SV COLLEGE OF ENGINEERING :: KADAPA

MANAGEMENT SCIENCE
Unit-II
Operations Management:
Operations management is the administration of business practices to create the highest
level of efficiency possible within an organization. It is concerned with converting materials and
labor into goods and services as efficiently as possible to maximize the profit of an organization.
Operations management teams attempt to balance costs with revenue to achieve the highest
net operating profit possible.

Specific Responsibilities of Operations Management:

Operations management handles various strategic issues including determining the size of
manufacturing plants and project management methods and implementing the structure of
information technology networks. Other operational issues include the management of inventory
levels, including work-in-process levels and raw materials acquisition; quality control; materials
handling; and maintenance policies.
Operations management entails studying the use of raw materials and ensuring minimal
waste occurs. Managers utilize numerous formulas such as the economic order quantity formula
to determine when and how large of an inventory order to process and how much inventory to
hold on hand.
Supply Chains and Logistics:
A critical function of operations management relates to the management of inventory
through the supply chain. Operations management understands local and global trends, customer
demand and the available resources for production. Operations management approaches the
acquisition of materials and use of labor in a timely, cost-effective manner to deliver customer
expectations. Inventory levels are monitored to ensure excessive quantities are on hand.
Operations management is responsible for finding vendors that supply the appropriate goods at
reasonable prices and have the ability to deliver the product when needed.
Delivery Management:
Another large facet of operations management involves the delivery of goods to
customers. This includes ensuring products are delivered within the agreed time commitment.
Operations management also typically follows up with customers to ensure the products meet
quality and functionality needs. Finally, operations management takes the feedback received and
distributes the relevant information to each department to use in process improvement.

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Unit-II
Plant Layout in Operation Management:
Plant layout refers to the physical arrangement of production facilities. It is the
configuration of departments, work centers and equipment in the conversion process. It is a floor
plan of the physical facilities, which are used in production.
According to Moore “Plant layout is a plan of an optimum arrangement of facilities
including personnel, operating equipment, storage space, material handling equipment and all
other supporting services along with the design of best structure to contain all these facilities”.
Plant Location and Plant Layout in Production Management
The Plant location and Plant layout in production management are
Objectives of Plant Layout
The primary goal of the plant layout is to maximize the profit by arrangement of all the
plant facilities to the best advantage of total manufacturing of the product. The objectives of
plant layout are:
1. Streamline the flow of materials through the plant.
2. Facilitate the manufacturing process.
3. Maintain high turnover of in-process inventory.
4. Minimize materials handling and cost.
5. Effective utilization of men, equipment and space.
6. Make effective utilization of cubic space.
7. Flexibility of manufacturing operations and arrangements.
8. Provide for employee convenience, safety and comfort.
9. Minimize investment in equipment.
10. Minimize overall production time.
11. Maintain flexibility of arrangement and operation.
12. Facilitate the organizational structure.
Principles of Plant Layout:
1. Principle of integration: A good layout is one that integrates men, materials, machines and
supporting services and others in order to get the optimum utilization of resources and
maximum effectiveness.
2. Principle of minimum distance: This principle is concerned with the minimum travel (or
movement) of man and materials. The facilities should be arranged such that, the total
distance travelled by the men and materials should be minimum and as far as possible straight
line movement should be preferred.
3. Principle of cubic space utilization: The good layout is one that utilizes both horizontal and
vertical space. It is not only enough if only the floor space is utilized optimally but the third
dimension, i.e., the height is also to be utilized effectively.

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4. Principle of flow: A good layout is one that makes the materials to move in forward direction
towards the completion stage, i.e., there should not be any backtracking.
5. Principle of maximum flexibility: The good layout is one that can be altered without much
cost and time, i.e., future requirements should be taken into account while designing the
present layout.
6. Principle of safety, security and satisfaction: A good layout is one that gives due
consideration to worker’s safety and satisfaction and safeguards the plant and machinery
against fire, theft, etc.
7. Principle of minimum handling: A good layout is one that reduces the material handling to
the minimum.
Factors influencing Facility Layout:
1. Management/Managerial Policy and Decisions
2. Nature of plant location
3. Type of machinery used
4. Nature of product to be manufactured or produced
5. Method of production
6. Minimum movement
7. The arrangement of materials handling equipment.
8. Continuance
9. Availability of total floor area
10. Type of industry
11. Possibility of future expansion
12. Flexibility
Types of Plant Layout:
1. Product layout or line processing layout or flow-line layout
2. Process layout or functional layout or job shop layout
3. Fixed position layout or static layout
4. Cellular manufacturing (CM) layout or Group Technology layout
5. Combination layout or Hybrid layout or Mixed layout
6. Service Facility Layout
Product Layout:
 It involves the arrangement of machines in one line depending on the sequence of operations.
 The material is fed into the first machine and finished products come out of the last machine.
e.g. Sugarcane to sugar, Bamboo to paper, plastic to plastic smart cards production

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 Emphasis is on special purpose machines so high investment is needed.
Advantages of a good, well planned and designed Layout:
1. Labour costs
 Increase in productivity with more units being produced per man hour.
 Reduction in the number of workers.
 Minimal movement between operations.
2. Production control
 Increased production rate.
 Provision of convenient and adequate storage points.
 Improved ability of forecasting manufacturing time and delivery.
3. Supervision
 Lesser requirement of supervision.
 Reduction in time spent on inspection.
 Reduction in cost of inspection.
4. Other manufacturing costs
 Reduced consumption of power.
 Minimisation of scrap and defective products.
 Better quality due to reduced handling.
 Reduced costs of maintenance.
 Improved utilisation of materials.
5. Workers
 Reduction in the number of those handling production related paraphernalia.
 Reduced effort, stress and strain.
 Better safety and less chance of accidents.
 Improved productivity leading to higher wages.
 Increased morale and motivation.
 Improved health and welfare.
Process Layout:
Involves the arrangement of similar machines in a group in one department/one area according
to the functions performed in the department e.g. welding machines.
Advantages of a Good Process Layout:
1. Reduced investment in machines if they are general purpose machines.

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2. Flexibility in production
3. Better and more efficient supervision is possible through specialisation
4. Better utilisation of men and machines
5. Full and efficient utilisation of equipment
Disadvantages a Bad Process Layout:
1. Difficulty in the movement of materials
2. If more floor space is needed
3. Difficulty in production control
4. More production time
Fixed position layout:
 Major components remain in a fixed location.
 The movement of men and machines to the product is advisable because the cost of moving
them would be less than the cost of moving the product which is very bulky.
 For example construction of buildings or bridges, ship-building etc.
Cellular Manufacturing (CM) Layout:
Machines are grouped into cells, and each group makes a family of parts which require similar
operation and service. It lies in between process layout and line layout.
Importance of Cellular Plant Layout:
1. Economies in Handling
2. Effective use of available area
3. Minimisation of production delays
4. Improved quality control
5. Better production control
6. Better supervision
7. Improved utilisation of labour
8. Improved employee morale
Plant Location Decisions and Factors Affecting Plant Location
Plant location refers to the choice of the region where men, materials, money, machinery
and equipment are brought together for setting up a business or factory. A plant is a place where
the cost of the product is kept to low in order to maximize gains. Identifying an ideal location is
very crucial, it should always maximize the net advantage, must minimize the unit cost of
production and distribution. Plant location decisions are very important because once the plant is
located at a particular site then the organization has to face the pros and cons of that initial
decision.

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While taking plant location decision organizations need to consider various factors such
as availability of men, materials, money, machinery and equipment. At the same time plant,
location decisions should also focus on expanding and developing facilities, the nearness of the
market, transport facilities, availability of fuel and power, availability of water and disposal of
water etc. There is no exact method of analysis or assurance for the selection of an optimal
location. But an extent of analysis and study can help in maximizing the probability of finding
the right locations.
If an organization is placed in a potentially satisfactory location then it can fulfill the
objectives smoothly in the long run, on the other hand, opt for a poor location does not give the
expected results due to the non-availability of raw materials, problems from local people,
problems associated with availability and disposal of water, power supply problems, etc.
Factors affecting the plant location:
Decisions regarding selecting a location need a balance of several factors. These are
divided into primary factors and secondary factors; here both the factors can influence the
business in the long run.
Primary factors
Availability of raw materials:
Availability of raw materials is the most important factor in plant location decisions.
Usually, manufacturing units where there is the conversion of raw materials into finished goods
is the main task then such organizations should be located in a place where the raw materials
availability is maximum and cheap.
Nearness to the market:
Nearness of market for the finished goods not only reduces the transportation costs, but it
can render quick services to the customers. If the plant is located far away from the markets then
the chances of spoiling and breakage become high during transport. If the industry is nearer to
the market then it can grasp the market share by offering quick services.

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Availability of labor :

Another most important factor which influences the plant location decisions is the
availability of labor. The combination of the adequate number of labor with suitable skills and
reasonable labor wages can highly benefit the firm. However, labor-intensive firms should select
the plant location which is nearer to the source of manpower.
Transport facilities

In order to bring the raw materials to the firm or to carrying the finished goods to the
market, transport facilities are very important. Depending on the size of the finished goods or
raw materials a suitable transportation is necessary such as roads, water, rail, and air. Here the
transportation costs highly increase the cost of production, such organizations can not complete
with the rival firms. Here the point considered is transportation costs must be kept low.
Availability of fuel and power:
Unavailability of fuel and power is the major drawback in selecting a location for firms.
Fuel and power are necessary for all most all the manufacturing units, so locating firms nearer to
the coal beds and power industries can highly reduce the wastage of efforts, money and time due
to the unavailability of fuel and power.
Availability of water:
Depending on the nature of the plant firms should give importance to the locations where
water is available.

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For example, power plants where use water to produce power should be located near the
water bodies.
Secondary factors:
Suitability of climate:
Climate is really an influencing factor for industries such as agriculture, leather, and
textile, etc. For such industries extreme humid or dry conditions are not suitable for plant
location. Climate can affect the labor efficiency and productivity.
Government policies:
While selecting a location for the plant, it is very important to know the local existed
Government policies such as licensing policies, institutional finance, Government subsidies,
Government benefits associated with establishing a unit in the urban areas or rural areas, etc.
Availability of finance:
Finance is the most important factor for the smooth running of any business; it should not
be far away from the plant location. However, in the case of decisions regarding plant location, it
is the secondary important factor because financial needs can be fulfilled easily if the firm is
running smoothly. But it should be located nearer to the areas to get the working capital and
other financial needs easily.
Competition between states:
In order to attract the investment and large scale industries various states offer subsidies,
benefits, and sales tax exemptions to the new units. However, the incentives may not be big but it
can help the firms during its startup stages.
Availability of facilities:
Availability of basic facilities such as schools, hospitals, housing and recreation clubs, etc
can motivate the workers to stick to the jobs. On the other hand, these facilities must be provided
by the organization, but here most of the employees give preference to work in the locations
where all these benefits/facilities are available outside also. So while selecting plant location,
organizations must give preference to the location where it is suitable for providing other
facilities also.

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Disposal of waste:
Disposal of waste is a major problem particularly for industries such as chemical, sugar,
and leather, etc. So that the selected plant location should have provision for the disposal of
waste.
Methods of Production:
The various methods of production are not associated with a particular volume of
production. Similarly, several methods may be used at different stages of the overall production
process.
Job Method:
With Job production, the complete task is handled by a single worker or group of
workers. Jobs can be small-scale/low technology as well as complex/high technology.

Low technology jobs: here the organization of production is extremely simply, with the required
skills and equipment easily obtainable. This method enables customer's specific requirements to
be included, often as the job progresses. Examples include: hairdressers; tailoring
High technology jobs: high technology jobs involve much greater complexity - and therefore
present greater management challenge. The important ingredient in high-technology job
production is project management, or project control. The essential features of good project
control for a job are:
- Clear definitions of objectives - how should the job progress (milestones, dates, stages)
- Decision-making process - how are decisions taking about the needs of each process in the
job, labour and other resources
Examples of high technology / complex jobs: film production; large construction projects
(e.g. the Millennium Dome)
Batch Method:
As businesses grow and production volumes increase, it is not unusual to see the
production process organized so that "Batch methods" can be used.
Batch methods require that the work for any task is divided into parts or operations. Each
operation is completed through the whole batch before the next operation is performed. By using
the batch method, it is possible to achieve specialization of labour. Capital expenditure can also
be kept lower although careful planning is required to ensure that production equipment is not
idle. The main aims of the batch method are, therefore, to:
- Concentrate skills (specialization)
- Achieve high equipment utilization
This technique is probably the most commonly used method for organizing manufacture.
A good example is the production of electronic instruments.

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Batch methods are not without their problems. There is a high probability of poor work
flow, particularly if the batches are not of the optimal size or if there is a significant difference in
productivity by each operation in the process. Batch methods often result in the buildup of
significant "work in progress" or stocks (i.e. completed batches waiting for their turn to be
worked on in the next operation).
Flow Methods:
Flow methods are similar to batch methods - except that the problem of rest/idle
production/batch queuing is eliminated.
Flow has been defined as a "method of production organization where the task is worked
on continuously or where the processing of material is continuous and progressive,"
The aims of flow methods are:
- Improved work & material flow
- Reduced need for labour skills
- Added value / completed work faster
Flow methods mean that as work on a task at a particular stage is complete, it must be passed
directly to the next stage for processing without waiting for the remaining tasks in the "batch".
When it arrives at the next stage, work must start immediately on the next process. In order for
the flow to be smooth, the times that each task requires on each stage must be of equal length and
there should be no movement off the flow production line. In theory, therefore, any fault or error
at a particular stage
In order that flow methods can work well, several requirements must be met:
(1) There must be substantially constant demand
If demand is unpredictable or irregular, then the flow production line can lead to a substantial
build up of stocks and possibility storage difficulties. Many businesses using flow methods get
round this problem by "building for stock" - i.e. keeping the flow line working during quiet
periods of demand so that output can be produced efficiently.
(2) The product and/or production tasks must be standardized
Flow methods are inflexible - they cannot deal effectively with variations in the product
(although some "variety" can be accomplished through applying different finishes, decorations
etc at the end of the production line).
(3) Materials used in production must be to specification and delivered on time
Since the flow production line is working continuously, it is not a good idea to use materials that
vary in style, form or quality. Similarly, if the required materials are not available, then the
whole production line will come to a close - with potentially serious cost consequences.
(4) Each operation in the production flow must be carefully defined - and recorded in detail
(5) The output from each stage of the flow must conform to quality standards
Since the output from each stage moves forward continuously, there is no room for sub-standard
output to be "re-worked" (compare this with job or batch production where it is possible to

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compensate for a lack of quality by doing some extra work on the job or the batch before it is
completed).
The achievement of a successful production flow line requires considerable planning,
particularly in ensuring that the correct production materials are delivered on time and that
operations in the flow are of equal duration.
Common examples where flow methods are used are the manufacture of motor cars,
chocolates and televisions.

Work study in Production and Operation Management:

“Work study is a generic term for those techniques, method study and work
measurement which are used in the examination of human work in all its contexts. And which
lead systematically to the investigation of all the factors which affect the efficiency and economy
of the situation being reviewed, in order to effect improvement.”

Framework of work study:

Work Study in Management Science:

Work study is a means of enhancing the production efficiency (productivity) of the firm
by elimination of waste and unnecessary operations. It is a technique to identify non-value
adding operations by investigation of all the factors affecting the job. It is the only accurate and
systematic procedure oriented technique to establish time standards.
It is going to contribute to the profit as the savings will start immediately and continue
throughout the life of the product. Method study and work measurement is part of work study.
Part of method study is motion study; work measurement is also called by the name ‘Time
study’.

Advantages of Work Study

Following are the advantages of work study:
1. It helps to achieve the smooth production flow with minimum interruptions.

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2. It helps to reduce the cost of the product by eliminating waste and unnecessary operations.
3. Better worker-management relations.
4. Meets the delivery commitment.
5. Reduction in rejections and scrap and higher utilization of resources of the organization.
6. Helps to achieve better working conditions.
7. Better workplace layout.
8. Improves upon the existing process or methods and helps in standardization and
simplification.
9. Helps to establish the standard time for an operation or job which has got application in
manpower planning, production planning.
Importance of Work Study
 Work study is a means of enhancing the production efficiency (productivity) of the firm
by elimination of waste and unnecessary operations.
 It is a technique to identify non-value adding operations by investigation of all the factors
affecting the job.
 It is the only accurate and systematic procedure oriented technique to establish time
standards.
 It is going to contribute to the profit as the savings will start immediately and continue
throughout the life of the product.
Work Study Procedure

Work-study is a procedure oriented and systematic study to establish the one best way
(standard) method of doing an operation by investigation and analysis of all the details regarding
the job or operation carried out as per the established standard method.

Steps Involved in Work Study

 SELECT Job or Process to be studied;
 RECORD all the details concerning job using various recording techniques;
 EXAMINE recorded facts critically by asking questions like who, what, when, why;
 DEVELOP most economical method;
 MEASURE the amount of work involved and set standard time to do that job;
 DEFINE new method and standard time;
 INSTALL the new method as a standard practice;
 MAINTAIN new method as agreed standard.

Statistical Quality Control (SQC):

Statistical Quality Control (SQC) is the term used to describe the set of statistical tools used by
quality professionals. SQC is used to analyze the quality problems and solve them.

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Statistical quality control refers to the use of statistical methods in the monitoring
and maintaining of the quality of products and services.
All the tools of SQC are helpful in evaluating the quality of services. SQC uses different tools to
analyze quality problem.

1) Descriptive Statistics
2) Statistical Process Control (SPC)
3) Acceptance Sampling
Descriptive Statistics involves describing quality characteristics and relationships. SPC
involves inspect random sample of output from process for characteristic. Acceptance Sampling
involve batch sampling by inspection.
The seven major tools used for Statistical Process Control are,
1) Histogram
2) Pareto Chart
3) Cause and Effect Diagram
4) Defect Concentration Diagram
5) Control Chart
6) Scatter Diagram
7) Check Sheet

Introduction to Inventory Management:

Inventory management is a very important function that determines the health of
the supply chain as well as the impacts the financial health of the balance sheet.

Every organization constantly strives to maintain optimum inventory to be able to meet

its requirements and avoid over or under inventory that can impact the financial figures .

What is inventory management?

Inventory management is the management of inventory and stock. As an element of
supply chain management, inventory management includes aspects such as controlling and
overseeing ordering inventory, storage of inventory, and controlling the amount of product for
sale.
The definition of Inventory Management is easy to understand. Simply put, inventory
management is all about having the right inventory at the right quantity, in the right place, at the
right time, and at the right cost.

Need for Inventory Management:

1. Meet variation in Production Demand
Production plan changes in response to the sales, estimates, orders and stocking patterns.
Accordingly the demand for raw material supply for production varies with the product plan in
terms of specific SKU as well as batch quantities.

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Holding inventories at a nearby warehouse helps issue the required quantity and item to
production just in time.
2. Cater to Cyclical and Seasonal Demand
Market demand and supplies are seasonal depending upon various factors like seasons;
festivals etc and past sales data help companies to anticipate a huge surge of demand in the
market well in advance. Accordingly they stock up raw materials and hold inventories to be able
to increase production and rush supplies to the market to meet the increased demand.
3. Economies of Scale in Procurement
Buying raw materials in larger lot and holding inventory is found to be cheaper for the
company than buying frequent small lots. In such cases one buys in bulk and holds inventories at
the plant warehouse.
4. Take advantage of Price Increase and Quantity Discounts
If there is a price increase expected few months down the line due to changes in demand
and supply in the national or international market, impact of taxes and budgets etc, the
company’s tend to buy raw materials in advance and hold stocks as a hedge against increased
costs.
Companies resort to buying in bulk and holding raw material inventories to take
advantage of the quantity discounts offered by the supplier. In such cases the savings on account
of the discount enjoyed would be substantially higher that of inventory carrying cost.

5. Long Lead and High demand items need to be held in Inventory

Often raw material supplies from vendors have long lead running into several months.
Coupled with this if the particular item is in high demand and short supply one can expect
disruption of supplies. In such cases it is safer to hold inventories and have control.
Inventory management techniques that can make or break your business:

But how do you implement the best inventory management techniques to ensure the
best results? Read on to find out our insights for inventory management best practices.
Inventory management is an intrinsic part of your business that you definitely don’t want
to mess around with. The following are some common inventory management techniques and
best practices deployed by organisations - along with their inventory holding costs and potential
profits. You’d probably require a mix of different inventory control techniques for the best
approach for your business.

Common inventory management techniques:

Just in time:
The Just In Time (JIT) method works to lessen the volume of inventory that a business
has on hand. It is considered a risky technique because you only purchase inventory a few days
before it is needed for distribution or sale so that the items arrive just in time for use.

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JIT helps organisations save on inventory holding costs by keeping stock levels low, and
eliminates situations where deadstock sit on shelves for months on end. You need to conduct
thorough research into customer buying habits, seasonal demand, and source for reliable
suppliers and channels of transportation before implementing JIT into your business operations
to minimise risks and screw ups.
ABC analysis:
Based on the Pareto Principle (also known as the 80-20 rule stating that 80% of the
overall consumption value is based on only 20% of the total items), ABC analysis is a popular
technique for dividing on-hand inventory into three categories: A, B, and C, based on annual
consumption unit, inventory value, and cost significance.
A: Items of high value (70%) and small in number (10%)
B: Items of moderate value (20%) and moderate in number (20%)
C: Items of small value (10%) and large in number (70%)
*the values and number of items of each category are expressed as a percentage of the total
The trick is to manage each category separately and as required, as not every category
needs the same amount of attention and effort. ABC Analysis allows for the prioritization in
terms of managing different goods and inventory, where selective control and allocation of funds
and human resources is deployed.
For instance, A Items should be eyeballed constantly and put under special and tight
inventory control because the need for reordering will be more frequent and continuous. On the
other hand, items in Category C require minimum attention and can be kept under simple
observation, employing a rather hands-off approach.
Drop shipping:
This inventory management technique eliminates the cost of holding inventory
altogether. When you have a drop shipping agreement, you can directly transfer customer orders
and shipment details to your manufacturer or wholesaler, who then ships the goods directly to
your customers. Thus you do not have to keep goods in stock, get to save on upfront inventory
costs, and benefit from a positive cash flow cycle.
Cross-docking:
A technique similar to drop shipping where both methods rule out the need for
warehouses or labour costs and risks involved with inventory handling, cross-docking is a
practice where incoming semi-trailer trucks or railroad cars unload materials directly onto
outbound trucks, trailers, or rail cars with little or no storage in between.
Essentially, it means you move goods from one transport vehicle directly onto another
with minimal or no warehousing. You might need staging areas where inbound items are sorted
and stored until the outbound shipment is complete and ready to ship though. Also, you will
require an extensive fleet and network of transport vehicles for cross-docking to work.
Economic Order Quantity:

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(EOQ) is the quantity of inventories that should be bought in each order so as to
minimize total inventories’ costs (ordering cost and carrying cost).

EOQ is the acronym for economic order quantity. The economic order quantity is the
optimum quantity of goods to be purchased at one time in order to minimize the annual total
costs of ordering and carrying or holding items in inventory.

EOQ = Economic Order Quantity,

RU = Annual Required Units,
OC = Ordering Cost for one Unit
UC = Inventory Unit Cost,
CC = Carrying Cost as %age of Unit Cost
Example 1:
Demand for the Child Cycle at Best Buy is 500 units per month. Best Buy incurs a fixed
order placement, transportation, and receiving cost of Rs. 4,000 each time an order is placed.
Each cycle costs Rs. 500 and the retailer has a holding cost of 20 percent. Evaluate the number of
computers that the store manager should order in each replenishment lot?

Example 2:

ABC Ltd. uses EOQ logic to determine the order quantity for its various components and
is planning its orders. The Annual consumption is 80,000 units, Cost to place one order is Rs.
1,200, Cost per unit is Rs. 50 and carrying cost is 6% of Unit cost. Find EOQ, No. of order per
year, Ordering Cost and Carrying Cost and Total Cost of Inventory.

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MARKETING INTRODUCTION:
In today's world of marketing, everywhere you go you are being marketed to in one form
or another. Marketing is with you each second of your walking life. From morning to night you
are exposed to thousands of marketing messages every day. Marketing is something that affects
you even though you may not necessarily be conscious of it.
After reading this you'll understand - what exactly the marketing is, to whom it is
beneficial, and what are the nature and scope of marketing.

DEFINITION OF MARKETING:
According to American Marketing Association (2004) - "Marketing is an
organizational function and set of processes for creating, communicating and delivering value to

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customers and for managing relationships in a way that benefits both the organization and the
stakeholder."
AMA (1960) - "Marketing is the performance of business activities that direct the flow of
goods and services from producer to consumer or user."
According to Eldridge (1970) - "Marketing is the combination of activities designed to
produce profit through ascertaining, creating, stimulating, and satisfying the needs and/or wants
of a selected segment of the market."
According to Kotler (2000) - "A societal 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."
Professor Philip Kotler explained that marketing was “meeting the needs of your
customer at a profit.”
Marketing is meeting the needs and wants of a consumer.
Classical marketing is often described in terms of the four “P’s, which are:
 Product – what goods or services are offered to customers
 Promotion – how the producer communicates the value of its products
 Price – the value of the exchange between the customer and producer
 Placement – how the product is delivered to the customer.

NATURE OF MARKETING:
1. Marketing is an Economic Function:
Marketing embraces all the business activities involved in getting goods and services,
from the hands of producers into the hands of final consumers. The business steps through which
goods progress on their way to final consumers is the concern of marketing.
2. Marketing is a Legal Process by which Ownership Transfers:
In the process of marketing the ownership of goods transfers from seller to the purchaser
or from producer to the end user.
3. Marketing is a System of Interacting Business Activities
Marketing is that process through which a business enterprise, institution, or organisation
interacts with the customers and stakeholders with the objective to earn profit, satisfy customers,
and manage relationship. It is the performance of business activities that direct the flow of goods
and services from producer to consumer or user.
4. Marketing is a Managerial function:
According to managerial or systems approach - "Marketing is the combination of
activities designed to produce profit through ascertaining, creating, stimulating, and satisfying
the needs and/or wants of a selected segment of the market."
According to this approach the emphasis is on how the individual organisation processes
marketing and develops the strategic dimensions of marketing activities.
5. Marketing is a social process:
Marketing is the delivery of a standard of living to society.

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According to Cunningham and Cunningham (1981) societal marketing performs three
essential functions:-
1. Knowing and understanding the consumer's changing needs and wants;
2. Efficiently and effectively managing the supply and demand of products and services;
and
3. Efficient provision of distribution and payment processing systems.
6. Marketing is a philosophy based on consumer orientation and satisfaction
7. Marketing had dual objectives - profit making and consumer satisfaction

SCOPE OF MARKETING:
1. Study of Consumer Wants and Needs:
Goods are produced to satisfy consumer wants. Therefore study is done to identify consumer
needs and wants. These needs and wants motivates consumer to purchase.
2. Study of Consumer behavior:
Marketers perform study of consumer behavior. Analysis of buyer behavior helps marketer in
market segmentation and targeting.
3. Production planning and development:
Product planning and development starts with the generation of product idea and ends with the
product development and commercialization. Product planning includes everything from
branding and packaging to product line expansion and contraction.
4. Pricing Policies:
Marketer has to determine pricing policies for their products. Pricing policies differs form
product to product. It depends on the level of competition, product life cycle, marketing goals
and objectives, etc.
5. Distribution:
Study of distribution channel is important in marketing. For maximum sales and profit goods are
required to be distributed to the maximum consumers at minimum cost.
6. Promotion:
Promotion includes personal selling, sales promotion, and advertising. Right promotion mix is
crucial in accomplishment of marketing goals.
7. Consumer Satisfaction:
The product or service offered must satisfy consumer. Consumer satisfaction is the major
objective of marketing.

8. Marketing Control:
Marketing audit is done to control the marketing activities.
Functions of Marketing:
The ultimate aim of marketing is exchange of goods and services from producers to
consumers in a way that maximizes the satisfaction of customer’s needs. Marketing functions
start from identifying the consumer needs and end with satisfying the consumer needs. The
universal functions of marketing involve buying, selling, transporting, storing, standardizing and
grading, financing, risk taking and securing marketing information. However, modern marketing
has some other functions such as gathering the market info and analyzing that info. Market

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planning and strategy formation. To assist in product designing and development also comes
under the marketing functions. The marketing functions have been discussed here briefly:
1. Market Information: To identify the needs, wants and demands of the consumers and
then analyzing the identified information to arrive at various decisions for the successful
marketing of a firm’s products and services is one of the most important functions of marketing.
The analysis involves judging the internal weaknesses and strengths of the organization as well
politico-legal, social and demographic data of the target market. This information is further used
in market segmentations.

2. Market Planning: Market-planning aims at achieving a firm’s marketing objectives.

These objectives may involve increasing market presence, dominate the market or increase
market share. The market planning function covers aspects of production levels, promotions and
other action programmes.
3. Exchange Functions: The buying and selling are the exchange functions of marketing.
They ensure that a firm’s offerings are available in sufficient quantities to meet customer
demands. The exchange functions are supported by advertising, personal selling and sales
promotions.
4. Product Designing and development: The product design helps in making the prodyct
attractive to the target market. In today’s competitive market environment not only cost matters
but also the product design, suitability, shape, style etc. matter a lot in taking production
decisions.
5. Physical Distribution: The physical distribution functions of marketing involve
transporting and storing. The transporting function involve moving products from their points of

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production to locations convenient for purchasers and storing function involve the warehousing
products until needed for sale.
6. Standardization and Grading: Standardization involves producing goods at
predetermined specifications. Standardization ensures that product offerings meet established
quality and quantity. It helps in achieving uniformity and consistency in the output product.
Grading is classification of goods in various groups based upon certain predetermined
characteristics. It involves the control standards of size, weight etc. Grading helps in pricing
decisions also. The higher quality goods and services attract higher prices.
7. Financing: The financing functions of marketing involve providing credit for channel
members or consumers.
8. Risk Taking: Risk taking is one of the important marketing functions. Risk taking in
marketing refers to uncertainty about consumer purchases resulting from creation and marketing
of goods and services that consumers may purchase in future.
9. Packaging, labeling and branding: packaging involves designing package for the
products, labeling means putting information required / specified on a product’s covering.
Packaging and labeling serve as promotional tools now a days, Branding distinguishes the
generic commodity name to a brand name. For example, Wheat Flour is a generic name of a
commodity while “Ashirvad Aata” is a brand name. In service industry, also branding matters a
lot.
10. Customer Support: Customer support is a very important function of marketing. It
involves pre sales counseling, after sales service, handling the customer complaints and
adjustments, credit services, maintenance services, technical services and consumer information.
For example, water purifier comes with an onsite service warranty of 7 years helps in marketing
and is an important marketing function as well.
Marketing Mix:
Meaning and its Elements:
Marketing Mix - A mixture of several ideas and plans followed by a marketing
representative to promote a particular product or brand is called marketing mix.
Several concepts and ideas combined together to formulate final strategies helpful in
making a brand popular amongst the masses form marketing mix.

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Elements of Marketing Mix:

The elements of marketin mix are often called the four P’s of marketing.
1. Product
 Goods manufactured by organizations for the end-users are called products.
 Products can be of two types - Tangible Product and Intangible Product (Services)
 An individual can see, touch and feel tangible products as compared to intangible
products.
 A product in a market place is something which a seller sells to the buyers in
exchange of money.
2. Price
 The money which a buyer pays for a product is called as price of the product. The
price of a product is indirectly proportional to its availability in the market. Lesser
its availability, more would be its price and vice a versa.
 Retail stores which stock unique products (not available at any other store) quote
a higher price from the buyers.
3. Place

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 Place refers to the location where the products are available and can be sold or
purchased. Buyers can purchase products either from physical markets or from
virtual markets. In a physical market, buyers and sellers can physically meet and
interact with each other whereas in a virtual market buyers and sellers meet
through internet.
4. Promotion
Promotion refers to the various strategies and ideas implemented by the marketers to
make the end - users aware of their brand. Promotion includes various techniques
employed to promote and make a brand popular amongst the masses.
Promotion can be through any of the following ways:
 Advertising
Print media, Television, radio are effective ways to entice customers and make them aware of the
brand’s existence.
Billboards, hoardings, banners installed intelligently at strategic locations like heavy traffic
areas, crossings, railway stations, bus stands attract the passing individuals towards a
particular brand.
Taglines also increase the recall value of the brand amongst the customers.
 Word of mouth
One satisfied customer brings ten more customers along with him whereas one dis-satisfied
customer takes away ten more customers. That’s the importance of word of mouth.
Positive word of mouth goes a long way in promoting brands amongst the customers.
Lately three more P’s have been added to the marketing mix. They are as follows:
 People - The individuals involved in the sale and purchase of products or services come
under people.
 Process - Process includes the various mechanisms and procedures which help the
product to finally reach its target market
 Physical Evidence - With the help of physical evidence, a marketer tries to communicate
the USP’s and benefits of a product to the end users
Four C’s of Marketing Mix
Now days, organizations treat their customers like kings. In the current scenario, the four C’s
has thus replaced the four P’s of marketing making it a more customer oriented model. Koichi
Shimizu in the year 1973 proposed a four C’s classification.
 Commodity - (Replaces Products)
 Cost - (Replaces Price) involves manufacturing cost, buying cost and selling cost
 Channel - The various channels which help the product reach the target market.
 Communication - (Replaces Promotion)

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Robert F. Lauterborn gave a modernized version of the four C’s model in the year 1993.
According to him the four C’s of marketing are:
Consumer
Cost
Convenience
Communication
Marketing vs selling:

Marketing Management - Distribution Channels

A distribution channel is the route through which goods or services move from the
company to the customer or the transfer of payment happens from the customer to the company.
Distribution channels can mean selling of products directly or selling through wholesalers,
retailers etc. The same applies for payment transfer from customers to company; it can move
through a path or can be sent directly to the company.

Functions of Distribution Channels:

Distribution channels basically function to deliver goods from the manufacturer to the customer.

The following are the functions of distribution channels −

 Facilitate selling by being physically close to customers
 Gather information about potential and current customer competitions, other factors and
forces of the environment
 Provide distributional efficiency by bridging the gap between the manufacturer and the
user efficiently and economically
 Assemble products into assortments to meet buyers’ needs
 Match segments of supply with segments of demand

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 Assist in sales promotion
 Assist in introducing new products
 Assist in implementing the price mechanism
 Assist in developing sales forecast
 Provide market intelligence and feedback
 Maintain records
 Take care of liaison requirements
 Standardize transaction

Objectives of Distribution Channels:

Objectives of a distribution channel are planned as per the target of the enterprise and
executed respectively. The following are the various objectives behind the planning of
distribution channels −
 To ensure availability of products at the point of sale
 To build channel member’s loyalty
 To stimulate channel members to put greater selling efforts
 To develop management efficiency in channel organization
 To identify the organization at the level
 To have an efficient and effective distribution system for making the products and
services available readily, regularly, equitably and fresh.
Major Channels of Distribution:

Here is a list of some of the major channels of distribution −

 Manufacturer → Consumer
 Manufacturer → Retailer → Customer
 Manufacturer → Wholesaler → Customer

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 Manufacturer → Wholesaler → Retailer → Customer
 Manufacturer → Agent → Retailer → Customer
 Manufacturer → Agent → Wholesaler → Customer
 Manufacturer → Agent → Wholesaler → Retailer → Customer
Profit distribution decreases as the channel length increases.

Designing Distribution Channels:

We have seen what a distribution channel is. Let us now see the designing process of a
distribution channel.

The following steps are involved in the designing of a channel system −

 Formulating the channel objectives

 Identifying the functions to be performed by the channel

 Analyzing the product and linking the channel design to the product characteristics

 Evaluating the distribution environment, including legal aspects

 Evaluating competitor’s channel designs

 Evaluating company resources and matching the channel design to the resources

 Generating alternative designs, evaluating them and selecting the one that suits the firm
best

Classification of Wholesalers:
A wholesaler purchases from the manufacturer and further distributes the product to
customers or retailers. Wholesalers can be classified into the following categories as per area of
functioning −
 Merchant wholesalers

 Agents and brokers

 Manufacturer’s sales branches and offices

ADVERTISING:

Advertising in business is a form of marketing communication used to encourage,

persuade, or manipulate an audience (viewers, readers or listeners; sometimes a specific group)
to take or continue to take some action.

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Objectives and Importance of Advertising:

Advertising is the best way to communicate to the customers. Advertising helps informs
the customers about the brands available in the market and the variety of products useful to them.
Advertising is for everybody including kids, young and old. It is done using various media types,
with different techniques and methods most suited.
Let us take a look on the main objectives and importance of advertising.
Objectives of Advertising
Four main Objectives of advertising are:

i. Trial
ii. Continuity
iii. Brand switch
iv. Switching back

Let’s take a look on these various types of objectives.

1. Trial: the companies which are in their introduction stage generally work for this
objective. The trial objective is the one which involves convincing the customers to buy the new
product introduced in the market. Here, the advertisers use flashy and attractive ads to make
customers take a look on the products and purchase for trials.
2. Continuity: this objective is concerned about keeping the existing customers to stick on
to the product. The advertisers here generally keep on bringing something new in the product and
the advertisement so that the existing customers keep buying their products.
3. Brand switch: this objective is basically for those companies who want to attract the
customers of the competitors. Here, the advertisers try to convince the customers to switch from
the existing brand they are using to their product.
4. Switching back: this objective is for the companies who want their previous customers
back, who have switched to their competitors. The advertisers use different ways to attract the
customers back like discount sale, new advertise, some reworking done on packaging, etc.

Basically, advertising is a very artistic way of communicating with the customers. The main
characteristics one should have to get on their objectives are great communication skills and very
good convincing power.

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Importance of Advertising
Advertising plays a very important role in today’s age of competition. Advertising is one
thing which has become a necessity for everybody in today’s day to day life, be it the producer,
the traders, or the customer. Advertising is an important part. Lets have a look on how and where
is advertising important:
1. Advertising is important for the customers
Just imagine television or a newspaper or a radio channel without an advertisement! No,
no one can any day imagine this. Advertising plays a very important role in customers life.
Customers are the people who buy the product only after they are made aware of the products
available in the market. If the product is not advertised, no customer will come to know what
products are available and will not buy the product even if the product was for their benefit. One
more thing is that advertising helps people find the best products for themselves, their kids, and
their family. When they come to know about the range of products, they are able to compare the
products and buy so that they get what they desire after spending their valuable money. Thus,
advertising is important for the customers.

2. Advertising is important for the seller and companies producing the products
Yes, advertising plays very important role for the producers and the sellers of the
products, because
 Advertising helps increasing sales
 Advertising helps producers or the companies to know their competitors and plan
accordingly to meet up the level of competition.
 If any company wants to introduce or launch a new product in the market, advertising will
make a ground for the product. Advertising helps making people aware of the new product
so that the consumers come and try the product.
 Advertising helps creating goodwill for the company and gains customer loyalty after
reaching a mature age.
 The demand for the product keeps on coming with the help of advertising and demand and
supply become a never ending process.
3. Advertising is important for the society
Advertising helps educating people. There are some social issues also which advertising
deals with like child labour, liquor consumption, girl child killing, smoking, family
planning education, etc. thus, advertising plays a very important role in society.
Classification of Advertising:
Advertising is the promotion of a company’s products and services though different
mediums to increase the sales of the product and services. It works by making the customer
aware of the product and by focusing on customer’s need to buy the product. Globally,
advertising has become an essential part of the corporate world. Therefore, companies allot a
huge part of their revenues to the advertising budget. Advertising also serves to build a brand of
the product which goes a long way to make effective sales.

There are several branches or types of advertising which can be used by the
companies. Let us discuss them in detail.

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 Print Advertising - The print media has been used for advertising since long. The
newspapers and magazines are quite popular modes of advertising for different companies all
over the world. Using the print media, the companies can also promote their products through
brochures and fliers. The newspaper and magazines sell the advertising space and the cost
depends on several factors. The quantity of space, the page of the publication, and the type of
paper decide the cost of the advertisement. So an ad on the front page would be costlier than on
inside pages. Similarly an ad in the glossy supplement of the paper would be more expensive
than in a mediocre quality paper.
 Broadcast Advertising - This type of advertising is very popular all around the world. It
consists of television, radio, or Internet advertising. The ads on the television have a large
audience and are very popular. The cost of the advertisement depends on the length of the ad and
the time at which the ad would be appearing. For example, the prime time ads would be more
costly than the regular ones. Radio advertising is not what it used to be after the advent of
television and Internet, but still there is specific audience for the radio ads too. The radio jingles
are quite popular in sections of society and help to sell the products.
 Outdoor Advertising - Outdoor advertising makes use of different tools to gain
customer’s attention. The billboards, kiosks, and events and tradeshows are an effective way to
convey the message of the company. The billboards are present all around the city but the
content should be such that it attracts the attention of the customer. The kiosks are an easy outlet
of the products and serve as information outlets for the people too. Organizing events such as
trade fairs and exhibitions for promotion of the product or service also in a way advertises the
product. Therefore, outdoor advertising is an effective advertising tool.
 Covert Advertising - This is a unique way of advertising in which the product or the
message is subtly included in a movie or TV serial. There is no actual ad, just the mention of the
product in the movie. For example, Tom Cruise used the Nokia phone in the movie Minority
Report.
 Public Service Advertising - As evident from the title itself, such advertising is for the
public causes. There are a host of important matters such as AIDS, political integrity, energy
conservation, illiteracy, poverty and so on all of which need more awareness as far as general
public is concerned. This type of advertising has gained much importance in recent times and is
an effective tool to convey the message.

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Sales Promotion:
Sales promotion is one level or type of marketing aimed either at the consumer or at the
distribution channel (in the form of sales-incentives). It is used to introduce new product, clear
out inventories, attract traffic, and to lift sales temporarily.
Definition of 'Sales Promotion':
Sales promotions are the set of marketing activities undertaken to boost sales of the
product or service.

Definition: Sales promotions are the set of marketing activities undertaken to boost sales of the
product or service.
Description: There are two basic types of sales promotions: trade and consumer sales
promotions. The schemes, discounts, freebies, commissions and incentives given to the trade
(retailers, wholesalers, distributors, C&Fs) to stock more, push more and hence sell more of a
product come under trade promotion. These are aimed at enticing the trade to stock up more and
hence reduce stock-outs, increase share of shelf space and drive sales through the channels.
However, trade schemes get limited by the cost incurred by the company as well as the
limitations of the trade in India to stock up free goods. Incentives can be overseas trips and gifts.

Objectives of Sales Promotion:

Sales promotion is a vital bridge or a connecting link between personal selling and advertising.
Sales promotion activities are undertaken to achieve the following objectives:
 To increase sales by publicity through the media which are complementary to press and
poster advertising.
 To disseminate information through salesmen, dealers etc., so as to ensure the product
getting into satisfactory use by the ultimate consumers.
 To stimulate customers to make purchases at the point of purchase.
 To prompt existing customers to buy more.
 To introduce new products.
 To attract new customers.
 To meet competition from others effectively.
 To check seasonal decline in the volume of sales.
Importance of Sales Promotion:
The importance of sales promotion has increased tremendously in the modern times.
Lakhs of rupees are being spent on sales promotional activities to attract the consumers in our
country and also in other countries of the world.
Some large companies have also begun to appoint sales promotion managers to handle
miscellaneous promotional tools. All these facts show that the importance of sales promotion
activities is increasing at a faster rate.

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11 Important Techniques of Sales Promotion
1) Rebate: Under it in order to clear the excess stock, products are offered at some reduced
price. For example, giving a rebate by a car manufacturer to the tune of 12,000/- for a limited
period of time.
(2) Discount: Under this method, the customers are offered products on less than the listed
price. For example, giving a discount of 30% on the sale of Liberty Shoes. Similarly giving a
discount of 50% + 40% by the KOUTONS.
(3) Refunds: Under this method, some part of the price of an article is refunded to the customer
on showing proof of purchase. For example, refunding an amount of 5/- on showing the empty
packet of the product priced 100/-.
(4) Product Combination: Under this method, along with the main product some other product
is offered to the customer as a gift. The following are some of the examples:
(5) Quantity Gift: Under this method, some extra quantity of the main product is passed on as a
gift to the customers. For example, 25% extra toothpaste in a packet of 200 gm tooth paste.
Similarly, a free gift of one RICH LOOK shirt on the purchase of two shirts.
(6) Instant Draw and Assigned Gift: Under this method, a customer is asked to scratch a card
on the purchase of a product and the name of the product is inscribed thereupon which is
immediately offered to the customer as a gift. For example, on buying a car when the card is
scratched such gifts are offered – TV, Refrigerator, Computer, Mixer, Dinner Set, Wristwatch,
T-shirt, Iron Press, etc.
(7) Lucky Draw: Under this method, the customers of a particular product are offered gifts on a
fixed date and the winners are decided by the draw of lots. While purchasing the product, the
customers are given a coupon with a specific number printed on it.
On the basis of this number alone the buyer claims to have won the gift. For example,
‘Buy a bathing soap and get a gold coin’ offer can be used under this method.
(8) Usable Benefits: Under this method, coupons are distributed among the consumers on behalf
of the producer. Coupon is a kind of certificate telling that the product mentioned therein can be
obtained at special discount.
It means that if a customer has a coupon of some product he will get the discount
mentioned therein whenever he buys it. Possession of a coupon motivates the consumer to buy
the product, even when he has no need of it.
Such coupons are published in newspapers and magazines. Some companies distribute
coupons among its shareholders. Sellers collect the coupons from the customers and get the
payment from the company that issues the same.
(9) Full Finance @ 0%: Under this method, the product is sold and money received in
installment at 0% rate of interest. The seller determines the number of installments in which the
price of the product will be recovered from the customer. No interest is charged on these
installments.
(10) Samples or Sampling: Under this method, the producer distributes free samples of his
product among the consumers. Sales representatives distribute these samples from door-to-door.

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This method is used mostly in case of products of daily-use, e.g., Washing Powder, Tea,
Toothpaste, etc. Thus, the consumers willy-nilly make use of free sample. If it satisfies them,
they buy it and in this way sales are increased.
(11) Contests: Some producers organise contests with a view to popularizing their products.
Consumers taking part in the contest are asked to answer some very simple questions on a form
and forward the same to the company. The blank form is made available to that consumer who
buys the product first.
Result is declared on the basis of all the forms received by a particular date. Attractive
prizes are given to the winners of the contest. Such contests can be organised in different ways.

12 Different Types of Marketing Strategy and Techniques

1. Social Marketing:
It refers to the design, implementation and control of programs to increase the
acceptability of a social cause or practice among people e.g. No Smoking campaign in Delhi
University, publicity campaign for casting vote.
2. Augmented Marketing:
It refers to providing additional services by way of innovative offerings and benefits to
the customers to increase his level of satisfaction e.g. free home delivery service by
Supermarkets.
3. Direct Marketing:
Marketing through various advertising media that interact directly with consumers,
generally calling for the consumer to make a direct response, e.g. Catalogue Selling, Mail-order,
Tele-calling and TV shopping.
4. Relationship Marketing:
Marketing through creating, maintaining and enhancing strong long-term relationships
with customers in order to win his loyalty e.g. a restaurant can build relationships with customers
by sending him wishes and discount offers on his birthdays.

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5. Services Marketing:
It is applying the concepts, tools and techniques of marketing to services like banking,
insurance, retailing, educational etc.
6. Person Marketing:
It consists of activities undertaken to create, maintain or change attitudes or behavior
towards particular people like politicians, sports stars, film stars, professionals to promote their
careers and income.
7. Organization Marketing:
It consists of activities undertaken to create, maintain or change attitudes and behavior of
target audiences towards an organization.
8. Place Marketing:
Place marketing involves activities undertaken to create, maintain, or change attitudes
and behavior towards particular places e.g. tourism marketing.
9. Differential Marketing:
A market-coverage strategy in which a firm decides to target different markets through
different strategies or offers e.g. Hindustan Unilever offers different types and qualities soaps for
different markets and customers.
10. Synchro marketing:
It refers to balancing the fluctuations in irregular demand for a product due to seasons,
timings etc, through flexible pricing, promotion and other incentives e.g. heavy off-season
discount on woollens may increase its demand to some extent.
11. Concentrated Marketing:
A market-coverage strategy in which a firm focuses on only one or few markets.
12. De-marketing:
Marketing strategies to reduce demand temporarily or permanently, not to destroy
demand but only to shift it e.g. Super stores may offer no discounts on Saturdays, Sundays and
holidays to reduce overcrowd
Product Life Cycle:
DEFINITION of 'Product Life Cycle'
The period of time over which an item is developed, brought to market and eventually
removed from the market. First, the idea for a product undergoes research and development. If
the idea is determined to be feasible and potentially profitable, the product will be produced,
marketed and rolled out. Assuming the product becomes successful, its production will grow
until the product becomes widely available. Eventually, demand for the product will decline and
it will become obsolete

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Product Life Cycle Stages
As consumers, we buy millions of products every year. And just like us, these products
have a life cycle. Older, long-established products eventually become less popular, while in
contrast, the demand for new, more modern goods usually increases quite rapidly after they are
launched.
Because most companies understand the different product life cycle stages, and that the
products they sell all have a limited lifespan, the majority of them will invest heavily in new
product development in order to make sure that their businesses continue to grow.

Product Life Cycle Stages Explained

The product life cycle has 4 very clearly defined stages, each with its own characteristics
that mean different things for business that are trying to manage the life cycle of their particular
products.
Introduction Stage – This stage of the cycle could be the most expensive for a company
launching a new product. The size of the market for the product is small, which means sales are
low, although they will be increasing. On the other hand, the cost of things like research and
development, consumer testing, and the marketing needed to launch the product can be very
high, especially if it’s a competitive sector.

Growth Stage – The growth stage is typically characterized by a strong growth in sales
and profits, and because the company can start to benefit from economies of scale in production,
the profit margins, as well as the overall amount of profit, will increase. This makes it possible
for businesses to invest more money in the promotional activity to maximize the potential of this
growth stage.

Maturity Stage – During the maturity stage, the product is established and the aim for
the manufacturer is now to maintain the market share they have built up. This is probably the
most competitive time for most products and businesses need to invest wisely in any marketing
they undertake. They also need to consider any product modifications or improvements to the
production process which might give them a competitive advantage.

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Unit-II
Decline Stage – Eventually, the market for a product will start to shrink, and this is
what’s known as the decline stage. This shrinkage could be due to the market becoming saturated
(i.e. all the customers who will buy the product have already purchased it), or because the
consumers are switching to a different type of product. While this decline may be inevitable, it
may still be possible for companies to make some profit by switching to less-expensive
production methods and cheaper markets.

Product Life Cycle Examples

It’s possible to provide examples of various products to illustrate the different stages of the
product life cycle more clearly. Here is the example of watching recorded television and the
various stages of each method:
1. Introduction – 3D TVs
2. Growth – Blue ray discs/DVR
3. Maturity – DVD
4. Decline – Video cassette
The idea of the product life cycle has been around for some time, and it is an
important principle manufacturers need to understand in order to make a profit and stay in
business.
However, the key to successful manufacturing is not just understanding this life cycle, but
also proactively managing products throughout their lifetime, applying the appropriate resources
and sales and marketing strategies, depending on what stage products are at in the cycle.
Product Life Cycle Examples:
Most consumers probably aren’t aware of the product life cycle stages. Even though they
make a conscious decision to switch from one product to another, this is more due to personal

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Unit-II
taste or simply wanting the have the latest and best, rather than an appreciation of which stage of
its life cycle a product may be going through.

But if you look at the trends in key markets over the last couple of decades, even just the
last few years, consumer demand for particular products can provide some very good product life
cycle examples.
Product Life Cycle Examples:
The traditional product life cycle curve is broken up into four key stages. Products first go
through the Introduction stage, before passing into the Growth stage. Next comes Maturity until
eventually the product will enter the Decline stage. These examples illustrate these stages for
particular markets in more detail.
 3D Televisions: 3D may have been around for a few decades, but only after considerable
investment from broadcasters and technology companies are 3D TVs available for the
home, providing a good example of a product that is in the Introduction Stage.
 Blue Ray Players: With advanced technology delivering the very best viewing
experience, Blue Ray equipment is currently enjoying the steady increase in sales that’s
typical of the Growth Stage.
 DVD Players: Introduced a number of years ago, manufacturers that make DVDs, and
the equipment needed to play them, have established a strong market share. However,
they still have to deal with the challenges from other technologies that are characteristic
of the Maturity Stage.
 Video Recorders: While it is still possible to purchase VCRs this is a product that is
definitely in the Decline Stage, as it’s become easier and cheaper for consumers to switch
to the other, more modern formats.
Another example within the consumer electronics sector also shows the emergence and growth
of new technologies, and what could be the beginning of the end for those that have been around
for some time.
 Holographic Projection: Only recently introduced into the market, holographic
projection technology allows consumers to turn any flat surface into a touchscreen
interface. With a huge investment in research and development, and high prices that will
only appeal to early adopters, this is another good example of the first stage of the cycle.

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Unit-II
 Tablet PCs: There are a growing number of tablet PCs for consumers to choose from, as
this product passes through the Growth stage of the cycle and more competitors start to
come into a market that really developed after the launch of Apple’s iPad.
 Laptops: Laptop computers have been around for a number of years, but more advanced
components, as well as diverse features that appeal to different segments of the market,
will help to sustain this product as it passes through the Maturity stage.
 Typewriters: Typewriters, and even electronic word processors, have very limited
functionality. With consumers demanding a lot more from the electronic equipment they
buy, typewriters are a product that is passing through the final stage of the product life
cycle.
2 Marks
1. State the methods of Productions
2. Brief on the functions of marketing
3. Define EOQ
4. What is advertisement
5. State the elements of marketing mix
6. Make a short note on control charts

10 Marks Questions
1. Define marketing mix and explain 7ps of marketing mix
2. Discuss about need of quality control and techniques of Quality control
3. What do you understand by channels of distribution?
4. Define plant location and explain the strategic decision and factors affect the plant
location.
5. Define Plant layout and principles and types of plant layout.
6. Explain Product Life Cycle with example.

37 T.Sanjeeva Prasad M.B.A