisfaction in a horizontal structure due to greater freedom and
autonomy. The use of cross-function teams can also lead to high levels of cooperation throughout the
organization. The heavy emphasis on innovation can lead to ideas that keep the organization ahead of
the competition. The absence of multiple structural layers provides streamlined communication and
reporting processes, making the organization more nimble and adaptable to change.

Disadvantages: The Finger of Blame

The decentralized structure could lead to a "loose ship," as the team and project leaders have high
levels of responsibility for achieving results but little real authority over their team members. A
resulting lack of control can lead to finger-pointing when things go awry, which can hinder
productivity. Organizations attempting to convert from a vertical to a horizontal structure can face
challenges, as management needs to adjust to a less authoritarian and a more peer-like relationship
with subordinates.

MANAGER VS LEADER
When you are promoted into a role where you are managing people, you don’t automatically become
a leader. There are important distinctions between managing and leading people. Here are nine of the
most important differences that set leaders apart:

1. Leaders create a vision, managers create goals.

2. Leaders are change agents, managers maintain the status quo.

3. Leaders are unique, managers copy.

Leaders take risks, managers control risk .

5. Leaders are in it for the long haul, managers think short-term.

6. Leaders grow personally, managers rely on existing, proven skills.

7. Leaders build relationships, managers build systems and processes.

8. Leaders coach, managers direct.

9. Leaders create fans, managers have employees.

TRAIT THEORIES
1. Research in the 1920s and 1930s focused basically on leader traits with the intent to isolate one or
more traits that leaders possessed, but that nonleaders did not.

2. Identifying a set of traits that would always differentiate leaders from nonleaders proved
impossible.

Traits are distinctive internal qualities or characteristics of an individual such as physical

characteristics (e.g., height, weight, appearance, energy), personality characteristics (e.g., dominance,
extroversion, originality), skills and abilities (e.g., intelligence, knowledge, technical competence),
and social factors (e.g., interpersonal skills sociability, and socioeconomic position).
 A number of the early research attempts were reanalyzed in the 1950s and concluded that there is no
set of traits which consistently distinguish leaders from nonleaders. Recent efforts suggest that the
trait approach may have been abandoned prematurely.

1. More sophisticated statistical techniques are now available.

2. Several rather predictable traits have now been suggested such as

a. intelligence

b. dominance

c. aggressiveness

d. decisiveness

The question of whether traits can be associated with leadership remains open. Recent research work
has looked at communication skills, human relations skills, resistance to stress, tolerance of
uncertainty, and others.

IDENTIFYING LEADER BEHAVIORS

A number of researchers have focused on the question of whether specific behaviors, rather than
traits, make some leaders more effective than others.

1. Three types of leadership behavior styles were identified.

a. Autocratic leaders tend to make unilateral decisions, dictate work

methods, limit worker knowledge about goals to just the next step to be
performed, and sometimes give feedback that is punitive.

b. Democratic leaders tend to involve the group in decision making, let

the group determine work methods, make overall goals known, and use
feedback as an opportunity for helpful coaching.

c. Laissez-faire leaders generally give the group complete freedom,

provide necessary materials, participate only to answer questions, and avoid
giving feedback.

2. Research on the comparative effectiveness of the three leadership styles was

inconclusive.

a. The laissez-fair style was ineffective.

b. The effectiveness of the autocratic and democratic leaders varied,

although satisfaction levels tended to be higher in the democratically led
groups.
CONTEMPORARY ISSUES IN LEADERSHIP
Contemporary roles relating to lead team as managing the conflicts; coaching to improve team
member performance; used to serve as troubleshooters. It seems to respond in a group in which they
have to participate with the leader.

Leaders as Shapers of Meaning

Framing Issues

A way to use language to manage meaning

Charismatic Leadership
Followers make attributions of heroic or extraordinary leadership abilities when they observe certain
behaviors (ex - Martin Luther King and JFK) Are charismatic leaders born or made? Can charisma
be a liability?

Transactional vs. Transformational Leadership

Transactional - leaders who guide or motivate their followers in the direction of established goals by
clarifying role and task requirements

Transformational - leaders who inspire followers who transcend their own self-interests and who are
capable of having a profound and extraordinary effect on followers.

Visionary Leadership
The ability to create and articulate a realistic, credible, attractive vision of the future for an
organization or organizational unit that grows out of and improves upon the present.

Q: What skills to visionary leaders exhibit? A: The ability to explain the vision to others, the ability
to express the vision not just verbally but through the leader’s behavior, and the ability to extend the
vision to different leadership contexts.

Authentic Leadership: Ethics and Trust Are the Foundations of Leadership

What is “Authentic” leadership?

· Leaders who know who they are, know what they believe in and value, and act on those values
and beliefs openly and candidly. Their followers would consider them to be ethical people.

Trust
A positive expectation that another will not act opportunistically Competence, consistency, loyalty
and openness are dimensions of trust You cannot lead others who do not trust you! Reengineering,
downsizing, and the use of 'temps' have undermined employee trust in management

Three Types of Trust

1. Deterrence Based Trust (based on fear)

2. Knowledge Based Trust (based on predictability over time)
3. Identification Based Trust (based on mutual understanding of wants and needs)
CONTEMPORARY LEADERSHIP ROLES

Providing Team Leadership

Many leaders are not equipped to handle the change to teams. New skills such as the patience to
share information, trust others, give up authority, and knowing when to intervene are paramount.
Team leaders are liaisons with external constituencies, troubleshooters, conflict managers, and
coaches

Mentoring
A senior employee who sponsors and supports a less-experienced employee.

Self-Leadership
A set of processes through which individuals control their own behavior.

Online Leadership
Most research has been conducted with “face-to-face” and “verbal” leadership situations. What
about online leadership? There is no “non-verbal” component (you cannot “read” the other person
via email).

Instead, the structure of words in digital communications can influence reactions: full sentences,
phrases, USING ALL CAPS, formality, importance/urgency, style (emoticons, jargon, abbreviations,
etc). Messages can convey trust, status, task directives, or emotional warmth.

Writings skills are likely to become an extension of interpersonal skills in the future. Challenges
to the Leadership Construct Leadership as an Attribution

Is leadership merely an attribution that people make about other individuals?

Substitutes and Neutralizers to Leadership

Some argue that sometimes leaders are not even needed! Sometimes individual, job, and
organizational variables can act as substitutes for leadership or neutralize the leader's effect to
influence followers (ex = a highly structured task)

Finding and Creating Leaders

Can we use selection to help? (personality tests, interviews – match to situation)

Training (can we train leadership? E.g. trust building, mentoring, situation-analysis skills)

Summary and Implications for Managers

Trust is important - as organizations are less stable, personal trust is key in defining relationships and
defining expectations. Transformational leaders are in demand. Organizations want leaders with
vision and charisma to carry out the visions. Invest in leadership selection and training (and follow up
with assessment centers, courses, workshops, rotating job responsibilities, coaching, and mentoring)
Businesses with unmotivated employees often face low productivity and high turnover rates. Multiple
theories help explain how workers are motivated and provide suggestions for how to increase
motivation in the workplace. Understanding which theory best fits your employees may help improve
your small business by increasing employee retention rates and improving worker productivity.

THEORY X AND THEORY Y

In the 1960s, Douglas McGregor proposed two theories related to employee motivation and
management. His theories divided employees into two categories. Theory X employees avoid work
and dislike responsibility. In order to motivate them, employers need to enforce rules and implement
punishments.

Theory Y employees enjoy putting forth effort at work when they have control in the workplace.
Employers must develop opportunities for employees to take on responsibility and show creativity as
a way of motivating Theory Y employees. A third theory, Theory Z, was developed by Dr. William
Ouchi. It encourages group work and social interaction to motivate employees in the workplace.

MASLOW'S HIERARCHY OF NEEDS

Maslow's Hierarchy of Needs contains five levels that often shape motivation styles in an
organization. To motivate employees, an organization must move up the pyramid of needs to ensure
all of an employee's needs are met. The bottom of the pyramid contains physiological needs such as
food, sleep and shelter. Safety makes up the second level and belonging the third.

The top two levels of the pyramid include esteem and self-actualization. Successful organizations
focus on the top two levels of the pyramid by providing employees with the necessary recognition
and developing opportunities for employees to feel they are doing valuable work and reaching their
potential with the company.

THE HAWTHORNE EFFECT

Through a series of experiments in the late 1920s, Elton Mayo developed the Hawthorne Effect. This
effect theorizes that employees are more productive when they know their work is being measured
and studied. In addition to this conclusion, Mayo realized that employees were more productive when
provided with feedback related to the studies and allowed to provide input into the work process.
Workers need recognition for a job well done and reassurance that their opinion matters in the
workplace to be motivated to perform.

EQUITY THEORY OF EMPLOYEE MOTIVATION

John Stacey Adams' Equity Theory argues that employees are motivated when they perceive their
treatment in the workplace to be fair and unmotivated when treatment is perceived to be unfair. In an
organization, this involves providing employees with recognition for the work they are doing and
giving all employees the chance to advance or earn bonuses and other awards. Managers who play
favorites or single out employees for recognition may face a largely unmotivated group of employees.

IMPORTANCE OF MOTIVATION
1. Improves Performance Level
2. Indifferent Attitudes can be Changed
3. Reduction in Resistance to Change
4. Reduction of Employee Turnover and Absenteeism
5. Healthy Corporate Image
6. Productive Use of Resources
7. Increased Efficiency and Output
8. Achievement of Goals
9. Development of Friendly Relationships
10. Stability in Work Force
11. Develop Leaders
12. Easier selection

Creativity

Creativity in very simple words means that "Thinking of new things". Following is the
definition of creativity; "The ability to develop new ideas and to discover new ways of looking at
problems and opportunities"

Innovation:

Innovation in very simple words means that "Applying something new". Following is the
definition of innovation; "The ability to apply creative solutions to the problems and opportunities
that people face in their routine life"

Creative Thinking:

Creative thinking is a specific thought process which improves the ability to be

creative. Following is the definition of creative thinking; "A series of mental action which produce
changes and development of thoughts"

Barriers for Creativity

When an entrepreneur wants to create something new

then he has to face some problems and these problems are called barriers for creativity. Following is
the barriers for creativity;
Searching for right answer Over Specialized

Focusing on logic Avoiding ambiguity

Blindly follow rules Fearing looks foolish

Constantly being practical Mistakes and failure

Play as frivolous Believing I am not creative

The Creative Process

Creative process is a process of creating

something new. Following is the process of creating something new;

Preparation:

In preparation step we have to prepare our mind for creating something new. A famous

Proverb will show the importance of preparation step; "Creativity favors a prepared mind"

In the step of preparation we have to prepare our mind for following things for better results;

1. Adopt attitude

2. Read a lot

3. Clip articles

4. Take time

5. Join professionalism

6. Develop listening skill

Investigation:

Investigation is the second step for creativity process and in this step we have to understand
about problems which we are facing.

Transformation:

Transformation includes the solution to the problems. In this step we want to find
solution to those problems which are directly involved to our goal. In this step we need two types of
thinking;

1. Convergent thinking to find similarities in you research

2. Divergent thinking to compare your research with other events and data. Divergent thinking needs
two things evaluation and rearrangement.
Incubation:

Incubation fulfills our subconscious needs such as what is indirectly involved or directly
involve to our research. Such as finance problems.

Illumination:

In this step all previous stages comes together to produce fact and results which is
required by us or not. Things may react inversely.

Verification:

Verification step includes about ideas as they are accurate and useful for
entrepreneurship or not. In this step we shall conduct experiments, tests and market analysis.

Implementation:

After verification the last and the most important step is to implement the results.
This is not an easy task because implementation required some skills. Every person does not do that.

THE ORGANIZATIONAL CONTROL PROCESS

The control process involves carefully collecting information about a system, process, person, or
group of people in order to make necessary decisions about each. Managers set up control systems
that consist of four key steps:

1. Establish standards to measure performance. Within an organization's overall strategic

plan, managers define goals for organizational departments in specific, operational terms that
include standards of performance to compare with organizational activities.
2. Measure actual performance. Most organizations prepare formal reports of performance
measurements that managers review regularly. These measurements should be related to the
standards set in the first step of the control process. For example, if sales growth is a target,
the organization should have a means of gathering and reporting sales data.
 3. Compare performance with the standards. This step compares actual activities to
performance standards. When managers read computer reports or walk through their plants,
they identify whether actual performance meets, exceeds, or falls short of standards.
Typically, performance reports simplify such comparison by placing the performance
standards for the reporting period alongside the actual performance for the same period and
by computing the variance—that is, the difference between each actual amount and the
associated standard.
4. Take corrective actions. When performance deviates from standards, managers must
determine what changes, if any, are necessary and how to apply them. In the productivity and
quality‐centered environment, workers and managers are often empowered to evaluate their
own work. After the evaluator determines the cause or causes of deviation, he or she can take
the fourth step—corrective action. The most effective course may be prescribed by policies or
may be best left up to employees' judgment and initiative.

These steps must be repeated periodically until the organizational goal is achieved.

CONTROLLING

Control is a fundamental managerial function. Managerial control regulates the organizational activities.
It compares the actual performance and expected organizational standards and goals. For deviation in
performance between the actual and expected performance, it ensures that necessary corrective action is
taken.

There are various techniques of managerial control which can be classified into two broad categories
namely-

 Traditional techniques

 Modern techniques

TRADITIONAL TECHNIQUES OF MANAGERIAL CONTROL

Traditional techniques are those which have been used by the companies for a long time now. These
include:

 Personal observation

 Statistical reports

 Break-even analysis

 Budgetary control
MODERN TECHNIQUES OF MANAGERIAL CONTROL

Modern techniques of controlling are those which are of recent origin & are comparatively new in
management literature. These techniques provide a refreshingly new thinking on the ways in which
various aspects of an organization can be controlled. These include:

 Return on investment

 Ratio analysis

 Responsibility accounting

 Management audit

 PERT & CPM

HR MANAGEMENT PORTION

The HRM department members provide the knowledge, necessary tools, training, administrative
services, coaching, legal & management advice and talent management oversight that the rest of the
organization needs for successful operation.

HRM functions are also performed by line managers who are directly responsible for the
engagement, contribution and productivity of their reporting staff members. In a fully integrated
talent management system the managers play a significant role in and take ownership responsibility
for the recruitment process. They are also responsible for the ongoing development of and retention
of superior employees.

ROLE OF HUMAN RESOURCE MANAGEMENT IN ORGANIZATIONAL

PERFORMANCE

1. HRM’s Changing Focus:

2. Recruitment, Selection: and Training:
3. Performance Appraisals:
4. Maintaining Work Atmosphere:
5. Managing Disputes:
6. Developing Public Relations:
7. Strategy:
8. Compensation:
9. Benefits:
10. Safety:
11. Legal suits liability
12. Training and Development:
13. Employee Satisfaction:
 14. Compliance:
15. Building Loyalty and Commitment

Functions of Human Resource Management

Human Resource Management functions can be classified in following three categories.

 Managerial Functions,
 Operative Functions, and
 Advisory Functions
The Managerial Functions
 1. Human Resource Planning - In this function of HRM, the number and type of employees
needed to accomplish organizational goals is determined. Research is an important part of this
function, information is collected and analyzed to identify current and future human resource
needs and to forecast changing values, attitude, and behaviour of employees and their impact
on organization.
 2. Organizing - In an organization tasks are allocated among its members, relationships are
identified, and activities are integrated towards a common objective. Relationships are
established among the employees so that they can collectively contribute to the attainment of
organization goal.
 3. Directing - Activating employees at different level and making them contribute maximum
to the organization is possible through proper direction and motivation. Taping the maximum
potentialities of the employees is possible through motivation and command.
 4. Controlling - After planning, organizing, and directing, the actual performance of
employees is checked, verified, and compared with the plans. If the actual performance is
found deviated from the plan, control measures are required to be taken.
The Operative Functions

 1. Recruitment and Selection - Recruitment of candidates is the function preceding the

selection, which brings the pool of prospective candidates for the organization so that the
management can select the right candidate from this pool.
 2. Job Analysis and Design - Job analysis is the process of describing the nature of a job and
specifying the human requirements like qualification, skills, and work experience to perform
that job. Job design aims at outlining and organizing tasks, duties, and responsibilities into a
single unit of work for the achievement of certain objectives.
 3. Performance Appraisal - Human resource professionals are required to perform this
function to ensure that the performance of employee is at acceptable level.
 4. Training and Development - This function of human resource management helps the
employees to acquire skills and knowledge to perform their jobs effectively. Training an
development programs are organized for both new and existing employees. Employees are
prepared for higher level responsibilities through training and development.
 5. Wage and Salary Administration - Human resource management determines what is to
be paid for different type of jobs. Human resource management decides employees
compensation which includes - wage administration, salary administration, incentives,
bonuses, fringe benefits, and etc,.
 6. Employee Welfare - This function refers to various services, benefits, and facilities that
are provided to employees for their well being.
  7. Maintenance - Human resource is considered as asset for the organization. Employee
turnover is not considered good for the organization. Human resource management always try
to keep their best performing employees with the organization.
 8. Labour Relations - This function refers to the interaction of human resource management
with employees who are represented by a trade union. Employees comes together and forms
an union to obtain more voice in decisions affecting wage, benefits, working condition, etc,.
 9. Personnel Research - Personnel researches are done by human resource management to
gather employees' opinions on wages and salaries, promotions, working conditions, welfare
activities, leadership, etc,. Such researches helps in understanding employees satisfaction,
employees turnover, employee termination, etc,.
 10. Personnel Record - This function involves recording, maintaining, and retrieving
employee related information like - application forms, employment history, working hours,
earnings, employee absents and presents, employee turnover and other other data related to
employees.
The Advisory Functions
Human Resource Management is expert in managing human resources and so can give advice on
matters related to human resources of the organization. Human Resource Management can offer
advice to:

1. Advised to Top Management

Personnel manager advises the top management in formulation and evaluation of personnel programs,
policies, and procedures.

2. Advised to Departmental Heads

Personnel manager advises the the heads of various departments on matters such as manpower
planning, job analysis, job design, recruitment, selection, placement, training, performance appraisal,
etc.

JOB ANALYSIS
Job analysis is a process of identifying and determining in detail the particular job duties and
requirements and the importance of these duties for a given job. It helps an organization determine
which employee is best for a specific job.
Methods
1. Observation Method
2. Interview Method
3. Technical Conference Method
4. Functional Job Analysis (FJA)
5. Questionnaire Method
6. Job Inventories or Checklists
7. Job Performance Method
8. Individual Psychographic Method
9. Job Analysis by Test
 10. Employee Job Diary
11. Reference Materials Method
12. Critical Incident Method
13. Group Interview Method.
Job Analysis Process
  Identification of Job Analysis Purpose: Well any process is futile until its purpose is not
identified and defined. Therefore, the first step in the process is to determine its need and
desired output. Spending human efforts, energy as well as money is useless until HR
managers don’t know why data is to be collected and what is to be done with it.
 Who Will Conduct Job Analysis: The second most important step in the process of job
analysis is to decide who will conduct it. Some companies prefer getting it done by their own
HR department while some hire job analysis consultants. Job analysis consultants may prove
to be extremely helpful as they offer unbiased advice, guidelines and methods. They don’t
have any personal likes and dislikes when it comes to analyze a job.
 How to Conduct the Process: Deciding the way in which job analysis process needs to be
conducted is surely the next step. A planned approach about how to carry the whole process is
required in order to investigate a specific job.
 Strategic Decision Making: Now is the time to make strategic decision. It’s about deciding
the extent of employee involvement in the process, the level of details to be collected and
recorded, sources from where data is to be collected, data collection methods, the processing
of information and segregation of collected data.
 Training of Job Analyst: Next is to train the job analyst about how to conduct the process
and use the selected methods for collection and recoding of job data.
 Preparation of Job Analysis Process: Communicating it within the organization is the next
step. HR managers need to communicate the whole thing properly so that employees offer
their full support to the job analyst. The stage also involves preparation of documents,
questionnaires, interviews and feedback forms.
 Data Collection: Next is to collect job-related data including educational qualifications of
employees, skills and abilities required to perform the job, working conditions, job activities,
reporting hierarchy, required human traits, job activities, duties and responsibilities involved
and employee behaviour.
 Documentation, Verification and Review: Proper documentation is done to verify the
authenticity of collected data and then review it. This is the final information that is used to
describe a specific job.
 Developing Job Description and Job Specification: Now is the time to segregate the
collected data in to useful information. Job Description describes the roles, activities, duties
and responsibilities of the job while job specification is a statement of educational
qualification, experience, personal traits and skills required to perform the job.

Thus, the process of job analysis helps in identifying the worth of specific job, utilizing the human
talent in the best possible manner, eliminating unneeded jobs and setting realistic performance
measurement standards.

FORECASTING PERSONNEL NEEDS

The most common personnel planning approaches involve the use of simple techniques like trend
analysis and ratio analysis to estimate staffing needs based on sales projections and historical sales to
personnel relationships. The usual process is to forecast revenues first, and then estimate the size of
the staff required to reach the sales volume. Several techniques used by Human Resource Managers:
Trend Analysis
Trend Analysis means studying variations in a firm’s employment levels over the last few years. You
might compute the number of workers in a firm at the end of each of the last five years or maybe the
number in each subgroup at the end of each of those years. The purpose is to identify trends that
might continue into the future.
Ratio Analysis
Ratio Analysis means making forecast based on the ratio between some causal factor like sales
volume and the number of workers required such as number of salespeople. Ratio analysis assumes
that productivity remains about the same. If sales productivity were to increase or decrease, the ratio
of sales to salespeople would change.
The Scatter Plot
Scatter plot shows how two variables such as a measure of business activity and firm’s staffing levels
are related. If they are, then if you can forecast the level of business activity, you should be able to
estimate personnel requirements

RECRUITMENT DEFINITION
In simple words Recruitment process indicates hiring of a person or group for a particular position, it
can also be said as activity that creates a link between employer and job seeker. Generally HR
department team in the company looks to evaluate the logical, analytical, critical, commitment and
responsibilities when searching for the candidates in the candidates while selection. Recruitment
process can also be identified as bringing together the applications from the job seekers and selecting
the best candidate for the role of the job identified. Actually it can be said the process of hiring
employees.

RECRUITMENT NEEDS CAN BE OF THREE CATEGORIES

Planned: The need of occurring since amendment in organization and retirement policy.

Anticipated: These needs are of those types in which movements can be forecasted by going through
the movement in internal and external environment.

Unexpected: The need can arise when resignation, termination, illness or death of the employee

RECRUITMENT PROCESS
Recruitment refers to the process of recognizing and drawing job seekers so that to construct a group
of job applicants. The main goal of the recruiter is to identify the right person for the said job and the
recruiters can achieve their target by 5 important guidelines.

1. Initial Screening
2. Application blank
3. Pre-employment Testing
4. Interview
5. Background Checks
6. Conditional Job Offer
7. Drug Test/Medical Exam
8. Final Selection Decision
In most of the organizations, recruitment process operates various channels: But in most of the
organizations companies will agree to the existing employee’s applications before trying to bring
from the external resource. The main types of recruitment process are.

INTERNAL RECRUITMENT
Generally, as soon as a position opens in an organization, the HRM panel would normally place the
vacancy under the company’s intranet as well as in familiar spot, such as cafeterias, break rooms, lifts
and departmental information boards. If member of the organization gets attracted in the position,
they will usually required to go through a related process same as external candidates interview. The
employees will have to submit their CV to HR team, if they get selected they would have to go with
number of rounds and finally with the hiring manager.

EXTERNAL RECRUITMENT
In this case the company generally places the position on various external resources for e.g. Internets,
newspaper, consultancies, educational institutes or campus selection and bring a friend referral to the
employees then the HR panel would select the CV of candidates who have applied for the position.
But in this case lot of time and money is spent. Generally, the interview and testing is determined as
per the company’s guidelines plus procedures. Several candidates will be selected and shortlisted on a
phone with human resource team and then they are asked take assessments, it can be personality,
technical aptitude or academic assessments depending upon the job required.

FACTORS AFFECTING INTERNAL RECRUITMENT

1. Recruitment policy
2. Human resource planning
3. Size of the firm
4. Cost
5. Growth and expansion

FACTORS AFFECTING EXTERNAL RECRUITMENT

1. Supply and demand
2. Labour Market
3. Image/ Goodwill
4. Political Social and Legal Environment
5. Unemployment Rate
6. Competitors

SELECTION
Selection means selecting the right person for the right kind of a job according to the company
demand and person’s ability. It is the process of opting within the scores of job seekers with
necessary qualification as well as competence to fill the position in the organization. Few of the
selection process could be applied within the organization as a part of promoting and transferring. In
selection criteria the candidates are cautiously picked up as per their ability.
SELECTION PROCESS
It means the combination of measure taken, or procedure used as per the basis of some employment
judgment. In selection process short listing is done as per the ability and performance of the
candidate.

Below are the various stages in selection process,

Application: Applicants are welcomed by e-mail or telephone by the Human Resources team.

Selection Methods: Selection system will be carried out to make a decision by the HRM team for the
selected candidates by the below stages.

Panel interview

Presentation

Selection tests

During the course of selection all the academic and experience of the candidate is verified by the
Human Resource team to ensure that they meet the compliance and integrity of the organization as
well as to suit for the post of the job. Usually in External Selection phase this kind of procedure is
followed. While during Internal selection, all the employees who are shortlisted and interviewed for
the position if they meet up the important criteria for the job. During the internal selection employees
if the employ is selected they are promoted or at least get a hike in their salary.

Equally recruitment and selection is the two segment of an employment procedure. The main
distinction between the two is as follows:

The recruitment can be the course of looking for the candidate for the employment and invigorating
them to be valid for the job, whereas selection engage in the various stages through which the
candidate is selected as per the ability.

The essential intention of recruitment is to develop a flair of candidates who are talented enough to be
able to get selected in the organization. While in selection the most important aim is to select the right
candidate to fill the a range of positions in the organization.

Recruitment is always a optimistic process, encouraging many candidates to submit an application for
the position whereas selection is a pessimistic approach in which it entails the elimination of the
incompatible candidates.

Training and Development

Training and Development is one of the main functions of the human resource management department.
Training refers to a systematic setup where employees are instructed and taught matters of technical
knowledge related to their jobs. It focuses on teaching employees how to use particular machines or how
to do specific tasks to increase efficiency.
Whereas, Development refers to the overall holistic and educational growth and maturity of people
in managerial positions. The process of development is in relation to insights, attitudes,
adaptability, leadership and human relations.

What is the difference between training and development?

Training is the process of improving and polishing the required Skills to an employee in order to
make him/her skilled and perfectionist in the job which he / she does. Training is purely job focused
but development is psychology and soft skills oriented

TRAINING AND DEVELOPMENT PROGRAMMES

These programmes are generally classified into two types: (i) on the job programmes, and (ii)off the job
programmes.
Technical training at a training with live demos, Internship training, Training via the process of rotation
of job.

Training given to people in a supervisory or managerial capacity is – Lectures, Group Discussions, Case
studies, Role-playing, Conferences etc.

Other Training Programmes

Technical Training – Technical training is that type of training that is aimed at teaching employees how
a particular technology or a machine.

Quality Training – Quality training is usually performed in companies who physically produce
a product. Quality training teaches employees to identify faulty products and only allow perfect products
to go out to the markets.

Skills Training – Skills training refers to training given to employees so as to perform their particular
jobs. For e.g. A receptionist would be specifically taught to answer calls and handle the answering
machine.

Soft Skills – Soft skills training includes personality development, being welcoming and friendly to
clients, building rapport, training on sexual harassment etc.

Professional Training – Professional Training is done for jobs that have constantly changing and
evolving work like the field of medicine and research. People working in these sectors have to be
regularly updated on matters of the industry.

Team Training – Team training establishes a level of trust and synchronicity between team members
for increased efficiency.
Benefits of Training

1. Training improves the quantity and quality of the workforce. It increases the skills and knowledge
base of the employees.

2. It improves upon the time and money required to reach the company’s goals. For e.g. Trained
salesmen achieve and exceed their targets faster than inexperienced and untrained salesmen.

3. Training helps to identify the highly skilled and talented employees and the company can give
them jobs of higher responsibilities.

4. Trained employees are highly efficient in comparison to untrained ones.

5. Reduces the need to constantly supervise and overlook the employees.

6. Improves job satisfaction and thus boosts morale.

Benefits of Development

1. Exposes executives to the latest techniques and trends in their professional fields.

2. Ensures that the company has an adequate number of managers with knowledge and skill at any
given point.

3. Helps in the long-term growth and survival of the company.

4. Creates an effective team of managers who can handle the company issues without fail.

5. Ensures that the employees utilise their managerial and leadership skills in particular to the
fullest.

IMPORTANCE OF TRAINING AND DEVELOPMENT

For companies to keep improving, it is important for organizations to have continuous training and
development programs for their employees. Competition and the business environment keeps
changing, and hence it is critical to keep learning and pick up new skills. The importance of training
and development is as follows:
• Optimum utilization of Human resources
• Development of skills like time management, leadership, team management etc
• To increase the productivity and enhance employee motivation
• To provide the zeal of team spirit
• For improvement of organization culture
• To improve quality, safety
• To increase profitability
• Improve the morale and corporate image
 NEED FOR TRAINING AND DEVELOPMENT
Training and development of employees is a costly activity as it requires a lot quality inputs from
trainers as well as employees. But it is essential that the company revises its goals and efficiencies
with the changing environment. Here are a few critical reasons why the company endorses training
and development sessions.
• When management thinks that there is a need to improve the performances of employees
• To set up the benchmark of improvement so far in the performance improvement effort
• To train about the specific job responsibility and skills like communication management, team
management etc
• To test the new methodology for increasing the productivity
WHAT ARE PERFORMANCE APPRAISALS?
Performance appraisals are an annual process that involves evaluating employee’s performance and
productivity against the pre-determined set of objectives for that year. It also helps to evaluate
employee’s skills, strength and shortcomings. The results of this performance appraisal
process determines the employees wage raise and promotion.

PERFORMANCE APPRAISAL PROCESS

1. Objectives definition of appraisal
2. Job expectations establishment
3. Design an appraisal program
4. Appraise the performance
5. Performance Interviews
6. Use data for appropriate purposes
7. Identify opportunities variables
8. Using social processes, physical processes, human and computer assistance

TECHNIQUES / METHODS OF PERFORMANCE APPRAISALS

Numerous methods have been devised to measure the quantity and quality of performance appraisals.
Each of the methods is effective for some purposes for some organizations only. None should be
dismissed or accepted as appropriate except as they relate to the particular needs of the organization
or an employee.
Broadly all methods of appraisals can be divided into two different categories.
 Past Oriented Methods
 Future Oriented Methods
Past Oriented Methods
1. Rating Scales: Rating scales consists of several numerical scales representing job related
performance criterions such as dependability, initiative, output, attendance, attitude etc. Each scales
ranges from excellent to poor. The total numerical scores are computed and final conclusions are
derived. Advantages – Adaptability, easy to use, low cost, every type of job can be evaluated, large
number of employees covered, no formal training required. Disadvantages – Rater’s biases
2. Checklist: Under this method, checklist of statements of traits of employee in the form of Yes or
No based questions is prepared. Here the rater only does the reporting or checking and HR
department does the actual evaluation. Advantages – economy, ease of administration, limited
training required, standardization. Disadvantages – Raters biases, use of improper weighs by HR,
does not allow rater to give relative ratings
3. Forced Choice Method: The series of statements arranged in the blocks of two or more are
given and the rater indicates which statement is true or false. The rater is forced to make a choice. HR
department does actual assessment. Advantages – Absence of personal biases because of forced
choice. Disadvantages – Statements may be wrongly framed.
4. Forced Distribution Method: here employees are clustered around a high point on a rating
scale. Rater is compelled to distribute the employees on all points on the scale. It is assumed that the
performance is conformed to normal distribution. Advantages – Eliminates Disadvantages –
Assumption of normal distribution, unrealistic, errors of central tendency.
5. Critical Incidents Method: The approach is focused on certain critical behaviors of employee
that makes all the difference in the performance. Supervisors as and when they occur record such
incidents. Advantages – Evaluations are based on actual job behaviors, ratings are supported by
descriptions, feedback is easy, reduces recency biases, chances of subordinate improvement are high.
Disadvantages – Negative incidents can be prioritized, forgetting incidents, overly close supervision;
feedback may be too much and may appear to be punishment.
6. Behaviorally Anchored Rating Scales: statements of effective and ineffective behaviors
determine the points. They are said to be behaviorally anchored. The rater is supposed to say, which
behavior describes the employee performance. Advantages – helps overcome rating errors.
Disadvantages – Suffers from distortions inherent in most rating techniques.
7. Field Review Method: This is an appraisal done by someone outside employees’ own
department usually from corporate or HR department. Advantages – Useful for managerial level
promotions, when comparable information is needed, Disadvantages – Outsider is generally not
familiar with employees work environment, Observation of actual behaviors not possible.
8. Performance Tests & Observations: This is based on the test of knowledge or skills. The tests
may be written or an actual presentation of skills. Tests must be reliable and validated to be useful.
Advantage – Tests may be apt to measure potential more than actual performance. Disadvantages –
Tests may suffer if costs of test development or administration are high.
9. Confidential Records: Mostly used by government departments, however its application in
industry is not ruled out. Here the report is given in the form of Annual Confidentiality Report (ACR)
and may record ratings with respect to following items; attendance, self expression, team work,
leadership, initiative, technical ability, reasoning ability, originality and resourcefulness etc. The
system is highly secretive and confidential. Feedback to the assessee is given only in case of an
adverse entry. Disadvantage is that it is highly subjective and ratings can be manipulated because the
evaluations are linked to HR actions like promotions etc.
10. Essay Method: In this method the rater writes down the employee description in detail within a
number of broad categories like, overall impression of performance, promoteability of employee,
existing capabilities and qualifications of performing jobs, strengths and weaknesses and training
needs of the employee. Advantage – It is extremely useful in filing information gaps about the
employees that often occur in a better-structured checklist. Disadvantages – It its highly dependent
upon the writing skills of rater and most of them are not good writers. They may get confused success
depends on the memory power of raters.
11. Cost Accounting Method: Here performance is evaluated from the monetary returns yields to
his or her organization. Cost to keep employee, and benefit the organization derives is ascertained.
Hence it is more dependent upon cost and benefit analysis.
 12. Comparative Evaluation Method (Ranking & Paired Comparisons): These are collection of
different methods that compare performance with that of other co-workers. The usual techniques used
may be ranking methods and paired comparison method.
 Ranking Methods: Superior ranks his worker based on merit, from best to worst. However how best
and why best are not elaborated in this method. It is easy to administer and explanation.
 Paired Comparison Methods: In this method each employee is rated with another employee in the
form of pairs. The number of comparisons may be calculated with the help of a formula as under.
N x (N-1) / 2
Future Oriented Methods
1. Management By Objectives: It means management by objectives and the performance is rated
against the achievement of objectives stated by the management. MBO process goes as under.
 Establish goals and desired outcomes for each subordinate
 Setting performance standards
 Comparison of actual goals with goals attained by the employee
 Establish new goals and new strategies for goals not achieved in previous year.
Advantage – It is more useful for managerial positions.
Disadvantages – Not applicable to all jobs, allocation of merit pay may result in setting short-term
goals rather than important and long-term goals etc.
2. Psychological Appraisals: These appraisals are more directed to assess employees potential for
future performance rather than the past one. It is done in the form of in-depth interviews,
psychological tests, and discussion with supervisors and review of other evaluations. It is more
focused on employees emotional, intellectual, and motivational and other personal characteristics
affecting his performance. This approach is slow and costly and may be useful for bright young
members who may have considerable potential. However quality of these appraisals largely depend
upon the skills of psychologists who perform the evaluation.
3. Assessment Centers: This technique was first developed in USA and UK in 1943. An
assessment center is a central location where managers may come together to have their participation
in job related exercises evaluated by trained observers. It is more focused on observation of behaviors
across a series of select exercises or work samples. Assessees are requested to participate in in-basket
exercises, work groups, computer simulations, role playing and other similar activities which require
same attributes for successful performance in actual job. The characteristics assessed in assessment
center can be assertiveness, persuasive ability, communicating ability, planning and organizational
ability, self confidence, resistance to stress, energy level, decision making, sensitivity to feelings,
administrative ability, creativity and mental alertness etc. Disadvantages – Costs of employees
traveling and lodging, psychologists, ratings strongly influenced by assessee’s inter-personal skills.
Solid performers may feel suffocated in simulated situations. Those who are not selected for this also
may get affected.
Advantages – well-conducted assessment center can achieve better forecasts of future performance
and progress than other methods of appraisals. Also reliability, content validity and predictive ability
are said to be high in assessment centers. The tests also make sure that the wrong people are not hired
or promoted. Finally it clearly defines the criteria for selection and promotion.
4. 360-Degree Feedback: It is a technique which is systematic collection of performance data on
an individual group, derived from a number of stakeholders like immediate supervisors, team
members, customers, peers and self. In fact anyone who has useful information on how an employee
does a job may be one of the appraisers. This technique is highly useful in terms of broader
perspective, greater self-development and multi-source feedback is useful. 360-degree appraisals are
useful to measure inter-personal skills, customer satisfaction and team building skills. However on
the negative side, receiving feedback from multiple sources can be intimidating, threatening etc.
Multiple raters may be less adept at providing balanced and objective feedback.

BASIC FACTORS IN DETERMINING PAY RATES

Employee compensation refers to all forms of pay going to employees and arising from their
employment. It has two main components, direct financial payments (wages, salaries, incentives,
commissions, and bonueses) and indirect financial payments (financial benefits like employer-paid
insurance and vacations).
In turn, there are two basic ways to make direct financial payments to employees: base them on
increments of time or on performance.
Several factors determine the design of any pay plan: legal, union, company strategy and policy, and
equity.
Legal Considerations in Compensation
Various laws specify things like minimum wages, overtime rates, and benefits. For example, Davis-
Bacon Act in 1931, Walsh-Healey Public Contract Act in 1936, Title VII of the 1964 Civil Rights
Act.
The 1938 Fair Labor Standards Act (FLSA) contains minimum wage, maximum hours, overtime
pay, equal pay, record-keeping, and child labor provisions.
One familiar provision governs overtime pay. It says employers must pay overtime at a rate of at least
one-and-a-half times normal pay for any hours worked over 40 in a workweek.
The FLSA also sets a minimum wage, which sets a floor for employees covered by the act (and
usually bumps up wages for practically all workers when Congress raises the minimum).
Exempt/Nonexempt Specific categories of employees are exempt from the FLSA or certain
provisions of the act, and particularly from the at’s overtime provisions–they are “exempt
employees”.
1963 Equal Pay Act an amendment to the FLSA, states that employees of one sex may not be paid
wages at a rate lower than that paid to employees of the opposite sex for doing roughly equivalent
work.
1974 Employee Retirement Incomes Security Act provided fro the creation of government-run,
employer-financed corporations to protect employees against the failure of their employer’s pension
plans.
Other Legislation Affecting Compensation For example, Age Discrimination in Employment Act,
Americans with Disabilities, Family and Medical Leave Act.
Union Influences on Compensation Decisions
Unions and labor relations laws also influence pay plan design. The National Labor Relations Act of
1935 (Wagner Act) gave unions legal protection, and granted employees the right to unionize, to
bargain collectively, and to engage in concerted activities for the purpose of collective bargaining or
other mutual aid or protection.
Competitive Strategy, Corporate Policies, and Compensation
The compensation plan should advance the firm’s strategic aims–management should produce an
aligned reward strategy.
Developing an Aligned Reward Strategy Questions to ask:

1. What must our company do (for instance interms of improving customer service), to be
successful in fulfilling its mission or achieving its desired competitive position?
2. What are the employee behaviors or actions necessary to successfuly implement this competitive
strategy?
3. What compensation programs should we use to reinforce those behaviors? What should be the
purpose of each program in reinforcing each desired behavior?
4. What measurable requirements should each compensation program meet to be deemed successful
in fulfilling it’s purpose?
5. How well do our current compensation programs match these requirements?

The employer’s compensation strategy will manifest itself in pay policies.

IBM Example IBM provides a classic example of how managers use compensation policy to support
their strategic aims. CEO–Louis Gerstner instituted four new incentive and other pay policies:

1. Pay to market.
2. Fewer, “broadband” jobs. 24 narrow wage grades –> 10 grades based on three factors (skills,
leadership requirements, and scope/impact)
3. Let managers manage.
4. Incentivize employees.

Types of Pay Policies emphasize seniority or performance.

Other pay policies usually cover how to award salary increases and promotions, overtime pay,
probationary pay, leaves for military service, jury duty, and holidays.
Salary and Incentive in Tough Times Not surprisingly, one way that employers deal with
economically challenging times is by cutting back on salary increases and merit pay.
Interestingly though, the challenging times were also prompting employers to pay closer attentiaon to
their highest performing employees.
Pay Raises Employers compute pay raises in one of two ways. merit pay(绩效工资) policies, award
raises across-the-board.
Salary Compression means longer-term employees’ salaries are lower than those of workers
entering the firm today, and is a creature of inflation.
Geography How to account for geographic differences in cost of living is another big pay policy
issue. Overseas, most multinational enterprises set expatriates’ salaries according to their home-
country base pay. In addition, the person typically gets allowances including cost-of-living,
relocation, housing, education, and hardship allowances.
Equity and Its Impact on Pay Rates
Equity Theory of Motivation postulates that people are strongly motivated to maintain a balance
between what they perceive as their inputs or contributions, and their rewards.
With respect to compensation, managers should address four forms of equity: external, internal,
individual, and procedural.

 External equity refers to how a job’s pay rate in one company compares to other job’s pay in
other companies.
 Internal equity refers to how fair the job’s pay rate is when compared to other jobs within the
same company.
 Individual equity refers to the fairness of an individual’s pay as compared with what his or her
coworkers are earning for the same or very similar jobs within the company, based on each
individual’s performance.
 Procedural equity refers to the “perceived fairness of the processes and procedures used to make
decisions regarding the allocation of pay.

Addressing Equity Issues Managers use salary surveys to monitor and maintain external equity.
They use job analysis and job evaluation comparisons of each job to maintain internal equity. They
use performance appraisal and incentive pay to maintain internal equity. And they use
communications, grievance mechanisms, and employee’s participation in developing the company’s
pay plan to help ensure that employees view the pay process as transparent and procedurally fair.

ESTABLISHING PAY RATES

The process of establishing pay rates while ensuring external, internal, and procedural equity consists
of five steps:

1. Conduct a salary survey of what other employers are paying for comparable jobs.
2. Determine the worth of each job in your organization through job evaluation.
3. Group similar jobs into pay grades.
4. Fine-tune pay rates.

Step 1. The Salary Survey

It’s difficult to set pay rates if you don’t know what others are paying, so salary surveys–surveys of
what others are paying–play a big role in pricing jobs. Salary surveys can be formal or informal.
Informal phone or Internet surveys are good for checking specific issues. Some large employers can
afford to send out their own formal surveys to collect compensation information from other
employers.
Step 2. Job Evaluation
Job evaluation aims to determine a job’s relative worth. The basic principle of job evaluation is this:
Jobs that require greater qualifications, more responsibilities, and more complex job duties should
receive more pay than jobs with lesser requirements.
Compensable Factors A fundamental, compensable element of a job, such as skills, effort,
responsibility, and working conditions. For example, Hay consulting firm emphasizes three factors:
know-how, problem solving, and accountability. Walmart bases its wage structure on knowledge,
problem-sovling skills, and accountability requirements.
Preparing for the Job Evaluation The main steps include identifying the need for the program,
getting cooperation, and then choosing an evaluation committee.
Job Evaluation Methods: Ranking There are several steps in the job ranking method.

1. Obtain job information.

2. Select and group jobs.
3. Select compensable factors.
4. Rank jobs.
5. Combine ratings.

Job Evaluation Methods: Job Classification Job classification (or job grading) is a simple, widely
used method in which raters categorize jobs into groups; all the jobs in each group are of roughly the
same value for pay purposes.
The most popular procedure is to choose compensable factors and then develop class or grade
descriptions for each class or grade in terms of the amount or level of the compensable factor(s) in
those jobs.
Job Evaluation Methods: Point Method The point method is a quantitative technique. It involves
identifying (1) several compensable factors, each having several degrees, as well as (2) the degree to
which each of these factors is present in the job.
Job Evaluation Methods: Factor Comparison is a refinement of the ranking method.
Computerized Job Evaluations have two main componets: a structured questionnaire, and use
statistical models.
Step 3. Group Similar Jobs into Pay Grades
A pay grade is comprised of jobs of approximately equal difficulty or importance as established by
job evaluation.
Step 4. Price Each Pay Grade–Wage Curves
The wage curve shows the pay rates currently paid for jobs in each pay grade, relative to the points or
rankings assigned to each job or grade by the job evaluation.
Here is how to price jobs with a wage curve. First, find the average pay for each pay grade, since
each of the pay grades consists of several jobs. Next, plot the average pay rates for each pay grade.
Then fit a line, called a wage curve, through the points just plotted. Finally, price the jobs.
Step 5. Fine-Tune Pay Rates
Fine-tuning involves (1) developing pay ranges and (2) correcting out-of-line rates.
Developing Pay Ranges Pay ranges often appear as vertical boxes within each grade, showing
minimum, maximum, and midpoint pay rates for that grade.
Correcting Out-of-Line Rates
HR in Practice: Developing a Workable Pay Plan
Developing a pay plan is as important in a small firm as a large one.
Wage Surveys Four sources can be especially useful. Internet and Web sites, classified newspaper
ads, Local Job Service offices, and local employment agencies.
Job Evaluation split employees into three clusters–managerial/professional, office/clerical, and plant
personnel.
Pay Policies The better is to have a policy of once-a-year raises following a standard 1-week
appraisal period, preferably about 4 weeks before you produce the budget for next year.
Other required compensation policies include amount of holiday and vacation pay, overtime pay
policy, method of pay, garnishments, and time card or sign-in sheet procedures.

PRICING MANAGERIAL AND PROFESSIONAL JOBS

The basic aim is the same: to attract and keep good employees. Managerial jobs tend to stress harder-
to-quantify factors like judgment and problem solving more than do production and clerical jobs.
There is also more emphasis on paying managers and professionals based on results–based on their
performance or on what they can do–rahter than on the basis of static job demands like working
conditions.
Compensating Executives and Managers
Compensation for a company’s top executives usually consists of four main elements: base pay,
short-term incentives, long-term incentives, and executive benefits/perquisites or “perks.”
What Determines Executive Pay?
three main factors: job complexity (span of control, the number of functional divisions over which
the executive has direct responsibility and management level), the employer’s ability to pay (total
profit and rate of return), and the executive’s human capital (educational level, field of study, work
experience) accounted for about two-thirds of executive compensation variance.
Elements of Executive Pay Salary is traditionally the cornerstone of executive compensation. On it,
employers layer benefits, incentives, and perquisites. Boards are boosting the emphasis on
performance-based pay.
Managerial Job Evaluation The basic approach is to classify all executive and management
positions into a series of grades, each with a salary range.
Compensating Professional Employees
Compensable factors focus on problem solving, creativity, job scope, and technical knowledge and
expertise. Most employers use a market-pricing approach.

COMPETENCY-BASED PAY
Introduction
An increasing number of compensation experts and employers are moving away from assigning pay
rates to jobs based on the jobs’ numerically rated, intrinsic duties.
What is Competency-Based Pay?
In brief, competency-based pay means the company pays for the employee’s range, depth, and types
of skills and knowledge, rather than for the job title he or she holds. Two basic types of pay
programs: pay for knowledge or skilled pay.
In sum, probaly the biggest difference between traditional and competency-based pay is this:

 Traditional job evaluation-based pay plans tie the worker’s pay to the worth of the job based on
the job description–pay here is more job oriented.
 Competence-based pay ties the worker’s pay to his or her competencies–pay is more person
oriented.Employees here are paid based on what they know or can do–even if, at the moment,
they don’t have to do it.

Why Use Competency-Based Pay?

The main reason is that traditional pay plans may actually backfire if a high-performance work
system is your goal. The whole thrust of these systems is to encourage employees to work in a self-
motivated way.
Competency-Based Pay in Practice
In practice, any skill/competency/knowledge-based pay program generally contains five main
elements, which are listed as follows:

1. A system for defining specific required skills.

2. A process for tying the person’s pay to his or her skill level.
3. A training system that lets employees acquire the skills.
4. A formal skills competency testing system.
5. A work design that lets employees move among jobs to permit work assignment flexibility.

General Mills Example four clusters of jobs: mixing, filling, packaging, and materials.
The Bottom Line on Competency-Based Pay
Competency-based pay has detractors. Some note that competency-based pay “ignores the cost
implications of paying [employees] for knowledge, skills and behaviors even if they are not used.”

SPECIAL TOPICS IN COMPENSATION

How employers pay employees has been evolving. We can sum up the main changes as follows:

 We’ve seen that there is somewhat less emphasis on the job’s duties, and more on the person’s
skills and competencies and how these fit with the firm’s strategic needs.
 We’ve seen that there is less emphasis on seniority, and more on the employee’s performance.
 There is less emphasis on narrowly defined pay ranges and jobs, and more on broader jobs and
pay ranges.
 There is increased interest in ensuring that men and women are paid comparably for essentially
the same work.
 There is more emphasis on board oversight and regulation of executive pay.
Broadbanding
Broadbanding means collapsing salary grades into just a few wide levels or bands, each of which
contains a relatively wide range of jobs and pay levels. Broadbanding breeds flexibility.
Use A survey of 783 employers found that about 15% were using broadbanding. Note that even with
competence/skill-based pay and broadbanding, 60% to 70% of U.S. firms use quantitative point and
factor comparison plans to create pay structures.
Comparable Worth
Comparable worth* refers to the requirement to pay men and women equal wages for jobs that are of
comparable value to the employer.
The Pay Gap Women in the United States earn only about 77% as much as men.
Board Oversight of Executive Pay
There are various reasons why boards are clamping down on executive pay.
Tomorrow’s Pay Programs
Companies around the world will continue to face severe economic and competitive challenges.
consultants McKinsey & Co. calls a “war for talent”. Younger “Generation Y” applicants will enter
the workforce with greater expectations for recognition and feedback than di their predecessors.
Improving Productivity Through HRIS: Automating Compensation Administration
Usually, the employer identifies set times during the year when all the firm’s managers review
employees’ performance and match these with budgetary constraints and formulate pay raise
recommendations for the coming year.

MARKETING PORTION

Environment

Environment is associated with our physical environment such as air quality, water pollution, solid
waste disposal and natural resources conservation.

Environment Monitoring

Environment monitoring is a process of gathering information regarding external marketing

environment and making future decisions after analyzing these information. There are two types of
marketing environment are as follows;

1. External Environment
2. Internal Environment
EXTERNAL ENVIRONMENT

Every organization operates with its external environment that is generally cannot be controlled. At
the same time marketing and non-marketing resources can be controlled in an organization. There are
two types of influences in external marketing environment;

a. Macro Environment
b. Micro Environment

External Macro Environment

The following external forces have considerable influence on any organization's marketing
opportunities and activities. Therefore they are macro environmental forces. These forces are largely
uncontrollable by the management but they are not totally uncontrollable. These are as follows;

i. Demographics
ii. Economic conditions
iii. Competition
iv. Social and cultural forces
v. Political and legal forces
vi. Technology

Demographics:

Demographics refer to the characteristics of the population including such factors as size, distribution
and growth. Because people constitute a market and executives of any management very interested in
demographics of the population. Demographic variables include age, marital status, sex, occupation,
income, location, and the like.

Economic conditions:

Economic conditions show the purchasing power of the customer in any specific area. The
management of the business also analyze that either people are willing to buy my product or not. The
economic conditions also include the trade cycle of the business. The stages of the business are as
follows;

1. Boom
2. Recession
3. Depression
4. Recovery

Competition:

A company’s competitive environment is also a major influence on its marketing programs. A

management used the SWOT analysis in order to understand its competitors. A firm generally faces
three types of competition;
1. Brand competition
2. Substitute products
3. General competition
Brand competition

Brand competition comes from its own product's competitors. The other companies who are
producing same kind of product may show healthy competition.

Substitute products

A competition from the substitute products are also influence the marketing in terms of competition.

Social and cultural forces:

Social and cultural effects are also put some impact on marketing. The businessmen produce those
goods which are required by the specific societies and culture. Social is the community’s effects but
cultural are traditional effects on the market.

Political and Legal forces:

Political conditions are always affect the market because the trust of the international buyer comes
from the state. There are also some laws which have to be followed in order to make marketing or to
run a business. Normally there are four legal and political categories which are as follows;

1. Monetary and fiscal policies

2. Social legislation
3. Government relationships with industries
4. Marketing legislation

Technology:

Technology put a positive impact on our lifestyle. With the help of technology a businessman can
produce something new which may attract the customers. The changing in a product is necessary in
order to create interest in the product and a business will stay in the market due to consistent
changing. People buy what they required but may required a new shape or new style.

External Microenvironment

External microenvironment are also affects the market situations. The external microenvironment
includes the three types of environment and these are as follows; They are also uncontrollable but
management may control by putting pressure on them.

1. The market
2. Suppliers
3. Intermediaries

The market:

A market is a place where buyer and seller meet, goods and services are offered for sale and a place
where ownership is transferred to others. In a marketing point of view the definition of market is not
sufficient but a market as a people or organization with needs to satisfy, money to spend and the
willingness to spend it. We can find following factors in a market in terms of marketing;
 1. People or organization with needs
2. Their purchasing power
3. Their buying behavior

Suppliers:

Suppliers are the persons, party or organization who supplies goods to the manufacturer in order to
make it and change the nature of the product and make it useful to the customer. The management is
not interested with the suppliers but in case of shortage of supply the production may affect and low
production effects the low supply of goods in the market.

Intermediaries:

Marketing intermediaries are independent business organizations that directly aid in the flow of
goods and services between a marketing organization and its market. There are two types of
intermediaries involved in the flow of goods or services;

1. Middlemen
2. Facilitating organizations

Middlemen: are the retailers and wholesalers

Facilitating organizations: are the aids to trade such as banks, insurance companies, transportation
organizations etc.

INTERNAL ENVIRONMENT

An organization's internal marketing environment is controllable by the management. The internal

environment means that environment which is within the boundaries of an organization. There are
many internal environmental forces which are as follows;

1. Financial resources
2. Production facilities
3. Human resources
4. Company image
5. Location
6. Research and development

Designing a Customer-Driven Marketing Strategy

Designing a true customer-driven marketing strategy involves:

1. Segmentation
2. Targeting
3. Differentiation
4. Positioning
MARKET SEGMENTATION

Segmentation means to divide the marketplace into parts, or segments, which are definable,
accessible, actionable, and profitable and have a growth potential. In other words, a company would
find it impossible to target the entire market, because of time, cost and effort restrictions. It needs to
have a 'definable' segment - a mass of people who can be identified and targeted with reasonable
effort, cost and time.

Basis of Segmentation for Consumer Market

There are many ways to segment the market, including the following common ways and these
approaches can be used in combination:

Demographic Segmentation:

Demographic segmentation, such as age, gender, income, education family life cycle, occupation,
social class has been widely used. That works well, when demographics are highly associated with
needs and wants.

Psychographic Segmentation:

Psychographic segmentation has become more popular as it reflects people’s lifestyles, attitudes
and aspirations. Psychographic segmentation can be very useful in strengthening brand identity and
creating an emotional connection with the brand, but may not necessarily result in sales.

Behavioral Segmentation:

Behavioral segmentation is based on product consumption-related behaviors and can include

frequency, volume and type of product usage. This type of segmentation can be very powerful for
firms that have a membership-type relationship with customers,

Needs Based Segmentation:

Needs-based segmentation groups customers based on similar needs and wants, or benefits sought,
with regards to a particular product or consumption context. Needs-based segmentation is perhaps the
segmentation trust to the marketing concept, that is, satisfying customers’ needs and wants. For
companies to increase their sales, segmentation requires understanding customer needs, including
those that are undeserved or even unmet.

Geographic Segmentation:

The segmentation which is based on location, region, city, urban or rural areas, countries and towns is
called geographic segmentation. Geographic characteristics are also measureable and accessible.

Benefits of Marketing Segmentation

Marketing segmentation is one of the most important element in the success of the company.
Companies are largely depends upon marketing segmentation as it defines profit. Following are the
benefits of marketing segmentation.
 1. Focus of the Company:
2. Increase in competitiveness:
3. Market expansion:
4. Customer retention:
5. Have better communication:
6. Increases profitability:
7. Better matching of customer needs:
8. Enhanced profits for business:
9. Better opportunities for growth:
10. Retain more customers:
11. Target marketing communications:
12. Gain share of the market segment:
13. Improved Branding
14. Increased Sales
15. Better Distribution
16. Better Advertising
17. Cost Reduction
18. Business Focus
19. New Markets
20. Product Development

Process of Marketing Segmentation

The following is a quick discussion of the full market segmentation, targeting and
positioning (STP) process, as shown above.

Step One – Define the market

In the first step in this more detailed model is to clearly define the market that the firm is interested
in. This may sound relatively straightforward but it is an important consideration.

Step Two – Create market segments

Once the market has been defined, the next step is to segment the market, using a variety of
different segmentation bases/variables in order to construct groups of consumer. In other words,
allocate the consumers in the defined market to similar groups (based on market needs, behavior or
other characteristics).

Step Three – Evaluate the segments for viability

After market segments have been developed they are then evaluated using a set of criteria to ensure
that they are useable and logical. This requires the segments to be assessed against a checklist of
factors, such as: are the segments reachable, do they have different groups of needs, are they large
enough, and so on.

Step Four – Construct segment profiles

Once viable market segments have been determined, segment profiles are then developed. Segment
profiles are detailed descriptions of the consumers in the segments – describing their needs,
behaviors, preferences, demographics, shopping styles, and so on. Often a segment is given a
descriptive nickname by the organization. This is much in the same way that the age cohorts of Baby
Boomers, Generation X and Generation Y have a name.

Step Five – Evaluate the attractiveness of each segment

Available market data and consumer research findings are then are added to the description of the
segments (the profiles), such as segment size, growth rates, price sensitivity, brand loyalty, and so on.
Using this combined information, the firm will then evaluate each market segment on its overall
attractiveness. Some form of scoring model will probably be used for this task, resulting in numerical
and qualitative scores for each market segment.

Step Six – Select target market/s

With detailed information on each of the segments now available, the firm then decides which ones
are the most appropriate ones to be selected as target markets. There are many factors to consider
when choosing a target market. These factors include: firms strategy, the attractiveness of the
segment, the competitive rivalry of the segment, the firm’s ability to successfully compete and so on.

Step Seven – Develop positioning strategy

The next step is to work out how to best compete in the selected target market. Firms need to identify
how to position their products/brands in the target market. As it is likely that there are already
competitive offerings in the market, the firm needs to work out how they can win market share from
established players. Typically this is achieved by being perceived by consumers as being different,
unique, superior, or as providing greater value.

Step Eight – Develop and implement the marketing mix

Once a positioning strategy has been developed, the firm moves to implementation. This is the
development of a marketing mix that will support the positioning in the marketplace. This requires
suitable products need to be designed and developed, at a suitable price, with suitable distribution
channels, and an effective promotional program.

Step Nine – Review performance

After a period of time, and on a regular basis, the firm needs to revisit the performance of various
products and may review their segmentation process in order to reassess their view of the market and
to look for new opportunities.

Targeted Marketing

A target market is a group of people toward whom a firm markets its goods, services, or ideas with a
strategy designed to satisfy their specific needs and preferences.
Undifferentiated Targeting:

This approach views the market as one group with no individual segments, therefore using a single
marketing strategy. This strategy may be useful for a business or product with little competition
where you may not need to tailor strategies for different preferences.

Concentrated Targeting:

This approach focuses on selecting a particular market niche on which marketing efforts are targeted.
Your firm is focusing on a single segment so you can concentrate on understanding the needs and
wants of that particular market intimately. Small firms often benefit from this strategy as focusing on
one segment enables them to compete effectively against larger firms.

Multi-Segment Targeting:

This approach is used if you need to focus on two or more well defined market segments and want to
develop different strategies for them. Multi segment targeting offers many benefits but can be costly
as it involves greater input from management, increased market research and increased promotional
strategies.

Niche marketing

Focusing on sub-segments or niches with distinctive traits that may seek a special combination of
benefits.

Micro-marketing

The practice of tailoring products and marketing programs to suit the the tastes of specific individual
and locations.(includes local marketing & individual marketing).

Individual-marketing

Tailoring products and marketing programs to the needs and preferences of individual customers.

Prior to selecting a particular targeting strategy, you should perform a cost benefit analysis between
all available strategies and determine which will suit your situation best.

Positioning
Positioning is a perceptual location. It's where your product or service fits into the marketplace.
Effective positioning puts you first in line in the minds of potential customers. Positioning is a
powerful tool that allows you to create an image. And image is the outward representation of being
who you want to be, doing what you want to do, and having what you want to have. Positioning
yourself can lead to personal fulfillment. Being positioned by someone else restricts your choices
and limits your opportunities.
PROCESS OF POSITIONING:

Positioning is a valuable step in understanding the strategic decisions that will need to be made to be
successful. A successful company considers the customers they are serving, what is the value they
can bring to the customers, and how they can differentiate themselves from other companies, and
then creates the products, services and delivery channels which provide more value than any other
company. By successfully thinking about positioning, companies can distinguish themselves in ways
meaningful to their target customers. There are five steps to positioning starting with understanding
customer needs and leading to building your brand equity.

1. Define target customers and market segment to dominate

The first step in positioning is studying potential target customers. Companies must understand the
needs of targeted customers and determine which segments make the most business sense to target
based on the opportunity uncovered. After carefully understanding the target market and segments,
including their spending patterns, needs, demographics, and other information about them, specific
industries, functions and even specific titles of customers can be selected to target.

2. Develop compelling value proposition

Once the needs of the target are understood, companies can determine what value can be created for
the target. It is important to develop a value proposition that is compelling to the target, whether it is
a product, service, the way the product is delivered, or even the way the customer is treated.

3. Differentiate from competitors

Once deciding on the target, understanding their needs, and determining how to create value for
them, a thorough competitive analysis must be undertaken. To be successful in the business
opportunity, companies must make sure they are differentiated in the customer's mind. To win in a
competitive business market, companies must make sure the position they take is clearly different
from the other competitors in the market.

4. Develop positioning statement and messages

Once you are clear as to what your customers want, what you can deliver of value to them, and how
to differentiate from your competitors, write it down. Your positioning statement should become the
foundation for you and your employees to use when making business strategy decisions, so that all
decisions support and strengthen your positioning in the market. By writing a clear positioning
statement, you can then develop the messages you need to convey to each of your audiences to create
awareness and demand. Of course, your messages must be based on the real, valuable and
differentiable product, pricing, and distribution strategies you have developed

5. Build your position.

By creating a positioning statement, you've gained understanding of what the market needs and how
you can fill a gap with a valuable solution. Now is the time to communicate about your company and
products, using the positioning statement as a guide. Communicate your strengths and benefits and
supply the evidence, not only in what you say, but what your company produces and how it acts.
Communicate though an integrated marketing program to all your audiences, including customers,
prospects, industry analysts, the press, the community.

Marketing information system

A marketing information system is the system or way in

which marketing information is formally gathered, stored, analysed and then it is distributed to
managers in accord with their informational needs on a regular basis. It is also a proceeding and
interacting structure of people, procedures and equipment to gather, analyse, sort and evaluate
information for used by the marketers.

Assessing Marketing Information Needs

The marketing information system primarily serves the

company’s marketing and other managers. However, it may also provide information to external
partners, such as suppliers, resellers, or marketing services agencies. In designing an information
system, the company must consider the needs of all of these users. A good marketing information has
the following characteristics;

1. Balanced Information
2. Demanded information
3. Cost of information
4. Extra information
5. Manager's decisions
6. Competitor's information

Balanced Information

A good marketing information system balances the information users would like to have against what
they really need and what is feasible to offer.

Demanded information

The company begins by interviewing managers to find out what information they would like. Some
managers will ask for whatever information they can get without thinking carefully about what they
really need. Too much information can be as harmful as too little.

Cost of information

Finally the costs of obtaining, processing, storing, and delivering information can
mount quickly. The company must decide whether the benefits of having additional information are
worth the costs of providing it, and both value and cost are often hard to assess.
Extra information

In many cases, additional information will do little to change or improve a manager’s

decision, or the costs of the information may exceed the returns from the improved decision.

Manager's decisions

Marketers should not assume that additional information will always be worth
obtaining. Rather, they should weigh carefully the costs of getting more information against the
benefits resulting from it.

Competitor's information

Managers might need to know about a new product that a competitor plans to
introduce during the coming year. Because they do not know about the new product, they do not
think to ask about it. The MIS must monitor the marketing environment in order to provide decision
makers with information they should have to make key marketing decisions.

Relevent information

The marketing information system should provide relevent information to the needed
party in order to make quick decisions and factual information.

Problems in MIS needs

1. There is too much information of the wrong kind.

2. There is not enough information of the right kind.
3. Information is too dispersed to be useful.
4. Information arrives too late to be useful.
5. Information often arrives in a form that leaves no idea of its accuracy and
therefore lacks credibility.

Clearly, there is a need to overcome these kinds of problems and complaints and it is for this reason
that marketing information systems have evolved.

Other Market Considerations

Research based information

The information provided in a market study should be based on research

collected AND NOT on one’s own perceptions, guesstimates or other unsupported statements. The
only exception to this may be within the SWOT analysis, however, even most of this should be
supported with some evidence.
Certain information

If you are unable to find certain information it is probably a good idea to make
this known so the person reading the report would know of this potential limitation of the market
study. Obviously you need to collect good research so you do not end up having too many of these
statements.

Important terms

It is generally a good idea to define important terms and concepts when you first
introduce them. This will benefit those reading the report who may not possess knowledge in this
area. Alternatively, you can create a glossary or definition section in the Endnotes area of the report.

Explain research process

Where necessary explain how the research was conducted or how data was
collected (e.g., explaining how survey was done).

Secondary research

Make note of any limitations of secondary research (research you obtained from other
sources) that you used. Unless there are very significant limitations you can generally include this as
an endnote.

Investigating new customers

If you are investigating a new/different way of doing something with

present customers, then you will need to provide a discussion of the cost/benefit of alternative
options. That is, what will customer give up to use something new versus what they will get from
using the new product.

Marketing research process

Marketing research helps to know us about the

customers we can judge that what type of customers we have, what they want and how they buy our
products. It includes the following points;

1. Define problem
2. Examination of secondary data
(a) Internal data
(b) External dat
3. Collecting primary data
(a) Survey
(b) Observations
 (c) Questionaire
(d) Experiment
4. Analysis of data
(a) Sampling plan
5. Recomendations
6. Implimentations
(b) Research report

Why we conduct marketing research?

To make sound business decisions, you need

accurate, up-to-date insights about your customers, markets, and competitors. Successful businesses
conduct research on a continual basis to keep up with market trends and to maintain a competitive
edge. Regardless of whether you’re starting or expanding your business, market research is vital to
understanding your target market and increasing sales.

Business owners conduct research for many reasons

Identify potential customers

Who is going to use your product/service? How old are they? Are they male
or female? Are they married, single or divorced? Do they have children? Where do they live? What is
their level of education? and so on.

Understanding your existing customers

Why do customers choose your product over competitors? What do they

value? Is it service, product quality or the prestige associated with consuming your product/service?
Who influences their buying decision? What magazines do they read? What websites do they visit?
What do they enjoy doing?

Set realistic targets

From the information you collect you’ll be able to set realistic targets for areas such
as growth, sales and the introduction of new products/services.

Develop effective strategies

From your research you’ll be able to make informed marketing decisions

about how to price your product/service, how to distribute your product/service, which media
channels to use (eg: newspaper, radio or direct marketing) or whether to develop a new
product/service. It will also help you make an informed decision about starting, building,
consolidating, diversifying or reducing business activity.
Examine and solve business problems

If you’ve identified a business problem, research will help you work out
what is happening. For example, if your sales have fallen you might discover that brand awareness
has also fallen, or that a new competitor has entered the market or a substitute product has become
available.

Prepare for business expansion

Research will help you identify areas for expansion and test the market’s
readiness for a new product/service. For example you could be looking to open a new retail store and
you need to find the right location or you could plan to make changes to your distribution channels
(eg: from home parties to retail) and need to determine how that will affect your customer base.

Identify business opportunities.

Your research could identify new business opportunities. You may find an un-
serviced or under-serviced market. You could identify changing market trends such as population
shifts, increasing levels of education or leisure time which bring new opportunities.

Effects of Marketing research on 4P's;

Product

Improve your product or service based on findings about what your customers really want
and need. Focus on things like function, appearance and customer service or warranties.

Price

Set a price based on popular profit margins, competitors' prices, financing options, or the price
a customer is willing to pay.

Placement

Decide where to set up and how to distribute a product. Compare the characteristics of
different locations and the value of points of sale (retail, wholesale, online).

Promotion

Figure out how to best reach particular market segments (teens, families, students,
professionals, etc.) in areas of advertising and publicity, social media, and branding.
 Product Mix (Product Portfolio or Product Assortment)

The Product mix is the total variety of products a

firm sells. Some firms will sell just one product, whilst others will sell a large number of different
products. For example Samsung's product mix includes mobile phones, netbooks, tablets, televisions,
fridges, microwaves, printers and memory cards. Firms should select their product mix carefully as
they will need to generate a profit from each of the products in the product mix.

Product Line

Firms may decide to split their product mix into

groups known as product lines. A product line is a number of products grouped together based on
similar characteristics. The characteristic used to split products, will depend on the firm and its
product strategy. They include product price, product quality, who the product is aimed at (target
group), and product specification/features. This is useful if the firm has a large product mix as there is
less need to concentrate on individual product type strategy.

Product Life Cycle (PLC)

A new product passes through set of stages

known as product life cycle. Product life cycle applies to both brand and category of products. Its
time period vary from product to product. Modern product life cycles are becoming shorter and
shorter as products in mature stages are being renewed by market segmentation and product
differentiation.

Making High Profit:

Companies always attempt to maximize the profit and revenues over the entire
life cycle of a product. In order to achieving the desired level of profit, the introduction of the new
product at the proper time is crucial. If new product is appealing to consumer and no stiff competition
is out there, company can charge high prices and earn high profits.

Stages of Product Life Cycle

Product life cycle comprises four stages:

1. Introduction stage
2. Growth stage
3. Maturity stage
4. Decline stage
 Product Life Cycle (PLC)

Introduction stage

Product is introduced in the market with intention to build a clear identity and
heavy promotion is done for maximum awareness. Companies incur more costs in this phase and also
bear additional cost for distribution. On the other hand, there are a few customers at this stage, means
low sales volume. So, during introductory stage company’s profits shows a negative figure because
of huge cost but low sales volume.

Core Focus

At introduction stage, the company core focus is on establishing a market and arising
demand for the product. So, the impact on marketing mix is as follows:

Product

Branding, Quality level and intellectual property and protections are obtained to stimulate
consumers for the entire product category. Product is under more consideration, as first impression is
the last impression.

Price

High(skim) pricing is used for making high profits with intention to cover initial cost in a short
period and low pricing is used to penetrate and gain the market share. company choice of pricing
strategy depends on their goals.
Place

Distribution at this stage is usually selective and scattered.

Promotion

At introductory stage, promotion is done with intention to build brand awareness.

Samples/trials are provided that is fruitful in attracting early adopters and potential customers.
Promotional programs are more essential in this phase. It is as much important as to produce the
product because it positions the product.

Growth Stage

In this stage, company’s sales and profits starts increasing and competition also begin to
increase. The product becomes well recognized at this stage and some of the buyers repeat the
purchase patterns. During this stage, firms focus on brand preference and gaining market share. It is
market acceptance stage. But due to competition, company invest more in advertisement to convince
customers so profits may decline near the end of growth stage. Affect on 4 P’s of marketing is as
under:

Product

Along with maintaining the existing quality, new features and improvements in product
quality may be done. All this is done to compete and maintain the market share.

Price

Price is maintained or may increase as company gets high demand at low competition or it
may be reduced to grasp more customers.

Distribution

Distribution becomes more significant with the increase demand and acceptability of
product. More channels are added for intensive distribution in order to meet increasing demand. On
the other hand resellers start getting interested in the product, so trade discounts are also minimal.

Promotion

At growth stage, promotion is increased. When acceptability of product increases, more

efforts are made for brand preference and loyalty.

Maturity stage

At maturity stage, brand awareness is strong so sale continues to grow but at a

declining rate as compared to past. At this stage, there are more competitors with the same products.
So, companies defend the market share and extending product life cycle, rather than making the
profits, By offering sales promotions to encourage retailer to give more shelf space to the product
than that of competitors. At this stage usually loyal customers make purchases. Marketing
mix decisions include:

Product

At maturity stage, companies add features and modify the product in order to compete in
market and differentiate the product from competition. At this stage, it is best way to get dominance
over competitors and increase market share.

Price

Because of intense competition, at maturity stage, price is reduced in order to compete. It

attracts the price conscious segment and retain the customers.

Distribution

New channels are added to face intense competition and incentives are offered to retailers
to get shelf preference over competitors.

Promotion

Promotion is done in order to create product differentiation and loyalty. Incentives are
also offered to attract more customers.

Decline stage

Decline in sales, change in trends and unfavorable economic conditions explains decline
stage. At this stage market becomes saturated so sales declines. It may also be due technical
obsolescence or customer taste has been changed. At decline stage company has three options:

Maintain the product, Reduce cost and finding new uses of product.

Harvest the product by reducing marketing cost and continue offering the product to loyal niche
until zero profit.

Discontinue the product when there’s no profit or a successor is available. Selling out to
competitors who want to keep the product.

At declining stage, marketing mix decisions depends on company’s strategy. For example, if
company want to harvest, the product will remain same and price will be reduced. In case of
liquidation, supply will be reduced dramatically.
 Limitations of Product Life Cycle (PLC)

Product life cycle is criticized that it has no

empirical support and it is not fruitful in special cases. Different products have different properties so
their life cycle also vary. It shows that product life cycle is not best tool to predict the sales.
Sometimes managerial decisions affect the life of products in this case Product Life Cycle is not
playing any role. product life cycle is very fruitful for larger firms and corporations but it is not
hundred percent accurate tool to predict the life cycle and sales of products in all the situations.

Difference between a product and a Brand

A product is something that is made in a factory. A

brand is something that is bought by a consumer. A product can be copied by a competitor. A brand
is unique. A product can be quickly outdated. And successful brands are timeless. And keep that in
mind. Because it is all about differentiating. Here is a great example. I mean Coca Cola is probably
the premiere brand in the world. And the product on the left is probably a good product. It’s from
Safeway. But it’s just a product.

What is Branding ?

A brand is the idea or image of a specific product

or service that consumers connect with, by identifying the name, logo, slogan, or design of the
company who owns the idea or image. Branding is when that idea or image is marketed so that it is
recognizable by more and more people, and identified with a certain service or product when there
are many other companies offering the same service or product.

Benefits/Advantages of Branding

Branding is the process of creating distinctive

and durable perceptions in the minds of consumers. A brand is a persistent, unique business identity
intertwined with associations of personality, quality, origin, liking and more. Here’s why the effort to
brand your company or yourself pays off.

TO BUYER:

1. Help buyers identify the product that they like/dislike.

2. Identify marketer
3. Helps reduce the time needed for purchase.
4. Helps buyers evaluate quality of products especially if unable to judge a products
characteristics.
5. Helps reduce buyers perceived risk of purchase.
6. Buyer may derive a psychological reward from owning the brand,
7. Stability in a price and quality
8. Put differentiation from the other products
 9. Less risk
10. Consumer feel pride while purchasing the brand
11. Consumer have familiare with the brand name already

TO SELLER:

1. Differentiate product offering from competitors

2. Helps segment market by creating tailored images
3. Brand identifies the companies products making repeat purchases easier for customers.
4. Reduce price comparisons
5. Brand helps firm introduce a new product that carries the name of one or more of its
existing products...half as much as using a new brand, lower co. designs, advertising
and promotional costs.
EXAMPLE, Gummy Savers
6. Easier cooperation with intermediaries with well known brands
7. Facilitates promotional efforts.
8. Helps foster brand loyalty helping to stabilize market share.
9. Firms may be able to charge a premium for the brand.
10. Lower marketing expenses as people knows them already

Selecting a Brand Name

1. Easy for customers to say, spell and recall (inc. foreigners)

2. Indicate products major benefits
3. Should be distinctive
4. Compatible with all products in product line
5. Used and recognized in all types of media
6. Single and multiple words Bic, Dodge Grand Caravan, IBM PC (letters), or a combination
Mazda RX7
7. Availability, already over 400 car "name plates", this makes it difficult to select a new one.
8. Use words of no meaning to avoid negative connotation, Kodak, Exxo
9. Can be created internally by the organization, or by a consultancy
10. Legal restrictions, i.e. Food products must adhere to the Nutrition Labeling and Education
Act, 1990...May 8 1994

Packaging

Packaging is more than just your product's

pretty face. The wrapping material around a consumer item that serves to contain, identify, describe,
protect, display, promote and otherwise make the product marketable and keep it clean

Packaging is the act of designing and producing the package for a product. A
package is a wrapper or container in which a product is kept.
 Labeling:

Label is a carrier of information about the product.

Labels are attached on the product package to provide information about the product such as
manufacturer of the product, date of manufacture, date of expiry, its ingredients, how to use product
and its handling.

Importance of Packaging

1. Protect a product from damage 12. Manufacturing and expiry dates

2. Protect during transit 13. Maintain temprature
3. To attract the consumers 14. Protection from pollution
4. Directions for consumers 15. Avoid fom pilfrege or wastage
5. Create uniqueness
6. Contains a product information
7. Contains a company information
8. Create differentiation from other products
9. Communicate the company
10. Final choice of the consumers
11. Maintain quality

Pricing Strategies

Pricing is one of the four elements of

the marketing mix, along with product, place and promotion. Pricing strategy is important for
companies who wish to achieve success by finding the price point where they can maximize sales and
profits. Companies may use a variety of pricing strategies, depending on their own unique marketing
goals and objectives.

Premium Pricing

Premium pricing strategy establishes a price higher than the competitors. It's a strategy
that can be effectively used when there is something unique about the product or when the product is
first to market and the business has a distinct competitive advantage. Premium pricing can be a good
strategy for companies entering the market with a new market and hoping to maximize revenue
during the early stages of the product life cycle.

Penetration Pricing

A penetration pricing strategy is designed to capture market share by entering the

market with a low price relative to the competition to attract buyers. The idea is that the business will
be able to raise awareness and get people to try the product. Even though penetration pricing may
initially create a loss for the company, the hope is that it will help to generate word-of-mouth and
create awareness amid a crowded market category.
Economy Pricing

Economy pricing is a familiar pricing strategy for organizations that include Wal-
Mart, whose brand is based on this strategy. Aldi, a food store, is another example of economy
pricing strategy. Companies take a very basic, low-cost approach to marketing--nothing fancy, just
the bare minimum to keep prices low and attract a specific segment of the market that is very price
sensitive.

Price Skimming

Businesses that have a significant competitive advantage can enter the market with a
price skimming strategy designed to gain maximum revenue advantage before other competitors
begin offering similar products or product alternatives.

Psychological Pricing

Psychological pricing strategy is commonly used by marketers in the prices they

establish for their products. For instance, $99 is psychologically "less" in the minds of consumers
than $100. It's a minor distinction that can make a big difference.

Cost Plus Pricing

The cost of the firm plus profit percentage on cost is used to get the final pricing
decision under cost plus pricing. The company recover its cost as well as profit.

Types of Pricing Strategy

Pricing Strategy Definition

Here the organisation sets a low price to increase sales and market
Penetration Pricing share. Once market share has been captured the firm may well then
increase their price.

The organisation sets an initial high price and then slowly lowers the
Skimming Pricing price to make the product available to a wider market. The objective is
to skim profits of the market layer by layer.

Setting a price in comparison with competitors. Really a firm has three

Competition Pricing
options and these are to price lower, price the same or price higher

Pricing different products within the same product range at different

Product Line Pricing
price points.
 The organisation bundles a group of products at a reduced price.
Common methods are buy one and get one free promotions or
Bundle Pricing BOGOF's as they are now known. Within the UK some firms are now
moving into the realms of buy one get two free can we call this
BOGTF i wonder?

Psychological Pricing The seller here will consider the psychology of price and the
positioning of price within the market place

Premium Pricing The price set is high to reflect the exclusiveness of the product.

The organisation sells optional extras along with the product to

Optional Pricing
maximise its turnover. T

The firms takes into account the cost of production and distribution,
Cost Based Pricing they then decide on a mark up which they would like for profit to come
to their final pricing decision.

Here the firm add a percentage to costs as profit margin to come to

Cost Plus Pricing
their final pricing decisions.

Segmentation Pricing

Segmented pricing is said to be done when a

company fixes or sets more than one price for a product, irrespective of its production and
distribution costs being the same. Normally international companies used this approach or those
companies who have a world wide business. The prices may be different in deffirenet countaries.

What is Discount ?

In simple terms, Discount is an allowance or

concession in price. Discount is given so that the buyer is induced (lured) to place an order and later
to make payment in time. Discount can be also referred to as a deduction in price. The seller deducts
the discount from the gross or total price, and the buyer is supposed to pay the net amount.

Discount Pricing Strategy

Businesses use discount pricing to sell low-priced

products in high quantities. With this strategy, it is important to cut costs and stay competitive. Large
retailers are able to demand price discounts from suppliers and make a discount pricing strategy
effective. It is usually impossible to compete with these retailers based solely on a discount pricing
strategy.
Use discounts off the list wisely and sparingly. Occasional discounts and discounts that reward loyal
customers are effective. Discounts used too often begin a downward pricing spiral that may
eventually damage your ability to sell the product at full price.

Types of Discounts

The two kinds or types of discounts are :-

1. Cash Discount
2. Trade Discount

Cash Discount

Cash discount is an allowance or concession given by the seller to the buyer. This
discount is offered to encourage the buyer for quick payment or settlement. It is allowed for
immediate payment of cash or payment within a short period.

The cash discount is normally shown in the quotation and invoice. It is deductible from the total price
and the buyer is requested to pay only to the net amount. Cash Discount is usually stated in the
percentage form.

1. Early full payment

2. Early partial payment
3. Seasonal discount

Trade Discount

Trade Discount is a reduction in the catalogue price of the goods allowed only if the
quantity ordered by the buyer is quite large. Its purpose is to encourage the buyer to make bulk
purchases. It is allowed on cash as well as credit sales.

The trade discount is not shown in the books of account. The trade discount is calculated as some
percentage of the catalogue price. It varies according to the quantity of order.

1. Quantity discount
2. Trade rate discount

Geographic Pricing Strategies

In pricing, a seller must consider the costs of shipping

goods to the buyer. These costs grow in importance, as the freight becomes a larger part of total
variable costs. Pricing policies may be established whereby the buyer pays all the freight expense, the
seller bears the entire cost, or the seller and the buyer share this expense.The strategies are:
Point-of-Production Pricing

In a widely used geographic pricing strategy, the seller quotes the selling price
at the point of production and the buyer selects the mode of transportation and pays all freight costs.
Usually referred to as FOB factory pricing, this strategy is the only one in which the seller does not
pay any of the freight costs. Under FOB factory pricing, the seller nets the same amount on each sale
of similar quantities. The delivered price to the buyer varies according to the freight costs.

Uniform Delivered Pricing

The same delivered price is quoted to all buyers regardless of their locations.
This strategy is sometimes referred to as "postage stamp pricing" because of its similarity to the
pricing of first-class mail service.

Zone-Delivered Pricing

This divides a seller's market into a limited number of broad geographic zones
and then sets a uniform delivered price for each zone. Zone-delivered pricing is similar to the system
used in pricing package-delivery services.

Freight-Absorption Pricing

To penetrate distant markets, a seller may be willing to absorb part of the freight
cost. Thus, under freight-absorption pricing, a manufacturer will quote to the customer a delivered
price equal to its factory price plus the freight costs that would be charged by a competitive seller
located near that customer. A freight-absorption strategy is adopted to offset competitive
disadvantages of FOB factory pricing.

Objectives of Pricing

1. Profit Maximization
2. Revenue Maximization
3. Maximiza profit margin
4. Survival
5. Status quo
6. Cost recovery
7. Effective leadership
8. Targeted return
9. Maximize market share
10. To prevent from competitors
11. Reputation of a company
 What is Advertising?

Advertising refers to the marketing

communication that businesses use to persuade, encourage or manipulate audiences to get them to
take some sort of action. The use of advertising has grown rapidly since then, with advertising
spending in 2010 estimated at approximately $143 billion in the United States alone.

Selecting Advertising Media

When business is good, it pays to

advertise; when business is bad, you’ve got to advertise. Advertising is the mouthpiece of business. It
is essential. Retailers are offered a multitude of avenues to promote their products; the greatest
challenge is deciding where to invest your advertising dollar to get the maximum return. Advertising
your business, services, and products does not have to be haphazard. You can plan, measure and
monitor your advertising activities...

Consider your audience.

If you do not know your target audience, and you blanket advertise, you will
be wasting your advertising budget. Everyone’s target market will be different, which is why you
need to consider, firstly, such general variables as:

1. The geographic location of your business and your audience - passers-by, workers, or
residents
2. The age group you wish to attract
3. The gender you are targeting
4. The primary socio-economic group you are hoping to draw upon
5. The occupations of your audience.

Target your specific audience.

Having reflected upon your general advertising framework, you should

become more focused on the individual customer. Marketers often use the term SPADE to focus
retailers on their real target audience:

Starter - The person who initiates the enquiry

Purchaser - The person who pays for the goods

Adviser - The person who influences the decision

Decider - The real authority on what to buy

End user - The consumer of the product.

This may be one person or five different people. At each stage they are looking for different benefits.
Your final advertising thrust should reflect this customer analysis by promoting to the selected target
audience the benefits of your product.

Select the appropriate advertising media.

Once you have decided on your target audiences, you can then
decide on the appropriate advertising media you should use to get their attention. Among the media
available to you are:

National newspapers - Expensive, but ideal for nationwide retail chains.

Regional newspapers - Have immediate impact but remember, yesterday’s newspaper is old news.

Local newspapers - Have excellent household penetration and can be very cost effective.

Trade magazines - Well read and very targeted.

Local directories - Very effective, but you must plan well in advance.

Radio - Local radio and community radio are becoming more and more popular. This is a useful
medium to consider.

Posters - Often linked to major advertising campaigns.

Street benches - Useful in high traffic areas. The message should be rotated every few months.

Public transport advertising - Moving messages on buses, trains and taxis must be simple, bold and
short. Get them right and they work.

Television - Regional television is very cost effective. Only large retailers can afford metropolitan
television. Ask your local television station; their advice is valuable.

Sponsorship - Always sponsor local events attended by your target audience. It gives credibility to
you as a neighborhood retailer and one of the ‘local good guys’.

Parking meters - this work in the United Kingdom: over 35,000 meters are used by 5.5 million
motorists a week.

Point of sale display - Remember, internal advertising is always more cost effective than external
advertising. You know you will hit your target.
 How can we Select our advertising media

Advertising is a non-personal form of promotion that is paid

for and delivered through selected media outlets to create awareness of the existence of a product or
service. Advertising media selection is the process of choosing the most cost-effective media for
advertising, to achieve the required coverage and number of exposures in a target audience

Before any media is selected for advertising, there has to be a criteria and one of the criteria is

Nature of Product.

Nature of the product to be advertised has an important bearing on the medium of

advertisement. Products should be classified into two broad categories, namely, consumer and
industrial goods. Consumer goods can be advertised in newspapers, magazines, radio and television
and through outdoor displays, But industrial goods can be advertised profitably in the specialized
trade, technical and professional journals.

Nature of Market.

Nature and extent of market can be determined by various factors like

geographical region, size of population and purchasing power of the population. The market may be
either local or national. Film advertising and outdoor advertising are more suitable for local products.
Newspapers are the most suitable for advertising products which can be sold throughout the country.

Objectives of Advertising.

The objectives of the advertising program are very important to determine the
choice of advertising media. The objectives may be introduction of new product, to increase demand
of an existing product, or to avoid competition by the rivals. If advertising is not to be carried on a
mass scale to have big impact in the short and long run, a combination of various advertising media
may be chosen. Sometimes advertisements are inserted in the newspapers and magazines to
complement the readers in order to enhance the goodwill of the advertiser.

Circulation of Media.

If the media have greater circulation, the message of the advertiser will reach a
larger number of people. It may be mentioned that newspapers have the widest circulation, but other
media have limited circulation.

Financial Consideration.

The cost of advertising media is an important consideration and it should be

considered in relation to (a) the amount of funds available, and (b) the circulation of the media. In the
first instance, the amount of funds available may dictate the choice of a medium or a combination of
media of advertisement, and secondly the advertiser should try to develop some relationship between
the cost of the medium and its circulation. The cost-benefit analysis will enable the advertiser to take
right decision in regard to selection of the advertising media.

Type of Audience.

If the message is to be conveyed to illiterate or less literate people, radio, television

and cinema advertisement will serve the purpose in a better way. Newspapers, magazines, displays
and direct mail may be used to convey the message to the educated people, Since different languages
are popular in different regions, advertisements in different languages may be given to popularize the
product.

Life of Advertisements

Outdoor display and magazines and direct mail have sufficiently longer life but the
life of newspaper, radio and television advertisements is very short unless they are repeated regularly.
Therefore, the advertiser should also take into consideration the duration for which he wants to create
the impression in the minds of the prospective customers.

Media used by Competitors.

The choice of advertising media also depends upon the media used by the
competitors. If a product is being advertised in a newspaper, the producers of its substitutes will find
it better to advertise them in the same newspaper. This practice has become more common these days
in order to fight competition in the market.

Developing an Advertising Compaign

Before you develop your advertising campaign,

take note of your company's position in the market and determine where you'd like to be. Design your
advertising campaign keeping the values, features and benefits of your product or service at the
forefront of the campaign. The following are the steps involved in the process of advertising:

Step 1 - Briefing:

The advertiser needs to brief about the product or the service which has to be
advertised and doing the SWOT analysis of the company and the product.

Step 2 - Knowing the Objective:

One should first know the objective or the purpose of advertising. i.e. what message is
to be delivered to the audience?

Step 3 - Research:
 This step involves finding out the market behavior, knowing the competitors, what
type of advertising they are using, what is the response of the consumers, availability of the resources
needed in the process, etc.

Step 4 - Target Audience:

The next step is to identify the target consumers most likely to buy the product. The
target should be appropriately identified without any confusion. For e.g. if the product is a health
drink for growing kids, then the target customers will be the parents who are going to buy it and not
the kids who are going to drink it.

Step 5 - Media Selection:

Now that the target audience is identified, one should select an appropriate media for
advertising so that the customers who are to be informed about the product and are willing to buy are
successfully reached.

Step 6 - Setting the Budget:

Then the advertising budget has to be planned so that there is no short of funds or
excess of funds during the process of advertising and also there are no losses to the company.

Step 7 - Designing and Creating the Ad:

First the design that is the outline of ad on papers is made by the copywriters of the
agency, then the actual creation of ad is done with help of the art directors and the creative personnel
of the agency.

Step 8 - Perfection:

Then the created ad is re-examined and the ad is redefined to make it perfect to enter
the market. If there is any problem with the ad then change it or improve it because at the time of
advertisement you must go for the perfect one.

Step 9 - Place and Time of Ad:

The next step is to decide where and when the ad will be shown. The place will be
decided according to the target customers where the ad is most visible clearly to them. The
finalization of time on which the ad will be telecasted or shown on the selected media will be done by
the traffic department of the agency.
Step 10 - Execution:

Finally the advertise is released with perfect creation, perfect placement and perfect
timing in the market. As a businessman you should understand that when and where the
advertisement will be started.

Step 11 - Performance:

The last step is to judge the performance of the ad in terms of the response from the
customers, whether they are satisfied with the ad and the product, did the ad reached all the targeted
people, was the advertise capable enough to compete with the other players. Every point is studied
properly and changes are made, if any.

Public Relations

Attempts to influence the attitudes and

perceptions of consumers, stockholders, and other stakeholders toward companies, brands,
politicians, celebrities, not-for-profit organizations. Creating good relationships with the popular
press and other media to help companies communicate messages to their publics—customers, the
general public, and governmental regulators—is the role of public relations (PR). The job consists of
not only encouraging the press to cover positive stories about companies, but also of managing
unfavorable rumors, stories, and events.

Sales Promotions

Sales promotions are marketing

activities that stimulate consumer purchases and improve retailer or middlemen effectiveness and
cooperation. Sales promotions are short-term efforts directed to the consumer or retailer to achieve
such specific objectives as consumer-product trial or immediate purchase.

Types of Sales Promotions

Free Samples

Distributing free samples introduces a new product to the market to generate demand.
Samples should be small, but they must be large enough to provide customers with an adequate
experience of your product. Give samples to representatives of your target market. If you are at an
exhibition or trade show, have a limited supply of your free samples available for view; this tells
people that your product is in high demand, and it stops customers from hoarding samples.

Coupons and Discounts

Coupons or discounts are distributed by mail, published in newspapers and magazines or

delivered in person. Coupon distribution pulls customers in and encourages them to buy within a
specific period. Include a picture of your product or service on a coupon, along with the discount rate
and expiration date. Target customers who would not normally purchase your product or service.

Mystery Rewards

Scratch-and-win cards or raffles for prizes are other popular promotional tools. The key
is to offer these rewards only after the customer has agreed to purchase your product or service.

Money Back Offers

When customers doubt the quality or reliability of your product or service, offer a
money-back guarantee. Give a detailed explanation of eligible returns and refunds available for
customer reference.

Branded Pens and Magnets

Customers like to receive free products that they can use, such as pens, sticky notes and
magnets. Distribute these products with your company's name and phone number branded on them.
Customers will be reminded of your product or service whenever they use it. These items can be
manufactured in bulk, and they cost a fraction of what sales will pay you.

Price Reduction

A price reduction allows customers to buy your products at a lower price for a specified
period of time. A price reduction may also be used to take attention away from a competitor.

Free Products

Giving something away is another way to lure customers to your place of business. For
your grand opening event, you can provide everyone who attends with free food or drink or free
merchandise. You can also give away items containing your brand or slogan such as coffee mugs or
t-shirts. Another idea is to give away prizes to the first 25 people who enter your place of business on
a given day.

Personal selling

Personal selling is a promotional

method in which one party (e.g., salesperson) uses skills and techniques for
building personalrelationships with another party (e.g., those involved in a purchase decision) that
results in both parties obtaining value. In the language of sales and marketing, "personal selling"
singles out those situations in which a real human being is trying to sell something to another face-to-
face. It is also called slalesmanship.
 Nature of personal selling

Advantages of personal selling.

Personal selling provides marketers the greatest freedom to adjust a

message to satisfy customers’ information needs. Personal selling is the most precise of all
promotional methods; it enables marketers to focus on the most promising sales prospects.

Disadvantage of personal selling

Major disadvantage of personal selling is its cost: generally, it is the

most expensive element in the promotion mix.

Source of income

Sales careers can offer high incomes, freedom, and a high degree of job satisfaction.
Unfavorable views of salespeople are changing because of the efforts of many corporations and other
organizations. Developing ethical codes of conduct will help organizations and personal sellers
continue to gain respect.

Personal selling goals

The goals of personal selling may vary from one firm to another. Following are
the main goals of personal selling

Typical goals

Typical goals are usually involve identifying prospects, determining their needs,
persuading prospects to buy, following up on the sale, and keeping customers satisfied. Identifying
potential buyers is critical.

a) Because most potential buyers seek certain types of information before they make a purchase
decision, salespeople must ascertain prospects’ informational needs and then provide relevant
information.

b) To achieve this purpose, sales personnel must be well trained in their products and the selling
process in general.

Be aware of their competitors.

a) They must monitor the development of new products and competitors’ sales efforts in their sales
territories, how often and when the competition calls on their accounts, and what the competition is
saying about their product in relation to its own.
b) Salespeople must emphasize the benefits their products provide, especially when competitors’
products do not offer those specific benefits.

Utilization of Resources

Personal selling needs to utilize information technology that can enhance

communication with customers.

a) Using websites to manage orders and product information, track inventory, and train
salespeople can save companies time and money.

b) Social networking sites can be used to post product information and updates, obtain
prospective clients, and recruit new salespeople.

c) CRM technology enables improved service, marketing and sales processes, and contact and
data management analysis.

For long-run survival,

For long run survival most marketers depend on repeat sales and thus need to
keep their customers satisfied.

a) Much of this burden falls on salespeople because they are usually closer to customers than
anyone else and often provide buyers with information and service after the sale.

b) Such contact allows a salesperson an opportunity to generate additional sales and offers them a
vantage point to evaluate the strengths and weaknesses of the company’s product and other
marketing-mix ingredients.

Changing Patterns in Personal Selling

Customarily, personal
selling has been a face-to- face, one-on-one situation. NowBut new trends and patterns are emerging
which are following:

1. Selling Centers — Team Selling

2. Systems Selling
3. Global Sales Teams
4. Relationship Selling
5. Telemarketing
6. Internet selling
 Steps in personal Selling process

Personal Selling consists of the following steps.

Pre-sale preparation:

The first step in personal selling is the selection, training and motivation of
salespersons. The salespersons must be fully familiar with the product, the firm, the market and the
selling techniques. They should be well-informed about the competitor's products and the degree of
competition. They should also be acquainted with the motives and behavior of prospective buyers.

Prospecting :

It refers to locating or searching out prospective buyers who have the need for the
product and the ability to buy it. Potential customers may be spotted through observation, enquiry and
analysis of records of existing customers.

1. Social contacts,
2. Business associations and
3. Dealers can be helpful in the identification of potential buyers.

Approaching :

The salesperson should always focus on the benefits for the customer. This is done by using the
product's features and advantages. This is known as the FAB technique (Features, Advantages and
Benefits).

Features : Refers to the physical characteristics such as size, taste etc.

Advantages : Refers to the performance provided by the physical characteristics eg it does not stain.

Benefits : Refers to the benefits for the prospect. Eg. Saves you 20% on replacement cost.

Focus on Customers

Before calling on the prospects, the salesperson should fully learn their number,
needs, habits, spending capacity, motives, etc. Such knowledge helps in selecting the right sales
appeal. After such learning, the salesperson should approach the customer in a polite and dignified
way. He should introduce himself and his product to the customer.
Presentation :

For this purpose, the salesperson has to present the product and describe its features in
brief. The presentation should be matched with the attitude of the prospect so that the salesman can
continuously hold his attention and create interest in the product.

Demonstration:

In order to maintain customer's interest and to arouse his desire, the sales-person must
display and demonstrate the product. He has to explain the utility and distinctive qualities of the
product so that the prospect realizes the need for the product to satisfy his wants. He should not be in
a hurry to impress the customer and should avoid controversy.

Handling objections:

Presentation and demonstration of the product are likely to create doubts and
questions in his mind. The salesman should clear all doubts and objections without entering into a
controversy and without losing his temper.

Ways to get attention

Testimonials, money-back guarantee, tact and patience are popular means of winning
over s hesitant buyers. The salesman should convince the customer that he is making the best use of
his money by purchasing the product.

Competitor’s analysis

For this purpose, the salesman should prove the superiority of his product over the
competitive products. He should not lose patience if the customer puts too many queries and takes
time in arriving at any decision.

When handling objections from buyers, salespeople should:

1. Be positive
2. Seek out hidden objections
3. Ask the buyers to clarify any objections
4. Take objections as opportunities to provide more information
5. Turn objections into reasons for buying

Closing the sale:

This is the climax or critical point in the personal selling process. Completing the sale
seems to be an easy task but inappropriate handling of the customer can result in loss of sale. The
salesman should not force the deal but let the customer feel that he has made the final decision. Some
adjustment in price or other concession may sometimes be necessary for a successful closing. The
salesman should show the same interest in the customer which he exhibited during approach stage.

Post-sale follow-up :

It refers to the activities undertaken to ensure that the customer is satisfied with the
article and the firm. These activities include installation of the products, checking and ensuring its
smooth performance, maintenance and after-sale service. It helps to secure repeat sales identify
additional prospects and to evaluate salesman's effectiveness.

Wholesaler

Wholesaler is a person or organization

who purchased goods from the company in large quantities in order to sell them at lower prices to the
retailers but not to the final consumers.

What is wholesaling

Wholesaling is a distribution channel

function where one organization buys products from supplying firms with the primary intention of
redistributing to other organizations (but, in general, not to the final consumer).

Why are wholesalers important to sellers?

You may ask "Why would

a producer use wholesalers rather than selling directly to retailers or consumers? Simply put,
wholesalers add value by performing one or more of the following channel functions:

Selling and promoting:

Wholesalers'sales forces help manufacturers reach many small customers at a

low cost. The wholesaler has more contacts and is often more trusted by the buyer than the distant
manufacturer.

Buying and assortment building:

Wholesalers can select items and build assortments needed by their

customers, thereby saving much work The wholesalers also delivered those goods which are neede in
a particular area.

Bulk breaking:

Wholesalers save their customers money by buying in carload lots and breaking bulk
(breaking large lots into small quantities.)
Ware-housing:

Wholesalers hold inventories, thereby reducing the inventory costs and risks of
suppliers and customers. Wholesalers keep inventories in warehouses and all the goods will remains
in protection mood.

Transportation:

Wholesalers can provide quicker delivery to buyers because they are closer to buyers
than are producers. The economical transportation is used by the wholesaler to delivered goods.

Financing:

Wholesalers finance their customer by giving credit, and they finance their suppliers by
ordering early and paying bills on time.

Risk bearing:

Wholesalers absorb risk by taking title and bearing the cost of theft, damage, spoilage,
and obsolescence. The wholesaler bear all the risks and losses if any which is made at any reason.

Market information:

Wholesalers give information to suppliers and customers about competitors,

new products, and price developments. Wholesaler knows the exact market conditions and also
helpful to the seller.

Management services and advice:

Wholesalers often help retailers train their salesclerks, improve

store layouts and displays, and set up accounting and inventory control systems." (Kotler &
Armstrong, 2012:P394)

Types of Wholesalers

1. Mercant Wholesaler
2. Agents and Brokers
3. Manufacturers

Merchant Wholesalers

Merchant wholesalers are

independently owned businesses that take title to goods, assume risks associated with ownership, and
generally buy and resell products to other wholesalers, business customers, or retailers.
Reasons to choose Merchant wholesaler

(1) A producer is likely to rely on merchant wholesalers when selling directly to

customers would be economically unfeasible.

(2) Merchant wholesalers are also useful for providing market coverage,
making sales contacts, storing inventory, handling orders, collecting market
information, and furnishing customer support.

Types of Merchant wholesaler:

Full-Service Wholesalers

Full-service wholesalers perform the widest possible range of wholesaling

functions. Customers rely on full-service wholesalers for product availability, suitable assortments,
breaking large quantities into smaller ones, financial assistance, and technical advice and service.

Types of Full-Service Wholesalers

(a) General-merchandise wholesalers carry a wide product mix but offer

limited depth within product lines.

(b) General-line wholesalers carry only a few product lines but offer an
extensive assortment of products within those lines.

(c) Specialty-line wholesalers offer the narrowest range of products,

usually a single product line or a few items within a product line.

(d) Rack jobbers are full-service, specialty-line wholesalers that own and
maintain display racks in supermarkets, drugstores, and discount and
variety stores.

Limited-Service Wholesalers

Limited-service wholesalers provide fewer marketing services than

full-service wholesalers and specialize in just a few functions.

(1) Limited-service wholesalers take title to merchandise but often do not

deliver merchandise, grant credit, provide marketing information, store
inventory, or plan ahead for customers’ future needs.

(2) The decision about whether to use a limited-service or a full-service

wholesaler depends on the structure of the marketing channel and the need
to manage the supply chain to provide competitive advantage.
Types of Limited-Service Wholesalers

(a) Cash-and-carry wholesalers are intermediaries whose customers—

usually small businesses—pay cash and furnish transportation.

(b) Truck wholesalers, sometimes called truck jobbers, transport a limited

line of products directly to customers for on-the-spot inspection and
selection.

(c) Drop shippers, also known as desk jobbers, take title to goods and
negotiate sales but never take actual possession of products.

(d) Mail-order wholesalers use catalogs instead of sales forces to sell

products to retail and business customers.

Agents and Brokers

Agents and brokers—sometimes called

functional middlemen—negotiate purchases and expedite sales but do not take title to products.
Although agents and brokers perform even fewer functions than limited-service wholesalers, they are
usually specialists in particular products or types of customers and can provide valuable sales
expertise.

a) Agents represent either buyers or sellers on a permanent basis.

b) Brokers are intermediaries that buyers or sellers employ temporarily.

Primary Purpose of agents

A broker’s primary purpose is to bring buyers and sellers together. Thus,

brokers perform fewer functions than other intermediaries.

Types of Agents

Manufacturer’s Agents

Manufacturers’ agents are independent intermediaries that represent two or

more sellers and usually offer customers complete product lines.

(1) They sell and take orders year-round, handle noncompeting and
complementary products, are governed by contracts, have little or no
control over producers’ pricing and marketing policies, and do not extend
credit and may be unable to provide technical advice.
 (2) They are commonly used in sales of apparel, machinery and equipment,
steel, furniture, automotive products, electrical goods, and certain food
items.

Selling Agents

Selling agents market either all of a specified product line or a manufacturer’s entire
output.

(1) They perform every wholesaling activity except taking title to products.

(2) They are used most often by small producers or by manufacturers that have
difficulty maintaining a marketing department because of seasonal
production or other factors.

Commission Merchants

Commission merchants receive goods on consignment from local sellers and

negotiate sales in large, central markets.

(1) They have broad powers regarding prices and terms of sale and specialize in
obtaining the best price possible under market conditions.

(2) Most often found in agricultural marketing, commission merchants take

possession of truckloads of commodities, arrange for necessary grading or
storage, and transport the commodities to auctions or markets where they
are sold.

A broker’s primary purpose is to bring buyers and sellers together. Thus, brokers perform fewer
functions than other intermediaries.

Manufacturers’ Sales Branches and Offices

Sales Branches

Sales branches are manufacturer-owned intermediaries that sell products and provide
support to the manufacturer’s sales force.

a) They offer credit, deliver goods, give promotional assistance, and furnish other
services; they may carry inventory.

b) Sales branches are common in the lumber and automotive parts industries.

Sales Officers
 Sales offices are manufacturer-owned operations that provide services normally
associated with agents.

Manufacturer

Manufacturers may set up these branches or offices to reach their customers more
effectively by performing wholesaling functions themselves.