INSTITUTE OF PROFESSIONAL EDUCATIONAL AND RESEARCH, BHOPAL

DEPARTMENT- MBA (FULL TIME) 2009-2011

Section-B, Semester- II

Report on:-

Apparel Industry – discounted Brands

Date of submission: - 0505/2010

Submitted By: Group No. 16

Name
Priyanka Rai
Saurabh Pandey

Submitted To:
Prof. Harish Kulkarni

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 ACKNOWLEDGEMENT

We, the students of MBA 2nd Semester, Section-B, would like to sincerely extend a warm
note of thanks and heartfelt gratitude for the concerned guidance of the professor in
charge,
Prof. Harish Kulkarni during the development of this Assignment. Any report contains for
more contribution to the elucidation to the work done than those made by the authors
alone. Our work is also no exception. But we do extend our heart- felt gratitude to our
report guides for being the rich resource full of motivation and support juncture. An idea
needs to properly incubated so us to make sure mature upend acquire tangible form. The
quality of environment is indispensable for sustaining the objectives & we are highly
fortunate to have a right atmosphere in our group to work flexibly.

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 Research Methods as an importance to Managerial
Decision Making

 Importance of Decision Making :

RESEARCH can have a range of broad effects on decision-making, such as:

Raising awareness of an issue or a problem;

helping identify policy alternatives;
contributing to a body of research on the same or similar topics that is likely to have an
Impact on future decisions; and
Helping pave the way for establishing research evidence as a regular factor in the
decision-making process.

What Is Decision Making?

"Choices among options."

It is defined as "the process of making choices among competing courses of action."
You must always be sure that the decision being made is for the correct problem and not for a
symptom. The best way to do this is to use the scientific method.
Decision-making describes the process by which a course of action is selected to deal with a
specific problem. The success of an organization depends greatly on the decisions of managers.
There are two major types of models used by managers to make decisions - (1) rational model
and (2) non-rational models. In the rational model, managers engage in rational decision-making
processes.

At the time of decision-making, they possess as well as understand all the information that is

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relevant to their decision. In contrast, non-rational models of managerial decision-making
suggest that limitations of information-gathering and information-processing make it difficult for
managers to make optimal decisions. The three non-rational models of decision-making
discussed in the chapter are: satisfying, incremental, and garbage-can models.

Any decision-making process contains seven basic steps:

(1) Identifying the problem;
(2) Identifying resources and constraints,
(3) Generating alternative solutions,
(4) Evaluating alternatives,
(5) Selecting an alternative,
(6) Implementing the decision, and
(7) Monitoring the decision.

Managerial decisions are of two types –

programmed decisions, and non-programmed decisions. Programmed decisions involve simple,
common, frequently occurring problems.
They have well-established and understood solutions.
Non-programmed decisions deal with unusual or exceptional problems. Based on the degree of
certainty involved, every decision-making situation falls into one of three categories: (i) certainty,
(ii) risk, and (iii) uncertainty.
In conditions of certainty, the decision-maker knows with reasonable certainty what the
alternatives are, what conditions are associated with each alternative and the outcome of each
alternative. Under a state of risk, the decision-maker has incomplete information about available
alternatives but has a good idea of the probability of particular outcomes of each alternative.
Conditions of uncertainty exist when the future environment is unpredictable and everything is in
a state of flux. The decision-maker is not aware of all available alternatives, the risks associated
with each alternative, or the consequences of each alternative or their probabilities.
In order to carry out managerial functions effectively, managers at all levels require vital
information with speed, brevity, precision and economy. A management information system is a
computer-based information system that gathers comprehensive data, analyzes and

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summarizes it, and provides it in a form that is of value to functional managers. A decision
support system is an interactive computer system that can be easily accessed and operated by
people who are not computer specialists, and who use this system to help them in planning and
decision-making.
Major decisions in organizations are often made by groups rather than a single individual. The
most common forms of group decision-making are: interacting groups, Delphi groups, and
nominal groups. Finally, the different decision-making techniques such as marginal analysis,
financial analysis, break-even analysis, ratio analysis and operations research techniques have
been discussed. The different operations research techniques discussed in the chapter include:
queuing or waiting-line method, linear programming, game theory, simulation, and decision
trees.

Problem Analysis

• Analyze performance, what should the results be against what they actually are
• Problems are merely deviations from performance standards
• Problem must be precisely identified and described
• Problems are caused by some change from a distinctive feature
• Something can always be used to distinguish between what has and hasn't been effected by a
cause
• Causes to problems can be deducted from relevant changes found in analyzing the problem
• Most likely cause to a problem is the one that exactly explains all the facts
Decision Making
• Objectives must first be established
• Objectives must be classified and placed in order of importance
• Alternative actions must be developed
• The alternative must be evaluated against all the objectives
• The alternative that is able to achieve all the objectives is the tentative decision
• The tentative decision is evaluated for more possible consequences
• The decisive actions are taken, and additional actions are taken to prevent any adverse

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consequences from becoming problems and starting both systems (problem analysis and
decision making) all over again

TITLE: Effects of price discounting on discounted brands.

Area of Research:

“Discounted brands in Apparel Industry – Purchase

intention of a customer.”

This research monitored daily sales of promoted and competing products (for clothing,
fashion garments and kids wear.) , during and after a price discount promotion. The
showrooms provided daily sales figures from checkout scanners for the discounted product
and its key competitors. Sales were monitored for three periods:
1. A period of three weeks prior to the discount promotion to enable establishment of a
base sales level.
2. The week during which the discount ran.
3. A post-promotion period of three weeks, to allow a comparison of post-promotion and
base level sales. Sales during the promotion period increased markedly for each
discounted product. When the discount period ended, sales declined for each brand,
however, in most cases sales remained above the weekly sales level recorded before the
promotion commenced. Unlike the cornflakes and washing powder though, sales of the fruit
juice declined to below base level following the promotion. In general, sales of competitors'
products declined during the discount week. However, in some cases they increased,
though never to the levels recorded by the promoted brand. Some implications of these
results are discussed.

Type of Research:

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Empirical Research
The research type is Empirical because it relies on experience and observation alone’:
It is generally a database research, which is based on previous data and observation
techniques. This type of research is capable of being verified by observation or experiment, and
the experimenter has the control on the variables.

Development Of Research Objective:

Apparel industry is very fastly growing with leading fashion industries as both of them
complement each other and this industry is growing at a rapid speed.

Research Problem:
 Increase in competition may rise to higher price.
 Branded clothes are much costly, so discount does not affect a lot to customer’s
satisfaction.

The following research objective has been developed because of the following
reasons:
Effect on Competitors

In general, sales of competitors' products declined during the discount week. However, in
some cases they increased, though never to the levels recorded by the promoted brand.
Figure 2 shows these results for the sales of washing powder and suggests that some
consumers changed brands, though not all competing brands were affected to the same
extent, or in the same way. Although chance variations in sales could have caused sales of
competing products to rise, these might also have occurred because of a stock out, a
situation where a supermarket cannot maintain sufficient stock levels of a brand to meet
consumers' demand for it. When this occurs, consumers who would ordinarily have
purchased the brand may instead purchase a substitute brand, thus causing sales of
competing products to rise, rather than decline.

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 However, why a stock out should cause one competitor's sales to increase, but not
another's is more difficult to explain. Consumers may have chosen the cheapest
alternative, or the brand that most closely resembled the unavailable product, but these
speculations require more detailed investigation before they can be accepted. Research
currently underway is examining the presence of stock outs and exploring why their effect
on competing brands differs. Price discounting potentially beneficial effect on competitors
becomes more serious when viewed in connection with the fact that price promotions may
not always result in increased profitability for the brand. Thus in the worst situation,
manufacturers may exacerbate the loss they incurred running the promotion by enhancing,
rather than undermining.

Effect on Purchase Timing and Quality

Temporary price discounts may affect other aspects of consumers' purchase behavior,
such as the quantity of product they purchase, and their interpurchase intervals. Wilson,
Newman and Hostak (1979) found a strong relationship between the buying situation and
the number of units purchased.
Shoemaker (1979) concluded that price discounts have more effect on the quantity
purchased than on buyers' inter-purchase interval, although later research questioned this.
In summary, manufacturers who promote their brands by way of temporary price discounts
may, in the short term, induce buyers of competing brands to purchase their product, but it
appears that price discounts do not usually have a permanent effect on consumers' brand
preferences. Research into purchase timing has generally concluded that this is disrupted
during discount periods. However, the effect on competing brands' sales has not received
detailed research attention. The research reported in this paper was designed to address
this issue, and monitored daily sales of promoted and competing products before, during
and after a price discount promotion.

HYPOTHESIS FORMULATION:

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Identification of Variables:

Dependent Independent Moderating Intervening

Variable Variable Variable Variable
DISCOUNTS CUSTOMERS PRICING & CULTURE &
BRANDS COMPETITORS TIME

Hypothesis:
 Apparel industry is leading industry with branded fashion brands
 Customers are attracted by discounts , specially given on branded garments
 By giving discounts cost price is lowered, so competition increases as market tries to
imitate profit going concerns.
 Offers and discounts keep on changing in India because of its cultural background in
festive seasons.

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 Discounts
given on
Customers
branded
items
Effects of
pricing on
discounted
brands

Cultures and
Pricing &
festive
competition
seasons

Analysis and Sharing of Research:

Effect of pricing on market share and competition:

Massy and Frank (1965) investigated the short term effects of temporary price discounts
that both brand-loyal and non-loyal buyers responded to a discount promotion. Hinkle
(1965) argued that a brand's age may influence the extent to which a price discount can
increase its share. He found that price discounts were most effective with new brands,
which ended to achieve higher gains with smaller price reductions than more established
brands. More than a decade later, Dodson, Tybout and Sternthal (1978) corroborated
Hinkle's endings and concluded that price discounting increased the market share of the
promoted product, at least in the short term. Furthermore, they suggested that a high
discount led to a greater increase in market share than a low discount.

Effect on Brand Switching

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Other studies explored the subsequent behavior of brand switchers to determine whether
consumers reverted to the purchase patterns they held prior to the promotion. Lawrence
(1969) and Shoemaker and Sheaf (1977) concluded that this was the case and suggested
the marketing Bulletin, 1991, 2, 55-59, Research Note 1
Market share gained from the promotion could be as temporary as the promotion itself.
Thus hey concluded that these promotions may have a limited effect because they serve
only to disrupt consumers' short-term purchase behavior, which eventually resumes its
normal share.

Effect on Purchase Timing and Quality

Temporary price discounts may affect other aspects of consumers' purchase behavior, uch
s the quantity of product they purchase, and their interpurchase intervals. Wilson, Newman
and Hostak (1979) found a strong relationship between the buying situation and the
number f units purchased.
Shoemaker (1979) concluded that price discounts have more effect on the quantity
purchased hand on buyers' inter-purchase interval, although later research questioned this.
Lattberg ppen and Lieberman (1981), Neslin, Henderson and Quelch (1985) and Gupta
(1988) concluded that these promotions may only displace sales that would have otherwise
occurred t the product's usual price, thus delaying their subsequent purchase of it and
competing brands. These conclusions raise an important question about the cost-
effectiveness of price discounts.
In summary, manufacturers who promote their brands by way of temporary price discounts
May, in the short term, induce buyers of competing brands to purchase their product, but it
Appears that price discounts do not usually have a permanent effect on consumers' brand
references. Research into purchase timing has generally concluded that this is disrupted
during discount periods. However, the effect on competing brands' sales has not received
retailed research attention. The research reported in this paper was designed to address

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this issue, and monitored daily sales of promoted and competing products before, during
and after price discount promotion.

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