What Is Business Ethics?

Business ethics is the study of appropriate business policies and practices regarding potentially
controversial subjects including corporate governance, insider trading, bribery, discrimination,
corporate social responsibility, and fiduciary responsibilities. The law often guides business
ethics, but at other times business ethics provide a basic guideline that businesses can choose to
follow to gain public approval.

Understanding Business Ethics

Business ethics ensure that a certain basic level of trust exists between consumers and various
forms of market participants with businesses. For example, a portfolio manager must give the
same consideration to the portfolios of family members and small individual investors. These
kinds of practices ensure the public receives fair treatment.

The concept of business ethics began in the 1960s as corporations became more aware of a rising
consumer-based society that showed concerns regarding the environment, social causes, and
corporate responsibility. The increased focus on so-called social issues was a hallmark of the
decade.

Since that time period, the concept of business ethics has evolved. Business ethics goes beyond
just a moral code of right and wrong; it attempts to reconcile what companies must do legally
versus maintaining a competitive advantage over other businesses. Firms display business ethics
in several ways.

[Important: Business ethics are meant to ensure a certain level of trust between consumers
and corporations, guaranteeing the public fair and equal treatment.]

Examples of Business Ethics

Here are a few examples of business ethics at work as corporations attempt to balance marketing
and social responsibility. For example, Company XYZ sells cereals with all-natural ingredients.
The marketing department wants to use the all-natural ingredients as a selling point, but it must
temper enthusiasm for the product versus the laws that govern labeling practices.

Some competitors' advertisements tout high-fiber cereals that have the potential to reduce the
risk of some types of cancer. The cereal company in question wants to gain more market share,
but the marketing department cannot make dubious health claims on cereal boxes without
the risk of litigation and fines. Even though competitors with larger market shares of the cereal
industry use shady labeling practices, that doesn't mean every manufacturer should engage in
unethical behavior.

For another example, consider the matter of quality control for a company that manufactures
electronic components for computer servers. These components must ship on time, or the parts
manufacturer risks losing a lucrative contract. The quality-control department discovers a
possible defect, and every component in one shipment faces checks.

Unfortunately, the checks may take too long, and the window for on-time shipping could pass,
which could delay the customer's product release. The quality-control department can ship the
parts, hoping that not all of them are defective, or delay the shipment and test everything. If the
parts are defective, the company that buys the components might face a firestorm of consumer
backlash, which may lead the customer to seek a more reliable supplier.

Key Takeaways

 Business ethics refers to implementing appropriate business policies and practices with
regard to arguably controversial subjects.
 Some issues that come up in a discussion of ethics include corporate governance, insider
trading, bribery, discrimination, social responsibility, and fiduciary responsibilities.
 The law usually sets the tone for business ethics, providing a basic guideline that
businesses can choose to follow to gain public approval.

Related Terms

How Codes of Ethics Work

A code of ethics is a guide of principles designed to help professionals conduct business honestly
and with integrity.
Social Responsibility Definition
Social responsibility is a theory that asserts that businesses, in addition to maximizing
shareholder value, have an obligation to act in a manner that benefits society.

What is Work Ethic, and its Purpose?

In its simplest definition, a system of moral principles is called ethics. They affect how people
lead their lives, for life is an unbroken stream of decision-making and ethics are concerned with
what is the right moral choice, for individuals and for society. This is also known as a moral
philosophy. The etymology of ethics is derived from the Greek word ethos, meaning habit,
custom, disposition or character.

Ethics are therefore concerned with these sorts of moral decision: how to live an ethical life,
rights and responsibilities, right and wrong language, what is good and bad and so on.
Contemporary notions of ethics have been handed on from philosophy, religions, and global
cultures. Ethics are debated in topics such as human rights, right to life, and professional
behavior.

In a business, an ethical code is a defined set of principles which guide an organization in its
activities and decisions and the firm’s philosophy may affect its productivity, reputation, and
bottom line.
Among staff ethical behavior ensures work is completed with integrity and honesty and staff that
are ethical adhere to policies and rules while working to meet the aims of the enterprise. An
ethically positive, healthy work culture enhances morale among employees.

Work Ethic Definition and Meaning

Traditionally, work ethic has been understood as a value based on hard work and diligence.
Capitalists, for example, believe in the necessity of working hard and in consequential ability of
enhancing one’s character. Socialists suggest that a concept of “hard work” is deluding the
working class into being loyal workers of the elite; and working hard, in itself, is not necessarily
an honorable thing, but simply a way to create greater wealth for those at the summit of the
economic pyramid.

These values have been challenged and characterized as submissive to social convention and
authority, and not meaningful in and of itself, but only if a positive result accrues. An alternative
perception suggests that the work ethic is now subverted in a broader, and readily marketed-to
society. This perspective has given us the phrase “work smart”.

In recent times, many say that a work ethic is now obsolete and that it is no true any longer that
working more means producing more, or even that more production leads to a better life… this
is, of course, not to be confused with quality productivity.

Here is one of the views about work ethic from Will Smith and how important it is where Will
says (about 2:00 during the interview):

“I’ve never viewed myself as particularly talented. Where I excel is ridiculous sickening work
ethic”

IMPORTANCE OF WORK ETHIC

Those with a strong work ethic have inculcated principles that guide them in their work behavior.
This leads them to consistent higher productivity, without any prodding that many require to stay
on track. Therefore, whether staff are naturally this way or need be trained, if possible, into such
an attitude is determined by the managers.

Productive Work

Individuals with a good work ethic are usually very productive people who work at a faster pace.
They regularly accomplish more work, more quickly than those who lack a work ethic, for they
do not quit until the work which they are tasked is completed. At least in part, this is also due to
the fact that they wish to appear to be stronger employees, and thus, they wish to appear to be of
more benefit to their managers and the company.

Cooperation
Cooperative work can be highly beneficial in a business entity, individuals with a good work
ethic know this well. They understand the usefulness of cooperation, e.g., teamwork — they
often put an extensive amount of effort into working well with others.

Such people usually respect company authority enough to cooperate with anyone else with
whom they are paired, in a polite and productive way, even if the individuals in question are not
so ethically inclined.

Ethics in Organizational Culture

Employers, executives and employees, all adhering to an ethics code stimulate an ethical work
culture. Business leaders must lead by exhibiting the behavior they wish to see in employees.

Reinforce ethical conduct by rewarding employees who show the integrity and values that
coincide with company policy, and discipline those who make the wrong ethical decisions.
Positive ethics culture improves morale in a business, plus it may increase productivity and
employee retention which cuts the costs of employee churning, consequentially financially
benefitting an organization as improved productivity improves company efficiency.

BASIC WORK ETHIC FOR AN ORGANISATION

Ideally, the policies a business operates with are compassion, fairness, honor, responsibility, and
integrity. One of the best ways to communicate organizational ethics is by training employees
about company standards. Basic work ethics for any organization should include:

 Uniform rules and regulations: An ethical organizational example is the common

treatment of all staff, i.e., with the same respect, regardless of race, culture, religion, or
lifestyle, with equal chances for promotion. Therefore, small company managers should
desist from favoring any one employee, for it can lead to lawsuits and is also highly
counterproductive.
 Communication of the rules and regulation to all employees: Company policies must
be clearly communicated to each employee with a transparency at all levels of the
hierarchy. Employees are the spine of all organizations and should have a say in the
goals and objectives of a firm.
 Respect for Employees: Respect employees and in return receive the same. Regulations
should not be so rigid, and therefore, don’t expect staff to attend work two days before
a marriage. If somebody is not well, don’t ask them to attend office unless or until
there’s an emergency.
 Allow a degree of freedom to employees without constant micro-management: Key
roles of responsibility need to be established on the first day of joining with
responsibilities commensurate with a person’s expertise. Employees should be inducted
into training if needed.
 Clear cut salary and promotion policy: Employees crib if they are underpaid. Make sure
they get what is deserved and decided in the presence of the person. A major attrition
 factor is a poor appraisal, promotion prospects are ideally based on merit, not favor.
Clarity is crucial.
 Clear and uniform holiday schedule: It is the responsibility of human resource
professionals to prepare the holiday calendar at the beginning of the year and circulate
the same among all employees.
 Effects of Work Ethics within an organization: Preferably a workplace ethic culture will
ensure that employers guide and mentor staff appropriately while management treats
all as equal. Transparency is essential.
 How Leadership ethics and Employee ethics can impact the organization: Owner and
executive level accountability is a vital function of leadership. Executives, as equally as
employees, are expected to be honest and transparent. Organizations need to abide by
ethical norms; all of which benefit the consumer, the society and the firm.
 What are the core ethical elements that define the ethics of an organization: There are
at least four elements that aim to create an ethical behavioral culture of employees
within an organization.
o A written code of ethics and standards (ethical code).
o Ethics training for executives, managers, and employees.
o The availability of ethical situational advice (i.e. advice lines or offices).
o A confidential reporting system.

HOW TO DEVELOP STRONG WORK ETHIC

The employment market is now so competitive that if one doesn’t have a positive work ethic,
then employers do not bat an eyelid about looking for someone who meets their firm’s
requirement.

As a positive work ethic is vital to a business success, then each person from the CEO to new
staff, must inculcate this to keep the company functioning optimally. Get to work promptly,
arriving late always starts a workday badly, and signals that you are not committed. Take into
consideration traffic, weather and so on and leave home to reach on time. Take responsibility for
your actions, which includes being punctual.

Step 1: Be professional about your work

Professionalism is beyond a clean shirt, for it includes one’s values, attitude, and demeanor.
Practice being cordial and positive while refraining from gossip. Knowing how to communicate
constructively and positively, while respecting the feelings of others is an invaluable tool.
Respect others and develop a reputation for having integrity, meaning honesty, fairness, and
consistency in what you do and say.

Reliability and honesty: Work ethic is more than completing long hours for its foundation is
integrity. To develop integrity, one can:

 Act the same when people are not watching you, as when they are.
  Perform consistently at the same level of quality. Be conscientious. Be honest in all
things.

Honesty isn’t a business policy, it is a state of mind.

Deliver best outputs: A work ethic is fundamental to success at anything, plus it makes you a
valuable employee. For career advancement this is more important than ever before. In work
assignments strive to exceed expectations by paying attention to details and making the quality
of work your central priority. Everyone can work fast, but few will deliver best quality outputs
with few mistakes.

Keep everything in an organized method like a good file system for documents (both soft and
hard copy), so you can retrieve these easily to get on with the essential tasks. All of us have
times when we are more productive, some in the early morning, some later at night. Identify and
schedule the difficult work to be completed in those periods.

Be consistent in delivering good quality work and earn good reputation: Everything
worthwhile accomplishing requires discipline. Remain focused on a long-term goal while
avoiding getting side-tracked by a short-term gratification. To be persistent and able to follow
through on assignments… Train yourself.

However productive you may be, there is always an opportunity to increase one’s level of quality
work. Effectiveness means doing the work that matters. Be effective first, then become efficient.
Efficient is achieving improved output in less time. There is no point in becoming efficient at
doing that non-value added work.

Step 2: Manage your time

Know your strength and weaknesses (including potential distractions, so you can avoid
them): Evaluate work. Identifying one’s weaknesses and making a plan to improve these areas
builds a stronger work ethic. One way of evaluating this is to create a list summarizing the skills
and requirements of your work, and the strengths and weaknesses. Be honest about weaknesses,
and what it is that distracts you – this is step one in learning to manage those weaknesses.

Distractions are everywhere – Twitter, Facebook, TV, mobile, etc. Complete these before
arriving at work for a no-distraction period. Turn off the internet and see how you start doing
work in due time. Ditch the unimportant. If the work is nice-to-do but not need-to-do. Stop it.

Accelerate becoming a more productive employee by regularly visualizing yourself as channeled

toward higher accomplishments. Vision yourself as highly efficient and feed the subconscious
mind with this vision until it is accepted as a command. The individual that you ‘‘vision”, is the
individual that you “become”. Lastingly successful people have one common denominator: they
focus on strengths and manage around any weaknesses

Set yourself deadlines for delivering even small tasks: Being able to complete your tasks and
finish what you start, is an essential part of character building. You cannot imagine a fully
mature, fully functioning person who is unable to finish what she begins. The development of
this habit is the key to long-term success. Don’t waste time by doing stuff that is not important?
Constantly evaluate to check which things absolutely must get done.

Prioritize tasks and set the most important ones in the morning: Complete projects and tasks
immediately. A trademark behavior of a worker with a poor work ethic is delaying work until
another day, which usually only leads to an incomplete or late project.

Avoid procrastination: Procrastinating is a great waste. Imagine all that could be accomplished
by eliminating procrastination from this moment on. To overcome procrastination, first realize
that it’s not the real issue. Procrastination, laziness, bad time management, or lack of discipline,
are merely symptoms of the issue. The real reason is beneath this. You can also use the
Pomodoro technique to avoid procrastination.

Avoid negative talk and gossip: Keep the lazy, the negative minded, and the unproductive, at
arm’s length, for it’s a psychological prison. Associate with ambitious, hard-working people, and
soon count yourself amongst them.

 Provide feedback that improves situations and builds people up.

 Be an active listener and keep an open mind.

Step 3: Keep a balance and deliver consistent high performance work

Do sport, sleep well, and socialize: Play is best when it’s earned, equally sleep. Earn sleep by
working hard on one’s goals in the day. A good work ethic isn’t just being glued to a computer.
It is also understanding how to take care with decent sleep, and eating nutritiously. Take time to
relax and recharge while keeping priorities in your life clear, helps maintain a good perspective
at work.

Step 4: Develop good work habits

Steer the self-development path towards choosing to be an employee with a strong ethic, after
all, creating a habit for oneself is really a question of being an action-minded person. The ‘doing
component’ flows easily when embracing the ‘being part.’

Create and learn habits: Values to inculcate and habitualize:

 Valuing punctuality and attendance.

 Valuing time, orderliness, neatness, and speed.
 Working smarter but not harder; being psychologically self-employed.
 Playing an internal game of working, yet enjoying the importance of relaxation and rest.

“Do it now” habit: Never leave ‘till tomorrow what can be accomplished today.’ Good ethics
habitualize both attitude, action, and inevitably – consequence: how you do, what you do this
moment.
  The initiative habit – positivity.
 The main cause of poor productivity and self-sabotage is procrastination, for many
reasons, including the perceptions that a task is unpleasant, may lead to negative
consequences, or is overwhelming.
 Cultivate flexibility.

“Do it right” habit: A disciplined habit makes a difference in the long term. Don’t try to break
bad habits. Alternatively, choose preferable substitutes that you move forward to, in place of the
old ones.

Other good habits:

Concentration is the ability to stay on a task until it is completed, by working in a straight line to
get from where one is, without distraction or diversion, to the destination, i.e., completion of the
work.

 Get off to a good start.

 Clean up and get organized.
 Plan activities.
 Streamline work and emphasize the important work.
 Concentrate on one work task at a time until completion.
 Work steadily.
 Make smart use of technology.
 Be in control of office paper, work in-basket, and e-mail.
 Multitask on routine matters.
 Make better use of time.

Don’t forget to create some quiet, uninterrupted time!

CORE ELEMENTS OF A STRONG WORK ETHIC

It is difficult to define the elements of good work ethics, as it is such an individualistic approach
and thinking. What may be good work ethics for me may not be the same for you. Much depends
upon how each organization or person looks at work ethics and the moral values that each
follows. What moral values you practice in daily life will define your attitude towards work and
your work ethics. But there are a few common elements that are universally followed and
employers look for it in their employees.

 Honesty: This is the core element of work ethics, all the other elements are based upon
your honesty. Be honest about your successes and failures, take credit only where due,
do not steal other’s works or ideas, and own up to your failures.
 Integrity: Do not let people down, try to fulfill your commitments, and be consistent in
your thoughts, action and behavior.
 Impartiality/Fairness: Be fair to all, do not practice favoritism. Treat everyone as equals.
 Alertness: Be aware of what is happening around and keep an eye on things.
  Openness: Share your ideas, results and resources with the other team members, so
that everyone has the same opportunity and know what you are doing. Being secretive
is counterproductive.
 Respect for others: No matter how urgent a deadline or heated that tempers become,
remain diplomatic and poised and show grace under pressure. Whether serving a client,
meeting a customer or meeting with management, do the best to respect other’s
opinions, even in stressful circumstances. It shows one values other’s individual worth
and professional contribution.
 Reliability and Dependability: Means being punctual for work and meetings, delivering
assignments within budget and on schedule. Be reliable about keeping promises for
reputation precedes one so that clients, customers, and colleagues do trust in you to do
all that you say you will – everyone appreciates the stability this embodies.
 Determination: Obstacles cannot stop you as they are a challenge to be overcome.
Embrace challenges positively and know that your role is to solve problems with
purpose and resilience. Push on, no matter how far it is necessary to go.
 Dedication: Continue until the job is complete, and delivered. “It’s good enough” is not
sufficient for you and the team, as you aim to be “outstanding” in content and quality.
Put in the extra hours to get things right by attending to detail and excellence.
 Accountability: Accept responsibility personally for one’s actions and outcomes in all
situations, plus avoid excuses when work does not proceed as planned – admitting
mistakes or oversights are used as a learning curve and will not be repeated again.
Employers expect employees to attain to high standards, and they should fully support
staff who accept responsibility, instead of passing the buck.
 Confidentiality: Any confidential information of documents you have should remain
confidential. You cannot discuss it or show it to anyone else, other than the people
authorized to do so.
 Responsibility: Take responsibility for your thoughts, actions, behavior and work.
 Legality: Always work within the legal boundaries, do not break or twist the law to fit
your agenda.
 Competence: Improve your performance and competence by constantly learning and
including the new learning into your work.
 Professionalism: From how one dresses and presents oneself in the business world, to
how others are treated, professionalism is such a very broad category that it
encompasses all the elements of a work ethic.
 Humility: Acknowledge other’s contribution, and share credit for successes. You have
integrity and are open to learning from mentors and others, even as you teach via your
action, example, and words. Though you take the work seriously, you are also
maintaining a sense of humor about yourself.
 Initiative: Do not be afraid to put forth your ideas or volunteer for work.

These days a work ethics is important in many situations. It is a skill that can be learned by every
person and has so often proved to be the path of success for many. All businesses give a higher
regard to an ethical employee, and hiring staff with positive ethics is appreciated around the
world.
Simply stating that “I have a good work ethic” is not the way to demonstrate it to an employer.
Don’t provide generic, wishy-washy utterings, allow the employer to visualize your ethic by
defining how they are incorporated in your accomplishments, without condition.

CONCLUSION

Today the notion of ethics is extremely widespread. They are an important part of our personal
and our working life. With a positive work ethic, individuals can become more focused and
responsible regarding their work. The individual can also cultivate a sense of achievement, and
this too, has positive effects on their career development, and also on the culture and productivity
within the enterprise.

If one is able to successfully demonstrate a positive work ethic, then you are sure to get the job
you are being interviewed for, retain your position or be expectant regarding a promotion.
However, it’s crucial to cognise what constitutes an ideal work ethics before answering the
question.

As we have seen, ethics are fundamentally the modus operandi of activity and any work or task
where one keeps in mind the synergy and harmony of coworkers involved which is simply one’s
demeanor with respect to others, and towards work.

Ethics in the work environment means those positive facets that accumulatively, define the staff
of a company, e.g. Integrity, determination, dedication, initiative and so on. If asked about your
ethics, then speak about how you implement them in your work and that being in a job that
satisfies you, ensures that you are productive in your current job performance.

What is a Market System?

A market system is the network of buyers, sellers and other actors that come together to trade in
a given product or service.

The participants in a market system include:

 Direct market players such as producers, buyers, and consumers who drive economic
activity in the market
 Suppliers of supporting goods and services such as finance, equipment and business
consulting
 Entities that influence the business environment such as regulatory agencies,
infrastructure providers and business associations

A market system can be specific to a product (coffee, mangoes, dairy) or a cross-cutting sector
(finance, labor, business development services). A market system’s strength depends on how
well the participants obtain financing, launch businesses and adopt new technologies and best
practices.
One example where TechnoServe has experience is the poultry market system:

Direct Market Players

Producers: The farmers who grow chicken and eggs for sale. The market system may
include small-, medium- and large-scale producers.
 Buyers: In many market systems, the product will change hands before reaching the
consumer. The poultry market system will likely have intermediaries who buy and sell before the
chickens and eggs reach consumers.

Consumers: The people who eat the chickens and eggs after buying them from a
retailer or restaurant

Suppliers of Supporting Goods and Services

Feed producers and suppliers: Poultry feed is made up of grains such as corn and
soybeans. These feedgrains have their own market systems, but they are also an important
element of the poultry market system.

Equipment suppliers: Good poultry production requires specialized equipment for

feeding, watering, nesting, and housing the chicks.

Hatcheries: Even small-scale chicken farmers often purchase commercially produced

day-old chicks to grow, rather than raising chickens from their own eggs.

Veterinary services: Chickens need to be vaccinated, and ill birds may be treatable.
Producers may seek veterinary advice if their flocks fall ill.

Banks: Poultry producers may benefit from loans in order to upgrade equipment or
expand.
 Entities that Influence the Business Environment

Government: Livestock regulations, trade rules, food safety laws and other
government actions can affect the poultry industry.

Infrastructure providers: Roads, electricity, telephone service and mobile

technologies all can facilitate transactions.

Industry association: An association can work for the common benefit of the industry
by advocating for favorable policies, finding investment support and promoting branding and
collective advertising.

Marketing is defined by the American Marketing Association as “the activity, set of institutions,
and processes for creating, communicating, and exchanging offerings that have value for
customers, clients, partners, and society at large.”“AMA Definition of Marketing,” American
Marketing Association, December 17, 2007, accessed December 1, 2011,
www.marketingpower.com/Community/ARC/Pages/Additional/Definition/default.aspx. Putting
this formality aside, marketing is about delivering value and benefits: creating products and
services that will meet the needs and wants of customers (perhaps even delighting them) at a
price they are willing to pay and in places where they are willing to buy them. Marketing is also
about promotional activities such as advertising and sales that let customers know about the
goods and services that are available for purchase. Successful marketing generates revenue that
pays for all other company operations. Without marketing, no business can last very long. It is
that important and that simple—and it applies to small business.

Marketing is applicable to goods, services, events, experiences, people, places, properties,

organizations, businesses, ideas, and information.Adapted from Philip Kotler and Kevin Lane
Keller, Marketing Management (Upper Saddle River, NJ: Pearson Prentice Hall, 2009), 6–7.

There are several concepts that are basic to an understanding of marketing: the marketing
concept, customer value, the marketing mix, segmentation, target market, the marketing
environment, marketing management, and marketing strategy.
Customer Value

The definition of marketing specifically includes the notion that offerings must have value to
customers, clients, partners, and society at large. This necessarily implies an understanding of
what customer value is. Customer value is discussed at length in Chapter 2 "Your Business Idea:
The Quest for Value", but we can define it simply as the difference between perceived benefits
and perceived costs. Such a simple definition can be misleading, however, because the creation
of customer value will always be a challenge—most notably because a company must know its
customers extremely well to offer them what they need and want. This is complicated because
customers could be seeking functional value (a product or a service performs a utilitarian
purpose), social value (a sense of relationship with other groups through images or symbols),
emotional value (the ability to evoke an emotional or an affective response), epistemic value
(offering novelty or fun), or conditional value (derived from a particular context or a
sociocultural setting, such as shared holidays)—or some combination of these types of value.
(See Chapter 2 "Your Business Idea: The Quest for Value" for a detailed discussion of the types
of value.)

Marketing plays a key role in creating and delivering value to a customer. Customer value can be
offered in a myriad of ways. In addition to superlative ice cream, for example, the local ice
cream shop can offer a frequent purchase card that allows for a free ice cream cone after the
purchase of fifteen ice cream products at the regular price. Your favorite website can offer free
shipping for Christmas purchases and/or pay for returns. Zappos.com offers free shipping both
ways for its shoes. The key is for a company to know its consumers so well that it can provide
the value that will be of interest to them.

Market Segmentation

The purpose of segmenting a market is to focus the marketing and sales efforts of a business on
those prospects who are most likely to purchase the company’s product(s) or service(s), thereby
helping the company (if done properly) earn the greatest return on those marketing and sales
expenditures.Center for Business Planning, “Market Segmentation,” Business Resource
Software, Inc., accessed December 1, 2011, www.businessplans.org/segment.html. Market
segmentation maintains two very important things: (1) there are relatively homogeneous
subgroups (no subgroup will ever be exactly alike) of the total population that will behave the
same way in the marketplace, and (2) these subgroups will behave differently from each other.
Market segmentation is particularly important for small businesses because they do not have the
resources to serve large aggregate markets or maintain a wide range of different products for
varied markets.

The marketplace can be segmented along a multitude of dimensions, and there are distinct
differences between consumer and business markets. Some examples of those dimensions are
presented in Table 6.1 "Market Segmentation".

LifeLock, a small business that offers identity theft protection services, practices customer type
segmentation by separating its market into business and individual consumer segments.
Table 6.1 Market Segmentation

Consumer Segmentation Examples Business Segmentation Examples

Geographic Segmentation
Demographic Segmentation
 Region (e.g., Northeast or
Southwest)
 The industry or industries to be served
 City or metro size (small,
 The company sizes to be served (revenue,
medium, or large)
number of employees, and number of
 Density (urban, suburban, or
locations)
rural)
 Climate (northern or southern)

Demographic Segmentation

 Age
 Family size
 Family life cycle (e.g., single or Operating Variables
married without kids)
 Gender  The customer technologies to be focused on
 Income  The users that should be served (heavy, light,
 Occupation medium, or nonusers)
 Education  Whether customers needing many or few
 Religion services should be served
 Race/ethnicity
 Generation
 Nationality
 Social class

Purchasing Approaches: Which to Choose?

 Highly centralized versus decentralized

Psychographic Segmentation
purchasing
 Engineering dominated, financially dominated,
 Personality
and so forth
 Lifestyle
 Companies with whom a strong relationship
 Behavioral occasions (regular or
exists or the most desirable companies
special occasion)
 Companies that prefer leasing, service
 Values
contracts, systems purchases, or sealed
bidding
 Companies seeking quality, service, and price

Behavioral Segmentation Situational Factors: Which to Choose?

 Consumer Segmentation Examples Business Segmentation Examples
 Benefits of the product (e.g.,  Companies that need quick and sudden
toothpaste with tartar control) delivery or service
 User status (nonuser, regular  Certain application of the product instead of
user, or first-time user) all applications
 Usage rate (light user, medium  Large or small orders or something in-between
user, or heavy user)
 Loyalty status (none, medium, or
absolute)
 Attitude toward the product (e.g.,
enthusiastic or hostile)

Personal Characteristics: Which to

Choose?
Other Characteristics
 Companies with similar people
 Status in industry (technology or revenue
and values
leader)
 Risk-taking or risk-aversive
 Need for customization (specialized computer
customers
systems)
 Companies that show high loyalty
to their suppliers

Source: Adapted from “Market Segmentation,” Business Resource Software, Inc., accessed
December 2, 2011, http://www.businessplans.org/segment.html; adapted from Philip Kotler and
Kevin Lane Keller, Marketing Management (Upper Saddle River, NJ: Pearson Prentice Hall,
2009), 214, 227.

Market segmentation requires some marketing research. The marketing research process is
discussed in Section 6.3 "Marketing Research".

Target Market

Market segmentation should always precede the selection of a target market. A target market is
one or more segments (e.g., income or income + gender + occupation) that have been chosen as
the focus for business operations. The selection of a target market is important to any small
business because it enables the business to be more precise with its marketing efforts, thereby
being more cost-effective. This will increase the chances for success. The idea behind a target
market is that it will be the best match for a company’s products and services. This, in turn, will
help maximize the efficiency and effectiveness of a company’s marketing efforts:

It is not feasible to go after all customers, because customers have different wants, needs and
tastes. Some customers want to be style leaders. They will always buy certain styles and usually
pay a high price for them. Other customers are bargain hunters. They try to find the lowest price.
Obviously, a company would have difficulty targeting both of these market segments
simultaneously with one type of product. For example, a company with premium products would
not appeal to bargain shoppers…

Hypothetically, a certain new radio station may discover that their music appeals more to 34–54-
year-old women who earn over $50,000 per year. The station would then target these women in
their marketing efforts.Rick Suttle, “Define Market Segmentation & Targeting,” Chron.com,
accessed December 1, 2011, smallbusiness.chron.com/define-market-segmentation-targeting-
3253 .html.

Target markets can be further divided into niche markets. A niche market is a small, more
narrowly defined market that is not being served well or at all by mainstream product or service
marketers. People are looking for something specific, so target markets can present special
opportunities for small businesses. They fill needs and wants that would not be of interest to
larger companies. Niche products would include such things as wigs for dogs, clubs for left-
handed golfers, losing weight with apple cider vinegar, paint that transforms any smooth surface
into a high performance dry-erase writing surface, and 3D printers. These niche products are
provided by small businesses. Niche ideas can come from anywhere.

Marketing Mix

Marketing mix is easily one of the most well-known marketing terms. More commonly known as
“the four Ps,” the traditional marketing mix refers to the combination of product, price,
promotion, and place (distribution). Each component is controlled by the company, but they are
all affected by factors both internal and external to the company. Additionally, each element of
the marketing mix is impacted by decisions made for the other elements. What this means is that
an alteration of one element in the marketing mix will likely alter the other elements as well.
They are inextricably interrelated. No matter the size of the business or organization, there will
always be a marketing mix. The marketing mix is discussed in more detail in Chapter 7
"Marketing Strategy". A brief overview is presented here.

Figure 6.1 The Marketing Mix

Product

Product refers to tangible, physical products as well as to intangible services. Examples of

product decisions include design and styling, sizes, variety, packaging, warranties and
guarantees, ingredients, quality, safety, brand name and image, brand logo, and support services.
In the case of a services business, product decisions also include the design and delivery of the
service, with delivery including such things as congeniality, promptness, and efficiency. Without
the product, nothing else happens. Product also includes a company’s website.

Price

Price is what it will cost for someone to buy the product. Although the exchange of money is
what we traditionally consider as price, time and convenience should also be considered.
Examples of pricing decisions include pricing strategy selection (e.g., channel pricing and
customer segment pricing), retail versus wholesale pricing, credit terms, discounts, and the
means of making online payments. Channel pricing occurs when different prices are charged
depending on where the customer purchases the product. A paper manufacturer may charge
different prices for paper purchased by businesses, school bookstores, and local stationery stores.
Customer segment pricing refers to charging different prices for different groups. A local
museum may charge students and senior citizens less for admission.Philip Kotler and Kevin
Lane Keller, Marketing Management (Upper Saddle River, NJ: Pearson Prentice Hall, 2009),
401.

Promotion

Having the best product in the world is not worth much if people do not know about it. This is
the role of promotion—getting the word out. Examples of promotional activities include
advertising (including on the Internet), sales promotion (e.g., coupons, sweepstakes, and 2-for-1
sales), personal sales, public relations, trade shows, webinars, videos on company websites and
YouTube, publicity, social media such as Facebook and Twitter, and the company website itself.
Word-of-mouth communication, where people talk to each other about their experiences with
goods and services, is the most powerful promotion of all because the people who talk about
products and services do not have any commercial interest.

Place

Place is another word for distribution. The objective is to have products and services available
where customers want them when they want them. Examples of decisions made for place include
inventory, transportation arrangements, channel decisions (e.g., making the product available to
customers in retail stores only), order processing, warehousing, and whether the product will be
available on a very limited (few retailers or wholesalers) or extensive (many retailers or
wholesalers) basis. A company’s website is also part of the distribution domain.

Two Marketing Mixes

No matter what the business or organization, there will be a marketing mix. The business owner
may not think about it in these specific terms, but it is there nonetheless. Here is an example of
how the marketing mix can be configured for a local Italian restaurant (consumer market).

 Product. Extensive selection of pizza, hot and cold sub sandwiches, pasta and meat
dinners, salads, soft drinks and wine, homemade ice cream and bakery products; the
best service in town; and free delivery.
 Price. Moderate; the same price is charged to all customer segments.
 Promotion. Ads on local radio stations, websites, and local newspaper; flyers posted
around town; coupons in ValPak booklets that are mailed to the local area; a sponsor of
the local little league teams; ads and coupons in the high school newspaper; and a
Facebook presence.
 Place. One restaurant is located conveniently near the center of town with plenty of off-
street parking. It is open until 10:00 p.m. on weekdays and 11:30 p.m. on Fridays and
Saturdays. There is a drive-through for takeout orders, and they have a special
arrangement with a local parochial school to provide pizza for lunch one day per week.

Here is an example of how the marketing mix could be configured for a green cleaning services
business (business market).

 Product. Wide range of cleaning services for businesses and organizations. Services can
be weekly or biweekly, and they can be scheduled during the day, evening, weekends,
or some combination thereof. Only green cleaning products and processes are used.
 Price. Moderate to high depending on the services requested. Some price discounting is
offered for long-term contracts.
 Promotion. Ads on local radio stations, website with video presentation, business cards
that are left in the offices of local businesses and medical offices, local newspaper
advertising, Facebook and Twitter presence, trade show attendance (under
 consideration but very expensive), and direct mail marketing (when an offer,
announcement, reminder, or other item is sent to an existing or prospective customer).
 Place. Services are provided at the client’s business site. The cleaning staff is radio
dispatched.

The Marketing Environment

The marketing environment includes all the factors that affect a small business. The internal
marketing environment refers to the company: its existing products and strategies; culture;
strengths and weaknesses; internal resources; capabilities with respect to marketing,
manufacturing, and distribution; and relationships with stakeholders (e.g., owners, employees,
intermediaries, and suppliers). This environment is controllable by management, and it will
present both threats and opportunities.

The external marketing environment must be understood by the business if it hopes to plan
intelligently for the future. This environment, not controllable by management, consists of the
following components:

 Social factors. For example, cultural and subcultural values, attitudes, beliefs, norms,
customs, and lifestyles.
 Demographics. For example, population growth, age, gender, ethnicity, race, education,
and marital status.
 Economic environment. For example, income distribution, buying power and
willingness to spend, economic conditions, trading blocs, and the availability of natural
resources.
 Political and legal factors. For example, regulatory environment, regulatory agencies,
and self-regulation.
 Technology. For example, the nature and rate of technological change.
 Competition. For example, existing firms, potential competitors, bargaining power of
buyers and suppliers, and substitutes.Philip Kotler and Kevin Lane Keller, Marketing
Management (Upper Saddle River, NJ: Pearson Prentice Hall, 2009), 294–95.
 Ethics. For example, appropriate corporate and employee behavior.

Figure 6.2 The Marketing Environment

Small businesses are particularly vulnerable to changes in the external marketing environment
because they do not have multiple product and service offerings and/or financial resources to
insulate them. However, this vulnerability is offset to some degree by small businesses being in a
strong position to make quick adjustments to their strategies if the need arises. Small businesses
are also ideally suited to take advantage of opportunities in a changing external environment
because they are more nimble than large corporations that can get bogged down in the lethargy
and inertia of their bureaucracies.

Marketing Strategy versus Marketing Management

The difference between marketing strategy and marketing management is an important one.
Marketing strategy involves selecting one or more target markets, deciding how to differentiate
and position the product or the service, and creating and maintaining a marketing mix that will
hopefully prove successful with the selected target market(s)—all within the context of
marketing objectives. Differentiation involves a company’s efforts to set its product or service
apart from the competition. Positioning “entails placing the brand [whether store, product, or
service] in the consumer’s mind in relation to other competing products, based on product traits
and benefits that are relevant to the consumer.”Dana-Nicoleta Lascu and Kenneth E. Clow,
Essentials of Marketing (Mason, OH: Atomic Dog Publishing, 2007), 170. Segmentation, target
market, differentiation, and positioning are discussed in greater detail in Chapter 7 "Marketing
Strategy".

Key Takeaways
  Marketing is a distinguishing, unique function of a business.
 Marketing is about delivering value and benefits, creating products and services that will
meet the needs and wants of customers (perhaps even delighting them) at a price they
are willing to pay and in places where they are willing to buy them. It is also about
promotion, getting the word out that the product or the service exists.
 The marketing concept has guided business practice since the 1950s.
 Customer value is the difference between perceived benefits and perceived costs. There
are different types of customer value: functional, social, epistemic, emotional, and
conditional.
 Marketing plays a key role is delivering value to the customer.
 Market segmentation, target market, niche market, marketing mix, marketing
environment, marketing management, and marketing strategy are key marketing
concepts.
 The marketing mix, also known as the four Ps, consists of product, price, promotion, and
place.

A company is any form of business whether it is small or large.

Generally the term "company" indicates a particular kind of business dealing in a specific
product.

An organisation is the larger form and generally comprises of a

number of companies. Simply, a company is an organization, but an organization is not just a
company.

An industry is the combination of companies in same line of

business.

Firm, corporation and business are synonyms of "company".

An Agency is a particular kind of company, which serves as an intermediary between clients

(other companies or individuals).

 Corporation: The business is a separate entity from the individuals that run the business.
Various individuals working in several different management roles like shareholders,
directors and officers.
 Firm: A business concern, especially one involving a partnership of two or more people.
 Company: A commercial business.
 Agency: A business or organization providing a particular service on behalf of another
business, person, or group.
 Organization: An organized group of people with a particular purpose, such as a
business or government department.
 Institution: An organization founded for a religious, educational, professional, or social
purpose.
 Industry: Economic activity concerned with the processing of raw materials and
manufacture of goods in factories.
  Business: Commercial activity.

Difference between firm and company must be examined from two main perspectives:

 Legal perspective and;

 Linguistic perspective.

From legal perspective there is no such business structure as firm. The word "firm" is used
interchangeably with the term "company".

From a linguistic point of view company is a broader notion of business entity. The notion of
“company” embraces the notion of “firm”. In simple words, all business entities are usually
referred as companies. Only those of companies that are partnerships are usually referred as
firms. (E.g. law firms, accounting firms - those are usually partnerships)

"Company", "firm", and "business" are synonyms. They all mean an organization engaged in
producing some product or service for sale and profit.

Though note that "company" can also mean "a group of people" in general, as in, "As I entered
the town, a large company of men came out to meet me." "Company" is also a size of a military
unit, in the US, it's a unit bigger than a platoon and smaller than a battalion.

An "organization" is a group of people organized for a particular purpose. It is more general than
"company". A social club, a government agency, or a church would also be "organizations" even
though they are not "companies" and don't sell their products.

A "corporation" is a specific kind of company. Namely, a company that was financed by selling
stock, so that it is owned by the share-holders. While laws vary between countries, typically the
share-holders liability for debts is limited to the value of their stock, that is, if the corporation
goes bankrupt at worst the share-holders stocks become worth zero; people the corporation owes
money to can't demand that share-holders pay more from other sources.

An "agency" can be, (a) a government organization or a division within a government

organization. Like in the US we have the "Environmental Protection Agency" and the "Central
Intelligence Agency". (b) A company that is in the business of representing people. The person
represented is then called a "client" and the company acts as the client's "agent". That is, they act
as a go-between for other people. For example a "real estate agency" takes on the task of selling
your house for you, and represents your interests to potential buyers, the bank, etc.

An "industry" is the set of all companies producing the same product or service. For example, the
"cell phone industry". "Industry" can also mean manufacturing. If we say, "The economy of this
town is centered on industry", we mean it has a lot of factories, as opposed to getting most of its
income from office work or retail stores.
Image by Derek Abella © The Balance 2019

By Susan Ward
Updated June 10, 2019

Marketing is the process of interesting potential customers and clients in your products and/or
services. The key word in this marketing definition is "process"; marketing involves researching,
promoting, selling, and distributing your products or services.

It's a huge topic, which is why there are tomes written on marketing, and why you can take a
four-year marketing degree. But essentially marketing involves everything you do to get your
potential customers and your product or service together.

When you're putting together a marketing program for your business, concentrate on the basics,
the four key components of any marketing plan: Products and Services, Promotion, Distribution,
and Pricing.

The name of the game in marketing is attracting and retaining a growing base of satisfied
customers. Creating and implementing a marketing plan will keep your marketing efforts
focused and increase your sales.

Apple Inc. Marketing Success Story

Started from a garage in California's Menlo Park in 1976, Apple Inc. has grown into the largest
company in the world by market capitalization. With over 100,000 employees worldwide and
$233 billion in revenue in 2015, if Apple was a country, its market capitalization would make it
the 20th largest country in the world by GDP.

In addition to developing the Apple I and Apple II lines of personal computers starting in
1976, Apple co-founder Steve Jobs went on to develop a number of unique and innovative
technology products, including the Mac computer, the iPod, iPhone, iPad, Apple TV, and
the Apple Watch.

While Steve Jobs is considered a technical genius, he was also a brilliant marketer.

Apple co-founder Steve Wozniak once said that marketing was Jobs' greatest skill. His keynote
introduction of the iPhone on the Macworld stage in 2007 with his trademark "One More
Thing..." joke is still regarded as one of the finest marketing performances ever.

Apple's 1984 Super Bowl ad for the launch of the Macintosh is widely considered to be the best
Super Bowl commercial ever. The decision to proceed with the ad was highly controversial
within Apple. The board of directors was not in favor of the ad, viewing it as costly and a slap in
the face to competitor IBM. However, Jobs loved the ad and offered to pay for the airtime.
Within the first 100 days of releasing the ad, Apple recorded $150 million in sales of the
Macintosh.

Jobs had a passion for making innovative, beautifully designed products for the mass market.

“I love it when you can bring really great design and simple capability to something that doesn’t
cost much,” he once stated. “It was the original vision for Apple. That’s what we tried to do with
the first Mac. That’s what we did with the iPod.” (Smithsonian.com)

Beauty and simplicity became core brand values of Apple, but while many Apple products were
very good at marketing themselves, Jobs recognized early on that he needed to integrate form,
function, and great marketing to become really successful, and by doing so he propelled Apple
into one of the world's most recognized consumer brands.

Even when Apple was not first out of the gate with a revolutionary new product, it was often the
company that took an existing product, re-engineered it in a unique fashion, developed a brilliant
marketing campaign, and make it into an enormous commercial success. The iPhone is such an
example, which when released destroyed competitors such as Nokia and Blackberry within a few
years.

Apple's marketing success revolves around building and sustaining brand loyalty. Apple
customers tend to be extremely loyal to the brand and many devoted Apple fans will purchase
every new release of an Apple product. It is not uncommon for consumers to line up for hours or
days for a new iPhone or other Apple product release. According to a 2014 Morgan Stanley
Research study, Apple's iPhone has a 90 percent brand retention rate over Samsung, LG, etc.
Apple is a consistent winner of awards for marketing excellence, including:

 Apple Inc. “Get a Mac” Named the Most Successful Marketing Campaign of 2007 at the
Annual Effie Awards (The "Get a Mac" ad campaign was hugely successful for Apple,
and they experienced 42% market share growth in its first year. The series portrayed a
young, hip Mac owner versus a bumbling, nerdy-looking, decidedly uncool PC
owner.) In 2010, Adweek declared "Get a Mac" to be the best advertising campaign of the
decade.
 The CMO Survey Award for Marketing Excellence overall winner in 2012 and 2016.
 “Brand of the Year” in 2013 in the categories of smartphones, tablets, and computers by
marketing research firm Harris Interactive.

Marketing Example: One of the maxims of marketing is that a profitable sales volume is more
desirable than the maximum sales volume.

What Are Business Activities?

Business activities include any activity a business engages in for the primary purpose of making
a profit. This is a general term that encompasses all the economic activities carried out by a
company during the course of business. Business activities, including operating, investing and
financing activities, are ongoing and focused on creating value for shareholders.

Key Takeaways

 Business activities are any events that are undertaken by a corporation for the purpose of
earning a profit.
 Operating activities relate directly to the business providing its goods to the market,
including manufacturing, distributing, marketing, and selling; they provide most of the
company's cash flow and hugely influence its profitability.
 Investing activities relate to the long-term use of cash, such as buying or selling a
property or piece of equipment, or gains and losses from investments in financial markets
and operating subsidiaries.
 Financing activities include sources of cash from investors or banks, and the uses of cash
paid to shareholders, such as payment of dividends or stock repurchases, and the
repayment of loans.

Business Activities

Understanding Business Activities

There are three main types of business activities: operating, investing, and financing. The cash
flows used and created by each of these activities are listed in the cash flow statement. The cash
flow statement is meant to be a reconciliation of net income on an accrual basis to cash flow. Net
income is taken from the bottom of the income statement, and the cash impact of balance sheet
changes are identified to reconcile back to actual cash inflows and outflows.
Noncash items previously deducted from net income are added back to determine cash flow;
noncash items previously added to net income are deducted to determine cash flows. The result
is a report that gives the investor a summary of business activities within the company on a cash
basis, segregated by the specific types of activity.

Operating Business Activities

The first section of the cash flow statement is cash flow from operating activities. These
activities include many items from the income statement and the current portion of the balance
sheet. The cash flow statement adds back certain noncash items such as depreciation and
amortization. Then changes in balance sheet line items, such as accounts receivable and accounts
payable, are either added or subtracted based on their previous impact on net income.

These line items impact the net income on the income statement but do not result in a movement
of cash in or out of the company. If cash flows from operating business activities are negative, it
means the company must be financing its operating activities through either investing activities
or financing activities. Routinely negative operating cash flow is not common outside of
nonprofits.

Investing Business Activities

Investing activities are in the second section of the statement of cash flows. These are business
activities that are capitalized over more than one year. The purchase of long-term assets is
recorded as a use of cash in this section. Likewise, the sale of real estate is shown as a source of
cash. The line item "capital expenditures" is considered an investing activity and can be found in
this section of the cash flow statement.

Financing Business Activities

The cash flow statement's final section includes financing activities. These include initial public
offerings, secondary offerings, and debt financing. The section also lists the amount of cash
being paid out for dividends, share repurchases, and interest. Any business activity related to
financing and fundraising efforts is included in this section of the cash flow statement.