Notes

ECO:

Introduction to ‘Economics’ using Current Economic Affairs:

1. Economics is a social science concerned with the production,

distribution, and consumption of goods and services.

2. It has its emergence in the Greek words “Oikos” and

“Nemein” meaning “the rule or the law of the
household”.
3. It studies how individuals, businesses, governments, and nations make
choices about how to allocate resources.

4. The building blocks of economics are the studies of labor and trade.

5. It seeks to analyze and describe the production,

distribution, and consumption of wealth.

6. Economics can generally be broken down into macroeconomics, which

concentrates on the behavior of the economy as a whole,
and microeconomics, which focuses on individual people and
businesses.

7. Economics is a logic of choice. It teaches the art of rational decision-making, in

economising behaviour to deal with the problem of scarcity. Economics is of significant
use in modern business, as decision-making is the core of business, and success in
business depends on right decisions. A firm or business unit faces the problem of
decision-making in the course of alternative actions, in view of the constraint set by given
resources, which are relatively scarce. 

Current economic affairs :

The Meaning, Scope and Methods of Managerial Economics:

Managerial economics is essentially applied economics in the field of business management. It
is the economics of business or managerial decisions. It pertains to all economic aspects of
managerial decision making. Managerial economics, in particular, is the study of allocation of
resources available to a business firm or an organisation. Business or managerial economics is
fundamentally concerned with the art of economising, i.e., making rational choices to yield
maximum return out of minimum resources and efforts, by making the best selection among
alternative courses of action. Managerial economics is pragmatic. It is concerned with analytical
tools and techniques of economics that are useful for decision-making in business. Managerial
economics is, however, not a branch of economic theory but a separate discipline by itself,
having its own selection of economic principles and methods.

Features:

• It involves an application of economic theory — especially, microeconomic analysis to

practical problem solving in real business life. It is essentially applied microeconomics. 
• It is a science as well as art facilitating better managerial discipline. It explores and
enhances economic mindfulness and awareness of business problems and managerial
decisions. 
• It is concerned with firm’s behaviour in optimal allocation of resources. It provides tools to
help in identifying the best course among the alternatives and competing activities in any
productive sector whether private or public. 
 Managerial economics differs from traditional economics in one important respect
that it is directly concerned in dealing with real people in real business situations.
Furthermore, unlike the present trend of modern economics, which is leaning
towards sophisticated theoretical, mathematical and complicated econometrics
models, managerial economics is concerned more about behaviour on the practical
side.
 Managerial economics is a blending of pure or positive science with applied or normative
science. It is positive when it is confined to statements about causes and effects and to
functional relations of economic variables. It is normative when it involves norms and
standards, mixing them with cause-effect analysis.

Nature :

 Art and Science: Management theory requires a lot of critical and logical
thinking and analytical skills to make decisions or solve problems. Many
economists also find it a source of research, saying it includes applying
different economic concepts, techniques and methods to solve business
problems.
 Micro Economics: In managerial economics, managers typically deal with
the problems relevant to a single entity rather than the economy as a whole. It
is therefore considered an integral part of microeconomics.
 Uses Macro Economics: A corporation works in an external world, i.e. it
serves the consumer, which is an important part of the economy.
 For this purpose, it is important that managers evaluate the various
macroeconomic factors such as market dynamics, economic changes,
government policies, etc., and their effect on the company.
 Multidisciplinary: It uses many tools and principles that belong to different
disciplines, such as accounting, finance, statistics, mathematics, production,
operational research, human resources, marketing, etc.
 Prescriptive/Normative Discipline: By introducing corrective steps it aims at
achieving the objective and solves specific issues or problems.
  Management Oriented: This serves as an instrument in managers’ hands to
deal effectively with business-related problems and uncertainties. This also
allows for setting priorities, formulating policies, and taking successful
decision-making.
 Pragmatic: The solution to day-to-day business challenges is realistic and
rational.

Scope : Micro
 Demand Theory: Demand Theory emphasizes the behavior of the consumer
towards a product or service. This takes into account the customers’ desires,
expectations, preferences, and conditions to enhance the manufacturing
process.
 Decisions on Production and Production Theory: This theory is primarily
concerned with the volume of production, process, capital and labor, costs
involved, etc. It aims to optimize production to meet customer demand.
 Market Structure Pricing Theory and Analysis: It focuses on assessing a
product’s price taking into account the competition, market dynamics,
production costs, optimizing sales volume, etc.
 exam and management of profit: the companies are operating for assets
hence they always aim to maximize profit. It also depends on demand from
the market, input costs, level of competition, etc.
 Decisions on capital and investment theory: Capital is the most important
business element. This philosophy takes priority over the proper distribution of
the resources of the company and investments in productive programs or
initiatives to boost operational performance.

MACRO : Any organization is greatly affected by the environment in which it

operates. The business climate can be defined as:

 Economic environment: A country’s economic conditions, GDP, government

policies, etc. have an indirect effect on the company and its operations.
 Social environment: The society in which the organization, like employment
conditions, trade unions, consumer cooperatives, etc., functions also affects it.
 Political environment: a country’s political system, whether authoritarian or
democratic; political stability; and attitude towards the private sector, impact
the growth and development of the organization.

 Decision Making Process &

its Complexity
 The standard of living of a country depends on its capacity
to generate goods and services
 The companies must be productive enough to produce
products and services for the development of a
country’s economy. 
 Prices increase when the government’s printing lots
of money.
 If surplus money is available with citizens, their capacity to
spend increases, eventually leading to a rise in demand.
Inflation takes place when the manufacturers are unable to
satisfy market demand.
 Society faces a short-term correlation between
unemployment and inflation.
 The government introduces numerous economic policies to
reduce unemployment. 

Economics and Decision
Making Principles of How
People Decide.
 Let us go through the following principles to understand
how decision-making takes place in real life:
 Humans face tradeoffs: To make decisions, people have
to make choices on whether to choose from the different
options available.
 Price of Opportunity: Each decision involves a cost of
opportunity which is the cost of those options that we let go
of while choosing the most appropriate one.
 Feel fair about the margin: People typically think about
the margin or income they receive before investing in a
specific project or individual with their money or resources.
 People respond to stimulus: Decisions to be
made highly depend on incentives related to a product,
service or activity. Negative incentives discourage people,
whilst positive incentives encourage people.
 Trade Could Better Anyone: The theory states that
trade is a way for people to share. 
 Markets usually represent a good way to organize
economic activity
 Markets often serve as a means of customer and
product interaction. Consumers express their
desires and expectations while
producers determine whether or not to
manufacture necessary products or services.
 Governments may often boost the performance of
the market
 During the time of adverse market conditions, or for
the benefit of society, the government intervenes in
business operations. 
UTILITY :

 Utility is the want satisfying power of a commodity .It is the capacity of

the commodity to satisfy human wants. The utility definition in
economics is derived from the concept of usefulness. An economic
good yields utility to the extent to which it's useful for satisfying a
consumer’s want or need. Economic utility can decline as the supply of
a service or good increases.

FEATURES:

Forms the Basis for Demand: A person will

demand a commodity only if it has utility for
him.
 Ethically Neutral: The concept of utility does
not consider whether the commodity satisfies a
good want or a bad want. 
 A commodity can have utility even if it satisfies

a bad or unethical want.
 Utility does not consider any moral or ethical

factors. 
 In short, it is ethically neutral. 

 Not the Same as Usefulness: Usefulness is

the benefit that is derived by consuming a
commodity whereas utility is the want
satisfying power of a commodity. 
 A commodity having utility need not be
useful.
 Measurement Not Possible: Utility is a
psychological concept. It is intangible and
invisible. 
 It is an inherent feeling. Therefore, it cannot
be measured cardinally i.e., in numbers.
 Utility - Subjective Concept: “Subjectivity”
means changing from one person to another. 
 A product may give utility to one person, but the
same product may not give as much utility to
another. 
 Therefore, utility is a subjective concept as the
utility of a commodity differs from person to
person on account of differences in tastes,
 preference, habits, surroundings, age, occupation
etc.
Relative Concept: Utility of a commodity
changes from time to time and place to place.
 Different from Pleasure: Utility and
pleasure are different. 
 A commodity may have utility, but it is not

necessary that its consumption will give

pleasure to the consumer.
 Satisfaction and Utility are Different: Utility and
satisfaction are inter-related but there is a
difference. 
 The following are difference: 
 Utility is the want satisfying power of a commodity
i.e.; utility is considered preconception. Satisfaction
is the happiness derived by the consumer after
consuming a commodity i.e., it is post-consumption. 
 Utility is assumed satisfaction, but satisfaction is
something that is realized. 
 Utility is related to the commodity whereas
satisfaction is experienced by a person.

Types of Utility :
 Time utility
 Place utility
 Form Utility
 Posession Utility
Total Utility :
It refers to the total psychological satisfaction a consumer derives
by consuming a particular commodity of several units. In
mathematical terms, total utility is the direct function of the
number of units of a commodity. 

Marginal Utility : It means change in total utility due to one

additional or one extra unit of commodity consumed. It can be
explained with the help of following example, by consuming one
slice of bread a consumer gets 10 units of utility and by consuming
second slice of bread utility increases to 18 units. Hence the
marginal utility of second slice of bread is 18-10 = 8 units.

Marginal Utility of three types:

(i) When TU increases with the increase in one unit of extra
consumption, then MU > 0

(ii)When TU remains same with

When TU decreases with the increase in one unit of extra

consumption, then MU < 0.
Cardinal Utility : Cardinal Utility is the idea that economic welfare can be
directly observable and be given a value.

For example, people may be able to express the utility that consumption gives
for certain goods. For example, if a Nissan car gives 5,000 units of utility, a
BMW car would give 8,000 units. This is important for welfare economics
which tries to put values on consumption. For example, allocative efficiency is
said to occur when Marginal cost = Marginal Utility.

Ordinal Utility : In ordinal utility, the consumer only ranks choices in terms
of preference but we do not give exact numerical figures for utility.

For example, we prefer a BMW car to a Nissan car, but we don’t say by how
much.

It is argued this is more relevant in the real world. When deciding where to go
for lunch, we may just decide I prefer an Italian restaurant to Chinese. We
don’t calculate the exact levels of utility.

Law of diminishing marginal utility :

The law of diminishing marginal utility states that all else equal, as
consumption increases, the marginal utility derived from each additional unit
declines. Marginal utility is the incremental increase in utility that results from
the consumption of one additional unit. The utility is an economic term used to
represent satisfaction or happiness.

KEY TAKEAWAYS

 The law of diminishing marginal utility says that the marginal utility from
each additional unit declines as consumption increases.
 The marginal utility can decline into negative utility, as it may become
entirely unfavorable to consume another unit of any product.
Example #1
Suppose if a person is very hungry and has not eaten any food all
day. When he finally starts to eat, the first bite will give him a lot of
satisfaction. As he keeps on eating more and more food, his
appetite will go down and come to a point where he does not want
to eat anymore.

Assumptions of the law :

 Rational Consumers
 Continuous Consumption : Example, if a hungry person eats
a pizza for lunch and then eats more pizza for dinner, the law
is violated because the consumer is again hungry and deriving
increased utility from the second pizza than he would if he was
eating it right after lunch. So intervals between consumption
of additional units lead to violation of the law.
 Standard Size of Units

Exceptions:

 Addictions/Hobbies
  Rare Items : example, acquiring a limited edition watch might
give much more satisfaction to an enthusiast who likes
collecting watches and already has a lot of them.
 Unrealistic Assumptions

CONCLUSION :  It helps us understand why a consumer is less and

less satisfied with the consumption of every additional unit of a
good. The law is based on the ordinal theory of utility and requires
certain assumptions to hold true.

 Consumer Surplus : A consumer surplus happens when the price

consumers pay for a product or service is less than the price they're
willing to pay.
 Consumer surplus is based on the economic theory of marginal utility,
which is the additional satisfaction a consumer gains from one more unit
of a good or service.
 Consumer surplus always increases as the price of a good falls and
decreases as the price of a good rises.

 The point where the demand and supply meet is the equilibrium
price. The area above the supply level and below the equilibrium
price is called product surplus (PS), and the area below the demand
level and above the equilibrium price is the consumer surplus (CS).

 While taking into consideration the demand and supply curves, the

formula for consumer surplus is CS = ½ (base) (height). In our
example, CS = ½ (40) (70-50) = 400.
  Indifference Curve : An indifference curve shows a combination of
two goods that give a consumer equal satisfaction and utility thereby
making the consumer indifferent.
 Along the curve, the consumer has an equal preference for the
combinations of goods shown—i.e. is indifferent about any combination
of goods on the curve.
 For example, a young boy might be indifferent between possessing two
comic books and one toy truck, or four toy trucks and one comic book
so both of these combinations would be points on an indifference curve
of the young boy.
 Indifference curves operate under many assumptions; for example,
typically each indifference curve is convex to the origin, and no two
indifference curves ever intersect. Consumers are always assumed to
be more satisfied when achieving bundles of goods on indifference
curves that are farther from the origin.
 As income increases, an individual will typically shift their consumption
level because they can afford more commodities, with the result that
they will end up on an indifference curve that is farther from the origin—
hence better off.

Budget Constraint : In economics, a budget constraint refers to all possible

combinations of goods that someone can afford, given the prices of goods, when all
income (or time) is spent. A budget constraint occurs when a consumer is
limited in consumption patterns by a certain income.

When looking at the demand schedule we often consider effective demand.

Effective demand is what people are actually able to spend given their
limitations of income.
Temporary budget constraints can be overcome by borrowing, but in the long
term budget constraints are determined by income such as rent and wages.

CONSUMER EQUILIBRIUM : A situation where a consumer spends his given

income purchasing one or more commodities so that he gets maximum satisfaction and
has no urge to change this level of consumption, given the prices of commodities, is
known as the consumer’s equilibrium. A consumer is said to be in equilibrium, when he does
not intend to change his level of consumption, i.e., when he derives maximum satisfaction.
Consumer's equilibrium refers to the situation when a consumer is having maximum satisfaction
with his limited income and has no tendency to change his way of existing expenditure.The
consumer has to pay a price for each unit of the commodity. So he cannot buy or consume unlimited
quantity

 ASSUMPTIONS : Consumer is rational and thus attempts to maximise

his/her total utility
 Fixed level of income of a consumer
 Fixed price of a commodity in question

LAW OF DEMAND AND DEMAND FUNCTION :

The Demand Function: The word ‘demand’ is a broad

concept referring to the entire schedule of quantities and
prices. But the term ‘quantity demanded’ refers to a single
point on the demand schedule or curve. It shows the
maximum quantity demanded at a particular price. A
demand function is a list of prices and the corresponding
quantities that individuals are willing and able to buy at a
fixed point of time
The demand function shows the relation between the quantity
demanded of a commodity by the consumers and the price of the
product. While many variables determine the quantity consumers
wish to purchase in a market, the price of the commodity is perhaps
the most important one.
Individual demand refers to the demand for a commodity from the individual point of view.
The quantity of a product consumer would buy at a given price over a given period of time is his
individual demand for that particular product. Individual demand is considered from one person’s
point of view or from that of a family or household’s point of view. Individual demand is a single
consuming entity’s demand. 
 Market demand for a product, on the other hand, refers to the total demand of all the
buyers, taken together. Market demand is an aggregate of the quantities of a product demanded
by all the individual buyers at a given price over a given period of time. 
Market demand function is the sum total of individual demand function. It is derived by
aggregating all individual buyer’s demand function in the market. 

Factors Influencing Individual Demand 

 Price of the Products

  Income.

 Tastes, Habits and Preferences.

  Relative Prices of Other Goods — Substitute and Complementary Products.

 Consumer’s Expectation.

 Advertisement Effect.

Factors Influencing Market Demand 

 Price of the Product.
 Distribution of Income and Wealth in the Community.
 Community’s Common Habits and Scale of Preferences.
 General Standards of Living and Spending Habits of the
People.
 Future Expectations.
 Inventions and Innovations.
 Climate or Weather Conditions.
 Fashion

DEMAND FUNCTION : Dx = f (Px, Ps, Pc, Yd, T, A, N, u)

The ‘own price’ of the product itself (Px)

The price of the substitute and complementary goods (Ps or Pc)

The level of disposable income (Yd) with the buyers (i.e., income
left after direct

taxes)
Change in the buyers’ taste and preferences (T)

The advertisement effect measured through the level of

advertising expenditure (A)

Changes in population number or the number of the buyers (N).

LAW OF DEMAND :

The law of demand describes the general tendency of consumers’

behaviour in demandinga commodity in relation to the changes in
its price. The law of demand expresses the nature of functional
relationship between two variables of the demand relation, viz.,
the price and the quantity demanded. It simply states that demand
varies inversely to changes in price.

Statement of the Law of Demand. Ceteris paribus, the higher the

price of a commodity, the smaller is the quantity demanded and
lower the price, larger the quantity demanded.

In other words, the demand for a commodity extends (i.e., the

demand rises) as the price falls and contracts (i.e., demand falls) as
the price rises

function:

D = f (P)
Assumptions :

 No change in consumer’s income.

 No change in consumer’s preferences.
 No change in the fashion.
 No change in the price of related goods.
 No expectation of future price changes or shortages.
 No change in government policy.
 No change in weather conditions.

EXCEPTIONS

 Giffen goods.
 Articles of snob appeal. – luxipurs goods highly expensive
 Speculation.
 Consumer’s psychological bias or illusion.

DEMAND FORECASTING

In modern business, production is often made in anticipation of

demand. Anticipation of demand implies demand forecasting.
Forecasting means expectations about the future course of
development. The future is uncertain. But, not entirely so. Hence,
one can hopefully predict the future event and reasonably gain.
Demand forecasting means expectation about the future course of
the market demand for a product. Demand forecasting is based on
the statistical data about past behaviour and empirical
relationships of the demand determinants. It is essentially a
reasonable judgement of future probabilities of the market events
based on scientific background. It is based on the mathematical
laws of probability.

Micro level - the individual business firm

Industry level.- the demand estimate for the product of the industry
as a whole. It relates to the market demand as a whole.

Macro level- aggregate demand for the industrial output by the

nation as a whole. is based on the national income or aggregate
expenditure of the country.

SIGNIFICANCE :

 Production Planning.
 Sales Forecasting.
 Control of Business.
 Inventory Control.
 Growth and Long-term Investment Programmes.
 Stability.
 Economic Planning and Policy-Making.

Types and Measurement of Elasticity:

1.Price Elasticity :  It refers to the quantity demanded of a commodity in response to a given change in  the
price of the commodity. It can be computed with formula.  

Proportiante change in quality demand  

Ep = eDp = Porportinate change in price  Where Ql = quantity demanded before change.  
(Q2 -QI)/QI  (P2 - PI)/PI ' 

The demand is said to be elastic with respect to price if the change in quantity  demanded is more
than the change in price. This implies that the elasticity is more  than one (e > I).  

The demand is said to be inelastic with respect to price when the change in quantity  demanded is
less than the proportionate change in price. This implies that the elasticity  is less than one (e < 1).  

The demand is said to be unity with respect to price when the change in quantity  demanded is equal
to the change in price (e = I).  
The demand elasticity is zero when a change in price causes no change in quantity  demanded and
the demand elasticity is said to be infinity when no reduction in price  is needed to cause an increase
in demand.  

2.  Income elasticity  :Income elasticity refers to the quantity demanded to the commodity in response to a 
given change in income of the consumer. It can be computed from the following  fonnula.  
Proportionate change in quantity demand  
Proportionate change in income  
The same is expressed as  
eDi = (Q2 - Q1)/Q1  
(12 - 11)111  

The income elasticity of demand is positive for superior goods and negative for  inferior goods.
Positive income elasticity of demand can be of three kinds - more  than unity elasticity, unity
elasticity and less than unity elasticity.  

The income elasticity of demand is positive and more than unity when change  in income leads to a
direct and more than proportionate change in quantity  demanded. Eg : Luxury articles. 

 The income elasticity of demand is positive and unity when a change in income  results into a
direct and proportionate change in quantity demanded.  Eg: semi-luxury.  

 Income elasticity of demand is positive and less than unity when an increase in  consumer's
income causes a less than proportionate increase in quantity  demanded and vice-versa.  
Eg: food, clothing etc.  
The income elasticity of demand is negative, when an increase in income leads to  decrease in
quantity demanded.  

3.Cross elasticity :  It refers to the quantity demanded for a commodity in response to a change in the  price of
a related good, which may be a substitute or a complement.  
(Q2-Q)/PB-PA
where Q, = Quantity demanded before change.  
Q2 = Quantity demanded after change.  
P A = Price of product A.  
P B = Price of related product B. 

Factors Governing Elasticity of Demand:

 Tastes and preferences of the consumer
 Time period:
 Level of price
 Government policy

Importance of elasticity of demand:  

 It helps:  
 (a) to fix the prices of factors of production,  
 (b) to fix the prices of goods or services,  
 (c) to formulate government policies,  
 (d) to forecast demand, and  
 (e) to plan the level of output and price

Supply Analysis – Supply Analysis is a research and analysis done to understand the supply
trends and responses to changing market and production variables. Supply Analysis takes
into account the production costs, raw material costs, technology, labour wages etc. The
analysis helps the manufacturers and companies to understand the impact of these
variables on supply and eventually demand..

Supply Analysis Parameters

Some of the key parameter which determine supply are:
1. Product's own price
2. Input prices
3. Technology
4. Expectations of the market
5. Number of producers present

Supply Function-Supply function is a mathematical description of the connection

between the quantity required of a service or product, its value and other
associated factors such as input costs and related goods prices. A supply
function has many independent variables and a single dependent variable. A
supply equation can be formulated by examining the relationship between the
supply and the independent variables. It can also be formulated by defining
whether the relationship is positively-or negatively related. For example, in
general, the market price and supply are inversely correlated. On the other
hand, supply and technological development are positively correlated; for
example, better technology indicates added supply. 
Law of Supply: The law of supply is the microeconomic law that states that, all
other factors being equal, as the price of a good or service increases, the
quantity of goods or services that suppliers offer will increase, and vice versa.
The law of supply says that as the price of an item goes up, suppliers will
attempt to maximize their profits by increasing the quantity offered for sale.

 Supply in a market can be depicted as an upward sloping supply curve

that shows how the quantity supplied will respond to various prices over
a period of time.
 Because businesses seek to increase revenue, when they expect to
receive a higher price, they will produce more.

Assumptions of Law of Supply are:

 The income of buyers and sellers remains unchanged.
 The commodity is measurable and available in small units.
 The tastes and preferences of buyers remain unchanged.
 The cost of all factors of production does not change over a period of time.
 The time period under consideration is short.
 The technology used remains constant.
 The producer is rational.
 Natural factors remain stable.
 Expectations of producers and the government policy do not change over time.

Exceptions of Law of Supply are:

1. Agricultural products
2. Goods for auction
3. Expectation of change in prices
4. Supply of labour

Supply elasticity : Supply elasticity is a measure of the responsiveness of an

industry or a producer to changes in demand for its product. The availability of
critical resources, technology innovation, and the number of competitors
producing a product or service also are factors. Elasticity of supply is a
measure of a producer's ability to cope effectively with changes in demand

KEY TAKEAWAYS

 The flexibility of production levels affects supply elasticity.

 Availability of critical resources is a factor.
 The number of competitors in an industry affects its supply elasticity.
Price elasticity of supply measures the responsiveness to the supply of a good
or service after a change in its market price.

1. Perfectly Elastic (Es =∞):Supply of a commodity is said to be

perfectly elastic, when the supply changes to any extent irrespective of any
change in its price. It means that at a price, any quantity of the good can be
supplied. But, at a slightly lower price, the firm will not sell at all.

2. Perfectly Inelastic (Es=0):

Supply for a commodity is perfectly inelastic, if supply remains same irrespective of
change in price of the commodity.
 3. Unit Elastic (Es =1):
Supply of a commodity is said to be unit elastic, if the percentage change in quantity
supplied is equal to the percentage change in price.

4. More than Unit Elastic (E s> 1):

When the percentage change in quantity supplied exceeds the percentage change in
price.

5. Less than Unit Elastic (Es < 1):

When the percentage change in quantity supplied is less than the percentage
change in price.
Factors determining :

 Availability of resources
 Technology innovation
 number of competitors
 Flexibility
 Time
 The Nature of the Good

Equilibrium price
The word “equilibrium” means “balance.” If a market is at its equilibrium
price and quantity, then it has no reason to move away from that point.
The equilibrium price is the only price where the plans of consumers and
the plans of producers agree—that is, where the amount of the product
consumers want to buy (quantity demanded) is equal to the amount
producers want to sell (quantity supplied). This common quantity is called
the equilibrium quantity. At any other price, the quantity demanded does
not equal the quantity supplied, so the market is not in equilibrium at that
price.

Example to understand
In the table above, the quantity demanded is equal to the quantity supplied
at the price level of $60. Therefore, the price of $60 is the equilibrium price.
At any other price level, there is either surplus or shortage. Specifically, for
any price that is lower than $60, the quantity supplied is greater than the
quantity demanded, thereby creating a surplus. For any price that is higher
than $60, the quantity demanded is greater than the quantity supplied,
thereby creating a shortage.

The equilibrium price can change in case of a technological advancement

or lower production costs that will increase the supply of the product at any
price level, thereby lowering the EQ.

 Both consumer surplus and producer surplus are economic terms

used to define market wellness by studying the relationship
between the consumers and suppliers.
 The consumer surplus refers to the difference between what a
consumer is willing to pay and what they paid for a product.
 The producer surplus is the difference between the market price
and the lowest price a producer is willing to accept to produce a
good.
 Consumer surplus refers to the monetary gain enjoyed when a
purchaser buys a product for less than what they normally would be
willing to pay. Each corresponding product unit price along the
supply curve is known as the marginal cost (MC).
 the producer surplus is the price difference between the lowest cost
to supply the market versus the actual price consumers are willing to
pay
 Consumer Surplus – ½*Q*P
Q-qt demand or supply at equilibrium
P- The difference between price at equilibrium

Government intension in the market : Governments intervene in markets to

try and overcome market failure. The government may also seek to improve
the distribution of resources (greater equality). The aims of government
intervention in markets include

 Stabilise prices
 Provide producers/farmers with a minimum income
 To avoid excessive prices for goods with important social welfare
 Discourage demerit goods/encourage merit good
Forms of government intervention in markets

1. Minimum prices- This involves the government setting a lower limit for
prices,
2. Maximum prices-This involves putting a limit on any increase in price
e.g. the price of housing rents cannot be higher than £300 per month.
3. Minimum wages-
4. Nudges/Behavioural unit

 Price control -Price controls are government-mandated minimum or

maximum prices set for specific goods and services.
 Price controls are put in place to manage the affordability of goods and
services on the market.
 Minimums are called price floors while maximums are called price
ceilings.
 These controls are only effective on an extremely short-term basis.
 Over the long term, price controls can lead to problems such as
shortages, rationing, inferior product quality, and black markets.

 Production function, in economics, equation that

expresses the relationship between the quantities of
productive factors (such as labour and capital) used and the
amount of product obtained. It states the amount of product
that can be obtained from every combination of factors,
assuming that the most efficient available methods of
 production are used. it studies the fundamental difference between
physical input and output. 
Below is its formula. 
Y= F (L.K)
Here, Y= Production, L= Labour and K= Capital.

BASIS FOR SHORT-RUN LONG-RUN

COMPARION PRODUCTION FUNCTION PRODUCTION FUNCTION

Meaning Short run production Long run production

function alludes to the time function connotes the time
period, in which at least period, in which all the
one factor of production is factors of production are
fixed. variable.

Law Law of variable proportion Law of returns to scale

Scale of No change in scale of Change in scale of

production production. production.

Factor-ratio Changes Does not change.

Entry and Exit There are barriers to entry Firms are free to enter and
and the firms can shut exit.
down but cannot fully exit.

Total Product : refers to the total amount of output that a firm produces within a
given period, utilising given inputs.

TP= AP*L

Average Product : output per unit of inputs of variable factors. 

Average Product (AP)= Total Product (TP)/ Labour (L). 
Marginal Product : denotes the addition of variable factor to total product. 

Thus, Marginal product= Changed output/ changed input. 

In other ways, marginal product leads to an increase of total product with the
help of additional worker or input.

Law of variable proportion

The law of variable proportions states that as the quantity of one factor is increased, keeping the
other factors fixed, the marginal product of that factor will eventually decline. This means that up to
the use of a certain amount of variable factor, marginal product of the factor may increase and after
a certain stage it starts diminishing. When the variable factor becomes relatively abundant, the
marginal product may become negative.

Assumptions:

 Constant State of Technology – Should be unchanged.

 Fixed Amount of Other Factors.
 Possibility of Varying the Factor proportions
 Short-Run -law operates in the short-run

Example : The law of variable proportion is illustrated in the following table and figure. Suppose
there is a given amount of land in which more and more labour (variable factor) is used to produce
wheat.
3 Stages of the Law of Variable Proportions:
 . Stage of Increasing Returns - total product increases at an increasing rate up to a point. This
stage is called the stage of increasing returns because the average product of the variable
factor increases throughout this stage. This stage ends at the point where the average
product curve reaches its highest point.

 . Stage of Diminishing Returns : total product continues to increase but at a diminishing rate
until it reaches its maximum point . here, both the marginal product and average product of
labour are diminishing but are positive. This is because the fixed factor becomes inadequate
relative to the quantity of the variable factor. This stage is important because the firm will
seek to produce in this range.

 Stage of Negative Returns: total product declines and therefore the TP curve slopes
downward. As a result, marginal product of labour is negative In this stage the variable
factor (labour) is too much relative to the fixed factor.

Law of Return to Scale

The law of returns to scale explains the proportional change in
output with respect to proportional change in inputs. In other
words, the law of returns to scale states when there are a
proportionate change in the amounts of inputs, the behavior of
output also changes.
 1.Increasing Returns to Scale: If the proportional
change in the output of an organization is greater
than the proportional change in inputs, the
production is said to reflect increasing returns to
scale. For example, to produce a particular product, if
the quantity of inputs is doubled and the increase in
output is more than double, it is said to be an
increasing returns to scale.

2. Constant Returns to Scale: production is said to

generate constant returns to scale when the proportionate
change in input is equal to the proportionate change in
output. For example, when inputs are doubled, so output
should also be doubled, then it is a case of constant
returns to scale.

3.Diminishing Returns to Scale:- proportionate change

in output is less than the proportionate change in input.
For example, when capital and labor is doubled but the
output generated is less than doubled, the returns to scale
would be termed as diminishing returns to scale.

Economies /diseconomies of scale :

Economies of scale are when the cost per unit of production (Average
cost) decreases because the output (sales) increases.

Diseconomies of scale are when the cost per unit of production (Average
cost) increases because the output (sales) increases.

Internal Economies : -are those economies which are internal to the firm. These arise
within the firm as a result of increasing the scale of output of the firm. A firm secures these
economies from the growth of the firm independently.
  Technical Economies

 ) Managerial Economies

 Marketing Economies

 Financial Economies

 Risk Bearing Economies

 Economies of Scale

External Economies : are those economies which are not specially availed
of by .any firm. Rather these accrue to all the firms in an industry as the industry
expands.

 Economies of localization

 Economies of vertical disintegration

 Economies of information

 Economies of by products

Internal Diseconomies of Scale are the Diseconomies resulting from the

internal difficulties within the organisation. The Internal Diseconomies are the
factors which raise the cost of production of an organisation like lack of
supervision, lack of management and technical difficulties.
External Diseconomies of Scale: External Diseconomies of Scale are the
external factors which result in the increase in the production per unit of a
product within an organisation. The external factors that act as a restrain to
expansion may include the cost of production per unit, scarcity of raw
materials, and low availability of skilled labours.

Cost Analysis : In economics, the Cost Analysis refers to the measure of

the cost – output relationship, i.e. the economists are concerned with
determining the cost incurred in hiring the inputs and how well these can be
re-arranged to increase the productivity (output) of the firm. the cost
analysis is concerned with determining money value of inputs (labor, raw
material), called as the overall cost of production which helps in deciding
the optimum level of production.

Cost Function ; A cost function is a function of input prices and output

quantity whose value is the cost of making that output given those input
prices, often applied through the use of the cost curve by companies to
minimize cost and maximize production efficiency. There are a variety of
different applications to this cost curve which include the evaluation of
marginal costs and sunk costs. 

In economics, the cost function is primarily used by businesses to determine

which investments to make with capital used in the short and long term. 

Different Costs:

Social cost in neoclassical economics is the sum of the private costs resulting
from a transaction and the costs imposed on the consumers as a consequence of
being exposed to the transaction for which they are not compensated or charged. In
other words, it is the sum of private and external costs. The cost of natural resources
for which the firms are not required to pay, for example, river, lake, atmosphere, etc.

The Physical cost is the cost price related to the value at time of receipt or issue the
goods. The Financial cost is the cost known at time of invoicing the goods. The settlement is
related to inventory closing

Revenue Structure : A revenue structure is a model of the revenue of an industry,

organization, business model or business unit. It is used to plan strategy and
communicate the revenue streams of a business or investment. A revenue structure
includes major categories of revenue visualized to represent their relative sizes
A revenue model is a part of the business model that explains different mechanisms
of income generation and its sources. This is a high level answer to the question that
asks how we will generate revenue from the value we bring to a certain customer
group.

The simplest example of a revenue model is a high traffic blog that places ads to
earn profit. Web resources that generate content for the public, e.g. news (value),
will make use of its traffic (audience), to place ads. The ads in turn will generate
revenue that a website will use to cover its maintenance costs and staff salaries,
leaving the profit

Firm’s Equilibrium conditions : A firm is a unit engaged in the

production for sale at a profit and with the objective of maximizing
profit.” -Watson
A firm is in equilibrium when it is satisfied with its existing level of
output. The firm wills, in this situation produce the level of output
which brings in greatest profit or smallest loss. When this situation
is reached, the firm is said to be in equilibrium.

“Where profits are maximized, we say the firm is in equilibrium”. -

Prof. RA. Bilas

Conditions for Firms equilibrium:

1. The first condition for the equilibrium of the firm is that its
profit should be maximum. -A firm is said to be in equilibrium
when it maximizes its profit. It is the point when it has no
tendency either to increase or contract its output. Now, profits
are the difference between total revenue and total cost. So in
order to be in equilibrium, the firm will attempt to maximize
the difference between total revenue and total costs
2. Marginal cost should be equal to marginal revenue-profits of a
firm can be estimated by calculating the marginal revenue and
marginal cost at different levels of output. Marginal revenue is
the difference made to total revenue by selling one unit of
output. Similarly, marginal cost is the difference made to total
cost by producing one unit of output. The profits of a firm will
be maximum at that level of output whose marginal cost is
equal to marginal revenue. Thus, every firm will increase
output till marginal revenue is greater than marginal cost. On
the other hand, if marginal cost happens to be greater than
marginal revenue the firm will sustain losses. Thus, it will be
in the interest of the firm to contract the output.

3.  MC must cut MR from below-

Profit Maximization : Profit maximisation is a process business

firms undergo to ensure the best output and price levels are
achieved in order to maximise its returns.
Influential factors such as sale price, production cost and output
levels are adjusted by the firm as a way of realising its profit goals.
In business, profit maximisation is a good thing, but it can be a bad
thing for the client if, for example, lower-quality materials and labour
are used or if the business decides to raise the prices for executing
projects, all in pursuit of profit maximisation.

Advantages :

 Economic survival
 Measurement standard
 Social and economic welfare

Disadvantages:

 Time value of money is ignored

 Attention not paid to risk
 Ignores quality

MARKETING NOTES

UNIT 1 :

Meaning, definition and Approaches to marketing

 The term “Marketing “is derived from “Market”, which can be

defined as – “a place where buyers and sellers gather to buy
and sell the products”. But Marketing is not only about
selling; because in order to sell the product we must know the
needs (basic requirements) of the customers . Also the
Management process comprises of five M’s i.e. men, money,
materials, machines and markets. Marketing is the last
component of this chain. The success of a business enterprise
lies not only in production, but mainly in successful
marketing. . Marketing is the process of getting potential clients or
 customers interested in your products and services. The keyword in
this definition is "process". Marketing involves researching,
promoting, selling, and distributing your products or services In
essence, the marketing concept is customer orientation aimed at generating customer-
satisfaction through integrated marketing. Marketing may be narrowly defined as a
process by which goods and services are exchanged and the values determined in
terms of money prices. That means marketing includes all those activities carried on
to transfer the goods from the manufacturers or producers to the consumers.

The components of marketing concept are as under:

a. Satisfaction of Customers: In the modern era, the customer is the focus of the
organization. The organization should aim at producing those goods and services,
which will lead to satisfaction of customers.

b. Integrated marketing: The functions of production, finance and marketing should

be integrated to satisfy the needs and expectations of customers.

c. Profitable sales volume: Marketing is successful only when it is capable of

maximizing profitable sales and achieves long-run customer satisfaction.

Def:

1. The American Marketing Association offers the following formal definition:

Marketing is an organizational function and a set of processes for creating,
communicating and delivering value to customers and for managing customer
relationships in ways that benefit the organization and its stake holders.

2. Philip Kotler defines marketing as ―a social process by which individuals and

groups obtain what they need and want through creating, offering and freely
exchanging products and services of value with others‖.

Approaches To Marketing :
1. Commodity Approach: The focus here is the product or the
commodity . Everything about a product is studied in this
 approach. A detailed study will be made on the nature of
the product, the source of supply, the pricing pattern, the
kind of promotional tool used, packing, brand selection,
the middlemen in the market and so on.

2. Functional Approach : In this approach the functions of

marketing become the target of study. Each of the functions
of marketing, namely, buying, assembling, selling, transport,
standardization, grading, storage and warehousing, financing,
risk-taking and market information will be analyzed in detail.

3. Institutional Approach: The institutions engaged

in the field of marketing become the focal point of
such an approach. There are a number of
institutions that are involved in marketing
activity. These include manufacturers,
wholesalers, retailers, transport organizations,
warehouses and so on.

4. Decision-making Approach : Decisions help to find

solutions to problems. Problems faced by marketers are
caused by both controllable and uncontrollable factors.

The controllable factors include quality, price, cost, profit,

production, sales, promotional tool and so on.
The uncontrollable factors include among others Government
policies, competitors’ actions and suppliers’ decisions.

Under the decision-making approach the manner in which

these various factors will be handled, to get rid of marketing
problems, is studied.

5. Legal Approach: This approach considers only the

legal aspects of marketing. A number of laws have been
 enacted in India to safeguard the interests of both the
buyers and sellers.

The Sale of Goods Act, The Consumer Protection Act, The

Essential Commodities Act, Prevention of Food
Adulteration Act, The Monopolies and Restrictive Trade
Practices Act (MRTP) are some of the laws concerned with
marketing.

6. Economic Approach : The economic aspects

affecting marketing get priority in such an
approach. There are a number of economic
concepts like cost, revenue, competition, demand
and supply that affect marketing.

7. Systems approach: A system is an organized body

of identifiable independent parts. These parts are
called the sub-systems. If business as a whole is a
system, production, finance and marketing are
the sub-systems.

Core concepts of marketing : To understand the customer,

marketplace, and behavior, 5 core customer and marketplace concepts
needed to be mastered.

All marketing efforts are made to attract customers, serve superior value,
and capture return value for the customer in a superior routine than the
competitors in the marketplace who compete with the same motiveSo,
understanding the customer, the marketplace, and their behavior is
essential for any marketing decision and action.
 1. Needs, Wants, and Demands: Need: It is state of deprivation of
sonic basic satisfaction. eg.- food, clothing, safety, shelter.

Want: Desire for specific satisfier need. eg. Indians need food – wants paneer
tikka/ tandoori chicken. Americans need food- wants hamburger/ French fries.

Demand: Want for a specific product backed up by ability and willingness to

buy. eg – Need – transportation.want – Car (say, Mercedes)  but able to buy
only Maruti. Therefore, demand is for Maruti.

Marketers cannot create needs. Needs preexists. Marketers can influence

wants. This is done in combination with societal influencers.

Demand influenced by making the product:

 APPROPRIATE
 ATTRACTIVE
 APPROACHABLE/ AFFORDAI3LE
 AVAILABLE EASILY

2. Product: Anything that can be offered to the market for attention,

acquisition, use or consumption that might satisfy a want or need. It
includes physical objects, services, persons, places, organizations, and
ideas.
 The concept of the product is not limited to physical objects- anything
capable of satisfying a need can be called a product. In addition to
tangible goods, products include services.
 Example: Mobile phone, Laptop, banking, airline, home repair services,
etc.
 
Service: Any activity or benefit that one party can offer to another that
is essentially intangible and does not result in the ownership or
anything.

3. . Value, Satisfaction, and Quality

Customer Value: The difference between the values the customer gains from
owning and using a product and the costs of obtaining the product.

Customer Satisfaction: The extent to which a product’s perceived

performance matches a buyer’s expectations. A customer might be
dissatisfied or satisfied.

1. If the product’s performance falls short of expectations, the buyer is

dissatisfied.
2. if the performance matches or exceeds expectations, the buyer is
satisfied or delighted.

Customer satisfaction depends on a product’s perceived performance in

delivering value relative to a buyer’s expectation. Smart companies aim to
delight customers by promising only what they can deliver, then delivering
more than they promise.

Quality: Programs designed to constantly improve the quality of products,

services, and Marketing processes.

4. Exchange, Transactions, and Relationships

Exchange: The act of obtaining the desired object from someone by offering

something in return.

Example: Hungry people could find food by hunting, fishing, or gathering fruit,

They could beg for food or take food from someone else. Or they could offer
money, another good, or a service in return for food.

Transaction: A trade between two parties that involves at least two things of
value, agreed-upon conditions, a time of the agreement, and a place of
agreement.

Example: One party gives X to another party and gets Y in return. Salvy pays
S600 to buy a television.
Relationship marketing: The process of creating, maintaining, and
enhancing strong, value-laden relationships with customers and other
stakeholders.

5. Market

The set of all actual and potential buyers of a product or service. The size of
the market depends on the number of people who exhibit the need, have
resources to engage in exchange and are willing to offer these resources in
exchange for what they want.

Marketing process and functions of marketing

Marketing Process :
:
Marketing Myopia?
Marketing myopia is a situation when a company has a narrow-
minded marketing approach and it focuses mainly on only one aspect
out of many possible marketing attributes.

For example, a brand focusing on development of high-quality

products for a customer base that disregard quality and only focuses
on the price is a classic example of marketing myopia.

Marketing myopia strikes in when the short term marketing goals are
given more importance than the long term goals. Some examples
being:
  More focus on selling rather than building relationships with the
customers
 Predicting growth without conducting proper research.
 Mass production without knowing the demand.
 Giving importance to just one aspect of the marketing attributes
without focusing on what customer actually wants
 Not changing with the dynamic consumer environment

 EXAMPLES: Kodak lost much of its share to Sony cameras

when digital cameras boomed and Kodak didn’t plan for it.
 Nokia losing its marketing share to android and IOS.
 Hollywood didn’t even tap the television market as it was
focused just on movies.
 Yahoo (worth $100 billion dollars in 2000) lost to Google and
was bought by Verizon at approx. $5 billion (2016).
Marketing Myopia in future
 Dry cleaners – New types of fiber and chemicals will result in
less demand for dry cleaners.
 Grocery stores – A shift to the digital lifestyle will make grocery
stores to disappear.

Evolution of Marketing : Marketing has changed over the

centuries, decades and years. The production centered system
systematically changed into relationship era of today and over the
period; the specializations have emerged such as sales versus
marketing and advertising versus retailing. The overall evolution of
marketing has given rise to the concept of business development.
Marketing has taken the modern shape after going through various
stages since last the end of 19th century. The Production oriented
practice of marketing prior to the twentieth century was conservative and
hidebound by rules-of-thumb and lack of information. Science &
technology developments and specially the development of information
technology have now changed the way people live, the way people do
business and the way people sell and purchase .
 The Simple Trade Era (1400s – 1700s)- At this time, the
industrial revolution had not yet begun and only handmade
products were being sold and exchanged. People made food
and other goods for their own household, and would go on to
sell (or exchange) anything they didn’t use to make some profit.

 The Production Era (1800s – 1920s)- Companies began

following the idea of mass production in order to reduce costs
and sell more. Simply put, the sole focus was to sell, sell, sell!
The Ford Motor Company’s assembly line defined this era, as
other companies soon followed suit and efficiency became
their one and only goal. They also focused their marketing
efforts on how to beat out competitors with the Coca Cola vs.
Pepsi rivalry being one of the most memorable examples in
changing the evolution of marketing.

 The Sales Era (1920s – 1940s)- As more businesses stayed in

competition with each other, their sales tactics became more and more
aggressive. Sales professionals were hired to go door to door selling
products in consumers’ living rooms. It seems back then everywhere you
looked you were being sold something you (likely) didn’t need. These
selling tactics were all considered part of ‘marketing’ and now play a
significant role in the do’s and don’ts of modern marketing efforts.

 The Marketing Department Era (1940s – 1960s)-

Together, the advertising and sales departments created the marketing
department. Interestingly, marketing was used to tell people the value of their
products and why they had to have them, rather than letting consumers decide
for themselves.

 The Marketing Company Era (1960s – 1990s)- At this

point, marketing departments were now the ones spearheading the company’s
initiatives and strategies across every department. A good customer experience
now became the company’s main mission.
  The Relationship Marketing Era (1990s – 2010s)-
Eventually, creating long-lasting relationships with customers became the
objective of most companies. The famous saying “the customer is king” was
popularized during this time, further showcasing the shift in their focus. 

 The Social and Mobile Marketing Era (2010 –

Present) -By this point in time, the tables have now turned and consumers are
the ones to dictate how they receive ads and other marketing content. Ad-less
streaming platforms like Netflix have taken off, making commercials somewhat
obsolete. Similarly, consumers only follow the companies they want to hear
from thanks to social media, email subscription lists, and blog posts. In 2017
digital marketing became a $24 billion dollar industry, with social media and
blogs being the top method of marketing! 

Digital Marketing :
Digital marketing is the use of the Internet, mobile devices, social media, search
engines, and other channels to reach consumers. Some marketing experts consider
digital marketing to be an entirely new endeavor that requires a new way of
approaching customers and new ways of understanding how customers behave
compared to traditional marketing.

KEY TAKEAWAYS

 Digital marketing is the use of the Internet to reach consumers.

 Digital marketing is a broad field, including attracting customers via
email, content marketing, search platforms, social media, and more.

Digital Marketing Channels

 Website Marketing

 Pay-Per-Click (PPC) Advertising

 Content Marketing

 Email Marketing

 Social Media Marketing

 Affiliate Marketing

 Video Marketing
Digital Marketing challenges :

1. Learning About Your Customers

2. Generating Qualified Leads

3. Managing Cash Flow

4. Creating Engaging Content

5. Complying With Privacy and Data-Sharing Regulations

6. Making Websites Accessible

7. Strategizing Mobile-First

8. Establishing an Omnichannel Marketing Strategy

9. Maintaining Brand Consistency and Authority

10. Staying Current With Google’s Algorithms

Emergence of AI : (read about it )

UNIT 2
DIFFERENT ASPECTS OF MARKETING ENVIRONMENT :

Marketing environment is the combination of external and internal

factors and forces that affect the company’s ability to establish a
relationship and serve its customers.

The marketing environment of a business consists of an internal and

an external environment.

 The internal environment is company-specific and includes

owners, workers, machines, materials etc. The internal
environment is under the control of the marketer and can be
changed with the changing external environment .This
environment includes the sales department, the marketing
department, the manufacturing unit, the human resource
department, etc.
Components :
Men:
Minutes
Machinery
Materials
Money

The external environment  constitutes factors and forces which are

external to the business and on which the marketer has little or no
control. The external environment is further divided into two
components: micro & macro.

o The micro or the task environment is also specific to the

business but is external. It consists of factors engaged in
producing, distributing, and promoting the offering.
o The macro or the broad environment includes larger societal
forces which affect society as a whole. It is made up of six
components: demographic, economic, physical,
technological, political-legal, and social-cultural environment.

Micro Environment

The micro-component of the external environment is also known as

the task environment. It comprises external forces and factors that are
directly related to the business. These include suppliers, market
intermediaries, customers, partners, competitors and the public.

Macro Environment

The macro component of the marketing environment is also known as

the broad environment. It constitutes the external factors and forces
which affect the industry as a whole but don’t have a direct effect on
the business

Demographic - according to their size, density, location, age, gender,

race, and occupation.

Economic- purchasing power and spending patterns. These factors

include the GDP, GNP, interest rates, inflation, income distribution,
government funding and subsidies, and other major economic
variables.

Physical- This includes the climatic conditions, environmental change,

accessibility to water and raw materials, natural disasters, pollution
etc.

Technological- innovation, research and development in technology,

technological alternatives, innovation inducements also technological
barriers to smooth operation.

Political-Legal The political & Legal environment includes laws and

government’s policies prevailing in the country

Social-Cultural- lifestyle, values, culture, prejudice and beliefs of the

people.
Importance of Marketing
Environment
 Essential for planning
 Understanding Customers
 Tapping Trends

Threats and Opportunities

 Understanding the Competitors

Features Of Marketing Environment

 Specific and general forces

 Complex
 Dynamic
 Uncertain
 Relative

TRENDS IN MARKETING ENVIRONMENT:

 Artificial Intelligence
Conversational Marketing
Video Marketing
Influencer Marketing
Personalization
Voice Search
Social Media Stories
Content Marketing
Information Protection
Interactive Content
Shoppable Social Media Posts
Focusing on Generation Z

Competitive Environment : A competitive

environment is a system where different businesses
compete with each other by using various marketing
channels, promotional strategies, pricing methods,
etc. This system has regulations within it that
companies should follow.
Types :
Pure competition
Monopolistic competition.
Oligopoly
Monopoly

Competitive Environment Analysis

SWOT Analysis.
Strategic Group Analysis-
Porter's Five Forces - It involves five elements: new entrants, buyers, suppliers,
substitutes, and competitive rivalry. These five influence the level of competition in
your industry.
Growth-Share Matrix-  It's particularly useful for large companies since it helps
them define their product portfolios and decide which products are worth continuing
to invest in and which are no longer worth it.
 Perceptual Mapping-  It enables you to understand how your customers perceive
your product compared to competitors' and whether your positioning strategy
matches your target audience. It can also help you find the gaps you need to resolve.

MIND MAPPING : Mind mapping is a way of linking key concepts

using images, lines and links. A central concept is linked via lines to other
concepts which in turn are linked with other associated ideas. It is similar as a
technique to concept mapping and spider diagrams, the difference being that
true mind mapping involves constructing a hierarchy of ideas instead of pure
random association.

Mind mapping uses the concept of "radiant thinking" – that is, thoughts radiate
out from a single idea, often expressed as an image. Branches flow
backwards and forwards from and to the central idea.

UNIT 3

STEPS of MARKETING RESEARCH :

1. Identify and define the problem: Before you start any

web survey project, you should identify the key issues you hope
to be able to solve.  This step should also include clearly defined
objectives.
2. Develop the approach.  In this step, you need to establish a budget, understand
influencing factors such as the environment or economy, decide on sampling
and survey methods, and formulating hypotheses.
3. Research design. Designing a survey or questionnaire is considered the most
important step in any survey process.  Question design takes a lot of thought and
time.  We like to say, "If you put garbage in, you'll get garbage out."  This means that
if the questions are bad, the data will be bad as well.  During the survey research
design, keep in mind sampling methods and data analysis factors you intend to use.
4. Collect the data. Don't forget to test your survey before to ensure you're fielding the
correct data.  Thankfully, with the help of an online survey tool, this step is relatively
painless.
5. Analyze the Data. The types of analysis you planned to perform on the collected
survey data should have been decided in earlier steps, but after collecting the data
you have to actually perform the survey analysis.  Analysis can be performed using
survey analysis tools like office programs, such as Excel, or more advanced
programs such as SPSS - the complexity of the questions will determine this.
6. Report, Present, Take Action. The final step in the market research process is to
present your survey research findings and draw conclusions.  While Step 3 is the
 most important because it defines the outcome of your survey, if you fail to complete
this last step and act on the findings in some way, the previous steps don't matter.

APPLICATION OF MARKETING RESEARCH:

Marketing research is a process of analyzing and conducting

research about the market to understand market trends. It involves
the proper collection, analysis, and interpretation of information
regarding market conditions. It is mainly conducted to identify the
changes in preferences and behavior of customers arising from
change in market mix elements viz. promotion, place, price, and
product. It may be defined as the mechanism which helps in linking
the customers, producers and several other end users to the
marketer and helps in finding and communicating all required
information.

Marketing research plays an important role in studying the consumer

behavior. It is a very efficient tool for marketers to understand the trends of
the market that mainly consists of information relating to new product
launch in the market, trends in consumer demand, pricing strategy of the
competitor and available close substitutes of the product. Through
marketing research companies easily identify what their customers want
which helps them in developing products of their use so that competitive
advantage over other competitors can be maintained in the market.
Demand Forecasting-Marketing research helps business in
estimating the demands of customers. It through various forecasting
techniques help business in predicting the right quantity of goods
needed and then accordingly producing it.

Sales Analysis-Marketing research enables business in

analyzing their sales through examining the sales report. It tells which
goods are sold well, whether the sales force is working effectively or
not, which inventory should be stock more and what should be the
production capacity.

Advertising Research-Marketing research has an efficient role

in determining an effective and appropriate advertising medium. It
analyses various aspects of advertising like themes, appeals,
headlines, communication clarity, attention value etc. according to
the advertising goals of business.

Positioning Research-Marketing research enables in

developing the optimal position of a brand or service in the market. It
collects and supplies all relevant information about potential
customers to business and this way helps in positioning the products
among customers in better way.

Market Segmentation-This process collects and

communicates all facts about market to companies. It is the medium
through which business is able to acquire key attributes about their
potential customers which helps them in creating different target
market groups.

Product Research-Marketing research is a significant tool for

planning and developing of products. It enables business in
designing the right product by providing all information regarding
new ideas in market, testing the new product and evaluating the
current product mix to find out the changes that need to be brought in
it.
 Pricing Research-It helps business in framing proper price
strategies for setting right price of its products. Marketing research
collects all information regarding competitors pricing strategies,
customer’s price expectations and various factors affecting the
pricing decisions.

Distribution Research-This research aims at choosing the

most appropriate distribution channel to deliver the products to
customers in less time. Marketing research analyses and identifies
the potential distribution channel, chooses efficient market
intermediaries, reduces the distribution cost and evaluates the
performance of the distribution channels.

Customer Satisfaction Research- means interacting with

customers and taking information about their shopping experience
with brand. Marketing research takes customers feedback and
focuses on their perception regarding the company products

MARKET RESEARCH TRENDS :

Artificial Intelligence Will Dominate the Consumer Engagement-Amazon's Echo, Google
Home, and other chat bots have successfully created a wave of Artificial Intelligence (AI)
in our daily lives in the years to come, AI will ease the task of field engagement, survey,
and questionnaire development.

 Data scientists are going to play a crucial role for enterprises as they gather a specific amount
of data on consumer behavior patterns and preferences to understand the behavior of their
customers better
 AI will significantly aid in market analysis but it will be a challenging task to eliminate
traditional research methods altogether
 Traditional methods such as surveys and qualitative research will continue to be a crucial part
of market research activities

 Blockchain for Marketing Will Gain Popularity- Of late there has been an emergence of
companies providing market research through blockchain. While the market has
witnessed blockchain in its financial form, the era has arrived when blockchain will start
 expanding into different verticals of global markets. Blockchain will reduce the risk of
fraudulent surveys because of immutable records and new ID verification
 In case of multiple similar surveys over long periods of time, it will be easy to locate the
participants of the earlier surveys through the blockchain
 Blockchain will help companies distribute their content in a way that will ensure fairness in
payment, security and trust to contributors, writers, editors, and consumers alike.

Automation Will be on the Rise

 It is a no-brainer that automation leads to higher productivity and also helps to save
time. This is one of the reasons why some companies use VBA in MS Excel.
Automation helps to increase the accuracy of the same while speeding up the process. It
also helps to ease out the process of ad testing while human researchers are busy
analyzing the results.
 Automation will continue to prove to be a boon for consumer data collection where you can
provide consumers with one-click forms and wait for the data to arrive
 It may look less influential but over a period of time automation is going to be extremely
impactful in market research

Voices on Social Media Platforms Will Gain Momentum

Social media has emerged as the voice of people! Analysis of social media exchanges of
opinions and reviews about your products/services can help you communicate better
with your target customers directly, and improve the impact of your marketing efforts.
conducting market research on social media has increased the audience size by a wide
range.

Hashtags Will Do the Talking

Hashtags help to set up the premise for the audience wherein people can share their
opinion or reviews on the same lines. Businesses are now dwelling on hashtag strategy
for effective marketing campaigns.

Experience-driven Market Will Flourish

Earlier the product and consumer cycles were based on the formula "brand = promise +
experience" where the brand had the power to shape the productIn an experience-driven
market, there will not be any promises which will be broken because a customer's next
purchase will depend on the experience of the previous purchase. Delivering consumer
experience first through the product, and then going back in the cycle to align the brand
promise, is what the market of the 21st-century demands.
Emotional Advertising Will Rule the Roost
Instead of taking the mechanical path to market products and services where you are just
promoting a product in a video or through creative visuals, making an ad which depicts
emotions of people, will lead to effective brand communication. Businesses will use
multiple forms of emotion in their ads. Gaining mastery into pulling the right plug of
emotion towards audiences is what companies will aim for because boring ads are out of
fashion now.

Serving Community Over Bunch of Buyers to Gain Momentum

Solving the problem for the masses has always been the greater guiding force for
successful companies. Focusing on the larger aspects of the solution rather than the
smaller ones is the key.

DEMAND FORECASTING AND SALES ESTIMATION :

No business owner has a crystal ball showing what customers will want during the
upcoming year and how much of it they will buy. Fortunately, you can forecast demand
using tools and information. While your demand estimation is unlikely to ever be
completely accurate, it will still provide you with valuable benchmarks to help you plan.
You can estimate and forecast demand using sophisticated mathematical tools based on
sampling your entire industry, identifying trends and variables, and applying formulas
developed by experts. Demand forecasting is the process of predicting future sales by
using historical sales data to make informed business decisions about everything from
inventory planning to running flash sales. Demand forecasting helps estimate the total
sales and revenue for a future period of time. Without a thorough understanding of
demand, businesses aren’t capable of making the right decisions about marketing
spend, production, staffing, and more. Through it will never be 100% accurate,
forecasting demand can help you improve production lead times, increase operational
efficiencies, save money, launch new products, and provide a better customer
experience overall.
The main features of the demand forecasting are;

1. Demand Forecasting is a process to investigate and measure the forces that determine sales for
existing and new products.

2. It is an estimation of most likely future demand for a product under given business conditions.

3. It is basically an educated and well thought out guesswork in terms of specific quantities

4. Demand Forecasting is done in an uncertain business environment.

 5. Demand Forecasting is done for a specific period of time (i.e. the sufficient time required to take a
decision and put it into action).

6. It is based on historical and present information and data.

7. It tells us only the approximate expected future demand for a product based on certain
assumptions and cannot be 100% precise.

Demand Forecasting Process :

 Specifying the objective of Demand Forecasting

 Determining the nature of goods
 Determining the time perspective
 Determining the level of forecasting;
 Selection of proper method or technique of forecasting
 Data Collection and modification
 Data analysis and estimations

Sales Estimation :
 A sales forecast helps every business make better business decisions. It helps
in overall business planning, budgeting, and risk management. 
 Sales forecasting allows companies to efficiently allocate resources for future
growth and manage its cash flow.
 Sales forecasts help sales teams achieve their goals by identifying early
warning signals in their sales pipeline and course-correct before it’s too late
 Sales forecasting also helps businesses to estimate their costs and revenue
accurately based on which they are able to predict their short-term and long-
term performance.

Factors to Keep in Mind for Accurate Sales

forecasting:
 Look at Historic Data and Reports
 Define the Sales Process 
 Invest in a CRM 
 Pick a Sales Forecasting Method
 Consider Both External and Internal Factors
Significance of Marketing in the modern world :

1. Provides Employment
2. Delivery of Standard of Living
3. Helpful in Increasing Profits
4. Protection Against Slump
5. Increases National Income
6. Facilitates Choice
7. Increases the Knowledge of Customer
8. Customer Satisfaction
9. Helpful in Business Planning and Decision Making
10. Key Factor in Distribution
11. Reduces Distribution Cost
12. Helpful in Communication Between Firm and Society
13. Importance in Sellers Market
14. Necessary for Developing Country

UNIT 4
Understanding Consumer Behaviour
Consumer behavior is the study of consumers and the processes
they use to choose, use (consume), and dispose of products and
services, including consumers’ emotional, mental, and behavioral
responses.

Consumer behavior incorporates ideas from several sciences

including psychology, biology, chemistry, and economics.

Studying consumer behavior is important because it helps

marketers understand what influences consumers’ buying
decisions.

By understanding how consumers decide on a product, they can fill

in the gap in the market and identify the products that are needed
and the products that are obsolete.

Studying consumer behavior also helps marketers decide how to

present their products in a way that generates a maximum impact
on consumers. Understanding consumer buying behavior is the key
secret to reaching and engaging your clients, and converting them
to purchase from you. Consumer behavior is often influenced by
different factors. Marketers should study consumer purchase
patterns and figure out buyer trends.

In most cases, brands influence consumer behavior only with the

things they can control; think about how IKEA seems to compel you
to spend more than what you intended to every time you walk into
the store.

1. Personal factors: an individual’s interests and opinions can be

influenced by demographics (age, gender, culture, etc.).
2. Psychological factors: an individual’s response to a marketing
message will depend on their perceptions and attitudes.
3. Social factors: family, friends, education level, social media,
income, all influence consumers’ behavior.
Types of consumer behavior
There are four main types of consumer behavior:

1. Complex buying behavior

This type of behavior is encountered when consumers are buying an expensive,
infrequently bought product. They are highly involved in the purchase process and
consumers’ research before committing to a high-value investment. Imagine buying
a house or a car; these are an example of a complex buying behavior.

2. Dissonance-reducing buying behavior

The consumer is highly involved in the purchase process but has difficulties
determining the differences between brands. ‘Dissonance’ can occur when the
consumer worries that they will regret their choice.

Imagine you are buying a lawnmower. You will choose one based on price and
convenience, but after the purchase, you will seek confirmation that you’ve made the
right choice.

3. Habitual buying behavior

Habitual purchases are characterized by the fact that the consumer has very little
involvement in the product or brand category. Imagine grocery shopping: you go to
the store and buy your preferred type of bread. You are exhibiting a habitual pattern,
not strong brand loyalty.

4. Variety seeking behavior

In this situation, a consumer purchases a different product not because they weren’t
satisfied with the previous one, but because they seek variety. Like when you are
trying out new shower gel scents.

The Consumer Decision Processes:

The Consumer Decision Processes (also known as Buyer Decision Processes) refer
to the decision-making stages that a consumer undergoes before, during, and after
they purchase a product or service.

John Dewey introduced 5 stages which consumers go through when they are
considering a purchase:

 Problem or Need Recognition: This is the first stage of the Consumer Decision
Process in which the consumer is able to recognize what the problem or need is and
subsequently, what product or kind of product would be able to meet this need. It is
oftentimes recognized as the first and most crucial step in the process because if
 consumers do not perceive a problem or need, they generally will not move forward
with considering a product purchase.
 A need can be triggered by internal or external stimuli.
 Internal stimuli refers to a personal perception experienced by the consumer,
such as hunger or thirst.

 Human needs as identified by Maslow:

 At the bottom of the hierarchy are the “Basic needs or Physiological needs” of a
human being: food, water, sleep and sex.
 The next level is “Safety Needs: Security, Order, and Stability”. These two steps are
important to the physical survival of the person.
 Once individuals have basic nutrition, shelter and safety, they attempt to accomplish
more. The third level of need is “Love and Belonging”, which are psychological needs;
when individuals have taken care of themselves physically, they are ready to share
themselves with others, such as with family and friends.
 The fourth level is achieved when individuals feel comfortable with what they have
accomplished. This is the “Esteem” level, the need to be competent and recognized,
such as through status and level of success.
 Then fifth is the “Cognitive” level, where individuals intellectually stimulate themselves
and explore.
  Finally, there is the “Aesthetic” level, which is the need for harmony, order and beauty.

At the top of the pyramid, “Need for Self-actualization” occurs when individuals reach
a state of harmony and understanding because they are engaged in achieving their
full potential.

Information Search
 Information Search is a stage in the Consumer Decision Process during which a
consumer searches for internal or external information.
 During the information search, the options available to the consumer are
identified or further clarified.
 An internal search refers to a consumer’s memory or recollection of a product,
oftentimes triggered or guided by personal experience.
 An external search is conducted when a person who has no prior knowledge
about a product seeks information from personal sources (e.g. word of mouth
from friends/family) and/or public sources (e.g. online forums, consumer
reports) or marketer dominated sources (e.g. sales persons, advertising).

Evaluating Alternatives

During the evaluation of alternatives stage, the consumer evaluates all the products
available on a scale of particular attributes.

 During this stage, consumers evaluate all of their products or brand options on
a scale of attributes which have the ability to deliver the benefit that they are
seeking.
 In order for a marketing organization to increase the likelihood that their brand
is part of the evoked set for many consumers, they need to understand what
benefits consumers are seeking and specifically, which attributes will be most
influential to their decision-making process.
 It is important to note that consumers evaluate alternatives in terms of the
functional and psychological benefits that they offer.
 During this stage, consumers can be significantly influenced by their attitude as
well as the degree of involvement that they may have with the product, brand,
or overall category.
 Ultimately, consumers must be able to effectively assess the value of all the
products or brands in their evoked set before they can move on to the next
step of the decision process.
Purchase

During the purchase decision stage, the consumer may form an intention to buy the
most preferred brand or product.

 During this time, the consumer may form an intention to buy the most preferred
brand because he has evaluated all the alternatives and identified the value
that it will bring him.
 The final purchase decision, can be disrupted by two factors: 1. Negative
feedback of others and our level of motivation to comply or accept the
feedback. 2. The decision may be disrupted due to a situation that one did not
anticipate, such as losing a job or a retail store closing down.
 During this stage, the consumer must decide the following: 1. from whom he
should buy, 2. when to buy, and 3. whether to buy.

Post-Purchase Behavior
 Post-purchase behavior is when the customer assesses whether he is satisfied or
dissatisfied with a purchase.
 How the customer feels about a purchase will significantly influence whether he
will purchase the product again or consider other products within the brand
repertoire.
 Cognitive dissonance is when the customer experiences feelings of post-
purchase psychological tension or anxiety.
 Some companies like to engage their consumers with post-purchase
communications in an effort to influence their feelings about their purchase and
future purchases.

Factors influencing consumer behaviour :

1. Psychological Factors
Human psychology is a major determinant of consumer behavior. These factors are
difficult to measure but are powerful enough to influence a buying decision.
Some of the important psychological factors are:
i. Motivation
When a person is motivated enough, it influences the buying behaviour of the
person. A person has many needs such as the social needs, basic needs, security
needs, esteem needs and self-actualization needs. basic needs and security needs
have the power to motivate a consumer to buy products and services.
ii. Perception
Consumer perception is a major factor that influences consumer behavior. Customer
perception is a process where a customer collects information about a product and
interprets the information to make a meaningful image about a particular product.

iii. Learning
When a person buys a product, he/she gets to learn something more about the
product. Learning comes over a period of time through experience. A consumer’s
learning depends on skills and knowledge.

iv. Attitudes and Beliefs

Consumers have certain attitude and beliefs which influence the buying decisions
of a consumer. Based on this attitude, the consumer behaves in a particular way
towards a product..

2. Social Factors
Humans are social beings and they live around many people who influence their
buying behavior. Human try to imitate other humans and also wish to be socially
accepted in the society. Hence their buying behavior is influenced by other people
around them. These factors are considered as social factors. Some of the social
factors are:
i. Family
Family plays a significant role in shaping the buying behavior of a person. A
person develops preferences from his childhood by watching family buy products
and continues to buy the same products even when they grow up.
ii. Reference Groups
Reference group is a group of people with whom a person associates himself.
Generally, all the people in the reference group have common buying behavior and
influence each other.
iii. Roles and status
A person is influenced by the role that he holds in the society. If a person is in a
high position, his buying behavior will be influenced largely by his status. A
person who is a Chief Executive Officer in a company will buy according to his
status while a staff or an employee of the same company will have different buying
pattern. 

3. Cultural factors
A group of people are associated with a set of values and ideologies that belong to
a particular community. When a person comes from a particular community,
his/her behavior is highly influenced by the culture relating to that particular
community. Some of the cultural factors are:
i. Culture
Cultural Factors have strong influence on consumer buyer behavior.  Cultural
Factors include the basic values, needs, wants, preferences, perceptions, and
behaviors that are observed and learned by a consumer from their near family
members and other important people around them.
ii. Subculture
Within a cultural group, there exists many subcultures. These subcultural groups
share the same set of beliefs and values. Subcultures can consist of people from
different religion, caste, geographies and nationalities. These subcultures by itself
form a customer segment.
iii. Social Class
Each and every society across the globe has form of social class. The social class is
not just determined by the income, but also other factors such as the occupation,
family background, education and residence location. Social class is important to
predict the consumer behavior.

4. Personal Factors
Factors that are personal to the consumers influence their buying behavior. These
personal factors differ from person to person, thereby producing different
perceptions and consumer behavior.
Some of the personal factors are:
i. Age
Age is a major factor that influences buying behavior. The buying choices of youth
differ from that of middle-aged people. Elderly people have a totally different
buying behavior. Teenagers will be more interested in buying colorful clothes and
beauty products. Middle-aged are focused on house, property and vehicle for the
family.
ii. Income
Income has the ability to influence the buying behavior of a person. Higher income
gives higher purchasing power to consumers. When a consumer has higher
disposable income, it gives more opportunity for the consumer to spend on
luxurious products. Whereas low-income or middle-income group consumers
spend most of their income on basic needs such as groceries and clothes.
iii. Occupation
Occupation of a consumer influences the buying behavior. A person tends to buy
things that are appropriate to this/her profession. For example, a doctor would buy
clothes according to this profession while a professor will have different buying
pattern.
iv. Lifestyle
Lifestyle is an attitude, and a way in which an individual stay in the society. The
buying behavior is highly influenced by the lifestyle of a consumer. For example
when a consumer leads a healthy lifestyle, then the products he buys will relate to
healthy alternatives to junk food.

5. Economic Factors
The consumer buying habits and decisions greatly depend on the economic
situation of a country or a market. When a nation is prosperous, the economy is
strong, which leads to the greater money supply in the market and higher
purchasing power for consumers. When consumers experience a positive economic
environment, they are more confident to spend on buying products.
Whereas, a weak economy reflects a struggling market that is impacted by
unemployment and lower purchasing power.
Economic factors bear a significant influence on the buying decision of a
consumer. Some of the important economic factors are:
i. Personal Income
When a person has a higher disposable income, the purchasing power increases
simultaneously. Disposable income refers to the money that is left after spending
towards the basic needs of a person.
When there is an increase in disposable income, it leads to higher expenditure on
various items. But when the disposable income reduces, parallelly the spending on
multiple items also reduced.
ii. Family Income
Family income is the total income from all the members of a family. When more
people are earning in the family, there is more income available for shopping basic
needs and luxuries. Higher family income influences the people in the family to
buy more. When there is a surplus income available for the family, the tendency is
to buy more luxury items which otherwise a person might not have been able to
buy.
iii. Consumer Credit
When a consumer is offered easy credit to purchase goods, it promotes higher
spending. Sellers are making it easy for the consumers to avail credit in the form of
credit cards, easy installments, bank loans, hire purchase, and many such other
credit options. When there is higher credit available to consumers, the purchase of
comfort and luxury items increases.
iv. Liquid Assets 
Consumers who have liquid assets tend to spend more on comfort and luxuries.
Liquid assets are those assets, which can be converted into cash very easily. Cash
in hand, bank savings and securities are some examples of liquid assets. When a
consumer has higher liquid assets, it gives him more confidence to buy luxury
goods.
v. Savings
A consumer is highly influenced by the amount of savings he/she wishes to set
aside from his income. If a consumer decided to save more, then his expenditure on
buying reduces. Whereas if a consumer is interested in saving more, then most of
his income will go towards buying products.

UNIT 5

Understanding Market Segmentation, Targeting and

Positioning. (STP)

As product markets tend to mature, customer needs often become

more specialized. Depending on the level of competition in the
product market, segmentation is the natural response of marketers
to deal with the situation in market. Market segmentation simply
means dividing up a market into distinct groups that-(i) have
common needs, and (ii) will respond similarly to a marketing
action.

1. Demographic Segmentation: (i.e., age, gender,

marital status, income, education, and income)
2. Geographic Segmentation: region, city size, density of
population, and climate
3. Psychographic/Lifestyle Segmentation: (i.e., motivation,
personality, perception, attitude, and lifestyle)
4. Segmentation Based on Product Usage:
5. Segmentation Based on Brand Loyalty:
6. Segmentation Based on Benefits
7. Segmentation Based on Attitudes
 8. Behavioural segmentation (i.e., benefit, usage rate,
loyalty, and awareness state)

SEGMENTATION OF INDUSTRIAL MARKETS :

1. Geographic Bases :Distance , Location of
Industrial Unit,
 Area and Climate: Area specific segmentation considers place-
specific bases such as hilly, desert, valley, plains, etc., while climate-
based classification includes segmenting market on the basis of
level and intensity of humidity, heat, cold, rains, etc.

2. Types of Industry: Company’s products are

used in different industries.

3. Type of Business Operation:

4. Consumption Rate/ Size:

5. Ownership Factor:
6. Buying Methods:
7. Ordering Time or Frequency
8. Payment Modes and Time
9. Legal Aspects
10. Other Bases:  Occasions ,User status ,Loyalty Pattern, Benefits
Expected , Attitudes, etc.
Service Segmentation:
CONCEPT OF STP: Segmentation targeting positioning marketing is a core concept
in modern-day marketing. Without it, marketing campaigns would be generic, have little to
no personalization, and overall would not be able to convert at a level most businesses
would deem effective.

STP marketing is an acronym for Segmentation, Targeting, and Positioning – a

three-step model that examines your products or services as well as the way you
communicate their benefits to specific customer segments.

In a nutshell, the STP marketing model means you segment your market, target
select customer segments with marketing campaigns tailored to their preferences,
and adjust your positioning according to their desires and expectations

STP marketing is effective because it focuses on breaking your customer base into smaller
groups, allowing you to develop very specific marketing strategies to reach and engage each
target audience. 

Segmentation + Targeting Equals Positioning

Segmentation
The first step of the STP marketing model is the segmentation stage. The main goal
here is to create various customer segments based on specific criteria and traits
that you choose. The four main types of audience segmentation include:
Targeting
Step two of the STP marketing model is targeting. Your main goal here is to look at
the segments you have created before and determine which of those segments
are most likely to generate desired conversions

1. Size: Consider how large your segment is as well as its future growth
potential.
2. Profitability: Consider which of your segments are willing to spend the most
money on your product or service. Determine the lifetime value of customers
in each segment and compare.
3. Reachability: Consider how easy or difficult it will be for you to reach each
segment with your marketing efforts. Consider customer acquisition costs
(CACs) for each segment. Higher CAC means lower profitability. 

There are limitless factors to consider when selecting an audience to target – we’ll
get into a few more later on – so be sure that everything you consider fits with your
target customer and their needs.

Positioning
The final step in this framework is positioning, which allows you to set your product
or services apart from the competition in the minds of your target audience

All the different factors that you considered in the first two steps should have made it
easy for you to identify your niche. There are three positioning factors that can help
you gain a competitive edge:

1. Symbolic positioning: Enhance the self-image, belongingness, or even ego of

your customers. The luxury car industry is a great example of this – they serve
the same purpose as any other car but they also boost their customer’s self-
esteem and image.
2. Functional positioning: Solve your customer’s problem and provide them
with genuine benefits.
3. Experiential positioning: Focus on the emotional connection that your
customers have with your product, service, or brand.  

EXAMPLE : Pepsi and Coco-Cola War

How to create an STP marketing strategy: The full STP model

1. Define the market

2. Create audience segments

3. Construct segment profiles

4. Evaluate the attractiveness of each segment

5. Select target audience/s

6. Develop a positioning strategy

There are several positioning strategy paths you can follow:

1. Category-based positioning – This calls for determining how are your products or
services better than the existing solutions on the market.
2. Consumer-based positioning – This calls for aligning your product/service offering
with the target audience’s behavioral parameters.
3. Competitor-based positioning – This is a pretty straightforward approach that calls
to prove you are better than competitor X.
4. Benefit-based positioning – This calls for proving the benefits that customers will
get from purchasing your product or service.
5. Price-based positioning – This calls for distinguishing based on the value for the
money people get when purchasing your product/service.
6. Attribute-based positioning – Competitors, price, and benefits aside, this calls for
zeroing in on a unique selling proposition that makes your product or service stands
out from the rest.
7. Prestige-based positioning – This calls for proving that your products supply a
certain boost in status to those who purchase.

7. Choose your marketing mix

UNDERSTANDING MARKETING MIX – PRICE

 A marketing mix includes multiple areas of focus as part of a

comprehensive marketing plan. A marketing mix often refers to E.
Jerome McCarthy's four Ps: product, price, placement, and promotion.
 The different elements of a marketing mix work in conjunction with one
another.
 Consumer-centric marketing mixes incorporate a focus on customers into
their approaches.
 Marketing mix is a set of actions a business takes to build and market
its product or service to its customers.
  It helps to make sure that you are able to offer your customers the
right product, at the right time and at the right place for the right price.

Importance of Marketing Mix

There are several benefits of the marketing mix that makes it important to
businesses;

 Helps understand what your product or service can offer to your

customers
 Helps plan a successful product offering
 Helps with planning, developing and executing effective marketing
strategies
 Helps businesses make use of their strengths and avoid unnecessary
costs
 Helps be proactive in the face of risks
 Help determine whether your product or service is suitable for your
customers
 Helps identify and understand the requirements of customers
 Helps learn when and how to promote your product or service to your
customers

Any company which intends to find the right pitch for their product needs to consider an
array of factors before setting out to do it. The marketing mix for any product will be
determined by two factors viz.

Internal Factors
It includes the factors which lie within the organization or is concerned with the inner
atmosphere of the firm. The internal factors are primarily :

 Nature of products
 Product stages in its overall life cycle
 Availability of funds
 Company objectives

External Factors
External Factors concerned with the factors outside the organization. They include the
following aspects :

 Degree of competition
 Efficiency of channel
 The buying behavior of a consumer
 Control from the government side
PRICE : Price is the amount of money charged for a product/service or Total
sum value of exchange the consumer offers for using a product/service. Price is one
of the main factors which affect the consumer’s buying decision. Particularly in price
sensitive segments proper price setting plays a major role in the success of the
product or the service offered. High price will make the buyer to look for other
options. On the other side low price might give an impression that the product might
be of low quality. So marketers must be very careful in setting the correct price.

The process of price setting is described below

 Five major objectives of the companies are

1. Survival
2. Maximum current profit
3. Maximum Market share
4. Maximum market skimming
5. Product-quality Leadership
Example: Sony uses market skimming prices

PRICING STRATEGIES : As with any business decision, determining your pricing

strategy starts with assessing your own business’s needs and goalsThere are dozens
of ways you can price your products, and you may find that some work better than
others — depending on the market you occupy. Consider these seven common
strategies that many new businesses use to attract customers.
Price skimming : Skimming involves setting high prices when a product is
introduced and then gradually lowering the price as more competitors enter
the market. This type of pricing is ideal for businesses that are entering
emerging markets. It gives companies the opportunity to capitalize on early
adopters and then undercut future competitors as they join an already-
developed market.

2. Market penetration pricing

Pricing for market penetration is essentially the opposite of price skimming.

Instead of starting high and slowly lowering prices, you take over a market by
undercutting your competitors. Once you develop a reliable customer base,
you raise prices. Many factors go into deciding on this strategy, like your
business’s ability to potentially take losses upfront to establish a strong footing
in a market. It’s also crucial to develop a loyal customer base, which can
require other marketing and branding strategies.

3. Premium pricing

Premium pricing is for businesses that create high-quality products and

market them to high-income individuals. The key with this pricing strategy is
developing a product that is high quality and that customers will consider to
be high value. You’ll likely need to develop a “luxury” or “lifestyle” branding
strategy to appeal to the right type of consumer.

4. Economy pricing

An economy pricing strategy involves targeting customers who want to save as

much money as possible on whatever good or service they’re purchasing. Big
box stores, like Walmart and Costco, are prime examples of economy pricing
models. Like premium pricing, adopting an economy pricing model depends
on your overhead costs and the overall value of your product.

5. Bundle pricing

When companies pair several products together and sell them for less money than
each would be individually, it’s known as bundle pricing. Bundle pricing is a good
way to move a lot of inventory quickly. A successful bundle pricing strategy
involves profits on low-value items outweighing losses on high-value items
included in a bundle.

6. Value-based pricing

Value-based pricing is similar to premium pricing. In this model, a company bases

its pricing on how much the customer believes the product is worth. This pricing
model is best for merchants who offer unique products, rather than commodities.

7. Dynamic pricing

Dynamic pricing allows you to change the price of your items based on the market
demand at any given moment. Uber’s surge pricing is a great example of dynamic
pricing. During low periods, Ubers can be quite an affordable option. But, when a
rainstorm hits during the morning rush hour, the price of an Uber will skyrocket,
given that demand is also likely to rise. Smaller merchants can do this too,
depending on seasonal demand for your product or service.

 ways to stay ahead in a competitive market :

1. Keep abreast of your costs. Before you consider raising

or lowering prices, review the costs involved in
producing your goods or services. Assess if the prices you are
charging will make decent margins - anything between 20–40 % above
cost value is regarded as a good return.
2. Don't ignore the competition. Find out who’s offering similar products
and services and the prices charged. 

3. Know your customers. Are you looking for an impulse purchase or a

considered choice and what does this say about your product? Are you
aiming for bargain hunters or the top end of the market?

4. Consider a “loss leader” - a product not in itself profitable, but that draws
in customers. Increased sales of pricier offerings effectively offset the
loss.

5. Be unique. Ensure you have a unique selling point (USP) and don't hide
that USP light under a bushel. The aim should be to find ways of making
your product or service less price sensitive, as successful brands such as
Apple have ably demonstrated.

6. Avoid over-discounting. Don’t throw in too many incentives or

discounts; you’ll only eat into your profit and risk betraying a lack of
faith in the original proposition.

7. Location. Varying prices according to where your products are available

is a tactic used by convenience stores. Customers are prepared to pay
more if the shop is on their way home or is over the road from where they
live.

8. Target your market. Consider adapting products to suit the needs of

particular customer groups. This might involve offering economy,
standard and premium versions. This market segmentation approach can
build loyalty and see customers progress to higher price points as their
circumstances and needs change. Offer a free warranty or after-care
service to differentiate yourself from the competition.

9. The cost of credibility. Consider offering joint promotions and share

publicity with businesses/charities you’d like to be associated with.
Respect can pay dividends.

10.Allow different ways to pay. Sometimes, the method of payment is as

critical as being competitively priced. Offering agreed time periods in
which to settle a balance is one way to incentivise purchases, particularly
on high cost items. Allowing payments to be made online or by telephone
are standard options any business should offer.
Concept of value and price and Value Justification.

BASIS FOR
PRICE COST VALUE
COMPARISON

Meaning Price is the Cost is the Value is the

amount paid for amount incurred utility of a good
acquiring any in producing and or service for a
product or maintaining the customer.
service. product.

Figure

Determines What a company What a company What product

charges? incurs or spend? pays to the
customers i.e.
worth.

Ascertainment Price is Cost is Value is

ascertained from ascertained from ascertained
the customer's or the producer's from the
marketer's perspective. consumer's
perspective. perspective.

Estimation Through Pricing Through Through

policy computation of usefulness
expenditure

Impact of Prices of product Cost of inputs Value remains

variations in increase or rises or fall. unchanged.
market decrease.
 BASIS FOR
PRICE COST VALUE
COMPARISON

Monetary Yes Yes No

Measurement

Understanding Marketing Mix-Product

Product : A product is the heart of the marketing mix. All marketing activities begin
with the product. The product is not a physical entity alone; it captures the whole tangible and
intangible aspects like services, personality, organization, and ideas . The product is either
a tangible good or an intangible service that is seem to meet a specific customer
need or demand. All products follow a logical product life cycle and it is vital for
marketers to understand and plan for the various stages and their unique challenges.
It is key to understand those problems that the product is attempting to solve. The
benefits offered by the product and all its features need to be understood and the
unique selling proposition of the product need to be studied. In addition, the potential
buyers of the product need to be identified and understood. The product mix is the
whole range of products a company offers to its customers. Say, for instance, Apple an
authority in electronic brand commands loyalty as a pioneer of mobile technology and e-
devices. Suppose, Apple decides to expand its product line with a new Apple sports shoe.
Thus the product mix of Apple.Inc will cover mobile phones, tablets, iPods, watches and the
new one in line the Apple shoes.

The decisions regarding product mix will depend on many factors like :

 Design
 Features
 Brand name
 Product variety
 Quality
 Services
 Packaging, returns, etc.

Product strategy : Product strategy is often called the roadmap of a product

and outlines the end-to-end vision of the product and what the product will
become. Companies utilize the product strategy in strategic planning and
marketing to identify the direction of the company's activities. The product
strategy is composed of a variety of sequential processes to effectively achieve
the vision. The company must know where they would like the product to take
them in order to identify and plan for the necessary activities to reach that
destination. This is similar in nature to a strategic vision of how a company wants
to achieve its goals. A product strategy is a high-level plan describing what
a business hopes to accomplish with its product and how it plans to do so.
The strategy should answer key questions such as who the product will
serve (personas), how it will benefit those personas, and the company’s
goals for the product throughout its life cycle.

IMPORTANCE OF PRODUCT STRATEGY :

1. A product strategy provides clarity for your company.

2. It helps you prioritize your product roadmap.

3. A product strategy improves your team’s tactical decisions.

Key Components of a Product Strategy?

1. Product vision

2. Goals

3. Initiatives

PRODUCT MIX : Product Mix, another name as Product Assortment, refers to

a number of products that a company offers to its customers. For example, a
company might sell multiple lines of products, with the product lines being
fairly similar, such as toothpaste, toothbrush, or mouthwash, and also other
such toiletries. All these are under the same brand umbrella.  Whereas, a
company may have varied and distinct other product lines that may be in good
contrast to each other, such as medicines and clothing apparel.  
Product mix can also be understood as the complete set of products and
services that are offered by a firm. A product mix consists of the product lines,
which are associated items which a consumer purchases

Dimensions of a Product Mix

1. Width : Width or breadth, that refers to the number of product lines which is
offered by a company to its customers.eg :Amul has different categories of
product ,like dairy , ready to eat , snacks beverages desserts etc .
2. Line :The length refers to the total number of products in a firm’s product
mix strategy.  Eg : dairy products is one of the product width and cheese ,
milk etc are the product lines under this product width
3. Depth :Depth refers to the number of variations that exist in a product line.
Eg : Considering the product width of desserts, one of the product line is ice
cream and the product depth is the no.of flavours ,like vanilla , mango etc. 
4. Consistency :This refers to how closely the products in a product line are
related to each other

IMPORTANCE :

 Customer Needs

 Business Image

 Providing Focus

 Inventory Management

PRODUCT LEVELS : the definition of a product goes way beyond being a

physical object or a service. He defines a product as anything that can
meet a need or a want. This means that even a retail store or a customer
service representative is considered a product.

The model considers that products are a means to an end to meet the
various needs of customers. The model is based on there being three ways
in which customers attach value to a product:
 Customer Need: the lack of a basic requirement.
 »Customer Want: a specific requirement for a product or service to meet a
need.
 »Customer Demand: a set of wants plus the desire and ability to pay to
have them satisfied.

Customers will choose a product based on their perceived value of it. The
customer is satisfied if the product’s actual value meets or exceeds their
expectations. If the product’s actual value falls below their expectations
they will be dissatisfied.

1. Core Benefit
The core benefit is the fundamental need or wants that the customer
satisfies when they buy the product.

For example, the core benefit of a hotel is to provide somewhere to rest or

sleep when away from home.
2. Generic Product
The generic product is a basic version of the product made up of only those
features necessary for it to function.

In our hotel example, this could mean a bed, towels, a bathroom, a mirror,
and a wardrobe.

3. Expected Product
The expected product is the set of features that the customers expect when
they buy the product.

In our hotel example, this would include clean sheets, some clean towels,
Wi-fi, and a clean bathroom.

4. Augmented Product
The augmented product refers to any product variations, extra features, or
services that help differentiate the product from its competitors.

In our hotel example, this could be the inclusion of a concierge service or a

free map of the town in every room.

5. Potential Product
The potential product includes all augmentations and transformations the
product might undergo in the future. In simple language, this means that to
continue to surprise and delight customers the product must be
augmented.

In our hotel, this could mean a different gift placed in the room each time a
customer stays. For example, it could be some chocolates on one
occasion, and some luxury water on another. By continuing to augment its
product in this way the hotel will continue to delight and surprise the
customer.
PRODUCT LIFE CYCLE : The product life cycle is the process a product
goes through from when it is first introduced into the market until it declines
or is removed from the market. The life cycle has four stages—introduction,
growth, maturity, and decline. Companies use PLC analysis (the process of
examining their product's life cycle) to create strategies to sustain their
product's longevity or change it to meet market demand or adapt with/to
developing technologies. 

MANAGING The PRODUCT LIFE CYCLE :

Product lifecycle management, also known as PLM, is the process of overseeing

how an item moves from an idea to a fully mature product. PLM encompasses a
product's design, manufacturing, production, marketing, updates and more. Effective
management of a product's life cycle connects and organizes the different parties
involved in creating a product, improving efficiency and developing a measurable,
goal-oriented process for taking an idea to market.

The purpose of product lifecycle management is to ensure that each product a

company develops has optimal quality, profitability and customer impact. The main
functions of product lifecycle management are:

 Managing documents related to a product such as design blueprints and the

bill of material
  Storing project data and electronic files
 Identifying and streamlining a specific workflow
 Assigning tasks to team members
 Controlling who has access to different product information

Benefits of Product Lifecycle Management

Other benefits include:

 Improved product quality and reliability

 Reduced prototyping costs
 More accurate and timely requests for quote (RFQ), i.e., solicitations from suppliers
 Quick identification of sales opportunities and revenue contributions
 Savings through the reuse of original data
 A framework for product optimization
 Reduced waste
 Improved ability to manage seasonal fluctuation
 Improved forecasting to reduce material costs
 Maximized supply chain collaboration

NEW DEVELOPMENT PROJECT :The new product development process is a

systematic guide for all budding businesses and entrepreneurs that will
help them come up with a customer-oriented, high-quality product that has
the best chance of doing well in the highly competitive markets

8 STAGES OF PRODUCT DEVELOPMENT PROCESS

1. Idea Generation: In this stage, the company comes up

with many different and unique ideas based on both
internal and external sources.
2. Idea Screening :  The primary objective of this stage is
to focus on ideas that are in line with the company’s
customer value and financial goals. The stage focuses
on the filtering out of ideas that are poor or are not
feasible and retain those that have good potential
3. Concept Development and Testing: In this stage, the
good product ideas must be developed into detailed
product concepts that are conveyed in consumer-
oriented terms. The concept must be made in order to
project the product in terms of how it is perceived by
consumers and how it will potentially be received in the
market and by which set of potential customers
 4. Development of Marketing Strategy: “In this step, the
company tries to come up with strategies to introduce a
promising product into the market. 
5. Business Analysis: The product concept is put through
a vigorous business analysis or test in order to ascertain
projected sales and revenue and also assess risk and
whether the production of the product is financially
feasible.

6. Product Development: This is the step that comes after the

management of a company declares a product concept to be in
line with the goals of the company and issues green light for
development. The research and development wing of the
company then works on the product concept for many months
and even years in some cases, to come up with a working and
functional prototype of the product concept.
7. Test Marketing: involves the testing of the product and
its suggested marketing program in realistic market
settings. This stage provides an insight into how the
product will be introduced into the market, advertised,
produced, packaged, distributed, and eventually sold to
the customers, 
8. Commercialization: Based on the information gathered
during the test marketing process, the business
management may either decide to go ahead with the
launch of the product or put it on the backburner. In case
the go-ahead is given, the product is finally introduced
into the market and this process is called
commercialization

Meaning of Brand and its link with Product

 A brand is a name given to a product and/or service such that it takes on an identity
by itself.

 A brand is an intangible marketing or business concept that helps people identify a

company, product, or individual.
  People often confuse brands with things like logos, slogans, or other recognizable
marks, which are marketing tools that help promote goods and services.
 Brands are considered to be among a company's most important and valuable assets.
 Companies can protect their brands by registering trademarks.

 Types of brands include corporate, personal, product, and service brands. st

rong brand is import
REASONS WHY BRAND IS IMPORTANT

Branding improves recognition

Branding creates trust
Branding supports advertising
Branding builds financial value
Branding inspires employees
Branding generates new customers

Difference Between Product and Brand

BrandProductDistinguishes a product from other productsAn item ready for sale in the marketIt is
what customers wantIt is what customers needCannot be copiedCan be copiedCreated by
consumers in their mindProduced by manufacturersCannot be replacedCan easily be replacedA
brand is intangibleProduct is tangibleA brand offers valueProduct performs specific functionsBrand
remains foreverA product can be replaced with time.

Read more: Difference Between Brand and Products |

Difference
Between http://www.differencebetween.net/business/marketin
g-business/difference-between-brand-and-products/
#ixzz7DLgxJz3R

Product analysis Core, Tangible and Intangible benefit of product.

Core Benefit :  the basic customer need that is fulfilled.
The core benefit is the fundamental need that the customer satisfies when
they buy the product.

It is important to think of the core benefit from the customers perspective.

The easiest way to do this is to ask yourself, “Fundamentally, why is the
customer buying this product?”.

For example, the core benefit of a mobile phone is to provide a mechanism

to make telephone calls when away from your home or office.

Tangible benefits are those that are quantifiable and measurable, sometimes called
“hard savings.” In other words, they are improvement project benefits that have some
specific dollar value, number of labor hours, or other specific metric that can be determined
to have been achieved through the project. 

Tangible benefits include cost savings, labor hours, and scrap

reduction, Revenue increase , Resource cost savings , Increased productivity,
Process improvements

Intangible benefits : The intangible benefits, sometimes also called “soft

benefits”, are the profits ascribable to the improvement project that cannot be
reported for formal accounting purposes. Another difference between these two
benefits is that intangible benefits can increase or decrease over time, while the
tangible benefits of a process are unlikely to fluctuate.

These benefits are not included in financial calculations because they are not
monetary or are difficult to quantify and calculate.

Intangible benefits include : Organizational strategy support ,

Enhanced user experience , Increased customer satisfaction ,
Increased customer satisfaction , Brand equity

Understanding Marketing Mix-Place :

Channel management can be defined as a process used by companies to
direct and manage various marketing techniques and the parties involved
in the channel of distribution. The channel management process is used to
reach a broad range of customers through different marketing and sales
channels.

Channel management is a technique of choosing the best and most

efficient channel partners and different routes to make your products
available in the market and to put various efforts to obtain maximum results
from these channels. Separate channels for distribution should be selected
based on your customers.

For example, if you are selling a product for adults, then you might consider
both online as well as offline channels that can sell your products in the
market on your behalf. But if you are in the grocery of sale products, then
selling your products in a well-established store might get you more sales
as compared to online channels.

Therefore, analyze and determine which channel will be suitable for the
sales of your products what output do you expect out of each distribution
channel. In addition to this, it also determines the segment of the
population, which is connected with each distribution channe

Steps of channel management

1. Identification of sources

2.Preparing a selection criterion

3. Selection of intermediaries

4. Providing required training to intermediaries to sell

5. Motivating intermediaries whenever required

6. Assessment of intermediaries

Problems in channel management

1. Lack of communication between the manufacturer and distributors.

2. Decreased sales of products by a distributor because of the presence
of multiple channels. For example, sales of a product get divided when
the manufacturer starts selling products online.
3. Conflict arises when a distributor starts selling products of
competitors. This can happen due to excessive competition.
 4. Lower enthusiasm at the end of the distributor.
5. Delay in shipment and supplies.
6. Not enough marketing and advertising

Selection of channel members :

1. Finding Prospective Channel Members
2. Applying Selection Criteria
3. Securing the Channel Members

Physical distribution (P.D) is an important marketing function

describing the marketing activities relating to the flow of raw
materials from the suppliers to the factory and the movement of
finished goods from the end of production line to the final
consumer or user.
Marketing agencies such as dealers, merchants and mercantile
agents manage the flow of goods and perform the function of
physical supply—right up to the consumer’s homes and stores.

According to Philip Kotler, physical distribution “involves planning,

implementing and controlling the physical flows of materials and
final goods from place of production to the place of end use to
satisfy buyers’ needs.”
The key functions within the physical distribution system are:

 Customer service
 Order processing
 Inventory control
 Transportation and logistics
 Packaging and materials

 Retailing : The act through which goods and services reach the end customer for
individual or business usage is known as retailing. The players involved in this act are known
as retailers. Retailers can be manufactures, distributors or wholesalers . They can reach the
end customer through the internet or physical stores. Retail organizations are divided into
three categories store retailers, non-store retailers and retail organization. Store retailing, the
best example is the department store like Macy or Sears. Store retailers are further divided on
the service level with self service, self selection, limited service and full service stores. Store
retailing comprises over 90% in way products reach the end customer.
 Wholesaling : The act of purchasing goods for consumer and industry for further resale is
referred to as wholesaling. Here, manufactures and farmers are not considered as wholesalers.

Wholesaler is an important part of the marketing channel. Wholesaler increase reach of the company
products and the risk of selling to the customers. Wholesaler can store inventory of various
assortment of product thus helping cost for company and time for customers. Wholesaler can serve
as ears and eyes for the company in understanding competition and customer.

 Marketing Logistics : Logistics is the overall process of managing how

resources are acquired, stored, and transported to their final destination.
 Poor logistics in a business can impact its bottom line.
 Logistics is now used widely in the business sector, particularly by
companies in the manufacturing sectors, to refer to how resources are
handled and moved along the supply chain.

The Intermediaries in Distribution Channels

The Nine Main Intermediaries in Distribution Channels

 Retailers. Retailers are intermediaries used frequently by companies. ...

 Wholesalers. Wholesalers are intermediaries that buy and resell products to
retailers. ...
 Distributors. ...
 Agents. ...
 Brokers. ...
 The Internet. ...
 Sales Teams. ...
 Resellers.
  Electronic Channels include all forms of service provision through
television, telephone, interactive multimedia, and computers

Benefits of electronic channels of services distribution

o Consistent delivery for standardized services:
o Low cost:
o  Customer convenience:
o Wide distribution:
o Customer choice:
o Quick customer feedback:

Understanding Marketing Mix-Promotion

 The Promotion is a mode of communication that companies use to

create awareness among the prospective customers about the
product, product line, brand and the company with an objective to
generate sales and create a brand loyalty.

Promotional strategies have developed over time in order to be able to create the space
you’ve always wanted for your business. By creating communication between the seller and
the buyer, promotional activities are quite useful for a business’ growth.
Some methods of this procedure contain an offer, coupon discounts, free sample
distribution, trial offer, buy two items in the price of one, contest, festival discounts, etc.
The promotion of a product is important to help companies improve their sales because
customers reaction towards discounts and offers are impulsive. In other words,
promotion is a marketing tool that involves enlightening the customers about the goods
and services offered by an organization.

Types of Promotion:
1. Advertising
2. Direct Marketing
3. Sales Promotion
4. Personal Selling
5. Public Relation

Promotion has following three specific purposes:

1. It communicates marketing information to consumers, users and

resellers.
2. It persuades and convinces the buyer and influences his/her
behaviour to take the desired action.
3. Promotional efforts act as powerful tools of competition
providing the cutting edge of its entire marketing programme.
4. Promotion is persuasive communication and also is a
tool of competition. It is a form of non-price competition.
5. Promotion is responsible for awakening and stimulating
consumer demand for a product or service.
6. It can create and stimulate demands, capture demand from rivals
and maintain demand even against stiff competition.
7. While speaking in favour of promotion, it is taken for granted that
the product has the capacity to satisfy consumer expectations and
can fill their wants and desires.
8. The sales promotion is basically aimed at increasing sales. Sales
can be increased mainly by attracting more customers. Promotion is
successful only if the middlemen co-operate with the manufacturer.

Advantages

1. It attracts more customers to the product. The incentives like

price off, premium etc., offered by the manufactures attracts people
to the product
2. It encourages the middlemen to buy and store more- As a result
of the incentives offered more people may go to the shops where the
product will be available. If sufficient quantity is not stocked
customers may shift to some other brands. Sometimes
manufactures encourage middlemen through additional
commission or allowances
3. It encourages the sales force by offering incentives to salesmen.
This will influence salesmen to participate in the campaign
wholeheartedly
4. It boosts sales in the short and long term
5. It reinforces the brand image with the customer

Positioning is a marketing strategy, also referred to as product positioning, which

refers to how a brand wants to be perceived in the mind of customers relative to competing
brands. The objective of a positioning strategy is to establish a single defining
characteristic of a brand in the mind of the consumer. Effective positioning strategies
consider the strengths and weaknesses of the organization, the needs of the customer and
the claims of competitors. Product positioning allows a company or brand to illuminate
areas where it can eclipse the competition.

 10 Benefits of Product Positioning

1. To Make Entire Organisation Market-oriented:
2. To Cope with Market Changes:
3. To Meet Expectation of Buyers:
4. To Promote Consumer Goodwill and Loyalty:
5. To Design Promotional Strategy:
6. To Win Attention and Interest of Consumers:
7. To Attract Different Types of Consumers:
8. To Face Competition:
9. To Introduce New Product Successfully:
10. To Communicate New and Varied Feature Added
Later on

A media mix, or marketing mix, is the combination of communication methods in

which brands can reach their desired audiences. To understand what this means,
consider these four elements:

 Product
 People
 Place
 Promotion
 Price

A media mix encompasses all the possible ways a product reaches

its chosen audience(s)—or people—through avenues like traditional
advertising, grassroots marketing, digital advertising, social media,
email, and landing pages. The idea is to choose the right combination to
communicate with the audience and make an impact as estimated in the media planning
strategy. The media mix is the sum-total of all advertising that a media house or advertising
agency commissions for a specific campaign or media plan.

the advantages of media mix?

1. Its take into account various external factors which makes it an

effective tool for planning of the budget.
2. It helps the marketers in understanding the latest marketing trend that
is going on in the market.
3. It also helps in formulating a better strategy so that more and more
people can get encouraged to buy the product.
IMPORTANCE :

 A brand’s media mix is important for total ROI and testing new
campaigns. Having a diverse mix of media means a brand
isn’t putting all its marketing or advertising budget in one place
and relying on only one method to reach their desired
audience.
 If one method is underperforming, having a diverse mix means
that the other methods can help balance out the total ROI
while you optimize—or choose to eliminate—ineffective
options.
 For example, if a brand has always seen positive results from
digital display ads but is interested in trying Streaming TV ads,
it can allocate half of its advertising budget to digital display
and half to streaming. This allows the brand to test something
new while keeping a safety net in place. Since digital
advertising is a dynamic field, the ability to test and evolve
your strategy is important.

Marketing Planning, Evaluation and Control

Nature, process, and contents of marketing plan : A marketing plan is a written

document that summarizes what the marketer has learned about the
marketplace and indicates how the firms plan to reach its marketing
objectives. It contains tactical guidelines for the marketing programs and
financial allocations over the planning period. It is one of the most important
outputs of the marketing process.

Marketing plans are becoming more customer- and competitor-oriented and

better reasoned and more realistic than in the past. The plans draw more
inputs from all the functions and are team-developed. Marketing executives
increasingly see themselves as professional managers first, and specialists
second. Planning is becoming a continuous process to respond to rapidly
changing market conditions.

PROCESS :
1. Scanning the marketing environment.

2. Internal scanning.

3. Setting the marketing objectives.

4. Formulating the marketing strategy.

5. Developing the functional plans.

Contents of the Marketing Plan:

Section Purpose

Presents a brief overview of the proposed plan for

Executive summary
quick management review

Presents relevant background data on the market,

Current marketing situation
product, competition, and distribution

Threats and opportunity Identifies the main threats and opportunities that
analysis might impact the product

Defines the company’s objectives for the product in

Objectives and issues sales, market share, and profit, and the issues that will
affect these objectives.

Presents the broad marketing approach that will be

Marketing strategy
used to achieve the plan’s objectives.

Specifies what will be done, who will do it, when it is

Action programs
done, and how much it will cost.
 A projected profit and loss statement that forecasts
Budgets
the expected financial outcomes from the plan.

Indicates how the progress of the plan will be

Controls
monitored.

3 Ps of Services
People - The Extended Marketing Mix

People are an essential ingredient in service provision; recruiting and training the
right staff is required to create a competitive advantage. Customers make
judgments about service provision and delivery based on the people representing
your organisation. This is because people are one of the few elements of the
service that customers can see and interact with. The praise received by the
volunteers (games makers) for the London 2012 Olympics and Paralympics
demonstrates the powerful effect people can create during service delivery.

Staff require appropriate interpersonal skills, aptitude, and service knowledge in

order to deliver a quality service. In the UK many organisations apply for the
"Investors in People" Accreditation to demonstrate that they train their staff to
prescribed standards and best practices.

Process - The Extended Marketing Mix

This element of the marketing mix looks at the systems used to deliver the service.
Imagine you walk into Burger King and order a Whopper Meal and you get it
delivered within 2 minutes. What was the process that allowed you to obtain an
efficient service delivery? Banks that send out Credit Cards automatically when
their customers old one has expired again require an efficient process to identify
expiry dates and renewal. An efficient service that replaces old credit cards will
foster consumer loyalty and confidence in the company. All services need to be
underpinned by clearly defined and efficient processes. This will avoid confusion
and promote a consistent service. In other words processes mean that everybody
knows what to do and how to do it.

Physical Evidence (Physical Environment) - The Extended Marketing Mix

Physical evidence is about where the service is being delivered from. It is

particularly relevant to retailers operating out of shops. This element of the
marketing mix will distinguish a company from its competitors. Physical evidence
can be used to charge a premium price for a service and establish a positive
experience. For example all hotels provide a bed to sleep on but one of the things
affecting the price charged, is the condition of the room (physical evidence)
holding the bed. Customers will make judgments about the organisation based on
the physical evidence. For example if you walk into a restaurant you expect a clean
and friendly environment, if the restaurant is smelly or dirty, customers are likely
to walk out. This is before they have even received the service.

Intangibility of services can be explained by a clear comparison

between restaurants and soaps. Soap has a clear metric like 500 grams of
soap and it is something which you can touch and feel and you know what
the exact cost of the product is and what it has to be priced at.

A service like a restaurant is always varying because you pay as per the
service that you receive. You cannot taste the food in a restaurant and then
order the food. You have to first order it and then hope that it is good in
taste. Thus, unlike products, services cannot be touched or felt beforehand.
They have to be first ordered and then they become tangible.
LEGAL ASPECTS OF BUSINESS :

INDIAN PARTNERSHIP ACT 1932

The Indian Partnership Act 1932 defines a partnership as a relation

between two or more persons who agree to share the profits of a
business run by them all or by one or more persons acting for them
all.

Earlier the partnership act was a part of the inidan contract act , but
then due to the need of implementing something new and revising it
became a separate act in 1932 .
PARTNER
According to Section 4 of the Indian Partnership Act, 1932, a partnership is
defined as a relationship between two persons who mutually agreed to share
the profits and losses in the business. Therefore, persons who have entered
into an agreement with one another are individually known as “partners”.

CHARACTERSTICS :
 Existence of an agreement -The Partnership Act,
1932 (Section 5) clearly states that “the relation of
partnership arises from contract and not from
status
 Existence of business -the Partnership Act, 1932
[Section 2 (6)] states that a “Business” includes
every trade, occupation, and profession. Business, of
course, must be lawful.

 Sharing of profits -Act (Section 6) which talks of the ‘mode of

determining existence of partnership’. It says that sharing of
profits is as essential condition, but In the following cases,
persons do share profits, but are not the partners:
(a) By a lender of money to person engaged or about to engage in
any business.

(b) By a servant or agent as remuneration.

(c) By the widow or child of a deceased partner, as annuity {i.e.,

fixed periodical payment), or

(d) By a previous owner or part-owner of the business as

consideration for the sale of the goodwill or share
thereof, does not of itself make the receiver a partner
with the persons carrying on the business

 Two or more persons : Earlier The maximum number of persons in

a partnership should not exceed 10 in case of banking business and
20 in other types of business. But now the max limit is 50 which is
mentioned in the Companies act 1956
 Restriction on transfer of interest: No partner can transfer his
share in the partnership without the prior consent of all other
partners

 Utmost good faith : The relations between partners are based upon
mutual trust and confidence .Every partner  must render true
accounts and make no secret profits from the business.

 Unlimited liability

TYPES OF PARTNERSHIP :

1. Partnership at Will : When forming a partnership if there is no

clause about the expiration of such a partnership, we call it a
partnership at will. According to Section 7 of the Indian Partnership
Act 1932, there are two conditions to be fulfilled for a partnership to be
a partnership at will. These are
 There is no agreement about a fixed period for the existence of a
partnership.
 No provision with regards to the determination of a partnership
 if a partnership was entered into a fixed term and continues to
operate beyond this term it will become a partnership at will from
the expiration of this term.

2] Partnership for a Fixed Term : the partners may agree on the

duration of this arrangement. This would mean the partnership was
created for a fixed duration of time.After the expiration of such a
duration, the partnership shall also end.

3] Particular Partnership : A partnership can be formed for carrying on

continuous business, or it can be formed for one particular venture or
undertaking. If the partnership is formed only to carry out one
business venture or to complete one undertaking such a partnership is
known as a particular partnership.

4] General Partnership : When the purpose for the formation of the

partnership is to carry out the business, in general, it is said to be a
general partnership.

 Rights and Duties of Partners as a firm and to each

other

Subject to contract between the partners – UNDER SECTION 12 ,THESE ARE THE
RIGHTS OF A PARTNER

(a) every partner has a right to take part in the conduct of the business;

(b) every partner is bound to attend diligently to his duties in the conduct of the business;

(c) any difference arising as to ordinary matters connected with the business may be decided
by a majority of the partners, and every partner shall have the right to express his opinion
before the matter is decided, but no change may be made in the nature of the business without
the consent of all the partners;

(d) every partner has a right to have access to and to inspect and copy any of the books of the
firm;

(e) in the event of the death of a partner, his heirs or legal representatives or their duly
authorised agents shall have a right of access to and to inspect and copy any of the books of
the firm.

Types of Partner

1.Active/Managing Partner :

2. Sleeping Partner : A sleeping partner is also known as a “dormant

partner” If a dormant partner makes a decision to retire from the partnership firm, then

it is not mandatory for him to give a public notice for the same. As a dormant partner is

not participating in daily operations of the business, he is not allowed to withdraw

remunerations from the firm. If at all the partnership deed is providing remuneration

to dormant partners, it is not deductible under the Income Tax Act, 1961.

3. Nominal Partner: A nominal partner does not have any real

or significant interest in the partnership firm. In simple words, he is
only lending his name to the firm and does not have a voice in the
management of the firm. On the strength of his name, the firm can
promote its sales in the market or can get more credit from the
market. 

For example: A partnership is executed between the partner and the

celebrity or a business tycoon for the sake of value addition to the firm and
also for promoting branding by using the person’s fame and goodwill.

This partner does not share any profit and losses in the firm because he does
not contribute any capital to the firm. However, it is pertinent to note that a
nominal partner is liable to the outsiders and third parties for the acts done
by other partners. 
 4. Partner by Estoppel: A partner by estoppel is a
partner who displays by his words, actions or conduct that he is
the partner of the firm. In simple words, even though he is not
the partner in the firm but he has represented himself in such a
manner which depicts that he has become a partner by
estoppel or partner by holding out. It is pertinent to note that,
though he does contribute in capital or management of the firm but on
the basis of his representation in the firm he is liable for the credits
and loans obtained by the firm.

There are two essential conditions of establishing a ‘holding out’:

1. Firstly, the person who is held out must have made a representation
of words, actions or conduct that he is a partner in the firm.
2. Secondly, the other party must substantially prove that he had
knowledge of such representation and he acted on it. 

5. Partner in Profits only : This partner of a firm will only share the

profits of the firm and won’t be liable for any losses of the firm. Moreover, if a partner

who is in “partner in profits only” deals with any of the third parties or outsiders then

he will be liable for the acts of profit only and not any of the liability. He is not allowed

to take part in management of the firm. Such kinds of partners are associated with the

firm for their goodwill and money.

6.Minor Partner : It is pertinent to note that, Section 11 of

the Indian Contract Act, 1872 prohibits a minor from entering into an
agreement, as the agreement entered by a minor is void ab initio. However,
the Partnership Act, 1932 allows a minor to enjoy benefits of partnership
when a set of rules and procedures are complied in accordance with the law.
A minor will share the profits of the firm, however, his liability for losses is
only limited to his share of the firm.

A minor person after attaining the age of majority (i.e. 18 years of age)
needs to decide within 6 months if he is willing to become a partner for the
firm. If at all a minor partner decides to continue as a partner or wishes to
retire, in both the cases he needs to make such a declaration by a public
notice.
Insolvency a partner – UNDER SECTION 34

(1) Where a partner in a firm is adjudicated an insolvent he ceases to be a

partner on the date on which the order of adjudication is made, whether or

not the firm is thereby dissolved.

2) Where under a contract, between the partners the firm is not dissolved

by the adjudication of a partner as an insolvent, the estate of a partner so

adjudicated is not liable for any act of the firm and the firm is not liable for

any act of the insolvent, done after the date on which the order of

adjudication is made.

Incoming &and Outgoing Partners:

Incoming Partner is the partner who is joining the partnership firm by

contract or is added to the firm.

Incoming Partner: A new partner can be introduced into a firm in the

following ways:

1. With the consent of all existing partners.

2. In accordance with a contract between the partners.
3. In accordance with the provisions of section 30. (minors)

Related Case: Central Bank of India vs Tarseema Compress Wood

Manufacturing Co.
Outgoing Partner is the partner who is leaving the partnership firm. It can
be because of death, expulsion, retirement etc

A partner may cease to be a partner in the following ways:

1. By retirement– Voluntary withdrawal of a partner from firm.

2. By expulsion– Generally, the expulsion of a partner is not possible

except under the following conditions:If the power to expel has been
conferred by a contract between the partners.
Such power has been exercised in good faith.

3. By insolvency of the partner– An insolvent is not allowed to continue

as a partner. Therefore a person who is adjudicated insolvent ceases to be
a partner on the date on which order of adjudication is made. Whether on
the adjudication of a partner as insolvent, the firm is also dissolved or not
depends on a contract between the partners.

4. Death of a partner– A firm is dissolved, but if other partners so agree,

the firm may not be dissolved, and the business of the firm may be
continued with the remaining partners.

Rights of Outgoing Partners of a Partnership Firm

1. Right to carry on a competing business.

2. Right to share subsequent profits until the amount due to him has been
paid.
 Dissolution of Partnership Firm
Section 39

DISSOLUTION OF A FIRM :

When the relation between all the partners of the firm comes to an end, this is called dissolution
of the firm. Section 39 of the Indian Partnership Act, provides that “the dissolution of the
partnership between all the partners of a firm is called the dissolution of a firm.” It implies the
complete break down of the relation of partnership between all the partners.

Dissolution of a partnership firm merely involves a change in the relation of partners; whereas the
dissolution of firm amounts to a complete closure of the business. When any of the partners
dies, retires or become insolvent but if the remaining partners still agree to continue the
business of the partnership firm, then it is dissolution of partnership not the dissolution
of firm..
Dissolution of a Partnership firm may be effected in the following ways:

Section40 DISSOLUTION BY AGREEMENT :. A firm may be dissolved with the consent

of all the partners or in accordance with a contract between the partners.

Section41 COMPULSORY DISSOLUTION. A firm is dissolved

(a) by the adjudication of all the partners or of all the partners but one as insolvent, or

(b) by the happening of any event which makes it unlawful for the business of the firm to be
carried on or for the partners to carry it on in partnership :

Section42 DISSOLUTION ON THE HAPPENING OF CERTAIN CONTINGENCIES.

Subject to contract between the partners a firm is dissolved

(a) if constituted for a fixed term, by the expiry of that term;

(b) if constituted to carry out one or more adventures or undertakings, by the completion
thereof;

(c) by the death of a partner; and

(d) by the adjudication of a partner as an insolvent.

Section43 DISSOLUTION BY NOTICE OF PARTNERSHIP AT WILL.

(1) Where the partnership is at will, the firm may be dissolved by any partner giving notice in
writing to all the other partners of his intention to dissolve the firm.

(2) The firm is dissolved as from the date mentioned in the notice as the date of dissolution
or, if no date is so mentioned, as from the date of the communication of the notice.

Section44 DISSOLUTION BY THE COURT. At the suit of a partner, the Court may
dissolve a firm on any of the following grounds, namely :-

(a) that a partner has become of unsound mind, in which case the suit may be brought as well
by the next friend of the partner who has become of unsound mind as by any other partner;
(b) that a partner, other than the partner suing, has become in any way permanently incapable
of performing his duties as partner;

(c) that a partner, other than the partner suing, is guilty of conduct which is likely to affect
prejudicially the carrying on of the business regard being had to the nature of the business;

(d) that a partner, other than the partner suing, wilfully or persistently commits breach of
agreements relating to the management of the affairs of the firm of the conduct of its
business; or otherwise so conducts himself in matters relating to the business that it is not
reasonably practicable for the other partners to carry on the business in partnership with him;

(e) that a partner, other than the partner suing, has in any way transferred the whole of his
interest in the firm to a third party, or has allowed his share to be charged under the
provisions of rule 49 of Order XXI of the First Schedule to the Code of Civil Procedure,
1908, or has allowed it to be sold in the recovery of arrears of land revenue or of any dues
recoverable as arrears of land revenue due by the partner;

(f) that the business of the firm cannot be carried on save at a loss; or

(g) on any other ground which renders it just and equitable that the firm should be dissolved.

Limited Liability Partnership

Introduction

The Limited Liability Partnership Act, 2008 was enacted by the Parliament of India to introduce and legally
sanction the concept of LLP in India. Unlike the general partnerships in India, LLP is a body corporate and legal
entity separate from its partners, have Perpetual succession and any change in the partners of a LLP shall not affect
the existence, rights or liabilities of the LLP Limited Liability Partnership (LLP) is an alternative form of business
organisation. It not only provides the benefits of limited liability but also allows its members the flexibility of
organising their internal affairs as a partnership based on a mutually arrived agreement. Liability of the partners is
not as limited as that of shareholder in a company.
LLP is a corporate business vehicle that enables professional expertise and entrepreneurial
initiative to combine and operate in flexible, innovative and efficient manner, as a hybrid of
companies & partnerships providing benefits of limited liability while allowing its members the
flexibility for organizing their internal structure as a partnership. [2] LLP is a legal entity partnership
act.

 Separate Legal Entity- Continue its existence irrespective of changes in partners,

 LLP itself can enter into contracts and hold properties,
 Partners' Liability limited to the agreed contribution,
 Professional & Non-professional (Businessmen), both can set up LLP.

Negotiable Instruments Act-

Negotiable Instruments Act, 1881 is a law relating to all negotiable
instruments such as promissory notes, bills of exchange and cheques.
The act into effect from 1st march 1882 .

 Exclusive of  Section 31 of the Reserve Bank of India Act, 1934-

only the RBI or the central government can issue and accept
promissory notes that are payable on demand. However, cheques,
that are payable on demand, can be issued by anyone
 A Negotiable instrument is a piece of paper which entitles the
person to the sum of money stated therein and which is
transferable from one person to other by mere delivery or
endorsement 
 A promise to pay a definite sum of money
  ‘negotiable instrument’ as such is not defined in the Negotiable
Instruments Act of 1881, but Section 13 of the Act gives its
meaning.

 Features of the act :

 Instrument should be freely transferable 

  Delivery or by endorsement and delivery
 Obtained in good faith and for value is free  from all defects-Title of
holder is free from all defects 
 In written format- includes handwriting, typing, computer printout,
engraving
 The property in negotiable instrument passes from one to another person
 Right to sue on the negotiable instrument in his own name for recovering
the amount. 
 Cheques are always payable on demand i.e. when they are presented to the
bank in due course of time. 
 Bills, promissory notes which are expressed to be payable on demand or at
sight or on presentment 
 Promissory notes or bills of exchange in respect of which no time limit is
specified are also payable on demand. 

Types of Negotiable Instruments

Under Law-
 Bills of Exchange: This is an order from the creditor to the debtor.
This instrument instructs the drawee (debtor) to pay the payee a
certain amount of money. The bill will be made by the drawer
(creditor)

 Cheque: This is just another form of a bill of exchange. Here the

drawer is a bank. And such a cheque is only payable on demand. It
is basically the depositor instructing the bank to pay a certain
amount of money to the payee or the bearer of the cheque.
 Promisory Note :An instrument in writing (not being a bank-
note or a currency-note) containing an unconditional
undertaking, signed by the maker to pay a certain sum of money
only to or to the order of a certain person or the bearer of the
instrument
 Bank notes, currency notes, though are similar to promissory
notes in all respects, have been expressly excluded
 Parties to a Promissory Note

There are basically two parties involved in a promissory note:

1. The Maker or Drawer – the person who prepares the note and promises to pay the
amount mentioned therein.

2. The Payee – the person to whom the amount is payable

 Section 138 deals with dishonour of cheque for insufficiency of funds in
the accounts and circumstances under which it can become a criminal
liability.
 As per the agreement with the bank, it exceeds the
amount arranged to be paid from that account
 Presumed to be committed an offence 

 Punishment upto 2 years imprisonment or fine

extending twice the amount of cheque or with both
 Provision will not apply unless:
 Cheque is presented within the validity period

 30 days written notice for demanding the payment of

amount is given to the drawer, from the date of receipt

of information regarding return of cheque
  Drawer fails to make the payment of such money to
the payee or holder in due course within 15 days of
receipt of such notice
 Complain can be made either by the payee or holder in
due course
 Either single complaint for each or multiple dishonour of
cheques possible


 Presumptions:
 Sec. 139: Holder of a cheque received the cheque of

the nature referred to in section 138 for the discharge,

in whole or in part, of any debt or other liability. 
 Sec:140: No defence in a prosecution of an offence
under section 138, that the drawer had no reason to
believe when he issued the cheque that the cheque
may be dishonoured on presentment for the reasons
stated in section 138.

 As per Section 141 (1), if the person

Offences by Companies:
committing an offence under section 138 is a company,
every person who, at the time the offence was
committed, was in charge of, and was responsible to the
company for the conduct of the business of the company,
as well as the company, shall be deemed to be guilty of
the offence and shall be liable to be proceeded against
and proceeded against and punished accordingly;  
 Arbitration

Arbitration is a procedure in which a dispute is submitted, by agreement of

the parties, to one or more arbitrators who make a binding decision on the
dispute. In choosing arbitration, the parties opt for a private dispute
resolution procedure instead of going to court.

A business dispute before a disinterested third party for resolution

Litigation is costly & Time consuming

Greater flexibility of process, higher confidentiality, greater likelihood of

settlement,choice of forum, choice of solutions etc.

PRINCIPALS OF ARBITRATION :
Arbitration is consensual
The parties choose the arbitrator(s)
Arbitration is neutral- arbitrators cannot act ultra - vires of their powers
Arbitration is a confidential procedure
The decision of the arbitral tribunal is final and easy to enforce
India arbitration is governed by the Arbitration and Conciliation Act, 1996 read with the Indian
Contract Act, 1872 UNCITRAL Model Law, on which the Arbitration& conciliation Act,1996 is
based.

Arbitration and Conciliation Act

The Act is categorized in two,
Part I deals with significant provisions which deal with domestic and
International commercial arbitration procedure to be conducted in India
irrespective of nationality

Part II talks about enforcement of foreign arbitration award .

Arbitration agreement
It can be defined as a written statement or exchange of
communication between the parties or any statement made through
means of telecommunication.
It is not compulsory for the parties to sign or unsign it. Even if an
arbitration clause is present in the agreement it would be
considered as an arbitration agreement.

Court cannot interfere in the arbitration proceeding except wherein

provided by the act in the following situations:

 Where an arbitrator needs to be appointed when the parties

cannot appoint a mutually independent arbitrator.
 In cases of taking the shreds of evidence.
 Where the court is ruling in the cases as the arbitrator is
terminated due to incapacity or other sufficient reasons mentioned
under the Act.

Arbitration Process post 2015 Amendment

 ORGANIZATIONAL BEHAVIOUR

According to Keith Davis “organizational behavior is the study and application of

knowledge about how people act within organizations. It is human tool for the
human benefit. It applies broadly to behavior of people in all type of organization
such as business, government, schools, etc. it helps people, structure, technology,
and the external environment blend together in to an effective operative system”.

Stephen Robins defines  organizational behavior as a “field of study that

investigates the impact that individuals, groups, and structure have an organization
for the purpose of applying such knowledge improving an organization’s
effectiveness“

Fundamental concepts :

The idea of the individual difference comes

1. Individual differences :
originally from psychology. From the day of birth, each person is
unique, and personal experiences after birth tend to make people
even more different. Therefore only an individual can take responsibility
and make decisions, whereas a group is powerless until all the individuals
within the group act accordingly.

2. A whole person: This indicates that when an individual is appointed in an

organisation, he/she is not hired only on the basis of skills, but also on likes
and dislikes, pride and prejudices. Skill doesn’t exist apart from background or
knowledge. Home life is not totally separate from their work life. Similarly
emotional conditions aren’t separate from physical conditions. Management
needs to care about the whole person. Authority should recognize them inside
and outside of firm

As an example, A women who attend the office at 9:00 AM is always

anxious for her children’s school time (if her kids can participate in
the school or not).
As a result, its impact falls on her concentration that means her working
life.

3. Perception: Peoples’ perceptions are also different when they see an

object. Two people can differently present the same object. And this
is occurring for their experiences.Employees also see work differently
for differ in their personalities, needs, demographics factors, past
experiences, and social surroundings. Management learns to guide their
employees who have perceptual difference.
4. Motivated behaviour: Motivation is essential to the operation of organization. An
organization with sophisticated technology and equipment can’t work if the
human resources aren’t motivated and guided properly. So the authority should
inspire or more motive the human resources by proving different kinds of facilities

5. Desire for Involvement: Every employee is actively seeking opportunities to

work to involve in decision-making problems. They hunger for the chance to
share what they know and to learn from the experience. So, the organization
should provide them a chance to express their opinions, ideas, and
suggestions for the decision-making problem .
6. Value of the person : People deserve to be treated differently from other factors
of productions (Land, Capital, and Technology). They want to be treated with
caring, respect and dignity.  They want to be valued for their skills and
abilities.

7. Human dignity: Every person needs to be treated with dignity and

respect, whether it’s the CEO of the company or labor. it recognizes
human dignity because people are of a higher order; they want
to be treated with respect and dignity and should be treated this
way.

8. Organisations are social systems:. Just as people have psychological

needs, they also have social roles and status. In fact, two types of
social systems exist side by side in organizations. One is a formal
system, and the other is the informal social system.

9. Mutuality of interest: indicates that both the organisation and people need
each other. Mutual interest provides a common goal for all .

10. Holistic concept: When the fundamental concepts of OB are placed

together, a holistic concept emerges. This concept interprets
 people-organization relationships regarding the whole person, the
whole group, whole organization, and the whole social system.It
takes across the board view of people in organizations to
understand as many as possible of the factors that influence their
behavior. Issues are analyzed in terms of the total situation
affecting them rather than in terms of an isolated event or
problems.

MODELS OF OB :

 Autocratic Model : The root level of this model is power with a

managerial orientation of authority. The employees in this model are
oriented towards obedience and discipline. They are dependent on their
boss. The employee requirement that is met is subsistence. The
performance result is less.
The major drawbacks of this model are people are easily frustrated, insecurity,
dependency on the superiors, minimum performance because of minimum wage.

 Custodial Model : The root level of this model is economic

resources with a managerial orientation of money. The employees
in this model are oriented towards security and benefits provided
to them. They are dependent on the organization. The employee
requirement that is met is security .  It is dependent on economic
resources. This approach directs to depend on firm rather than on
manager or boss.

 Supportive Model : The root level of this model is leadership

with a managerial orientation of support. The employees in this model
are oriented towards their job performance and participation. The
employee requirement that is met is status and recognition. The performance
result is awakened drives.
This model is dependent on leadership strive. It gives a climate to help
employees grow and accomplish the job in the interest of the organization.
Management job is to assist the employee’s job performance. Employees feel a
sense of participation.

 Collegial Model : The root level of this model is partnership with

a managerial orientation of teamwork. The employees in this model are
oriented towards responsible behavior and self-discipline. The employee
requirement that is met is self-actualization. The performance result is
moderate zeal.
This is an extension of supportive model. The team work approach is adapted
for this model. Self-discipline is maintained. Workers feel an obligation to uphold
quality standard for the better image of the company. A sense of “accept” and
“respect” is seen.

IMPORTANCE OF OB :

The need and importance of organisational behaviour are as under:

1. Skill Improvement
2. Understanding Consumer Buying Behaviour
3. Employee Motivation
4. Nature Of Employees
5. Anticipating Organisational Events
6. Efficiency & Effectiveness
7. Better Environment Of Organisation
8. Optimum Or Better Utilization Of Resour
9. The Goodwill Of Organization
 Determinants of behavior

The way an individual addresses a situation single-handedly or say in a group is

influenced by many factors. The key factors influencing an individual’s attitude in
personal as well as social life are –

Abilities
 Abilities are the traits a person learns from the environment around as well as the
traits a person is gifted with by birth.
 Intellectual abilities − It personifies a person’s intelligence, verbal and analytical
reasoning abilities, memory as well as verbal comprehension.
 Physical abilities − It personifies a person’s physical strength, stamina, body
coordination as well as motor skills.
 Self-awareness abilities − It symbolizes how a person feels about the task, while a
manager’s perception of his abilities decides the kind of work that needs to be
allotted to an individual.
These traits owned by a person defines the behavior of a person in social and personal life. 

Gender
Research proves that men and women both stand equal in terms of job
performance and mental abilities; however, society still emphasizes differences
between the two genders. Absenteeism is one area in an organization where
differences are found as women are considered to be the primary caregiver for
children. A factor that might influence work allocation and evaluation in an
organization is the manager’s perception and personal values.
For example − An organization encourages both genders to work efficiently towards
the company’s goal and no special promotion or demotion is given or tolerated for
any specific gender.

Race & Culture

Race is a group of people sharing similar physical features. It is used to define

types of persons according to perceived traits. For example − Indian, African.

On the other hand, culture can be defined as the traits, ideas, customs and
traditions one follows either as a person or in a group. For example − Celebrating
a festival.

The common mistakes such as attributing behavior and stereotyping according to

individual’s race & culture basically influences an individual’s behaviour
In today’s diverse work culture, the management as well as staff should learn and
accept different cultures, values, and common protocols to create more comfortable
corporate culture.
For example − A company invites candidates for a job post and hires one on the
basis of eligibility criteria and not on the basis of the country a person belongs to or
the customs one follows.

Perception

IT  is the process of interpreting something that we see or hear in our mind and
use it later to judge and give a verdict on a situation, person, group, etc.

For example − Priya goes to a restaurant and likes their customer service, so she
will perceive that it is a good place to hang out and will recommend it to her
friends, who may or may not like it. However, Priya’s perception about the
restaurant remains good.

Attribution
Attribution is the course of observing behavior followed by determining its cause
based on individual’s personality or situation.
Attribution framework uses the following three criteria −
 Consensus − The extent to which people in the same situation might react
similarly.
 Distinctiveness − The extent to which a person’s behavior can be
associated to situations or personality.
 Consistency − The frequency measurement of the observed behavior, that
is, how often does this behavior occur.
The framework mentioned says it is all about how an individual behaves in different
situations.
For example − Rohit invites Anisha and two more friends for a movie and they
agree to bunk and watch the movie, this is consensus. Bunking of class says that
they are not interested in their lectures, this is distinctiveness. A little change in the
situation, like if Rohit frequently starts bunking the class then his friends may or may
not support him. The frequency of their support and their rejection decides
consistency.

Attitude
Attitude is the abstract learnt reaction or say response of a person’s entire cognitive
process over a time span.
For example − A person who has worked with different companies might develop an
attitude of indifference towards organizational citizenship.
Felt vs. Displayed Emotions
1. Emotional labor creates dilemmas for employees when their job requires them to exhibit emotions
incongruous with their actual feelings. It is a frequent occurrence. For example, when there are people
that you have to work with whom you find it very difficult to be friendly toward. You are forced to feign
friendliness.

2. Felt emotions are an individual’s actual emotions.

3. Displayed emotions are those that are organizationally required and considered appropriate in a
given job. They are learned.

4. Key—felt and displayed emotions are often different. This is particularly true in organizations,
where role demands and situations often require people to exhibit emotional behaviors that mask their
true feelings.
Emotional Continuum :

Our emoti
ons live on a continuum and on any given day we eb and flow between them.
At Explore and Soar, we describe this by using the terms optimal band of arousal
and window of tolerance. Each allow us as humans to function optimally on any
given day, to be able to maintain a home and hold down a steady job as adults

Emotional Intelligence: Emotional intelligence (otherwise known as

emotional quotient or EQ) is the ability to understand, use, and manage
your own emotions in positive ways to relieve stress, communicate
effectively, empathize with others, overcome challenges and defuse
conflict. Emotional intelligence helps you build stronger relationships,
succeed at school and work, and achieve your career and personal goals.
It can also help you to connect with your feelings, turn intention into action,
and make informed decisions about what matters most to you.

PERSONALITY THEORIES :
MBIT FRAMEWORK : the Myers–Briggs Type Indicator (MBTI) is
an introspective self-report questionnaire indicating differing psychological preferences in how
people perceive the world and make decisions.[1][2][3] The test attempts to assign four categories:
introversion or extraversion, sensing or intuition, thinking or feeling, judging or perceiving. One
letter from each category is taken to produce a four-letter test result, such as "INFJ" or "ENFP".

The MBTI is based on a very old theory, has mixed at best research support,
but is widely used and very popular in real-world career counseling, team
building, conflict management, and analyzing management styles.
Though the MBTI resembles some psychological theories, it has been criticized
as pseudoscience[5] and is not widely endorsed by academic researchers in the field. [6] The
indicator exhibits significant scientific (psychometric) deficiencies, notably including:

 poor validity (i.e. not measuring what it purports to measure, not having predictive power or
not having items that can be generalized);
 poor reliability (giving different results for the same person on different occasions);
 measuring categories that are not independent (some dichotomous traits have been noted to
correlate with each other);
 not being comprehensive (due to missing neuroticism).[7][8][9][10]
 Motivation
Motivation is the word derived from the word ’motive’ which means needs, desires, wants or drives
within the individuals. It is the process of stimulating people to actions to accomplish the goals. In the
work goal context the psychological factors stimulating the people’s behaviour can be -

 desire for money

 success
 recognition
 job-satisfaction
 team work, etc

One of the most important functions of management is to create willingness amongst the employees
to perform in the best of their abilities. Therefore the role of a leader is to arouse interest in
performance of employees in their jobs. The process of motivation consists of three stages:-

1. A felt need or drive

2. A stimulus in which needs have to be aroused
3. When needs are satisfied, the satisfaction or accomplishment of goals.

Therefore, we can say that motivation is a psychological phenomenon which means needs and wants
of the individuals have to be tackled by framing an incentive plan.
 CLASSICAL THEORY : The Classical Theory is the traditional theory,
wherein more emphasis is on the organization rather than the employees
working therein. According to the classical theory, the organization is
considered as a machine and the human beings as different
components/parts of that machine.
The classical theory has the following characteristics:

1. It is built on an accounting model.

2. It lays emphasis on detecting errors and correcting them once they have
been committed.
3. It is more concerned with the amount of output than the human beings.
4. The human beings are considered to be relatively homogeneous and
unmodifiable. Thus, labor is not divided on the basis of different kinds of
jobs to be performed in an organization.
5. It is assumed that employees are relatively stable in terms of the change, in
an organization.
6. It is assumed that the authority and control should be vested with the
central authority only, in order to have a centralized and integrated system.

Modern or contemporary motivation theories are;

1. Acquired Needs Theory by McClelland’s.

2. Goal Setting Theory by Edwin Locke.
3. Theory of Self Efficacy by Albert Bandura.
4. Reinforcement Theory by B.F. Skinner and his associates,
5. Cognitive Evaluation Theory,
6. Expectancy Theory by Victor H. Vroom,
7. Equity Theory of J. Stacy Adams.

LEADERSHIP :

Leadership is a vital management function that helps to direct an organization's

resources for improved efficiency and the achievement of goals. Effective leaders
provide clarity of purpose, motivate and guide the organization to realize its mission.
Regardless of your position, understanding the role of leaders can help you
contribute more meaningfully to the accomplishment of your company's objectives.
Leadership is important for the success of an organization because it provides guidance,
purpose and helps others understand the long-term strategies and goals of a business.

Pioneering leaders are adventurous — driven to keep seeking bigger and better roles,
products, and experiences. They inspire a team to venture into uncharted territory. They get
caught up in their passion to grow, expand, and explore.

Energizing leaders pump up the energy around them. They tend to be spontaneous, outgoing
and encouraging. Ideas flow from their lips. They try to create innovative environments
around them.

Affirming leaders are friendly, approachable and nice to be around. They’re upbeat,
easygoing and positive. They work to create workplaces that are harmonious and caring,
where everyone is respected.
 Strongly inclusive leaders show optimism, promote collaboration and are dependable. They
may follow routines with which they are comfortable, enjoying a stable environment rather
than rapid changes. Since they try to find win-win situations and to accommodate everyone,
they can be slow to make decisions, especially unpopular or disruptive ones

We describe it as more than being soft-spoken, fair-minded and modest. We also see these
leaders as precise, methodical and consistent. 

You might think of the deliberate leader as the expert, the one who leads through their
greater knowledge or experience

they tend to prefer one or find one easier to exhibit.  Leaders who primarily use the Resolute
Dimension tend to be challenging, determined and rational.

Leadership theories

The trait theory of leadership suggests that certain inborn or

innate qualities and characteristics makes someone a leader.
These qualities might be personality factors, physical factors,
intelligence factors and so on. In essence, trait theory proposes
that the leader and leaders’ traits are central to an organisation’s
success. The assumption here is that finding people with the
right traits will increase organisational performance. Trait theory
focuses exclusively on the leader and neglects the follower.
Strengths/Advantages of Trait Theory

 It is naturally pleasing theory.

 It is valid as lot of research has validated the foundation and basis of the theory.
 It serves as a yardstick against which the leadership traits of an individual can be assessed.
 It gives a detailed knowledge and understanding of the leader element in the leadership
process.

Limitations of The Trait Theory

 There is bound to be some subjective judgment in determining who is regarded as a ‘good’ or

‘successful’ leader
 The list of possible traits tends to be very long. More than 100 different traits of successful
leaders in various leadership positions have been identified. These descriptions are simply
generalities.
 There is also a disagreement over which traits are the most important for an effective leader
  The model attempts to relate physical traits such as, height and weight, to effective
leadership. Most of these factors relate to situational factors. For example, a minimum weight
and height might be necessary to perform the tasks efficiently in a military leadership position.
In business organizations, these are not the requirements to be an effective leader.
 The theory is very complex.

We’ve all heard the phrase “great leaders are born, not made”. This was
the core of the original idea behind what made an effective leader.

After its proposal in the mid-1800s by Thomas Carlyle, trait theory (or the “great
man” theory) of leadership served as one of the most widespread ideas on what
makes a great leader.

I could name countless examples of why this seems ridiculous. A person’s

nurture and what they do with their life plays such a pivotal role in their ability to
fit a certain role that the theory seems incredibly close-minded but, alas, that
was the dominant theory.

Then trait theory was tested and studied. It was discovered, measurably so, that
are few natural traits that differentiate leaders from followers.

In other words, leaders are made, not born.

The trait theory of leadership suggests that certain inborn or

innate qualities and characteristics makes someone a leader.
These qualities might be personality factors, physical factors,
intelligence factors and so on. In essence, trait theory proposes
that the leader and leaders’ traits are central to an organisation’s
success. The assumption here is that finding people with the
right traits will increase organisational performance. Trait theory
focuses exclusively on the leader and neglects the follower.
Strengths/Advantages of Trait Theory

 It is naturally pleasing theory.

 It is valid as lot of research has validated the foundation and basis of the theory.
 It serves as a yardstick against which the leadership traits of an individual can be assessed.
  It gives a detailed knowledge and understanding of the leader element in the leadership
process.

Limitations of The Trait Theory

 There is bound to be some subjective judgment in determining who is regarded as a ‘good’ or

‘successful’ leader
 The list of possible traits tends to be very long. More than 100 different traits of successful
leaders in various leadership positions have been identified. These descriptions are simply
generalities.
 There is also a disagreement over which traits are the most important for an effective leader
 The model attempts to relate physical traits such as, height and weight, to effective
leadership. Most of these factors relate to situational factors. For example, a minimum weight
and height might be necessary to perform the tasks efficiently in a military leadership position.
In business organizations, these are not the requirements to be an effective leader.
 The theory is very complex.

A new approach was needed. the behavioral theory of leadership.

The idea is simple. If there are few natural traits exclusive to effective leaders,
perhaps leaders aren’t born – they’re made.

Following this logic, if leaders are made, there must be some consistencies in
the environment and behaviors that the individual is exposed to and learns to
adopt. This, in theory, means that anyone could become a great leader if they
were taught the same behaviors.

According to this theory, it isn’t inherent characteristics that make a good leader.
A leader makes themselves effective via the way they act and what they do.

Example : A common example of behaviorism is positive reinforcement. A student

gets a small treat if they get 100% on their spelling test. In the future, students work
hard and study for their test in order to get the reward. 
The contingency theory of leadership supposes that a leader’s
effectiveness is contingent on whether or not their leadership style suits a particular
situation. According to this theory, an individual can be an effective leader in one
circumstance and an ineffective leader in another one. To maximize your likelihood of
being a productive leader, this theory posits that you should be able to examine each
situation and decide if your leadership style is going to be effective or not. In most
cases, this requires you to be self-aware, objective and adaptable.

Charismatic leadership is a trait-based leadership theory where the leaders

act as visionary driven by their convictions and motivate their followers to
work towards common vision using their charm and persuasiveness. These
charismatic leaders act as role models and exhibit extraordinary characteristics
that inspire devotion and motivation in followers to persuade change. Leaders
are able to cultivate a profound sense of trust with the group of followers.

TEAMS
Simple Work Teams - Simple work teams have low task complexity and low
team fluidity. Their goal is simple problem solving, and often they are a group
that supports day-to-day activities, dealing with issues that require input from
more than one person or to generate commitment from employees

Administrative Teams - An administrative team has high task

complexity but low team membership fluidity, meaning that the
problems the team deals with are complex but people stream in and out
of the group.

Cross-Departmental Teams - A cross-departmental team tends to have

a low complexity level but a high team membership fluidity, meaning
that the work is fairly simple but the teams are commit

Process Teams- Process teams deal with high complexity tasks and
have high team member fluidity, meaning people are assigned to the
team and stay. These folks are creative problem solvers and deal with
implementation. Their focus is strategic and broad.

Self-Managed Teams - Self-managed teams (SMTs) are a commonly

used process team used in organizations. Self-managed teams are
process teams of employees who have full managerial control over their
own work.

TEAM COMPOSITION : refers to the overall mix of characteristics among

people in a team, which is a unit of two or more individuals who interact interdependently to
achieve a common objective.[1] It is based on the attributes among individuals that comprise the
team, in addition to their main objective.
Team composition is usually either homogeneous, in which all members are the same, or
heterogeneous, in which team members all contain significant differences. It has also been
identified as a key factor that influences team performance.

TEAM PROCESSES : Team processes refer to the actions team members take to combine their individual
resources, knowledge, and skill to resolve their task demands and achieve collective goals. These are distinct
from team emergent states which refer to characteristic levels of feelings or thoughts among team members. T
 Managers often are charged with designing or bringing together a group of
individuals to carry out a specific function. This is generally how formal
groups begin. ... This involves many different considerations about the group and
the individuals making it up. This is known as team design.

Group decision making is a type of participatory process in which multiple

individuals acting collectively, analyze problems or situations, consider and
evaluate alternative courses of action, and select from among the alternatives a
solution or solutions. The nature and composition of groups, their size,
demographic makeup, structure, and purpose, all affect their functioning to some
degree. The external contingencies faced by groups (time pressure and
conflicting goals) impact the development and effectiveness of decision-making
groups as well.

Conflict is a 'clash of interests, values, actions, views or direction. Conflict situations

arise because of fear, force, fair or funds. Fear is an imaginary concern for future. Force
of any kind initiates and concludes conflicts. Fair is the sense of fairness, which
determines the moral values of an individual. Tangible as well as intangible costs may
provoke conflict, and also help towards its resolution. Interpersonal conflicts arise
because of differences in personality, perceptions, status and ideological and
philosophical outlooks. Other causes of conflict can be communication gaps; personality
differences; substandard performance; disputes over approaches, responsibility and
authority; lack of cooperation; or competition for limited resources.

Conflict Management Skills

1. Active Listening

2. Emotional Intelligence

3. Patience

4. Impartiality

5. Positivity

6. Open Communication
Organizational culture is the collection of values, expectations, and
practices that guide and inform the actions of all team members. Think of it
as the collection of traits that make your company what it is. A great
culture exemplifies positive traits that lead to improved performance, while
a dysfunctional company culture brings out qualities that can hinder even
the most successful organizations.

Don’t confuse culture with organizational goals or a mission statement,

although both can help define it. Culture is created through consistent and
authentic behaviors, not press releases or policy documents. You can
watch company culture in action when you see how a CEO responds to a
crisis, how a team adapts to new customer demands, or how a manager
corrects an employee who makes a mistake.

Organizational culture affects all aspects of your business, from punctuality

and tone to contract terms and employee benefits. When workplace culture
aligns with your employees, they’re more likely to feel more comfortable,
supported, and valued. Companies that prioritize culture can also weather
difficult times and changes in the business environment and come out
stronger.

Culture is a key advantage when it comes to attracting talent and

outperforming the competition. 77 percent of workers consider a company’s
culture before applying, and almost half of employees would leave their
current job for a lower-paying opportunity at an organization with a better
culture. The culture of an organization is also one of the top indicators of
employee satisfaction and one of the main reasons that almost two-
thirds (65%) of employees stay in their job.

Qualities of a great organizational

culture
 Alignment comes when the company’s objectives and its employees’
motivations are all pulling in the same direction.
 Appreciation can take many forms: a public kudos, a note of thanks, or
a promotion. A culture of appreciation is one in which all team members
frequently provide recognition and thanks for the contributions of others.
 Trust is vital to an organization. With a culture of trust, team members
can express themselves and rely on others to have their back when they
try something new.
 Performance is key, as great companies create a culture that means
business. 
 Resilience is a key quality in highly dynamic environments where
change is continuous.
 Teamwork encompasses collaboration, communication, and respect
between team members.
 Integrity, like trust, is vital to all teams when they rely on each other to
make decisions, interpret results, and form partnerships. Honesty and
transparency are critical components of this aspect of culture.
  A culture of innovation means that you apply creative thinking to all
aspects of your business, even your own cultural initiatives.
 Psychological safety provides the support employees need to take
risks and provide honest feedback.
 LEVELS OF CULTURE :
 National/Societal: The level of culture that deals with awareness of cultural dynamics and patterns by
nationality. It is particularly relevant for (a) entering a new market for product, service, and/or talent; (b)
cross-border division of labor; and (c) international outsourcing relationships.
 Organizational Culture: The level of culture that focuses on the experience of cultural dynamics in an
organization. This is especially relevant for global organizations and those involved in M&A.
 Social Identity Group Culture: The level of culture for analyzing the diversification of society by gender,
generation, ethnicity, religious affiliation, and other social groups. It is particularly relevant for workforce
diversity and talent management concerns.
 Functional Culture: The level of culture that addresses cross-functional effectiveness, based on the
cultures created by specific business units. Cross-functional or management teams concentrate on
functional cultures and leverage their differences carefully, bridging distinct cultural differences across
their constituent units.
 Team Culture: The level of culture that becomes apparent when teams develop a distinct identity and
culture. To effectively build teams in global and matrixed organization, an understanding of how to
collaborate in complex and dynamic situations is essential.
 Individual Culture: The level at which the "building blocks" of culture are present,in both intrapersonal
and interpersonal dynamics. An understanding of this level is important for successfully addressing the
concerns at any level of culture.

HOW DOES CULTURE AFFECT BEHAVIOUR :

Culture is a belief about ethics, behaviors and values that are held by a
majority of people within a society. The culture of which we are a part impacts
our identity and even our beliefs about the nature of life. The type of culture
either Individualistic or Collective into which a person is born affects and
influences what that person believes and how that person behaves. For
example, someone growing up in a “tight” (Collective) culture, where rules are
strongly enforced, does not support individualistic thought or behavior.

 If culture fosters a more extroverted personality style, we can expect more
need for social interaction. Additionally, Individualistic cultures foster more
assertive and outspoken behavior. When the general population encourages
these gregarious behaviors, more ideas are exchanged and self-esteem
increases.
The opposite of extroversion is not introversion. More correctly, people who are
low in extroversion are more likely to be less socially inclined, but that doesn’t
mean that they do not enjoy socializing. They may like to socialize in smaller
groups or one on one. They can be less assertive. Additionally, a person who is low
in extroversion tends to be less energetic and less active.

Emotional well-being is generally more evidenced in cultures that promote

belief in facts and not theories because there is more emotional security in
reality. Greater emotional well-being was noted in immigrants whose
personality characteristics were more congruent with the cultural norms of
the new country to which they migrated.
Diversity is no longer just a buzzword. It's become an essential
ingredient for any organization that wants to build happier, more
productive, and more effective workplaces. Diversity is the state
of having a wide variety of people from different backgrounds working
together in harmony. It ensures inclusivity in the workforce; that all people
are accommodated, regardless of their socio-economic backgrounds.
There are many positive effects that diversity has on the business, its
employees and other stakeholders.

Tips for managing workplace diversity :

PRIORITIZE COMMUNICATION:
TREAT EACH EMPLOYEE AS AN INDIVIDUAL
ENCOURAGE EMPLOYEES TO WORK IN DIVERSE GROUPS
BASE STANDARDS ON OBJECTIVE CRITERIA
BE OPEN-MINDED

Redefine, and recognize the many types of diversity.

 Redefine discrimination, and clamp down on all its forms.

Celebrate diversity in all ways possible.

Keep reaching out.

Don’t assume people understand your jokes.

The Hofstede’s’ cultural index :

 FOR MORE INFO :

https://corporatefinanceinstitute.com/resources/knowledge/other/
hofstedes-cultural-dimensions-theory/ 
Power and influence processes are pervasive and important in
organizations, so leaders need to be able both to understand power and to act

on that knowledge Power is the ability to influence the behaviour of others to get

what you want. It is often visible to others within organizations. Conformity manifests

itself in several ways, and research shows that individuals will defer to a group even

when they may know that what they are doing is inaccurate or unethical. The fact that
we can see and succumb to power means that power has both positive and
negative consequences. On one hand, powerful CEOs can align an entire
organization to move together to achieve goals .  On the other hand, autocracy
can destroy companies and countries alike. The phrase, “Power tends to
corrupt, and absolute power corrupts absolutely” was first said by English
historian John Emerich Edward Dalberg, who warned that power was
inherently evil and its holders were not to be trusted.

Contemporary Issues - in organizations

Financial management

Uncertainty about the future

Monitoring performance

Regulation and compliance

Competencies and recruiting the right talent

Technology

Exploding data

Customer service

Maintaining reputation

Knowing when to embrace change

Diversity in the Workforce

Outsourcing

Green Business Practices

 tress management refers to a wide spectrum of techniques and therapies that
aim to control a person’s levels of stress, especially chronic stress, to improve
everyday functioning.
 To reduce workplace stress, managers can monitor each employee’s workload
to ensure it is in line with their capabilities and resources.
  Managers can also be clear and explicit about general expectations and long-
term objectives to ensure there is no discrepancy between what the manager is
looking for and what the employee is working toward.
 Managers must keep culture in mind when approaching issues of workplace
stress. They must quickly dismantle any negative workplace culture that arises,
such as bullying or harassment, and replace it with a constructive working
environment.

CHANGE MANAGEMENT : Change management is a systematic

approach to dealing with the transition or transformation of an
organization's goals, processes or technologies. The purpose of change
management is to implement strategies for effecting change, controlling
change and helping people to adapt to change. Such strategies include
having a structured procedure for requesting a change, as well as
mechanisms for responding to requests and following them up.

To be effective, the change management process must take into

consideration how an adjustment or replacement will impact processes,
systems, and employees within the organization. There must be a process
for planning and testing change, a process for communicating change, a
process for scheduling and implementing change, a process for
documenting change and a process for evaluating its effects.
Documentation is a critical component of change management, not only to
maintain an audit trail should a rollback become necessary but also to
ensure compliance with internal and external controls, including regulatory
compliance.
This checklist can be used to create a simple change management plan.

Types of organizational change

Change management can be used to manage many types of organizational change.
The three most common types are:

1. Developmental change - Any organizational change that improves on

previously established processes and procedures.
2. Transitional change - Change that moves an organization away from its current
state to a new state in order to solve a problem, such as mergers and
acquisitions and automation.

3. Transformational change - Change that radically and fundamentally alters the

culture and operation of an organization. In transformational change, the end
result may not be known. For example, a company may pursue entirely
different products or markets.