Business Communication & Marketing - Study Material

CHARTERED ACCOUNTANCY PROFESSIONAL (CAP) - II
Study Material
Paper 6
BUSINESS COMMUNICATION
AND
MARKETING
Education Department
The Institute of Chartered Accountants of Nepal
Publisher : The Institute of Chartered Accountants of Nepal
ICAN Marg, Satdobato, Lalitpur, P.O.Box: 5289, Kathmandu
Tel: 977-1-5530832, 5530730; Fax: 977-1-5550774
E-mail: ican@ntc.net.np, Website: www.ican.org.np
© The Institute of Chartered Accountants of Nepal
All rights reserved. No part of this publication may be translated,

reprinted, reproduced or utilized in any form either in whole or in part
or by any electronic or other means, including photocopying, recording
or in any information storage and retrieval system, without prior
permission in writing from the publisher.
Price : Rs. 350/-
First Edition : March, 2011
Second Edition : June, 2014
Third Edition : June, 2019
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PREFACE
This Study Material contains the subject matter on the subject ‘Business Communication’ and
‘Marketing’ prepared for the students of Chartered Accountancy Professional (CAP)- II course.
The Study Material on the subject “Business Communication” has been prepared with an
objective to provide working knowledge on communication process with basic qualities of
business documents, letters, and reports through writing assignments simulating situations
occurring in business organizations.
It aims to make students familiar with sources of business information & the techniques for
collecting data necessary for the preparation of documents in business & produce employment
communication. Similarly the students will also be able to develop an understanding of non-
written business communications & demonstrate human relations skills through the use of
effective listening techniques & interpersonal skills within a group setting.
The study material has been divided into five chapters which include Ways of Communication
in working environment, working in groups, Cross cultural Communications, Employment
Communication & Analyzing Information and preparing Reports & Proposals. Samples of
letters, reports, resumes & other means of communications have been included amply while
preparing this material to clarify concepts of Communication in Business sector.
Similarly, the Study Material on the subject “Marketing” has been prepared with an objective to
develop knowledge & understanding of marketing fundamentals relevant to a professional
accountant & understanding of marketing forces & practices in organizations. It will be useful
for students to develop their abilities to set effective plans & strategies for market promotion of
their organizational products & services.
The study material has been divided into eleven chapters which include Meaning of Marketing
& Marketing Mix, Marketing Concepts, Environmental Concepts of Marketing, Market
Segmentation & Targeting, Market Information System, Buyer Behavior Analysis, Product
Decisions, Price Decisions, Place Decisions, and Promotion Decisions & Emerging Concepts in
Marketing.
Students are requested to familiarize with the syllabus of the subject, read each topic thoroughly,
prepare important notes and evaluate their understanding on the topic. After reading the
material, this will help them to practice solving the questions in examination conditions to
generate self confidence.
We believe, this material will be of great help to the students of CAP-II. However, they are
advised not to rely wholly on this material. They should study and update themselves with the
latest developments in marketing tools & techniques as well as other recommended text books
given in the CA Education Scheme and Syllabus.
Lastly, we gratefully acknowledge the efforts of Mr. Mukunda Das Shrestha, who has
meticulously assisted to prepare the study material of Business Communication and Mr. Madan
Lamichhane, who has assisted to review the material thoroughly and helped in building them
in the comprehensive shape. Also, we gratefully acknowledge the efforts of Professor Dr.
Govind Ram Agrawal, who has meticulously assisted for preparation and updating the study
material of Marketing and helped in building them in the comprehensive one. Similarly, we are
also thankful to Associate Professor Dr. Vishnu Khanal who has reviewed this material to
bring in this form.
Due care has been taken to make every chapter simple, comprehensive and relevant for the
students while preparing this material. In case students need any clarification or have any
suggestions to make the material for further improvement, they may be forwarded to CA Himal
Dahal, Deputy Director at the Education Department.
June, 2019
Education Department
The Institute of Chartered Accountants of Nepal
SYLLABUS
Paper-6 Business Communication & Marketing
(One Paper- Two Sections-Three Hours-100Marks)
SECTION A: BUSINESS COMMUNICATION
Level of Knowledge : Working

Course objectives :
• Develop an understanding of the role of communication in
business, communication process with basic qualities of
business documents, letters, reports through writing
assignments, simulating situations occurring in business
organizations.
• Become familiar with sources of business information and the
techniques for collecting data necessary for the preparation of
documents in business and produce employment
communication, including resume, cover letter, and other
employment documents.
• Develop an understanding of non-written business
communications and demonstrate human relations skills through
the use of effective listening techniques and interpersonal skills
within a group setting (team building).
COURSE CONTENTS
Introduction: Communicating at Work
• Succeeding in the new workplace
• Examining the process of communication
• Overcoming interpersonal barriers
• Communicating in organizations
• Ethics in business communications
• Strengthening your communication skills
Working in Groups
• Listening skills
• Group interactions
• Determining group goals
• Individual roles in groups
• Conflict resolution
• Effective meetings
• Writing notifications, agenda and minutes
• Giving and receiving feedback in groups
Communicating Across Cultures
• Importance of international business
• Diversity in today’s workplace
• Ways to look at culture
• Values, beliefs, and practices
• Nonverbal communication
• Writing to an international audience
• Learning more about international business communication Employment
Communication
• Preparing for employment
• The persuasive resume
• Emailing your resume
• The persuasive letter of application
• Follow-up letters
• Interviewing for employment
Writing Reports and Proposals
• An inside perspective analyzing data and writing reports and proposals
• A timetable for writing reports and proposals
• Choosing information for reports and proposals
• Analyzing data and information for reports and proposals
• Organizing information in reports and proposals
• Presenting information effectively
• Report types informational and analytical
• Proposal types technical and financial
• Formal and informal reports and proposals
SECTION B: MARKETING
Level of Knowledge : Working
Course objectives :
• Develop knowledge and understanding of fundamentals of
marketing relevant to a professional accountant.
• Understanding marketing forces and practices in organizations.
COURSE CONTENTS
Meaning of Marketing and Marketing Mix

• Marketing meaning and importance
• Marketing mix meaning and components
• Emerging marketing challenges
Evolution of Marketing Concepts

• Production, product, selling, marketing, customer & societal, Holistic concept
Environmental Context of Marketing

• Marketing environment meaning, importance
• Micro environment forces in marketing
• Macro environment forces in marketing
• Impact of environment on marketing. Marketing environment in Nepal
• Market Segmentation and Targeting
• Market segmentation meaning, benefits and requirements
• Process of market segmentation
• Segmentation variables for consumer and industrial markets
• Market targeting
• Market segmentation in Nepal
Market Information System

• Meaning and importance of market information system
• Components of market information system
• Market research process
• Problems of market information system in Nepal
Buyer Behavior Analysis
• Meaning and importance of buyer behavior
• Stages of consumer buying behavior
• Factors affecting consumer buying process
• Features of organizational buying behavior
• Factors affecting organizational buying behavior
• Consumer buying behavior in Nepal
Product Decisions
• Product Meaning, levels, types
• Product life cycle and marketing activities
• Process of new product development and reasons for their failure
• Product line and mix
• Service product
• Branding, packaging, labeling
• Product scenario in Nepal
Price Decisions
• Price meaning, importance, objectives and factors affecting price determination
• Methods of price determination
• Pricing policies and strategies
• Pricing scenario in Nepal
Place Decisions (Distribution)
• Place meaning, importance and objectives
• Marketing middlemen
• Channels structures for consumer and industrial products
• Physical distribution meaning and components
Promotion Decisions
• Promotion meaning, objectives
• Promotion mix meaning and factors affecting it
• Advertising meaning, importance, objectives, media
• Public relations meaning, objectives, methods
• Sales promotion meaning, objectives, methods
• Personal selling meaning, objectives, methods
• Promotion scenario in Nepal
Emerging Concepts in Marketing
• Relationship marketing
• E-commerce
• Strategic alliances
• Green marketing
• Ethics in professional services marketing
Table of Content
SECTION A : BUSINESS COMMUNICATION
Chapter 1 - Introduction: Communicating at Work 1

1. Succeding in the Workplace 7
2. Examining Organizational Communication Process 12
3. Overcoming Interpersonal Communication Barriers 16
4. Communicating in Organizations 18
5. Ethics in Business Communication 21
6. Strengthening Your Communication Skills 33
Chapter 2 - Working in Groups 36

1. Listening Skills 43
2. Group interactions 45
3. Determining Group Goals 46
4. Individual Roles in Groups 47
5. Effective Meeting in Organizations 51
6. Writing notifications, agendas and minutes 52
7. Giving and receiving feedbacks 54
Chapter 3 - Communicating Across Culture 56

1. Diversity in today's workplace 66
2. Ways to look at culture 67
3. Values, Beliefs and Practices 69
4. Non-verbal Communication 70
5. Writing to an International Audience 81
6. Learning More abut International Business Communication 81
Chapter 4 - Employment Communication - 84

1. Preparing for Employment 84
2. Writing Persuasive Letters 85
3. Preparing for Computer Scanning 91
4. Faxing or Emailing your Resume 91
5. Writing Follow-up Letters 93
6. Interviewing for Employment 94
Chapter 5 - Analyzing Information and Writing Reports and Proposals - 97
1. An Inside Perspective: Analyzing Data & Writing Reports and Proposals 101
2. A Timetable for Writing Reports 101
3. Collecting and Choosing Information for Reports 101
4. Analyzing data and information (findings) for Reports 102
5. Organizing Information in Reports 111
6. Presenting Information Effectively 111
7. Report types : Informational and Analytical 113
8. Formal and Informal Reports and Proposals 113
SECTION B : MARKETING
Chapter 1 - Meaning of Marketing and Marketing Mix 117
1. Meaning of Marketing 117
2. Importance of Marketing 121
3. Meaning of Marketing Mix 123
Self Study Questions 126
ICAN Questions 126
Chapter 2 - Evolution of Marketing Concepts 127

1. Introduction 127
2. The Production Concepts 128
3. The Product Concepts 128
4. The Selling Concepts 129
5. The Marketing Concepts 130
6. The Customer Concepts 133
7. The Societal Concepts 133
Self-study Questions 136
ICAN Questions 136
Chapter 3 - Meaning of Marketing Environment 137

1. Meaning of Marketing Environment 137
2. Importance of Marketing Environment 139
3. Micro Environment Forces in Marketing 140
4. Macro Environment Forces in Marketing 146
5. Marketing Environment in Nepal 156
ICAN Questions 163
Chapter 4 - Market Segmentation and Targeting 164
1. Meaning of Market Segmentation 164
2. Process of Market Segmentation 167
3. Segmentation Variables for Consumer Markets 171
4. Segmentation Variables for Industrial Markets 177
5. Market Segmentation in Nepal 179
ICAN Questions 180
Chapter 5 - Marketing Information System 181
1. Meaning of Marketing Information System 181
2. Importance of Marketing Information System 183
3. Components of Marketing Information System 184
4. Marketing Research Process 188
ICAN Questions 194
Chapter 6 - Buyer Behavior Analysis 195
1. Meaning of Buyer Behavior 195
2. Importance of Buyer Behaviour 197
3. Stages of Consumer Buying Process 198
4. Factors affecting Consumer Buying Process 202
5. Features of Organizational Buying Behavior 211
6. Factors affecting Organizational Buying Behavior 214
ICAN Questions 217
Chapter 7 - Product Decisions 218
1. Meaning of Product 218
2. Product Life Cycle 227
3. Process of New Product Development 232
4. Product Line and Mix 238
5. Service Product 241
6. Branding 244
7. Packaging 250
8. Labelling 253
9. Product Scenario in Nepal 254
ICAN Questions 257
Chapter 8 - Price Decisions 259
1. Meaning of Price 259
2. Objectives of Price 261
3. Methods of Price Determination 263
4. Pricing Policies 269
5. Pricing Strategies 272
6. Pricing Scenario in Nepal 275
ICAN Questions 277
Chapter 9 - Place Decisions (Distribution) 278
1. Meaning of Place (Distribution) 278
2. Importance of Place 279
3. Objectives of Place 280
4. Channel Structure 281
5. Meaning of Physical Distribution 288
ICAN Questions 295
Chapter 10 - Promotion Decisions 296
1. Meaning of Promotion 296
2. Objectives of Promotion 296
3. Meaning of Promotion Mix 297
4. Advertising 303
5. Public Relations 310
6. Sales Promotion 313
7. Personal Selling 318
8. Promotion Scenario in Nepal 322
ICAN Questions 327
Chapter 11 - Emerging Concepts in Marketing 328
1. Relationship Marketing 328
2. E-commerce 331
3. Strategic Alliances 334
ICAN Questions 338
Chapter 12 - Marketing Case Studies 339
1. How to analyze a Marketing Case Study 339
2. Case Studies 340
Questions 353
SECTION A
BUSINESS
COMMUNICATION
CHAPTER - 1
COMMUNICATING AT WORK
“ You can employ men and hire hands to work for you, but you will have to win their
hearts to have them work with you. ”
— William J.H. Boetcker
Business In day-to-day context, business is buying and selling, commerce, trade, work, affairs, etc. To
define business first, a business is a formally and legally organized and recognized profession or
organization aimed to provide goods, services or both to consumers, business professionals and others
concerned in exchange for some gains- material or immaterial.
Business services offer business related information to all concerned at all levels through
broadcast internet, phone, digital cable, internet data services, etc. It is also a gateway for
interpretation, transactions and services to assist business people in their dealings with people
both and home and around the world.
Business is also a gateway for interactions, providing services to assist business people in their
dealings with all kinds of people at all levels. Because of development of science and technology
and globalization of many things and their impact on human life, the business world today is
getting much more complex than ever before.
Increasing Value of Business Information. In this age of information revolution, INFORMATION
stands out as the most powerful resource and valuable asset of business organizations. This
necessitates the need for Information Management System (MIS). The value of business information,
increased by business communication in today’s business world can be illustrated by the
following three things:
(a) Organizational competitive insight. This refers to the extent of organizational knowledge
and information about things happening and changes taking place in the business
world.
(b) Addressing customer needs. It should be realized that organizations that can quickly
cater to customer needs and services can stand as achievers. Hence, the organizational
responsibilities towards meeting customer needs.
(c) Conducive state policy and directives. Today’s government is required to keep itself at a
competitive edge, which is possible only through a strong economy. Unless business
organizations are strengthened and their business globally expanded, no government
can thrive on mere political ideals and slogans. For this, a forward-looking and
aggressive government is necessary to articulate state economic policies and issue
directives and guidelines conducive for overall development of all spheres of state
economy – export and import, taxation, banking, resource management and so on. All
these areas can flourish only in the efficiency and effectiveness of the business world,
which depends upon of a reliable and effective information dissemination system
supported by the state policy.
The Institute of Chartered Accountants of Nepal 1

Business Cummunication
Other factors, considered important in the business communication context, include:

(a) A quick response, by business organizations, to the globalization of business and
increased workplace diversity,
(b) The conquest of new frontiers of science and technology and to have their positive
impact on all spheres of human development,
(c) The evolution of organizational structure,
(d) The effectiveness of teamwork and
(e) The appraisal of organizational management audit system
To conclude, business communication is the study of all aspects of organizational operations, its
information networking system that takes place in the most complex and changing business
world distinctly affected by scientific and technological innovations.
Communication, in simple words, is the transmission of messages/ information sent from one
person, party and place to another person, party and place. In broader context, it is more than
transmitting information, because it is also the bond of human relationship and the key to all
aspects of human development. Full understanding of the term follows hereafter.
Business Communication: The two-word term refers to the vast world of communication, which,
due to technological innovations and their effect on human life has become much more complex
because of the involvement of local, national and multi-national agencies. More importantly,
politics and bilateral and multi-lateral relations also impact business communication of today.
To its credit, business communication, in broader perspective, is used to promote a product,
service or organization, disseminate all sorts of information on business matters or deal with
legal or similar issues. Apart from other things, it also a means of facilitating deals between
producers and consumers.
Once the concepts of “business” and “communication” are clear, we can easily understand
what “business communication” means. Anyone, who has some experience of the business
world, can understand “business communication” well. As today’s business situation is very
complex and ever-changing, business communication is affected, among other things, by
globalization of business, globalization of information networking system, evolution of
organizational structure, impact of science and technology on business, and an increase in the
workplace diversity.
Concepts of Effective Communication

Effective communication helps us better understand a person or situation and enables us to
resolve differences, build trust and respect, and create environments where creative ideas, problem
solving, affection, and caring can flourish. As simple as communication seems, much of what
we try to communicate to others—and what others try to communicate to us—gets misunderstood,
which can cause conflict and frustration in personal and professional relationships. By learning
these effective communication skills, you can better connect with your spouse, kids, friends, and
coworkers.
In the information age, we have to send, receive, and process huge numbers of messages every
day. But effective communication is about more than just exchanging information; it also about
understands the emotion behind the information. Effective communication can improve
relationships at home, work, and in social situations by deepening your connections to others
and improving teamwork, decision-making, and problem solving. It enables you to communicate
2 The Institute of Chartered Accountants of Nepal

Chapter 1 - Communicating At Work
even negative or difficult messages without creating conflict or destroying trust. Effective
communication combines a set of skills including nonverbal communication, attentive listening,
the ability to manage stress in the moment, and the capacity to recognize and understand your
own emotions and those of the person you’re communicating with.
While effective communication is a learned skill, it is more effective when it’s spontaneous
rather than formulaic. A speech that is read, for example, rarely has the same impact as a speech
that’s delivered (or appears to be delivered) spontaneously. Of course, it takes time and effort to
develop these skills and become an effective communicator. The more effort and practice you put
in, the more instinctive and spontaneous your communication skills will become. Followings
are the essential skills of effective communication:
1. Listening
Listening is one of the most important aspects of effective communication. Successful listening
means not just understanding the words or the information being communicated, but also
understanding how the speaker feels about what they’re communicating.
Effective listening can:
 Make the speaker feel heard and understood, which can help build a stronger, deeper
connection between you.
 Create an environment where everyone feels safe to express ideas, opinions, and
feelings, or plan and problem solve in creative ways.
 Save time by helping clarify information, avoid conflicts and misunderstandings.
 Relieve negative emotions. When emotions are running high, if the speaker feels that
he or she has been truly heard, it can help to calm them down, relieve negative feelings,
and allow for real understanding or problem solving to begin.
Tips for effective listening
 Focus fully on the speaker, his or her body language, and other nonverbal cues. If
you’re daydreaming, checking text messages, or doodling, you’re almost certain to
miss nonverbal cues in the conversation. If you find it hard to concentrate on some
speakers, try repeating their words over in your head—it’ll reinforce their message and
help you stay focused.
 Avoid interrupting or trying to redirect the conversation to your concerns, by saying
something like, “If you think that’s bad, let me tell you what happened to me.” Listening
is not the same as waiting for your turn to talk. You can’t concentrate on what someone’s
saying if you’re forming what you’re going to say next. Often, the speaker can read your
facial expressions and know that your mind’s elsewhere.
 Avoid seeming judgmental. In order to communicate effectively with someone, you
don’t have to like them or agree with their ideas, values, or opinions. However, you do
need to set aside your judgment and withhold blame and criticism in order to fully
understand a person. The most difficult communication, when successfully executed,
can lead to the most unlikely and profound connection with someone.
 Show your interest in what’s being said. Nod occasionally, smile at the person, and
make sure your posture is open and inviting. Encourage the speaker to continue with
small verbal comments like “yes” or “uh huh.”

2. Non-verbal Communication
When we communicate things that we care about, we do so mainly using nonverbal signals.
Wordless communication, or body language, includes facial expressions, body movement and
gestures, eye contact, posture, the tone of your voice, and even your muscle tension and breathing.
The way you look, listen, move, and react to another person tells them more about how you’re
feeling than words alone ever can.
Developing the ability to understand and use nonverbal communication can help you connect
with others, express what you really mean, navigate challenging situations, and build better
relationships at home and work.
 You can enhance effective communication by using open body language—arms
uncrossed, standing with an open stance or sitting on the edge of your seat, and
maintaining eye contact with the person you’re talking to.
 You can also use body language to emphasize or enhance your verbal message—
patting a friend on the back while complimenting him on his success, for example, or
pounding your fists to underline your message.
Tips for improving how you read nonverbal communication
 Practice observing people in public places, such as a shopping mall, bus, train, café,
restaurant, or even on a television talk show with the sound muted. Observing how
others use body language can teach you how to better receive and use nonverbal signals
when conversing with others. Notice how people act and react to each other. Try to
guess what their relationship is, what they’re talking about, and how each feels about
what is being said.
 Be aware of individual differences. People from different countries and cultures tend
to use different nonverbal communication gestures, so it’s important to take age, culture,
religion, gender, and emotional state into account when reading body language signals.
An American teen, a grieving widow, and an Asian businessman, for example, are
likely to use nonverbal signals differently.
 Look at nonverbal communication signals as a group. Don’t read too much into a
single gesture or nonverbal cue. Consider all of the nonverbal signals you receive, from
eye contact to tone of voice to body language. Anyone can slip up occasionally and let
eye contact slip, for example, or briefly cross their arms without meaning to. Consider
the signals as a whole to get a better “read” on a person.
3. Managing Stress
In small doses, stress can help you perform under pressure. However, when stress becomes
constant and overwhelming, it can hamper effective communication by disrupting your capacity
to think clearly and creatively, and act appropriately. When you’re stressed, you’re more likely
to misread other people, send confusing or off-putting nonverbal signals, and lapse into unhealthy
knee-jerk patterns of behavior.
How many times have you felt stressed during a disagreement with your spouse, kids, boss,
friends, or coworkers and then said or done something you later regretted? If you can quickly
relieve stress and return to a calm state, you’ll not only avoid such regrets, but in many cases
you’ll also help to calm the other person as well. It’s only when you’re in a calm, relaxed state

that you’ll be able to know whether the situation requires a response, or whether the other
person’s signals indicate it would be better to remain silent.
To deal with stress during communication:
 Recognize when you’re becoming stressed. Your body will let you know if you’re
stressed as you communicate. Are your muscles or your stomach tight and/or sore?
Are your hands clenched? Is your breath shallow? Are you “forgetting” to breathe?
 Take a moment to calm down before deciding to continue a conversation or postpone
it.
 Bring your senses to the rescue and quickly manage stress by taking a few deep breaths,
clenching and relaxing muscles, or recalling a soothing, sensory-rich image, for
example. The best way to rapidly and reliably relieve stress is through the senses: sight,
sound, touch, taste, and smell. But each person responds differently to sensory input,
so you need to find things that are soothing to you.
 Look for humor in the situation. When used appropriately, humor is a great way to
relieve stress when communicating. When you or those around you start taking things
too seriously, find a way to lighten the mood by sharing a joke or amusing story.
 Be willing to compromise. Sometimes, if you can both bend a little, you’ll be able to
find a happy middle ground that reduces the stress levels for everyone concerned. If
you realize that the other person cares much more about something than you do,
compromise may be easier for you and a good investment in the future of the relationship.
 Agree to disagree, if necessary, and take time away from the situation so everyone can
calm down. Take a quick break and move away from the situation. Go for a stroll
outside if possible, or spend a few minutes meditating. Physical movement or finding
a quiet place to regain your balance can quickly reduce stress.
4. Emotional Awareness
Emotions play an important role in the way we communicate at home and work. It’s the way you
feel, more than the way you think, that motivates you to communicate or to make decisions. The
way you react to emotionally driven, nonverbal cues affects both how you understand other
people and how they understand you. If you are out of touch with your feelings, and don’t
understand how you feel or why you feel that way, you’ll have a hard time communicating your
feelings and needs to others. This can result in frustration, misunderstandings, and conflict.
When you don’t address what’s really bothering you, you often become embroiled in petty
squabbles instead—arguing with your spouse about how the towels should be hung, for example,
or with a coworker about whose turn it is to restock the copier.
Emotional awareness provides you the tools needed for understanding both yourself and other
people, and the real messages they are communicating to you. Although knowing your own
feelings may seem simple, many people ignore or try to sedate strong emotions like anger, sadness,
and fear. But your ability to communicate depends on being connected to these feelings. If you’re
afraid of strong emotions or if you insist on communicating only on a rational level, it will impair
your ability to fully understand others, creatively problem solve, resolve conflicts, or build an
affectionate connection with someone. Emotional awareness helps us;
 Understand and empathize with what is really troubling other people

 Understand yourself, including what’s really troubling you and what you really want
 Stay motivated to understand and empathize with the person you’re interacting with,
even if you don’t like them or their message
 Communicate clearly and effectively, even when delivering negative messages
 Build strong, trusting, and rewarding relationships, think creatively, solve problems,
and resolve conflicts
Objectives of Business Communication

People communicate for achieving a number of personal as well as organizational goals.
Categorically, they are classified into two types: (a) general and (b) specific
General Objectives:
The general objectives of communication are:
• to disseminate information
• to promote interpersonal relations between/ among the communicators
• to convey message/s from one party to another party
• to make others (the receivers) understand the message conveyed
• to share and exchange opinions and ideas to get things done
• to understand people (the receiver) to discuss matters of common concern
• to have psychic satisfaction over the delivery of the message and response to it
• to achieve common individual or organizational goals
Specific Objectives:
• to share and exchange ideas, opinions on a specific subject/ issue facing the people
concerned.
• to discuss various aspects of specific problems and work out solutions
Ten ways of communicating effectively at work:
1. Listen. Most of us are terrible listeners. Instead of truly listening to what the person is
saying, we interrupt, prepare our response, or think we already know what the speaker is
going to say next. It’s impossible to understand what someone needs or wants if we don’t
give them our undivided attention.
2. Pay attention to body language. Body language can tell you just as much as what a person
says, if not more. Observe how they act when they talk. Is your co-worker saying she can
meet a deadline, but wringing her hands while she says it? She might be afraid to tell you it
will be hard to make the due date.
3. Consider communication preference. Not everyone likes to communicate the same
way. Email works for some, but others would rather pick up the phone and talk, text, or even
use social media or instant messaging to relay something. Respect the person you’re trying
to contact and use the method she seems to prefer. If you’ve called a client several times and
always get her voicemail, but she’s always quick to respond to email, switch to email instead.
4. Consider your tone. The problem with email and social media is that it can be difficult to
determine the tone. You may mean something as a joke, but if it comes off pushy or angry,

you could cause an unintended reaction from the recipient. Make sure your language is
clear, and if you are angry, take a few minutes to cool down before you type. Better yet, meet
in person so nothing is misconstrued.
5. Don’t be too casual. Getting along with your work colleagues can help you do your job
better, but don’t take it too far in your communication on the job. Keep the cursing for after
hours, and make sure your emails, meetings, and phone calls are professional. Being too
casual on the job may make others feel uncomfortable.
6. Check your grammar. Spell check is your best friend on the job. Always proofread anything
you type—be it an email, Tweet, or letter. If you’re not great at catching errors, ask someone
else to proof it for you.
7. Keep criticism constructive. If you manage others, you want them to do their best. Work to
ensure your comments aren’t emotionally charged, and that the person you’re speaking
with grasps what you’re trying to say when giving feedback. Provide positive reinforcement
when a job is well-done, and find ways to add in tips for improvement without being “that
boss.”
8. Restate what you hear. Rephrasing what your co-worker or boss says to you by repeating
the important points shows you are listening and understand what you were told. It gives
both parties a chance to clarify if there is any confusion, and by repeating it, you’ll remember.
9. Get a little personal. People let their guards down when you talk about their lives outside
of work. Ask about a co-worker’s kid’s soccer tournament. Find ways to interact on a personal
level without going too far. You’ll go a long way toward building trust.
10. Never stop improving. Effective communication is a skill you must practice. Observe how
others respond to your communication to clue you in on areas for improvement.
1. Succeeding in the Workplace

Effective communication is a key ingredient in professional success and personal
fulfillment. We all need to effectively communicate our thoughts and emotional reactions to
co-workers, friends, or others. Because our educational system does not provide any direct
guidelines for teaching communication, we usually end up with hit-or-misscommunication;
sometimes we get our point across but many times we don’t. We also tend to forget that
communication is a two-way street: A complete communication cycle includes both the
ability to clearly express a message and to accurately understand the messages of others.
Communication researcher Dr. Paul Waltzawick says in his book, The Language Of Change,
that human communication has three major characteristics:
(a) We cannot not communicate - even silent persons are communicating something about
themselves through the silence.
(b) Human communication is multileveled – your words could be saying one thing but
your body language or clothing could be communicating another message. (c) The
message sent is not necessarily the message received - because of the different angles
each person uses to interpret information, you cannot assume that what you meant has
been understood by the other person.

 Succeeding in New Work Places
Human Organization
Basic Concepts: Professional Achievements

By relations
e.g. family
By birth
Ascribed traits Achieved traits
Perceptions Psychology Temperamental Culture Ethics Class

Social-economic factors
Effects
Organization success and its growth largely depend on the status and kills of human
resources, capacity and appropriate input to the existing management structure. In addition,
human resources are the driving agents of organization who are responsible to plan, operate
and execute the fundamental decisions accepted by individual members of group. In this
regard the success of organization is valued in relation to the proportional growth of human
resources who are involved in the managerial or the operational level of organization.
In a literal sense ‘success refers to a long term achievements gained by individual or
organization at the cost of sincere compliance to the ethical, legal and soci-cultural norms
and values of respective community. However, the organization is a separate entity that is
formed with specialized objectives and structure to meet a common target. Whereas, human
beings, mainly the human resource are distinctly a potential mark guided by varying interest,
expectations and personal demands to fulfill in relation to organization growth.
Therefore, every performance and activities of employees are mostly guided by two
fundamental drives as below:
1) Ascribed traits 2) Achieved trait
Among these two drives of life the former is known to be an orthodox that remains barrier in
the personal and professional existence. Therefore it largely demands the skills of adaption
to have a proper co-existence with the team and group irrespective of personalized feeling
and expectations likewise an organization is set entity comprising:
a) Leadership
b) Chain of command and authority delegation
c) Hierarchy relationship(protocol)
d) Communication pattern
e) Organizational norms and values

f) Organizational climate
i) Transparency
ii) Open mindedness
iii) Mutual trust and understand
 Factors responsible behind the changing trend of management structure:
a) Globalization of global market economy:
Globalization is literally understood as a socio-political consciousness to view the
world from singular prospective. Whilst (meanwhile) acknowledging the under currents
of diversities and differences. Accordingly, it combines a diversified cultural, political,
social and ethical values in the integrated human relation. In this regard globalization
aims to bring together under the single umbrella of the melting differences (class
difference, gender etc) and diversities of social and corporate professions with the
advancement of technology, communication and mass media. Similarly global market
economy refers to a network of business relationship negotiated among the companies
and industries in the direct and indirect level.
Accordingly business activities are carried and performed in a chain of relationship
with global communities, multinational investment and foreign investment in local
markets. The basic concept of global market economy can be assessed below.
 Benefits/Advantage/Boon
i) Inter cultural and cross cultural relationship along with cross cultural
transformation.
ii) Financial and economic exposure to the developing and under developed countries
through business alliance with the developed nations.
iii) Free trade and tariff privilege that has promoted towards export and import
business.
iv) Enhanced revenue of the local market and earning of foreign currency
v) Social empowerment, professional exposure and formation of knowledge in the
local and regional markets.
vi) Global sales and marketing opportunities of the local products in the international
market.
vii) Employment opportunities and cross flow of labours
viii) Globalization has further promoted towards virtual business policies known as
tele shopping e-commerce, e-banking, in line of promoting transaction relationship.
ix) Support to national economy through product diversification, revenue benefits
and business tie up to local franchise.
 Disadvantages:
i) Globalization and Market economy has intensified conflicts in the corporate
industry.
ii) Cultural diversities and differences have resulted into unwanted class and tassels
among the class and cultural differences.
iii) Over shadowed the local and indigenous cultural values, human behavior and
style of living.

iv) Encroachment of traditional values, religion and morality in the influence of

modernization
v) Unwanted market competition and unhealthy business practices that destroys
the expectations of local entrepreneurs.
b) Flattened mgmt. hierarchies and team based mgmt:

Flattened management hierarchies refers to an effort towards corporate liberalism in
which the mgmt system is guided by active participation and involvement of people
from different hierarchy and status. Since 1980’s many organizations are practicing
towards flat management system with the view to incorporate liberal leadership and
public private partnership model that ensures the participation of every individuals as
the stakeholders of respective organization. In addition this management system applies
team and group based management in matters of operation. Thus, it is a reaction towards
vertical management system with the following major management visions:
I) Liberal/Nominal leadership
II) Participating techniques in matters of decision making and problem solving.
Bilateral/Multilateral communication approach
III) Team building and group activities.
IV) Personal exposure and empowerment of individuals
V) Minimized intensity of conflict in group and team.
 Demerits:
I) Lack of timely and effective decision making because it consumes lot of time frame
to gain the consensus from every individuals.
II) Ineffective controlling and disciplinary mechanism
III) Degraded chain of command and authority delegation in the organization.
IV) Legal and ethical violations.
V) Club culture(Group formation) as well as inter and intra group conflicts.
VI) Group prejudices and ego-centrism.
c) Technological Advancement:
Technology is one of the most essential factors of corporate industries which has
upgraded the working pattern and enhanced the efficiency of performance. Particularly,
business organization rely on manufacturing plans, transportation and the
revolutionary growth of communication technologies .With the rapid growth of said
technologies, business society has become more advanced and sophisticated
(comfortable). Basically the growth of mass media has contributed a lot in diversified
marketing effects through global publicity, advertising and sales through strategic
business network and e-commerce activities. In this regard technology has become an
indispensible component of business society. At the mean time the explosive growth of
technology and irresponsible application has induced a number of challenges as below:
I) Environment and ecological threat.
II) Climate change and public health hazards.
III) Social violence and crimes.

IV) Paranoiac effects in human psychology and paralyzed human status .

V) Displacement of human resources and human creativity.
d) Multicultural Workforce:
Multiculturalism is a state of human existence that is formulated through integrated
relationship among the people from different class, caste and ethnicity. With the rise of
globalization and a technological advancement human relationship is very much
narrowed and also complicated due to the workforce diversity. In this regard business
organizations today have become a melting spot of heterogeneous people in matters of
genders, caste, class, race, ethnicity and so on. Accordingly it is a challenge for
organizations to unite the diverse workforce to fulfill the basic goals of organization.
At the mean time multi cultural work force has created several conflicts and tassels in
the team. Moreover it has caused a serious crisis of potential human resources in the
country of origin due to brain draining and workforce displacement.
Organizational Communication/ Communication in the Workplace

In a workplace- old or new, people- employers and employees work with the workplace faith.
Here, employees, especially new entrants, learn many valuable skills and new ways towards
succeeding in the new workplace.
A religious minded mentality believes that God is raising up a new breed of man and
woman in the workplace today. Every employee working effectively in a work situation is
likened to a person participating in a win-in-win negotiation. With valuable lessons learnt at
the workplace employees will be able to build capacity to meet growing customer demands,
implementing new service oriented regulations. If the team led by someone or part of it is
not succeeding, the leader’s failure is sure to occur. So an efficient and successful manger or
organizational leader must be able to ask for new commitment from a passive aggressive
employee to succeed at the workplace.
Whether or not communication is operational or non-operational, organizational people
spend nearly 79% of their working hours in communication. The amount of communication
varies with the size, objectives and activities of the organization.
Effectiveness and success of all organizations depend, among other things, upon:
(a) Proper Planning, (b) Effective Decision-making, (c) Delegation of Authority, (d) Proper
Development and Mobilization of Resources - human, material and structural, (e) Promoting
Interpersonal Relationship among Staff. (f) Proper Directions of Communication and (e)
Monitoring and Evaluation of Organizational Activities.
Other conditions and factors needed for organizational effectiveness include:
(i) communication competence of the manpower at all levels and (ii) effective use of modern
communication tools and techniques, (iii) expansion of the computing system and expansion
of the organizational information networking system., (iv) positive attitude and behavior of
the organizational people towards their work and (v) organizational environment conducive
for effective communication

Organizational Communication Activities: Planned organizational communication activities

are as follows:
 Policy planners and designers formulate and implement organizational plans to achieve
desired organizational goals.
 Factory workers feed raw materials into the machinery for their necessary processing
 Production managers inspect the production process, provide safety guidelines to
workers, and devise troubleshooting ways and means for safety of the workers
 Marketing professionals study marketing situation and seek consumer information
needs.
 Dispatch sections and departments deliver goods to various agencies/dealers through
appropriate channels
 Production researchers carry out various studies on expansion of production and on
overcoming problems that face smooth production operations.
 Monitors and evaluators of various organizations see if things are going well as planned
 Employees responsible for their respective work report back on to the Management on
various problems facing them in the work situation.
Things that matter much in business communication pose the following questions to be
answered.
 Why is communication important to you and in business organizations?
 What are the different forms of communication in business context?
 What are the formal and informal types of communication in business organizations?
 What factors do contribute to organizational communication effectiveness?
 What is the process of business communication?
 What are the conditions ideal for effective communication among various levels of staff
members?
Organizational Communication Needs: The amount of organizational communication needs
is also dependent upon the size and types of organizations/ companies. Likewise, large
business establishments need more communication. Banking and insurance companies
also, for example, need more communication, whereas repair shops and grocery shops
need less communication. Employees concerned with weather forecasts need to communicate
with multiple locations, and finally, those associated with share market also need more
communication. Organizations with mechanized functioning system can lessen the amount
of human communication. For example, the ATM (Automatic Trailer Machine) and food
and beverage vending machines also can save time and the amount of human
communication.
2. Examining Organizational Communication Process

Communication is a process in which information is enclosed in a package and is channeled
and imparted by a sender to a receiver via some medium. The receiver thin decodes the
message. Communication is a process that allows entities to exchange information by several
methods. Communication requires that all parties understand a common language used
during the communication.

Since communication is the central factor in the emerging knowledge economy and a major
consideration for anyone entering today’s workforce, we need to look more closely at the
total process of communication, just what is communication? For our purposes
communication is the transmission and meaning from one individual or group to another.
The crucial element in this definition is the meaning. Communication had its central objective
the transmission of meaning. The process of communication is successful only when the
receiver understands an idea as the sender intended it. Both parties must agree not only on
the information transmitted but also the meaning of that information. This entire book is
devoted to one objective: teaching you the skills of communication so that you can transmit
meaning along with information. How does an idea travel from one person to another?
Despite what you mean have been seen in futuristic science fiction movies, we can’t just
glance at another person and transfer meaning directly from mind to mind. We engage in a
sensitive process of communication that generally involves five steps, discussed here.
• Sender Has Idea
The process of communication begins when the person with whom the message
originates – the sender- has an idea. The form of the idea will be influenced by complex
factors surrounding the sender: mood, frame or reference, background, culture, and
physical make up, as well as the context of the situation and many other factors. The
way you greet people on campus, for example, depends a lot on how you feel, whom
you are addressing ( a classmate, a professor, a campus worker), and what your culture
has trained you to say (“Hi, “Howdy”, :How ya doing?” or “Good Morning”).
The form of the idea, whether a simple greeting or a complex idea, is shaped by
assumptions is based on the sender’s experience. A manager sending a message to
employees assumes they will be receptive, while direct mail advertises assume that
receivers will give only a quick glance to their message. Ability to accurately predict
how a message will affect its receiver and skill in adapting the message to its receiver
are key factors in successful communication.
• Sender Encodes Idea in Message
The next step in the communication process involves encoding. This means converting
the idea into words or gestures that will convey meaning. A major problem in
communicating any message verbally is that words have different meanings for different
people. When misunderstandings result from missed meanings, It’s called bypassing.
Recognizing how easy it is to be misunderstood, skilled communicators choose familiar
words with concrete meanings on which both senders and receivers agree. In selecting
proper symbols, senders must be alert to the receiver’s communication skills, attitudes,
background, experiences, and culture: How will the selected words affect the receiver?
For example, a Dr. Pepper cola promotion failed miserably in Great Britain because
American managers had not done their homework. They had to change their “I’m a
Pepper” slogan after learning that pepper is British slang for prostitute. Because the
sender initiates a communication transaction, he or she has primary responsibility for
its success or failure. Choosing appropriate words or symbols is the first step.
• Message travels over a channel
The medium over which the message is physically transmitted is the channel. Messages
may be delivered by computer, telephone, letter, memorandum, report, announcement,
picture, spoken word, fax, pager, or through some other channel. Because

communication channels deliver both verbal and non verbal messaged, senders must
choose the channel and shape the message carefully. A company may use its annual
report, for example, as a channel to deliver many messages to stockholders. The verbal
massage lies in the reports financial and organizational news. Nonverbal message,
though, are conveyed by the report’s appearance (showy versus bland), layout (ample
white space versus tightly packed columns of print), and tone (conversational versus
formal).
Anything that interrupts the transmission of a message in the communication process
is called noise . Channel noise ranges from static that disrupts a telephone conversation
to typographical and spelling errors in a letter or e-mail message. Such errors damage
the credibility of the sender. Channel noise might even include the annoyance a receiver
feels when the sender chooses an improper medium for sending a message, such as
announcing a loan rejection via postcard or firing an employee by e-mail.
• Receiver Decodes Message
The individual for whom the message is intended is the receiver . Translating the message
from its symbol form into meaning involves decoding. Only when the receiver
understands the meaning intended by the sender—that is, successfully decodes the
message—does communication take place. Such success, however, is difficult to achieve
because no two people share the same life experiences and because many barriers can
disrupt the process.
Decoding can be disrupted internally by the receiver’s lack of attention to or bias against
the sender. It can be disrupted externally by loud sounds or illegible words. Decoding
can also be sidetracked by semantic obstacles, such as misunderstood words or
emotional reactions to certain terms. A memo that refers to all the women in an office as
“girls” or “chicks,” for example, may disturb its receivers so much that they fail to
comprehend the total message.
• Feedback Travels to Sender
The verbal and nonverbal responses of the receiver create feedback, a vital part of the
communication process. Feedback helps the sender know that the message was received
and understood. If, as a receiver, you hear the message How are you, your feedback
might consist of words (I’m fine) or body language (a smile or a wave of the hand).
Although the receiver may respond with additional feedback to the sender (thus creating
a new act of communication), we’ll concentrate here on the initial message flowing to
the receiver and the resulting feedback.
Senders can encourage feedback by asking questions such as, Am I making myself clear?
And Is there anything you don’t understand? Senders can further improve feedback by
timing the delivery appropriately and by providing only as much information as the
receiver can handle.
Receivers can improve the process by paraphrasing the sender’s message with
comments, such as, Let me try to explain that in my own words. The best feedback is
descriptive rather than evaluative. For example, here’s a descriptive response: I
understand you want to launch a used golf ball business. Here’s an evaluative response:
Your business ideas are always goofy. An evaluative response is judgmental and doesn’t
tell the sender whether the receiver actually understood the message.

Process of Communication in detail

It is wrongly assumed that communication takes place easily just because of the presence of
the sender and the receiver and some roles they play. But it is also necessary that they talk
and work collaboratively in a process to achieve a desired goal of understanding and
getting things done properly. In the process of passing a complicated message, the sender
first thinks of sending a message to the concerned person/party and encode it before sending
it to the receiver. To this end, he uses words, body language, gestures, symbols, signs, etc.
This part of the process is called encoding. Encoding is the purposeful attempt of the sender
to represent the abstract and vague ideas by presenting it in the form of verbal cues- spoken
and written matters, table, maps, acronyms, diagrams, abbreviations as better alternative to
use of words.
The message sent by the sender passes into the sensory world of the receiver, who interprets
it to get the meaning intended by the sender. This process is called decoding. The receiver
reacts to it and communicates back to the sender confirming whether or not he/she has
received the intended meaning.
As no two persons are identical in their capacity to understand things, and in nature,
attitude and behavior, the same message may give different meanings to different receivers.
The meaning of the term freedom, for example, may mean different things to two different
persons – (a) freedom of enjoying democratic rights to a politician or human rights activist and
(b the right of doing anything without being uninterrupted to an uneducated layman.
After the meaning of the message is received, the receiver reacts to it by sending his/her
response to it. This marks the completion of the second cycle of communication. This can be
done in several ways – using oral or written, gesture, etc.
Cyclic Process of Communication: Like in the former process, the response sent back by the
receiver passes into the sensory world of the sender, who, on the basis of his knowledge,
understanding, experiences and socio-cultural status, revises the message, improves it to
make it understandable to the receiver. This process continues to repeat until the receiver
gets the meaning. Communication, in such a case is said to be cyclic which unlike in a linear
process keeps passing to and from between the sender and the receiver. In some cases, the
cycle repeats itself until the two have a complete communication. But some communications
may take more cycles and some a few.
To conclude, the process of communication is supposed to be complete only when the
message received is understood up to the level of the sender’s understanding and the sender
gets the right feedback.
More about Encoding and Decoding in Communication:

Mere sender, receiver and message do not make the communication process complete. It
involves the process of encoding and decoding. Encoding is the process of transforming
abstract ideas into tangible ideas. The sender uses different sets of symbols to encode his
ideas into meaningful message. A great skill is needed for encoding.
Decoding is the filtering of the message sent by the sender. Here, the message sent by the
sender is filtered through contents of the receiver’s mind. The message gives meaning within
the limits of the receiver’s level of understanding. It includes his entire emotional makeup,
socio- cultural attitudes and outlook.

Characteristics of Encoding:
Encoding is choosing certain words or methods to
carry out one’s ideas to some person/party Encoding
is a purposeful attempt to present abstract and vague
ideas and information in the form of table, images,
acronyms, and diagrams, abbreviations as a better
alternative to use of orders or texts.
i) Encoding employs visual aids to communication
which needs serious attention on the part of the
receiver.
ii) Encoding is deliberate efforts towards
representing abstract ideas.
iii) The process of encoding is psychological and also
depends, among other things, upon geographical
distance.
iv) It enhances readability.
v) It economizes the use of words.
vi) It promotes highly understandable and
motivational character.
Cautious Handling of Encoding: Encoding, which is done in various forms and ways, should
be handled with care and caution so that the message is conveyed to the receiver without
physical strain.
Decoding and Its Characteristics
i) Decoding is the process of interpreting and defining abstracts.
ii) Decoding is an act of understanding and interpreting information usually in encoded
form.
iii) It is closely associated with words or symbols that relay special message.
In the processing of decoding, the receiver faces various problems including that of
perceptional barriers, cultural differences, and comprehensive barriers
3. Overcoming Interpersonal Communication Barriers

The communication process is successful only when the receiver understands the message
as intended by the sender. It sounds quite simple. Yet it is not. How many times have you
thought that you delivered a clear message, only to learn later that your intentions were
totally misunderstood?
Most messages that we send reach their destination, but many are only partially understood.
Obstacles That Create Misunderstanding

You can improve your chances of communicating successfully by learning to recognize
barriers that are known to disrupt the process. The most significant barriers for individuals
are bypassing, differing frames of reference, lack of language skill, and distractions.

Bypassing. One of the biggest barriers to clear communication involves words. Each of us
attaches a little bundle of meanings to every word, and these meanings are not always
similar.
Bypassing happens when people miss each other with their meanings. 34 Let’s say your
boss asks you to “help” with a large customer mailing. When you arrive to do your share,
you learn that you are expected to do the whole mailing yourself. You and your boss attached
different meanings to the word help . Bypassing can lead to major miscommunication because
people assume that meanings are contained in words. Actually, meanings are in people.
For communication to be successful, the receiver and sender must attach the same symbolic
meanings to their words.
A recent study revealed a high likelihood of miscommunication when people use common
but vague words such as probably, always, never, usually, often, soon, and right away. What do
the words really mean?
Frame of Reference
Another barrier to clear communication is your frame of reference. Everything you see and
feel in the world is translated through your individual frame of reference. Your unique
frame is formed by a combination of your experiences, education, culture, expectations,
personality, and other elements. As a result, you bring your own biases and expectations to
any communication situation. Because your frame of reference is different from everyone
else’s, you will never see things exactly as others do. American managers eager to reach an
agreement with a Chinese parts supplier, for example, were disappointed with the slow
negotiations process. The Chinese managers, on the other hand, were pleased that so much
time had been taken to build personal relationships with the American managers. Wise
business communicators strive to prevent miscommunication by being alert to both their
own frames of reference and those of others. You will learn more about communicating
across cultures in Chapter 3.
Lack of Language Skill. No matter how extraordinary the idea, it won’t be understood or
fully appreciated unless the communicators involved have good language skills. Each
individual needs an adequate vocabulary, a command of basic punctuation and grammar,
and skill in written and oral expression. Moreover, poor listening skills can prevent us from
hearing oral messages clearly and thus responding properly.
Distractions. Other barriers include emotional interference, physical distractions, and digital
interruptions. Shaping an intelligent message is difficult when one is feeling joy, fear,
resentment, hostility, sadness, or some other strong emotion. To reduce the influence of
emotions on communication, both senders and receivers should focus on the content of the
message and try to remain objective. Physical distractions such as faulty acoustics, noisy
surroundings, or a poor cell phone connection can disrupt oral communication. Similarly,
sloppy appearance, poor printing, careless formatting, and typographical or spelling errors
can disrupt written messages. What’s more, technology doesn’t seem to be helping.
Knowledge workers are increasingly distracted by multitasking, digital and information
overload, conflicting demands, and being constantly available digitally. Clear
communication requires focusing on what is important and shutting out interruptions.

Overcoming Communication Obstacles

Careful communicators can conquer barriers in a number of ways. Half the battle in
communicating successfully is recognizing that the entire process is sensitive and susceptible
to breakdown. Like a defensive driver anticipating problems on the road, a good
communicator anticipates problems in encoding, transmitting, and decoding a message.
Effective communicators also focus on the receiver’s environment and frame of reference.
They ask themselves questions such as, How is that individual likely to react to my message? or
Does the receiver know as much about the subject as I do?
Misunderstandings are less likely if you arrange your ideas logically and use
words precisely.
Mark Twain was right when he said, “The difference between an almost-right
word and the right word is like the difference between lightning and the lightning
bug.” But communicating is more than expressing yourself well. A large part of
successful communication is listening.
Management advisor Peter Drucker observed that “too many executives think
they are wonderful with people because they talk well. They don’t realize that
being wonderful with people means listening well.”
Effective communicators create an environment for useful feedback. In oral
communication this means asking questions such as, Do you understand? and
What questions do you have? as well as encouraging listeners to repeat instructions
or paraphrase ideas.
As a listener it means providing feedback that describes rather than evaluates. In
written communication it means asking questions and providing access: Do you
have my phone numbers in case you have questions? or Here’s my e-mail address so that
you can give me your response immediately.
Ways of Overcoming Communication Barriers

Interpersonal barriers are not such that defy solutions. Some of the suggestions for overcoming
communication barriers are:
i) Using familiar words and terms: Start with the familiar words to introduce a new idea. As
inception of a new idea causes resistance, the safest way to discuss and accept any new
information is to begin with what is known. Start from what it is to what it could be
ii) Understanding traits of cross-cultural communication traits
iii) Understanding perceptions and conceptions of others
iv) Using listener-oriented viewpoints
v) Avoidance of grapevine and rumor mills
vi Avoidance of ambiguous words, jargons, slangs and semantic words
Language Use: Choice of appropriate words for effective communication. Short words and
sweet and meaningful sentences take the listeners to a world of good understanding
4. Communicating in Organizations
Until now, you’ve probably been thinking about the communication you do personally.
However, business communicators must also be concerned with the bigger picture, and

that involves sharing information in organizations. On the job you will be sharing
information by communicating internally and externally.
Internal and External Functions

Internal communication includes exchanging ideas and messages with superiors, coworkers,
and subordinates. When those messages must be written, you will probably choose e-mail.
Some of the functions of internal communication are to issue and clarify procedures and
policies, inform management of progress, develop new products and services, persuade
employees or management to make changes or improvements, coordinate activities, and
evaluate and reward employees.
When you are communicating externally with customers, suppliers, the government, and
the public, you may send letters on company stationery. External functions involve answering
inquiries about products or services, persuading customers to buy products or services,
clarifying supplier specifications, issuing credit, collecting bills, responding to government
agencies, and promoting a positive image of the organization.
Now, look back over the preceding discussion of internal and external functions of
communication in organizations. Although there appear to be a large number of diverse
business communication functions, they can be summarized in three simple categories, as
Figure 1.5 shows: (a) to inform, (b) to persuade, and/or (c) to promote goodwill.
New Emphasis on Interactive communication

The flattening of organizations coupled with the development of sophisticated information
technology has greatly changed the way we communicate internally and externally. One
major shift is away from one-sided, slow forms of communication such as memos and
letters to more interactive, fast-results communication. Speeding up the flow of
communication are e-mail, instant messaging (IM), text messaging, smartphones, voice
mail, cell phones, and wireless fidelity (“Wi-Fi”) networks. Wi-Fi lets mobile workers connect
to the Internet at ultrafast speeds without cables. You’ll be learning more about these forms
of communication in subsequent chapters. Despite the range of interactive technologies,
communicators are still working with two basic forms of communication: oral and written.
Each has advantages and disadvantages.
Oral Communication
Nearly everyone agrees that the best way to exchange information is orally in face-to-face
conversations or meetings. Oral communication has many advantages. For one thing, it
minimizes misunderstandings because communicators can immediately ask questions to
clarify uncertainties. For another, it enables communicators to see each other’s facial
expressions and hear voice inflections, further improving the process. Oral communication
is also an efficient way to develop consensus when many people must be consulted. Finally,
most of us enjoy face-to-face interpersonal communication because it is easy, feels warm
and natural, and promotes friendships.
The main disadvantages of oral communication are that it produces no written record,
sometimes wastes time, and may be inconvenient. When individuals meet face-to-face or
speak on the telephone, someone’s work has to be interrupted. In addition, conversations
take more time because we find it difficult to stick to business. Most of us consider it impolite

to start a conversation without preliminaries such as how are you? Conversations may
meander into chitchat, and some people do not know how to end a conversation. Nevertheless,
oral communication has many advantages for communicators.
Written Communication
Written communication is impersonal in the sense that two communicators cannot see or
hear each other and cannot provide immediate feedback. Most forms of business
communication— including e-mails, memos, letters, faxes, instructions, procedures, policies,
proposals, manuals, newsletters, instant messages, Web sites, blogs, wikis, and résumés—
fall into this category.
Organizations rely on written communication for many reasons. Written messages provide
a permanent record, a necessity in these times of increasing litigation and extensive
government regulation. Writing out ideas instead of delivering them orally enables
communicators to develop organized, well-considered messages thus facilitating recall
and comprehension for receivers. Written documents are also convenient. They can be
composed and read when the schedules of both communicators permit, and they can be
reviewed if necessary.
Written messages have drawbacks, of course. They require careful preparation. In addition,
written messages can be dangerous. Words spoken in conversation may soon be forgotten,
but words committed to hard or soft copy become a public record—and sometimes an
embarrassing or risky one. E-mail and text-messaging records, even deleted ones, have
often become “smoking guns” in court cases, revealing insider information that was never
meant for public consumption. 38
Another drawback to written messages is that they are more difficult to prepare. They
demand good writing skills, and we are not born with these skills. But writing proficiency
can be learned. Because as much as 90 percent of all business transactions may involve
written messages and because writing skills are so important to your business success, you
will be receiving special instruction in becoming a good communicator.
Every big organization is a communicating center and it has its own Communication
Networking System set up internal operation and external operation communication. In
the first one, communication takes place within the organization among staff
members of all levels communicate on matters relating to day-to-day operations of
the organization. The contents and the actors of communication – the sender and
the receiver have been discussed above.
In the External Operational Communication, communication takes place between
two or more parties –individuals to individual, individual to organizations and
organizations to organizations. The main objectives of such communication are
to: seek information about organizations, build information networking system to
expand the volume of business, promote human and business relationships with
other parties- both at home and abroad.
Apart from the above two, the third type of communication that exists within the
organization is Personal Communication to give vent to the employees’ feelings,
attitude and behavior with which the employees feel a sense of self-satisfaction.
Though not operational, such communications contribute to providing important
feedbacks to the management on the strengths and weaknesses and functioning

style of their organization. Contents of personal feedbacks cover a wide range of

subjects.
Management scholars have emphasized communication as the basic function of
management in any organization. It is a basic tool for carrying out regular
operations. Communication plays an important role even in non-operational or
non-business related situations. Communication in organizations is used to
promote a product, service, or organization; flow information within the business;
or deal with legal and similar issues.
To conclude, organizational effectiveness depends upon the effectiveness of its
communication networking system.
5. Ethics in Business and Communication

 What is ethics? Discuss the issues of ethical concern in business.
 What are the popular ethical traps/dilemma in professional sector?
 Discuss the major perspective of ethical business
 Discuss the concept of ethics in communication
Law-Implementing
Morality-reinforcing
Ethic-Self conscious, social concern, inheritance
The fundamental concept of ethics is originally borrowed from Latin root ‘Ethikos’ which
means a justifiable human conduct and character towards doing something right. In this
regard ethics is broadly understood as the awareness of self and a conscious towards moral
being in the personal as well as per professional life. Basically the idea of ethics broadly
incorporate social values, cultural norms, human brought up, morality and legal regularity
norms which contribute to proper direction and instruction towards positive attitude.
Moreover, ethics is an abstract notion that relates to self awakening and awareness towards
justifiable behavior and responsible activities.
Ethics is a branch of philosophy which is concerned with human character and conduct.
According to the dictionary,’ ethics are the principles of conduct governing an individual
or a group ‘’. Under the study of ethics, we consider what things are good or bad and about
what actions are right and wrong. Typically, the example is given of a butcher with a knife
chasing a cow and asking you which way the cow has gone . Are you supposed to tell him
the truth? The traditional answer is no. That is what ethics amount to. Ethics tells us what
the conduct, ought to be; hence it is a normative science. It is concerned with the judgment
upon conduct, its rightness or wrongness. The word ‘’moral ‘’ is very close to the word
‘’ethical’’. The words sometimes used interchangeably. Most dictionaries use the word ‘’
moral’’ to define ‘’ethical’’. For example, ‘’ ethics is the science of moral conduct, rules of
conduct etc.’’ Moral values are deeply held beliefs, which guide our conduct. Morality is
concerned with the norms, values and belief embedded in social process. They define right
and wrong for an individual or a community.
Moral standards include the norms we have about the actions we believe are morally right
or wrong. Moral norms can often be expressed as general rules such as, ‘’Always tell the
truth,’’ ‘’It is wrong to kill Innocent people,’’ ‘’Bribery is wrong’’ etc.

Similarly, business ethics is associated with responsible business operation with sincere
compliance to institutional norms and standards. The idea of business ethics has emerged
as a serious concern since 1980’s with a view to develop an integrated relation between
consumer and corporate society. With the advancement of technology, globalised economic
network and rise of materialism, business industries are becoming autonomous with
monopoly effect among the consumers. Therefore, ethical concern of business is associated
with social development, growth of human resources, economized consumption of natural
resources, poverty alleviation employment and a justifiable economic distribution.
Following are the major ethical dilemma/traps
a) The false necessity trap
b) The doctrine of relative-filth trap
c) The rationalization trap
d) The self -deception trap
e) The end -justify the means trap
(a) The false necessity trap:

It’s a general human predicament in which unethical activities are performed in an
intention manner out of compulsion rather than the choice. In this process individuals
tend to cheat the customers and the colleagues through false impressions, activities
and appeal to pity for, others favor. Such cases are very common in matters of
punctuality, time management, customer care and product diversification, surrogate
marketing and false advertising.
(b) The doctrine of relative-filth trap:

Is a tendency of human kind in which unethical activities are logically justified in
comparison to worst cases of others, in order to minimize the intensity of unethical
deeds(activities). Such cases are very common in competitive business marketing,
employee relationship and personal performance. Such activities are intentionally
performed to gain the clean cheat against the immoral activities.
(c) The rationalization trap:

Rationalization is a practice to justify activities through required analysis and
interpretations. In this process human beings tend to overlap the unethical performance
through false logic, arguments, claims simply to justify the unethical performance as a
necessary decision. In the institutional and professional level such issues are
rationalized by precedence.
(d) The self-deception trap:

Self deception is a very general tendency of individual to steal the time and not being
accountable to assigned job responsibility. While doing so employees tend to develop
fence sitting habits in order to get personal privilege and benefits. However, such
attributes becomes a great barrier in matters of personal and institutional growth. Thus
the unethical activities are suppressed and hidden by unwanted power exercise and
abuse of authority.

(e) The end-justify the means trap:

It refers to a process of maintaining fair balance between the process and output achieved
in personal as well as professional life. Such cases are very common in competitive
business market in which achieving goal and benefit is given more priority than the
process and methodology and achieved . So, it aims to achieve the maximum output
through justifiable process which ultimately contributes to sustainable institutional
growth and development.
Major factors of ethics:
a) Corporate social responsibility(CSR)
b) Cultural responsibilities
c) Functional responsibilities
d) Environmental and ecological responsibilities
e) Technological responsibilities
(a) Corporate social responsibility:

The concept of corporate social responsibility is an emergence of modern business
industry with the view to bridge a link between trait and general public. It is obvious
that corporate society is growing into prosperity with the raise of advanced business
behavior technology and globalized business networks resulting into more
consumption of resources, production and enhanced commercial benefits. Contrarily
it has created an unexpected impact in the social, ecological and economic environment
of respective society. In this regard CSR in visions to promote responsible business
activities which necessarily contribute to social welfare, behavioral changes and
economic upliftment to the general public and local communities. CSR comprises the
following major role/ characteristics:
i) Responsible behavior towards consumption of natural resources
ii) Social development and cultural transformation
iii) Protection and conservation of critical and natural resources and application of
eco friendly activities
iv) Property alleviation and equitable distribution of resources
v) Social inclusion and gender balancing
Employment, social mobilization and capacity building of local level people
through vocational training and orientations
vi) Preservation of traditional and skills, art, culture and craftsmanship
(b) Cultural Responsibility:

Culture is a liability to the organization which is sincerely looked after organisation with
the growth of organization culture. As an institutional liability, organization comprises
multiple forms of cultural values which are shared, inherited and performed in the broader
corporate culture. In the most literal sense, culture is an essential social heritage contained
with a number of tangible and intangible aspects. However, with the growth of
modernization and urbanization, indigenous cultural values and gradually diminishing
and often disappearing due to the emergence of capitalism and industrialization. In this
regard the ethical concern of cultural responsibility looks into:

I) Avoidance towards the unwanted encroachment of foreign culture

II) Maintain cultural integrity in the multicultural trade scenario
III) Mitigation of cultural crisis like intercultural, counter cultural and cross cultural
influence
IV) Preserve and protect the indigenous cultural norms, values and rituals
V) Contribute towards social harmony, integrity and human relationship
VI) Incorporate and adapt the changing tendencies of cultural practices influenced by
changing dynamics of business environment and patterns.
(c) Functional Responsibilities:

It refers to the operational modalities of organization and operations of trade and
transaction with view to promote social obligations of business. It is mainly associated
with the structural and leadership aspects of institution to contribute towards corporate
liberalism and freedom towards corporate norms. It broadly involves the changing
patterns of management structures and models of operation like PPP model(Private
Public Partnership approach), social inclusion, team base management and flattened
management hierarchies. Accordingly it looks into contributing social awareness ,
behavior transformation, poverty reduction and last of all sound corporate governance.
So, the function in the ethical concern is a response towards human involvement for a
positive outcome to the society and organization.
(d) Environment and Ecological Responsibilities:
(e) Technological Responsibilities:

It refers to the responsible and intelligent use of new technologies as a response towards
minimizing the possible environmental hazards. In addition it aims to develop proper
balance between environmental resources and consumption of energy in line of
protecting technocratic human behavior . In contrary to the benefits of technological
advancement the consequences of technology mainly the manufacturing giants, mass
media , transportation are growing equally as a matter of challenge. So, the ethical
concern of technological responsibility aims to develop responsible behavior and
rational application of new as well as existing techno practices of business in a balance
to human originality and creativity.
Major perspective of ethics:

Economic perspective
Legal perspective
Philosophical perspective
• Economic perspective:
It mainly deals with the financial and economic activities involved in business
transactions, trade and merchandise. In this regard economic analysis of business
activities mainly associated with financial mgmt, business planning, investment
analysis, forecasting and margin of constant price hike in regular transaction. In this
regard the ethical concern of economic analysis looks into the following breaches in the
financial market.

• Product planning, Manufacturing and pricing, discrepancies

• Financial control and disciplinary norms to avoid financial abuses, embezzlement
and bribery
• Customers care service and consumer right protection
• Black market economy and unfair business competencies
• Transactional ambivalence between import and export activities
• Increment of business productivity, economic independence and self reliance to
avoid the intervention of foreign or external sources of economy.
• Legal perspective:
It refers to a binding principal as well as a regulatory norms to govern, operate and a
lead to socio-economic as well as personal activities. It comprises a form guideline to
formulate statutory norms and effective governance of principal to lead a positive
outcome to the nation. No organisation and state can function without legal guidelines
which is mainly responsible for controlling and monitoring the relation. However,
with the passage of time, law and ethics seem to be a greed paradox as well as self
contradictory forces to each other but still sincere compliance to legal obligations is
also a part of ethical business behavior.
• Philosophical perspectives:
The term ‘philosophy’ is related to the study of human being, existence and human
relationship to the existing world. In the organizational context, philosophy refers to
the human relation negotiated among the seniors and sub ordinates. It is obvious that
organisation can’t simply run at the cost of economic resources and legal guideline
only, it requires philosophical concern to bridge the relation between material concern
and legal obligations. Thus, the ethical concern of institutional philosophy deals with:
a) Respect to others, cultural values and norms
b) Honor the self esteem of all levels of employees
c) Respect and acknowledge changing political values
d) Mutual co-operation, co-ordination and understanding
e) Social co-existence and harmony
f) Avoidance of prejudices
g) Inclusion and balancing
According to Velasquez, the five characteristics of moral standards are:
• They are involved with serious injuries or benefits to human.
• They are not established by law, nor legislated.
• They should be preferred to other values, especially self-interest.
• They are based on impartial considerations.
• They are associated with special emotions such as guilt and shame and a
corresponding moral vocabulary.
We absorb these moral standards as children from a variety of influences and revise
them as we mature. Thus, ethics is the discipline that examines the moral standards of
an individual or a society .Its purpose is to determine whether a given moral standard

(or moral judgment) based thereon is more or less correct. In our present study, we shall
apply ethical norms to various areas of business such as accounts, finance, marketing,
human resource etc.
Distinction between ethics and morals-

The words ‘ethics’ and ‘ morals ‘ are often used interchangeably. Distinction, if any, is now
blurred. The following distinguishing features maybe pointed out, but practically, such
distinction is not made.
Ethics Moral
Root Word in Greek is 'ethikos' which Root word in Greeks is 'mos' which means
means 'character' custom.
Deals with right and wrong conduct. Deals with principles of right and wrong.
Deals with individual character. Deals with customs set by groups.
Character is personal attribute. Customs are determines by groups or some
authority like religion or culture
Ethics is the response of an individual to a Morals are general principles, e. g. 'You
specific situation, e. g whether in that should speak truth.' Morals are community
situation, it is ethical to state the truth. defined.
Ethics are personal choices or inclinations.
Factors Influencing Business Ethics/Sources of Ethics

(a) The legal system: Laws are generally passed when people have low ethical standards
and they avoid social responsibilities. For example, in many families, sons do not take
care of their parents in their old age. As a result, the government of Maharastra was at
one time proposing a law to bind sons to look after their aged parents.
(b) Government rules and regulation: Government regulations regarding industrial
working condition, product safety, etc. are backed by the legal system. From these,
business houses can derive their own ethical standards and practices.
(c) Codes of conduct of companies: Many companies have their systematic ethical code of
conduct. The managers’ and employees’ conduct has to be according to it.
(d) Society’s expectation: Looking at the power and financial well-being of companies,
society expects companies to take up social causes. For example, it is forcefully being
proposed that private companies should reserve a certain percentage of jobs for
backward classes.
(e) Religious Morality: Most people are sometime or other God-fearing and tend to conform
to religious doctrines in their moral life. For example, religion says,’’ Do not steal’’. This
may prevent an employee from pilfering office property for personal use. The golden
rule of conduct is ‘’Do unto others as you would have them do unto you. ‘’
(f) Genetic inheritance: The qualities of goodness are in the genes. Some people are born
saints and some are born rouges. This directly affects the ethical conduct and behaviour.
Benefits and Importance of Business Ethics

In the previous section we saw the compelling reasons why ethically run businesses
eventually yield a more satisfying kind of profit. It is true that if a company’s share value

goes higher, investors are attracted to it. But does the company want profit hunters or
sensible, respectable investors. Of late, progressive business magazines have been
highlighting lists of most respectable companies. And respectively is not measured in
quantitative data but assessed by the quality and professionalism of the management.
We enumerate the benefits of business done with proper regard for ethics. (A business
house which is conscious of its business ethics runs an ethics program, i.e. a program
covering the ethical guidelines for its employees.)
1. An improved society: Attention to business ethics has improved the society. Earlier,
children and unorganized workers were exploited by the capitalist bosses. But thinkers
and activist have changed all this with unceasing action over the generation .Recently
Narmada Bachau Aandolan has taken up the houseless people on the banks of the
Narmada. Running a government is also like a business, and all the principles of
business ethics apply to it.
2. Help in turbulent time: Ethics programs help in staying on the moral course in times
of disturbance. The leader and staff maintain consistency.
3. Better Teamwork and productivity: An ethical program promotes teamwork and
enhances productivity. When a company’s workers bring the professed values close to
the actually practiced values, there is openness, integrity and communal cohesiveness.
4. More resilient workforce: ethical conduct in the workplace helps the employee face
difficult situations. ‘’ Tough times don’t last, but tough people do.’’
5. Helpful in biding by law: Ethical programs help to generate lawful policies. In matters
of hiring, evaluating, disciplining, dismissing, etc, the owners of the business need to
be ethical. This may save the company the cost of litigation later on.
6. Helps to avoid criminal acts in management: Ethical programs help to speedily detect
and correct the violations in ethics.
7. Help in quality management and strategic planning: Ethical programs help in bringing
the organizational conduct in line with its preferred values. Many of us have noticed
that reliance petrol pumps are run by boys who humbly bow to you with Namaste as
you go to get a fill of petrol. A culture of courtesy is clearly a reflection of the thinking in
the higher echelons of the company. Reliance in considered reliable for measure and
purity.
8. Binds together the diversity in the workforce: An ethics program takes care of the
diversity of values in the company. This in turn makes way for sound ethics
management.
9. Sound public image: A sound ethical base amounts to good public relations, though
PR need not be the reason why you are ethical. It is better to be ethically correct for the
sake of goodness and nothing else. The rewards of this may not be monetary, but then
there are satisfactions that money cannot buy. Ethics is about the highest good in
human conduct.
Corporate Social Responsibility/Responsiveness (CSR)

The term corporate social responsibility focuses on the idea that a business has social
obligations above and beyond making a profit. Business is accountable to the full range of

stakeholder, viz. Customers, creditors, suppliers, and employees of the company, the
government and society at large.
At the same time, if a company’s main purpose is to maximize the returns to its shareholders,
then it could be seen as unethical for a company to consider the interests and rights of
anyone else!
There is no clear definition about the concept of social responsibility. It has been defined in
various ways. Some of the definitions are as follows.
 ‘’ Corporate social responsibility in the continuing commitment by business to behave
ethically and contribute to economic development while improving the quality of life of
the workforce and their families as well as of the local community and society at large.’’
 CSR is the responsibility of business to society to perform its economic function of
producing and supplying goods and services in a very efficient manner, so as to
maximize its profitability.
 CSR is the obligation of the business to consider the interest of society and of its major
groups and give dues weight age to them while making its economic decisions and
undertaking economic activities.
 CSR is the responsibility and commitment of business to society beyond the basic,
traditional and economic functions of producing and supplying goods and services.
 ‘’Corporate social responsibility is an integrated combination of policies, programs,
education and practices which extends throughout a corporation’s operations and
into the communities in which they operate.’’
 ‘’Corporate social responsibility is achieving commercial success in ways that honor
ethical values and respect people, communities, and the natural environment.’’
Socially conscious enterprises can take wide range of initiatives in social action areas such
as adoption of village, contribution to rural development, general health and education,
sanitation, housing, combating environmental pollution, reducing urban congestion, etc.
But the basic social responsibility of the business is to run the business efficiently and
profitably by discharging its obligations to shareholders, employees and workers. After
discharging its basic obligations ably, it should pursue public objects and maintain a balance
between service to society and the financial viability.
Socially responsible business behavior is reflected in several ways. While taking economic
decisions, ne social benefit should be the dominant criterion of choice. Enterprises should
be concerned with the social consequence of their economic decisions. For example, setting
up industrial plant in an already congested area is ignoring social responsibility. Companies
which have taken up social responsibilities, in India are those of the Tata group who have
set up several hospitals, educational institutions, township and have contributed
tremendously to the promotion of sports and cultural activities. Birla group has set up
hospitals, educational institutions and promoted several socially useful activities. Reliance
group is supplying water by converting sea water into drinking water in Jamnagar Township.
Companies can best benefit their stakeholders by fulfilling their economic, legal, ethical and
discretionary responsibilities. The corporate citizenship denotes the extent to which
businesses meet the legal, ethical, economic and voluntary responsibilities placed on them
by their stakeholders.

Social Responsibilities
Economic Responsibility Ethical Responsibilities
Legal Responsibilities Discretionary Responsibilities
Social issues with which business corporations have been concerned since the 1960s may
be divided into three categories:
(a) Social problems external to the corporation that were not caused by any direct business
action like poverty, drug abuse, decay of the cities and so on.
(b) The external impact of regular economic activities. For example, pollution caused by
production, the quality, safety, reliability of goods and services, deception in marketing
practices, the social impact of plant closures and plant location belong to this category.
(c) Issues within the firm and tied up with regular economic activities, like equal
employment opportunity, occupational health and safety, the quality of work life and
industrial democracy.
The second and third categories are of increasing importance and are tied up with the
regular economic operations of business. Improved social performance demands changes
in these operations.
Need for social responsibilities

1. To fulfill long-term self- Interest: A business organization should be sensitive to
community needs. It should implement special programs for social welfare. As a result
of this, crime would decrease; turnover and absenteeism would also be substantially
reduced. A better society would produce a better environment in which the business
may gain long- term profit maximization.
2. The Iron Law of Responsibility: If a business intends to retain its existing social role
and social power, it must respond to society’s needs constructively. This is called the
Iron Law of Responsibility.
3. To establish a better public image: If a business organization must enhance its public
image to secure more customers, better employees and higher profit. According to this
line of argument, social goals are now a top priority with members of the public. So, if
the firm wants to project a favorable public image, it will have to show that it also
supports these social goals.
4. To avoid government regulation or control: If the businessman fails to assume social
responsibilities, then the government may intervene and regulate of control his activities.
Regulation and control are costly to business, both in terms of energy and money and
restrict its flexibility of decision-making.
5. To avoid misuse of national resources and economic power: Businessmen must use
resources for the common good of society. They should not forget that the power to
command national resources has been delegated to them by the society to generate
more wealth for its betterment. They must honor social obligations while exercising the
delegated economic power.

6. To convert resistances into resources: Many Problems in the society can be transformed
into resources if the innovative ability of business is turned to social problems. All
problems may not be capable to being handled this way, but many of them would be
solved to the ultimate benefit of society.
7. To minimize environmental damage: the effluence of many businesses positively
damages the surrounding environment. By their own socially responsible behavior,
they can prevent government intervention if they are duty-bound and repair the damage
by recognizing their ecological responsibility towards society.
Benefits of Corporate Social Responsibility

Companies recognize that a strategy for corporate responsibility can play a valuable role
not only in meeting the challenges of globalization by mitigating risks domestically and
internationally, but also in providing benefits beyond risk management. The benefits of
“good corporate citizenship” Include:
• A stable socio-Political-legal environment for business: The prime benefit is that your
business gains a stable environment as well as enhanced competitive advantage
through better corporate reputation and brand image, improved employee recruitment,
retention and motivation, improved stakeholder relations and a more secure
environment in which to operate.
Corporate social responsibility is the commitment of businesses to behave ethically
and to contribute to sustainable economic development by working with all relevant
stakeholders to improve their lives in ways that are good for business, for a sustainable
development agenda, and for society at large. Social responsibility becomes an integral
part of the wealth creation process which, if managed properly, should enhance the
competitiveness of business and maximize the value of wealth creation to society.
There is a growing body of data, quantitative and qualitative, that demonstrates the
bottom-line benefits of socially responsible corporate performance.
• Improved financial performance: Business and investment communities have long
debated whether there is a real connection between socially responsible business
practices and positive financial performance. In the recent past an increasing number
of studies have been conducted to examine this link. A DePaul University study in
2002 showed that overall financial performance of the 2001.Business Ethics Best Citizen
companies was significantly better than that of the remaining companies in the Standard
and Poor (S&P) 500 Index, based on eight statistical criteria, including total return,
sales growth, and profit growth over one-year and three-year periods, as well as net
profit margins and returns on equity.
• Reduced operating costs: Some CSR initiatives can reduce operating costs dramatically.
For example, many initiatives aimed at improving environment performance- such as
reducing emission of gases that contribute to global climate change or reducing use of
agrochemicals- also lower costs. Many recycling initiatives cut waste-disposal costs
and generate income by selling recycled materials. In the human resources arena, flexible
scheduling and other work-life programs that result in reduced absenteeism and
increased retention of employees often save companies money through increased
productivity and reduction of hiring and training costs.

• Enhanced brand image and reputation: Customers often are drawn to brands and
companies with a good reputation in CSR – related areas. A company considered
socially responsible can benefit both from its enhanced reputation with the public as
well as its reputation within the business community, increasing the company’s ability
to attract capital and trading partners.
• Increased sales and customer loyalty: A number of studies have suggested a large
and growing market for the products and services of companies perceived to be socially
responsible. While businesses must first satisfy customer’s key buying criteria, such as
price, quality, availability, safety and convenience, studies also as “sweatshop-free”
and “child -labour- free” clothing , lower environmental impact , and absence of
genetically –modified materials or ingredients.
• Increased productivity and quality: efforts to improve working conditions, lessen
environmental impact or increase employee involvement in decision-making often lead
to increased productivity and reduced error rate in a company. For example, companies
that improve working conditions and labour practices among their suppliers often
experience a decrease in merchandise that is defective or can’t be sold.
• Increased ability to attract and retain employees: Companies perceived to have strong
CSR commitments often find it easier to recruit and retain employees, resulting in
reduction in turnover and associated recruitment and training costs. Even in difficult
labour markets, potential employees evaluate a company’s CSR performance to
determine whether it is the right “fit”.
• Reduced regulatory oversight: Companies that demonstrably satisfy or go beyond
regulatory compliance requirements are given more free reign y both national and local
government entities. In the U.S., for example, federal and state agencies overseeing
environmental and workplace regulations have formal programs that recognize and
reward companies that have taken proactive measures to reduce adverse environmental,
health and safety impacts. In many cases, such companies are subject to fewer
inspections and paperwork, and may be given preference or “fast-track” treatment
when applying for operating permits or other forms of government permission.
• Access to capital: The growth of socially responsible investing (SRI) means companies
with strong CST performance have increased access to capital that might not otherwise
have been available.
Apparently lots of ongoing operational activities, involvement of a well-trained workforce,
a good information networking system, and use of modern sophisticated communication
tools and techniques seem to be the hallmarks of a successful business organization. But
this is not all, because there is something else that needs to be considered very important. It
is “Ethics in Business Organizations” or “Ethics at Workplace”
The term “ethics” is derived from the Greek word meaning character. Appraisal of what is
good and what is bad determines the dimension of ethics. It is characterized by the
organization, village, and the family in which people live.
Former U.S Supreme Court Justice Potter Stewart defined ethics as “knowing the difference
between what you have right to do and what is right thing to do.” Ethics is a set of accepted
principles and code of conduct adopted within an organization to run it smoothly. Concerned
with matters related to “what is right” and “what is wrong”, organizational people follow
certain norms and values, the violations of which is subjected to violation of ethical values.

Organizational ethical norms and values affect, among other things, organizational
communication system, because operation of every system depends upon the efficiency and
effectiveness (professional honesty and sincerity of its operations) of the manpower involved
in the system. Ethical communication system believes in fair, true and reliable dissemination
of information, whereas unethical information means false release of deceptive and unreliable
information. As such, it stands to reasons that business organizations which cannot stand
ethically upright cannot do justice to the public at large.
Unethical Communication
Some business organizations violate ethical morals but try to stand as good achievers. They
intend to make quick progress overnight without making necessary efforts. In doing this,
they violate established ethical norms and values. Violations of ethical standards may
occur in many ways, but two of them are worth mentioning. The first is unethical practices
within the organization and the second is unethical dealings with the public.
Examples of Internal Unethical Dealings

Some of the organizations are run with unethical work behavior and culture. Here, the
leadership is either ineffective or is dominated by external, that is, political and some unseen
forces, as a result of which it cannot steer the organization and majority of the employees sit
idle, produce nothing but spend most of the time in gossiping. The worst of grapevine
communication becomes predominant in such a situation. The main reasons of such a
situation can be attributed to the violation of norms and values and the breach of
organizational ethical laws, and code of conduct. Such organizations cannot achieve and
they are, in the long run, doomed to fail.
Example of External Unethical Dealings

Some of the examples of unethical practices of manufacturing business organizations.
· Plagiarism. A deceitful practice, it is using other’s words or name for a product as your
own. It is, in a sense, stealth of other’s copy right.
· Distorting graphical presentations. Some organizations may distort the size and shape
and look of its products to confuse or deceive the public by giving a false impression of
the product.
· Misapprehending numbers. This entails the practice of altering the figures, numbers,
and statistics.
· Presenting a fabricated fact statement. This is making a better but false statement about
a thing or product.
Prerequisites of Sound Ethical Environment

As a business organization has to deal with a number of its stakeholders- shareholders,
consumers, customers, and others, its communication system–internal as well as external,
should be ethically rational and reliable. It requires the following conditions:
(a) ethical organizational leadership, (b) ethical individuals, and (c) appropriate
organizational policies and structures.
To elaborate the first case, if organizational leadership does not stand upright and the
company executives make unethical decisions, employees may not explicitly follow the
directives and guidelines pushed on them. So it is indispensable for the organizational

leadership to be morally and ethical sound. To this end, many companies explicitly establish
a code of ethics. Under this, unethical leadership that may tarnish the image of their
organization should be prevented from doing undesirable things for fulfilling of their vested
interests.
Secondly, employees are held responsible to work and communicate in the most ethical
ways. Apart from having to perform regular duties, employees have to be morally and
ethical sound on other matters concerning organizational image. Many organizations
conduct ethics audits to ensure that ethical norms and values are strictly followed by
organizational people.
Thirdly, some of the organizations fail to achieve their intended goals despite their manpower
and resource abundance. Here, lack of ethically appropriate and sound organizational
policies and structure account for organizational ineffectiveness.
6. Strengthening Your Communication Skills

Improving Communication Skills for Achieving Organizational Goal
It has been argued that communication effectiveness is the backbone of organizational
effectiveness. It is the concern of every organization to strengthen its communication skills
to the best possible extent. Some of the simple ways of improving communication skills are
as follows:
(a) Understand the purpose of your communication,
(b) See if your purpose has been achieved or not,
(c) The purpose, if not achieved, know the flaws in our communication system, process
and personal ways of communicating things,
(d) Remove barriers (physical and metal) impacting your communication,
(e) Make effective use of the available communication tools & materials best suited to the
situation,
(f) Identify various factors impacting effective communication in your organization,
(g) Discuss your communication problems among your office staff members and work out
solutions to the problems collectively,
(h) Always try to understand the people you communicate with
(i) Communicate the right message to the concerned authorities with appropriate
suggestions
Components of Effective Communication Skills

In the recent days of information revolution, business communication is a network of
information revolution and globalization of information dissemination. Improving
communication skills entails improving: i) Listening, ii) Speaking, iii) Reading and iv)
Writing skills. Use of non-verbal communication is equally important. A successful manager,
apart from his personal, administrative and management skills, needs to understand and
use non-verbal communication skills in situations, where verbal communication would
not work. Apart from the above, technical skills, modern tools and techniques and office
automation equipments for improving personal and organizational communication capacity,
leadership qualities also matter much in improving organizational communication skills..

Essentials of Communication Skills
Case Study 1
Pillsbury’s Restructuring “Discombobulate” Employees
A new age dawned at Pillsbury in the 1990s. The food giant underwent staggering changes that
shook it to its very flour- milling roots. Like many companies at that time, it experiences mergers
and acquisitions, a shake- up of senior management, and downsizing in some divisions. With
over 18,000 employees worldwide, Pillsbury maintains its headquarters in the Pillsbury Center,
Minneapolis, shown on page 2. It controls many well- known trademarks including Green
Gaint, Haagen- Dazs, Old El Paso, and Progresso. It also claims America’s most famous
spokescritter, the Pillsbury Doughboy, and, until recently, owned Burger King.
“The company got a new CEO in the fall of 1991,” explained Lou de Ocejo, senior vice president
of human resources and corporate affairs. “We went through a fairly extensive structural changes
in how we run the business – we focused on competencies in food technology, brands marketing,
and that type of thing. [moving] away from the old focus, which was on divisions within the
company and functional silos.” Instead of working in “silos” such as research, production,
personnel, or shipping, people became part of cross functional teams. “When we made that
change”, said de ocejo, it was very traumatic. Philosophically, it was a good idea, but the lines of
authority got blurred, and new things became important. People became discombobulated- who’s
my boss? Where do I go?”
Worse yet, as a company Pillsbury wasn’t growing. Business was flat. Moreover, it was
fundamentally a U.S. business. Suddenly, this company that had seen all roads begin and end in
Minneapolis had to regroup and look beyond its regional home. “Roads were beginning and
ending in Argentina and Bombay,” said de Oceja. Expanding it global market, managing broad
restructuring, pumping up sagging employee morale became urgent concerns in the new age of
Pillsbury.
In any organization, when employees fear that their jobs will change or even disappear, morale
plummets. Rumors fly, and productivity sinks. Excessive caution and mistrust prevail. That’s
why, in times of upheaval, communication- and lots of it-becomes paramount.
www.pillsbury.com

Case Study Analysis

a. Comprehension
b. Critical analysis/problems
c. Recommendation/conclusion
The case study above critically analyzes on series of upheavals that took place in Pill’s Burry.
Pills Burry is a globally renowned food producing multinational chain business that contained
its business networks in the major global markets with a network of 18,000 employees around
the world. Initially the company branded its products with diversified approaches of global
brand like Magen-Dasz (Ice-cream brand in Europe), Progresso (Coffee brand) and the green
Giant with its special focus on ecological and environmental concerns. However in the later
days of 1990’s in matters of its business holds, economic prosperity and the booming stage of
business in the national and international market.
The popularity of business was short lived with the unexpected transition that began with the
recruitment of new CEO. The new CEO further introduced a policy of structural changes in the
traditional pattern of business with the view to liberalize the operational modalities in a more
democratic way. As per the provision traditional management hierarchies were restructured in
the team and group based management along with downsizing of employees in different regional
diversions. This unprecedented change in management created a very traumatic (unexpected)
figure among the employees regarding the future security of job, the line of authority was all
blurred, employees morale become down and finally the business was all collapsed which is
termed as employee discombobulating.
This misfortune of Pills Burry can be analyzed from communication and managerial prospective in
which change management seems to be of higher significant in time of crisis. Even though the
company practiced some innovative policies like food technology brand marketing and team based
management but these all policies turn out to be very much counter productive to the organization.
Following issues can be regarded as the major problem that occurred in the company.
• Ineffective leadership in matters of co-ordination, controlling and regulation of the business
• Implementation of unplanned change policies
• Autocratic leadership and unilateral communication
• Lack of participatory mgmt, decision making and implementation
• Improper chain of command and ineffective authority delegation
• Lack of confidence, co-operation and mutual understanding among the several layers
of management
Even though the policy of restructuring Pills Burry was an ideal concept of new CEO in order to
introduce liberal mgmt. and team based activities but the leadership default of new CEO begins
with his lack of foresightedness for the practical implications of structural change in this regard
though liberal is philosophy but turn out to be an autocratic in practice. Without having any
consultation nor communicating about new policy, he started the business operation. In this
regard the crises of Pills Burry would have been better addressed by the following major strategies:
i. Proper communication and co-ordination with all levels of mgmt and employees in
prior to implementing the decisions.
ii. Use of formal chains of communication like meeting, discussion and brainstorming
about new policies
iii. Effective crisis management skills for managing and organizing the changes
iv. Proper job description and employee orientation about new policies

CHAPTER - 2
WORKING IN GROUPS
A. Conflict Management Issues
a) Basic concept of conflict:
Conflict is one of the most essential drive as well as an agentive force that envisions towards
constituting revolutionary changes in existing norms and values. In this regard conflict is
literally termed as a ‘clash’ or intentional disagreement towards existing patterns. Whereas
in the institutional context, it can be viewed as the incompatible relationship among the
different layers of management, employees and authorities. This incompatibility
stems(originates) right at the level of interest, opinions, ideas, expectations and other socio-
cultural differences so, conflict is aimed to review and revisit the situation from a very
renewed perspectives.
Conflict Resolution
Mark Robert’s skill-focused book on conflict management, entitled MANAGING CONFLICT
FROM THE INSIDE OUT analyzes the types of situations that cause conflicts. This book
also deals with how to handle conflicts that are difficult to avoid. Apart from conflicts
inside the organization, the book also deals with ways and means of handling conflicts
among, families and friends.
Resolving conflicts, in a way, means handling conflicts properly, objectively and impartially.
Positive conflicts can be minimized because they exert a force necessary for better
management. Such conflicts are based on the principle of “All is well that ends well.”
Most conflicts being sensitive in nature need to be handled properly. Conflicts, if not properly
managed leads to failure in group performance
Conflicts, though are indispensable for positive results, should not be lingering. Ways and
means of resolving them are equally important and need to be devised as early as possible.
Resolutions delayed means resolutions denied. As conflicts are not problems that defy
solutions, the following measures need to be considered:
 Proaction Addressing minor conflicts before they become serious
 Communication. Bringing the conflicting parties to a negotiating table to discuss the
issues.
 Openness. Expose the conflicting parties to an environment of open discussion, before
the major issues are touched upon.
 Research. Identify the factual reasons of the conflict.
 Flexibility. Create a flexible environment for free and open discussion.
 Fair Play. Encourage everyone to work out a fair solution to the problem

Chapter 2 - Working in Groups
 Alliance. Let the conflicting parties fight out and drive out ‘’external forces’ from meddling
in their business.
 Help others realize reality See whether or not the resistance to change is possible or not.
Help the other persons to realize the same and motivate them to cooperate with you in
your mission.
 Bring resistance out into the open To awaken the silent and uninterested and noncommittal
participants towards positive response, you might ask,” Have I talked irrational? Am
I unreasonable? Why don’t you open your mouth? We expect some positive response
from you.” Such remarks will enthuse the silent and non- participating speakers to
speak, express positive views and contribute to overcoming résistance.
 Evaluate others’ objections fairly Don’t harp on the same string, however right you think
you are. Let others open up. Let them express their dissatisfaction. This is necessary to
make a balanced judgment about the major problems.
 Hold your arguments until the other person is ready for them Do not always think that a
strong argument will always speak for itself. By listening to others, you will lean to
understand others- their feelings, emotions, etc. This is necessary to overcome resistance.
Facilitating Conflict Resolution

Conflicting parties, overwhelmed by arrogance, egos and obstinacy stick to their own stand,
cannot understand living realities of the situation. They continue the struggle until either of
the two or both lose the battle, with irreparable loss Such a situation could better be addressed
only with the involvement of a third party known as the mediator, the arbitrator to avoid legal
interventions. The mediator, besides playing various, acts as a facilitator, who can be rightly
compared to an elephant, enormous in size, shouldering the burden of hard work and
enduring and persevering during duties. Over the years the mediation method has achieved
excellent success in resolving serious business and management-related conflicts which
otherwise would have resulted in irreparable wastage of time and resources.
Overcoming Resistance:
Resistance to change, which may be either logical or irrational, is a kind of conflict. By
following certain strategies, irrational resistance can be overcome by:
a. being calm in nature and reasonable in approach
b. maintaining your composure and by thinking about others’ views, beliefs and ways of
thinking as reasonable from their own perspective.
Diffusing Hostilities
Handling emotional people who are quick ton anger and aggressiveness is difficult, but
also pleasant because they provide a lot of leaning inputs about people temperament,
attitudes and behavior responsible for causing conflicts. The book recommends the following
hostility diffusing ways:
1. Understand feelings and behaviors of such people when they are confronted by angry
people
2. Increase employee awareness on the causes of anger and hostility
3. Learn the skills that can transform a confrontation into a positive resolution

Following are the universal assumptions of conflict:

1) Conflict is an outcome of incompatibility of relationship.
2) Conflict has its very dialectical relation(positive &negative)
3) The proximity and intensity of conflict can only be minimized if not uprooted forever.
Following are the universal basis of conflict:

a) Ideological Conflict:
Ideology refers to an established doctrine of the respective society that governs the
behavioral, psychological and intellectual conscience of human kind. Therefore the
ideological base of conflict is related to the incompatibility of principles, thinking
pattern and value differences among the conflicting groups. Further known ‘War of
words’ this form of conflict is simply limited to the theoretical level in which
disagreements are discussed, argued and resolutions are formed with the view to
ensure betterment to a larger group of people .This is the reason why ideological
conflict is consider to be creative, constructive and last but the most obliged
compatibility among human society.
Following are the basic implication/roles of ideological conflict:
• Conflict is an agent of social transformation and above drive for changes
• It helps to fight against the autonomy of power
• Maintains proper check and balance among authorities
• Develop the capacity of resistance and confidence towards decision making and
problem solving.
• Contributes social integrity, homogeneity and to a larger extent social synergy
(energy +energy)
• Develop non-violent resistance and sense of fraternity among human kind.
b) Affective Conflict:
It is an extensive form of ideological conflict that mainly looks into the confrontation
created among ruling and oppositional groups. Most importantly affective conflict
takes the form of violence and bloodshed as the only way of resistance and subjugation.
Consequently it mainly entertains the limited interest of specific group for personal
benefits.
b) Popular schools of thought on Conflict:

1) Structuralist school of thought – 18th century
2) Marscist school of thought – 19th century
3) Psycho analytical school of thought – 20th century
1. Structuralist school of thought:

Emerged during mid 18th century, structural school of thought deals with conflict as an
outcome of structural deficiency in the organization. It is obvious that no society or
organization can sustain in proper without having structural divisions. Accordingly
the structural relation is naturally divided into the group of rulers and ruled in which

the ruled group are always in disagreement with ruling power. Therefore, conflicting
circumstances are created to revolutionize the established regulatory norms and values.
So, structuralist share a popular belief that liberal hierarchy and democratic leadership
can reduce or minimize the chances of conflict in organization. However, as long as the
structure exists, conflict is never going to be reduced forever from the society.
Following are the basic ideas to minimize conflict:
a) Flat management hierarchy
b) Corporate liberalism
c) Participatory management pattern(PPP model)
d) Group and team based management
e) Multilayered leadership schemer.
2) Marxist school of thought:

Marxist school of thought deals with financial as well as material resources which
are mainly responsible in the management and operation of structure. Karl Marx
propounded the theory of communism and socialism as a reaction against capitalist
mode of human existence. For Marx conflict is originated due to the unequal
distribution of resources which results into the class difference between ‘haves’ and
‘haves not’. The former group of people own the property and the resources whereas
the latter make the existences by selling the labor and skills .Accordingly, the process
of exploitation begins in order to acquire more resources so Marxis in vision social
conflict as the primary reason of economy which creates the class difference at the
same time class struggle. This material base is a significant determinant towards the
level of human consciousness, culture, politics, religion for personal interest. So the
conflict can be minimized through the concept of socialism and social welfare
principles.
3) Psycho Analytical school of thoughts:

Psycho analysis is the study of human behavior attitude and individual norms that
guides towards individual’s personal identity roles and performance, propounded by
Sigmund Freud during 20th century. It envisions conflict as an outcome of individual
human impulses like desire, egocentrism, jealousy and human phonetics. In addition
Freud believes that human activities and personalities are guided by two fundamental
drives.
Phonetics
• Heterogeneity
• Anger, Jealousy, frustration
• Hate and war
Eros
• Homogeneity
• Happiness, Solidarity and optimism
• Love, Pity, sympathy and unity

Thus, psycho analysis relate to managing the conflict through:

• Sense of humanity and humanitarian human relation
• Avoidance of ego centric human attributes in matters of class, culture and social
identities.
• Tolerance and patience for human solidarity, homogeneity, mutual understanding
and respect of self esteem
• Compromise, flexibility, fraternity and avoidance of human stereotypes.
c) Techniques of Conflict Management:

a) Negotiation
b) Mediation
c) Arbitration
d) Reconciliation
a) Negotiation:
Negotiation is one of the most preliminary stage of managing conflict in the close
group participation of conflicting forces. Further known as wind-wind theory .It aims
to settle the dispute through intra group facilitation and co-ordination to resolve into a
mutual compromise. So negotiation aims to bring together the conflicting parties in the
single platform to resolve disputes and misunderstanding through bilateral discussion,
dialogues, bargaining , flexibility and compromise. Accordingly, the bargaining power
of claims are intentionally brought to mid point discussions which turns out to be the
point of compromise. Accordingly, the consensus of agreement is mutually agreed and
executed in the testimonial record.
b) Mediation:
It is any extended form of negotiation in which the disputes are facilitated by third
party intervention. The third party is granted with an institutional status to have
autonomous execution of decision upon the consent of conflicting groups.
Process of Mediation:
• Authorization and validation of claims
• Bargaining and package deals
• Stream lining of structural pattern of conflict and resources
• Integration and settlement
• Arbitration for agreement and forceful adjustment
• Governing and controlling of integrated forces.
c) Arbitration:
Arbitration refers to the process of subjugating and subordinating policy of controlling
the conflicting circumstances. In this approach disputes and disagreements are legally
entertained with view to eradicate institutional base of conflict considered as the least
scientific approach to conflict management, arbitration is performed in lies of
constitutional and judiciaries authority to sublet the countering force being illegal and
illegitimate in the given circumstances. The overall objective of arbitration is to.

(I) Internationally dominate the conflicting parties

(II) Coercion of countering force through forceful impositions
(III) Model the conflict into under understanding
(IV) Deterrence from the possibility of repeating the similar consequences
d) Reconciliation:
The primary concept of reconciliation is an institutional practice to bring together the
conflicting groups into a consensus. Basically, reconciliation looks into the approach
of integration and strategic settlement of two opposite forces. The strategic handling of
conflict envision towards intelligent process of packaging the disputes basically in the
after math of any conflicts. According it aims to;
(I) Bringing together to the opposite forces
(II) Settlement and integration of power
(III) Parallelism of structure to be governed by central working force
(IV) Interdependence and co-existence
B. Working in Groups and Teams

Team is one of the preliminary entity of group which is formed and developed out of likeminded
people in matter of interest, objectives and role relations, irrespective to their status and position.
In addition a team is homogenous confluence of people to fulfill common objectives and goals. In
this regard, a team is characterized as:
(I) Skilled task force with needed expertise
(II) Informality and horizontal relation
(III) Lack of leadership influence
(IV) Moderated in volume and size
(V) Uniformity, mutual co-operation and understanding
Following are the basic role of team:

(a) Executive roles
(b) Task facilitating roles
(c) Quality control roles
(d) Ad Hoc roles/special task roles.
Characteristics of successful teams:

• Small in size of diverse make up
• Agreement on purpose
• Ability to confront conflict
• Use of good communication techniques
• Ability to collaborate rather than to complete

Stages of team building

Formating Storming Norming Performing
a) It is the most preliminary a) Storming is an a) Norming is a process of a) This stage is primarily
stage of building team in international practice to socializing the individual concerned with the
which the members are put bring together the member member with the view to value and output
down in a proper and mutually discuss about develop intimacy among contributed by the
organizational structure. responsibility. the members. member of team.
b) Selection of member is b) Create opportunity to b) Norming comprises a b) The assessment of team
made on the basis of discuss, interest and procedure of developing and it’s members are
personal skills, expertise, communicate to each other towards informality made to evaluate the
experience and personal inorder to share the ideas, among the member performance and
attitude. views and opinion and representing different regular responsibilities.
c) Member of team are knowledge. layers. c) This is further associate
accordingly assigned with c) Storming provides required c) Helps to develop mutual with
specific job responsibility orientation, vision, mission understanding integrity • Controlling
and authorities to fulfill and objectives and uniformly. • Monitoring
within the given frame of d) Facilitate problems of d) Reduces the proximity of • Evaluating
time and resources. individual members avoids conflict. • Appraisal
d) Members are further misunderstanding and d) Develops sincerity to
provided the specific develop awareness in the job and high sense of
limitations and regulatory team. accountability.
norms to fulfill.
Group Communication Techniques:
Interaction Discussion Meeting

(a) It refers to (a) Discussion is a semi- (a) It is a highly formal approach to
unstructured form of structured form of organizational communication.
discussion and organizational (b) Comprises structured patterns:
conversation among communication. a. -Notice and notification
the employees. b. Agenda
(b) It is well planned and c. Minutes
(b) It is guided and systematically guided by d. Resolution
followed on a. Planning e. Action Plan
extempore b. Purpose (c) Decisions are formally resolved
approach(not c. Participation and minuted as formal office
planned) d. Informality record.
e. Leadership
(c) Mainly deals with (d) Provides the guideline for
informal talk, chit- (c) Decisions are mutually solved implementation of all the
chat , gossiping and and executed. decisions.
discussion on.
(d) Contributes to (d) Oriented to specific problems
psychological decision making and problem
satisfaction on due to solving.
personal exposure
and freedom
(e) Challenge grapevine

and freewheeling.

1. Listening Skills
Background: Nature has gifted us with one mouth and two ears. This is symbolic in many
ways. With this, we have to understand that we should listen more in order to be enlightened
and speak less. n order to let others speak and listen to them attentively.
Understanding Listening. Listening may be defined as the ability to understand and respond
effectively to oral (face-to-face) communication. Though listening and hearing sound alike, they
are different in organizational communication context. While listening perceives the contents
of what is said, hearing just absorbs sound without paying any attention to what is said. As
such, the latter does not involve any response or feedback.
Listening is the most important of all communication skills. The listening process takes
place in four stages: (i) perception, (, ii) interpretation, (iii) evaluation and (iv) action.
Listening is one of the most fundamental skills of human communication activities that
idealize interpersonal human relations through sharing and exchange of ideas, experiences
and information. Listening involves sensing. Listening is always a participatory approach
of effective communication. Most of the evidences show that the receptive side of listening
is more crucial and it causes more problems than transmitting messages for others to
understand them. Poor listening is major cause of miscommunication. Improving listening
ability is the major challenge for better communication.
Listening, the most basic quality of human communication is an act of sharing and exchange
of ideas, experiences and opinion. It must be realized that the best way to understand
people is to listen to them properly. So listening remains to be the most prominent and
structured procedure of communication that broadly consists of methodological procedures
like sensing, interpreting, evaluating, remember and responding. It is assumed that 90
present of the organizational problems are caused due to misleading and misrepresentation
resulting from listening problems.
For many reasons, the same piece of message conveyed by the speaker may be subjected to
both hearing and listening. Sometimes, a piece of message is just heard, if it is considered less
important. It also depends upon how the listener reacts to it. Other things remaining the
same, a good manager is required to be good listener in order to be a good speaker.
Listening involves filtering – a process of decoding the message to get the meaning through
mental verification. It depends upon our knowledge, beliefs, attitude and behavior, biases
and experiences. To elaborate, listening involves:
i. Sensing things by perception. It is the most fundamental aspect of human learning,
understanding things with rationality and reasonability.
ii. Interpretation is the deliberate process to have explanations, illustrations and establish
proper understanding. Evaluation is the process of finding logic and evidence. Every
listener is required to have proper analytical skills to prepare proper logic and evidence,
classification and sub-classification of ideas and argumentative habits.
iii. Remembering refers to the process of internationalizing information before it is
communicated to the listeners. In short, it is the quality of retaining in mind what has
been received (listened to). Various factors determine our capacity to remember things.
Some people have photographic memory and can reproduce past information. Next,
remembering deteriorates with aging. It has also to do things with people of the
marginalized community. Family members of a backward community of slum-dwellers

in the Banke district in Far Western Nepal, when interrogated by a crime investigation
team on the color of the shirt family members could not rightly tell the color of the shirt
their son wore on the day of his killing.
iv. Responding is the final stage of human communication quality in which the listeners
reproduce replies or respond to the speakers on the specific state of affairs, i.e., queries
made by the speaker. The response reflects the listener’s reactions to various aspects of
the message. It could be positive as well as negative and confused understanding.
Listening as a process of communication could be best understood as a set of the following
commands.
The Ten Commandments of Listening
1. Develop positive thinking attitude towards speakers.
2. Question and counter question for the appropriate compressions
3. Raise the speaker in status of role model.
4. Listen to concepts, key ideas and facts
5. Listen attentively and patiently
6. Put the speaker at ease
7. Be patient
8. Judge content, not the appearances or habits of the speaker
9. Keep an open mind when confronted with temperamental influences.
10. Apply the standard of mind filter.
Types of Listening: Various categories of listening include:
(a) Discriminative Listening, (b) Appreciative Listening, (c) Evaluative Listening, (d)
Emphatic Listening (Listeners put themselves at the position of speakers and try to
understand their feelings, expressions thoughts and emotions)
Do’s and Don’ts of Good Listening

Do’s, of Good Listening
1. Stop talking too much,
2. Remove distractions.
3. Concentrate only on the factual contents of the message and use the way they are
transmitted.
4. Be patient while listening to others
5. Let the speaker have his/her says.
6. Ask questions and make requests for repetition of things for clarification.
7. Avoid difficult and technical parts of the message.
8. Make use of gestures (body language) to show your agreement or disagreement with
the speaker.
9. Differentiate facts from fancy and make comments on the delivery.
10. Remove distractions
11. Be patient

12. Provide feedbacks also.

13. Keep listening until the speaker has finished. Don’t interrupt in the middle.
Don’ts of Good Listening
(i) Avoidance of difficult listening conditions, (ii) Tolerance of distractions, (iii) Faking attention,
(iv) Criticizing mannerism and style of speakers. It is not good to criticize the speaking styles,
manners and speaker’s attitudes unless reached into conclusions. Listeners can provide
feedbacks on such presentation flaws without criticizing and disturbing the sparker, (v)
majoring in minors. Some listeners have the habit to get distracted, while speaker is speaking.
They miss the major points and keep majoring in minor. The core or major part of the
communication should be dealt or listened effectively and efficiently.
Improving Listening Skills: Much has already been said on various aspects of listening. The
last word about to be said it is that listening skill could be improved by asking, among other
things, targeted focal point questions to the listeners. Such questions intend to ensure
listeners’ attention to the things said or spoken.
2. Working in Groups: Group Interactions

The present-day world is a world of development activities, mobility of the workforce to and
fro around the world and global information networking system. Under the complex as
well as dynamic global development scenario, all sorts of development activities cannot be
performed only by government and government agencies. As such, people organized in
groups/ committees shoulder the burden of various development activities at various levels.
The whole mystery of group workings is enshrined in what is called the science of Group
Dynamics.
Prior to understanding group interactions, determining group goals, and individual roles
in Group Dynamics, it is necessary to understand “Group” in its peripheral subjects in
their right perspective.
Understanding Group
It is rightly said: ‘Two heads are better than one head.’ Thoughts and beliefs held collectively
are much more productive and effective than those held individually. In other words, an
individual can seldom have the same volume of information that a group can bring into the
process of decision-making. Individual thoughts and plans and programs, however good
and practicable, cannot be materialized unless supported by a group or community of
authorized people.
Understanding Principles of Group Dynamism:

The term ‘dynamics’ derived from the Greek root means “force”, which is necessary like the
fuel for running an engine. Group force gives an impetus to the working with common
consensus and enthusiasm for achieving a common goal. Group Dynamics is the study of
the relationship and interactions between/among group members united by common goal
of achieving certain goals of the group or a community of people. Most complex problems in
business organizations are solved in the principles of group dynamics. Group discussions
and consensus constitute the essence of group dynamism. Patterns of group communication
are different from individual communication.

A group is heterogeneous in nature, but homogeneous in functioning. To clear the point, it

is broadly understood as the spirit of heterogeneous mass formed deliberately to succeed
the common objectives of an organization. In other words, a group is a powerful and deliberate
combination of people having varying cultural and sub-cultural background
The term ‘group’ is defined as a cluster of two or more individuals, who interact with each
other on a relatively enduring basis, identify themselves as belonging to a distinct unit,
share and exchange ideas and experiences on certain issues, interest, values and goals,
and finally initiate activities considered expedient for all the members. Group members,
united by common beliefs and perceptions, implement their work plans towards achieving
their goals. Such principles and ideals of group functioning are enshrined in the principles
of group dynamics.
Understanding Group and Team: Though enshrined within the same principles of Group
Dynamism, the word “TEAM”, in a narrow sense, means a number of persons forming one
side of the game/ party standing opposite to the other party. It is based on the principle of
togetherness. The four letters TEAM stand for “T” (Together) “E” (Everyone), “A” (Achieves)
“M” (More). In broader context, the two words are used to mean the same thing for the same
purpose, because a group also works in a team spirit and sense of belongingness.
Characteristics of a Group
The following are the distinctive features of a group:
(a) Specified group goals, (b) Group structure, (c) Group patterns, (d) Group norms and
values, (d) Group environment are the characteristics of a Group
Group Size: There are no hard and fast rules about the size of a group because the number
depends upon the type of the group and the circumstances in which it is formed. However,
the normal size ranges between a group of 5-6 and that of 15- 20 members. Sometimes, a
small group can perform much better than a large unmanageable group, which becomes
non-functional or ineffective when its individual members stand just for name sake. The
principle of Small is Beautiful applies to the effectiveness of a small group. To cite an example,
a business organization with many hands for doing the same kind of work cannot achieve
its organizational goal.
Distinctive Features of Group Communication

a. Focus on specific problems of the organization.
b. Selection of appropriate channel of communication during group performance
c. Group consensus for group functioning and decision making.
d. Agenda-specific and time-bound performance activities
e. Group participation.
f. Involvement of individuals in group activity through brainstorming, nominal or Delphi
techniques.
3. Determining Group Goals

Every group is formed by setting certain goals. This starts with an initiative usually taken
by a team of two or more persons- intellectuals, professionals, experts, technical-minded
people and the like, who gather with a thought of initiating some entrepreneurial or
enterprising work or with a thought of achieving some common goals In business

communication context, such a gathering of elites interact on what to do, how to do and
where to do. Interactions and discussions consume a considerable amount of time. The
relationship and interactions between members of a group is known as “Group Discussion”.
Interaction among members is the core group of Group Dynamics. Interactions involve
creative thinking on doing certain things creatively. At the goal setting stage, members,
based on the ideas they have in mind, shower a number of group goals, which are filtered
into tangible, workable and achievable sets of actions to be undertaken.
Mere flow of ideas in the interaction would not determine group goals. A strong personality
from among the group members, considerate and insightful enough to perceive and preview
the future working of the group, intervenes in deciding group goals. Some confuse goals
with objectives. Setting of group goals is the most important function, next to the formation
of the group. Setting objectives is the third important function. Some groups have general as
well as specific objectives to follow. Plans and programs to be followed as per group goals
occupy the fourth place in the role of functions.
To understand the distinction between goals and objectives, it will be better to cite an example
of the Police Institution in most countries. In Nepal “Satya Sewa Surakchhyanam” meaning
Protection of Real Service, is the mission. The goal is to be dedicated to ensuring security of
life and property of the people in general.
4. Individual Roles in Group:

Individuals as group members are the crew members of a team for piloting the group work.
To this end, they should acquire the following qualities and bear responsibilities towards
achieving group goals. The following are some of the major individual roles of group
members.
a. Complying with group principles, strategies and limitations,
b. Working in a group spirit,
c. Avoidance of stereotyped perceptions & thoughts,
d. Avoidance of biased and skeptic attitudes towards fellow-members and group
performance,
e. Active participation in group programs.
f. Generate a sense of liberal and generous attitude.
g. Abide by the principles of corporate culture.
h. Keep group interests above individual interests.
i. Be able to address and manage a conflict which helps to retain group structure for al
long time.
Group, Crowd and Mob Distinguished: Literally, a group is a number of persons assembled
at a place for accomplishing certain tasks. In communication context, a group is like a
symphony in which musicians play different musical instruments, but all go along with the
same tunes directed and conducted by the conductor. As individual musicians playing
their own tunes will not make any symphony, an individual member with personal plans
and programs, however good and feasible, cannot function like a group.
Crowd A crowd is also a group of people temporarily seen gathering somewhere aimlessly.
A mass of people in the street or at a football stadium or in the street protesting against the
government or some other things, are an example of a crowd. People seen moving in a

crowd do not have identity of their own. They show unorganized, unplanned or
unpredictable attitude and behavior. Crowds are often seen involved in anti-social activities
without thinking of their results. They disperse after some event.
Mob A mob is a disorderly crowd or rabble or throng of people taking part in mob rule or
mob violence. It does not hesitate to undertake any destructive work quite irrespective of its
disastrous consequences.
What a Group is Not: To understand a group in its right perspective, it is necessary to realize
that just a throng of people or a mere aggregation of people does not make a group. For
example, people lining up in queues to buy the cinema or railway tickets, pilgrims waiting
in a temple for the worship of gods and goddesses, and people sitting together in a bus or
railway compartments are not groups. Another example, in any busy city, an incident or
accident or mob violence soon collects a large number of people, most of whom start playing
violent roles. This aggregation of people also does not constitute a group, because here also
the people are not collectively directed towards achieving any specific goals for the common
good of others.
Functioning Style of a Group: At the early part of its formation and functioning, it carries out
lot of discussions with sharing and exchange of individual opinions and attitudes towards
the subject of discussion, which are later filtered and merged into a set of opinions and
decisions of common consensus.
Organizations function with several kinds of teams or groups of people. Each of these teams
or groups communicates differently according to its goals of formation. Longevity of a team
depends upon its nature and the situation of its formation.
Importance of a Group
Working in group/s is a democratic principle. This principle applies to cases of families to
large organizations. Families run with one-man decision policy against the group decision
policy, are authoritarian and cannot work with common consensus. Conflicting ideas and
opinions, not properly addressed under the able leadership impede real growth and
development of families. Likewise, political parties in a multi-party system, working with
individual party biases and preconceptions cannot take the country to height. Others, on
the other hand, working in group spirit and a sense of belonging can achieve tangible goals.
Such people believing and working in the principle of unity within diversity can work in
peace and harmony and contribute to sustainability and longevity to the organization. To
this end, it is necessary to learn much from bees and ants that work hard and collectively.
Types of Groups The followings are various types of groups:
1. Self-directed groups: They are self regulated groups of staff members empowered to
influence decisions and exert pressure.
2. Committee-based Groups .Groups exist in the form of committees under different names,
e.g. (a) Steering Committee, (b) Standing Committee, (c) Advisory Committee, and (d)
Adhoc Committee (meaning for this/ that purpose). Some of the above are long-termed
and some short-termed
3. Task Force (karyadal) formed for a short period to investigate facts of a problem and
suggest measures for resolving the problem, or achieving something new in a short
span of time. It is an important structure of internal operational procedure of business
organizations.

4. Quality Circles This is a new technique of group dynamics intended to strengthen

human relations and organizational behavior for increasing organizational
productivity. It is a small group formed and committed to work voluntarily towards
quality improvement in organizations.
5. Brainstorming: It is one of the techniques used in group decision-making. Brainstorming
follows the following techniques:
i. Free flow of ideas
ii. Innovative and new ideas are appreciated leaving young members a chance to
show their talent and members express and write down their ideas, whether it be
relevant or not
iii. Members allow free flow of ideas
iv. All ideas are collected by the secretary
v. The best idea is adopted after evaluation of all ideas.
Formal and Informal Groups The first is formed with official sanction of management to
meet certain official requirements, while the second with common consensus among a few
persons, not necessarily approved officially.
Advantages of Group Working

An organized group of competent and committed members has to its credit the following
advantages:
i) Group members get a feeling of warmth and reinforcement
ii) Individuals get a feeling of security and safety from a group
iii) Groups provide opportunities to individuals to work unitedly
iv) Groups help solve the problem of an organization systematically
v) Groups offer outlets for creative and artistic expression for its members
vi) Individuals working in a group are privileged to enjoy many advantages of listening to
diverse views and get better information
vii) Access to increased source of information: Every individual member can have an access
to an increased source of information, because a group has a richer source of information
than an individual.
viii) Individual members working in teams can keep themselves at a competitive edge.
Individual members are like racers taking part in a marathon race, each struggling to
win the race
ix) Increased mutual accountability. Members working in a group work with a sense of
increased accountability
x) Collective achievement. Most things done with a team spirit bring out good results,
because members in team or group can perform better.
xi) A group can have an advantage of many approaches and alternatives
xii) Contribution to management effectiveness: A properly guided and wisely functioning
group may contribute to management effectiveness of an organization which may be
lacking in vision and insight.
xiii) Advantage of lateral thinking a group encourages lateral thinking, i.e. it makes the members
think on lines different from commonly accepted ones

xiv) Generation of creative ideas: Groups formed of people with creative and constructive
ideas can generate new ideas beneficial for the organization. Group contribution in
this respect is necessary because management may or may not be far-sighted and lacking
in innovative ideas.
xv) Advantage of varied talents and diversity of views. While working in a group, an
individual member acquires varied talents from talented members
xvi) Individual members working a heterogeneous group will know how to work unitedly
to achieve group goals.
Drawbacks of Teamwork Despite distinct advantages; a group has the following drawbacks.
a. Sacrifice of individual capacity. Every member in a group is a unique entity and expertise.
While working in a group an individual member sacrifices his individual identify and
capacity to work separately.
b. Sacrifice of the opportunity cost. The individual in a group will have to sacrifice all
opportunities which he/she can enjoy while standing and working with individual
identity.
c. Bear unwanted pressure and rigidity of principles. Individual members under the
pressure of the group will have to work unwillingly against the individual will and
aspirations
d. Groupthink: A team may not function in a team spirit if individual members keep
individual interests above group interest.
e. Hidden agendas. Some individual members may work for the fulfillment of their
individual interests against team interests at the cost of other members
f. Free riders: Some members may say,” Everybody’s son is nobody’s son.” Under the
sway of such a wrong notion, they do not care about their duties/ allegiance to the
welfare of the team as a whole.
g. High cost of coordinating group activities. Coordinating scattered members with vested
interests is another drawback.
h. Unwell with team culture. Those, who feel unhappy, unwell and uncomfortable while
working in a team prefer to work individually and cannot contribute to the team as a unit.
i. Loss of individual identity. In a group, an individual with his/her personal excellence
loses individual identity. Whatever is done by an individual becomes an asset of the
group as a whole, not individual
j. Consensus problems in heterogeneous groups. In such a group, the group leaders feel it
difficult to bring the group members to a common consensus
k. Individual sacrifice of personal perception, identity and dignity. Most individual qualities
are sacrificed under the group domination.
l. Possibility of cross-cultural clash. Members with cross-cultural differences may clash on
matters of cultural concern
Communications in such a case become difficult.
m. Sacrifice of personal perception identity and dignity at the cost of sacrifice of personal
ambitions, interests and benefits

n. Loss of individual quality When in a group, even the most reasonable and considerate
person may lose his individual qualities under a party/group domination/ whip.
Overcoming Group Problems

As there are no problems that defy solutions, group problems can be overcome with the
following individual roles
a. Proper compliance to the limitations of time and agenda.
b. Formulation of group spirit and identity.
c. Avoidance of stereotyped perceptions and feelings.
d. Avoidance of skepticism, personal sense of insecurity,
e. Avoidance of personal lobbying, exerting personal influence, and threats
f. Generate a sense of generosity, tolerance, patience, and endurance
g. Abiding by the group rules and ethics.
h. Ability to motivate others to perform better.
i. Delegation of authority to employees at different levels.
j. Feeling of “We” and “Our and Ours”, not “Me” and “Mine”
Some other measures for resolving group problems

a. Making physical arrangements: Prior to group discussion, the group leader articulate the
conduct of the group meeting by providing necessary things/ equipment for conducting
the meeting smoothly. They include necessary physical arrangements with proper
seating arrangements, stationery, visual aids, primary data and available information
on maters to work with.
b. Easy working with homogeneous groups: As such groups can communicate effectively
than the heterogeneous ones; it is advisable for the group leader to form the group with
like-minded people. However, valid points and innovative diverse views raised by
heterogeneous group members also should be addressed and integrated on the basis of
reasonability and rationality.
c. Sufficient time to think over the subject: Members should be given sufficient time to think
over the topic of discussion, because members need to study the subject-matters in
order to contribute effectively in the group discussion. Just shouting much during the
discussion will be just like fire producing more smoke without flame.
d. Steering role of the leader. The group leader should play an important role in steering the
group towards achieving the intended group goals. He should first familiarize the
group members with the assigned task together with its objectives. He should help the
group discussion proceed ahead without any distractions, but let not it deviate from
the right track. This is followed by his wrapping up the group discussions. He should
also give due credit to group members for their contributions.
e. Follow-up: The summing up of the group discussion should be followed by notifying
the concerned for implementation of the group recommendations.
5. Effective Meeting in Organizations

In the present day world, there would not be any organization that is not preoccupied with
meetings, which occupy a large amount of working time at the cost of customer service.

When staffs, mostly senior, are not seen in their respective rooms, they are mostly supposed
to be attending meeting/s, leaving customers in utter despair and frustration. In such a
case, customers understand meeting as an effective way avoiding office responsibility.
Skeptical views about meeting: Many having skeptical views about the excess of meeting
uphold that meetings, in most cases, mean sheer wastage of time at the cost of the customer
service. In most meetings words, not work, speak louder. Besides, meetings are a jumble of
people for vomiting irrelevant and unrelated opinions. They are also costly in terms of time
and money. In Peter Ducker’s words, “Meetings are by definition a concession to deficient
organization, for one either meets or one works. One cannot do both at a time.’
Living realities about meeting: Most managers spend considerable amount of their working
time interacting with people- organizational and intra-organizational, sharing and exchanging
their views and ideas. They spend their time also sitting with people discussing various
agendas, agreeing or disagreeing on issues and points raised, asking pertinent questions
and finally working out solutions to problems or arrive at certain conclusions.
Viewed from another perspective, the person presenting his/her viewpoints is not merely
talking, but also projecting his/her image as an individual personality, cooperating with
other participants in arriving at useful and practical conclusions on particular issues raised.
Discussions and hot debates on crucial issues sometimes take the participants much farther
than needed. Whatever the issues, and whatever the mode of discussions, meetings are
conducted with certain purposes.
Effective Meetings
Meetings may or may not be effective and output oriented. Effective meetings thrive in many
things including important agendas, serious discussions among all the participants, active
participation of all the members, proper guidelines for conducting meetings, important role
played by the Chair, efficiency of the office-secretary, implementation of the decisions taken
in earlier meetings, follow-ups and evaluation of the earlier meetings.
6. Writing Notifications, agendas and Minutes

Meeting conducting responsibilities involve a lot of writing activities including writing
notifications, setting agendas and circulating minutes, which are described below:
Notification: Defined: In simple words, a notification is a notice or information sent to person/
s invited to a meeting. A modern notification system is a combination of software and
hardware that provides a means of delivering a message to a set of recipients. For example,
notification can send an e-mail when a new topic has been added
Notice of Board Meeting
Mahaluxmi Textile Industries
Naya Bazar, Kathmandu
Notice is hereby given to all the board members that a meeting of the Board of Directors of
the above Industries is due to be held at the Meeting Hall of the Company on 5th March
2010 at 1.00 p.m on the following agendas:
9-8-2010 The Secretary

Agendas

Agenda: At a meeting, the term agenda is used in a broader context. It refers to points to be
discussed in the meeting .They are thought about and decided before the meeting. The
secretary sets and prepares them in consultation with the Executive Director, Managing
Director or some senior person who acts the Chairperson of the meeting.
Sample Agendas of the Meeting of XVC Cooperative Bank

1. To discuss plans and programs to be followed to mark the completion of the 25th year
of the establishment of the Jana Jyoti Industrial Bank.
2 Formation of the various committees - sports, entertainment, prize and award etc.
3. To name the Chief Guest of the Program.
4. Budgeting for the Function
5. Miscellaneous
Qualities of Good Minute-writing
Writing meeting minutes involve the following activities:
 Up-to-date attendance record of the members and participants
 Accuracy of the matters discussed and resolutions taken
 Decisions written in easy and understandable language .
 Distinction between viewpoints, discussion’s tit-bits and real decisions,
 Chairperson’s proper way of steering the meeting.
 Encouraging all the participants to contribute
 Chairperson’s approval or disapproval of the points,
 Separation of the minutes into clauses or sub-clauses, divisions, etc.
 Getting chairperson’s initial at changes made or points added,
 Making an index (with topic, number, date, etc.)
Minuting. It is the most important activity of conducting meetings. Unless decisions taken
in the meeting are minuted, the meeting will not bear any meaning. at all. The last important
activity after agenda setting, notification and meeting conducting is intuiting. Things written
in the minutes will be a record of organizational achievements.
Minuting is noting down of the resolutions adopted in the meeting. Decisions taken in the
meeting are noted down in the Minute-book and duly signed by the Chairperson and all the
members.
Minute is the legal and authentic record of any meeting. It is, in other words, documents
recoded during the procedures of the meeting. The minutes are clearly written and
documented for future reference. Minute-writing includes: (i) preliminary data, (ii) the body
(discussion, decision taken), (iii) Getting signature for ensuring authenticity of matters
discussed and decision contents.
A well-documented minute is preserved as a valuable testimony of organizational
achievements. Minutes serve as a reference as well as guidelines for determining future
course of organizational development.
Usually, minute-writing is done by member-secretary of the executive board or the person
appointed by the Chairperson.

Minute Contents A minute is the legal and authentic record of any meeting. It is, in other
words, a document recoding the procedures of meeting. The minutes are clearly written and
documented for future reference. Minute-writing includes: (i) preliminary data, (ii) the body
(discussion, decision taken), (iii) Getting signature for ensuring authenticity of matters
discussed and decision contents.
A well-documented minute is preserved as a valuable testimony of organizational
achievements. Minutes serve as a reference as well as guidelines for determining future
course of organizational development.
Usually, minute-writing is done by member-secretary of the executive board or the person
appointed by the Chairperson.
Effective Meeting. As has been agued earlier, meeting conducting procedure is a complete
package of activities which must be carried out with utmost rigors of organizational
discipline. Its effectiveness depends, among other things, upon effective roles played mostly
by the Chairperson, the Office secretary and the members Apart from various things, member
motivation, involvement, participation, and implementation of decisions taken in the meeting
are keys to effective meeting.
7. Giving and Receiving Feedbacks from Groups

Feedback Defined . Sometimes called “criticism,” it is a type of communication, intended to
make the message sent more understandable, but this is not necessarily a criticism of things.
It is also an urge for the sender to be clear about the message sent.
Communication is a two-way and a cyclic process in which sending and receiving feedbacks
continues till what is intended to be informed by the sender to the receiver is achieved. To
give a simple example, the sender sends the message to the receiver, through some medium/
channel- the path through which the message flows from the sender to the receiver. The
receiver decodes the message to get the meaning of the message. But he may not receive the
message in that he or she gets the message, not the meaning. Unable to understand the
sender’s message for a number of reasons – difference in the educational background,
socio-cultural differences, and attitudinal and behavioral differences, the same word, phrase
or sentence structure may give different meaning to the two actors.
In such a situation, the receiver, in order to be clear about the meaning of the message, sends
the feedbacks to the sender. To the sender, the feedback sent by the receiver, becomes the
message, which he decodes to understand why the receiver could not understand his
message. After necessary considerations over the message, the receiver of the feedback
decodes the message (feedback) and modifies it in every possible ways so as to make it
understandable to the receiver.
In the sense that this process continues for a long time sending and receiving continue.
Understanding Feedbacks Literally, feedback is understood as a decretory meaning like
pinpointing others’ weaknesses and lapses in the process of communication. But this is, in
fact, an effort towards assessing the message objectively, impartially and analytically.
To simplify, feedbacks are literally considered to be the common response made by the
receiver and the stimulations of received information. In business communication, feedback
is considered to be a concrete evidence of the two-way communication. Effective
communication, therefore, depends upon useful feedbacks.

Importance of giving and receiving feedbacks. Giving feedback is the avenue to performance
greatness. An effective feedback received well has the potential to improve things pointed
out in the message. Fedbacks also determine the effectiveness of communication because it
is way to improving things we do in business situation. It is the key to performance
effectiveness. Giving feedback effectively is has the potential of making communication
effective.
Characteristics of Feedback
i) comparison and contrast between varying meaning of information
ii) classification and sub-classification of information for clarity of meaning
iii) avoidance of prejudices
iv) positive thinking
v) analytical and critical approach to information
Giving and receiving feedbacks in groups also follows the same procedure.
Case Study :2
Harley- Davidson Cruises Toward Team- Based Management
For nearly a century Harley- Davidson motorcycles cruised the open road, the ultimate symbol of
freewheeling joy and machismo. But though the Harley- Davidson Motor Company is wallowing
in “ hog heaven” profits now, the company was near death’s door un the early 1980s. Poor
quality was a major problem. Bikers took perverse joy in pointing to any oil puddle on the road
and speculating that a Harley had recently been parked there. Plagued with reliability and other
problems, the company lost significant market share to Honda, Suzuki, Kawasaki, and Yamaha.
Under new ownership, however, Harley- Davidson narrowly averted bankruptcy to emerge as a
classic American Cinderella story. Its remarkable turnaround resulted from a number of factors,
including a fanatical brand of customer loyalty. Many customers actually have the company
logo tattooed on their bodies! More relevant to its comeback, though, were extensive changes in
organization and management. With new owners the Harley- Davidson Motor Company created
a flatter, more interdependent organizational structure. It moved away from the traditional model
of independent leaders issuing orders to dependent followers. New managers emphasized
empowered work teams called “circles”, leading to greater employee involvement in decision
making.
Although new leadership and a flatter organization boosted Harley- Davidson to its current
position as the leading global supplier of premium quality, heavyweight motorcycles, it’s not
out of woods yet. Upstart companies with few factories want to cash in on the world’s robust
appetite for cruising and touring machines. And Harley hankers after the younger market, where
it is pitching its more affordable “Sportster” model. Some advertisement even attempt to soften
its image with less testosterone and leather and more “poetry” of the open road. Meeting local
and global competition, developing new markets without abandoning its core market, and
maintaining quality are continuing challenges for Harley- Davidson. Its move away from a
strong hierarchical organization to management by collaborating teams has enabled it to respond
to these challenges, but not always smoothly.
www.harley-davidson.com

CHAPTER - 3
COMMUNICATING ACROSS CULTURES
Communicating Across Culture

Study of cultural and society has remained one of the most essential activity of modal community
considering the multifaceted relationship of business with the diverse behavioral studies such
as society as sociological studies, cultural studies, psychology, economy, demography, ecology
and environment, research etc. The above concepts are directly interlinked with everyday business
activities, business behavior and values. Similarly business activities are becoming very much
diverse due to the rise of multinational capital, globalized economic market, advancement of
technology and global human network. These factors are playing key roles towards global
business development enhanced public relationship and broaden market scopes. Hence, the
study of multicultural business relation is a practice to study and analyze about the varying
socio-cultural values of national and international communities in order to gain required business
and corporate sensitivity. Accordingly, the concept of sustainable business development and
integrated corporate growth largely demands to cope up with socio-cultural values of respective
society to have a balanced development of business together with the growth of communities,
public and society at large as a part of corporate social responsibility.
Following are the major factors responsible behind multicultural business network and
relationship:
a) Globalized economic relationship
b) Workforce diversity and cosmopolitan culture
c) Technological advancement and volume production
d) Growth of mass media and enhanced public relationship
e) Cross border and intra-national business expansion, trade alliance, franchise, mergers
and acquisitions
Following are the components of multi-cultural communication:
(a) Culture
(b) Inter-cultural relations
(c) Counter cultural relations
(d) Cross cultural relation
1. Characteristics of Culture
Culture is shaped by attitudes learned in childhood and later internalized in adulthood. As
we enter in this current period of globalization and interculturalism, we should expect to
make adjustments and adopt new attitudes. Adjustment and accommodation will be easier
if we understand some basic characteristics of culture.

Chapter 3 - Communicating Across Cultures
Culture Is Learned: Rules, values, and attitudes of a culture are not inherent. They are
learned and passed down from generation to generation. For example, in many Middle
Eastern and some Asian cultures, same-sex people may walk hand-in-hand in the street,
but opposite sex people may not do so. In Arab cultures conversations are often held in close
proximity, sometimes nose to nose. But in Western cultures if a person stands too close, one
may react as if violated: He was all over me like a rash. Cultural rules of behavior learned from
your family and society are conditioned from early childhood.
Cultures Are Inherently Logical: The rules in any culture originated to reinforce that culture’s
values and beliefs. They act as normative forces. For example, in Japan the original Barbie
doll was a failure for many reasons, one of which was her toothy smile. 23 This is a country
where women cover their mouths with their hands when they laugh so as not to expose
their teeth. Exposing one’s teeth is not only immodest but also aggressive. Although current
cultural behavior may sometimes seem silly and illogical, nearly all serious rules and values
originate in deep-seated beliefs. Rules about exposing teeth or how close to stand are linked
to values about sexuality, aggression, modesty, and respect. Acknowledging the inherent
logic of a culture is extremely important when learning to accept behavior that differs from
one’s own cultural behavior.
Culture Is the Basis of Self-Identity and Community: Culture is the basis for how we tell
the world who we are and what we believe. People build their identities through cultural
overlays to their primary culture. When North Americans make choices in education, career,
place of employment, and life partner, they consider certain rules, manners, ceremonies,
beliefs, languages, and values. These considerations add to their total cultural outlook and
are major expressions of their self-identity.
Culture Combines the Visible and Invisible: To outsiders, the way we act— those things
that we do in daily life and work—are the most visible parts of our culture. In Japan, for
instance, harmony with the environment is important. Therefore, when attending a flower
show, a woman would wear a dress with pastel rather than primary colors to avoid detracting
from the beauty of the flowers. In India people avoid stepping on ants or insects because
they believe in reincarnation and are careful about all forms of life. Such practices are
outward symbols of deeper values that are invisible but that pervade everything we think
and do.
Culture Is Dynamic: Over time, cultures change. Changes are caused by advancements in
technology and communication, as discussed earlier. Local differences are modified or
slowly erased. Change is also caused by events such as migration, natural disasters, and
wars. The American Civil War, for instance, produced far-reaching cultural changes for
both the North and the South. Another major event in this country was the exodus of people
from farms. When families moved to cities, major changes occurred in the way family members
interacted. Attitudes, behaviors, and beliefs change in open societies more quickly than in
closed societies.
Dimensions of Culture
The more you know about culture in general and your own culture in particular, the better
able you will be to adopt an intercultural perspective. A typical North American has habits
and beliefs similar to those of other members of Western, technologically advanced societies.
In our limited space in this book, it is impossible to cover fully the infinite facets of culture.

But we can outline some key dimensions of culture and look at them from a variety of
viewpoints.
So that you will better understand your culture and how it contrasts with other cultures, we
will describe five key dimensions of culture: context, individualism, formality,
communication style, and time orientation.
Context: Context is probably the most important cultural dimension and also the most
difficult to define. It is a concept developed by cultural anthropologist Edward T. Hall.
In his model, context refers to the stimuli, environment, or ambience surrounding an event.
Communicators in low-context cultures (such as those in North America, Scandinavia, and
Germany) depend little on the context of a situation to convey their meaning. They assume
that listeners know very little and must be told practically everything. In high-context cultures
(such as those in Japan, China, and Arab countries), the listener is already “contexted” and
does not need to be given much background information. 24 To identify low- and high-
context countries,
Hall arranged them on a continuum, as shown in Figure 3.2.
Low-context cultures tend to be logical, analytical, and action oriented. Business
communicator’s stress clearly articulated messages that they consider to be objective,
professional, and efficient. High-context cultures are more likely to be intuitive and
contemplative. Communicators in high-context cultures pay attention to more than the
words spoken. They emphasize interpersonal relationships, nonverbal expression, physical
setting, and social setting. For example, a Japanese communicator might say yes when he
really means no . From the context of the situation, the Japanese speaker would indicate
whether yes really meant yes or whether it meant no. The context, tone, time taken to answer,
facial expression, and body cues would convey the meaning of yes. 25 Thus, in high-context
cultures, communication cues are transmitted by posture, voice inflection, gestures, and
facial expression. Establishing relationships is an important part of communicating and
interacting.
In terms of thinking patterns, low-context communicators tend to use linear logic . They
proceed from Point A to Point B to Point C and finally arrive at a conclusion. High-context
communicators, however, may use spiral logic , circling around a topic indirectly and looking
at it from many tangential or divergent viewpoints. A conclusion may be implied but not
argued directly. For a concise summary of important differences between low- and high-
context cultures, see Figure 3.2.
Individualism. An attitude of independence and freedom from control characterizes

individualism. Members of low-context cultures, particularly Americans, tend to value
individualism. They believe that initiative and self-assertion result in personal achievement.
They believe in individual action and personal responsibility, and they desire a large degree
of freedom in their personal lives.
Members of high-context cultures are more collectivist. They emphasize membership in
organizations, groups, and teams; they encourage acceptance of group values, duties, and
decisions. They typically resist independence because it fosters competition and
confrontation instead of consensus. In group-oriented cultures such as those in many Asian
societies, for example, self-assertion and individual decision making are discouraged. “The

nail that sticks up gets pounded down” is a common Japanese saying. 26 Business decisions
are often made by all who have competence in the matter under discussion. Similarly, in
China managers also focus on the group rather than on the individual, preferring a
consultative management style over an autocratic style. 27
Many cultures, of course, are quite complex and cannot be characterized as totally
individualistic or group oriented. For example, European Americans are generally quite
individualistic, whereas African Americans are less so, and Latin Americans are closer to
the group-centered dimension. 28
Formality. People in some cultures place less emphasis on tradition, ceremony, and social
rules than do members of other cultures. North Americans, for example, dress casually and
are soon on a first-name basis with others. Their lack of formality is often characterized by
directness.
In business dealings North Americans come to the point immediately; indirectness, they
feel, wastes time, a valuable commodity in American culture.
This informality and directness may be confusing abroad. In Mexico, for instance, a typical
business meeting begins with handshakes, coffee, and an expansive conversation about the
weather, sports, and other light topics. An invitation to “get down to business” might
offend a Mexican executive. 29 In Japan signing documents and exchanging business cards
are important rituals. In Europe first names are never used without invitation. In Arab,
South American, and
Asian cultures, a feeling of friendship and kinship must be established before business can
be transacted.
In Western cultures people are more relaxed about social status and the appearance of
power. 30 Deference is not generally paid to individuals merely because of their wealth,
position, seniority, or age. In many Asian cultures, however, these characteristics are
important and must be respected. Wal-Mart, facing many hurdles in breaking into the
Japanese market, admits having difficulty training local employees to speak up to their
bosses. In the Japanese culture lower-level employees do not question management.
Deference and respect are paid to authority and power. Recognizing this cultural pattern,
Marriott Hotel managers learned to avoid placing a lower-level Japanese employee on a
floor above a higher-level executive from the same company.
Communication Style: People in low- and high-context cultures tend to communicate

differently with words. To Americans and Germans, words are very important, especially
in contracts and negotiations. People in high-context cultures, on the other hand, place
more emphasis on the surrounding context than on the words describing a negotiation. A
Greek may see a contract as a formal statement announcing the intention to build a business
for the future. The Japanese may treat contracts as statements of intention, and they assume
changes will be made as a project develops. Mexicans may treat contracts as artistic exercises
of what might be accomplished in an ideal world. They do not necessarily expect contracts
to apply consistently in the real world. An Arab may be insulted by merely mentioning a
contract; a person’s word is more binding. 31
Americans tend to take words literally, whereas Latinos enjoy plays on words; and Arabs
and South Americans sometimes speak with extravagant or poetic figures of speech that
may be misinterpreted if taken literally. Nigerians prefer a quiet, clear form of expression;
and Germans tend to be direct but understated. 32

In communication style North Americans value straightforwardness, are suspicious of

evasiveness, and distrust people who might have a “hidden agenda” or who “play their
cards too close to the chest.” 33 North Americans also tend to be uncomfortable with
silence and impatient with delays. Some Asian businesspeople have learned that the
longer they drag out negotiations, the more concessions impatient North Americans are
likely to make.
Western cultures have developed languages that use letters describing the sounds of words.
But Asian languages are based on pictographically characters representing the meanings of
words. Asian language characters are much more complex than the Western alphabet;
therefore, Asians are said to have a higher competence in the discrimination of visual
patterns.
Time Orientation: North Americans consider time a precious commodity to be conserved.

They correlate time with productivity, efficiency, and money. Keeping people waiting for
business appointments wastes time and is also rude.
In other cultures time may be perceived as an unlimited and never-ending resource to be
enjoyed. A North American businessperson, for example, was kept waiting two hours past
a scheduled appointment time in South America. She wasn’t offended, though, because she
was familiar with South Americans’ more relaxed concept of time.
Although Asians are punctual, their need for deliberation and contemplation sometimes
clashes with an American’s desire for speedy decisions. They do not like to be rushed. A
Japanese businessperson considering the purchase of American appliances, for example,
asked for five minutes to consider the seller’s proposal. The potential buyer crossed his
arms, sat back, and closed his eyes in concentration. A scant 18 seconds later, the American
resumed his sales pitch to the obvious bewilderment of the Japanese buyer.
Types of multicultural communication:

(a) Inter-cultural relationship
(b) Counter-cultural relationship
(c) Cross-cultural relationship
(a) Inter-cultural relationship:

In refers to meeting relationship between 2 opposite cultural values which are being
gradually merged in process of economic relationship, trade and business network etc.
In this regard, modern day corporate society is required to develop cultural sensitivity
to facilitate the relationship between two opposite cultural in matter of festivals, rituals,
performance, ethics etc.
(b) Counter-counter relationship:

In deals with intercultural relationship negotiated between high and low cultural
values. It is obvious that every nation has high and low cultural communities known
as ethics groups, disadvantage community and marginal class, whose role in equally
significant to gain material prosperity. So, business community is required to be sensible
enough to certain the rising expectations, demands and identities of marginal group.

(c) Cross-cultural relation:

Cross-cultural refers to the meeting relation between two distinct cultural values that
forms into hybrid cultural identity. The modern society us contained with the ‘hybrid’
social communities formed due to cultural transformation cross-cultural, social and
martial relations and acculturations. Also known as imagined community it comprises
the people and social communication with hypaneted identities who practice and
follow a diverse cultural value. In this regard, it has become a great challenge for
professional society to get hold of their confidence and retain into business.
Achieving Multicultural Sensitivity

Being aware of your own culture and how it contrasts with others is an important first step
in achieving intercultural proficiency. Another step involves recognizing barriers to
intercultural accommodation and striving to overcome them. Some of these barriers occur
quite naturally and require conscious effort to surmount. You might be thinking, why bother?
Probably the most important reasons for becoming intercultural competent are that your
personal life will be more satisfying and your work life will be more productive, gratifying,
and effective.
1. Avoiding Ethnocentrism
The belief in the superiority of one’s own race is known as ethnocentrism, a natural
attitude inherent in all cultures. If you were raised in North America, many of the
dimensions of culture described previously probably seem “right” to you. For example,
it is only logical to think that time is money and you should not waste it. Everyone
knows that, right? That is why an American businessperson in an Arab or Asian
country might feel irritated at time spent over coffee or other social rituals before any
“real” business is transacted. In these cultures, however, time is viewed differently.
Moreover, personal relationships must be established and nurtured before credible
negotiations may proceed.
Ethnocentrism causes us to judge others by our own values. We expect others to react
as we would, and they expect us to behave as they would. Misunderstandings naturally
result.
A North American who wants to set a deadline for completion of negotiations is
considered pushy by an Arab. That same Arab, who prefers a handshake to a written
contract, is seen as naïve and possibly untrustworthy by a North American. These
ethnocentric reactions can be reduced through knowledge of other cultures and the
development of increased intercultural sensitivity.
Consider the dilemma of the international consulting firm of Burns & McCallister,
described in the accompanying Ethical Insights box. In refusing to send women to
negotiate in certain countries, the company engaged some women’s rights groups. But
was Burns & McCallister actually respecting the cultures of those countries?
2. Bridging the Gap

Developing cultural competence often involves changing attitudes. Remember that
culture is learned. Through exposure to other cultures and through training, such as
you are receiving in this course, you can learn new attitudes and behaviors that help
bridge gaps between cultures.

a. Tolerance: One desirable attitude in achieving intercultural proficiency is that of

tolerance. Closed-minded people cannot look beyond their own ethnocentrism. But
as global markets expand and as our own society becomes increasingly multiethnic,
tolerance becomes especially significant. Some job descriptions now include
statements such as, Must be able to interact with ethnically diverse personnel.
To improve tolerance, you will want to practice empathy . This means trying to see
the world through another’s eyes. It means being less judgmental and more eager
to seek common ground. For example, one of the most ambitious intercultural
business projects ever attempted joined Siemens AG, the giant German technology
firm, with Toshiba Corporation of Japan and IBM. Scientists from each country
worked at the IBM facility on the Hudson River in New York State to develop a
revolutionary computer memory chip. All sides devoted extra effort to overcome
communication and other problems.
The Siemens employees had been briefed on America’s “hamburger style of
management.”
When American managers must criticize subordinates, they generally start with
small talk, such as How’s the family? That, according to the Germans, is the bun on
the top of the hamburger.
Then they slip in the meat, which is the criticism. They end with encouraging
words, which is the bun on the bottom. “With Germans,” said a Siemens cross-
cultural trainer, “all you get is the meat. And with the Japanese, it’s all the soft
stuff—you have to smell the meat.” 37 Along the continuum of high-context, low-
context cultures, you can see that the Germans are more direct, the Americans are
less direct, and the Japanese are very subtle.
Recognizing these cultural differences enabled the scientists to work together with
greater tolerance. They also sought common ground when trying to solve
disagreements, such as one involving workspace. The Toshiba researchers were
accustomed to working in big crowded areas like classrooms where constant
supervision and interaction took place. But IBMers worked in small, isolated offices.
The solution was to knock out some walls for cooperative work areas while also
retaining smaller offices for those who wanted them. Instead of passing judgment
and telling the Japanese that solitary workspaces are the best way for serious
thinkers to concentrate, the Americans acknowledged the difference in work
cultures and sought common ground. Accepting cultural differences and adapting
to them with tolerance and empathy often results in a harmonious compromise.
b. Saving Face: In business transactions North Americans often assume that economic
factors are the primary motivators of people. It is wise to remember, though, that
strong cultural influences are also at work. Saving face, for example, is important in
many parts of the world.
Face refers to the image a person holds in his or her social network. Positive comments
raise a person’s social standing, but negative comments lower it.
People in low-context cultures are less concerned with face. Germans and North
Americans, for instance, value honesty and directness; they generally come right
to the point and “tell it like it is.” Mexicans, Asians, and members of other high-
context cultures, on the other hand, are more concerned with preserving social

harmony and saving face. They are indirect and go to great lengths to avoid giving
offense by saying no . The Japanese, in fact, have 16 different ways to avoid an
outright no . The empathic listener recognizes the language of refusal and pushes
no further.
c. Patience: Being tolerant also involves patience. If a foreigner is struggling to express
an idea in English, Americans must avoid the temptation to finish the sentence
and provide the word that they presume is wanted. When we put words into their
mouths, our foreign friends often smile and agree out of politeness, but our words
may in fact not express their thoughts.
Remaining silent is another means of exhibiting tolerance. Instead of filling every
lapse in conversation, North Americans, for example, should recognize that in
Asian cultures people deliberately use periods of silence for reflection and
contemplation.
3. Moving Beyond Stereotypes

Our perceptions of other cultures sometimes cause us to form stereotypes about groups
of people. A stereotype is an oversimplified behavioral pattern applied uncritically to
groups. For example, the Swiss are hard- working, efficient and neat; Germans are
formal, reserved, and blunt; Americans are loud, friendly, and impatient. As an
American, are loud, friendly, and impatient? Probably not, and you resent being lumped
into this category. When you meet and work with people from other cultures, remember
that they, too, resent being stereotyped. In achieving multicultural sensitivity, we must
look beneath surface stereotypes and labels to discover individual personal qualities.
Case Study : 3
CORNORING AND VITRO REVISITED
The marriage and subsequent divorce of glassmakers Mexico, illustrate the difficulty of joining
two cultured. Corporate consultant Richard N. Sinkin believes that cultural differences are the
number one reason for failure in Mexican- US business ventures. For example, take the matter of
contracts. In the United states contracts are law, but in Mexico Sinkin says they “ are kind of
ideal things that you strive to achieve.”
Many companies involved in joint ventures resort to borrowing from both cultures to fashion a
new corporate culture. For example, Bank One of Columbus. Ohio, worked with Bancomer , one
of Mexico’s largest banks, to set up a consumer credit card operation. But different approaches to
working procedures disrupted the operation. Mexican bankers were accustomed to long working
hours, typically from 9 a.m until 9 p.m. They took leisurely meals, sometimes lasting two hours.
They also requested evening meetings, to which they wete often late. The American bankers ate
their lunches at their desks and wanted to be home in the evening. In forging a new culture, both
groups agreed to changes, including full lunches in the company dinning rooms. Evening meeting
were held, but latecomers had to drop a few pesos for every tardy minute into a piggy bank set in
the middle of the meeting table:
Critical thinking
• What typical North American culture values may clash with Mexican values in business
alliances?

• How could Corning and Vitro have worked to improve their corporative effort?
• Should the more powerful partner have imposed its culture and management style on
the weaker?? why or why not?
SIX STAGES OF Multicultural Transformation

Achieving multicultural sensitivity and acceptance is not easy for people raised in closed
communities where they had few opportunities to interact with other cultures. Moving from a
state of ethnorelativism refers to an attitude that absolute standards of rightness and goodness
cannot be applied to cultural behavior. Cultural differences are neither good nor bad: they are
merely different. Those making the transformation will probably pass through the six stages.
1. Denial. We deny that cultural differences exist among people. We avoid learning other
languages, we avoid topics that cause cultural discomfort, and we distort novel ideas.
2. Defense: we attempt to protect our own worldview to counter the perceived threat of
cultural differences. For example, we may use words such as backward and primitive
to describe cultures that differ from our own. We insist that only our language be
spoken in the workplace.
3. Minimization: We attempt to protect the core of our own worldview by concealing
differences in the shadow of cultural similarities. For example, one might say, “They
may talk, dress, and eat differently, but underneath they’re just like us.” Surface
similarities are recognized while deep differences are trivialized.
4. Acceptance: We begin to accept the existence of behavioral differences and underlying
cultural differences. We begin to adopt a “ live and let live” philosophy.
5. Adaptation: We become empathic toward cultural differences and become bicultural
or multicultural. We may live and work in communities where multiple languages may
be spoken and various cultural practices exist side by side.
6. Integration: we apply ethno relativism to our own identity and can experience difference
as an essential and joyful aspect of all life. We look upon cultural differences as a
means of enriching our lives.
Importance of International Business

Roger Harrison’s and Herb Stokes book on on organizational culture DIAGNOZING
ORANIZATIONAL culture is an authentic book HELPING CONSULTANTS AND
ORGANIZTIONAL MEMBERS IDENTIFY THE WHARED VALUES AND BELIEFS This
constitutes an organization’s culture. It deals with four cultures - basic to most organizations.
They are Power, Role, Achievement, and Support.
Understanding Values of International Business

Understanding business in today’s context is a difficult task, because of the complexities and
frequent rise and fall in the price of consumers’ goods. Because of the impact of globalization
and scientific and technological innovations and global information networking, optimum
exploitation of a country’s business potentials is getting dependent upon things happening in
the world market. Recently (January 2011), the cost of onion went high in the Nepalese market,
because of short supply of the same from India. India also faced the short supply of onion
following the cut in the export of onion by Pakistan to India. Local and national markets get

affected with frequent rise and fall in the price even of the perishable vegetable item like tomato.
Because of sharp and sudden decline in the products of agricultural goods, countries exporting
them for decades will be bound to import. Influenced by its globalized characteristics, business
is difficult to understand. Every product- consumer goods we use bear a lot of meanings. A
simple thing like a pair of shoes we wear undergoes a long process of its journey – the materials
used, the country where it these materials import and export to companies, finishing of the crude
raw materials and passing of the products into the hands of national and international agencies
and their flow in the market for consumer use. To cite an another example, Toyota cars
manufactured or assembled in the Japanese assembling plants set up in Bangkok, Thailand are
exported the US and Canada. Likewise, parts of Mercedes cars are manufactured in India and
sold in Germany and in other parts of the world. Anyone, who has some experience of the
business world, can understand such a business and communication involved in the whole
affairs of production import and export of the products. Business Communication as a study
discipline enshrines all these complex operations. The discipline is not only a study of jumble of
problems but their administration and management as one of the activities of human development
in the business world.
As today’s business environment is very complex and ever-changing, business communication
is affected, among other things, by globalization of business, globalization of information
networking system, evolution of organizational structure, impact of science and technology on
business, and an increase in the workplace diversity.
Increasing Value of Business Information. In this age of information revolution, INFORMATION
stands out as the most powerful resource and valuable asset of business organizations. This
necessitates a need for information management system (MIS). The value of business information,
increased by business communication in today’s business world can be illustrated by the
following three things:
(a) Organizational competitive insight. This refers to the extent of organizational knowledge
and information about things happening and changes taking place in the business
world.
(b) Addressing customer needs. It should be realized that organizations that can quickly
cater to customer needs and services can stand as achievers. Hence, the organizational
responsibilities towards meeting customer needs.
(c) Conducive state policy and directives. Today’s government is required to keep itself at a
competitive edge, which is possible only through a strong economy. Unless business
organizations are strengthened and their business globally expanded, no government
can thrive on mere political ideals and slogans. For this, a forward-looking government
is necessary to articulate state economic policies and issue directives and guidelines
conducive for overall development of all spheres of state economy – export and import,
taxation, banking, resource management and so on. All these areas can flourish only in
the efficiency and effectiveness of the business world, which depends upon reliable
and effective information dissemination system.
Other factors considered important in the business communication context, include:
(a) a quick response, by business organizations, to the globalization of business and
increased workplace diversity
(b) The conquest of new frontiers of science and technology and to have their positive
impact on all spheres of human development

(c) The evolution of organizational structure,

(d) The effectiveness of teamwork
(e) The appraisal of organizational management audit system.
To conclude, business communication is the study of all aspects of organizational operations, its
information networking system that takes place in the most complex and changing business
world distinctly affected by scientific and technological innovations.
1. Diversity in Today’s Workplace

Impact of Cultural Diversity on Cross-cultural Communication.
The increasing diversity of workforce has posed a challenge to the managers and executive
heads. But after exhaustive research on the subject, it has also been revealed that workplace
diversity as an organizational asset can be managed with some efforts. The outcomes of a
Workshop for Managing Diversity by the Workplace first recognizes the importance of diversity
awareness and focuses on three important things: Interpersonal Relationships, (b)
Relationships at Work and (c) Learning Managing Diversity, (d) Manager’s Proactive Role
on the Sensitivity of the issue
Major Problems of Workplace Diversity

• Messages interpreted differently by workers of different gender, racials and cultural
background
• Employees not able to adjust themselves into the diverse cultural situation are
misunderstood
• Expectations not met and increasing frustration impact worker productivity
• Employee dissatisfaction negatively impact overall morale
• Lack of cooperation and emotional support with the change in traditional roles
Emotional support when traditions
• Conflict between men and women workers when necessary adjustments not made
• Resentment and confusion as result of style difference. Lack of flexibility need to deal
with changing values
• Lack of cooperation
Managing Diversity
It has been assumed that in the days ahead women and others from cultural minorities will
constitute the new workforce. Managers, supervisors, then will be required to adopt the
following principles towards managing workplace diversity:
• Conduct a diversity audit in organizations to find the most effective program for your
needs
• Design increasing meetings , useful for all
• Build cohesive multi-cultural work teams
• Create a corporate culture that can accommodate diversity to maximize the potential of
your workforce
• Hire, train, and promote a diver workforce.

Cross-cultural communication as the words imply is the communication among people of

diverse culture at a workplace, both at home and around the world. . Cultural differences
greatly impact cross-cultural communication
because the diverse workforce with their cultural biases cannot adjust themselves to the
new and different working environment. Such differences sometimes lead to
miscommunication resulting in communication failure. This is called the problem of ethnicity
at the workplace
With the globalization of business, trade and industry, a huge workforce migrates from
their native places to workplaces all over the world in search of jobs. With the opening of job
opportunities, over the decades, in Japan, Malaysia, South Korea, Saudi Arabia, Iraq, Qatar,
UAE, the influx of diverse workforce into these countries is growing. The increase in the
volume of international trade and commerce resulting from globalization, has expanded
the scope of multicultural communication for national and multinational companies,
producers, manufacturers, businessmen, multi-national organizations to communicate and
interact with people of diverse work cultures. Cross-cultural communication provides them
a platform to review their own culture and learn much from others towards improving their
working conditions. Cross-cultural communication contributes to promote interpersonal
relationship among the people of diverse cultures to achieve multiple organizational goals.
The communication which takes places among workforce of diverse culture is known as
cross-cultural communication.
The reality of the present-day work situation is that no nation in this changing dynamic
world can stand alone to achieve human development goals without support and
cooperation of other nations. To this end, a lot of communication takes place among people
of diverse culture. Hence the need for global communication.
2. Ways to Look at Culture

Understanding Globalization of Culture
To understand cross-cultural communication, it is necessary to understand culture in its
right perspective. According to the Classicists, Culture is defined as the ways of life of a
group of people. However, modern definition puts culture as “the ways of life through
which people understand and interpret the world in a broad dimension and adjust
themselves to the changes for a better living.” Again, culture is a set of rituals and ceremonies
adopted as attributes of human identity. Human identity diminishes in the absence of
cultural belongingness. Norms and values, beliefs, and perceptions shape the ways of
thinking, believing, and doing things as the ways of life. Culture is a also a process of
socialization The living environment in which a child is brought up shapes the socialization
process of the child, who, if exposed to continuously changing environment, cannot have
any particular sense of cultural belonging. The child picks up the cultural values of the
environment where he/she lives longer. Traditionally, profession is also attached to cultural
identity.
People living in different countries interpret things and events in different ways. Each
group of people considers its own culture to be normal and natural and others’ culture
unnatural.
People all over the world are not the same. They differ in their ways of ways of communicating,
looking at things and doing things in their own ways. Geographical, regional, racial, ethnic,

socio-cultural milieus are responsible for this diversity which class people as Asians,
Africans, Europeans, Indians, South Asians, Arabs, Jews and others.
Institutional Culture and Socio-culture Culture in Relation to Growth and Development

After political changes, most nations passing through a stage of transition face many
problems and remain unstable for a long time. In order to keep in good shape government,
new laws and new rules and regulations are passed which the government in power wants
to be obeyed by the people. But such institutional aspirations cannot be fulfilled unless they
become compatible with informal laws- norms and values and the codes of conduct which
people have been following for ages. For example, when most Latin American countries
became independent from Spain in the early nineteenth century, they adopted more or less
the pattern of the U.S. constitution, but characterized by traits of informal system – the
cultural ways of lives of the people. The rule-of-law indicator adopted by the UNDP could
not be fully compatible with those in vogue in local communities in Asian countries and
could not show any coordination with the economic growth of the slowly developing
countries. As the rule of law is not an independent variable, the case above confirms that the
truth that nations attain economic growth and development without integrating people’s
informal laws in the formal laws. Within the same country, people with diverse socio-
cultural, religious, and ethnic groups try to behave differently by following various norms
and values. Managing diversity in some countries become a hard-nut to crack. Ethnic
violence and communal riots directed towards separatist movements Growth and
development is almost unthinkable in such countries. Hence, it is indispensable for all
nations in transition to be serious about cultural diversity with formulation of policies and
implementation of laws and regulations capable of addressing the needs of all.
Communication across cultures. In the present age of population explosion, a large
workforce from most Asian countries move to and fro around the world in search of jobs
in the global market, which also is getting diverse with the ever increasing inflow of
workers With the diverse workforce from different countries, the workplace is required to
manage diversity, i.e. addressing the problem of diversity, so as to increase organizational
productivity and create harmonious work environment to achieve millennium
development goals.
Globalization of Culture
In the fast changing world, culture is viewed, interpreted and understood in global context
because culture is being globalized in many ways. Globalization of cultures involves three
things: (a) understanding culture in broader perspective, (b) promoting cross-cultural
relationship between/ among people of diverse cultures working in diverse work situation,
each respecting each other’s cultural norms and \values, and (c) changing traditional
cultural perceptions incompatible with the changing needs of today. .
Promoting cross-cultural relationship: Society is made of people with diverse cultures. With
diversity in socio-cultural attitude and behavior and beliefs, people may differ in their ways
of life, sometimes resulting in clash of interests. The most reasonable way to deal with such
a situation for all is to respect norms and values. of others’ cultures
Changing with times: With the impact of science and technology on human life, life is
changing much faster than ever before. Willingly and unwillingly, people have to change
with the times which greatly impact conditions of survival because the choice of work and
the place of workplace are not always at our disposal. We have to work for survival. The

search for job for survival takes people to job market where they have to adjust themselves to
the existing work culture which seeks t maintain the law of uniformity with diversity.
3. Values, Beliefs and Practices

Values, beliefs and practices can be interpreted as the values and beliefs of individuals as well
as organizations. Organizational practices are based on its values and beliefs, organizational
practices. In business communication context, we do not have anything s “individual
practices.
Individual values and beliefs

Each individual is a single complete entity in respect of his caste, color and creed. An
individual’s name (first and family), family, place of birth and his upbringing, etc.are attached
to his/her personal identity. As part of his identity an American citizen wants to be called
by his first name, Mr. Michael Angelo, for example, is addressed as “Mike” only, whereas
an Englishman prefers to be called by his formal family name as “Mr. Angelo”. The next
thing that comes as part of the personal identity is a person’s national identity or the
identity of citizenship. On the basis of such an identity, a jew is different from an Arab; so is
a Frenchman different from an Englishman.
The next thing to be considered is religion. A Hindu or a Buddhist and a Muslim have
different religious identities. Religious tolerance, nobility and humility also count as the
hallmarks of identity.
Attitudinal and behavioral Aspects of Personal Identify

Traits of personal identify are also reflected in people’s attitude and behavior, food habits
and movements. Taking lunch and dinner in a sitting or squatting position is common
among the traditional people in some parts of Asia. Artisans and other professionals,
handicraft workers feel it comfortable to work in a sitting position.
Organizational Values, beliefs and practices

Like individuals, organizations also have their values and beliefs and practices, which are
enshrined in what is called the “Organizational Culture”. Organizations exist with strong
and weak culture. In organizations with strong culture, organizational people- are required
to follow strict rules and regulations and the codes of conduct in respect of the organization’s
calendar of operations, attendance, leave, maintaining organizational secrets. Such
organizations prefer to remain reserved in respect of the disclosure of their functioning
style. They are not much affected by changes taking place in organizations with weak
culture, these organizations can survive and make its headway towards a better prospect
Other organization, flexible in nature and prompt to adapting changes are more open.
Employees in such organizations prefer to welcome to new changes seemingly beneficial to
them. Keeping individual interests above organizational ones, they voice for changes.
Adopting new changes and integrating new changes may seem difficult for the top
management of the organization.
In spite of the advantages of rigidity of organizational values, beliefs and practice, no
organization, however rigid in its adherence to strong culture, can remain unaffected by
changes brought about by globalization and the impact of science and technology. As such,
business is globalized so is business communication.

People with different caste, color and creed migrate to different parts of the world in search
of job. The modern job market is no longer local and national. Values, beliefs and practices
of large industries operating on the strength of the global workforce cannot stick, for a long
time, to any long-established any organizational values. So their norms and values also
tend to change with the times and situations.
Legal Identity. in Business Communication: Based on the observation of things happening the
business world, it seems desirable to argue that peace and security, business promotion
and law are inter lined from many points of view There will be all anarchy in the absence
of law. To show that law and enforcement of legal enforcement are important, let us refer to
an answer given by a Peruvian manager of an industry, who said that to get a spare part of
a machinery it takes eighteen months to get through a official channel, two weeks illegally by
bribing the customs officials and 12 hours in Florida, in the United. It is the law and legal
rules and regulations than can answer why such things happen. The legal identity is
recognized when it can intervene in such matters...
4. Non-verbal Communications
General Background: Verbal communication is one in which communication takes place
orally or in writing. Most communication – personal or organizational- takes place verbally -
orally or in writing. The words in verbal communication are backed up by sound patterns
like pronunciation, pitch intonation, volume of articulation, speed selection of words, etc. It
is known as the primary form of communication.
In verbal communication words are systematically manipulated as per the grammatical
structures in order to communicative an intended message to the receiver. It is known to be
the second form of communication which requires a good deal of planning, organization
and effective presentation. of ideas.
It is believed that verbal language is deceptive because it can hide the truth of the subject-
matter, whereas non-verbal (body/gesture/sign-symbol language) communication is
considered to be the most original form of human communication, because it not only
carries mechanical information but also expresses the psychological behavioral and
temperamental influence of the speaker.
Understanding Non-verbal Communication In verbal communication messages are

transmitted by such means different from linguistic means. Even when we can refuse to
speak or write something, it is impossible to avoid behaving nonverbally.
Attitudes, various moods, nervousness, fear, horror, sympathy, pity, lack of
understanding, matters of interest and disinterest can be much better expressed
nonverbally. Through movement of various bodily parts, such as the nodding of heads,
blinking of eyes, waving of hands, etc, we can identify what a person is feeling and how
he wants to express them.
Most importantly, non-verbal communication is used in particular circumstances when the
speaker remains verbally incapable of speaking, or the speaker thinks that articulating
something verbally might sound unethical. Non-verbal communication also applies to the
styles of directness and indirectness. Indirect styles of non-verbal communication are used in
such circumstances in which the speaker is poised to communicate matters (prohibited and
unethical) indirectly. To cite an example of such a situation, the director of the telephone
company, intending to speak something about corruption in the organization he belongs to,

cannot do so in verbal language in the meeting of the Board of Directors. Here, he is obliged
to use non- verbal communication.
Characteristics of Non-verbal Communication

Non-verbal communication, which constitutes use of body language, body postures and
movements, gesture, sign language, etc., is distinguished by the following characteristics:
a. Non-verbal communication is a universal phenomenon.
b. Non-verbal communication is visceral (physical)
c. Unlike verbal communication, non-verbal communication is not edited. and expresses
unconsciously.
d. Body language is highly unique, individual and involuntary and spontaneous.
e. Body language is succinct (concise) and expresses feelings economically
Contents of Non-verbal Communication

Bodily parts, movements of limbs, eyes and eye-contact, shrug of shoulders, stamping of
feet, gestures, bodily postures, space relationship, and speech rhythm, shaking hands,
statues, images and portraits in various positions.
Importance of Non-verbal Communication in Various Contexts

Non-verbal communication takes place through use of body, bodily parts, gestures and
signs. More than thirty-five percent of our communication takes place through our body
language. We express feelings, emotions, honesty, dishonesty, wrath, motive of revenge
through bodily parts and their movements.
Communication takes place even when our mouth is shut and or no words are uttered.
Mime (imitation), gestures and postures are the oldest forms of communication. Occasions,
environment and attitudinal behavior of people also communicate lots of things. For
example, a soldier on duty, standing erect in front of his officer indicates orderliness, discipline,
etc. The chief of an organization in the board meeting sits with his torso (chest) slightly bent
forward expresses his readiness to conduct the meeting addressing all the issues raised.
Some examples of non-verbal communication

a. During paper presentation, the director of a financial organization, who cannot express
his joy verbally because of over delight, rubs his palms together to convey the message
b. In another case, the secretary of a banking organization, in a staff meeting, when not
able to say that he has forgotten to bring the agendas of the previous meeting,
communicates the matter non-verbally.
c. He does the same when verbal communication cannot help him express his unpleasant
feelings while communicating a bad news, i.e. Corruption, anomalies and irregularities
within the organization.
d. A person, who wants to cooperate with others with an open heart, but finds no words
to rightly express his feelings, communicates by using gestures,
e. Someone wants to say good luck to a friend, but cannot do so because of the distance.
Here, he holds his thumb upwards.

f. Students and many other people, overtaken by frustration, use non-verbal

communication cues.
Facial expression in non-verbal communication: It is rightly said that face is the index of mind,
because it tells lots of things - tells if someone is happy or not, whether one is well or not,
happy or sad, feels agile or sleepy, pensive or embarrassed. Human face can display over
250 different expressions. Facial contents, such as the eyes, eyebrows, lips, mouth, and
exposition of teeth tell a lot. Their movements –the lowering of eyebrows, clenching of jaws,
labio-dental (contact between lip and teeth) contacts voluntarily or involuntarily reflect
immense human feelings – of fear, anxiety, gaiety, pleasant and unpleasant emotions, anger
and wraith.
In short, facial expression reflects deeply rooted feelings and emotions, which verbal
language cannot communicate
Familiarization with Common Non-Verbal Cues

Clasped hands = tense, crossed fingers = impatiently waiting for something exciting, long
strides of walks = tension, excitement, hesitation, etc. lowered head = feeling guilty and
humiliated, head held high = confidence and pride, hands on chair = analyzing something
seriously. a bowed head = submission, right and left palms attached together turned upwards on
the religions rituals = devotion and dedication to supreme celestial entity.
Forms of Non-verbal Communication

Non-verbal communication finds its expression in various forms- (a) Body Language, (b)
Gestures, (c) Sign Language and (d) Visual Language
(a) On Body Language

Body language is universal and holds sufficient amount of believability and reliability
In non-verbal communication, communicators make the best use of bodily parts, postures
and movements to express uneasy feelings, strong feelings and emotions,
Eye contact. Eyes, one of the most important contents of our face, play a pivotal role in
reflecting our real inner feelings, sometimes hidden unexpressed in words. Called the
“Windows to the soul’, eyes are the most accurate prediction of the speaker’s true
feelings, emotions and attitudes. Most non-verbal communication begin with good eye
contact. By maintaining eye-contact with the receiver and studying the body language,
the speaker can get the idea of how the receiver has perceived the message
Head and movement of head: Head symbolizes the identity and dignity of an individual
being. Things and facts about a person are assumed and ascertained from the exposition
of his/her head – head set erect, head bent/ bowed down, etc. Movement of head and
its positions have a number of symbolic representations I and expressions in
communication. “Hold your head high’’, for example, means ‘Be confident’ or
“Maintain your identity and dignity”. High head also symbolizes the confidence and
boldness. The speaker in public reporting is expected to keep or set his/her head in
different positions and directions to ensure dynamism in his delivery
Types of Non-verbal Communication
Non-verbal communication is classified into three main categories:
i. Body language, ii. Proxemics or space language and iii. Paralanguage/linguistic

(a) Kinesics, the study of language concerned with body, bodily movements, face and
facial expressions and gestures, was first developed by anthropologist Ray L. Bird
Whistell in 1950s. language () is the first important type of non-verbal language with
the movement of the bodily parts, such as the head, facial parts (eyes, eyes-lids, lips,
teeth, etc.) hands, legs, fist, fingers, and body postures. In other words, we can
communicate by nodding and shaking of our head, blinking eyes, shrugging shoulders,
waving hands and doing many other things. Such movements can express our strong
feelings, nervousness, intention, etc. better than words.
(b) Pronemics, the study of language in relation to space and surrounding and distance
and space was first developed by Edward T. Hall during 1950s 1960. In the study, he
also observed the trait of animal territoriality in which animals in the forest kingdom
lay claim to their territorial integrity. Proxemics concerns itself with sending out message
signals at a certain distance between the speaker and the listener. The range of space
depends upon the relationship between the speaker and the listener.
Hargie & Davidson identified four territoriality of human space communication. This
can be classed as Number One indicating close space (physical contact within 18 inches),
Number Two, indicating personal space (18 inches to 4 feet), Number Three .indicating
Social space (4 to 12 feet) and Number Four indicating public space (12 feet and beyond
that). Here, communication is highly formal and objective. This is used at public address
programs. A high pitch and a loud voice is used to be heard the by the public.
To elaborate the above, space language used for various purposes shows the
relationship between the speaker and the listener. Personal space is used to
communicate with friends, colleagues and visitors; Social space is used in social
gatherings, i.e. at parties, social and religious occasions and functions. Public space is
used at public address programs. The purpose and the way of space communication
vary with various kinds of space mentioned above.
(c) Chromatics, study of communication in relation to time. Time has to something to do
with punctuality, timing and the frequency of action as well.
(d) Paralanguage (vocal characteristics) language literally means ‘“like language.”
Paralanguage, also called “vocalic” is, in short, a kind of voice language. It is more
about how we speak than what we speak. It covers almost 37% of our communication effect.
Paralanguage refers to the tonality of non-verbal communication. Its ability lies in
exposing the speaker’s age, gender, educational and geographical background, etc.
Paralanguage is concerned with many things with vocal characteristics.
Voice quality, physical attributes, bodily postures, facial expression walking style,
blended together contributes to effectiveness of non-verbal communication.
Vocalic deals with various acoustic properties of speech such as tone, pitch and accent.
Voice quality, which includes pitch variation (speaking with higher and lower pitch),
adds to the effectiveness of paralanguage in non-verbal communication. Pitch variation
is used to express joy, excitement, and anger
Change in voice for effect. Through a change in voice, one can clearly express his or her
feelings, attitude, worries, joy and sorrow. Through one’s voice, we can know about speaker’s
sex, and social, educational background. Voice could be clear, appealing, pleasant and
unpleasant. It refers to the intensity of sound produced at an instant. A sweet voice is the
attribute of radio-television anchors. A good singer together with knowledge and training

is required to have an ear-pleasing voice. Normally, a speaker should speak in a normal/

moderate voice, but in practice, he/she tends to raise the voice in crucial matters.
Paralanguage stands close to verbal communication, because voice comes from the use of
words. A speaker uses a lot of vocal cues when he/she produces voice. The following are
some the vocal cues mentioned under paralanguage.
i. Speaking speed depends upon the type of contents. Easy parts of the verbal contents are
usually spoken at a faster speed and the difficult parts at a slower speed.
ii. Pause Things spoken or read out without pauses makes reading mechanical, not human.
Such a reading renders reading or speaking ineffective and unimpressive. Pauses are
used for gaining control over what is being said, laying emphasis on some points,
drawing attention of listeners. Pauses have to be used properly. Incorrect use of pauses
damages the consistency, continuity and coherence of the speech.
iii. Silence is one important form of non-verbal communication. Though silence is said to
mean consent, in communication context, it may convey both positive as well as negative
meaning. Depending on the situation, it may also mean dissatisfaction, disagreement,
fear, helplessness and surrender. One remains silent when he/she gets angry, and
remains frightened. Silence plays a distinctive role in creating an intended situation. A
sudden presence of a manager at a workplace awakens the staff to attention. Likewise,
a pause or silence in a class or at a meeting helps draw the attention of the listeners.
Sometimes, a teacher applies this method to draw attention of a disturbing class.
iv. Non-fluency, ‘oh’, ‘um’, ‘ah’ are non-fluencies with no meaning of their own. They give
breathing time to the speaker. A patient continuously panting in “um” indicates acute
suffering. “sh” indicates a warning for silence.
v. Word stress A sentence read out with stress on different words emphasizes the meaning
of different words. The same word, for example, used as a noun and as a verb will have
stress on the first and the second syllable respectively. Example: /in-crease (n.) and in-
crease (v.)
Besides this Stress and Intonation convey the real message that a sender intends to
communicate.
Note: A shift in the stress of words in sentences results in the emphasis of the meaning.
Example He went to Sydney yesterday. Here, every word can be stressed separately.
a. He went to London yesterday. Means the person who went to Sydney is he, not others.
b. He went to Sydney yesterday. Means he went to London, not any other country.
c. He went to Sydney yesterday. Focuses on the day.
Other Aspects of Non-verbal Communication includes the following:

Haptics also called Touch language is one of the many ways of sending message non-verbally
by touching people’s body. Touch occurs accidentally and unconsciously. This so happens
when people line up in a queue while buying a bus ticket. Done consciously, the sender
touches somebody else to express his perception of status, attitude and affection towards
the receiver. Touch is not, however, a thing that one can use everywhere without restrictions.
A junior touching a senior-most officer at a formal meeting is unusual in most cultures
though touching near friends and relatives confirms love, affections and closeness. Use of

touch depends upon socio-cultural milieu. As touch is status related and gender sensitive,
it is possible in some cultures but objectionable in other cultures. Females in Asian culture
feel awkward to be touched publicly by their male counterparts.
The touch language, akin to kinesics, is different in procedures and devices. Touch language
(touch, affection, closer relationship) is concerned with independent communication
procedures. Apart from the use of hands and other parts of the body, it includes the waving
of hands.
Wearing veils. Wearing veils among the Muslim and Terai women of traditional and
backward communities is still prevalent in Asian countries. Women in veils, bowing down
to an idol in a shrine express deep faith in eternity; the bow to senior family members
indicates regard and respect and modesty and soberness blended with traditional socio-
cultural etiquette of the female members of the family
Walking. Different ways of walking carry in them a lot of non-verbal communication cues.
It is associated with the walker’s mood, state of mind- agility and vigor. Brisk and hasty
movements (walks) and walking at a snail’s pace tell lots of things.
Walking differences in various cultures. Walking steps are
fast, long and short. Those taking long strides might
look funny to those walking with short steps. Long strides
also indicate that the walkers are in a hurry.
Cross-cultural Aspects of Body Language

Body language, though universal and holds sufficient
amount of believability and reliability, is greatly affected
by cultural diversity. As such, people of a given
community of a country label their own gestures as native
and others’ gestures as foreign.
Cross-cultural differences are reflected in the use of body
language of typical indigenous Newar and other similar
community people. This occurs during typical festivals
when they sit squatting / crouch (sit on heels) on straw-
woven long mattresses known as sukul to enjoy traditional
feasts. But with the effect of modernization on the food
habits of the people, such practices are slowly dying
out. During the Rana regime, staff members of the finance
department, Kumari Chowk, inside the Basantapur
palace, who were responsible mostly for collecting revenue, carried out office business in
squatting position, used ink and bamboo pens and kept accounts and records on sheets of
Nepali paper. While squatting is common in some cultures, sitting is common in other
cultures.
Eyes and eye movements also vary with cultures. People of all cultures have most things in
common regarding eye-related communication. For example, eye-contact is indispensable
in formal speeches, whereas it (eye contact) gets diverted in informal talks. Staring down at
somebody indicates anger and aggressiveness. Looking directly over people in higher
echelons of society and higher positions is considered disrespectful in some cultures.

On Gesture Language. A gesture is the movement of bodily parts to indicate or illustrate an

idea, feeling, etc. It also indicates something done to convey a friendly intention.
In the above discussion, much light has been shed on the use of body language as the
backbone of non-verbal communication. But mere mention of body and bodily parts in
isolation make no sense. For example, an eye extracted from a dead body and lips and limbs
separated from the body of a man killed in a truck mishap do not communicate anything.
They would be inanimate objects having nothing to do with non-verbal communication.
They would be meaningful only when they remained associated with the body of a living
person with his/her sensory world in perfect working condition. To clear the point, the
staring eye of a person is associated with his stern anger at somebody. Likewise, one’s
waving hands at somebody indicates friendship and goodwill.
On Sign Symbol / Symbol Language. Sign language is the third important type of non-verbal
communication which helps the people to understand the visuals and react to them
positively. Police administration use and lot of traffic signs and signals to manage flow and
movement of traffic- motorists and pedestrians in the street. Sings and symbols can strike
the receiver more quickly and effectively than words.
Signs are used in different fields and concerns to mean different things. But some of them,
like No-Smoking, No-Horn Please universally mean the same thing for all.
In the non-verbal communication context, a lot of messages are conveyed and information
disseminated through the use of sign language. There is no limit to the number of signs
because there are as many sign languages as there are spoken ones. Nearly half a million
deaf people use American Sign Language (ASL) in Sign Supporting English Method. The
meanings of the signs vary with the facial expressions used.
A sign language is supplementary by nature. It is an addition to the volume of non-verbal
communication.
Though limited, use of simple visual signs is universal. A cross over a lit cigarette and a
hanging doll (female) on the top of the toilet door indicate (a) No Smoking and (b) Ladies Toilet
respectively.
A Glimpse of Visual Language
NO SMOKING ZONE NO LIFE SAVEER SWIM AT YOUR OWN RISK
NO PARKING PARK AT YOUR OWN RISK
SILENCE PLEASE SLIPPERY PRONE LADDER WALK CAREFULLY
Limitations to Sign Language

Uneducated people and riff-raffs cannot understand sign language easily. Understanding
gesture and sign language needs knowledge and an educated mind. Communicating across
cultures necessitates familiarization with cultural differences. People with an exposure to
the meaning of well-recognized signs and symbols can benefit from sign language. Traffic
police and many other institutions use a lot of signs which a layman may not understand.

Symbolic Use of Non-verbal Communication

Human beings are capable of communicating various things with the use of symbols. Using
various objects to reflect unexpressed feelings and convey message/s in a symbolic way
constitute the meaning of symbol language.
Examples: Leaving a lit lantern in the street on broad day light indicates: i. absence of law and
order situation and ii. .people‘s search for justice.
The protesters in a political agitation program send a set of reading glasses and a set of earphones
to the government or concerned authorities. This indicates negligence and indifference of the
authorities concerned to the genuine public grudges and matters of common concern
Visual Non-verbal Communication

Visual language forms one of the most important forms of non-verbal communication. It is
rightly said, “a picture is worth thousand words.” Postures, sketches, cartoons, photographs
and statues speak volumes on various things. Such things/objects are used to educate the
people on the use of visual signs. Maps, charts, diagrams used in atlas and books on
different subjects provide a lot of meaningful information about various things. Branded
electric and electronic companies, auto companies and manufacturers of various products
use their patent signs and symbols. Likewise, offices use logos. Products of Philips, B & O,
Grundig, Tandburg, General Electric, Samsung, National and other companies- all use
their branded patent number and marks. Likewise, cars and vehicles of Mercedes, Rolls
Royce, Toyota, Nissan, Tata, are known by their patent symbols.
Apart from the above, revolving neon lights on top of ambulance and on police patrolling
vehicles, flags, bouquets of flowers also are other forms of visual communication. Though
sign language poses a problem of difference in meaning in different countries, many well-
established organizations also use their organizational signs and symbols.
Audio Signs and Signals: Some things which do not use words but produce sounds are
sirens, buzzers, ringing of bells, etc.
Use of Colors in Visual Communication:

Colors also play a significant role in visual presentation/communication. They indicate
different things as mentioned below:
Yellow- friendship; Red- revolution, danger, also something good and auspicious; Blue-
Peace; White- simplicity,
Understanding Native and Foreign Gestures

Though meaning of some of the gestures are common to all, native and foreign gestures
differ in meaning. Socio-cultural differences, geography, local characteristics and many
other factors account for the difference in meaning.
Non-verbal differences vary widely from culture to culture and vary with people’s aging. In
the U.S culture, aging people wish to look themselves physically smart and presentable.
Millions of older people spend millions of dollars every year in cosmetics and plastic surgery
in a bid to look or feel younger, considering that youth is associated with strength, energy,
and freedom, opportunities, whereas aging is associated with decline in power and strength,
loss of respect and authority. Contrary to this, people in some cultures welcome aging as a
natural phenomenon.

Gender Differences The perception of men and women in business also varies from culture to
culture. Men tend to emphasize contents in their messages, and women tend to emphasize
relationship maintenance.
Religious differences Religion, the dominant force in some cultures, matters much in many
cultures. Companies want their employees to avoid religious differences to minimize
resistance and frictions between people of different religions.
Example of Gesture Difference A fisherman in Britain demonstrates the size of the fish he has
caught by keeping the palms facing each other. The distance between the two palms indicates
the size of the fish. But in some parts of Africa, the fisherman measures off the size of the fish
along with his left arm stretched with the right palm above the arm beneath.
Disastrous Consequences of Gesture Misinterpretation

Disastrous events occur because of misinterpretation of meaning of culture differences.
Innocent swimmers swimming near the restricted coastal areas of another country were
shot dead in cold blood when they could not understand the gestures used by the coastal
guards.
In some cases, body language needs interpretation when gestures used by the sender are
not understood by the receiver. Shoppers miss to pick up the things they buy from shops
because they may not understand the gestures used by the sales girls.
Tips for Using Body Language (non-verbal)

 Use body language when and where necessary
 Try to understand others’ gestures and respond to them positively
 Use gestures understood by both- speaker and listeners
 Use less gestures in formal communication
 Match verbal expressions with non-verbal expressions (gestures) for effective
communication, because communication efforts fail due to the mismatch between the
two.
 Use body language in understanding and reacting to others’ feelings
 Use body language for creative and productive, not destructive and unproductive
purposes
Use of Graphics in Non-Verbal Communication

It is rightly said that a picture is worth thousand words. Effectiveness of Photo Journalism
depends upon the artist’s (journalist’s) skill of using photos and in his efforts and vision
and insight in making figures and visuals meaningful. His skills lies in making the photos
draw viewers’/readers’ interest in the photos that speak volumes on information.
Widespread Use of Graphics In the present-day world of visual presentation, graphics plays
a significant role. Impressive visual advertisements of products and information about
happenings and events are unthinkable without use of some kind of graphics. We cannot
escape viewing the work of graphic designers in posture advertisement in the street and
various product graphics, information graphics; media print graphics and animated graphics
moving across the screen. Things we see all around us project the magical values of graphics.

Objectives of using audio-visual aids in business communication are:

a. to make people look, read and understand.
b. to concretize the verbal message that is culturally suited, highly restive and readable to
the target mass
c. to support graphic assignment of verbal information by using quantitative or numerical
information, explanation and description,
d. to simplify the change of the complicated description into different flow charts, diagram
so that reader can easily understand the complicated description
e. to emphasize the important points by illustrating them with line-bar, pie charts and
important points
f. to enhance technical capability and efficiency on he part of source.
g. to summarize briefly all the information by making table or chart.
h. to attract and impress the audience in different colors, pictures in the material use of
images
i. to use graphics to support and strengthen AIDA strategy
Various Types of Graphics

Information Graphics as part of visual graphics can be classified, as tabulated and illustrative
techniques. Graphic designs, symbols, bar charts, flow-charts, pie charts, Gantt charts,
pictograms, histograms, line graphs, drawings, diagrams and photographs are various
types of information graphics used in non-verbal communication. Data and diagrams supply
in-depth information which economizes the cost and verbal presentations. .
i. Graphic designs are created to provide information and guidance for the people in the
street or at the airport terminals around various channels of movements. Clear signs
and symbols and images provide quick information to people, no matter which language
they speak.
ii. Line graphs are used to show the relationship between the development, movement and
expansion of things, e.g., the growing of the length of one’s feet in relation his/her
growth in height. Relationship between temperature in Fahrenheit and in Celsius also is
an example of line graph.
iii. Histograms show the relationship between the vertical growth and horizontal extension
of things, e.g. the number of school children (vertical) and the shoe sizes they wear.
(horizontal)
iv. Bar charts though look like histograms, do not have numbers along their bottom axis,
because the bars are used for comparing different things. Here also, the vertical bar
shows the number of vehicles and the horizontal bar shows the types of vehicles moving
/passing across a bridge in, say, for example, 5 minutes.
v. A Pie chart looks like an eating pie. Slices cut from the center shows the amount of time
or other things we do in 24 hours, say, for example, 3 hrs. for eating, 4 hrs. for walking,
8 hrs. for working, 3 hrs. for recreation and finally 6 hrs. for sleeping out of 24 hours of
a day.

Flow charts and organizational charts are used in the appropriate planning for organizational
structure, departmentalization, hierarchy, formation and mobilization of organization’s
structure.
Gantt chart and pie charts enable us to incorporate multiple themes of corporate activities
within a single graph.
Role of Graphics in Non-verbal Communication: Graphics plays a significant role in educating

the people fully or partially, dependent on non-verbal communication. The dumb and the
deaf and those, orally deficient fully depend on visual communication. For people of artistic
taste, visual communication has artistic and creative values. Flow charts and organizational
charts supplied with appropriate organizational needs- organizational structure,
departmental organization, hierarchical formation and resource mobilization, project the
real picture of things, which words alone cannot do.
To conclude, audiovisual aids popularly known as non-verbal communication cues, have
contributed psychological, social and cultural significance to the communication activities.
The basic principles of applying audio-visual aids are deeply rooted in the technique of
encoding the verbal message with more visual and tangible means
Various Types of Graphics

Information graphics * Table *Line graphs *Histograms *Bar charts *Pie charts, * Gantt
charts

5. Writing to an International Audience

The term Writing to an International Audience seemingly sounds vague, on that it is difficult to
decide who the specific audience could be, what is to be communicated to him or her. and
subject determines the topic for international communication. But things considered in
business communication context, international audience may mean individual/s people of
various socio-cultural, religious, geographical and educational backgrounds. The
communicator, the sender of the message/information may of the same or different
background, but familiar with the changes taking placing in the world. .Topic of common
concern for all could be:
Sustained growth and development for all: the biggest poverty reducer, ii the greatest
opportunity provider,
The secret of fastest growth in some countries is the growth based on “catch-up” The
ingredients of successful catch-up are: exploiting the world economy, maintain stable
macro economy. allowing market to allocate resources, providing equal opportunity
for all., giving what the world market needs, growth dependent upon efficient
utilization of labor, and saving and investment for the overall development of all.
Measuring rods of growth and development The growth and development of forest-based
countries can be measured in the treetops (GDP), but most required action is to ensure micro
economic undergrowth where new limbs sprout and dead wood is cleared away. Growth
The above symbols is also
were dependant
designed for theon public
1972 investment
Olympic aimed
Games held to ensure employee protection with non-
in Munich,
Germany. discrimination of employment policies. For all these, capable and competent and committed
leadership is necessary. Leaders need to be pragmatic to be able to adopt change. Leaders of
Writing to an International Audience
the developed countries must be able to minimize the global crisis of unemployment in the
Asian, African and Latin American countries, for which, they should have an insight into
them the serious problems of economic recession rocking the people of the underdeveloped
countries, and have strategic plans for improving the deteriorating global economy. For this
they require to have patience, long-term planning and improving investment climate. To
cite an example of the problem of unemployment affecting the broadcasting programs of the
British Broadcasting Corporation. Recently, the BBC shut up its programs in 5 languages
resulting in the cut of 600 jobs as a result of 15% cut in the British funding.
6. Learning More about International Business Communication

The famous book on learning entitled THE LEARNING EDGE by Calhoun W. Wick and Lu
Stanion Leon shows that effective managers and executives can transform their organizations
into learning organizations. Such executives can develop their junior managers as

developers. World famous manufacturing companies - Du Point, Kodak, Motorola , and

Hewlett Packard are known as developers of learning organizations.
The famous book the Learning Edge provides the following tips on process, tools and models
necessary to transform any organization into a vibrant, growth-oriented learning
organization: Masters of the art of intentional learning have provided the process, tools and
models necessary to transform any organization into learning organizations. Their focus
on the following points:
• Be familiar with the art of transforming organizations as learning organizations, apart
from continuing as performing organizations.
• Build developmental learning teams
• Motivate workers to stretch and take risks
• Grow on the job in spite of any lack of to-level support.
As business today is broad based and most things we talk about in our day-to-day life is
globalized. If we talk about the simple consumer goods as to where it has come from, who
are involved in its production and how it has reached our place, etc. we would be taken far
away in the course of discussion revolving around the topic. Even the perishable goods like
the vegetable and fruits used in the US are exported from a country like the Philippines,
Thailand, Nepal exports herbs to very distant countries. If we take a deeper look at various
things imported and exported, produced and consume
The present time is the age of international cooperation. In international seminars
participating countries share their experiences drawn from the study of growth and
development of various counties. Nepal, for example, has been a platform for her neighboring
countries and donor agencies for sharing and exchange of ideas and experiences about
growth and development of other countries. Such programs provide ample opportunities to
learn more about business and business communication. Such programs provide a lot of
learning inputs to the underdeveloped countries moving at a snail’s pace.
Specific Learning Points- Equality for all, an end to discriminations, transparency of
development policies, pursuit of interest for specific ethnic, religious, regional, political or
social groups.
A very important lesson and a word of wisdom for a country in transition are:
• transforming herself from a feudal autocracy to an inclusive democratic republic
• adopt the policy of “One Nation” with a culture of cultures
• adopt the policy of “One Economy” to avoid risk of separatist movements and class
and ethnic conflicts
• within the country, equal opportunities for overall development of
• implement non-discriminating policy while dealing with the problems of diversity in
geography, gender, caste, color and creed
• strong commitment of financial assistance by developed countries to the under-
developed and developing countries.

For achieving all this, a forward looking country needs a strong political leadership
committed to formulate participative economic development policies. For this, administration
and management of state affairs should be based on the principles of “rule of law”.
As learning is faster than inventing, developing countries should acquire knowledge and
learn technologies created in advanced countries. They should learn what the rest of the
world already knows. Also realized that the countries saved a lot leaving room for investment.
Case Study : 4
Corning and Vitro: A Marriage Made in Hell
When the marriage was first announced, it seemed like a blessed union. U.S glassware leader
Corning joined with the giant Mexican glass manufacturer Vitro in a cross-border alliance. Both
companies were customer oriented. Both were aggressive global marketers, and both still had
founding families in control.
But the honeymoon was short- lived. Perhaps the split- up could have been foreseen. Corning’s
modern offices in upstate New York feature streamlined glass structures. In sharp contrast,
Vitro’s headquarters in historic Monterrey are a replica of sixteenth century convent, with artwork,
arched ceilings, gardens, and fountains.
Beyond conflicting styles of architecture, deeper disparities separated the two companies. Corning
managers complained that important deadlines were often missed because only top managers
could make decisions at Vitro. Mexicans faulted the Americans for being too direct and pushy.
Vitro managers, practicing politeness, appeared to the Americans to be unwilling to recognize
problems and weaknesses. The Mexicans generally thought that Vitro was too slow. And the
need to react to a fast- changing market only added to the difficulties.
Clashes in management style also caused problems. Vitro and other Mexican businesses are
hierarchical. This means that decisions are often left either to a member of the controlling family
or to top executives. Middle managers may not even be asked their opinions. After the split, Vitro
president Eduardo Martens remarked, “Business in Mexico is done on a consensus basis. It’s
very genteel and sometimes slow by U.S standards.” Summing up, one analyst pronounced it “a
marriage made in hell.”
www.corning.com

CHAPTER - 4
EMPLOYMENT COMMUNICATION
D. Employment Communication
The Job Search: Preparing for Employment Preparing for employment can be considered in two
dimensions: (a) internal employment and (b) external employment.
In the first kind of employment, youths go on job-hunting within the institutions, offices within
the country.
The second type of job search is done mostly by those who have to have a job for earn a living for
themselves or the family. In the present-day context of unemployment, people, whose government
cannot provide jobs, move and migrate to different countries in search of work. Workplaces in
big industries are crowded with a bulk of manpower with diverse culture. Manpower Companies
provide services to such workforce.
To elaborate the first kind of job seekers, students even during their learning period, do job-
hunting to support their education. In other words, self-dependent students, who do learning by
earning, need to do a lot of job searching during their and career development period. Many of
such students need to get some kind of job to support their education. As getting employment is
not an easy task, they will have to spend quite a considerable amount of time in job search. They
do this by building a network of contacts with a number of related personalities, organizational
heads at many places. The job search follows a process which takes the searcher to a wider circle
of friends facing similar problems and those who have already gone a few steps ahead of them
in getting the job. The most probable people they meet include: university professors, business
executives, businessmen and industrialists. They also need to approach community
organizations and make contacts with them through internships
Identifying and Preparing for Appropriate jobs During job search; students have to consider both
internal and external factors to get the right job. During this time, greater efforts are made to get
the job that matches with the applicant’s education, skills and experiences. Here, the job searcher’s
specific qualities, distinct personal qualifications, work experience and special qualities,
communication skills matter much for potential employer. Most schools have career counseling
centers that provide career counseling on job during the study period of the student. Besides,
classified advertisements published in the local papers also help the students in getting appropriate
jobs.
1. Preparing for Employment The stage of job search is followed by the second step in which
the student prepares himself/herself in preparing application documents. Here, the student
makes personal visits, does online contacts and faxes or emails his/ her resume to various
organizations. He may also write a persuasive letter for an interview for employment with
follow-ups.
After finding one, he writes an application to select a group of companies, decides on
whether to send a message alone with a resume or with a resume and a reference sheet.

Chapter 4 - Employment Communication
Place of Resume in Job Search: A job application followed by a resume knocks at the door of the
employer, who sets the applicant to a challenging task of an interview.
2. Writing Persuasive Letters

Using persuasion effectively in letters matters much in business communication. This
technique is used specially in making requests and composing sales messages, Persuasive
letters are written in the indirect order. Not written as bad-news letter, a persuasive message
tries to catch up the interest of the reader. Here, attempts are made to move the reader from
an uninterested or even antagonistic position to a convincing one.
Agreeing with what Aristotle talked about three kinds of persuasions: i. logic based, ii. Emotion
based and iii. character based, in a persuasive letter it is necessary to make the reader to
comply and make the requested action clear and easy. This, to be logical, needs reasonability
and rationality. Every customer may not buy your goods or products only on the strength of
the seller’s showering of words in favor of the products. Some buyers get emotionally agile
in buying things, quite irrespective of their material worth. Here, the writing party needs to
appeal to the emotion of the reader with use of appropriate words. Thirdly, buyer’s character
also counts much in writing a persuasive letter.
Writing persuasive resume

Using persuasion is open to other areas, such as writing a persuasive resume. Before learning
how to write a persuasive resume, it is necessary to understand what a resume is and then how
to write it.
Understanding & Writing an Effective Resume: A resume (also called data sheet and curriculum
vitae) is the formal arrangement of a writer’s personal inventory. It lists facts in some orderly
way. Normally, one applies for jobs by using resume and letters. Writing complete resume require
meeting certain requirements: contents, presentations, format and style with appropriate style.
A resume is the personally developed details of an individual. Writing an effective resume
begins with the process of selling abilities and skills. With the art of convincing the reader in
accepting the writer’s request. In short, it is an act of advertising one’s abilities and skills towards
performing better as per organizational gals. Human resource management team of an
organization determines the quality of an individual by looking at the resume.
• Contents of Resume: A resume consists of overall information related to personal details,

academic achievements, job experiences, expertise, and professional skills and so on. It
requires to be developed in a systematic order so as to elaborate every related information
for a specific job purpose.
Resume Writing Process. One’s job search activities begin with writing a good resume. The
success of a resume in getting a job depends upon three things: (a) Planning, (b) Start
writing and (c) Completing the writing.
Planning involves: i. analyzing the situation in which the purpose of your writing the
resume should be clear, ii. gathering information about what the work organization intends
to seek in its new job hire, iii. selecting the right medium and iv. Organizing the information
The Writing Stage. Here, start writing your resume in properly worded sentence format.
Write things in a professional tone to capture the audience attention.

Completing the Writing. This involves evaluating the contents, editing and rewriting and
producing the message to the concerned as per instructions of the employer
• Contents of a Resume:
1. Resume Head
The resume head contains personal details like
- Full name (Block letter)
- Permanent address
- Mailing address (e-mail, phone, fax, citizenship number,
- Marital Status: Single/ Married
- Mailing Address/ Contact Address
Note: Constructing a heading for the entire resume and sub-heading for other parts.
include other vital information such as objectives and contact information.
1. Constructing the Headings. This includes education, experience and skills. The second
and less widely used form is to use the talking head which might read as Education,
Specialized Training in Accounting or Computer Software Application Skills acquired. to
distinguish the headings from other information.
2. Objective/ Smart statements or Objective Statement: This includes a statement of objective
of applying for a particular job. It is worded as a. Objective, b. Career Objective and c. Job
Objective. The objective appears after the Resume Head.
Examples:
Objective:
i. To apply for the post of Marketing Research Officer
ii. To apply for the post of Sales Representative for Bluebird Departmental Store
leading to Sales Management
3. Academic History: Academic history is written in Block letters. The third step of resume is. to
give details of an academic history. Here, we write an academic history in a descending order, i
e. higher to lower. Here we include the following points:
a. Degree, name of institution, date of completion
b. Area’s of specialization
c. Related course work: Thesis, dissertation, project work, internship
d. Professional Background: After finishing academic history, we write professional
background. This includes the following: i. Computer training, ii. accounting
package
e. Designation, Name of the company, tenure, written in descending order Personal
and professional skills are used while working with the above company/ies
f. Computer training, ii. Accounting package
g. Seminars and Workshops Attended
h. Language Competency: Write down the languages in which you can communicate
with others.

i. Referees In referees, mention names of at least two distinguished personalities in

public administration and educational institutes
j. Signature - Date.
k. Including Contact Information. This refers to the applicant’s Address, Telephone
Number, Email Address, Fax Number and Web Page Address, if possible.
Note: Also write that personal statement of every information provided above is true
and authentic.
Types of Resume A resume is of the following types:

Wrting a persuasive resume also involves familiarization with the types of resume, because the
applicant should now which type of resume writing for geting a job. A look at the following
types is necessary.
(a) Functional Resume. Sometimes called skills resume, it focuses on the importance of special
educational qualifications, skills, experience, etc.
(b) Chronological Resume. It focuses on the recent job history of the candidate
(c) Combined Résumé This stresses distinguishing qualities of the both- functional and
chronological resume, but the objective portion is omitted in such a resume
“Do’s “and “Don’ts” of a good resume.

Weak Statements (to be avoided ) Impressive Statements
1 I was responsible for developing a I developed a scientific
telephone messaging system. telephone messaging system
to curtail unnecessary
talking
2 I was in-charge of customer I handled customer
complaint handling division complaints in the Division
3 I won a trip to Africa to open our In Africa I opened the
branch office in three major cities company’s branch office in
three cities
4 Member of the special task force to I assisted in solving the
handle water supply problem water supply problem
5 Responsible for solving public I discussed and resolved
holiday issues. problems related to public
holidays
Employment correspondence deals with professional transaction made between recruiting

company and prospective candidates to ensure better job turnover and retain professionals for
the long term benefits. For this both the employer and employee are required to be activity involved
to explore better job platform that ensures professional growth, financial security and social
security to the employees. In other hand recruiting companies or business organizations the
required to identity and appoint the most potential and competitive professionals that ensure a
hike of institutional image professionalism and last of all to contribute sound corporate image in
the cutting edge of globalized corporate world.

For this following universal strategies are adopted in career planning and job placement:
1. Career planning stage:

It is one of the most preliminary stages for candidate to plan the career and set the goals
which directly addresses the requirement of market. While doing so the prospective
candidates are required to have proper assessment of micro and macro business
environments. Such as:
(a) Profile of the company
(b) Future expansion possibilities
(c) Career hikes and promotion
(d) Job reliability & exit plans
(e) Financial and admin policies of the company
(f) Proper evaluation of circular strategies
Professional Resume (PR)
1cm
MR. SHANKAR MAHARJAN

Maharajgung – 3, Kathmandu
Phone: …………………………………
Cell No: …………………………………
E-mail: ………………………………….
Identity verification: Passport No: ………..
A management professional and student pursuing career in the field of financial mgmt,
business administration, marketing and sales, HR etc.
ACADEMIC PROFILE
• Master’s in Business Studies
Shanker Dev Campus (TU)
Passed in 2011 AD with
Distinction (CGPA 3.9)
• Specializations:
- Investment analysis
- Marketing
- Economics
PROFESSIONAL PROFILE
• Asst. Manager
Chaudhary Group Nepal
Worked from 2010-2011
• Job descriptions
 Financial management & credit control
 Administered and everyday operations
 Supervised the subordinated job performance

 Reported and updated everyday activities

 Dealt with customer queries and dealings supported and facilitated secretarial
support of company.
PROSEFFIONAL SKILLS/EXPERTISE
• Chartered Account qualified from ICAN in 2019
• 3 years of articleship as a part of chartered accountants Nepal (ICAN)
• Advance accounting package of 3 weeks from global institute of professional
studies, putakisadak
• 6 months paid internship in standard chartered bank in the department of credit
during the BBS studies.
• Proficient communication studies during CA foundation and intermediaries
• Specialized training package as a part of curriculum during CA intermediate studies
SPECIAL QUALIFICATION
• Member if Rotary Club Nepal, Balaju Branch
• Attended workshop or mgmt, education in Nepal co-ordinated by MAN.
• Entitled with best employee award in 2011.
REFERENCE
• Mr. ABC
Principal
Shanker Dev Campus
Phone: ……………………….
E-mail: ………………………..·
• Mr. Keshor Banskota, FCA
Chairperson
CCM College Pvt. Ltd.
Phone: …………………..
E-mail: ……………………
Date: May 30, 2013.
 Cover Letter- Sample

Date: …………….
The Director
Human Resource Department
P. O. Box: 6319 KTM
Sir/Madam
Subject: Cover Letter for the position of ……………..
This is in reference to your vacancy announcement publish in Kathmandu Post dated 15th
May, 2013. I would like to submit hereway required testimonial for the position of Finance
Manager as seeking by your esteemed (high value) organization.

I have thoroughly gone through your job requirements and stipulated responsibilities
that are entitled for the desired post of finance manager. Having gone through the
requirements, I came to realize that my academic profile and professional exposure suits
to your company’s expectations to recruit the professional therefore, I have place this
cover letter as one of the deserving to the above mentioned post. Prior to my academic
credentials and the relevance of the study, I am very much interested to pursue the career
in the field of finance, marketing, accounting management, HR etc. It is obvious that
management profession is a basic need of global corporate society with the view to develop
managerial efficiency, business proficiency, and service excellence along with ethical
professionalism which I expect to capitalize in the job. In addition to this I have been
privileged to acquire diverse professional experiences in the due course of my study
profession along with my personal interest in most contemporary issues of financial
policies, investment plan, mgmt analysis etc.
Along with my exposures in academics and profession I do possess my most dynamic
requirement of IT and communication skills which I sincerely believe as indispensible part
of business professionalism. Moreover I have had ample orientation in the job market which
I have gained through different seminar and workshops. I have attended on the burning
issues of mgmt profession. With these value and inputs in me it has developed a high level
of confidence in me to position as a potential candidate for the above post. I thus request the
management for a prompt and positive reply on my job references above.
I shall be pleased to be contacted for further queries and information if any, on my contact
details enclosed here with my updated CV and supporting documents.
Yours faithfully
Miss/Mr. ABC
Applicant
REFERENCE LETTER
ABC INTERNATIONAL
Naxal -14, Kathmandu
Phone:
Fax:
Ref No: 02/HR/069-070

May 31, 2013
Re: Reference Letter
I feel very much privileged to grant this letter of reference to Mr. XYZ shrestha in recognition
to his mentorious performance in the Job. Mr. shrestha joined our organization in 2010
under the job title of Asst. Manager for Marketing and Sales Department. As designated to
his post, he has successfully accomplished the following job responsibilities:
• Over all sales and marketing activities
• Customer relation and facilitation
• Administered the marketing plans and analysis
• Conducted several sales campaigns in joint support of trade and companies

• Prepared consumer database and followed for sales

• Report senior management for periodic progress.
Mr. Shrestha as the most hard working and sincere employee performed the job well. We
wish him every success in his future Endeavour.
MN Mishra
Managing Director
FOLLOW UP LETTER
May 31, 2013

Human Resource Department
P. O. Box: 634
Subject: follow up request
This is in reference to my application file, registration no. 231 submitted for the post of
assistant manager. I have submitted all the required documents and have attended the
interview conducted on April 27, 2013.
Since, the deadline of announcing the final decision has exceeded more than a month, so I
would like to sincerely put up this request to update me about yours company’s final
decision. This should be very much helpful for me to plan ahead my other career options in
the open job markets.
Anticipating for your replies with an early effect
Yours Faithfully
Name: (……………………………..)
Application No: ………………….
Contact details (……………………………………..)
3. Preparing for Computer scanning

Why should a business have computers when all of the business’s information is on ... your
document scanning needs? Why should a business have computers when all of the
business’s information is on ... your document scanning needs?
Scanning tips and hints, how to get the most from your digital images and scanner. How it
works, for those that want to know
4. Faxing or Emailing Your Resume

Faxing:
It is estimated that over 10 million people use fax services everyday Fax machines are sold
by computer shop with the temptation, “Get Your Free Fax Training with FINIX
COMMUNICATION CENTER”. With increasing use of fax machines, these days many

private cyber concerns offer fax services for job seekers to employers. Most big organizations
have fax machines of their own.
Fax writing situation

Imagine that you and your partner work in the Export Department of Mahendra Woolen
Carpets Inc. with the head office located at Bishal Nagar, Kathmandu. Your boss Mr. Govinda
Rajbhandari has recently found a promising new Costa Rican customer in Katmandu, who
is interested in importing Nepalese carpet to Costa Rica. Because of technical problems and
the difficulty in getting through by telephone, your boss asks you to write a fax
Sample of the Fax
MAHENDRA WOOLEN CARPETS INC.

Bishal Nagar, Kathmandu
FROM: MAHENDRA WOOLEN CARPETS INC.
TO: Naves Limn, Puerto Limon, Cost Rica +406 778855
Thank you for your interest and enquiry about the Nepalese carpet and prices of
various products. To inform you, we have varieties of carpets of various designs
and patterns and quality, which we offer for sale on special discount price on bulky
import.
We are sending a sample of the varieties for your choice. Please let us know of it and
place order for the same.
The goods will be ready for shipment reaching you within 3 to 4 weeks from the date
of written order.
We would appreciate payment by irrevocable letter of credit confirmed on Nepal
Investment Bank.Ltd.
We look forward to hearing from you. For further information, write to us at the
above address.
Mr. Rajbhandari sends his best regards.
Best wishes,
............
MAHENDRA WOOLEN CARPETS
Resume Faxing: One of the most popular ways to send a resume to a prospective employer
is to send it by facsimile. Resume faxing is still the most efficient way of sending the job
application to the prospective employer.
With Faxresume. you can easily fax your resume to any job via Internet and increase your
resume‘s chances of being read. .If you are with online faxing, you can set your resume as a
file attachment in the employer’s office. You need to get the number of your recipient and fill
it in the recipient box.

5. Writing Follow-up Letters
Follow-up letters
The term “follow-up” is, in isolation, understood as something done or to be done in relation
to other things done earlier, or things towards accomplishing the committed assignment.
Copies of the minutes, notice, letters, etc. are sent to the member as follow-ups.
Follow-up and Remind letters. Sometimes, follow-up letters are confused with remind letters.
The two, in spite of similarity in sense, are a bit different. Against what a follow-up letter is,
a reminder letter is defined as:
Reminder letter: Remind letters are generally written by banks to realize loan/dues
from the debtors, who do not pay their dues in time in spite of being reminded of it. To
defaulters, at first, mild reminders are written, which, if not responded promptly, will
be followed by persuasive remind letters, appealing to the conscience of the debtor. Here,
the former will try to persuade the latter to pay the dues. Failing to receive any response
thereafter, banks will be obliged to write last resort letters with threats of legal action.
Sample of Follow-up Letter
THE GANESH TILE AND BRICK INDUSTRIES

Pulchowk, Lalitpur, Nepal
Mr.Govinda Bdr. Chitrakar
Branch Manager
Ganesha Brick Industries
Duhabi, Biratnagar
Dear Mr. Chitrakar,

You know the last meeting of the branch managers of our Industries held in
Kathmandu on 15 February 2011 had decided to expand our business by setting up
brick production units in various parts of the Eastern Nepal within the next fiscal
year, To this end, the meeting had decided to write to few heavy equipment industrial
machinery suppliers of India about the supply of machinery needed for the above
purpose. The head office wants to know if our branch managers have carried out
follow-up operations in response to the decisions taken in the February meeting. If
not, initiate necessary actions. Promptly. The head office wants to know what
progress has so far been made in this regard.
Reply this letter at the earliest possible date.
Yours sincerely
……………….
Chief Administrative Officer
25 February 2011

Sample of Reminder letter

----------------------------------------------------------------------------------------------------------------------------------
Dear Mr. Krishna
Krishna Auto Works
Subidhanagar, Kathmandu
This is to remind you that your account with us is three months past. Now your outstanding
payment due is Rs. 50, 000/- N.C (fifty thousand rupees) . We are obliged to think that you
have overlooked the matter owing to your busy schedule.
Hope that you will understand the situation and our position at the non-realization of
dues. So cooperate with us with payment at your earliest convenience.
Yours sincerely,
Hari Khadka
For ABC Bank
----------------------------------------------------------------------------------------------------------------------------------
6. Interviewing for Employment
Interview Facing Employment interview is crucial for both the interviewer and the
interviewee. Facing an interview and satisfying the interviewer is an art, skill and a
presence of mind of the interviewee. Getting a job in these days of cut-throat competition
has become much more challenging than even before. A job-hunting prospective candidate
should first be qualified and competent and has to keep himself at a competitive edge to
get a good job. The purpose of writing effective resume and letter of application in a bid to
get the job is to be short-listed for an interview. To draw an analogy, writing a resume and
a letter of application is just like your knocking at the door for someone to open it for you.
The entry into the room will be followed by an interview. Your winning a job depends
upon how you can impress the interviewer/s. Only an effective interview will help you
win the job. Your prompt response to the questions asked will be a plus point in impressing
the interviewer/s.
• Stages of Interview Mot interviews are conducted in three stages: a. the warming-up
stage (getting into the interview situation with a good appearance), b. the question-
answer, the largest stage in which you will be preoccupied with prompt answers asked
by the interviewers), and c. the summing-up stage, in which the interviewers frame
some idea about who should be selected.
The purpose of writing effective resume and letter of application in a bid to get the job
is to be short-listed for an interview. To draw an analogy, writing a resume and a letter
of application is just like your knocking at the door for someone to open it for you. The
entry into the room will be followed by an interview. Your winning a job depends upon
how you can impress the interviewer/s. Only an effective interview will help you win
the job. Your prompt response to the questions asked will be a plus point in impressing
the interviewer/s.

Interview Considerations for the Interviewee The following are some of the job interview
considerations. They mention what an average interviewee needs to do at the time of
attending an interviewee.
Appearing with a good appearance. This means presenting yourself with a good image to
give an impression to the interviewers.
Dress- up for impression Some countries and cultures place emphasis on dress and personal
grooming, contrary to the culture of expectations of personal appearance. This does not
mean wearing highly fashionable and stylish clothes. The point of argument is that the
interviewing board expects an interviewee to dress tidy and look neat and clean. Remember
that no one will like to see you in a shabbily dressed shape.
Punctuality Better, for many reasons, to arrive at the interview some twenty to thirty
minutes before the appointed time. Knowingly or unknowingly, your time may be
consumed in parking your vehicle, or in hair brushing or in straightening your neck tie.
It is therefore, necessary to consider the time factor.
Avoiding chewing gum or paan (beetle leaf), smoking, and drinking coffee, because they make
your gum sticky. The chewing gum could distort one’s speech; smoking could be rude,
and drinks- tea or coffee might make your mouth sticky affecting your articulation.
Being mindful of the body language Be straight, look responsive, and be concerned with
the interviewer. Look at the interviewer’s eyes expecting his gesture to make you sit
down, or do something else.
Moving with self-confidence Self-confidence is the interviewee’s strength, which should
be maintained throughout the interview. This helps the interviewee keep himself self-
possessed, not being nervous and not monopolizing the interview once one question
has been answered satisfactorily.
Coming well-prepared with necessary documents Bring necessary testimonials, letters of
achievements, and letters of recommendations and if any.
Controlling over speaking Speak slowly and politely, not arrogantly. Have self control;
do not speak over-confidently.
Watching the body language: Sitting straight, looking at the interviewer, being alert and
responsive is necessary.
Interview is a formal network of oral communication systematically planned and performed
in participatory discussion. Employment interview is a secondary approach for the selection
of prospective candidate in order to have proper assessment of the candidates profile,
behavior and attitude.
Following are the basic values to be considered by candidate in prior to attending the
interview.
a) Punctuality and time management
b) Formality and politeness
c) Dress code and get up
d) Appropriate use of body language
- Eye contact
- Facial complexion

- Movement of body
- Sitting position
- Presence of mind
e) Paralinguistic skills
- Clarity of sound
- Volume variation
- Maintain speaking speed
- Economize the use of non-fluencies
- Maintain the pause(sound)interval
Following are the interview skills/steps of interview

a) Informative skill (Rapport building round)
 Personal detail
 Academic Background
 Family Background
b) Comprehension Skill (Intensive round)
 Focused questions as per the objective of job
 Assessment of intellectual capacity
 Case questions and demo questions
c) Brain teasers skills (Logical round)
 General knowledge(IQ)
 Confusing questions
 Hypothetical questions
d) Illegal Questions (Subjective round)
 Religion and religious belief
 Personal habits
Overcoming Fear in an Interview

Job interviews, in most cases, might seem frightening and challenging. Some of the
interviewees feel humiliated at being asked odd questions posed by the interviewers. But
fear and such feelings could be overcome by knowing how it (the interview) works. The
following ways help overcome the fear and hesitation during interviews.
• Attend the interview with a fresh mental-up, with a confidence that you will do good
there by satisfying the interviewers.
• Understand interviewing organizations.
• Learn about the position.
• Plan to sell yourself.
• Prepare yourself with the right answers to the questions.
• Prepare success stories
• Stand firm and answer assertively.
• Look pleasant and happy
• Dress appropriately

CHAPTER - 5
ANLYZING INFORTMATION AND WRITING

REPORTS AND PROPOSALS
E. Improving Writing Skills for Analyzing Information and Writing
Reports and Proposals
Improving Writing Skills Since this Chapter deals with lots of writing activities, it is necessary to
devote some amount of time in understanding report toward improving writing skills.
Improving Writing Skills

Since writing occupies a significant place in formal organizational communication and the
effectiveness of every organization depends, among other things, upon writing skill, it is necessary
for the organizational people, especially the senior managers, to be familiar with better writing
skills. Improving writing skills entails: (a) the correct choice of words (b) sentence construction and (c)
structuring paragraphs. The three skills are elaborated below:
• (a) Choice of Words. Improving communicative writing depends first upon choice of words
in sentence construction. It is recommended that good manager during organizational
communication use short and simple words instead of long ones; use single words in place
of long phrases; short and concrete words instead of abstract expressions, short and simple
words instead of dull and unimpressive words; short and strong words instead of weak
expressions; active voice instead of passive voice; and single words instead of double entry
use.
Examples
i. Use of Short and Simple Words instead of Long Words
Short and Simple Long Words
inform familiarize
show demonstrate
although despite the fact that
do accomplish
but nevertheless
use utilization
proof verification

ii. Single Word Long Phrase

if in the event that
if in case
because owing to the fact that, due to
nearby in the close proximity of
refer with reference to
boom period of business prosperity
iii Simple Word Double Entry Words

fact actual fact
increasing ever increasing
iv. Action Verb Camouflaged Use of Verbs

discuss make a discussion
state makes a statement
Assess make an assessment
v. Active Voice Passive Voice

I. The manager will consider Your case will be considered by the manager
Your case. ii. Do it now. (Passive) Get it done now. (Passive)
Have you thought about (Active) Has any thought been given to our plan?
our plan? (Passive)
Guidelines on Sentence Construction People in the past associated themselves with writing
long and bulky sentences as an expression of wisdom and intellect. With things changing
with times, people now prefer to write short and simple sentences with compact and concise
thoughts within short sentences. To fine-tune sentence structures in business writing, the
following things should be considered.
Grammar Aspects of Language for Writing Correct Sentence Structures.
It is necessary to argue that sentence structures, besides being simple, short and concise and
expressive, have to be grammatically correct. Native speakers of English communicate in
English – both orally and in writing in grammatically correct sentence structures, quite
irrespective of the knowledge of grammatical rules. But it is not so easy for non-native
speakers, especially the adult learners. As such, knowledge of grammar seems necessary
for them to write correct English. One of the grammatical rules of foremost importance is
Syntax (Word Order)
(i) Word order: This is ordering of words according to the rules of Syntax. Simple word
order rules follow.

Chapter 5 - Anlyzing Infortmation And Writing Reports And Proposals
(a) Subject + Verb (We play), (b) Subject + Verb + Object, (c) Subject + Verb + Indirect Object
+ Direct Object, (d) Subject + Verb + Infinitive, (e) Subject + Verb + Compliment, (f)
Subject.+Verb Gerund, (g) Subject + Verb + Phrase, (h) Subject + Verb + Clause, (i) Subject+
Verb + Adverbial Adjunct, (j) Subject +Verb+ Object +Past Participle (We had the house
painted)
Note The Oxford Advanced Learner’s Dictionary of Current English (OALDCE), Third Edition
provides more examples of Verb Patterns
(ii) Placing words correctly. Words correctly placed give the right meaning. Misplaced words
create chaos and confusion.
Example 1
Both the views of Mr. Gopal Shivakoti and Mr. Singh are wrong. (words misplaced)
The views of both Mr. Gopal Shivakoti and Mr. Singh are wrong. (rightly placed)
(iii) Change in meaning with the change in the placement of words

Example 2
(a) Happily my father did not die. - means “Luckily the person did not die.”
(b) My father did not die happily. - means “The man died unhappily.”
(iv) Writing polite language. One of the attributes of effective commercial correspondence is
writing in polite language, when and where necessary. While doing this, one will,
sometimes, have to change the form of sentences- Assertive (statement sentence) into an
Interrogative. This needs a lot of practice. Prior to doing this, one must go through lot of
many similar sentence structures.
Example 3
Some of the simple remarks turned into polite forms are given below:
1. Please supply us the books ordered on 12th July.
It would be convenient for us if you could supply the books of 12th July order (polite).
2. Will she pass the open competition written test? –Interrogative Sentence
I just wonder if she will pass the open competition written test. (polite expression)
3. Please open the window for me?
Would you mind opening the window for me? (polite)
4. I request you to withdraw your claim.
It would be better if you would withdraw your claim. (polite)
(v). Avoiding expletives (useless) words like “here” and “there”, which have no meanings of their
own.
Example 4
There were sixteen army personnel who were ready to help us in need. (long)
Sixteen army personnel were ready to help us in need. (short)

Here we are! Here comes the hero in blue suit. There is a temple of Lord Shiva in the
middle of Ranipokhari.
(vi) Using Saxon words (of British origin) instead of Romance (of Latin origin)
Saxon words Romance words
living animate
dead body corpse
(vii) Avoid Surplus Words.

Maya ordered furniture that is of aristocratic class. (surplus words)
Maya ordered aristocratic class of furniture.
(viii) Avoid Repetition of Words

The tax officer has not received the payment covering invoices covering July purchase.
The tax officer has not received the payment covering the July purchase (no repetition)
(ix) Avoiding cluster of words

Cluster of words Better substitute
just sometime ago - recently
in spite of the fact - even though
in the middle of the day - at noon
(x) Writing in the direct instead of roundabout way

The tax collector is of the opinion that the tax should not be misused. (Indirect)
The tax collector stressed that tax should not be misused. (Direct)
(xi) Writing with you-viewpoint instead of we-viewpoint. Business letters are customer-focused
and written with you-viewpoint.
We have forwarded the textbooks you have ordered. (We-viewpoint)
You will be pleased to receive the textbooks of your order. (You-viewpoint)
(xii) Using collocations (grouping of words) in stead of long phrases
Report Writing
Operational business activities entail a lot of communication activities– more verbal and less
non-verbal. Oral and written communications constitute the whole of the organizational
communication activities. Most formal aspects of organizational operations are based on
written communication. Organizational policy plans and their implementation strategies,
rules and regulations, letters, memos, reports, office note, press release, advertisements and
many other things available on printed forms and formats are examples of written
communication. Report writing constitutes one of the most important forms of written

communication. Most reports are written by senior staff members within the organization.
They are written also by hired external consultants/ experts, and consulting firms that, on
request, write management audit report/s for improving organizational performance
effectiveness.
1. An Inside Perspective: Analyzing Data and Writing Reports and Proposals

Recollecting Information, Analyzing Data and Information and Organizing Information
in Reports.
Information collection in all cases of investigation is not as easy as it seems to be. In
many cases, the information is quantitative and in complex cases, statistical tools,
intended to examine the set of facts, are used. Such statistics are required to be descriptive.
2. A Timetable for Writing Reports

Though there are not any hard and fast rules regarding the timetable for report writing,
the nature of various kinds of report discussed in the Types of Report indicate the time,
period and occasion when a particular report is written. In short, a report is written on
demand. Accidental reports are, for example, written immediately after an accident
occurs when annual reports are written once a year for presentation in the annual function.
In police and security related organizations investigative reports are written very
frequently. In technical and research organizations, where research and lab tests form
parts and parcel of regular activities, reports are written as soon as a test or experiment
is made.
Frequency of Report Writing. Frequency of report writing depends on the size and nature
of organizations. In most large organizations, report writing is vital. Report writing
forms part and parcel of most companies. Engineers often write reports on technical
problems and the accountants on the company’s financial transactions, situations and
operations, and production people on various aspects of import and export operations.
Sales managers write reports on marketing matters. Report writing is the profession of
management consulting firms. Their reports are diagnostic in nature. Based on analysis
of findings, such reports focus more on remedial measures. Sometimes, individuals
write reports on a wide variety of communication skills. Reports are written also in
relation to consistency in time viewpoint – past and present. Of the two viewpoints- past
and present, select one, and do not change. The past-time viewpoint views the research
and the findings as of the past, and the present viewpoints reveal concepts and proven
conclusions as of the present. Here, all information can be assumed to be the events of
the present time of writing the report.
3. Collecting and Choosing Information for Reports

Gathering Information: As writing anything –report, proposal and any other thing is
unthinkable without information, gathering information is a task of utmost importance
in report writing. Mere collection of information – unrelated and irrelevant does not
make any sense. Gathering information involves the report writer in doing very many
things-getting himself to proper place where the source of information is abundant.
Apart from tapping primary and secondary sources, which also is not enough in modern
complex situations, a report writer, doing the research for writing the report on problems
and issues of his own organization may try to gather and review the information

available with the organization. In such a case the researcher is required to study all
the related materials available within the organization. The problem may be
management related, computer related, compute-related and technology-related.
Information collection in highly technologically advanced companies calls for formal
and research type of work information collection is much more challenging Various
types of problems - management related, computer related and production related need
various approaches Highly technologically advanced companies call for a formal and
research type of approach. Business-related problems require formal type of research.
They need more survey type of researches. In lab related researches, lab more lab work
is done to collect information the task might call for more techniques such as citing
references, quoting; paraphrasing and electronically techniques using bibliography Apart
from these, tapping Internet sources also could be one of the sources of collecting
information.
4. Analyzing Data and Information (findings) for Reports

Analyzing Data
Analyzing is a vague term. Analyzing various things for a wide range of purposes.
The term, pl. of Latin datum, means facts, things certainly known and from which
conclusions are made. To cite an example, data on a recipe item of a reputed hotel
analyze nutrition, including food labels, calories, protein, fat, carbohydrates and
glycolic etc.
Michelle Gainer has been working with schools, principals and district administrators
for more than 10 years helping them to understand and analyze data and implement
key
Data analysis Made Easy

Analysis and interpretation of data should be free from human errors. Some of the
important considerations towards making effective analysis and interpretation of
information are as follows:
i) Reporting facts as found: Attempts to make interpreting more or less interesting and
exciting through deviation in facts spoils the task.
ii) Summarizing only facts when they do not support conclusions.
iii) Not comparing non-comparable data, that is, dissimilar things should not be compared
to draw a conclusion.
iv) Not drawing illogical cause-effect conclusions. Things presented and comparisons
made must be logical. .
v) Avoiding unreliable and unrepresentative information: As After the collection of
necessary information and data come the analyzing and interpretation of
information, This is one of the major step in report writing. While doing this, it is
necessary to keep in mind two things: (a) reader’s needs and (b) problem addressed
in the report. Here, the report writer, who uses his own knowledge, information,
objective judgment and analytical skills, has also to consider ethical aspects in
relation to adequacy and appropriateness of the information collected. In this
context, analyzing information becomes a mental process. To understand

interpretation in a broader perspective, it is a mental process of dealing much of

the information found in secondary information may be unreliable due to collection
error, personal research biases and other technical and non-technical factors, it is
better to avoid unrealistic data.
vi) Not oversimplifying facts: It is likely that in reports specially when dealing with
complex problems, inexperienced report writers may ignore or exclude the important
things needing necessary elaborations.
Tips for Better Analysis of Data and Information for Reports

For better interpretation of findings, report writers are advised to consider some of the
following attitudinal practices:
a) Maintain a judicial attitude. Think that you, as a judge, are looking at things fairly,
impartially and independently, not to entertain or incorporate any personally
biased points in your interpretations of data/information
b) Consult others, who know better than you because two heads are better than one head,
c) Test your interpretations. As you could be the best judge of what you have
done, your findings should be tested and tempered on the basis of your
knowledge, skills, professional expertise and hard work. This entails two or
three tests, the first of which is the test of experience using the underlying
theme on the basis of rationality and reasonability. Ask yourself: “Are the
things I’m doing reasonable?”
The second test is to expose your findings to critical comments. Assume that your
findings have flaws and errors which are subject to other generalizations. Compare
this assumption to the original assumption on the basis of evidences to ensure that the
second one is baseless because it is not supported by evidences and test result.
Use of Statistical Tools in Interpretation

Researches giving quantitative information need to be analyzed and interpreted with
statistical tools and techniques which provide various methods for analyzing data. As the
scope of statistical technique is vast, we generally use descriptive statistics that employ the
medium and the mode that will help you find a common value of variances and standard
derivations.
Sometimes, unexplained statistical calculations create confusion to the readers. Such a
problem should be addressed through necessary explanations.
A report is examined study of fact and situations with view to investigate problems, explore
new ideas and recommend the substantial solutions. Report writing comprises the following
stage.
 Pre-writing stage:
- Gathering of information and data
- Classification of data
- Tabulation of data

 Drafting stage:
- Note making
- Screening and scanning
- Analysis and observation
 Editing and presentations:
- Style of report presentation
- Concept editing
- Language and grammar
Types of business report
Informative (Short) Investigative report
Proforma/progress report Mgmt/operational report Research report Recommendation report
Financial report Situational report
 Components of informative report:

- Background
- Objective
- Details/feasibility
- Executive summary
 Two forms of report writing
a) Letter style
b) Schematic style
a)
ABC INTERNATIONAL
NAXAL, KATHMANDU
Phone:
Fax:
Website
Memo Report
No: 01
Date: May 03, 2013
To: CEO
From: Director, sales and Marketing

Subject: Performa Report of March, April 2013
This is in reference to the circular received from CEO’S office regarding the Performa
report of each department .This report briefly presents the major activities and its output
performed by the sales and marketing department from March-April 2013. This report
has its objective to:
- Inform and update the periodic activities
- Analyze potentials
- Make an assessment of overall activities.
Details/Feasibility
S.
Activities Unit Achievement Remarks
N
1 Advertising 4 • Media coverage in local • The company advertised
and Publicity media network through Kantipur daily,
• Consumer awareness The republica, Ad
• Increment of sales commercials on Kantipur
TV and News 24.
2 Meeting with 1 • Business networking
international • Joint promotion • The company had a
delegates agreement meeting with 10 delegates
from Japan, Korea and
3 Participation in • Product show costing Thailand
Trade fair and • Consumer publicity
Expo 1 • Data base mgmt and • Participated in National
sales increase fair organized at Bhrikuti
Mandap.
Executive Summary:
This study shows that companies required to have the following urgent ‘initiatives’
• Needs to highlight more on marketing campaign
• Company is advised to participate in more exhibitions and fairs
• Start lobbying for international marketing and linkage
Q1. Write an operation report representing XYZ electronics by analyzing about annual
operation events for the fiscal year 20-4-15. Kindly incorporate major activities, budget
allocation along with program highlights and its benefits.
Q2. ACE development bank has nominated you to participate in the annual SAARC
conference about the challenges of financial market. Prepare a situational report to
submit the managing director by describing about your participation and the
importance of events.

 Investigating Report:
This refers to a critical analysis of situation and the study of problem in order to investigate
major problems and recommend and effective solutions. Thus, unlike informative reports, it
is more focused to a specific problem of organization. Following are the basic components
of investigating report.
- Statement of problem
- Objective
- Methodology(Sampling, interview, secondary data)
- Findings
- Conclusion
- Recommendation
- Bibliography(Only for secondary data)
AN ANALYTICAL REPORT ON
JAGADAMBA STEELS PVT.LTD
May 03, 2013
Statement of the problem

This study exclusively focuses on the operating performance of Jagadamba steels Pvt.Ltd.
along with the financial status of the company in the fiscal year 20-3-2014. It will also
highlight on specific issues related to financial mgmt, credit analysis and the assessment of
business performed by the company. So, this research emerges out of basic problem related
to the financial crisis in the company with the following major objectives:
- Study and analyze the managerial efficiency of the company
- Observe production and sales status
- Interact and interview with the employees
- Explore the most frequent problems
- Suggest the management for best effective solutions.
Methodology:
 Primary sources of information
• Interview
• Meeting
• Interdepartmental discussion
• Analysis and supervision of the company’s financial performance
• Secondary sources of information

• Quarterly financial reports
• Audit reports
• Balance sheet of the previous fiscal year since 2009

Finding and feasibility analysis:

1. Study of campaign financial and operating performance it is noted at admin and OH
expenses are in the higher side due to unplanned recruitment policies
2. Low operating performance of the employees due to ineffective HR control in matters of :
- Job assignment and deputation
- In punctuality and employee turnover
- Lack of motivation among the employees due to low social securities and opportunities
of professional growth
- Lack of capacity building approach, training and orientations to the employees
- Reward and punishment policies are found quite nominal even negligible
3. Financial abuse and indiscipline is found very much intense due to:
- Lack of budget projection and investment
- Poor investment , planning approaches
- Corruption and bribery
- Ineffective financial control and decision making policy
- On the basis of study made on available sources (primary and secondary). It shows
that the company’s financial status is growing weaker by 20% loss/deficit in the
increasing trend since fiscal year 2009 to 2012.
Conclusion:
The entire study and observation made to the company shows that the margin of loss is ever
increasing then the income sources with the loss of 25% in the present value. This loss is likely
to affect the entire mechanism of the company’s cooperation, production and HR activities. If the
same trend continues the company will be totally bankrupt by the end of 2016.
Recommendation:
1. The first and foremost initiative of the company should be strategic recovery of financial
loss at the rate of 25% in the present value by applying the following approaches:
- Downsizing of admin expenses by economic utilization of office resources
- Cut off the staff/employee luxury allowances such as fuel, vehicle, communication etc.
- Controlling of financial abuse in matters of fuel consumption, electricity and day to
day expenses
- Processing of loan/overdraft facilities with the bank/financial companies
- Downsizing of employees numbers to 60 officials only
- Financial restrictions, procure policies should be streamlined for more transparent
wage.
- Regular auditing and outsourcing of financial expenses in time of planning and
projection.

2. Upgrade and improve the logistic resource and plants

- Maintenance and renovation of existing plant machines(total 4) instead of fresh
purchase.
- Rental services for transportation is recommended rather than purchasing of office
vehicle in order to minimize the operating cost.
- Production planning should be made justifiable to basic market requirements through
proper market study and analysis.
3. Develop proper strategies to compete in the market

- Product differentiation strategy and focus branding approaches
- Promotion and publicity of product to top the reasonable and local market through
corporate alliances with a local dealer, sales agents on the targets bonus scheme.
4. Human resources analysis and Mgmt.

- Review on recruitment policies and job assignment
- Employee performance control mechanism through regular reporting appraisal ,
performance auditing
- Participatory mgmt. approach and group decision making
- Corporate liberalism and transfer of liabilities through joint investment and issuing of
share to the employees.
 Proposal:
A proposal is an exploration of innovative ideas, concepts as well as techniques for the
successful operation of business. At the mean time it Is a persuasive offer to supply services
or products to the needy customers, clients and last of all the entire corporate fraternity. In
this regard a proposal is formal networking of business to ensure mutual benefits and
financial prosperity.
There are two major prospective of proposal:
(a) Research proposal
(b) Business proposal
 Components of Business proposal:

- Background
- Objectives
- Service highlights/Activities
- Competitive benefits/Advantages
- Terms and conditions
- Conclusion

GALAXY MANAGEMENT GROUP

Tangal-17, Kathmandu
Phone………………………
Fax…………………………..
E-mail……………………….
Website…………………..
17th May, 2013
Background:
Galaxy Management Group popularly known s GMG consultant is a professional venture
of the leading chartered accountancy, management professionals as well as highly acclaimed
scholars of the nation founded in 2009, GMG is providing quality mgmt services, professional
advisory, accounting orientation and auditing services to the companies and institutions
in the country. This proposal is exclusively about consultant services that include leadership
management, financial management and environment planning approaches to the needy
companies and institutions. It comprises the following major objectives:
(a) Develop managerial efficiency and professionalism in business
(b) Facilitate companies for future investment plans, development and promotion.
(c) Contribute to essential leadership management business operation and overall health
of the organization.
Service highlights/activities
SN Activities/programs
(d) Bonding Financial detail
corporate network,Remarks
business relationship and joint promotional activities.
1. Leadership The package of (a) This package comprises 10 days
(e)
management and Nrs.50,000 exclusive orientation, class room
consultancy presentation & group discussion
(b) Case study analysis & mini-research
activities
(c) Seminar, workshop and paper
presentation
(d) Certification and accreditation with
the ministry of education
2. Advance accounting 3 weeks package (a) This package is applicable to the
training and of Nrs.70,000 for institution for their employees not
counseling institution exceeding to 15 employees in a
group
(b) Training comprises both the
computerized and manual
(c) Job placement and recruitment to
the deserving’s

SN Activities/programs Financial detail Remarks

1. Financial analysis, Nrs.100,000 for 6
planning & auditing months
2. Strategic planning, The package of (a) Strategic promotion and marketing
policy making etc. one week (b) Marketing research & customer
Nrs.30,000 feedback
(c) Consumer behavior analysis
Special highlights:
(a) The above services are customized packages developed through extensive research,
study & analysis to meet the market requirement and professionals’ deliverance.
(b) Highlights will be made to practical works like mock research, mini-case studies and
professional dealings so as to develop applied skills in everyday business operation
(c) Classes are conducted by professionals with great experience in the filled and skilled
enough to furnish your professional requirements.
(d) Affordable group packages and accessible to institution.
Business terms and conditions:

(a) The above packages are deemed to apply only for the institutional provision to be
sponsored by the company to the group of employees not exceeding 15 members in the
group
(b) Every session will comprise classroom method and applied methods for presentation,
field work and research.
(c) Every logistic arrangement such as venue, stationeries and AV equipment should be
provided by the respective component
(d) 80% of the applicable charge for a package will be provided in time of signing the
agreement and the remaining balance to be settled upon the completion of intend project.
(e) Classes will be held 5 days in a week in a business day starting from Monday to Friday
only for the morning session, from 7 am to 9 am only.
Conclusion:
We sincerely believe that the above packages will meet the emerging necessity of your
institution. Please feel free to interact with us or any negotiation in the project via mail or
telephone enquiries on the below:
Phone no: …………………………..
Contact person: ………………….
E-mail: ………………………………..

5. Organizing Information in Reports

Effective report writing does not end just with collecting data. The information collected
must be organized in a logical way. Some of the ways are described below:
i) Outlining the Contents: It is systematic ordering of contents presented in the report. In
longer reports, such an outline will help you form headings and the basis of table of
contents. In outlining, use any system of numbering or formatting Technical executives
use sophisticated software to update their outline symbols.
ii) Using Systems- Conventional or Decimal: The example of the Conventional system
appears like:
(a) Conventional System
I. First-level heading
A. Second level, First part
B. Second level, Second part
(b) Decimal System
1.0. First –level heading
1.1. Second level, first part
1.2. Second level, second part
(c) Organization by Division
One method of outlining contents is to divide the contents into smaller and smaller
sectors. This is followed by sub-dividing the tents in each major section.
(d) Division by Conventional Relationships
Time, place, quantity are the basis for such relationship
6. Presenting Information Effectively

As collection and analysis of information, and facts and figures and organization of
interpretation of data would not constitute the writing of a good report, presenting the
information effectively is most crucial in report writing. Of the many factors to be considered
in this respect, the following provide some of the requirements of effective presentation of a
report:
(a) Communicating clearly and promptly
(b) Get the right and most important things in order. It is not necessary that the first draft
should contain everything in a perfect format
(c) See that the use of words is interrelated to the structure of the of the report
(d) Coherence and coordination between the beginning and ending pars
(e) Contain answers to what , when, how questions
(f) Maintain a logical and objective interpretation of facts.
(g) Show that you made every possible effort towards search for information to show that
objectivity is the believability. To this end, do not use personal pronouns like “I’s,”
“We’s”, etc.

Regarding objectivity in report writing, some of the writers stand in favor of using personal
style to make reading of reports more interesting .As such, letter-type of report writing also
has become very common. While making a fair judgment of the two- personal and impersonal,
it is worthwhile to make a balanced view that both have merits and weaknesses. .It is
advisable to use the personal style for writing regular short reports and use Impersonal style
for writing long and formal reports.
Examples of Personal and Impersonal Styles:
Personal Style Impersonal Style
Having studied the advantages and A comparative study of advantages and

disadvantages of the reservations on disadvantages of the reservation
free boarding at school hostels for scheme policy adopted by the
children of the marginalized government shows that this is not a
community, I opine that this is not a good scheme, as it is likely to encourage
good practice, because once such even the undeserving children to lay a
reservations are opened, even the claim for the free boarding facility at
undeserving students might claim for school hostels.
the same privilege.
In both of the above, maintain interest of the readers, but not at the cost of readers’ focus on
the information.
On structure of the report

In writing an effective report, focus should also be laid on the structure. The writer should
be quite clear about the structure of the report. He should be clear about when to make the
report long or short and formal or informal. The answer to questions on the structure will
depend on the situation. The structure tends to be different according to the length and
formality. Structure matters much more in long and formal reports, but matters less in the
short and informal report.
Complete Form of the Report for Presentation

The complete format of a finished report will contain the following:
(a) The Cover Page bearing, bearing on top of the page the name of the organization
publishing the report.
(b) The Acknowledgement, in which thanks deserving hands, who have who have extended
support and cooperation to the report writer or team of writers in writing the report.
Normally, thanks or sincere gratitude is expressed for the advisory support/services.
Thanks are also extended to the hands providing technical support in preparing and
publishing the report.
(c) Table of Contents. This is chapter-wise presentation of contents.

(d) List of Tables used in the report. This is graphic use of information .Depending upon the
needs of the report; tables, charts, graphs, etc. are used.
(e) The Body Part of the Report. This is the sum total of the (i) Introduction, (ii) Objectives of
Writing Report (the reasons for writing the purpose), (iii) Target Group, (iv) Methodology.
This involves the methods used during search fro information, and also the problems
faced during information collection, (v) Elaboration of Major Findings, (vi) Conclusion.
and (vii) Appendix, containing the names of the parties involved in collecting, and
choosing information and updating the information.
7. Report Types: Informational and Analytical

Informational Reports: Some reports focus more on accumulation of information (contents)
rather than on analysis of things. It presents the data collected or facts studied in an organized
form. Unlike in other detailed reports, it does not include conclusions and recommendations.
A bank report, for example, containing the data on deposits and investments is an example
of informational report.
Business reports are classified as Pro-forma, Informational, Structural and Organizational reports.
Analytical Report (contains recommendations, suggestions). Yard-stick report, feasibility
report, research report, recommendation report are more or less analytical.
The major parts and components of an Internal Analytical Report includes: i. Terms of
Reference (TOR), ii. Actions or measures taken iii. Findings of infestation and, iv. Conclusions
and recommendations.
8. Formal and Informal Reports & Proposals

Formal Report: For business and academic audiences, you need to keep things a bit more
formal. With Formal writing, which doesn’t mean rigid and stiff, you can make business and
academic writing lively and interesting. This can be achieved by avoiding jargon and keeping
things simple. Keep the fancy language and acronyms to a minimum, and don’t write long
and convoluted and confusing sentences and paragraphs.
Informal Report: An informal report is written in person – to - person communication. Often
written in the form of a letter or memorandum, its length ranges between a few lines to
several pages. Informal reports different from the formal ones are less structured. A letter
type of report is an example of it.
Official or unofficial. A formal report, usually long, needs to be presented in a prescribed
form. More structured, it is prepared according to the prescribed procedures. A formal
report can be both statutory and non-statutory. Reports on day-to-day business affairs and
problems created therein are not much formal and long.
An Overview of Preview of Proposal Writing

Definition: A proposal is defined as a persuasive presentation seeking consideration of
something. It is also a selling document of a job to be done at the satisfaction of an individual
/ organization. It is, in other words, a bid, in writing, for sale of products or services appealing
for grants and donations to do the work. Examples: (a) The: Merchant’s Bank, Dilli Bazar’s
proposal of merging with the Lokhit Commercial Bank, Anam Nagar or (b) Mercedes Benz’s proposal
to collaborate with Tata, or (c) Japan’s Mazda with India’s Swaraj or Ashok Leyland.

A company offering a new product or service may write a proposal and submit it to the
concerned organization, seeking approval for the proposal. This may be within the
organization. External proposals are written in response to the call made by the service-
seeking organizations – governmental as well as non-governmental...
Who makes proposals? Proposals are made by an individual, group of individuals or
organizations to individual/s or organizations. Organizations- governmental as well as non-
governmental - invite proposals- from interested parties for carrying out various business/
service activities. Example:
PLAN-International- Nepal invites proposals from interested professional

consultants / management consulting firms for research study on the birth
registration situation of five districts of Far Western Nepal.
Prospecting proposals are very much like writing rational sales letters. A business firm offering
unique services might submit an unsolicited description of the services to a business
organization that might use the services. .
Proposal length: Proposal writing ranges from writing a simple e-mail to full-dress reports,
and they may be formal or informal.
Terms of Reforms (TOR: Like in report writing, proposals are written according to the
organizations terms of reference which is mentioned in the proposal ads.
Formality Requirements: .All proposals do not have to meet the same formalities. The
difference lies in formality. A university’s proposal for research work on Research Methodology
from some other organizations has to be strictly formal, whereas a Textile Manufacturing
Company’s proposal for the introduction of more powerful and efficient motors could be
informal.
Criteria for Proposals: The proposal writing job involves:
a. Title page is like a dust-cover of an audio-recorder. It is the name of the proposal title. It
also includes the name of the proposal-writer and the date of submission of the proposal.
A PROPOSAL ON THE CHILD LABOR SITUATION IN NEPAL

Prepared by: Lal Bhadur Shastri
For
Nepal Administrative Staff College, Jawalakhel
Submitted by: Govinda Silwal
September 23, 1993
b. Cover letter prefaces the proposal and gives an overview of what is to follow. Provides
an answer to a. why write the proposal, b. what it contains and c. when actions occur, etc.
c. Table of contents provides information about the contents for the readers who might take
a look at them from their individual perspectives. A flawed table of contents may give
a poor impression to the proposal receiver.

Table of Contents
List of Illustrations …………………………………………v iii
Abstract ………………………………………………………iv
1.0 Introduction …………………………………. ………… 1
1.1 Purpose ……………………………………………… 3
d. List of illustrations gives a picture of several tables, charts and illustrations. The list
must be a full illustration of individual names of figures. A flawed or poor illustration
will be like this:
Fig 1. ..........…………………………….........………….… P age 301 (flawed)

against the following clear illustration:
Figure 1 …. Income Generation Activities in Villages … Page 301 (clear)
e. Abstract or summary provides quick but complete information about the details of the
proposal, which will be helpful for those who do not have time to read the full text.
f. Introduction mentions two problems: (a) purpose (telling the purpose of writing the
proposal) and (b) problems (faced during the period of observation and writing)
Cover Page of a Proposal
PRPOSAL TO KEEP COLLEGE PREMISES CLEAN

For
Times International College
Submitted by
Govinda Das Shrestha
Engineering Technician
September 15, 2008
Example
Purpose: The purpose of this proposal is to study the real child labor situation in
Nepal so as to recommend the Government and the concerned donor agencies/
NGOs and INGOs to address the identified problems by taking necessary measures
Problem statement should be limited to one to three sentences.

g. Discussion (the body of the proposal) occupies nearly 85 percent of the text. Contains
everything ranging from the existing situation, working methodology to the projected
milestones and cost charts.
h. Conclusion / recommendations are like prescriptions written by physicians for patients. It
deals with ways of means of doing things better for the concerned party in the future.
Executive chiefs will cast a cursory glance at them in the way they do at the abstract.
i. Glossary. It is an alphabetized list of high-tech terminology placed after the report
conclusions/recommendations.
Proposal Writing Activities: The writing requires more work – collecting more data,
organizing more information and revising the collected data and information. In short,
report writing involves:
• Prewriting; Follow Prewriting techniques which include: Listing /brainstorming, asking
Wh-questions, flowcharting, mind mapping, etc. Organize the inputs in some rational
order...
• Writing: This involves reviewing your writing. The act involves organizing the data,
managing the contents in chronological order, and writing carefully conclusions/
recommendations
• Rewriting: by adding details for clarity and doing other necessary things .
Bibliography:
Guffey, M. Ellen. Business Communication: Process & Product. Thomson: South Western.
Jain, VK and Biyani, Omprakash.PBusiness Ethics and Communication. S. Chand & Company
Ltd.Ramnagar, New Delhi, 2012.
***

SECTION B
MARKETING


CHAPTER - 1
MEANING OF MARKETING AND MARKETING MIX
1.1 Meaning of Marketing

Marketing activities are part of everyday life. All types of organizations need marketing.
Marketing has gained a great deal of importance in modern organizations to achieve objectives.
Organizational success depends on marketing ability.
To the general public, marketing is selling products. However, selling is only a part of
marketing. Marketing satisfies customer needs. It creates value for customers.
Marketing is demand management. It stimulates demand for products. It helps to find out
customer needs. It decides what products should be offered to satisfy their needs. It matches
products with customer needs.
Marketing is concerned not only with attracting customers but also with retaining customers.
It is carried on long after the customer has bought the product. It aims to develop long term
relationships with the customers.
Marketing identifies and satisfies human and social needs to achieve organizational
objectives.
Definition of Marketing
 According to William Stanton Marketing is a total system of business activities designed to

plan, price, promote and distribute want-satisfying products to target markets to achieve
organizational objectives.
 According to William Stanton Marketing is a total system of business activities designed to

plan, price, promote and distribute want-satisfying products to target markets to achieve
 Adock : Marketing is offering ”the right product, in the right place, at the right time.”
 Encarta Dictionary: “Marketing is the “business activity of presenting products or services
to potential customers in such a way as to make them eager to buy.”
For our purposes, Marketing can be defined as follows:

The marketing process encompasses all activities aimed at identifying and satisfying
customer needs through exchange rela-tion-ships to achieve organizational objectives in a
dynamic environment.

Business Communication and Marketing
The above definition of marketing has the following key points:

a) Marketing is a process
Process is a systematic way of performing activities. Marketing process manages
marketing activities. Such activities are of value to customers.
b) Marketing consists of activities

An activity consumes resources and time. It can be performed by individual, group or
organization. Marketing consists of activities. They can be:
 Product-related activities: They are concerned with new product development,
modifying existing products, branding, packaging, labelling, and quality control.
 Price-related activities: They are concerned with pricing objectives, pricing policies
and strategies and pricing method.
 Place-related activities: They are concerned with distribution of products. They
consist of distribution activities through channels and physical distribution.
 Promotion-related activities: They are concerned with promo-tional objectives,
promotion mix, media selection, sales promotion schemes, public relations and
personal selling.
c) Marketing satisfies customer needs

Human needs are the starting point of marketing. Needs are basic human requirement.
Products that give value to customers satisfy needs. Customer need identification and
satisfaction is the focus of marketing. Marketing deals with identifying and meeting
human and social needs.
 Wants are specific satisfiers of needs. Products satisfy wants. For a hungry person,
food is a need but ‘momo’ is a want.
d) Marketing Facilitates Exchange Relationships

Exchange is a value creation process. It is the act of obtaining a desired product from
someone by offering something of value in return. Marketing facilitates exchange
relationships between the buyer and the seller. (Figure 1–1)
Money
Something
BUYER of value SELLER
Product
Figure 1-1: Exchange Relationships in Marketing

Chapter 1 - Meaning of Marketing and Marketing Mix
Five conditions should be satisfied for exchange to take place:

i) Two or more parties should participate as buyer and seller.
ii) Each party should have something of value that the other party desires, such as
product, money.
iii) Each party should be capable of communication and delivery.
iv) Each party should be free to accept or reject the offer.
v) Each party should believe that it is appropriate to deal with the other party.
 The focus of exchange is on developing and sustaining relationships with
customers.
e) Marketing helps achieve objectives

Objectives are end results to be achieved. Marketing helps to achieve
organiza-tional objectives. They can be:
 Profit: It is excess of income over expenditure. It is the primary objective of business
organizations.
 Service: It is performing useful service to enhance consumer and social welfare.
Non-profit organizations have service objective.
 Growth: It is growth in terms of sales, market share and profits. Growth is the
objective of all organizations.
 Survival: It is staying alive in future. Organizations pursue this goal during
economic difficulties.
 Leadership: It is market leadership through continuous technological innovation
and quality improvements.
f) Marketing occurs in a dynamic environment

Marketing is environment specific. It occurs in a dynamic environ-ment. Changing
environmental forces provide opportu-nities and threats to marketing. Such forces are
political-legal, economic, socio-cultural and technological.
g) Marketing consists of business activities:

Marketing is environment specific. It occurs in a dynamic environ-ment. Changing
environmental forces provide opportu-nities and threats to marketing. Such forces are
political-legal, economic, socio-cultural and technological.
Box 1–1: Core Concepts of Marketing
1. Needs:
They exist in the individual. They describe basic human requirements. They indicate a state
of deprivation of some basic satisfaction. People have various needs:
 Physical needs for food, clothing, shelter, sex.

 Safety needs to protect from physical harm and economic threat.

 Social needs for love, friendship and belongingness.
 Ego-related needs for status recognition and self-esteem, and
 Self development needs for knowledge, achievement, and creativity.
2. Wants:
They are specific satisfiers of needs. Wants are shaped by:
 Socio-cultural forces: Reference groups, friends, social class, ethnicity, language and
religion.
 Institutions: Families, schools, business, etc.
 Individual: Personality, life style, etc.
Specific products satisfy wants. Marketing influences wants.
3. Demand:
They are wants for specific products backed by ability and willingness to buy. Wants backed
by purchasing power (money) and willingness to spend the money become demand. It
stimulates and satisfies demand.
4. Market:
A market consists of all potential customers having a need or want who possess ability and
willingness to engage in exchange to satisfy that need or want. In other words, there should
be:
 People with needs or wants to satisfy.
 Money to spend.
 Willingness to spend through exchange.
Markets can be: Consumer, Business, Institutional, and Global.
5. Marketing:
Marketing is a process which encompasses all activities aimed at satisfying customer needs
and wants through exchange relationships to achieve organizational objectives in a dynamic
environment.
6. Satisfaction:
It is the customer’s perceived performance from a product in relation to the expectations. The
customer is dissatisfied if the performance falls short of expectations; satisfied if the performance
matches the expecta-tions; delighted if the performance exceeds expectations.
Marketing aims for total customer satisfaction by matching product performance with
expectations.

1.2 Importance of Marketing

Marketing is important to consumer, organization and society. This is clear from the
following points: (Figure 1–2)
1.2.1 Importance to Consumers

Marketing is important to consumers in the following ways:
a) Standard of Living: Marketing delivers standard of living to consumers. It offers
products that satisfy their needs. Safe and hygienic products of high quality improve
the quality of life of consumers. Marketing also facilitates life style changes.
Figure 1–2: Importance of Marketing
b) Value Addition: Marketing adds value to consumers through delivery of product

at right place, in right time and in right quantity and quality. It creates value by
facilitating exchange relationships.
c) Information: Marketing provides information to consumers about product, price,
place and promotion. This promotes efficient buying for consumers.
d) Product Assortment: Consumers desire large variety of products. Marketing
facilitates assortment of products. Customers can get all the products they want at
convenient locations. They can exercise freedom of choice.
e) Satisfaction: Better product performance provides satisfaction. Marketing provides
satisfaction to customers. It facilitates production of products that match consumer
preferences. Consumers get satisfaction from such products.

1.2.2 Importance to Organization

All organizations need marketing. It is important to organizations in the following
ways:
a) Demand Management: Marketing stimulates and manages demand. Various

promotion tools stimulate demand. They inform, per-suade, remind and reinforce
customers about the products. It also provides valuable information about markets,
consumers and competitors.
b) Product Distribution: Marketing distributes products manufactured by the
organization. It distributes the products of right quality in right time to right place
in right quantity. Customers can get products of their choice right at their doorstep.
c) Coordinated use of Resources: Marketing identifies market opportunities in target
markets. Organizations can choose the most profitable segments. This facilitates
effective use of resources. Integrated approach to marketing facilitates coordinated
use of resources.
d) Objective Achievement: Marketing helps organizations to achieve their objectives
in terms of profit, service or quality leadership. Price and non-price competition
can be used to influence profit and market share. Marketing mix can be changed to
meet competition and consumer needs.
e) Environmental Adaptation: Marketing monitors environmental changes to identify
important trends. Changes in consumer preferences resulting from technological,
economic, political and socio-cultural forces can be monitored. This facilitates
environmental adaptation of the organization.
1.2.3 Importance to Society

Marketing survives and grows in social context. It is important to society in the following
ways:
a) Social Well-being: Marketing pursues social responsibility objective along with

other objectives. This safeguards the well-being of society. The societal interests
are protected through:
 Environmental Quality: Natural resources are properly used. Pollution is
controlled. Environment-friendly products are made to promote social interests.
 Planting trees, recycling used materials, and saving on energy use also enhance
social well-being.
b) Employment Generation: Marketing is an important source of generating
employment opportunities. Socially and economically disadvantaged groups can
be given preference for employment. The middlemen are important creators of
employment. So is distribution system.

c) Community Needs: Marketing contributes to social causes, such as education,

health, arts, culture and sports. It uses its expertise to solve social problems. It
supports charities. It meets community needs. It sponsors social welfare
activities.
d) Economic Management: Price influences factors of productions. It determines
supply and demand. It also affects saving and investment. It is an important
tool for economic management. Most economic decisions are affected by
marketing.
1.3 Meaning of Marketing Mix

Marketing mix is a blend of product, price, place and promotion tools. It is offered for
customer need satisfaction. Organizations must create and manage an effective marketing mix
that satisfies customer needs in a target market.
■ According to Philip Kotler

Marketing mix is the set of marketing tools that the firm uses to pursue its
marketing objectives in the target market.
The components of marketing mix are known as 4 Ps (Figure 1-3):

 Product: Offer to the target market.
 Price: Function of setting what customers pay.
 Place (Distribution): Getting the product to target market
 Promotion: Communicating with target market
Figure 1-3: The Elements of Marketing Mix

The four components of marketing mix are interrelated. Decisions in one element affect
others.
The design, implementation, and control of the marketing mix constitute important
aspects of marketing. Organizations should offer different marketing mixes for different
target markets. Ultimately, marketing management is the management of the marketing
mix.
The marketing mix should satisfy customer needs. It should be cost effective. It should
change with changes in the environment and customer preferences.
1.3.1 Components of Marketing Mix

Product, Price, Place, Promotion (4 Ps) constitute the components of the marketing mix.
Each component has its own mix. (Figure 1-4)
 Product Mix  Price Mix
 Place Mix  Promotion Mix
Figure 1-4: Components of Marketing Mix

a) Product Mix
A product is any offering that can satisfy customer needs. It can be goods, services,
ideas, experiences, events, places, properties, organiza-tions and information.
Components of product mix consist of:
 Product variety: Product lines and items offered
 Quality: Standardization and grading (high, medium, low).
 Product design: Shape, colour, look.
 Features: Size, style, functions
 Branding: Name, mark, sign, symbol
 Packaging: Container or wrapper
 Services: Presales or after sales services
 Warranties: Free repair and maintenance
 Guarantee: Replacement of defective product.
b) Price Mix
Price is the amount of money that customers pay for the product. Components of price
mix consist of:
 Setting list price: It is one price for all.
 Discounts and allowances: They provide price flexibility.
 Terms of sale: They are credit terms and payment period.
c) Place (Distribution) Mix

Place includes various activities undertaken to make the product accessible and
available to target customers. Components of place mix consist of:
 Channels: They can be direct or middlemen consisting of wholesaler, retailer etc.
 Physical distribution activities consisting of:
i) Order processing: Receiving, handling, filling orders.
ii) Warehousing: Storage facility until the product is sold.
iii) Material handling: Movement of products.
iv) Inventory management: Control of costs and levels of inventory.
v) Transportation: Carrier type and mode for transport of product.
d) Promotion Mix
Promotion includes all the activities undertaken to communi-cate and promote products
to the target market. The components of promotion mix consist of:

 Advertising: Paid form of nonpersonal communication with buyers.

 Sales Promotion: Short term incentive to promote sales.
 Publicity/Public Relations: Programmes to promote or protect company image
or products.
 Personal Selling: Personal communication to persuade buyers.
Organizations can change price mix and promotion mix in the short run. However, product
and place mixes can only be changed in medium term. Organizations should have different
sets of marketing mixes for different group of customers.
Self-study Questions
1. Define marketing. Explain the key points in definition of marketing.
2. What is marketing? Why is it important in the business world?
3. What is the importance of marketing to consumers?
4. Describe the importance of marketing to organization.
5. Why is marketing important to society?
6. Define marketing mix. Explain its components.
7. Describe the components of product mix.
8. Explain the components of place mix.
9. Describe the components of promotion mix.
10. Describe non-price components of marketing mix.
11. Why the knowledge of marketing is so important to a manager?
12 “Marketing is creating demand, analyzing demand and satisfying demand.” Comment.
13. “The starting point of marketing is people with needs to satisfy.” Do you agree with
this?
ICAN Questions
1. Briefly explain marketing mix. (Dec 2009)
2. Explain the importance of marketing to consumers. (Dec.2010)
3. What is marketing mix controllable and tactical in nature? (June 2010)
4. What is marketing? What are the major features of marketing in Nepal? (Dec.2011)

CHAPTER - 2
EVOLUTION OF MARKETING CONCEPTS
2.1 Introduction
Various concepts of marketing that have evolved over the years are: (Figure 2–1)
1. Production concept
2. Product concept
3. Selling concept
4. Marketing concept
5. Customer concept
6. Societal concept
Figure 2-1: The Marketing Concepts

2.2 The Production Concept

The focus of this concept is production. It holds that customers prefer widely available and
low cost products. This concept has the following features (Figure 2-2):
a) Production-orientation of the organization. It aims at selling what can be produced. Its
starting point is factory.
b) High production efficiency through improved technology, stan-dardization and mass
production.
c) Mass distribution of the product to facilitate wider availability.
d) Low price to attract customers. Price is regarded as critical for marketing.
e) Profit is made through production efficiency.
Figure 2-2: Production Concept of Marketing
Under this concept, managers concentrate on increasing production volume, reducing costs,
and mass distribution. Many Nepalese organiza-tions are still working under the production
concept. This concept is widespread in developing countries.
This concept is useful to expand the market share. But it leads to impersonal and poor-
quality service. It ignores non-price variables. Customer's needs are disregarded.
2.3 The Product Concept

The focus of this concept is product. It holds that customers favour products that offer good
quality, high performance, and innovative features. This concept has the following features
(Figure 2-3):
a) Quality orientation of the organization. It aims at improving the product through
innovation. Its starting point is factory. Quality serves as the key to marketing.
b) Superior, long lasting, well-made products at reasonable price.
c) No concern for customer needs. Product-orientation.
d) Quality improvements over time to attract customers.
e) Profit is made by improving product quality.

Chapter 2 - Evolution of Marketing Concepts
Figure 2–3: Product Concept of Marketing
Under this concept, managers focus on making superior products. They disregard customer
needs and preferences. They give attention to product. But changing customer preferences
and technology make the products obsolete.
2.4 The Selling Concept

The focus of this concept is selling. It holds that customers should be persuaded for buying
through aggressive selling and promotion efforts. This concept has the following features
(Figure 2-4)
a) Selling orientation of the organization. It aims at satisfying the seller's needs. It
focuses on products. It aims to sell what is made. The philosophy is "we sell what
we make". The starting point is factory.
b) Aggressive selling and promotion to attract customers. Pushing the products in
the market for high sales volume.
c) No concern for customer needs. Seller's needs are important.
d) Customer persuasion into buying existing products through a range of selling
techniques.
e) Profit is made through high sales volume.
Figure 2-4: Selling Concept of Marketing

Under this concept, managers focus on stimulating sales through promotional tools.
Customers are persuaded to buy. This concept is dominant in Nepalese organizations. It is
popular with non-profit organi-zations for social marketing. It is also used for political
marketing.
2.5 The Marketing Concept

The focus of this concept is customer needs. It holds that the key to achieving organizational
objectives consists of integration of marketing activities to satisfy the needs of customers.
This concept has the following features (Figure 2-5) (Box 2-1):
a) The starting point is target market. The marketing programme is tailored for customers
b) Focus on customer needs. The aim is to make what the customers want. The philosophy
is "we make what we can sell".
c) Customer orientation of the organization by creating value-adding products. The focus
is on customer needs.
d) Integration of all the activities that affect customers through coordinated marketing
efforts.
e) Profit through customer need satisfaction.
Figure 2–5: Marketing Concept of Marketing
 The marketing concept is a new way of thinking about organizational activities.

Managers focus all activities at determining customer needs in the target market.
Profit through customer need satisfaction is the objective of the organization. All
departments “think customer.”
The differences between the selling concept and the marketing concept are presented
in figure 2-6.

Figure 2–6: Selling and Marketing Concepts Contrasted
Box 2–1: Fundamentals of the Marketing Concept
The marketing concept holds that marketing activities should be oriented toward identifying
and satisfying customer needs of target markets to achieve organizational objectives.
The basic principles of the marketing concept are: (Figure)
 Target market
 Customer orientation
 Integrated marketing
 Objectives achievement through customer need satisfaction.
Figure : Basic Principles of the Marketing Concept

a) Target Market
No organization can operate within one broad market and satisfy every need of the
customers.
Under the marketing concept, a target market consisting of a group of homogeneous
customers is carefully selected for marketing purposes. The focus is on a group of
customers in a well defined market whose needs can be satisfied. For example, the
target market for the mountain flights of Nepalese airlines is foreign tourists.
b) Customer Orientation
Under the marketing concept all organizational activities are customer-oriented. All
activities of the organization are focused on determining and satisfying customer needs.
 The marketing activities begin and end with customers. The key to organizational
success is customer satisfaction. What is good for the customer is good for the
organization. Marketing is customer-driven.
 All departments in the organization “think customer”. They work together to satisfy
customer needs. Top management adopts customer-oriented philosophy, values
and beliefs.
c) Integrated Marketing
Under the marketing concept all marketing activities are organizationally coordinated
under the marketing department to satisfy customer needs. This implies:
 Various marketing functions work together. Such functions can be product
management, marketing research, pricing, distribution, promotion, etc. The
marketing department is the focal point for all such activities.
 Marketing department is well coordinated with other departments like finance,
production, human resources and research and development to foster team work.
All employees work toward customer satisfaction. All departments work together
to serve the customer's interests. Service support to customer is strengthened.
d) Objectives Achievement
 The ultimate purpose of the marketing concept is the achievement of organization’s
objectives. For private business, the objective is profit, market share, sales, etc. For
public and non-profit organizations, it is surviving and attracting funds to provide
service.
 The marketing concept stresses that organizations can best achieve objectives
through customer value and satisfaction. Organizations should not only satisfy
but also delight their customers by delivering more than they promise. For example,
helmet and leg-guard with motorbike.

2.6 The Customer Concept

The focus of this concept is individual customer. It holds that individual customer is
the key to achieving organizational objectives. Marketing is done to satisfy the needs of
individual customer. (Figure 2-7)
This concept has the following features:
a) The starting point is individual customer needs and values.
b) Tailoring marketing programme to the needs of individual cus-tomer. Customized
marketing mix. Individualized promotion and distribution.
c) Capture larger share of each customer's expenditure.
d) One-to-one marketing integration.
e) Profit through customer loyalty and retention.
Figure 2–7: Customer Concept of Marketing
Organizations collect information about the profile of each customer. They use e-
commerce and the latest information tech-nology. This concept is useful to companies
selling of high value products.
2.7 The Societal Concept

Marketing survives and grows in the society. All marketing decisions have social
implications. Marketing must act responsibly toward consumers and society. (Figure
2-8)
Figure 2–8: Societal Concept of Marketing

The societal marketing concept is an emerging concept. It holds that organizational

objectives should be achieved through customer need satisfaction in ways that protect
the interests of the consumers and safeguard the well-being of society. Marketing must
be socially respon-sible. It should be accountable to society for its actions. (Figure 2–9)
Figure 2–9: The Three Pillars of Societal Concept
The societal marketing concept has the following features:

a) The starting point is the target market.
b) Social responsibility orientation of marketing to enhance social welfare. It can be by
improving environmental quality, creating employment opportunities, supporting
socially desirable issues, and meeting social needs. Focus is on social needs.
c) Customer need satisfaction in the target market through the delivery of superior
value products compared to competitors.
d) Integrated marketing efforts through organizationwide market-ing think. All
activities related to marketing are assigned to the marketing department.
e) Profits through proper considerations to the interests of consumers and society.
The social responsibility of marketing is both towards consumers and society. (See Box
2–2).
Box 2–2: Social Responsibility of Marketing towards

Consumers and Society
Towards Consumers
Marketing should protect consumer’s interests through:
i) Product quality: Provision of reliable products at reasonable prices. Guarantee,
warranty and after-sales service offers should be honored. Adulteration and
activities that cause health hazard should not be undertaken.

ii) Product safety: Provision of safe products that do not cause injury or accidents.
Child safety should be a priority.
iii) Honesty: Marketing should have honesty in promotion. Misleading, false and
unethical advertising should be avoided. It should not indulge in bribe and kick-
offs.
iv) Consumer Rights: Marketing should respect and protect consumer rights. It should
not indulge in restrictive trade practices, profiteering, black marketing and
hoarding. It should be proactive to consumerism and environmental protection
movements.
Towards Society
Marketing should protect societal interests through:
i) Environmental quality: Marketing should make all efforts to protect and promote
environmental quality. It should work for clean and green environment by the use of
recyclable materials. Natural resources should be judiciously used. Pollution should
be controlled by protecting forests, rivers, lakes, wild-life and air.
ii) Employment Generation: Marketing should generate employment opportunities,
especially for women and disadvantaged groups. Industries should be promoted
in less developed and backward regions.
iii) Meet Community Needs: Marketing should contribute to social causes such as
education, health, arts, culture, sports etc. It should use its expertise and resources
to solve social problems.
 Marketing should strike a balance between the interests of the consumers, the
organization and the society under the societal concept of marketing.
(See Box 2–3 for Comparative Features of Marketing Concepts)
Box 2–3: Comparative Features of Marketing Concepts

1. What do you mean by marketing concept? Discuss the principles of the marketing concept.
2. What is marketing concept? Explain the difference between selling concept and
marketing concept.
3. Define marketing and explain societal marketing concept.
4. Point out the fundamentals of the marketing concept.
5. What is marketing concept? Show the difference between sales oriented marketing
concept and societal marketing concept.
6. Trace the evolution of various marketing concepts.
7. Show your acquaintance with production-oriented marketing concept and market-
oriented marketing concept.
8. What do you understand by social marketing concept?
9. What do you understand by marketing and marketing concept. Explain.
10. Which concept of marketing is best and why?
11. What are the fundamentals of marketing concept?
12. Differentiate between marketing concept and Social marketing concept.
13. What do you understand by customer concept? How practical do you find this concept
to apply in practice?
ICAN Question
1. Differentiate between the production concept and product concept of marketing.
(December 2009)
2. Briefly explain the marketing mix of in business. (Dec.2010)
3. What are the ingredients of marketing concept? (Dec.2110)
4. Write short notes on types of labels. (June 2010)
5. Differentiate between the selling concept and marketing concept. (June 2011)
6. Define the term “marketing” and explain the fundamental principles of a customer
oriented philosophy of marketing. (June, 2012)
7. Briefly explain the Marketing Mix. (June, 2012)
8. What is marketing? Explain the selling concept of marketing. (Dec. 2013)

CHAPTER - 3
ENVIRONMENTAL CONCEPT OF MARKETING
3.1 Meaning of Marketing Environment

Marketing environment refers to all actors and forces which influence exchange relationship
of marketing with target customers. They affect the performance and outcomes of marketing.
Marketing operates in a dynamic environment.
Definition
■ According to Kotler and Armstrong
The marketing environment comprises all actors and forces influencing the
company’s ability to transact business effectively with the target market.
Marketing environment can be divided into: (Figure 3-1)

1. Micro Environment (Internal environment/Task environment)
2. Macro Environment (External environment)
Figure 3-1: Components of Marketing Environment

Micro Environment
It is located within the organization. It consists of organizational activities, scope, and
stakeholders. It is controllable by the organization. It provides strengths and weaknesses to
marketing. (Figure 3-2)
Figure 3–2: Micro Environment of Marketing
Macro Environment
It is located outside the organization. It cannot be controlled by the organization. It provides
opportunities and threats to marketing. It consists of political, economic, socio-cultural and
technological forces. (Figure 3–3)
Figure 3-3: Macro Environment of Marketing

Chaper 3 - Environmental Concept of Marketing
Marketing should continually monitor its environment. It should anticipate and predict
the changing forces in the environment. It should adapt to the changing environmental
forces.
3.2 Importance of Marketing Environment

Marketing is the product of its environment. It should continually adapt to changing
Marketing is the product of its environment. It should continually adapt to changing
environmental forces to achieve goals efficiently and effectively. It should be able to
anticipate and predict the changing forces in the environment.
Environment is important due to the following reasons: (Figure 3–4)
Figure 3–4 : Importance of Marketing Environment
1. Adaptation: Environmental analysis helps marketing to monitor changes and

developments in the environment. It can detect trends and create scenarios. It can
maintain dynamism through continuous environmental adaptation.
2. Strategic orientation: Strategies provide long term direction. The study of
environmental trends and events fosters strategic thinking in marketing. Current
strategies can be altered. New strategies can be adapted based on the identification
of opportunities and threats in the environment. The study of environment helps
to turn threats into opportunities.

3. Boundary spanning: The study of environment helps marketing to learn what other
organizations are doing. It can analyze the strategies of competitors. It can provide
strategic response through counter strategies. It can form alliances and develop
relations with other organizations for mutual gains and spanning boundary.
4. Lobbying: The study of environment helps marketing to lobby for environmental
changes. It can serve as powerful pressure group to influence new laws and policies
of the government which impact marketing.
5. Stability: The study of environment enables marketing to foresee the impact of
environmental changes on its stability. It can develop action plans to cope with
such changes for maintaining stability.
3.3 Micro Environment Forces in Marketing

Micro environment consists of conditions and forces within the organization. It affects the
performance and outcome of marketing. It is located within the organization. It provides
strengths and weaknesses to marketing. It is controllable by marketing.
Strength is an inherent capacity which marketing can use to gain advantage over its
competitors.
Weakness is an inherent limitation which creates a disadvantage for marketing in relation
to competitors.
Components of the micro environment forces of marketing consist of: (Figure 3-5)
1. Organizational Activities
2. Organizational Scope
3. Stakeholders
3.3.1 Organizational Activities

They consist of organizational activities other than marketing. They can be:
i) Production: The production facilities limit marketing. Products need to be produced
before they can be marketed. Expansion of production facilities cannot be done
overnight.
ii) Finance: Financial capability is needed for all activities of marketing. New product
development, additional production facilities and promotion campaigns need
finance.
iii) Human Resource Management: Quality people in desired quantity are required to
carryout marketing activities.

iv) Research and Development: R & D facilities with adequate budget are needed to
develop new products. Marketing research is also needed to match marketing mix
to customer needs.
Figure 3-5: Components of Micro Environment of Marketing
3.3.2 Organizational Scope

It is indicated by:
a) Objectives: Organizations are created to achieve objectives. They are the desired
outcomes. Profit serves as the primary objective of business organizations. Other
objectives can be market share, leadership, and social responsibility. The activities
of marketing must be conducted within the framework of objectives.
 Policies: Policies are guidelines for marketing decision making. They follow
from objectives. They are guidelines for future action. Marketing must operate
within the policy guideline framework.
b) Organizational Structure: Structure is the design of jobs and relationships. It defines
how jobs are divided, grouped and coordinated. It is concerned with division of
activities (differen-tiation) and coordination of efforts (integration).
 Marketing activities are greatly influenced by structure. They must be carried
out within the boundary of organizational structure.
 Other activities in organization structure, such as production, finance, human
resource management and research and development also influence
marketing.

c) Organizational Resources: Resource availability sets a limit on the activities of

marketing. Resources can be physical, financial, human and information. Marketing
requires large amounts of information. The acquisition, storage, analysis and
retrieval of information is very important. The recent developments in information
technology have greatly increased its importance.
 Marketing must operate within the constraints of resources.
d) Organizational Culture: Culture refers to shared values and beliefs, norms, symbols
and artifacts. They guide behavior in organiza-tions (Figure 3-6).
Figure 3–6: Organizational Culture
 Values represent basic convictions as to what is right, good, important or

desirable for an individual.
 Beliefs are descriptive thought that an individual holds about something.
 Norms are accepted standards of behavior shared by group members. They
are informal rules.
 Symbols: They are visible symbols.
Organization culture shapes the effectiveness of marketing. Marketing must
operate within the framework of organizational culture.
3.3.3 Stakeholders
Micro environment comprises of forces that are immediately relevant for achievement
of the goals of marketing. It affects marketing’s ability to serve its customers.
Micro environment is made up of stakeholders. They are outside organizations or
groups who affect the activities of marketing and are affected by marketing. They have
a stake in the performance of marketing.
The stakeholders in the micro environment include: (Figure 3–7)

a) Customers
b) Suppliers
c) Competitors
d) Market intermediaries
e) Labour unions
f) Pressure groups and Media
Figure 3–7: Stakeholders in Micro Environment of Marketing
a) Customers
All activities of marketing are focused on satisfying customer needs. Marketing activities
begin and end with customers.
Customers can be of the following types:
 Consumers: Individuals and households who buy products for personal
consumption or household use. They are ultimate consumers.
 Business: Business organizations who buy products for business use, reselling or
to make other products through further processing.

 Institutions: Organizations who buy products to provide service to the clients.

Customers vary greatly in terms of needs, preferences, pur-chasing
power, buying behavior and loyalties. Marketing activities are directly
influenced by customers.
b) Suppliers
They are individuals or organizations who supply inputs and resources. Shortages or
delays in supplies can adversely affect marketing activities. Factors in supplier
environment that influence marketing activities are cost, availability, and continuity of
supply of inputs.
c) Competitors
Competition can be at following levels: (See Box 3-1)
 Generic competition: Many products are offered to satisfy the same needs. For
example, hunger need can be satisfied by rice, noodles, momo, bread, meat, etc.
 Product competition: Similar products are offered to satisfy the same needs. For
example, coke, tea, coffee, water to satisfy thirst need.
 Brand competition: Similar brands compete against each other, for example Coke
and Pepsi, Wai-wai and Mayos instant noodles.
 Price competition: Involves manipulation of price by lowering or raising.
 Non-price competition: Involves quality of product, distribution and promotion.
Marketing is directly influenced by the competitive environment. Globalisation of
business has made this aspect much more important.
Box 3-1: Structure of Markets
i) Pure competition: Many competitors offer similar products. Price competition is

important.
ii) Oligopoly: Few large competitors offer similar products. Non-price competition is
important. Supply is controlled.
iii) Monopolistic competition: Many competitors offer different products. Marketing
mixes are differentiated.
iv) Monopoly: Only one supplier of a specific product which has no close substitutes.
d) Marketing Intermediaries
Marketing needs the services of a variety of market intermediaries to carry out its
activities. They are:

 Middlemen: They are represented by wholesalers and retailers. They buy products
for reselling.
 Facilitators: They facilitate physical movement of products from manufacturer to
customer. Transporters, warehouses, clearing and forwarding agents fall under
this category.
 Market Service Agencies: They consist of advertising agencies, credit information
agencies, marketing research and consulting firms. They help in promoting
products.
 Financial Institutions: Organizations depend on a variety of financial institutions
for supply of funds. Such institutions can be commercial banks, development
banks, finance compa-nies, insurance companies, and capital market institutions.
The policies and actions of financial institutions directly influence marketing.
Cordial working relationships are essential with financial institutions. Marketing
is directly influenced by marketing intermediaries. Cordial relationships are needed
with them for the successful operation of its activities.
e) Government
It regulates marketing. Government policies, laws, rules and regulations directly affect
marketing. They can promote or restrain marketing. They promote the interests of
consumers and society. All marketing activities must comply with government
regulations.
f) Labour Unions
A Labour Union is an organization of workers acting collectively to promote and protect
mutual interests through collective bargaining.
Labour unions directly influence marketing activities. Marketing should promote and
develop healthy labour relations, minimize conflicts and solve disputes.
g) Pressure Groups
Pressure groups are special interest groups. They are voluntarily organized to use the
political process to advance their position on a particular issue. They pressurize and
lobby government and business organizations to protect their rights and interests.
Examples are: consumers associations, environmental groups, human rights groups,
feminist groups.
Marketing is directly influenced by the activities of pressure groups. It should carefully
consider their attitudes toward its activities and products.
h) Media
Media can be newspapers, magazines, radio, television and films. They carry news,
features, advertisements and editorial opinion. Every action of marketing is subject to

media scrutiny. Media should be effectively handled by marketing to protect image

and products.
3.4 Macro Environment Forces in Marketing

Macro environment consists of external conditions and forces that influence the
performance and outcomes of marketing. It cannot be controlled by marketing. It provides
opportunities and poses threats for marketing.
Opportunity is a favourable condition in the environment. It enables an organization to
consolidate and strengthen its position.
Threat is an unfavourable condition in the environment. It creates risk or causes damage
to marketing.
The forces in macro environment of marketing consist of: (PEST) (Figure 3-8)
 Political-legal (P)  Economic (E)
 Socio-cultural (S)  Technological (T)
Figure 3-8: Forces in Macro Environment of Marketing

Components of macro environment of marketing are: (Figure 3–9)

Figure 3-9: Components of Macro Environment of Marketing
3.4.1 Political-Legal Forces of Marketing

a) Political Forces
Political environment consists of factors related to management of public affairs.
The important political factors that influence marketing are: (Figure 3-10)
Figure 3-10: Political Environment of Marketing

i) Political System: The nature of the political system promotes or hinders marketing
activities. A stable, efficient and honest political system is essential for the growth
of marketing. Marketing thrives with stable political system.
ii) Political Institutions: They consist of legislature, executive and judiciary.
 The legislature or Parliament enacts laws that guide marketing activities.
 The executive or government implements the decisions of the legislature. It
lays down policies, regulations and procedures that influence marketing
activities.
 The judiciary or courts of law serve as watchdog. Their rulings influence
marketing practices. It settles disputes affecting marketing.
Government Agencies: Many government agencies function as regulatory agencies.
They issue licences and quotas and provide loans, guarantees, and subsidies.
Their activities affect marketing activities.
iii) Political Philosophy: Political philosophies influence marketing activities.

Democracy provides greater role to private sector through liberalization,
globalisation and competition. Totalitarianism provides greater role to state through
planning, control, quotas and public enterprises. Mixed philosophy provides roles
to both the private sector and the state.
b) Legal Forces
They refer to rules of conduct enforced by the state. They treat all persons equally.
Legal environment of marketing refers to all the legal surroundings that affect marketing
activities. It consists of acts, rules, regulations, precedent and institutions. It defines
what marketing can and cannot do. Marketing must ensure that its activities conform
to the laws of the land.
Legal environment of marketing is concerned with
 Protecting the rights and interests of marketers, consumers, employees, and the
society.
 Providing grounds on which marketing activities can be carried out. Encouraging
or restraining marketing activities by provid-ing facilities to law abiders and
punishment to law breakers.
 Regulating marketing activities through legal provisions. They relate to licencing,
wages, labour relations, monopoly, foreign investment, foreign exchange,
environment protection, consumer protection, imports, exports, pricing, and
taxation, etc.
The important legal factors that influence marketing are (Fig. 3-11):
i) Business Law: It consists of business laws that regulate marketing activities. It is
enacted by the Parliament. It provides legitimacy, security, control and incentives
for business activities. It also protects the rights and interests of consumers labour,
business and society.

ii) Courts of Law: Courts are established to solve legal disputes. Courts of Law carry
out judicial review, interpret laws, give rulings on business disputes and serve as
watchdog. The rulings of the courts are treated as a part of the legal framework.
Figure 3-11: Legal Environment of Marketing
iii) Law Administrators: Various law enforcement agencies implement laws and the
judgement of the courts of law. Government agencies, lawyers, police and jails
play an important role in law administration.
3.4.2 Economic Forces
Economic forces refer to economic surroundings that influence marketing. They consist
of economic parameters that provide the climate for survival and growth of marketing.
They significantly influence resource allocation, costs, profits, and consumer spending.
Important components of economic environment of marketing are: (Figure 3-12)
a) Economic System
Economic system determines the scope of private sector participation and market forces
in marketing. The various models of economic system are:
i) Free Market Economy: This system is based on private sector ownership of all the
factors of production. Profit serves as the driver of economic engine. The market
mechanism guides business decisions. Customers have freedom of choice.
ii) Centrally Planned Economy: This system is based on public ownership of all the
factors of production. The economy is centrally planned, controlled and regulated
by the government. There is no freedom of choice. Public enterprises play the
dominant role.

iii) Mixed Economy: This system is a mix of free market and centrally planned
economies. Both public and private sectors coexist. The public sector owns and
controls basic industries and utilities. The private sector owns agriculture and
small, medium, and large industries.
Figure 3-12: Economic Environment of Marketing
b) Economic Policies
Economic policies of the government guide marketing policies. Changes in economic
policies influence marketing activities.
Key economic policies influencing marketing are:
i) Monetary Policy: It is concerned with money supply, interest rates and credit
availability. It influences the level of spending through interest rates. It influences
the cost of capital.
ii) Fiscal Policy: It is concerned with taxation and government expenditure. It regulates
the level of aggregate economic activity. Taxation on income, expenditure and
capital influence marketing decisions. Government purchases and subsidies
influence business activities.
iii) Industrial Policy: It is concerned with industrial licencing, location, incentives,
facilities, foreign investment, technology transfer, privatization and nationalization
of industries. It influences the marketing climate.
c) Economic Conditions
They indicate the health of the economy in which marketing operates. The factors of
economic conditions are:

i) Income: The level and distribution of income affect expenditure, saving and
investment. They influence market conditions. Marketing requires purchasing
power and willingness to spend. Consumers should have income for marketing.
ii) Business Cycles: The stages of business cycle can be prosperity, recession and
recovery. They affect customer's willingness to spend.
 Prosperity: It is a period of economic growth and high income. Unemployment
is low. Buying power is high. It is best for marketing.
 Recession: It is a period of economic decline and falling income. Unemployment
is high. Buying power is low. It is bad for marketing.
 Recovery: It takes the economy from recession to prosperity. The ability and
willingness to purchase rise.
iii) Inflation: It is rise in price level. It influences costs, price and profits that affect
marketing. It adversely affects consumer spending power.
iv) Stage of Economic Development: An economy can be least developed, developing
and developed. Marketing activities are influenced by the stage of economic
development.
v) Natural resources: They are in the form of land, water, forest, raw materials, minerals,
and natural environment. They play an important role in marketing. Raw material
shortages and rising energy costs adversely affect marketing.
d) Globalization
It is developing the world as one borderless market. It has brought competition
everywhere. It promotes free flow of trade, capital, tech-nology, labour and managerial
knowhow. World Trade Organization (WTO) has accelerated its growth. So has regional
economic groupings. They promote free trade among members.
3.4.3 Socio-cultural Forces

a) Social Forces
They refer to social surroundings that influence marketing. They consist of factors
related to human relationships.

The society in which people grow up shapes their beliefs, values and attitudes. The
expected roles and status influence buying behavior.
Figure 3-13: Social Environment of Marketing
i) Demographics: Demography is concerned with human population and its

distribution. Demographic forces consist of:
 Population size: It limits the market. Market size is limited by the population
size.
 Population growth: It determines expansion or contraction of the market.
Nepal's population growth is 2.3% per annum. Some countries are
experiencing zero or negative population growth.
 Age mix: It refers to age group of population. Nepal is a country of young
people with 40% of population below 14 years. In developed countries 14% of
total population is above 65 years. Product demand and buying habits differ
according to age group.
 Urbanization: It provides added opportunities for marketing. It increases
accessibility for marketing. Customer preferences change due to change in
location. About 45 percent of world population lives in urban areas.
 Distribution: It affects the location of customers. Urban areas generally contain
concentration of customers.

 Migration: It refers to geographical shifts in population. It can be from rural to

urban areas. It can be across international borders. Markets shift with
population shifts.
ii) Social Institutions: They consist of family, reference groups and social class that
influence marketing.
 Family: From marketing point of view, a family is an important consumption
unit. The roles performed by various family members influence purchase
decision. The women participation in marketing activities is increasing. The
family as a social institution influences marketing.
 Reference Groups: They consist of groups that influence the attitudes and
behavior of consumers. They influence consumer judgement. They can be
sports, musical, cinema personalities or professionally successful people.
Reference groups influence marketing by influencing product and brand
choices of consumers.
 Social Class: It is the rank within a society determined by its members. It can
be classified into upper, middle and lower. It reflects income, occupation,
education and area of residence. Members of a class share similar values,
interests and behavior. Marketing activities are influenced by the buying
behavior of various classes.
iii) Social Change: Change is making things different. Social change implies
modification in relationships and behavior patterns. The buying behavior of
consumers change over time.
 Social trends are reflected by one-child family, disintegrating joint family,
married working women, delayed marriages, anti-smoking attitudes and social
pressures against environment pollution etc. They have a big impact on the
products offered.
iv) Life Style: It is a person's pattern of living reflected in his activities, interests and
opinions. They affect product needs and choices. Marketing must adapt products
to the changes in life styles.
b) Cultural Forces
They refer to cultural surroundings that influence marketing. Culture includes
knowledge, customs, traditions, mores, values, religion, language, symbols and works
of arts and architecture. It is created by society. It is handed down from generation to
generation. Important cultural components are norms, values and beliefs, language
and religion, symbols and artifacts. (Figure 3–14).

Figure 3-14: Cultural Environment of Marketing
Culture is learned behavior. It is made up of subcultures based on religion, language,

caste and ethnicity. Cultural factors influence marketing as follows:
i) Attitudes: Creating attitudes towards work, leisure and business. Work ethos,
work motivation, profit motivation, meaning of body gestures and attitudes toward
time vary from culture to culture.
ii) Value and Beliefs: Influencing values and beliefs of customers. Values are basic
convictions. Beliefs are descriptive thoughts held about something based on
knowledge, opinion or faith.
iii) Type of products: The type of food people eat, beverages they drink, clothes they
wear, and the building materials they use for construction of houses are influenced
by culture.
Marketing should be culturally sensitive. Cross-cultural changes are having significant
influences on marketing. It should fulfill the needs of subcultures.
3.4.4 Technological Forces

Technical forces refer to technological surroundings that influence marketing.
Technology is the method of converting resources into products. It consists of skills,
methods, systems and equipment. It includes inventions, and innovations.
Technology influences marketing by bringing about changes in jobs, skills, life styles,
products, production methods and processes. Mechanization, automation,
computerization, robotics, information technology, biotechnology, nano-technology,
new materials and artificial intelligence have all influenced marketing. There have
been dramatic developments in new technology. Products rise and decline with
technological changes. New products are generated by technology.
Factors in the technological environment of marketing consist of: (Figure 3–15)

a) Level of Technology:
The level of technology can be appropriate or sophisticated. It can be labour-based or
capital-based. The level of technology influences marketing.
i) Labour-based Technology: Human labour is mainly used for the operations of
business.
ii) Capital-based Technology: Machinery is mainly used. Technology is represented
by automation, computerization, robotization, etc. The technology can be high,
intermediate or low. It involves high cost.
Figure 3-15: Technological Environment of Marketing.
b) Pace of Technological Change:

Technology is a dynamic force. Its pace of change is accelerating. Marketing should
adapt to the changing technological forces. It should also upgrade the skills of human
resources to cope with technological changes.
Technological change influences marketing in the following ways:
 It can make existing products obsolete.
 It can rejuvenate the existing products through improvements or cost reductions.
 It can create entirely new products
 It can increase government regulations to safeguard the interests of consumers
and society.
c) Technology Transfer:
Technology transfer implies technology imported from technologi-cally advanced
countries.
Technology transfer can be through:
i) Globalisation: Global companies are the key sources of technology transfer. The
modality can be franchising, technical collaboration and subsidiary establishment.
ii) Projects: Turn-key projects subject to global bidding serve as source of technology
transfer.
iii) Trade: This consists of sale of equipment or machines by the manufacturer.

iv) Technical Assistance: Donors under technical assistance provide international

consultants who bring new technology with them.
v) Training and publications: They provide opportunities to learn about new
technology.
Technology transfer influences marketing by:
 Increasing efficiency and decreasing costs.
 New product development and product improvements
 Improving production systems and processes
 Better satisfaction of customer needs.
d) Research and Development (R & D) Budget:

Customer expectations for improved technology are increasing. Customers expect new
products of superior quality which are safe, comfortable and environment-friendly.
This calls for increased research and development budget for technological adaptation,
upgradation and development.
3.5 Marketing Environment in Nepal

Nepalese marketing environment consists of forces that influence exchange relationships.
It is dynamic. It affects the performance of Nepalese marketing.
Forces in macro Nepalese marketing environment are:
 Political-legal forces
 Economic forces
 Socio-cultural forces
 Technological forces
3.5.1 Political-Legal Forces

a) Political forces
Its components are:
i) Political System: Nepal is a republic based on multi-party system. There are 75 political
parties. 25 parties are represented in the parliament. The major parties are:
1. Nepal Communist Party (Maoist)
2. Nepal Communist Party (UML)
3. Nepali Congress Party
4. Madhesh Janadhikar Forum
5. Terai Madhesh Loktantrik Party
6. Nepal Sadbhavana Party
7. Rastriya Prajatantra Party
The ideologies of the parties affect Nepalese marketing.

Nepal has been suffering from political uncertainties. There has been 20
governments since 1990. Political uncertainties have adversely affected Nepalese
marketing. At present a new constitution is being drafted by the Constituent
Assembly.
In Nepal, business financing of political candidates and parties has been
significant. Business donations are critical for running political parties.
ii) Political Institutions: They consist of Legislature, Executive and Judiciary. In

Nepal, the Legislature (Parliament) enacts laws that guide marketing activities.
The Executive (government) implements the laws and lays down policies and
regulations that affect marketing. The Judiciary (Courts of law) interpret laws and
give rulings on business disputes which impact marketing practices.
iii) Administration: Administration in Nepal implements laws, policies, programmes.
It is represented by civil service, police, military and jails.
 Nepal's administration lacks professionalism. Corruption is widespread.
Good governance is lacking. It is highly politicised.
iv) Pressure Groups: Pressure groups are emerging in Nepal. They pressurise and
lobby government and business to protect consumer interests, environment, human
rights and rights of women. Their activities influence marketing.
b) Legal Forces
Legal forces in Nepalese marketing environment consist of laws, rules, regulations and
institutions. They define what marketing can and cannot do. They promote or restrain
marketing activities. They influence marketing policies and practices. Marketing must
comply with the laws. (Box 3-2)
Box 3-2: Legal Framework related to Marketing in Nepal
a) Contract Act, 2000 (2056)

b) Arbitration Act, 1999 (2055)
c) Company Act, 2006 (2063)
d) Industrial Enterprise Act, 1992 (2049)
e) Foreign Investment & Technology Transfer Act, 1992 (2049)
f) Partnership Act, 1964 (2020)
g) Agency Act, 1958 (2014)
h) Private Firm Registration Act, 1958 (2014)
i) Labour Act, 1992 (2048) (amended in 1998)
j) Trade Union Act, 1993 (2049)
k) Child Labour Act, 2000 (2056)
l) Consumer Protection Act 1999 (2056)
m) Export and Import (Control) Act, 1956 (2013)

n) Foreign Exchange (Regulations) Act, 1962 (2018)

o) Income Tax Act, 2002 (2058)
p) Customs Act, 1962 (2018)
q) Value Added Tax Act, 1996 (2052)
r) Environment Protection Act, 1996 (2053)
s) Copyright Act, 2002
t) Patent, Design and Trademark Act, 1965 (2022)
u) Mines and Minerals Act, 1985
v) Nepal Standards Act, 1980
w) Food Act, 1966
x) Black Market and Some Other Social Crime and Punishment Act, 1977
y) Various sectoral legislation relating to tourism, transport, vehicles, forest, water,
electricity, telecom, etc.
Nepal's legal framework for protection of intellectual property rights is poorly

implemented. The poor implementation of environment-related laws has led to
deteriorating conditions of forests, soil, water and air.
3.5.2 Economic forces

Economic forces consist of all the economic surroundings that influence marketing in Nepal.
Their components are:
a) Economic System
Nepal has a mixed economy system. Both public and private sectors coexist. The public
sector has ownership and control of basic industries and utilities. The private sector is
growing. Globalization of the economy is increasing.
 Nepal has implemented ten long term development plans.
b) Economic Policies
Economic policies guide marketing policies. The important economic policies are:
i) Fiscal Policies: They deal with taxation, public expenditure and foreign assistance.
Nepal is over-dependent on foreign assistance. Taxation on consumption is the
main source of public revenue. Tax on income and wealth has a secondary role.
Nepal has introduced VAT (Valued Added Tax) which has created a lot of
challenges for marketing.
ii) Monetary Policies: They are prescribed by Nepal Rastra Bank. They affect money
supply, cost and availability of credit and interest rates.
The financial sector in Nepal has excess liquidity. Interest rates are low. Inflation
rate is high. Nepal has opened its financial sector to foreign investment.
iii) Trade Policy: Nepal has adopted the policy of increasing trade through open
liberal environment, private sector participation, and product-wise and country-

wise trade diversification. India is the dominant trade partner of Nepal. However,
trade with overseas countries is fast increasing. Nepal faces overall trade deficit.
Smuggling through open borders has been a major problem of trade.
Nepal is a member of WTO (World Trade Organization) and SAFTA (South Asian
Free Trade Area).
iv) Industrial Policy: Nepal's industrial policy aims to expand and diversify industrial
production, develop export-oriented industries, encourage foreign investment and
enhance the role of private sector. Licensing requirements have been abolished
except for industries related to defence, health and environment.
v) Privatization Policy: Nepal has adopted the policy of privatizing public enterprises.
A total of 18 public enterprises have been privatized or liquidated. However, the
pace of privatization has been very slow. Political commitment is lacking.
c) Economic Conditions
Nepal is a least developed country. The economic conditions in Nepal are reflected by
following factors:
i) Natural Resources
 Nepal is largely a rugged mountainous country. Remote parts of the country
remain unconnected by roads. Market remains fragmented due to poor
accessibility.
 The presence of all climatic zones in Nepal provides opportu-nities for
marketing.
 Nepal is poor in mineral resources. But it is rich in water resources. There are
tremendous opportunities of marketing of hydropower (theoretical capacity
of 83,000 Megawatts). But the development of this resource has been very
poor. Energy costs are the highest in South Asia.
ii) Income Distribution: Nepal's per capita income is US $ 470. An estimated 31% of
population lives below the poverty line. The income distribution is highly skewed.
The bottom 20% households enjoy only 4% and the top 10% enjoy 50% of income.
Service sector contributes 43% to Gross Domestic Product.
iii) State of Economic Development: Nepal is a least developed country. The growth of
GDP is poor. Inflation is high. Agricultural productivity is declining.
iv) Industrialization: Nepal had a late start in industrialization. The pace of
industrialization has been slow. The manufacturing sector contributes about 8%
to GDP.
 Tourism industry is steadily growing in Nepal. Adventure tourism is growing
fast. Private sector participation in this industry is pronounced.
 Woollen carpets, pashmina shawls, readymade garments are the major export
industries of Nepal. However, they are declining in recent years.
 Nepal's industrial sector suffers from the following problems:
a) Uncertain government policies.

b) Declining demand for products; low capacity utilization; limited market.

c) Poor access to credit facilities
d) Mounting labour problems
e) Tax-related problems.
f) Lack of mutual trust between government and private sector.
g) Poor competitive capacity; high cost and poor quality of products.
h) Outdated technology
i) Weak institutional support.
 About 60% of Nepal's industries are sick. The number is increasing.
3.5.3 Socio-cultural Forces

a) Social Forces
Nepalese marketing operates within the Nepalese society. Social forces influence
policies, practices and activities of Nepalese marketing. Important components of social
forces are:
 Demographics
 Social institutions
 Social change
i) Demographics: Demographic forces that influence marketing in Nepal are:

 Size, growth and distribution of population: Population limits the size of the
market. According to 2001 census, Nepal had a total population of 23,151,423.
The number of households was 4,253,220. Male and female were almost half
and half. The growth rate of population was 2.27%. Of the total population,
about 51.94% was in mountains and 49.06% in terai.
 Age mix of population: Nepal is a country of young people. About 42% of its
population is below 14 years.
 Urbanization of population: Urbanization in Nepal is increas-ing-from about
10% in 1991 to 14.2% in 2001. This is low compared to 45% for world average
for urbanization.
 Migration of Population: The migration of Nepalese population from mountain
and hills to terai plains is increasing. The exodus of people from hills to terai
is on-going. International migration is also increasing.
 Markets in Nepal have shifted with the shifts in population.
ii) Social Institutions: Social institutions that influence Nepalese marketing are:
 Family: Family as a social institution significantly affects purchase decisions
in Nepal. It is an important consumption unit.

Nepal still has predominantly a joint family system. The roles performed by
various family members influence marketing. Generally, the head of the
household serves as the decision making centre. However, in recent years,
nuclear families are emerging.
 Reference Groups: They influence attitudes and behavior of customers. Friends
are important reference groups in Nepal. So are sports, musical and movie
personalities.
 Social Class: Nepalese social class can be divided into upper, middle and
lower. The lower class is in large majority. Middle class is growing. Buying
behavior is substantially influenced by social class in Nepal.
iii) Social Change: Social trends are changing in Nepal. Participation of married women
in work activities is increasing. Marriages are being delayed. Family planning has
made families smaller. Joint families are disintegrating. Such social changes are
significantly influencing Nepalese marketing.
b) Cultural Forces
The components of cultural forces in Nepal are:
i) Attitudes: Culture creates attitudes towards time, leisure, work and business.
Attitudes influence marketing. "Bholi" or tomorrow is the common attitude toward
time in Nepal.
ii) Values and Beliefs: Nepalese prefer to work for government because of job security
and poor accountability.
Fatalism and superstition dominate values and beliefs of Nepalese people. They
greatly affect marketing. Nepalese people generally do not buy new cloths on
Monday and edible oils on Saturday.
iii) Religion: It reflects culture. In 2001, Nepal had 81% Hindu, 11% Buddhist, 4%
Muslims and 4% others in terms of religion. Religious coexistence is present in
Nepal. Religion influences food habits, dress and dates of travelling. It is a powerful
influence on Nepalese marketing.
iv) Language: Language reflects culture. Nepal is a multi-lingual country. Nepali is the
national language but more than three dozen languages are spoken by Nepalese
people. The influence of language is pronounced on Nepalese marketing.
 Cultural forces are very important in Nepalese marketing. Nepal is a garden
of ethnicity, a melting pot of religions, and a kaleidoscope of subcultures. The
colourful festivals provide many purchase occasions for marketing. Global
cross-cultural influences on marketing are increasing.
3.5.4 Technological Forces

Technological forces refer to all technological surroundings that influence Nepalese
marketing. They consist of:

a) Level of technology
It is both labour-based and capital-based. The level of technology affects the processing
and outputs of marketing in Nepal.
b) Pace of technological change

Technological pace of change is slow. Marketing in Nepal is slow to adapt to
technological changes to avoid obsolescence. The skills of human resources to handle
technology is not properly upgraded.
c) Technology transfer
In Nepal, technology transfer is increasing and the sources are:
i) Global companies: Under agreements for direct foreign investments, such
companies transfer technology.
ii) Technical assistance: Donors under technical assistance provide foreign
consultants who transfer new technical skills. Donors also provide equipment
and training.
iii) Projects: Donor-assisted projects transfer new technology to Nepal. Most of them
are subject to global bidding.
iv) Trade: Sale of equipment and machines by foreign manufac-turers also help import
of technology in Nepal.
d) Research and Development (R & D) Budget

R & D budget has been very low in Nepal. Even big houses have ignored the R & D
aspect. Most products are imitations or modifications.
Nepal is rich in many traditional technologies which are still prevalent in rural areas.
But efforts are lacking to promote and upgrade them. The technology in modern
industries is mixed. Some industries are still using old technology. Modern technology
is growing. But the bulk of technology is Indian.
Plastics have created serious pollution problems, even on the Mount Everest. However,
information technology has greatly facilitated marketing.
1. Describe the socio-cultural environment of marketing.
2. Describe the economic environment of marketing.
3. Explain the socio-cultural environment of marketing and its effect in the design of the
marketing mix.
4. Explain the demographic environment of marketing and its effect in the design of the
marketing mix.
5. Explain the technological environment of marketing and its effect in the design of the
marketing mix.

6. What is marketing environment? How social and cultural factors affect the marketing
program of a company? Briefly explain.
7. What do you understand by micro environment and macro environment? How do
economic factors affect the marketing mix? Explain.
8. What do you understand by micro and macro environment? How do socio-cultural
factors affect the marketing mix? Support your answer with suitable examples.
9. What is marketing environment? Explain its importance.
10. Explain the components of micro-environment of marketing.
11. Describe marketing environment in Nepal.
12. Why the study of marketing environment is so important to a manager?
13. How the economic factors affect the marketing activities of an organization?
14. Why the study & analysis of environment is important for a marketer?
15. How the demographic factors affect marketing activities? Discuss.
ICAN Questions
1. Point out the macro (external) environment of marketing. (June 2009)
2. What is marketing environment ? Explain how economic environment affects the
marketing activities. (December 2009)
3. Summarize the economic and demographic environments in Nepal. (June 2010)
4. Discuss the effects of socio-political environment on Nepalese marketing systems. (Dec.
2011)
5. How does environment influences industrial development in Nepal. (June 2011)
6. Describe the environmental forces that affect the company’s ability to serve its customers.
(Dec. 2012)
7. How can economic factors affect the buying decision of an individual buyer? (Dec.2013)

CHAPTER - 4
MARKET SEGMENTATION AND TARGETING
4.1 Meaning of Market Segmentation

Customers have needs to satisfy, money to spend and willingness to buy products. No
product can satisfy the needs of all the customers in the market. Customers vary in needs,
characteristics, buying behavior, purchasing power, and preferences.
Gone are the days of mass marketing which required mass production, mass distribution
and mass promotion. One single marketing mix is not enough to satisfy the needs of all the
customers. Organizations practice "Micromarketing". They tailor marketing mixes to satisfy
the needs of specific customer segments.
Modern marketing views the total market as consisting of heterogeneous segments. One or
more segments are selected as target market. Separate marketing mix is designed for each
selected segment.
Definition of Segmentation
A segment consists of a group of customers who share similar needs and characteristics.
Segmentation is the process of dividing the total market into large homogeneous groups of
customers who share similar needs and characteristics.
 According to Philip Kotler (2006)

Marketing segmentation is the act of identifying and profiling distinct groups
of buyers who differ in their needs and preferences.
 According to Stanton, Etzel and Walker

Market segmentation is a process of dividing the total market for a good or
service into several smaller groups, such that the members of each group are
similar with respect to the factors that influence demand.
 According to Paul Banes, Chris Fill, Kelly Page and Piyush K.Sinha
Market segmentation is the division of a market into different groups of
customers with distinctly similar needs and product/ service requirements.
Or, to put it another way, market segmentation is the division of a mass market
into identifiable and distinct groups or segments, each of which have common
characteristics and needs and display similar responses to marketing actions.

Chaper 4 - Market Segmentation and Targeting
Segmentation finds customer groups for deciding target markets. It directly affects the
design of marketing mix. Marketing efforts are focused on segments. (See Box 4-1 for
Types of Segmentation)
Segmentation implies:
a) Division of total market into groups
b) The group should be large enough for marketing purposes.
c) The group should be homogeneous in preferences.
d) The customers in a group should have similar needs and characteristics.
Box 4-1: Types of Segmentation
Segmentation can be of the following types:
1. Target Marketing (Differentiated Marketing Strategy)

The total market is viewed as consisting of heterogeneous customer groups. They have
various characteristics. The market is divided into segments. One or more segments are
selected as target market. Marketing mix is tailored for each segment. This is based on
new marketing concept.
2. Niche Marketing (Concentrated Marketing Strategy)

A niche is a more narrowly defined group of customers. It is identified by dividing a
segment into subsegments. Marketing mix is tailored to the niche. Niches are fairly
small groups whose needs have not been well served. They are willing to pay higher
prices. They are seeking distinctive mix of benefits.
3. Local Marketing
The marketing mix is tailored to the needs and wants of local customer groups. They
can be localities or stores in local area. For example, New Road in Kathmandu.
4. Customized Marketing
The market is viewed as consisting of individuals with distinct needs and
characteristics. Marketing mix is tailored to each individual. Tailor-made clothes and
individually designed houses are examples. Business-to-business marketing is largely
customized. This is based on customer concept of marketing.
4.1.1 Benefits of Segmentation

The benefits of market segmentation are: (Figure 4-1)

Figure 4-1: Benefits of Market Segmentation
1. Identification of market opportunities:

Marketing can assess the needs, size, growth and profit potential of each segment. It
can identify market opportunities in each segment. It can choose to operate in profitable
segments and drop unprofitable segments. It can effectively serve the target market. It
can focus marketing efforts on segments.
2. Effective use of marketing resources:

There is no scattering of resources. By tailoring marketing mixes to individual segments,
marketing resources can be effectively utilized. Products can be designed to match segment
demand. Promotion can be made segment specific. The price can be set to match the
paying capacity of the segment. Distribution channels can be selected to match segment
needs. Quick response can be given to changing market needs.
3. Competitive response:
Organizations face fewer competitors in segments. They can watch and analyze the
marketing strategies of the competitors. They can face the competition by changing the
marketing mix.
4. Market specialization:
Segmentation leads to development of micro markets. Organizations can develop market
specialization by serving many needs of one segment. They can fine-tune their market
mix.
5. Environmental adaptation:
Organizations can effectively monitor environmental changes in segments to identify
trends. They can also anticipate and predict changes in segments. This helps them to
adapt their marketing mixes to environmental changes.

6. Objective Achievement:
Segmentation, above all, helps organizations achieve their objectives effectively and
efficiently. No organization can survive without achieving its objectives.
4.1.2 Requirements for Effective Segmentation

The requirements for effective market segmentation are:
a) Measurable: The size, needs, purchasing power, and characteristics of the customers
in the segment should be measurable. Quantification should be possible.
b) Divisible (Differentiable): The segments should be differentiable. There must be
clear-cut basis for dividing customers into homogeneous groups. They should
respond differently to different marketing mixes. There should be differences in
buyer's needs and characteristics for dividing in groups.
c) Accessible: The segment should be accessible through marketing institutions, such
as distribution channels, advertising media and sales force. There should be
middlemen to distribute the products. It should be researchable and serviceable.
d) Substantial: The segment should be substantial. It should be large enough in terms
of customers and profit potential. It should justify the costs of developing a separate
marketing mix.
e) Actionable: It should be actionable for marketing purposes. Organizations should
be able to design and implement the marketing mix to serve the chosen segment.
4.2 Process of Market Segmentation

The process of market segmentation consists of the following steps. (Figure 4-2)
Figure 4-2: Process of Market Segmentation

1. Market Survey
Segmentation requires investigation of the total market characteris-tics. Marketing
survey is conducted for this purpose. Information is collected on the following aspects:
 Customer needs and characteristics
 Product attributes desired by customers
 Brand awareness by customers
 Product usage patterns and usage rate by customers
 Customer attitudes toward the product
 Preference patterns of customers
2. Segment Identification
Detailed analysis of the information collected from the market survey is done.
Appropriate statistical tools are used to make the analysis.
Factors affecting product demand are classified into major and minor factors. The
major factors are further analyzed in relation to:
i) buyer needs,
ii) buyer characteristics.
Homogeneous groups of customers are clustered to identify segments. Cluster analysis
is used for this purpose.
3. Segment Profiling
The variables for segmentation are identified. They can be geographic, demographic,
psychographic and behavioural. They vary according to the type of market.
Each segment is profiled in terms of similarities and dissimilarities in demand and
characteristics of customer groups. When this process is completed, the organization
has identified market segments. They represent micro markets.
4. Segment Evaluation
Organizations select one or more segments after their careful evaluation. The chosen
segments become target market. The factors that are considered for segment evaluation
are:
a) Segment attractiveness in terms of size, growth, profit, competition, technology,
customer loyalty, risks.
b) Organizational objectives and resources
c) Segment relations and cooperation.
d) Ethical considerations in terms of environment and social well-being.
e) Government policies and laws

f) Market coverage desired.

 Markets keep on changing. Hence, market segmentation should be done
periodically.
5. Segment Selection
Organizations should carefully select the segments to be served. The selected segments
constitute the target market.
Segment selection should consider:
1. Market Coverage Levels (Targeting levels)

They can be:
a) Single segment coverage: An organization selects one segment and offers one
marketing mix. (Figure 4-3). The selected segment becomes the target market.
The organization gains reputation through specialization in the selected segment.
It can match marketing mix to customer needs with limited resources.
Organization Marketing Mix Target Mix
Product A
Place Price B
Promotion C
Figure 4-3: Single Segment Market Coverage
b) Multi-Segment Coverage (selective Specialization) (Figure 4-4): An organization

selects two or more market segments and offers separate marketing mixes for each
segment. The selected segments become target markets.
This strategy diversifies the risk. It results in greater sales volume.
Organization Marketing Mix Target Mix
A A
B B
C C
Figure 4-4: Multi-Segment Market Coverage

c) Product Specialization: An organization concentrates on making a single product

which is sold to multiple segments. The marketing mix is modified to satisfy the
needs of customers in various segments. This strategy builds product reputation
and diversifies risk.
d) Market Specialization: An organization concentrates on one segment but serves
many products to that segment. This strategy helps organizations to build reputation
but they remain over-dependent on one segment.
e) Full Market Coverage: An organization serves all market segments with all the
products they need. Various product items in one product line are offered. Coca
Cola is using this strategy by offering a variety of soft drinks to all segments of the
market. The full market becomes the target market. (See Box 4-2 for Product
Positioning)
Box 4-2: Product Positioning
Positioning has emerged as a powerful marketing strategy. It is a new thinking in marketing.

Marketers should position and reposition their products to satisfy the needs of the customers.
Each product should be positioned in the mind of consumers.
Product positioning describes how an organization's brand differs in relation to its competitors
brand in the minds of target customers. It is distinct perception of product differentiation by
customers. It is done after selecting the target market.
Positioning deals with the minds of the customers. It creates a brand image which customers
view as different from the image of competing brands. It communicates competitive advantage to
the target customers.
Positioning creates market-focused value proposition. It makes the product differentiation
meaningful. However, marketing mix should support the positioning strategy.
Positioning begins with the product brand name. Ti establish one message in consumer's mind.
It reinforces the original message about the product to stay consistent.
Steps in Product Positioning Implementation

The following steps are needed for implementation of product positioning:
a) Identify potential competitive advantages: This should be done by careful evaluation
of the competitive advantages in terms of competitors positions and weaknesses.
b) Establish the product's key distinctive competitive advantage: It should be
emphasized. It could be one variable or a combination of variables. It should be
consistent with the organization's image. Costs of positioning should be carefully
considered. (See Box 4-2)
c) Communicate the competitive advantage: It is communicated to target customers
through the marketing mix. Marketing mix is designed to suit the positioning strategy.

Product positioning can be based on competitive advantage of one or a combination of

the following variables:
 Attributes: Product characteristics such as size, colour, taste, etc. This is widely
used in Nepal.
 Price: High, medium, low; best value price.
 Quality: High medium, low or superior quality.
 Technology: Manual, automatic, computerized, robotized.
 Service: Pre sale, during sale, after sales services.
 Competition: Better than competitor, cheaper maintenance.
 Use: Many uses of the same product. Many usage occasions. For example, noodles
as breakfast food, tiffin or meal.
 Benefit: End benefits or results from buying the product. For example, better health,
increased beauty etc.
 Category: Leader in a product class, for example "best yak cheese from the
Himalayas".
4.3 Segmentation Variables for Consumer Markets

Segmentation variables are characteristics of customers used for dividing a total market
into segments. Selecting appropriate variable is an important decision for marketing
segmentation.
Consumer markets consist of ultimate consumers. They buy products for personal or
household use.
Segmentation variables for consumer markets can be: (Figure 4-5)
 Geographic  Demographic
 Psychographic  Behavioral
Segmentation can be based on:

a) Single variable segmentation: Only one variable is used to segment the total market. For
example, income.
b) Multivariable segmentation: More than one variable is used to segment the total market.
For example income and gender.

Figure 4-5: Segmentation variables for consumer market
4.3.1 Geographic Variables

The market is divided into different geographical units. The variables used are:
a) Area: The market is segmented into country, zone, district, city. For example,
Nepalese market can be segmented into 5 development regions, 14 zones and 75
districts. The location of consumers is determined in geographical areas.
b) Topography and climate: The market is segmented according to topography and
climate. In Nepal, the country can be divided into mountain, hill and terai from
topographical perspective. Climate-wise, it can be divided into tropical, temperate
and alpine. Product needs are affected by topography and climate.
c) Population density: Population density refers to population per square kilometer.
It determines the demand size. The market can be divided as urban and rural. In
Nepal the municipalities constitute urban areas and account for 14 % of total
population.
4.3.2 Demographic Variables

Demography is concerned with human population and its distribution. Demographic
variables are very popular for market segmentation. They are easy to measure. They
consist of:
a) Age: Product needs differ according to age groups. The market is segmented into
young, teenage, middle age, and old age. In Nepal, 40 percent of the population is
below 14 years. (See Figure 4-6 for segmentation of toy market based on age).

Under 1 year
1-3 years
3-8 years
8-12 years
Above 12 years
Figure 4-6: Age-based Segmentation of Toy Market
The Indian market for kids products aged 8–12 years is estimated at Rs. 200
billions. The world market is more than US$ 1000 billion.
b) Gender: Market segmentation can be done by gender of customers-male or female.

Market demand and buying behavior differ according to gender. Traditionally,
markets for clothes, cosmetics, magazines and shoes have been segmented on the
basis of gender.
 There is a growing movement for unisex products. They are used both by men
and women.
c) Family size: Segmentation can be done by the size of the family. It affects the usage
and packaging of the product. Nepal has a joint family system and the average
family size is 6. In western countries, family size is small. China has a policy of one
child family.
d) Family life cycle: Family life cycle affects spending patterns. The following six
stages can be used for market segmentation:
 Young bachelor living alone
 Young couple with no children
 Young couple with children under 6 years (Full Nest-1)
 Young couple with children over 6 years (Full Nest-2)
 Middle aged couple with children over 6 years (Full Nest-3)
 Older single living alone (Empty Nest)
e) Education: Education can be used for segmentation. Education levels for

segmentation can be: illiterate, primary, secondary, graduate, post graduate. Books
and magazines are segmented on this basis.

f) Occupation: Buying patterns differ with occupation. The income of a professor

and a taxi driver can be the same but their spending patterns vary. The market can
be segmented into unemployed, students, service holders, professionals, self-
employed, farmers, home makers, retired, etc. The market for product is directly
related to occupation.
g) Income: Income provides purchasing power and determines the level of spending.
Working wives add to family income levels. The market can be divided into: high
income, middle income and low income. For example, annual income levels in
Nepal can be classified as follows for market segmentation:
Up to Rs. 60,000 Low income

Rs. 60,000 - 200,000 Middle income
Rs. 200,000 - and above High income
h) Social Class: It is the rank within a society determined by its members. It reflects
income, education, occupation and area of residence. It influences product choice.
Market can be divided into: upper class, middle class, lower class. Members of a
class share similar values, interests and behaviors.
i) Ethnicity: Caste, race, nationalities and ethnic groups can be used for market
segmentation. They affect product usage. Nepal has about 60 ethnic groups
("Janajati").
j) Religion: Religion affects product usage. Major religions such as Christianity,
Hinduism, Buddhism, Islam. can be used for segmentation purposes. Nepal has
81% Hindus, 11% Buddhists, 4% Muslims and 4% others according to 2001 census.
4.3.3 Psychographic Variables

Psychographic variables describe consumers in terms of psychological and behavioral
dimensions. They are buying motives, life style and personality.
a) Buying Motives: A motive is a pressing need. It drives consumers to seek
satisfaction. Activated motives motivate consumers for buying. Consumers can be
segmented on the basis of their buying motives as follows:
 Rational motives: Economy, durability, efficiency, convenience.
 Emotional motives: Love, affection, friendship, belongingness.
 Ego motives: Status, respect, prestige, recognition.
b) Life Style: Lifestyle is a person's pattern of living. It is reflected in his activities,

interests and opinions. It affects product needs and choices.
Life style groups people according to how they spend their time, what are their
interests and what are their opinions about themselves and broad issues.
Life style variables that can be used for segmentation are:

i) Activities: Anything that involves money and or time is activity, for example
work, hobbies, vacation, entertainment, shopping, sports. It can be:
 Culture-oriented
 Sports-oriented
 Outdoor-oriented
ii) Interests: They can be about family, home, job, fashion, food, recreation,
hobbies.
iii) Opinions: They can be about self, society, politics, business, products, culture,
etc.
Life style patterns for segmentation can be grouped as:
 Traditionalists (Straights)
 Playboy (Swingers)
 Long hairs (hippies, punks, etc.)
c) Personality: Personality is the sum total of ways in which an individual reacts

and interacts with others. It is an individual's pattern of traits. It influences
behavioral responses.
The 'big five' personality traits that can be used for segmentation are:
i) Extraversion/Introversion: It deals with relationships.
ii) Agreeableness/Disagreeableness: It deals with propensity to defer to others.
iii) Conscientiousness/Non-conscientiousness: It deals with reliability.
iv) Emotional stability/Emotional instability: It deals with ability to withstand stress.
v) Openness to experience/Closed to experience: It deals with interests and
fascination with novelty.
4.3.4 Behavioral Variables

They refer to consumer response to the product. The behavioral variables for
segmentation consist of:
a) Occasions: They affect purchase need and usage. They can be segmented into:
 Regular occasion: Daily routine needs.
 Special occasion: Festival, marriage, death needs.
b) Benefits: Consumers seek benefits from products. Benefits describe consumer
feelings of satisfaction and outcomes of buying products. They result from product
use. They can be functional and emotional. Consumers seek various functional
benefits from the product. They can be quality, service, economy, and speed.
Trekkers to Nepalese mountains may get the emotional feeling of adventure,
friendliness. Benefit segmentation is getting popular and important.

c) User Status: User status reflects frequency of product purchase. It can be segmented
into:
i) Regular user - uses the product regularly
ii) First time user - first experiment with the product
iii) Ex user - stopped using the product
iv) Potential user - can use the product in future
v) Non user - not using the product
d) Usage Rate: It is the rate at which consumers use or consume products. It can be
segmented into:
i) Heavy user: They account for high consumption.
ii) Medium user: They account for moderate consumption.
iii) Light user: They are users of light quantity.
Marketers are interested in heavy users. They try to encourage light users to increase
the usage rate.
e) Loyalty Status: Consumer loyalty to brands can be used for segmentation. Loyalty
patterns can be:
i) Hard core: One brand bought all the time. Full and undivided loyalty. There is
no brand switching.
ii) Split loyal: Two or more brands are bought. Divided loyalty is present.
iii) Shifting loyal: Loyalty shifts from one brand to another brand.
iv) Switchers: No loyalty to any brand. Switch from brand to brand.
f) Attitude toward Product: Attitudes are judgements concerning objects, people or
events. Consumer's attitudes toward products can be used for segmentation into:
i) Enthusiastic: Consumer is enthusiastic to buy the product.
ii) Positive: Consumer has positive attitude about the product.
iii) Negative: Consumer has negative attitude about the product.
iv) Indifferent: Consumer has indifferent attitude about the product.
v) Hostile: Consumer has hostile attitude towards the product.
Box 4-3: Benefit segmentation of toothpaste
1. Economy: Low price, money saving.

2. Medicinal: Protection from cavities and gum diseases.
3. Cosmetic: Sparkling teeth, bright teeth.
4. Taste: Good taste for children and women; pleasant flavour.

4.4 Segmentation Variables for Industrial Markets

Industrial markets buy products for business use, resell, or to make other products. Industrial
buyers are usually well-informed. The customers are few but the orders are of big size. The
variables used for segmenting the industrial markets are: (Figure 4-7)
 Geographic
 Demographic
 Operating
 Purchase-related
Figure 4-7: Segmentation Variables for Industrial Market.
4.4.1 Geographic Variables

Industrial marketing can be segmented according to:
a) Location: It is geographic location to be served. It can be local, national, regional,
global. It sets the boundary.
b) Topography: It is terrain to be served. It can be mountain, hill, terai. It affects
movement of products.
c) Climate: It is climate to be served. It can be tropical, temperate, alpine. It affects
product needs and packaging requirements.
4.4.2 Demographic Variables

The major demographic variables for segmenting industrial markets are:
a) Type of Industry: Industrial markets consist of a range of industries. They require
different market mixes. Segmentation can be done according to industry type:
i) Agriculture, forestry, fishing
ii) Mining and construction
iii) Transport and communication

iv) Finance, insurance, real estate

v) Services
b) Size of Customers: Every industry contains various sizes of customers in terms of
orders. The bases for segmentation can be:
i) Cottage and Small units: Small customers
ii) Medium size units: Medium customers
iii) Large size units: Large customers
iv) Global units: Very large customers without borders with supply needs in
many countries.
4.4.3 Operating Variables

They are technology, usage rate and service needs.
a) Technology: Technology determines the product requirements of buyers.
Segmentation variables can be:
i) Manual technology: Human labour is used.
ii) Mechanised technology: Machines are used.
iii) Automated technology: Automatic machines are used.
iv) Computerised digital technology: Computers are used.
v) Robotics technology: Robots are used.
b) Usage Rate: Usage rate affects the frequency and quantity of product use. Users
can be classified as:
i) Heavy user: big size order for products
ii) Medium user: medium size order for product
iii) Light user: small size order for products
iv) Non user: No order for products
c) Service Needs: Customers may require various types of services. The bases for
segmentation can be:
i) Before sales service: It is information based.
ii) After sales service: It is repair and maintenance based.
iii) Warranties, guarantee: Warranty replaces parts; guarantee replaces product.
iv) Installation, repairs, etc. in the place of customer.
v) Credit needs to finance purchase.
4.4.4 Purchase-related Variables

They are:
a) Purchase Organization: They can be centralized or decen-tralized. They can be
segmented by who operates them: individual, purchase committee, or purchase
department.

b) Purchase Documentation: Some industries make direct purchase. Others need

documentation such as quotations, tenders and contracts. Segmentation can be
done according to the number and type of documentation requirements by the
buyers.
c) Negotiation Period: Time required for negotiation and completion of sale. It may
vary because several persons participate in the buying decision. The sale of aircrafts
may take years. Segmentation can be done according to length of negotiation period.
In Nepal, government purchases require following documentation

i) Prequalification, based on submission of renewed certificate of firm
registration, income tax clearance certificate, value added tax (VAT)
registration.
ii) Quotation (at least three) or tenders depending on the amount of order.
iii) Evaluation of quotations and tenders by committees.
4.5 Market Segmentation in Nepal

The supplier driven Nepalese market generally practiced mass marketing approach with
product variations in the past. The socio-economic changes and developments in transport
and communication system have made Nepalese marketers conscious of market segmenta-
tion. The marketing strategies of global organizations like Coca Cola, Pepsi, Nepal Lever
and Standard Chartered Bank have reinforced this consciousness.
The following points describe the practices of market segmentation in Nepal:
1. Non-systematic: Segmentation is generally not based on systematic market research.

Past experiences, hunches of management, and competitor's strategy have influenced
segmentation.
2. Variables for Segmentation: The variables mostly used for consumer market
segmentation are:
i) Geographic: Nepalese organizations generally segment market on area basis-
Development regions, zones, district, etc. Population density is also used for some
products. Geographic variables are most poplar for market segmentation.
ii) Demographic: Gender, age, and income are widely used as variables for
segmentation. Family life cycle is not much used. Religion and ethnicity also
influence market segmentation in Nepal. The importance of demographic variable
is gradually increasing for market segmentation.
iii) Psychographic: Life style and personality variables are not much used for market
segmentation. Some high priced products like cigarettes and liquors use personality
variables.
iv) Behavioral: Benefits, usage rate, and loyalty, have been neglected for segmentation
in Nepal.
3. Lack of Information: Nepalese marketers lack comprehensive information about
consumer characteristics. They regard marketing research as a "wasteful cost". This
has constrained the effective evaluation of market segments in terms of their
attractiveness and appropriateness. Risks are not properly assessed.

4. Government Policies: Government policies in Nepal are not very supportive of

marketing. They do not regard businessmen as partners for development. Restrictions
and controls have discouraged market segmentation.
5. Lack of Ethical Considerations: Environmental and welfare considerations are generally
disregarded for market segmentation in Nepal.
 The concept of market segmentation is at an initial stage in Nepal. However, the
importance of market segmentation is likely to increase in the years to come.
1. What is market segmentation? Briefly explain the process of market segmentation.
2. Explain the requirements for effective market segmentation.
3. Describe the variables used for segmentation of consumer market.
4. Explain the variables used in segmentation of an industrial market.
5. Describe the use of life-style for segmentation of the consumer market.
6. Identify the demographic variables in segmenting a consumer market. Also explain
any two of them with the help of a suitable example.
7. Explain the benefits of market segmentation.
8. What is market segmentation? Explain the requirements for effective market segmentation.
9. Explain the criteria used for evaluation of market segments.
10. Describe market segmentation practices in Nepal.
11. Describe various types of market segmentation.
12. You are going to segment the market for your newly introduced noodles named “Mitho”
in Nepal. What variables do you consider? and why?
13. Why do you segment the market for your product?
14. What is the process of segmenting the market for consumer product?
15. How do you segment the market for your industrial product?
16. Why do you segment your market? Explain.
17. What are the advantages of market segmentation?
18. What are the bases of market segmentation?
ICAN Questions
1. Explain the requirements for effective market segmentation. (June 2009)
2. Briefly explain industrial and consumer market. (June 2009)
3. Briefly explain niche market. (Dec. 2009)
4. What is market segmentation? List the factors that are required for effective market
segmentation. (Dec.2010)
5. What are the requirements for effective segmentation of a consumer market?(Dec.2011)
6. Write short note.

CHAPTER - 5
MARKETING INFORMATION SYSTEM
5.1 Meaning of Marketing Information System

Information is processed data. Marketing managers need information to respond to
environmental changes. Marketing decisions are based on information.
Organizations need to design and use an effective marketing information system (MKIS).
They should provide continuous flow of information to their marketing managers.
Marketing information system provides information support for marketing decision making.
Information is power.
Definition
Marketing Information System consists of people, equipment, and
procedures to gather, sort, analyze, evaluate, and distribute needed, timely,
and accurate information to marketing decision makers.
■ According to William J. Stanton and others
Marketing Information System is an on-going, organized procedure to
generate, analyze, disseminate, store, and retrieve information for use in
making marketing decisions.
A marketing information system is a unified system of interrelated parts to provide

information support to achieve marketing objectives. It consists of input-processing-output-
feedback components (Figure 5-1)
a) Input: It is based on database of the organization. It consists of data generated from

external and internal sources. Need assessment is done to find data requirements.
External sources of data can be environment market and competitors. Internal sources
are within the organization.

PROCESSING
2.
Analysis
INPUT OUTPUT
1. 3.
Data Generation Sorting Evaluation • Regular Reports
• External Sources MKIS • Special Reports
• Internal Sources 4 • Others
6
Retrieval Dissemi-
nation
5
Storage
FEEDBACK
Figure 5-1: Marketing Information System
b) Processing: It consists of activities related to data sorting, analysis, evaluation, storage,

retrieval and dissemination. The information is timely, up-to-date and accurate. Its
flow is continuous.
c) Output: It consists of regular and special reports needed for marketing decision making.
It is information dissemination.
d) Feedback: It provides information to redesign input and processing to meet changing
needs of marketing.
People, equipment, and procedures are needed for the develop-ment and management
of MKIS. Information technology, especially the internet and computer, play an
important role in its operation.
MKIS should be tailor-made according to the organizational needs. Information overload
should be avoided. It should be cost-effective. (See Box 5-1)
Box 5-1: Features of Marketing Information System
The features of marketing information system are:

a) Inter-related components: Marketing information system is a set of inter-related
components. They consist of people, equipment and procedures. Computer hardware,
software and information communica-tion technology is used to design and deliver it.
b) Processing: Marketing information system collects, processes, analyses, stores, retrieves,
and disseminates information for decision making and control. Its output consists of
various reports.
c) Timeliness: Marketing information system provides right information to right people
at right time. Information if received late has no use. Marketing information system is a
continuous process.

Chapter 5 - Marketing Information System
d) Accuracy: Marketing information system provides accurate and reliable information.

Past and present information are more accurate than future forecasts. It also provides
complete and valuable information.
e) Consistency: Market information system provides consistent information. All data is
based on same definition, assumptions and time period.
f) Accessibility: Market information system is easily accessible. The information is
properly secured. But it is easily available to authorized persons. Information
communication technology has facilitated accessibility. It also avoids information
overload.
5.2 Importance of Marketing Information System

The importance of marketing information system is clear from the following points:
a) Marketing Planning: Marketing Information System helps marketing to predetermine
future courses of action. It also helps to set objectives and standards of performance for
marketing planning. Marketing opportunities of competitive advantage can be
identified. Strategic plans can be prepared. Segmentation can be done effectively. Non
price competition can be planned. Marketing mixes can be formulated.
b) Marketing Programme Implementation: Marketing Information System aids
implementation of the marketing programme. It helps to analyze sales trends, stage of
product life cycle, pricing and non-pricing strategies of the competitors in target
segments. Marketing mix can be designed to meet customer expectations.
c) Marketing Control: Marketing Information System facilitates continuous monitoring
of marketing performance for timely corrective actions. Deviations can be analyzed
and corrected.
d) Market Coverage: Marketing Information System provides information to increase

market coverage. It can be single or multiple segment coverage. It can be product or
market specialization. Marketing information also helps to create wants.
For the Nepalese garment industry, it is very important to know about the "Colour of
the Year" in the USA to increase market coverage.
e) Environmental Adaptation: Marketing Information System provides information about
changes in trends and events in the environmental forces. This helps organizations to
identify opportunities and face threats. They can adapt to the changing environment.
New technology can be adopted. Environment scanning and monitoring can be done.
f) Marketing Decision Making: Marketing Information System aids organizations to make
marketing decisions. It helps them to understand the problem, identify and evaluate
alternatives and to make a choice. It provides information support for decision making.
It closes the information gap.
g) Marketing Concept Implementation: Marketing information system is a must to
implement the new marketing concept. Customer orientation in target market is possible
only if information is available about customers in the segments.

5.3 Components of Marketing Information System

The components of Marketing Information System are: (Figure 5–2)
1. Internal Records System
2. Marketing Intelligence System
3. Decision Support System
4. Marketing Research System
5.3.1 Internal Records System

Every organization maintains an internal database about current and past results. The
data is gathered from sources within the organization. They consist of:
a) Customer-Related Records: Orders, invoices, shipping docu-ments, inventory
records, and payments provide infor-mation about customer demand and their
profiles. The “order to payment cycle” is the heart of internal records system.
Invoices are important for customer information. So are customer complaints.
b) Sales Reports: Sales reports submitted by sales force provide information about
performance of brands, sales trends and customer expectations.
c) Other Records: Annual reports, financial statements, audit reports, and special
reports also provide useful information. Previous market research reports are also
useful.
Figure 5-2: Components of Marketing Information System
5.3.2 Marketing Intelligence System

The marketing intelligence system provides information about everyday happenings
in the marketing environment. It involves environ-mental scanning.


Marketing Intelligence System is a set of procedures and sources used by
managers to obtain everyday information about pertinent developments in
the marketing environment.
The Sources of marketing intelligence are:

a) Marketing Managers: They read books, newspapers, and trade publications. They
talk with customers, suppliers, distributors and personnel within the organization
to gather market information.
b) Sales Force: They spot and report new developments in the market place.
Organizations train and motivate them for marketing intelligence purposes.
c) Middlemen: They handle several products and usually know in advance about
competitor's moves. They can provide vital market information.
d) Specialists: They are appointed to gather market intelligence. They even pose as
"mystery shoppers" to assess how employees treat customers or how competitors
price their products.
e) Outsourcing: Commercial detectives are hired to gather specific information. Data
can be purchased from research firms which specialize in supplying information
at low cost.
f) Marketing Information Section: Organizations can establish a Marketing
Information Section for marketing intelligence. It formally scans the environment
to gather information. It also surfs the internet to gather data.
5.3.3 Marketing Research

Research is systematic gathering of information. Marketing research is a systematic
inquiry undertaken to help resolve a specific marketing problem. Its purpose is to guide
marketing decisions by generating information. It provides alternatives for making the
choice. It is a tool for identifying market opportunities and to minimize threats. It is
problem-oriented.

Marketing research is the systematic design, collection, analysis,
and reporting of data and findings relevant to a specific marketing
situation facing the company.
■ According to William Stanton
Marketing research is the development, interpretation, and
communication of decision-oriented information to be used in the
strategic marketing process.
Features of marketing research are:

a) Systematic: Marketing research is a systematic step-by-step process. It is properly
planned and implemented.

b) Objective: Marketing research is unbiased. It is objective in collecting, analyzing,

interpreting and reporting data.
c) Problem-oriented: Marketing research deals with specific marketing problems.
d) Decision making: Marketing research helps make timely marketing decisions.
Most large organizations have their own Marketing Research Department. Small
organizations can buy the services of outside marketing research firms. Organizations
generally budget 1 to 2 percent of sales for research.
5.3.4 Decision Support System (DSS)

Organizations develop marketing decision support system to help their marketing
managers make better decisions. It works through computer workstations.

A Decision Support System is a procedure that allows a manager to
interact with data and methods of analysis to gather, analyze, and
interpret information.
DSS does not collect information. It stores, analyses and synthesizes the collected
information. It has three components. They are (Figure 5-3):
Data
Bank
De cision
Support
System
Model Methods
Bank Bank
Figure 5-3: Components of Decision Support System
a) Data Bank
Decision Support System consists of a Data Bank. It stores different types of data collected
from various sources such as internal reports, market intelligence and market research.
They are data about customers, competitors, environmental trends, organization's
performance, etc. It is the data base stored in computers.

b) Methods Bank
DSS has methods bank for analyzing data which range from simple procedures to
sophisticated statistical tools. It is the statistical bank.
Analytical methods for Decision Support System can consist of the following statistical
tools.
 Multiple Regressions: Technique for estimating "best fitting" equation.
 Discriminant Analysis: Technique for classifying an object or persons into two or
more categories.
 Factor Analysis: Technique to determine the few underlying dimensions of a larger
set of inter-correlated variables.
 Cluster Analysis: Technique for separating objects into specified number of mutually
exclusive groups.
 Conjoint Analysis: Technique to determine a person's inferred utility function for
each attribute and the relative importance of each attribute.
 Multidimensional Scaling: Technique for producing perceptual maps of competitive
products or brands.
c) Model Bank
They consist of various models that facilitate decision making. Models define the
interrelationships between different variables that help decision makers to understand,
predict and control marketing problems. Model Bank consists of:
i) Models: They are:
 Markov Model: It shows the probability of moving from a current state to any
future state.
 Queuing Model: It shows the waiting times and queuing lengths that can be
expected in any system.
 New Product Pretest Models: It estimates functional relations in a pretest
situation.
 Sales Response Models: It estimates functional relations between one or more
marketing variables.
ii) Optimization Routines: They consist of
 Differential Calculus: To find maximum or minimum value along a well-
behaved function.
 Mathematical Programming: To find the values that would optimize some
objective function that is subject to a set of constraints.
 Statistical Decision Theory: To determine course of action that produces the
maximum expected value.
 Game Theory: To determine the course of action that will minimize the decision
maker's maximum loss.

 Heuristics: Using a set of rules of thumb to find a reasonably good solution.

The potential of DSS has been enhanced by computers, user-friendly software and
networking. However, it is costly to implement and maintain. Specialized human
resources are needed.
5.4 Marketing Research Process

Marketing research process involves the following six steps (Fig 5-4)
1. Define the problem
2. State the research objectives
3. Develop research plan
4. Collect needed information
5. Analyze the information
6. Report the findings
5.4.1 Define the Problem

Problem determines the scope of research. It should be defined carefully- neither too
broadly nor too narrowly. It should not be mixed up with the symptoms. For example,
if the sales of Nepalese garments decline due to high prices, sales decline is a symptom
and high price is a problem. Symptoms indicate the existence of a problem
Problem identification can be based on:
a) Literature review: Published secondary data is studied.
b) Experience survey: Conversations with qualified persons inside and outside the
organization who possess knowledge and experience.
c) Case study: Exploratory study of the organization to identify the problem.
d) Brainstorming: Ideas are generated spontaneously through group creativity. Free
wheeling is encouraged but criticism is disallowed.

Develop Collect
Research Needed
Plan Information
State Analyze
Research the
Objectives Information
Define
Report
the
Findings
Problem
Figure 5-4: The Process of Marketing Research
5.4.2 State Research Objectives

The objectives of the research should be stated clearly and precisely. They specify the
information required for research. They also determine the research design. Objectives
should follow from the problem defined for research.
 Hypothesis can also be posed. It is a tentative assumption about the problem. Its
validity remains to be tested through research. It explains relationship between
variables. It implies cause and effect relationship.
5.4.3 Develop Research Plan

It is the research methodology for gathering the needed information. It deals with
decisions on: (See Figure 5-5)

Data Sources
Primary Secondary
Research Methods • Internal Reports

• Government Publications
• Survey • Trade & Professional
• Observation (Case) Publications
• Focus Group • Libraries
• Experimentation • Internet / Websites
• Consumer Panel • Books, Periodicals
• Newspapers
• Research Reports
Research Instruments • Thesis (Master, Ph.D.)
• Other Published Sources
• Questionnaire
• Interview
• Mechanical Device
Research Plan
• Sample Unit
• Sample Size
• Sampling Procedure
Contact Methods
• Mail
• Personal Interview
Telephone/Fax/E-mail
• Computer
Tools for
Data Analysis
Figure 5-5: Components of Research Plan.
a) Data Sources:
They can be secondary or primary.
 Secondary data refers to data collected earlier for other purposes. It already exists
somewhere. Internal reports of the organization, periodicals, books and reports,
government publications, trade and research organizations, libraries, and internet
serve as sources for the secondary data. Desk research is needed to collect secondary
data.
 Primary data refers to data collected for the first time for a specific purpose.

b) Research Methods:
They are used for collecting primary data. Research methods can be:
i) Survey: It involves direct questioning of people to gather facts, opinions or other
information. Talking is a must for survey. Field study is needed. Data is collected
through use of questionnaire or interview.
ii) Observation Case Study: It is the process of collecting information by watching the
actions of people or settings. Actions of customers or events are recorded in market
place. Case study is based on observation.
iii) Focus Group Research: It is a gathering of small group of 6 to 10 people who are
invited to spend a few hours with a skilled moderator to discuss the research
problem. Open-ended questions are used.
iv) Experiment: It can be lab experiment or field experiment. Lab experiment is done
under controlled conditions in an artificial environment. Field experiment is
conducted in a real organiza-tion. Experiment consists of control group and
experiment group.
v) Consumer Panel: A panel of a group of people serves as subjects of survey. Nepal
Rastra Bank uses consumer panels to collect information for preparing consumer
price index.
c) Research Instruments:
They are used for collecting primary data. They can be:
i) Questionnaire: It is a set of questions presented to respon-dents for their answers.
It should be carefully constructed. The questions may be:
- Open-ended: Respondents are free to provide answers in their own words.
- Discrete: Direct response (Yes/No)
- Closed-end: Scale of answers are pre-specified for choice. This is widely used
in practice. (Box 5-2)
ii) Interview: A checklist of questions is prepared. Respondents are asked to answer

the questions face-to-face.
iii) Mechanical Instruments: Mechanical devices are used for collecting information.
For examples, audiometer to collect TV viewing data. On-line interviewing is also
used.
d) Sampling Plan:
It is a method of selecting units from the total population. It decides:
 Sampling unit: Who is to be researched?
 Sample size: How many people should be researched?
 Sampling procedure: How should the representative respon-dents be chosen.
Probability sampling is done to obtain a representative random sample. Non-portability
sampling methods are also used (Box 4-3)

e) Contact Method:
It decides how the respondent should be contacted ? It can be:
 Mail method: Questionnaire are mailed to respondents.
 Interview: Personal or telephone interview is conducted.
 Computer: E-mail, Fax, on-line computer is used to get responses.
f) Analytical Tools:
Tools for analyzing information are identified. They are statistical tools, such as mean,
regression, correlation, analysis of variance, chi-square, etc.
5.4.4 Collect Needed Data

Collection of primary data involves field study. Skilled personnel are used to collect
data. Questionnaires are filled-in and responses of interviews are recorded. Accuracy
is ensured in data collection. The information collected should be useable and relevant.
5.4.5 Analyze the Data

It involves coding, tabulating and statistical analysis of data. Appro-priate statistical
tools are used to analyze and interpret the collected data objectively. The value of
research is determined by its results. Computers have proved a great help for analyzing
information. Data becomes information through analysis and interpretation. Results
are evaluated.
5.4.6 Report Findings

Research findings are reported to the relevant clients in the form of written report and
oral presentations.
 It should be noted that market research cannot replace sound judgement. Facts
provided by marketing research should be blended with judgement to make effective
marketing decisions.
Box 5-2: Closed End Questions for Questionnaire
1. Discrete: Yes/No
Discrete: Yes/No
 Do you drink Coca-Cola? Yes No
2. Multiple Choice: Three or more answers

 What do you Drink ?
Tea Coffee Cola Beer

3. Likert Scale: Amount of agreement or disagreement.

 Nepal Bank has good service.
Strongly Disagree 1 Disagree 2
Neither agree nor disagree 3 Agree 4
Strongly Agree 5
4. Importance Scale: Rates importance of some attribute

 Environment protection to me is
Extremely Important 1 Very Important 2

Somewhere Important 3 Not Very Important 4
Not at all important 5
5. Rating Scale: Scale for rating some attribute from poor to excellent.
 The taste of wai-wai is ?
Excellent 1 Very good 2

Good 3 Fair 4 Poor 5
1. What is marketing information system? Why is marketing information system important
for a business organization?
2. What is marketing information system? What are its components?
3. What is marketing intelligence system? How does it differ from the marketing research
system?
4. What is a marketing information system? Briefly explain the marketing intelligence
system.
5. Describe the importance of market information system.
6. Describe the process of market research.
7. Explain in brief the components of a marketing information system.
8. Explain the importance of marketing information system for marketing decisions.
9. Describe the sources of marketing intelligence.
10. What do you understand by Decision Support System (DSS)? Explain.
11. What is Internal Record System (IRS)? Discuss.

ICAN Question
1. What are the components of marketing information system? (June 2009)
2. Briefly explain the marketing research. (Dec.2010)
3. Point out the components of Marketing Information System and explain briefly the
Marketing Decision Support System. (June 2010)
4. Point out the components of marketing information systems and explain briefly the
Marketing Decision Support System. (June 2010)
5. Explain the significance of Marketing Information System. (June 2011)
6. What is marketing research? Give your opinion about the essentials of marketing
research process. (Dec. 2013)

CHAPTER - 6
BUYER BEHAVIOR ANALYSIS
6.1 Meaning of Buyer Behavior

Marketing identifies and satisfies the needs of customers. Marketers must understand
behavior of their customers about how they select, buy, use and dispose products.
Human behavior is a complex process. No two customers always behave in the same way.
Marketers must understand why customers behave as they do. Buyer behavior influences
customer's willingness to buy.
Buyer behavior is concerned with activities of customers. Such activities are observable by
others. They are related to products.
Buyer behavior refers to the buying behavior of customers. It involves decisions by buyers.
They can be consumers or organizations.
Definition
Definition
■ According to Philip Kotler:
Buying behavior is the decision processes and acts of customers involved in
buying and using products.
Marketing attempts to provide answers to the following questions by studying buyer

behavior:
 Who participates in buying? Participants in buying
 What do they buy? Objects of buying.
 Why do they buy? Reasons for buying.
 When do they buy? Occasions for buying.
 Where do they buy? Channels for buying.
 How often do they buy? Frequency for buying.
A model for studying buyer behavior is presented in Figure 6-1.

Stimuli Influences Responses
Market Mix Buyer Buyer
Characteristics Decision
Environmental Buyer Decision About Product

Force Process brand, channel,
purchase timing
and amount
Post Purchase Feedback
Figure 6-1: Model of Buyer Behavior

1. Stimuli
Buyers are stimulated by:
a) Marketing mix: It consists of product, price, place, and promotion variables.
b) Environmental forces: They consist of political, economic, socio-cultural and
technological forces (PEST).
2. Influences
Buyer behavior is influenced by
a) Buyer Characteristics: They consist of:
i) Personal: They are age, gender, stage in life cycle, occupation, income.
ii) Psychological: They are motivation, perception, learning, beliefs, attitudes,
personality, life style.
iii) Social: They are family, reference groups, social class, status.
iv) Culture: It determines a person's wants and behavior. Each culture consists of
subcultures.
b) Buyer Decision Process: It consists of:
 Problem recognition: It is recognizing an unsatisfied need.
 Information search for identification of alternative products.
 Evaluation of alternatives relating to products.
 Purchase decision to select product or brand.
 Post purchase behavior: satisfaction or dissatisfaction after purchase.
3. Buyer Responses
They are buyer decisions about:
 Product choice
 Brand choice
 Channel choice
 Purchase timing
 Purchase amount.
4. Post Purchase Feedback

It provides information about buyers satisfaction or dissatisfaction about product
performance. It helps to redesign marketing mix.

Chaper 6 - Buyer Behavior Analysis
6.2 Importance of Buyer Behaviour

The following points indicate the importance of understanding buyer behavior: (Figure 6-2)
Customer Need Satisfaction
Market Mix Development
New Market Opportunities

Importance of
Buyer
Behavior Target Market Selection
Product Positioning
Efficient Resources Use
Figure 6-2: Importance of Buyer Behavior
1. Customer Need Satisfaction:

Organizations should offer a marketing mix that satisfies consumer needs. To find out
what satisfies customers, they must understand buyer behavior.
2. Marketing Mix Development:

Customers' responses to marketing mix keep changing. Better understanding of the
factors that influence consumer behavior helps organizations to develop appropriate
marketing mixes. They can better predict how customers will respond to the marketing
mix.
3. New Market Opportunities:

Unsatisfied needs motivate customers to buy. By understanding buyer behavior,
marketers can locate new market opportunities.
4. Target Market Selection:

Behavior is an important variable for market segmentation. By understanding buyer
behavior, organizations can effectively segment the market. They can select the most
attractive segments as target market.

5. Product Positioning:
Positioning describes how an organization's product differs from its competitors. By
understanding buyer behavior, organizations can better position their products. They
can communicate key product benefits to the target market.
6. Efficient Resource Use:

By understanding buyer behavior organizations can make efficient use of marketing
resources. They can focus their marketing efforts on meaningful groups of
consumers.
6.3 Stages of Consumer Buying Process

Consumers buy products for ultimate use. It is important to understand how they
actually make their buying decisions. The buying process influences their buying
decisions.
Consumer buying process varies with the type of buying decision. Buying decisions can be
classified into: (Box 6-1)
1. Low Involvement Purchase
2. High Involvement Purchase
1. Low Involvement Purchase

It involves routine purchase decision. Products are repeatedly purchased as a habit.
Consumers are familiar with the product.
Many brands, low risk, small amount of money, short purchase time, passive interest
in product information, positive attitude toward the product, short term product benefits
and limited interest in the product characterize low involvement purchase. Examples
are a cup of tea, loaf of bread.
2. High Involvement Purchase

It involves extensive decision making. The buying behavior is complex. Consumers are
unfamiliar with the product.
Few brands, high risk, large amount of money, long purchase time, active interest in
product information, uncertain attitude toward the product, long term product benefits
and high interest in the product characterize high involvement purchase. Examples
are: car, motorcycle, house, computer.

Box 6-1: Characteristics of Buying Decisions
Characteristics Low Involvement High Involvement

Purchase Purchase
1. Brand of the product Many Few
2. Level of buying risk Low High
3. Amount of money involved Small Large
4. Purchase time needed Short Long
5. Interest in product information Passive Active
6. Attitude toward the product Positive Uncertain
7. Product benefits Short term Long term
8. Interest in the product Limited High
Stages of Consumer Buying Process

There are five stages in the consumer buying process (See Fig. 6-3)
Post-
Purchase
Behavior
Evaluation
Need Information Purchase
of
Recognition Search Decision
Alternatives
Figure 6-3: Stages of Consumer Buying Process
a) Need Recognition
The buying process starts when the consumer recognizes a need. The need can be
activated by internal stimulus such as hunger and thirst. It can also be activated by
external stimulus such as advertisement and window display. Activated needs drive
the consumers to products. This stage identifies specific needs.
b) Information Search
After need recognition, consumers search information about products. The information
can be about features, advantages and benefits of the products. This stage identifies
product alternatives through:

i) Internal search: Consumers scan their memory of previous experiences about

products.
ii) External Search: Consumers seek information from:
 Personal Sources: Friends, family, relatives, associates.
 Market Sources: Advertising, sales force, middlemen, packaging.
 Public Sources: Media like television, radio, newspapers, internet, consumer
interest groups, and government.
 Experiential Sources: Handling, examining, testing the product by the
consumer.
The time spent on information search depends on low involvement or high involvement
nature of buying decision.
c) Evaluation of Alternatives
After identifying product alternatives, consumers evaluate them. They use evaluation
criteria to find out which of them will best satisfy their needs. There is no one single
evaluation criterion for this purpose. Evaluation is influenced by:
i) Product Attributes: Consumers view product as a package of attributes. They can
be features, brand, price, quality, service, performance, warranty. They evaluate
products in terms of attributes that they perceive as important. Attributes of
competing products are also compared.
ii) Brand Beliefs: Consumers use their brand beliefs to evaluate products. Brand beliefs
are shaped by past experiences and opinions of family, friends and reference
group.
iii) Utility Function Attributes: The utility function is the expected total satisfaction.
Consumers have utility function for each product attribute. They arrive at some
preference towards the utility function of alternative brands. They develop purchase
intention.
This stage provides the consumer with a clear set of product and brand preferences.
d) Purchase Decision
After evaluating alternatives, consumers make the purchase decision. They actually
select the product or brand.
Purchase decision is influenced by:
 Payment method, warranties, delivery, after-sales service, and installation.
 Purchase intention developed during evaluation of alternatives.
 Social influence from family, friends, co-workers.
 Situational factors that increase the level of risk.

e) Post Purchase Behavior

After purchasing the product, the consumer may be satisfied or dissatisfied. Satisfied
consumers continue to purchase and develop brand loyalty. Dissatisfied consumers
stop purchasing the product. They dissuade others from buying it. If performance
exceeds expectations, the consumer is delighted.
When consumers experience anxiety over their purchase decision it is called cognitive
dissonance. Marketers should take steps to reduce this anxiety through follow-up,
post-purchase services, speedy handling of consumer grievances and persuasive
communication. They should constantly monitor this post purchase behavior.
Disposal of products by consumers after use is an important post purchase decision.
They can get rid of it temporarily, or get rid of it permanently or keep it.
Permanent disposal can be through sell, exchange, give away, and throw away.
Temporary disposal can be by renting or lending. Organiza-tions should monitor
product disposal and assess its environmental impact. (Figure 6-4)
 Marketers need to understand consumer behavior to ensure customer satisfaction
at all stages of the buying process. Post-purchase behavior is important for
relationship marketing.
Figure 6-4: Methods of Product Disposal

6.4 Factors affecting Consumer Buying Process

Consumers make buying decisions. Their buying process is influ-enced by economic,
personal, psychological and socio-cultural factors. (Figure 6-5)
Figure 6-5: Determinants of Consumer Buying Process
6.4.1 Economic Factors

Economic factors that affect buying decisions consist of:
a) Level of income
The ability to spend is determined by the level of income. Product choice is very
much dependent on income level. Income of various family members increase the
level of income.
b) Liquid Assets
Consumers who do not have regular income may possess liquid assets like gold
and shares. They provide spending power to the consumers.

c) Savings, Debt and Credit Availability

They all affect consumer expenditure levels. High savings result in lower interest
rates. Credit availability by bank becomes cheaper through lower interest rates.
This increases the level of consumer spending.
d) Attitude Toward Spending

Negative attitude toward spending adversely affects the willingness of the
consumers to spend. This influences the product choice.
e) Economic Conditions
The stage of economic development, inflation and business cycles affect consumer's
willingness to spend. Prosperity is good and recession is bad for marketing. Health
of the economy affects consumer behavior.
6.4.2 Personal Factors (Demographic Factors)

Personal factors consist of:
a) Age
Consumers buy different products according to age group. Their taste in food,
clothes, and recreation is age-related. Young consumers like to experiment new
products. Older consumers prefer brand loyalty.
b) Gender
Male and female exhibit differences in buying behavior. Their needs also vary.
c) Family size and Family life cycle

Family size determines the level of expenditure and product choice. Buying
decisions in larger families favour brand loyalty.
The family life cycle influences spending patterns. Product interests differ
according to the stage in family life cycle. Such stages consist of singles, bachelors,
married, married with children and old.
d) Occupation
Occupation influences consumption pattern. Factory workers buy work clothes.
Bank managers buy expensive suits. Professional people dress properly.
6.4.3 Psychological Factors

Psychological factors consist of motivation, perception, learning, attitude, personality
and life style.
a) Motivation
A motive is a pressing need. Motives motivate consumers. Motivation leads to
intensity, direction and persistence of efforts toward attaining goals. A motivated
consumer is ready to buy. (See Box 6-2 for Theories of Motivation).

b) Perception
Consumer behavior is based on perception of what reality is, not on reality itself.
Perception influences how the motivated consumer actually acts. Perception is the
process of selecting, organizing and interpreting information inputs by consumer
to produce meaning.
i) Selection: Consumers receive numerous information from the environment.
Perception filters, modifies or changes the relevant information.
ii) Organization: The information is ordered and classified in a logical manner.
iii) Interpretation: This involves assignment of meaning to make sense out of the
information.
Consumers detect information through sensation. The five senses are vision,
hearing, taste, smell, and touch. Perception gives meaning to information.
Consumers perceive the same situation differently because of selectivity in
perception due to:
i) Selective attention: Consumers are selective in noticing information. They are
more likely to notice stimuli that relate to their current needs.
ii) Selective distortion: Consumers distort information to suit their preconceptions.
They hear what they want to hear.
iii) Selective retention: Consumers tend to retain information that supports their
attitudes and beliefs. They want to continue believing in what they believe.
They retain a small fraction of information in their long term memory.
Perception influences consumer buying decisions. Marketers must understand

how the consumers see the world around them. They should ensure that customers
perceive their marketing mix in a positive way.
c) Learning
When consumes act, they learn. Learning is an enduring change in behavior. It
results from information and experience. Most human behavior is learned. There
are various theories of learning. (See Box 6-3).
d) Attitudes and Belief

i) Attitudes: Attitudes reflect likes and dislikes of consumers. An attitude is a
person's judgement toward some object, people or event. They are learned,
have consistency, and are either favorable or unfavorable about objects.
Personal experience, environment and situation moulds attitude.
Attitudes influence consumer behavior. Generally, it is easy to change products
than it is to change consumer's attitudes. Marketers should fit products to
existing attitudes.

ii) Belief: A belief is a descriptive thought that a consumer holds about something.
It can be based on knowledge, opinion or faith. Beliefs make up product and
brand images.
e) Personality
Personality is the sum total of ways in which an individual reacts and interacts
with others. Personality is an individual's psychological traits that lead to enduring
behavioral responses. The big five personality dimensions are: (Box 6-4)
 Assertiveness: extrovert or introvert
 Agreeableness: agreeable or disagreeable
 Conscientiousness: conscientious or non-conscientious
 Emotional stability: emotionally stable or emotionally unstable
 Openness to experience: open or closed to experience.
Consumer personalities are reflected in the clothes they wear, vehicles they use,
restaurants they visit, and jewellery they wear.
f) Life Style
Life style is pattern of living. It is reflected in activities, interests and opinions. It is
the way in which people conduct their lives.
 Activities: They are related to work, hobbies, vacation, shopping, sports, etc.
 Interest: It is in family, home, job, fashion, food, etc.
 Opinions: They are about self, society, politics, business, products, etc.
Life style is an important variable for understanding how consumers spend their
time, what are their interests, and what are their opinions about self and broad
issues. It influences product needs and brand choices.
Box 6-2: Theories of Motivation
1. Freud's Theory of Motivation (Sigmund Freud):

This is a Psycho-analytical theory. It states that unconscious motives influence consumer
behavior. Consumers repress many urges in the process of growing up and socialization.
These urges are never elimi-nated and unconsciously motivate consumer behavior. In-
depth interviews with consumers are conducted to uncover unconscious motives.
Freud's theory is based on the "hedonistic principle". It advocates that most human
behavior originates from sex drive (libido). Individuals desire pleasure and avoid pain.

This theory advocates that consumer behavior is a function of the ID, the Super Ego and
the Ego. The ID represents impulsive needs. They are the source of sex drives. They
impel individual for action. The Super Ego represents the social values based on
moralistic principles. The Ego is the balancing force between the ID and the Super Ego.
It directs the individual towards reason and good sense. It motivates individual to act
in a practical way.
2. Maslow's Theory of Motivation (Abraham Maslow):

This theory states that:
 Needs motivate consumers. There is a hierarchy of consumer needs. They range
from the most pressing to the least pressing. Consumes take a step-by-step approach
and satisfy most pressing needs first.
 Satisfied needs do not motivate. Unsatisfied needs influence consumer behavior.
The strength of the need depends on particular consumer, situation and time.
The needs have been classified in a hierarchy as follows: (Figure)
Maslow's Hierarchy of Needs

i) Physiological needs: They are the lowest level needs. They assume top priority.
They include basic survival needs for food, water, clothing, shelter, sex, etc.
ii) Safety needs: They consist of needs for security and protection from harm, ill-
health, and economic deprivation. When consumers feel threatened, safety becomes
an important need.
iii) Social needs: They consist of needs for sense of belongingness, love, friendship
and social acceptance. Nepalese consumers tend to be highly influenced by social
needs.
iv) Esteem needs: They consist of external needs for status, recognition, praise and
prestige. They also consist of internal needs for self-esteem. This is a higher level
need. Job title and luxury cars satisfy such needs.
v) Self-Actualization needs: These are the highest level needs. They consist of needs
for achievement, creativity, talent utilization, self-fulfilment and personal growth.
It is becoming what one is capable of becoming.
3. Herzberg's Theory of Motivation (Frederick Herzberg):

This theory is based on two factors.
 Dissatisfiers or hygiene factors: They do not motivate but cause dissatisfaction
when not present. They consist of lower level needs for survival, safety and
friendship.
 Satisfiers or motivating factors: They motivate and provide satisfaction. They consist
of higher level needs for esteem and self-actualization.
Marketers should identify dissatisfiers and avoid them. They should identify satisfiers
to influence product choices.

Box 6-3: Theories of Learning
a) Stimulus-Response Theory of Learning:

According to this theory, learning occurs when
 A person responds to some stimulus by responding in a particular way. Learning
is the result of association between stimulus and response.
 The person is rewarded for a correct response or punished for an incorrect one.
S (Stimulus)  R (Response)
b) Operant Conditioning Theory:

This theory states that behavior is a function of its consequences. It is learning of habit
through reinforcement. Reinforcement is anything that the learner finds rewarding.
R (Response)  S (Stimulus)
c) Cognitive Theory of Learning:

This theory states that learning involves a relationship between cognitive environmental
cues and expectations. One stimulus leads to another stimulus.
 Cognition refers to an individual's thoughts, knowledge, inter-pretations and
understandings about oneself and the environ-ment.
S (Stimulus)  S (Stimulus)
d) Modern Theories of Learning:

In Modern theories of learning, four factors are essential to learning:
 Drive: A strong internal stimulus requiring action.
 Cues: Minor stimuli that determine the response. They are present in the
environment.
 Response: Person’s reaction to drive and cues.
 Reinforcement: It results when the response is rewarding. It can be positive or
negative. Repeated reinforcement leads to a habit or brand loyalty.
Marketers should help consumers learn about their marketing mixes and positively
reinforce them to be loyal to the brand.

Box 6–4: The Big Five Dimensions of Personality
6.4.4 Socio-cultural Factors
Social Factors
Social factors are influences that other people exert on consumer behavior. They consist
of reference groups, family, and social class.
a) Family
Two or more persons related by blood, marriage or adoption who reside together
constitute a family.
The role performed by each member influences family purchase decision. The various
roles are:

i) Initiator: Suggests the idea for the product.

ii) Influencer: Provides information and advice about the product.
iii) Decider: Makes the buying decision.
iv) Buyer: Makes the actual purchase of product.
v) Users: Uses or consumes the product.
Marketers should target marketing mix to members who influence and make buying
decisions.
b) Reference Groups
Reference groups consist of groups that have a direct or indirect influence on the
consumer’s attitudes. Consumers use them as point of reference for evaluating their
own beliefs and attitudes.
Reference groups influence consumer behavior in three ways:
i) They expose consumers to new behavior and lifestyles by providing information.
ii) They influence consumer’s values and attitudes.
iii) They provide norms for consumer behavior. They create pressure for conformity to
norms.
Reference groups can be of three types:
i) Membership groups: A person holds membership of the group and has regular
face-to-face contact. For example, family, co-workers, religious, professional, trade
union groups.
ii) Aspiration groups: A person aspires to join the group but is not a member of the
group. For example, a student of management may aspire to become a member of
the Institute of Chartered Accountants of Nepal.
iii) Dissociative groups: A person keeps distance and rejects the values, attitudes or
behavior of the group.
Reference groups influence product and brand choices. Marketers should identify
reference groups to design and develop marketing mixes. Advertisers use well known
athletes, musicians, actors, and professionally successful people to influence consumers
who admire them.
c) Social Class
It is rank within a society. It is determined by members constitutes social class. It can be
upper, middle and lower. It indicates preferences and life style. Members share similar
values, interests and behavior. Social class reflects income, occupation, education and
area of residence. It is a grouping of people.

There are substantial differences in the buying behavior among classes. Marketing mix
need to be tailored to the specific social classes.
d) Status
It is based on role position. It is the rank given to a person by others. Branded products
provide status symbol. Status influences consumer buying decisions.
Cultural Factors
Cultural factors that influence consumer behavior consist of:
a) Culture
Culture includes values, attitudes, beliefs, language, religion, customs, traditions and
works of arts and architecture. Culture reflects the ways people live together.
Culture is learned behavior. It changes over time. Cross-cultural influences influence
consumer behavior. Food habits, dress and housing are influenced by cultural
norms.
Marketers should offer marketing mixes to fit cultural norms. Cultural changes should
be carefully taken into account for modifying marketing mixes.
b) Subculture
Each culture consists of subcultures. Subculture is based on homogeneous characteristics
such as religion, language, race, caste and ethnicity.
Subcultures provide specific identification and socialization for its members. They
constitute important market segments. Marketers should design marketing mixes tailored
to the needs of specific subcultures.
6.5 Features of Organizational Buying Behavior

Organizational behavior refers to the buying behavior of organizations. They buy products
for business use, resell or to make other products.
Organizations consist of business, industries, retailers, government, and non-government
organizations.
 Business and industries buy products for business use or to produce other products.
 Resellers buy products to resell at a profit.
 Government buys products for use in offices and development projects or to provide
service to people.

 Non-government organizations buy products to provide service to their clients. They

can be hospitals, educational institutions, political parties, religious and social
organizations.
The features of organizational buying behavior are:
a) Buyers: Fewer buyers buy large volume in geographically concentrated areas.

b) Demand: The total demand is inelastic. It is not affected by price changes. The demand
is derived from the demand for consumer goods. The demand is known as "derived
demand". It keeps on fluctuating because a small change in consumer demand results
in major shift in organizational demand.
c) Relationship: The relationship between supplier and customer is close. This is due to
few and large customers.
d) Professionalism: Professional and trained people make purchases. Purchase policies
require buying instruments like quotations, tenders, contracts, etc.
e) Channel: Organizations generally buy direct from manufacturers. Purchasing agents
are also used.
f) Buying Influences: More participants influence buying decisions. Buying committees
and evaluation committees are used. Personal selling is important. The participants
are:
i) Initiators: Request the product purchase.
ii) Users: Use the product. It can be an initiator.
iii) Influencer: Influences the buying decision by providing information and advice.
iv) Deciders: Make the decision about product/supplier.
v) Approvers: Authorize the purchase.
vi) Buyers: Actually purchase the product.
vii) Gatekeepers: Control flow of information about the product, for example telephone
operator, personal assistant, peon.
g) Rationality: Buyers are informed and are more rational in making buying decisions.
The buying criteria can be value, quality or service.
(See Box 6-5 for Stages in Organizational Buying Process)

Box 6-5: Organizational Buying Process
There are six stages in the organization buying process:
Stages in Organizational Buying Process
a) Need Recognition:
The buying process starts when individuals recognize a problem or need. Need
recognition can arise under a variety of situations, for example accountant needing a
calculator, researcher needing a book.
b) Product Specifications:
This stage involves development of product performance specifications to solve the
problem. Technical people assist in this job. For example, construction firms require
detailed specifications.
c) Supplier Search:
Possible suppliers for the product are searched and located at this stage. Suppliers are
identified through:
 Internal Search: The sources can be company files, catalogs, market information
system and purchase department, etc.
 External Search: It is by soliciting proposals from known suppliers or through
public notice. Pre-qualification of suppliers may be needed. This stage produces a
list of alternative suppliers.
d) Proposal Evaluation:
Proposals are invited from suppliers. They can be based on competitive bidding. Tenders
and quotations may be used. They also can be separated into technical proposal and
financial proposal. The proposals are evaluated to determine whether the products
meet performance specifications. Suppliers are evaluated for capability, price and
service. Committees may be used for evaluation.

e) Purchase Decision:
The supplier is selected. Negotiations are made. An order is placed. Several suppliers
may also be used. Specific details regarding terms of sale, credit arrangement and
technical services are worked out.
f) Post-purchase Behavior:
The performance of product and supplier is evaluated at this stage. Actual performance
is compared with specifications. If the performance is not satisfactory, repeat orders are
not placed with the supplier.
 Marketers need to understand buyer behavior at each stage of the organizational
buying process.
6.6 Factors affecting Organizational Buying Behavior

Organizational buying behavior is influenced by: (Figure 6-6)
 Environmental factors
 Organizational factors
 Interpersonal factors
 Personal factors
6.6.1 Environmental Factors

They consist of economic, technological, political-legal and social responsibility factors.
Environmental Organizational
• Economic Factors • Objectives
• Technological Factors • Policies
• Political/Legal Factors • Procedures
• Social Responsibility • Structures
Factors • Systems
Organizational Buying Behavior
Interpersonal Personal
• Authority • Age
• Interests • Income
• Status • Education
• Persuassiveness • Job Position
• Personality
Figure 6-6: Factors affecting Organizational Buying Behavior

a) Economic Factors
They consist of:
i) Level of Demand: Demand refers to ability and willingness to purchase products.
The level and distribution of income affects the level of demand. Price is also an
important determinant of demand.
ii) Economic Health: It is indicated by the stage of the business cycle.
 Prosperity is a period of economic growth.
 Recession is a period of decline.
 Recovery is path from recession to prosperity.
Economic health is good in prosperity and bad in recession. In recession, business
buyers reduce investment in plants and inventories.
iii) Competition: It is a major influence in organizational buying. It can be price, non
price, brand, domestic, international. Various modes of competition can be:
 Pure competition: Many competitors with similar products.
 Oligopoly: Few competitors with similar products.
 Monopolistic: Many competitors with different products.
b) Technological Factors
The level of technology and the pace of technological change greatly affect
organizational buying behavior. E-commerce and developments in information
technology have revolutionized purchasing and inventory management by business
buyers.
 Technological changes have destroyed existing industries and started entirely
new industries.
c) Political/Legal Factors
i) Political Factors: Government policies and regulations affect organizational
buying. The government itself is a big buyer. Political climate affects buying.
ii) Legal Factors: Laws restrain or encourage marketing activities. Organizational
buying must comply with legal provisions. Business laws greatly affect buying.
d) Social Responsibility Factors

Social responsibility refers to pursuit of goals that are good for society. Organizational
buying should protect society's interests. It should protect environment and meet
community needs. Buying of domestic products should be preferred.
 Organizational buying should be sensitive to the interests of the various pressure
groups.

6.6.2 Organizational Factors

Every organization has buying objectives, policies, procedures, and structures. They
affect
a) Objectives: Organizational buying must be conducted within the framework of
purchase objectives of the organization. If the objective is to purchase high quality
materials, it must be followed in buying.
b) Policies: They provide guidelines for buying decisions. If the policy is to buy from
domestic suppliers, it must be followed. Long term contracts for supplies may be
required.
c) Procedures: They indicate steps to be followed while making purchases. Various
documentation requirements for purchasing must be followed in organizational
buying. Competitive bidding may be needed.
d) Structure: The purchasing structure can be centralized or decentralized.
Organizational buying should function within the boundary of authority-
responsibility relationships. Specialized purchasing depart-ments are emerging
in modern organizations.
6.6.3 Interpersonal Factors

Interpersonal factors that influence organizational buying are:
a) Authority: It is the right to act and command subordinates to obey orders.
Organizational buying is authority based. Every purchase should be properly
authorized.
b) Interests: Organizational buying consists of several participants. They are:
initiators, users, influencers, deciders, approvers, buyers, gatekeepers. Their
interests influence the buying process. Group dynamics are important.
c) Status: Status is based on position and role performed in the organization. The
status of the buying participants influences the buying process.
d) Persuasiveness: This personality factor of persuasiveness is pronounced in
organizational buying.
6.6.4 Personal Factors

The personal factors that influence organizational buying are:
a) Age: Young buyers favour building new relationships. Old buyers favour
established relationships. Age influences perception and prefer-ences of buyers.
b) Income: The level of income of the buyer also influences buying. Personal
motivations are influenced by income. Organizational purchases tend to be infested
with corruption.
c) Education: Educated buyers carefully search and evaluate products and suppliers.
They develop "Purchase information systems". Computer experts make rigorous
analysis of competitive proposals. They search internet for attractive deals.

d) Job Position: It is the place in the organizational hierarchy. It provides authority to

influence buying decisions.
e) Personality: It is a buyer's pattern of traits that influence buying responses. Buyer's
personality may favour specific brands. Personal factors differ from buyer to buyer.
1. Explain the post purchase behaviour of a consumer.
2. Explain the social factors affecting consumer behaviour.
3. Explain the economic factors affecting consumer behaviour.
4. Describe briefly psychological determinants of consumer behaviour.
5. Describe briefly the socio-cultural determinants of consumer behaviour.
7. What do you understand by buyer behaviour? Explain its importance.
8. What are the different stages of consumer buying process?
9. How does learning and motivation influence consumer buying process.
10. Describe briefly the factors affecting organizational buying behavior.
11. Explain the features of organizational buying behavior.
12. Which factors in your opinion affect Nepalese consumers’ buying behavior and why?
13. How does individual buying behavior differ from organizational buying behavior?
14. What are the procedures of individual buying decision?
ICAN Question
1. Describe the stages of consumer buying process. (June 2009)
2. “Buyer behavior is a decision making process.” (Dec. 2011)
3. What is buyer behavior? How does individual buyer behavior affect buying decision
for a particular product? Explain. (Dec.2012)
4. Discuss main features of organizational buying behavior. (Dec.2010)
5. Briefly explain the post purchase behavior. (June 2010)
6. How can economic factors affect the buying decision of an individual buyer? Explain
with the help of suitable examples. (Dec.2013)

CHAPTER - 7
PRODUCT DECISIONS
7.1 Meaning of Product

Product is anything that satisfies the needs of customers. Products can be:
a) Goods: Physical goods like food, clothing, books, cosmetics, and computer. They are
tangible and can be touched and owned.
b) Services: Intangible activities which cannot be touched or owned. Examples are travel
training, hairdressing, car repair, consultancy.
c) Ideas: They include concepts, causes and issues, such as environmental protection,
consumerism, human rights. They are social ideas.
d) Experiences: They are experiences through doing acts like climbing, rafting, Cable Car
ride, Bunji jumping, yoga.
e) Events: Time-based events such as Olympic games, music, exhibitions, conventions.
f) Persons: Celebrity marketing for political leaders, movie stars, artists, professionals to
build reputation.
g) Places: Marketing of specific locations such as country, city or village to attract tourists,
factories, offices, residents.
h) Properties: Intangible rights of ownership to land, houses, shares.
i) Organizations: Organizational image for corporate entity. For example, SONY, Hulas.
j) Information: Production and marketing of information by schools, universities,
newspapers, magazines, internet.
Definition
 According to Philip Kotler:

A product is anything that can be offered to a market to satisfy a want or need.
 According to William J. Stanton:
A product is a set of tangible and intangible attributes, including packaging,
colour, price, quality and brand, plus the seller’s services and reputation.
According to W. Alderson:
Product is a bundle of utilities consisting of various product features and accompanying
services.”

Chapter 7 - Product Decisions
In the broadest sense, a product is anything offered to satisfy customer needs. Its components
are: design, quality, variety, features, branding, packaging, services, and warranties. It is a
bundle of benefits and services. (Figure 7-1).
Figure 7-1: Components of Product
The components that make up a product are:

 Design: Shape, colour, look of product
 Quality: Standardization and grading of product
 Variety: Lines and items of product
 Features: Size, style, physical features of various models
 Brand: Name, mark, sign, symbol of product
 Packaging: Container or wrapper of product
 Services: Pre-sales or after-sales services for the product
 Warranty: Free repair and maintenance of product
Box 7-1: Features, Advantages, Benefits of Product (FAB)
All products have features, advantages, and benefits.

a) Features: What the product is? They are physical characteristics of a product: size,
colour, look. For example, Flat screen computer.
b) Advantages: Why the product is better than competitor's? They solve customer's
problems. They are related to performance characteristics of a product; for example
greater memory in computers.

c) Benefits: What the product will do for the customer? They describe customer feelings.
They represent favourable results of buying the product. They are feeling of satisfaction
by the customer. For example, saving of time and costs by computers. Benefits can be
functional or emotional.
7.1.1 Levels of Product

Every product has five levels. (Figure 7-2)
Figure 7-2: Levels of Product.
1. Core Product:
It is service or benefit customers buy. A woman buying lipstick is buying beauty. A
hotel guest is buying rest and sleep. It is the utility attached with the product.
2. Actual Product:
It is design, quality, features, brand and packaging offered to customers. Examples
are Hulas rice, San Miguel Beer, Sunsilk shampoo. It delivers the core benefit.
3. Expected Product:
It is product attributes and conditions that customers expect. Hotel guests expect
clean beds and bathroom.
4. Augmented Product:
It is added benefits and services that satisfy customers beyond their expectations.
They delight customers by exceeding their expectations. Free helmets with
motorbikes are examples of delight. It includes installation, delivery, services, credit
and warranty.

5. Potential Product:
It is possible augmentations and transformations of the product in future. For
example, black and white TV into colour TV.
7.1.2 Types of Products

Products can be classified according to their ultimate use. They can be: (Figure 7-3)
Figure 7-3: Classification of Products According to use
1. Consumer Product:
They are bought to satisfy personal and family needs. They are bought by final
consumer for personal consumption. They are convenience, shopping, specialty
and unsought products.
2. Industrial Product:
They are bought for business use or to make other products. The examples are raw
materials, capital items, supplies and services.
The same product can be both consumer and industrial product. Sugar used for
household use is a consumer product. It becomes an industrial product if used for
making sweets.

Consumer Products
They are of following types: (See Box 7-2)
a) Convenience Products
They are purchased easily and often. Consumers buy them frequently and
immediately. They are inexpensive. They are of non-durable type. Their distinctive
features are:
i) Purchased immediately and frequently in low quantities.
ii) Purchase effort is minimal and unplanned, low involvement purchase.
iii) Brand awareness is high but brand loyalty is low.
iv) Packaging is important for buying decisions.
v) Price is usually low.
vi) Bought at convenient outlets, such as corner stores, retailers.
The examples of convenience products are bread, newspaper, cigarette, sweets.
 Such products can be: Staples (purchased regularly), Impulse goods
(purchased on impulse); and Emergency goods (purchased in emergency).
Marketing Considerations for Convenience Products
i) Brand loyalty should be promoted.
ii) Packaging should be made attractive.
iii) Low price and low profit margin strategy should be adopted.
iv) Intensive distribution should be done through many retail outlets and
wholesalers.
v) Promotion should be done to boost sales through advertising and sales
promotion by manufacturer.
b) Shopping Products
They are of durable type. They are purchased after consideration of alternatives
regarding price, quality and style. Their distinctive features are:
i) Purchased less frequently and consumed slowly.
ii) Considerable purchase effort is needed in planning and making the purchase.
Consumers compare brands, high involvement purchase.
iii) Brand awareness and loyalty is low.
iv) Packaging is less important.
v) Price is usually high.
vi) Bought at selective outlets.
 The examples of shopping products are: fashion clothes, shoes, furniture,
electrical appliances, motorbikes.

Marketing Considerations for Shopping Products

i) Image of the manufacturer should be promoted. Branding has a lesser role.
ii) Packaging should be appropriate.
iii) High price strategy for high profit margin should be adopted.
iv) Selective distribution through retail outlets. Direct channel from manufacturers
to retailers.
v) Personal selling is important. Advertising is done by retailers at local level.
Window displays are important.
vi) After sales service and warranties are important.
c) Speciality Products
They are products of durable type with unique features. Consumers have strong
brand preference and loyalty. They are expensive products. Their distinctive
features are:
i) Purchased infrequently.
ii) Purchase is well planned. Consumers spend substantial time and effort in
locating the brand.
iii) Strong brand loyalty. Consumers do not accept substitutes.
iv) Packaging is less important.
v) Price is generally high.
vi) Bought at exclusive outlets.
 The examples of specialty products are: Benz Car, Rolex Watch.
Marketing Considerations for Specialty Products
i) Brand loyalty should be reinforced by maintaining unique features of the
product.
ii) Packaging should be appropriate.
iii) High Price and high profit margins.
iv) Exclusive distribution through limited number of retail outlets; direct channel
from manufacturer to retailer.
v) Manufacturer and retailer jointly advertise the product. Personal selling is
very important.
d) Unsought Products
They are products that the consumers do not know or do not normally think of
buying. They have little product awareness and knowledge. Their distinctive
features are:
i) Purchased rarely.
ii) No purchase planning. No buying efforts made.

iii) Branding is less important. No brand loyalty.

iv) Price varies according to the product.
v) Bought at specific outlets.
 The examples of unsought products are life insurance, encyclopedias,
videophone.
Marketing Considerations for Unsought Products

i) Consumers should be more aware of the product and the brand.
ii) Packaging should be appropriate for the product.
iii) Price is generally high because the product is new.
iv) Direct marketing is done by manufacturer through tele-marketing, mail order
outlets, websites.
v) Personal selling and advertising is done to promote the product.
Box 7-2: Distinctive Features and Marketing Considerations

for Consumer Products

Industrial Products
They can be of following types. (See Box 7-3)
a) Materials and Parts
They are goods that become part of the final product. They are bought for further
processing or for business use. They consists of materials and parts. They can be natural
or agricultural. Their distinctive features are:
i) Raw materials consist of natural products and farm products. They change their
form to become final product.
ii) Parts enter finished products without change (component parts like nut and bolt).
Marketing Considerations for Raw Materials and Parts
i) Long term contracts are important.
ii) Generally no brand preference. Quality is important.
iii) Price competition is high due to many suppliers.
iv) Direct or selective channels are used due to the importance of timely delivery,
reliability and cost savings.
v) Promotion is generally little.
vi) Post-sale services are not important.
b) Capital Items
They are long lasting goods that facilitate production of the finished product. They
consist of installations and accessory equipment. Their distinctive features are:
i) Installations consist of building, machinery and equipment. They are non movable,
expensive and long-lived. They affect the scale of operations. They remain fixed in
one place.
ii) Accessory equipment consist of movable equipment, tools and office equipment.
They help in the production process. They have a shorter life span.
Marketing Considerations for Capital Items
i) Negotiation periods are generally long for purchase purpose.
ii) Reputation of the supplier is very important due to brand preference.
iii) Price competition is not very important.
iv) Bought directly from the producer. Short channel used for accessory equipment.
v) Promotion is generally sales force based. Advertising is important for accessory
equipment.
vi) Post sale services for repair and maintenance are important. Warranty is important
in accessory equipment.
c) Supplies and Services

They are goods and services that facilitate developing and managing the finished
product. They consist of operating supplies and services. Their distinctive features are:

i) Operating supplies are consumable industrial goods. They are low cost, short-
lived and frequently purchased. Examples are fuel and stationery. They are the
convenience goods of industries.
ii) Business services are support services and consist of repair and maintenance and
advisory services (consulting, legal).
Marketing Considerations for Supplies & Business Services
i) Standardization is very important. Contracts are entered for services.
ii) Branding and packaging is less important.
iii) Price competition is important.
iv) Distribution channels are long.
v) Advertising is important.
vi) After-sale services are not important.
Box 7-3: Distinctive Features and Marketing Considerations

for Industrial Products

7.2 Product Life Cycle

Meaning of Product Life Cycle
All products have a life cycle. They are born, they live, and they die. No product sells forever.
Changes in technology, competition, and buyer's preferences limit their life. Product sales vary
over the life cycle. Different groups of consumers buy the product at different periods of time.
Definition
The product life cycle depicts sales history of a product over time. It is a bell-shaped curve.
It indicates that:
 Every product has a limited life. It differs from product to product.
 Product sales pass through different stages.
 Profits rise and fall at different stages of product life cycle
 Marketing strategies should differ in each stage of product life cycle.
The product life cycle is a valuable marketing tool for planning and control.
7.2.1 Stages of Product Life Cycle

The product life cycle is divided into four stages: (Figure 7-4)
a) Introduction: A period of slow sales growth
b) Growth: A period of rapid sales growth
c) Maturity: A period of a slowdown in sales growth.
d) Decline: A period of decline in sales
Figure 7-4: Stages of Product Life Cycle.

a) Introduction Stage
In this stage, the new product is launched in the market. The marketing objective is to
create product awareness and induce trial purchase among consumers.
The characteristics of this stage are:
i) Slow sales growth: Consumers are unaware about the product. They are reluctant
to change their brand. Technical problems delay production. Distribution channels
are inadequate.
ii) Negative or low profit: Sales are low. Distribution and promotion expenses are
heavy with product introduction. Profit is negative or low.
iii) Innovator customers: Customer acceptance is low. Only the innovator customers
try the product.
iv) No competitors: The competitors are none. They lack production facility and
technical know-how to compete.
v) High price: The target market is high-income groups. High price are charged to
recover heavy costs incurred on product development.
b) Growth Stage
This stage is the period of market acceptance. The marketing objective is to increase
market share. This is the most important stage.
The characteristics of this stage are:
i) Rapid sales growth: The innovator customers continue to buy the product. New
segments start buying the product. Product acceptance increases.
ii) Rising profits: High sales at high price generate profits. Produc-tion costs fall.
Promotion costs are spread over a large volume.
iii) Early adopter customer: They are opinion leaders. They start buying the product.
New product features attract them.
iv) Growing competition: New competitors enter the market. They are attracted by
opportunities for large scale production and profit.
v) Slightly lower price: Prices are lower compared to introduction stage.
c) Maturity Stage
This stage is the period of defending market share. The rate of sales growth slows
down. The marketing objective is to stabilize profit and defend market share. This stage
lasts longer.

Characteristics of this stage are:

i) Slowdown in sales growth: The product achieves acceptance by customers. The
industry has over capacity. The sales are at the peak level. Sales growth slows
down.
ii) Stable profit: Profits stabilize and are high.
iii) Middle majority customers: Low prices attract the middle majority customers to
buy products.
iv) Intense competition: The competition intensifies. Price wars take place. Weaker
competitors withdraw from the market.
v) Lowest Price: The intense competition leads to the lowest price.
d) Decline Stage
This is the stage when sales decline and profits also decline. The marketing objective is
to survive and eventually withdraw from the market.
Characteristics of this stage are:
i) Declining Profits: Profits decline and reach to zero or negative level.
ii) Declining Sales: The decline in sales is rapid. Technological advances, intense
competition, changes in consumer preferences and price cutting are the reasons
for sales decline.
iii) Laggard Customers: Hard core loyal customers continue buying the product. Late
comers (laggards) also buy the product.
iv) Declining Competition: Competitors withdraw from the market. They incur losses.
v) Increased Price: The loyal customers are willing to pay higher price.
 Intense competition has made product life cycles shorter. Products must earn
their profit in a short period. Marketers should carefully manage the product
life cycle. (See Box 7-4, 7-5 and 7-6)
Box 7-4: Characteristics of Product Life Cycle
Introduction Growth Maturity Decline

Characteristics
Sales Slow growth Rapid Growth Peak Level Growth declining
Profits Negative Rising Stable/High Declining
Customers Innovators Early Adopters Middle Majority Laggards/Loyal
Competition Little, if any Growing Intense Decreasing
Price High Slightly Lower Lowest Increasing

Box 7-5: Product Life Cycle for Style, Fashion, Fad
Product life cycles vary from product to product. Style, fashion and fad affect them.
Product Life Cycle for Style, Fashion, Fad
 Product life cycle for Style can last long-- going in and out of vogue.
 Product life cycle for fashion tend to grow slowly, remain popular for a while, and
decline slowly.
 Fads are fashions that come fast and decline fast. The life cycle is short.
Box 7-6: Marketing Activities in Different Stages of Product Life cycle
Marketing activities differ according to the life cycle stage of the product. They are:
a) Marketing Activities at Introduction Stage

The marketing activities aim at market development.
i) Product: A basic or new product is offered as the "first" in the market. The product
mix is small. Product innovation is done.
ii) Price: The pricing method used is generally cost-plus basis. High price is charged
to skim the market.
iii) Promotion: The level of promotion is high. Advertising is used to build product
awareness. Sales promotion is used to promote product trial.
iv) Place: Selective channels are used for distribution of the product.
b) Marketing Activities at Growth Stage

The marketing activities aim at market expansion.

i) Product: Quality is improved. New features (models and styles) are added. Service
and warranty are provided. New market segments are entered.
ii) Price: Price is slightly lowered to penetrate the market. Price-sensitive customers
are attracted.
iii) Promotion: Promotion expenses are slightly increased. Advertising shifts from
product awareness to brand preference and acceptance. Sales promotion is reduced.
Brand loyalty is emphasized. Promotion is done to pull the customer.
iv) Place: Intensive distribution is done to increase market coverage. Distributors feel
interested in the product. New market segments are served.
c) Marketing Activities at Maturity Stage

The marketing activities aim at defending the market share. Marketing mix modification
is done.
i) Product: Product differentiation is done with new brands and models. Product
modifications are also done in terms of quality, feature, style. Product positioning
is also done. Competitor's customers are won.
ii) Price: Price is competition-based. They are generally low.
iii) Promotion: Brand loyalty is emphasized. Advertising is redesigned to stress brand
differences and benefits. Sales promotion is increased to encourage brand switching.
Post-sale services are offered. Dealer promotion is done to push the product.
iv) Place: More intensive distribution strategy is followed. New distribution channels
are used.
d) Marketing Activities at Decline Stage

The marketing activities aim at efficiency or exit from market.
i) Product: Weaker product lines are phased out. Brands are reduced. Product offer
is rationalized. Market niches are catered.
ii) Price: High price strategy is used for loyal customers.
iii) Promotion: Promotion is limited to reinforcement. Advertising is reduced at the
level needed to retain loyal customers. Sales promotion is minimal or none.
iv) Place: Distribution is made selective. Unprofitable channels are phased out.
Marketing activities in different stages of product life cycle can be summarized as
follows:

7.3 Process of New Product Development

Organizations must develop new products. Changes in technology, competition, customer
preferences, and environmental forces necessitate new product development. The
requirements for organizational growth and short product life cycles reinforce such
necessity, New product development is the life source of organization.
Products that are new to the organization and market place can be regarded as new products.
They should be perceived as new by the customers.
New products can be developed in the organizations own laboratories by cross functional
teams. Outside independent research firms can also be contracted to develop new products.

New products include original products, improved products,
modified products, and new brands that the firm develops.
New products can be of three types (Figure 7-5):

 Product innovation
 Product modification
 Product imitation

Figure 7-5: Types of New Products
1. Product Innovations
Innovations are unique or original products that are new to the world. They satisfy
needs that are not being satisfied. Innovations are costly, risky and time consuming.
Only 10% of new products are innovative. However, the failure rate of innovations is
also high. About 75% of new products fail.
2. Product Modifications
Existing products are modified and improved. Customers perceive them different from
existing products. The objective is to defend market share. Modification can be in terms
of quality, function, and benefits.
 Quality modification improves dependability and durability of the product. It
improves the existing products.
 Functional modification improves the performance of the product.
 Benefit modification enhances the result of buying the product and the feeling of
customer satisfaction.
3. Product Imitations (Copy)

Imitations are products that are new to the organization but old to the market. They are
"me too" products. They represent copy- 'SUNSIGHT SOAP' for 'SUNLIGHT SOAP'
and 'PODREJ for GODREJ'. New product lines that allow entry in an established market
fall under this category.
Process of New Product Development

The process of new product development involves seven stages. At each stage, decision
should be made regarding whether to proceed to next stage or abandon the product. The
stages are: (Figure 7-6)

1. Idea generation
2. Idea screening
3. Concept development and testing
4. Marketing strategy and business analysis
5. Product development
6. Test marketing
7. Commercialization
1. Idea Generation
A product idea is the starting point of new product development. It is targeted at
satisfaction of unmet customer needs. It is a possible product that can be offered to
the market. Ideas can be generated from the following sources. (Also see Box 7-7).
Figure 7-6: Stages in New Product Development.
Box 7-7: Techniques for Idea Generation
Idea generating techniques are:

 Marketing Research: Surveys of customers, focus group discussions, advisory panels
etc. are useful tools of marketing research to generate new product ideas.
 Attribute Listing: All attributes of an existing product are listed. Each attribute is modified
to arrive at an improved new product.

 Forced Relationships: Several objects to be included in a product are considered in

relation to one another to create a new product.
 Need/Problem Identification: Use of market research to ask consumers about needs,
problems and ideas regarding a product.
 Morphological Analysis: It involves a detailed structural analysis of the dimensions of
a need or problem to find a better way to meet the need or solve the problem.
 Brainstorming: Ideas are created for a specific problem through group creativity. Free
wheeling and quantity in ideas is encouraged. Criticism is ruled out. Combining and
grouping of ideas is welcome.
 Synetics: The participants in the brainstorming session are not told about the specific
problem but are provided with a broad framework of the problem to avoid jumping into
quick solutions.
a) Customers: Customers are the users of products. Many ideas come from customers.
Their needs and wants, problems they face in using products, suggestions and
complaints, and improvements desired by them provide useful ideas.
b) Competitors: Ideas for products come from competitor's products. They can be
studied to get ideas for product improvement and imitation. Competitor analysis
helps locate products of competitive advantage.
c) Sales Force, Suppliers and Middlemen: Sales force, suppliers and middlemen are
good sources for new product ideas. They possess first hand knowledge of customer
preferences. They are aware about competitive developments. Many companies
provide rewards for good ideas.
d) Company Personnel: Executives, engineers, designers and other employees can
provide useful new product ideas. Research and Development department is a
major source of new ideas. Accepted ideas should be rewarded.
TOYOTA employees generate two million ideas annually; 85% of

them are implemented.
e) Other Sources: Ideas can come from outside inventors and consultants, research
institutions, universities, journals, seminars, and other "idea people".
 The generated ideas should be reviewed carefully for screening.
2. Idea Screening
It is the process of eliminating unfeasible ideas. The ideas are screened in terms of
organization's objectives, policies, resources and technical capabilities. Generally a
committee is used for this purpose. Ideas are classified into:
a) Promising ideas: They are evaluated for consideration in the next stage.
b) Marginal ideas: They are stored for future uses.
c) Reject ideas: They are dropped.

3. Concept Development and Testing

a) Concept Development: A product concept is elaborated version of the ideas
expressed in customer terms. Promising ideas are turned into product concepts to
provide:
i) Precise description of the product with its uses and benefits.
ii) Physical prototype or drawings of how the product looks like. Computer-
aided designs are very helpful in this regard. For example, noodles can be
turned into three product concepts
 Breakfast food in the morning
 Tasty snacks for afternoon
 Full meal for lunch or dinner.
b) Concept Testing: A concept testing is asking potential customers to evaluate description

of product concept. It evaluates the product idea. Computer-aided designs or product
prototypes are used to get customer reactions.
 The interview technique is used to find out customer reactions about:

i) Uniqueness of the concept
ii) Clarity of the concept
iii) Need satisfying attributes of the concept
iv) Buying intent
v) Price-value perception
vi) Frequency of potential use.
 Feasible product concepts are selected for the next stage of marketing strategy and
business analysis.
4. Marketing Strategy and Business Analysis

a) Marketing Strategy: A preliminary marketing strategy for the selected project
concept is developed. It covers:
 Target market for the product
 Product positioning strategy.
 Estimates of market share.
 Marketing budget
 Marketing mix

b) Business Analysis: A business analysis is done to evaluate the product concept's

business attractiveness. It involves:
 Competitor analysis
 Demand forecasts.
 Cost statement and break-even analysis to estimate costs
 Profit projections.
If the product concept passes the marketing strategy and business analysis test, it
moves to the next stage of product development.
5. Product Development
The product concept is developed into physical product. The R & D (Research and
Development) departments develop physical versions of the product. They are known
as product prototypes. Functional tests under lab and field conditions are conducted to
see that the product performs safely and effectively.
Consumer tests are done to find out their likes and dislikes for the product.
6. Test Marketing
The product is manufactured in a limited scale. It is given a brand name, packaging
and marketing programme. It is placed on sale in a Test Market. The goal is to test the
product in consumer settings.
Trial, first repeat, adoption and purchase frequency are monitored. Corrections in the
marketing mix are made based on the results of test marketing. Successful test
marketing leads to the next stage of commercialization. (See Box 7-8 for Market Testing
Methods).
 Trial: Number of consumers who buy the product for the first time.
 First Repeat: Number of consumers who buy the product for the second time.
 Adoption: Number of consumers who continue using the product and frequently
buy it.
 Purchase Frequency: Frequency of product purchase by adopters.
7. Commercialization
In this stage, full-scale production and marketing programmes are prepared. The product
is commercially lunched in the target market. The major decisions made are:
a) When: Entry timing for commercialization. Competitor's moves in lunching similar
product are important for timing. "Be First" is the rule.
b) Where: Geographical segments to be served.

c) Whom: Target markets to be served.

d) How: Marketing strategy and action plan for lunching the product.
Generally, one out of thirty new product ideas get to the commercialization stage.
Box 7-8: Test Marketing Methods for Consumer Products
1. Sales Wave Research:

Consumers who try the product at no cost are reoffered the product at slightly reduced
price. The process is repeated three to five times (sales waves). Number of customers
selecting the product at each sales wave and their level of satisfaction is noted.
2. Simulated Test Marketing:

About 30 to 40 qualified shoppers are selected. They are questioned about brand
familiarity and preferences for the product being tested. They are then invited to
screening of product ads, including the ad for the test product. They are then asked to
make purchases in a store. The number of customers selecting the new brand are
noted.
3. Controlled Testing Method:

A panel of stores are selected to carry the new product in a specified geographic
location. The sales results are measured. A research firm is generally third for carrying
out controlled test marketing.
4. Test Markets:
One or a few representative cities are chosen as test markets for a period. The stores
carry the test product with full shelf exposure. The product is promoted during the
length of test. Trial, first repeat, adoption and purchase frequency of the test product is
monitored. Based on the results of test markets, correction is made in the marketing mix
for the national launch of the product.
Source: Kotler, 2009.
7.4 Product Line and Mix

7.4.1 Product Line
Product line is a group of closely related products. They perform similar function. They
are sold to the same customer group. They are marketed through the same channels.
They fall within given price ranges.

Product line involves decisions regarding:

 Line length
 Line modernization
 Line featuring.
1. Product Line Length

It includes total items in a product line. Organizations seeking market share carry
longer lines. Those seeking profit carry shorter lines. Product lines tend to lengthen
over time. Product line length decisions involve line expansion and line
contraction.
a) Line Expansion:
New items are added in the product line. Two methods are followed for this
purpose. They are:
i) Line Stretching: Product line is lengthened beyond the current price range. It
is also known as trading-up and trading-down strategies. (Figure 7-7).
 Trading-up (Upward Stretch): It means adding a higher price item to
the line to enhance image and increase sales.
 Trading-down (Downward Stretch): It means adding a lower price
item to the line to cater to price-sensitive customers.
Both way stretch means adding both high price and low price items to the line.
ii) Line filling: More items are added within the current price range to discourage
competition or make profit.
b) Line Contraction:
Product line is reduced by dropping items. Money losing items are normally
dropped. Items with poor sales are also dropped.

Figure 7-7: Product line stretching strategies
2. Line Modernization
Organizations modernize their product lines to cope with changing technology,
increasing competition and changing customer preferences. Product improvements
are done to encourage customer migration to higher priced items.
3. Line Featuring
It involves featuring one or two low-priced or high-priced items to attract a specific
group of customers. Low-priced items attract price-sensitive customers. High-priced
items provide prestige to the product line.
7.4.2 Product Mix

Product mix is an important element of the marketing mix. It is also called product
assortment.

Product mix is the set of all product lines and items that a
particular seller offers for sale.

Product Line includes closely related products. Product Item is distinct unit in the
product line. Product mix involves decisions regarding a product's : (Figure 7-8)
 width  depth  length  consistency
Figure 7-8: Product Mix in Practice
a) Product Width: It refers to the number of product lines. Product width can be
modified by adding or dropping a product line.
b) Product Depth: It refers to the number of items in a product line. Product depth can
be modified by adding or dropping product items in a product line.
c) Product Length: It refers to total number of product items in the product mix. It can
be modified by adding or dropping product items. General Electric Company has
about 250,000 items in its product mix.
d) Product Consistency: It refers to how closely related the various product lines are.
Consistency can be increased by adding closely related product lines. It can be
decreased by adding unrelated product lines.
7.5 Service Product

The role and scope of service product has been growing rapidly in marketing. Generally
physical goods are accompanied by services.

Service is an identifiable, intangible activity that is the main object
of transaction designed to provide want satisfaction to customers.
A service is any act or performance that one party can offer to
another that is essentially intangible and does not result in the
ownership of anything.

7.5.1 Types of Service Product

Service product can be of following types.
a) People-based or Equipment Based
i) People-based service products are provided through personal skills (Porter,
mechanic, doctor)
ii) Equipment-based service products are provided through automated machines
(vending machines, computers)
b) Personal or Business
i) Personal service products are provided to satisfy personal or household needs
(haircutting, entertainment).
ii) Business service products are provided to satisfy organization's needs.
(marketing research, insurance)
c) For Profit or not-for-Profit
i) Profit organizations provide service products for profit (private nursing home,
banks, private colleges)
ii) Not-for-profit organizations provide service products for social welfare
(government hospitals, churches).
d) Client Presence or Absence
i) Service products may require client's presence (students for teaching).
ii) Service products may be performed in client's absence (shoe repair).
7.5.2 Nature of Service Products

Service products are of following nature:
a) Intangibility: Customers cannot touch, taste, see, hear, or smell a service product
before they buy it. This causes uncertainty for the customers.
b) Inseparability: Service products are produced and consumed simultaneously.
Customers receive and consume the service products at the time of performance.
c) Variability: Service products are highly variable. They depend on who provides
them and when and where they are provided. Standardized output is not possible.
Quality of service varies.
d) Perishability: Service products are highly perishable. They cannot be stored. Their
demand is fluctuating. Some organizations provide off-peak discounts.

7.5.3 Service Marketing Mix (7Ps)

Service organizations are adopting the new marketing concept to satisfy customer
needs. They identify the target market and offer a marketing mix of 7Ps: Product, Price,
Place, Promotion, People, Physical evidence, Process.
1. Service Product Mix

Product mix for services consist of service lines and items. Strategies can be:
 Limited line strategy or broad line strategy.
 Service line length expansion or contraction.
 Service line modernization through service improvements.
 Service line featuring by focusing high-price or low-price service.
 Service-mix consistency by providing closely related service lines.
 Creating favorable brand image.
 Quality management through consistency in providing service.
 Managing product support services: Pre-sale, during-sale, and post sale.
2. Service Pricing Mix

 One price strategy
 Flexible pricing strategy. Discounts are common in services marketing. A
season ticket for bus, discount for timely payment of bank interest are examples.
 Competition based pricing.
3. Service Place Mix

 Provide good locations which are convenient to consumers.
 Channels are short because of inseparability of services. Agent middlemen
are used (insurance agents, share brokers.)
4. Service Promotion Mix

 Personal selling plays a dominant role.
 Advertising is extensively used by non-profit organizations; Professional
associations generally prohibit advertising in legal, accounting, medical fields.
Word of mouth is important.
 Sales promotion is frequently used. Many Banks provide insurance coverage
to saving account holders.
 Publicity or public relations is very important

5. People
People provide services. Training and motivation of employees is important for
service marketing. They need to be competent. Marketing can be:
 Interactive marketing (Service Quality): It refers to employee skills in serving
the client. Clients are the judge of service quality. They look for high quality.
 Internal marketing: It is Investment in human resources to train and motivate
employees to better serve the customers. This strategy leads to improved service
productivity.
6. Physical Evidence
Service providers demonstrate their quality through physical evidence. Hotels have
elaborate decorations and beautiful gardens. Dentists have comfortable waiting
rooms. Airlines have uniquely dressed air hostesses. They provide physical evidence
of quality. Service marketing improves physical environment for service delivery.
7. Process
Service delivery processes are important in service marketing. Service organization
can choose among different processes to deliver their service. For example:
Restaurants can be fast food, buffet, candlelight service. Hotels can be lodges, non-
star, star.
Differentiation can be:
a) Service differentiation based on delivery process.
b) Service differentiation based on image of the provider.
 Service organizations should provide right service to right market
segment. The service-mix should satisfy customers and achieve
7.6 Branding
7.6.1 Meaning of Branding
Branding is an important part of product mix. It is used to identify the seller or maker
of the product. Brands suggest product differences to customers. They convey attributes,
image, values and benefits. Most products are branded.

A brand is a name and/or mark intended to identify the product of
one seller or group of sellers and differentiate the product from
competing products.
A brand is a name, term, sign, symbol or design, or a combination of
them, intended to identify the goods or services of one seller or
group of sellers and to differentiate them from those of competitors.

 A brand name consists of words, letter, and numbers.

 A brand mark appears in the form of symbol, design, sign, colour. It is recognized
by eyes.
 A trademark is a legally protected brand. It implies ownership and exclusive right
to use by the user
 A brand equity is the value a brand adds to product. Famous brands add value in
the minds of customers. Organizations build brand portfolios. Brands convey
reputation of the seller.
7.6.2 Objectives of Branding

Branding has objectives for the customer, the organization, and the society.
a) Customer-related Objectives of Branding
i) Product Identification: Brands help customers to identify products. Brands
guide them in making product choice.
ii) Quality Assurance: Branded goods assure quality. In Nepal, Nepal Standards
provides quality certification. ISO provides international certification. Branded
products have quality consistency.
iii) Prestige and Status: Brands provide prestige and status. Customers satisfy
their esteem needs by purchasing branded products.
b) Organization-related Objectives of Branding

Branding has the following objectives for the organization:
i) Promotion: Promotion activities are built around brands. Brands identify
products. Advertising campaigns and sales promotion schemes are brand-
oriented. Promotion of one product indirectly helps promotion of other
products under the same brand.
ii) Brand Loyalty: Brands promote brand loyalty among customers. Organization
achieves stable market share. Brands provide protection from competition.
iii) Product Positioning: Branding is needed for product positioning. Product
differentiation is based on brands. Competitive advantages of the product
can be easily communicated to the market through brands.
iv) Product Mix Expansion: Organization can expand its product lines and
product items through branding. Buyers prefer to buy products under
established brand names.

v) Efficiency in Marketing: Branding makes marketing efficient. Orders can be

processed easily on the basis of brands. Organization can use its resources
efficiently.
vi) Image Enhancement: Brands enhance the image and prestige of organizations.
They create reputation for the organization.
vii) Legal Protection: Legally registered brands provide legal protection. They
can be sold, leased or rented to other organizations.
c) Society-related Objectives of Branding

Branding has the following objectives for the society:
i) Event Promotion: Established brands sponsor social and cultural events. This
fulfills the objective of society to stage the events.
ii) Consumer Welfare: Brands protect consumer rights. Damages can be claimed
in the courts of law if branded products are faulty, hazardous, or provide
misinformation.
iii) Environmental Protection: Well-known branded products tend to be
environment-friendly. Organizations manufacturing branded products are
responsive to environmental issues.
7.6.3 Reasons For and Against Branding

Most organizations brand their products. The reasons for branding are (Figure 7-9):
Figure 7-9: Reasons For and Against Branding

1. Product Identification: Customers can easily identify branded products. This

facilitates product choice. Brands also differentiate products from those of
competitors. This facilitates product positioning.
2. Quality Consistency: Brands assure quality to customers. Branded products

possess quality consistency. This improves brand loyalty.
3. Prestige and Status: Branded products provide prestige and status to the user.
Reputation of the producer is enhanced. Value of the organization increases.
4. Promotion: Promotion activities are brand-oriented. Promotion of brand promotes

all the products under that brand.
5. Efficiency: Branding makes marketing efficient. Resources can be used efficiently.

Distribution is easy.
6. Legal Protection: Brands provide legal protection. They cannot be copied by others.
7. Social well-being: Brands can be used to sponsor social and cultural events.
Damages can be claimed only for branded products only.
Some organizations do not brand their products. The reasons against branding are:
1. High cost: Branding requires a great deal of time and money for promotion,
packaging, and legal protection.
2. Low quality: If the product is of low quality, branding is not done. Similarly,
branding is not done where consistency of quality is not possible.
3. Perishable Products: Perishable products are generally not branded. Their life is
short. Their storage time is also short. Examples are fruits and vegetables.
4. Homogeneous Products: They are difficult to differentiate from those of competitors.

Hence, they are not branded. Examples are raw materials and food grains.
5. Legal Formalities: Brands need legal protection. This involves legal formalities.
They can be costly and time consuming.
 There is a movement towards "no branding". Products are sold under their
generic names, such as jam, milk, baby shampoo. This cuts the product price
considerably.

7.6.4 Types of Branding

Brands can be classified as follows: (Figure 7-10)
Figure 7-10: Types of Brand
1. Ownership-based, consisting of a) Manufacturer Brand

b) Distributor Brand
c) Licenced Brand
2. Product line-based, consisting of a) Individual Brand
b) Family Brand
1. Ownership-based Brand
They are as follows:
a) Manufacturer Brand: It is owned by the manufacturer. It is also called national
brand. Generally, the brand is given manufacturer's name. For example, IBM, SONY,
General Electric. The manufacturer plays a dominant role in the market.
Manufacturer brands assure quality. They are aggressively promoted. Their price
is high. Such brands have strong image and reputation in the market.
b) Distributor Brand: It is private brand owned by the distributors. Generally, the
brand is given distributor's name. Big supermarkets own such brand. Distributors
possess strong image in the market.
 Distributor brands are not heavily promoted. Their price is lower compared to
manufacturer's brand.
c) Licenced Brand: The use of manufacturer brand is allowed under contract or licence.
The user pays royalty. Franchise arrangements are based on licenced brand.
 There is a "battle of brands" between manufacturer brand and distributor
brand.

2. Product Line-based Brand

They are as follows:
a) Individual Brand: Each product has a separate brand name. It is used where the
quality and features of products differ widely. Such brands differentiate products.
Advantages of Individual Brand
a) If one brand fails, the prestige of organization does not suffer.
b) Several products can be marketed. They compete with each other. Different
tastes and preferences of consumers can be catered.
c) Several brands create opportunities for development of employees. They
compete with one another within the organization and gain experience.
d) Brands can be effectively controlled.
Disadvantages of Individual Brand

a) They are costly to promote. Each brand has to be promoted separately.
b) Each brand needs its own marketing mix. This may create inefficiencies in
marketing.
c) Corporate image may not be enhanced by individual brand.
b) Family Brand: All products are given a single family name as brand. For example,
Hulas, Magee, SONY, Philips. The family name can also be combined with product
name. For example HULAS Rice, Magee Tomato Sauce.
Advantages of Family Brand
a) Promotion costs are low. Each product does not need separate promotion
mix. Integrated marketing mix is possible for all products.
b) Prestige of one product helps to market other products.
c) Corporate image is enhanced by family brand.
Disadvantages of Family Brand
a) If one product fails, prestige of the organization suffers. It may damage the
sales of other products.
b) It may not be possible maintain quality for all products.

7.6.5 Features of Good Brand Name

Brand name should be carefully selected. It should have the following features:
a) Brevity: It should be easy to remember, recognize, and pronounce. Short brand
names have greater impact on customers. Examples are GO-GO, Wai-Wai, Nanglo.
They should not hurt religious feelings.
b) Distinctiveness: Brand names should be unique. They should be different from the
competitive brands. They should avoid confusion with similar brands. Overused
brand names lose their distinctiveness. Himalaya, Yeti, Everest, Khukuri are
overused brand names in Nepal.
c) Adaptable: Brand name should be adaptable to new products. Family brands like
BAJAJ, SONY, HULAS can be easily adapted to new products. They should also
be usable in global marketing.
d) Product Attributes: Brand name should reflect product attributes and benefits. It
should appeal to customers for purchase.
e) Legal Protection: The brand name should be capable of registration for legal
protection and trade mark status.
f) Relevant: The brand name should stay relevant. It should deliver the benefits
customers desire.
g) Positioning: The brand name should be appropriate for positioning purposes.
7.7 Packaging
7.7.1 Meaning of Packaging
Packaging is container or wrapper for the product. Packaging consti-tutes an important
part of the product mix. Attractive packaging leads to more sales. It is also called fifth P
of marketing mix. It is essential for building brands.

Packaging includes the activities of designing and producing the
container or wrapper for a product.
Packaging can be of the following types

1. Unit Packaging: One product item is placed in one package. For example, one
candy bar.
2. Family Packaging: Multiple items of one product are placed in one package. For
example, three candy bars in one pack. It is also called economy pack.

3. Line Packaging: Identical packaging is used for all items in a product line. For
example identical packaging for all items of Real Juice of Dabur.
4. Banded Packaging: Several related product items are packed in one package. For
example, shampoo, soap and hair oil in one package.
5. Multiple Packaging: Separate packages are used according to size and weight of
the product. For example, packs of 500 gms and 1 kg.
7.7.2 Levels of Packaging

A package has three levels:
a) Primary package: It holds the actual product, for example bottle containing after-
shave lotion, tube containing toothpaste. It may hold the product until it is used.
b) Secondary package: It contains the primary package, for example card board
package for one toothpaste tube, wrapper of soap. It is an additional layer of
package. It is removed when the product is used.
c) Shipping package: It is Package used to store and transport the product, for example
card board box containing one dozen toothpaste tubes. It is removed when retailers
receive the product.
Packages are available in many sizes, shapes and design. Multi-use packages are getting
popular-Jam in drinking glass, Boost in jar.
Materials used for Packaging can be
a) Glass: This is the traditional material. It is totally non-porous to preserve product
quality. It is recyclable.
b) Wood, Tin and Aluminium foil: They have been used traditionally. They are costly
but can be recycled.
c) Paper/Cloth: These are used as a wrapper and are partly recyclable.
d) Plastics: They are of many grades. They have become very popular. They pollute
the environment and are nonbiodegradable.
Tetra pack and aerosol cans for liquids, blister pack for tablets and capsules, and
aseptic container for perishables and drinks made from combinations of paper,
aluminium foil and plastics have revolutionized packaging.
Sachetization of fast moving consumer goods is increasingly used.
7.7.3 Objectives of Packaging

Packaging has the following objectives:
1. Protection: Packaging aims to protect the product from damages. It preserves quality
of the product from damages that occur from climatic conditions, mishandling,
spilling and evaporation. Perishable products need sound packaging to prolong
their life.

2. Storage: Packaging facilitates storage of products till they are used. It fulfills the
storage needs of consumers as well as middlemen.
3. Information: Packaging provides information about the product. It identifies the
product and its manufacturer. It informs about product ingredients, directions for
use, price, quality, date of manufacture and expiry and safety precautions for use.
4. Positioning: Packaging is used for positioning of products. Differentiated packages
facilitate product differentiation. Con-sumers perceive product differences based
on packaging.
5. Promotion: Packaging promotes the product. Advertising messages and sales
promotion schemes can be printed on packages. They facilitate self-service
marketing.
7.7.4 Functions of Packaging

Packaging serves various functions. They are:
a) Containment: Packages are containers and wrappers for products of various sizes
and shapes. They serve the containment function.
b) Product Protection: Packaging protects the product from evaporation, spilling,
spoilage and mishandling. The product quality is preserved. It provides protection
after the product is purchased. It prolongs the usable life of many products,
especially those of perishable nature. It also facilitates storage of products.
c) Identification: Labels on packages identify products. They provide necessary
information about the product such as ingredients, manufacturer, brand, date
of manufacture and expiry, quantity, price, directions for use, safety precautions,
etc.
d) Promotion: Attractive packaging attracts customer attention. It serves as "silent
sales person". Advertising message, sales promotion schemes can be communicated
on product packages. In self-service outlets, package designs are very important in
influencing buyer choice.
e) Product Differentiation: Packaging is used for product differentiation and
positioning. Many producers change package for modification of products. An
old product in a new package can be a new product for consumers.
f) Distribution: Packaged products are convenient to handle and distribute. They
can be easily transported.
7.7.5 Essentials of Good Packaging

Package is an integral part of product. A good package should have the following
features:
a) Attractive: The design, colour, shape and size of the package should be attractive
to arouse customer interest in the product. They should be visible on store selves.
Innovative packages attract customers.
b) Convenient: The package should be convenient for the customer to carry, open, use
and store. The size and shape should be appropriate to the needs of customers. It
should be suitable for product assortment.

c) Economic: The cost of packaging should not be high. Over-packaging should be

avoided. The nature of product should be properly considered for packaging. Bulk
packaging should be used for industrial products.
d) Reusable: The package should be reusable or it should have multiple uses.
Customer's value increases by such package.
e) Environment-friendly: Packaging materials should not pollute the environment.
Recyclable materials should be preferred. Plastics have appeared as the enemy of
environment. Package should be easily disposable.
f) Communicative: Packaging should provide information required by law and desired
by customers.
7.8 Labelling
7.8.1 Meaning of Labelling
The label is a part of the packaging. It identifies the brand or products. It can be a tag
attached to a product. It also can be an elaborately designed graphic on the package. Its
functions are:
a) Identification: The labels identify the product or brand. They also identify quality
through certification seals: NS, ISO, ISI.
b) Description: Labels describe the product regarding:
 Who made it ? Manufacturer's Name
 Where it was made ? Place of Manufacture
 When it was made ? Date of Manufacture and expire period.
 What it contains ? Quantity, ingredients, composition.
 How to use it ? Possible uses, safety considerations, operating methods.
c) Promotion: The attractive graphics and design of label promote the product. They
are eye catching.
7.8.2 Types of Labels

There are three types of labels: brand, grade, descriptive.
a) Brand labels: Brand name appears on the label. Clothing provide example of such
labels.
b) Grade labels: Provide information on quality of the product along with brand
name. Perishable goods generally carry grade labels. Standardization labels are
also carried.
c) Descriptive labels: They are elaborate and contain information on the product
ingredients, manufacturer, dates of manufacture and expiry, price, uses, operating
and safety instructions. In many countries, legal provisions prescribe the
information to be provided on labels to protect consumers.

7.9 Product Scenario in Nepal

Product has an important role in the marketing mix of Nepalese organizations. The following
points characterise product scenario in Nepal.
1. Product Concept
 Goods dominate the product concept in Nepal.
 Services are getting important as products. Awareness is increasing about "places,
events and experiences" as product.
 Personalities become important during election times or religious events.
 Ideas are gradually being accepted as a product. Family plan-ning ideas as a product
has been widely marketed. So are environment protection and human rights.
 The concept of organization as a product is increasing. Golchha organization has
launched image building efforts through "Hulas" brand.
2. Type of Products
 The consumer products dominate Nepalese marketing, espe-cially the convenience
and shopping product.
 Industrial raw materials for manufacturing are mostly imported. Agro-forestry
products serve as raw materials for many local products. Almost all the capital
goods are imported.
3. Product Life Cycle

 The concept of product life cycle has not caught up well with Nepalese marketers.
They lack awareness about the need for managing every stage of the product life
cycle.
 Nepal is experiencing shorter product life cycles. Recently, some manufacturers
have started product modification at the maturity stage.
 Products normally die their natural death.
4. New Product Development

 Nepalese organizations lack research and development base. Product innovations
are rare. Product modifications are increasing.
 Product imitations dominate new product development. New products are mostly
"me too" products which are copies of Indian and Chinese products. For example
"Podrej" steel products are copy of "Godrej".
 The new product development process is not systematic. Test marketing before
commercialization is generally lacking. The failure rate of new products in Nepal
is high. Some examples are: Indreni Soyamilk, Fewa noodles, Royal Drug toothpaste.

5. Product Mix
 The product lines are expanding in Nepal. Big houses like Jyoti, Golchha,
Chaudhary Groups are constantly adding new lines. Chaudhary group has added
health, education and energy line
 Product line strategies are not well planned. Product improve-ments are lacking to
modernize product lines. Line featuring is not emphasized.
 Service marketing is in the initial stage. However, star hotels in Nepal emphasize
people and physical environment variables.
6. Branding
 Most manufactured products are branded in Nepal. Agricultural products
remain largely unbranded although branding of Rice (Makhan, Hulas) and
Pulses (Dugar, Hulas) is increasing. Name is the popular form of branding.
(See Box 7-9)
 Most brands in Nepal are individual brands. Family brands are catching up, for
example, Hulas biscuits, rice pulses, flour, wires, steel utensils, G.I. sheets.
 Private branding has not appeared in Nepal. Manufacturer's brands are popular.
Brand licencing is also catching up, for example Frooty, Hot breads.
7. Packaging
 Nepalese marketers have started giving attention to packaging. However,
innovations in packaging are generally lacking. Imitations of Indian or Chinese
packages abound in the market. Package modification strategies are also
practiced.
 Plastics dominate the packaging material, especially polythene bags for consumers
to carry products. They have created serious environmental problems.
 Packaging materials are mostly imported. Nepalese organiza-tions manufacture
tin, paper, cardboard, plastic packages on a limited scale.
 Packaging has been used in Nepal for promotion purposes.
 Some organizations use packaging for product differentiation. For example NEBICO
biscuit uses separate packaging for normal and gift packs.
 Reusable environmental friendly packaging strategy is missing.
8. Labelling
 Nepalese marketers have neglected labelling.

 The implementation of Consumer Protection Act since April 1998 has prescribed
strict labelling requirements consisting of:
a) Name and address of manufacturer.
b) Ingredients of the product, quantity, weight.
c) Quality certification mark.
d) Operating or use instructions and effects of use.
e) Price, batch number, date of manufacture, date of expiry.
f) Guarantee information for electronics, hardware, etc.
g) Safety precautions for hazardous and fragile products.
h) Others, as specified from time to time.
However, the legal provisions have not been enforced effectively. With the opening
up of the economy to foreign investment, information communication revolution,
invasion of cable television in consumer's homes and growing professionalization, it
is expected that product strategies will assume importance in Nepalese marketing in
coming years.
Box 7-9: Brand Scenario in Nepal
 Most manufactured products in Nepal are branded.

 International brands have come to Nepal. Chinese imitations of international brands
have flooded the market.
 Coca-Cola commands 80% of market share compared to 20% for Pepsi-Cola. They both
follow similar sales promotion strategies.
 Bagpiper whisky has become a household name.
 Tuborg and San Miguel are number one and two brands respectively in beer.
 Wai-Wai is number one in noodles. The market is getting saturated with about 30
brands of noodles.
 Surya Tobacco, a joint venture of ITC (India) and British American Tobacco (UK) has
localized brands: Surya, Shikhar, Khukuri.
 Golchha Group uses "Hulas" family brand for rice, pulses, flour, biscuits, steel, wires
and other products.

1. What is product? Describe various types of products.
2. Describe the characteristics for specially goods.
3. Describe the main features of service product marketing.
4. Describe the trading-up and trading-down strategies.
5. What is a new product? Discuss the steps involved in the development of new products.
6. Describe the characteristics for consumer convenience goods.
7. Describe the main features of service products.
8. What is a product life cycle? Discuss the pricing and promotion strategies during the
growth stages of the product life cycle.
9. Describe the characteristics of shopping goods and their marketing considerations.
10. What is family branding? Explain the characteristics of a good brand name.
11. What is product? What are its various concepts? Describe the product line extension
strategies.
12. What is packaging? What are its functions? Explain the features of a good packaging
system.
13. What is product life cycle? Why the product life cycle is considered as a strategic tool in
marketing?
14. Describe the characteristics of consumer convenience goods and their marketing
considerations.
15. What is a new product? Describe the new product development process.
16. Show the difference between tangible product and service product.
17. What do you understand by a product line and product mix?
18. What are product mix, product line and product item?
19. Explain the following items: 1. Brand name; 2. Brand mark; 3. Trade mark; 4. Trade name
20. What is label? What are its types?
21. Describe product scenario in Nepal.
22. Explain product line length strategies.
23. What are the qualities of a good brand name?
24. Differentiate consumer and industrial products.
25. Make clear the concept of new product in marketing.
ICAN Questions
1. What is packaging? Explain its objectives. (June 2009)
2. State and explain the process of new product development. (Dec. 2009)
3. Briefly explain service product. (Dec. 2009)

4. What are the messages that the product l life cycle Communicates to the marketer?
(Dec.2010)
5. Briefly explain the types of labels. (June 2010)
6. Give the meaning of a product and explain the feature of industrial products. (June
2010)
7. Describe the role of Product Life cycle in marketing decision making. (Dec. 2011).
8. Briefly explain Test Marketing. Dec. 2011)
9. Explain the significance of Marketing Information System. (June 2011
10. What is a new product? Explain the process of new product development. (June, 2012)
11. Briefly explain the features of packaging. (June, 2012)
12. What is product Life Cycle in marketing? Explain the major contributions of product
life cycle that a marketer must understand to make business successful and sustainable.
(Dec. 2013)

CHAPTER - 8
PRICE DECISIONS
8.1 Meaning of Price

Price is an important determinant of customer choice. It is the only marketing mix element
that produces revenue. It determines profit and losses. It is the easiest element of marketing
mix to change.
Price is what customers pay for what they get. It is the amount of money that customers pay
for the product. It is the value of what is exchanged. It is an important variable for product
positioning.
Price can be:
a) Interest: Paid for the use of money.
b) Rent: Paid for the use of assets (building, equipment, car.)
c) Commission: Paid for services (salesperson, share broker.)
d) Fee: Paid for professional services (tuition fee, audit fee, consulting fee).
e) Salary and Wages: Paid for services of employees and workers.
f) Taxes: Paid for the privilege of making money.
Definition
Definition
■ According to William Stanton:
Price is the amount of money and/or other items with utility needed
to acquire a product.
Price is usually expressed in terms of money. It can also be a combination of money and
other items of value.
8.1.1 Importance of Price

Price is important to the economy, to the organization, and to the customer.
1. Importance to the Economy (Macro perspective)
a) Factors of production: Rent, wages, interest and profits are paid as price for
land, labour, capital, and entrepreneurship. Price influences the supply of
factors of production. It regulates the allocation of factors of production.
b) Supply and demand: The level of demand and supply are determined by price.
From the economic point of view, high prices increase supply and low prices

increase demand. In practice, this may not be true for all products because
non-price factors also affect supply and demand. Non price factors are product,
place, promotion.
c) Saving and investment: High prices discourage saving and investment.

Government controls prices to encourage saving and investment. It
provides subsidies to stabilize prices. Price level determines role of
inflation.
d) Economic management: Government uses price in the form of taxes to manage

the economy. It administers prices for public utilities like electricity, water,
telephone. It regulates prices of public enterprises.
2. Importanc e to the Organization (Micro perspective)
a) Profitability: Price can be changed quickly. Changes in price change the

revenue and costs which determine profits. Low prices reduce revenue. High
prices of inputs increase costs.
b) Market share: Price is an important determinant of product demand and

market share. It is a tool to deal with competition. It is used to manage the
product life cycle. Prices vary with the stage in the product life cycle. It is a fool
to deal with competition.
c) Non-price competition: Non-price competition refers competition based on to

product, place, promotion. Price is used to influence such competition. Product
differentiation and product positioning can be based on price. Image of the
product is reflected by price– low price with low quality, high price with high
quality and prestige.
3. Importance to Customer
a) Product choice: In developing countries, price is very important for customer

to make product choice
b) Quality of the product: High price is perceived as high quality product by

customers.
c) Customer value: Value is the ratio of benefits to price. When incomes decline,
lower prices attract customers. Cut-price and discount is getting popular
among price-sensitive customers.

Chapter 8 - Price Decisions
8.2 Objectives of Price

The objectives of price can be: (Figure 8-1)
 Profit-oriented   Sales-oriented
 Status quo-oriented  Quality-oriented
Figure 8-1: Pricing Objectives
8.2.1 Profit-oriented Pricing Objectives

They focus on profits. The pricing objective can be target return or satisfactory profit.
a) Target return: The pricing objective is to achieve a specified return on sales or
investment. This is the desired profit. For example, 5% on sales or 10% on net
worth (Total assets minus liabilities). Market leaders who do not face competition
use this objective.

b) Satisfactory profit: The pricing objective is to get a satisfactory profit. It is reasonable

for the organization. This may be similar to bank interest or profit in similar
ventures.
 Economists follow the objective of profit maximization-make as much profit
as possible. In real world, this is not possible. What is maximum ? 10% or
1000 %.
8.2.2 Sales-oriented Pricing Objectives

They focus on sales. The pricing objective can be to gain sales volume or market share.
a) Sales Volume: The pricing objective is to generate higher sales volume, for example
20% increase annually. Low price strategy is followed to stimulate demand.
Economics of scale lead to lower unit cost.
b) Market Share: The objective is to maintain or increase market share in competitive
markets. Wai-Wai is pricing objective is to maintain its market share in Nepal.
Increase is market share is needed to utilize extra production capacity. This provides
economies of scale. Low price and high promotion strategies are used to increase market
share. Mayo's pricing objective is to increase its market share.
8.2.3 Status Quo-oriented Pricing Objectives

They focus on maintaining the current market position. The pricing objective can be:
a) Price Stability: The pricing objective is to stabilize current price. This is pursued
by smaller organizations. Standardized products are suitable for such pricing
objective. This method maintains current status quo.
b) Meet Competition: The pricing objective is to meet competition. The prevailing
market price is used to avoid price competition. Market followers use this method.
c) Survival: The pricing objective is to survive in the market. The operations are kept
going at the break-even point. Intense competition, decrease in demand and change
in customer preferences necessitate such objective. An excellent example is the
carpet industry in Nepal where pricing objective is to survive. So is for readymade
garments.
8.2.4 Quality-oriented Pricing Objectives

They focus on the product quality. The pricing objectives can be:
a) Quality Leadership: The pricing objective is product quality leadership. This is
generally used for prestige products like Rolex watch, Benz car. Market skimming
is done by setting higher prices. High image of the organization is needed for this
objective to be meaningful.

b) Quality Imitation: The pricing objective is to imitate the high quality products.
Lower prices are set to attract price-sensitive customers. China, India and Hong-
Kong are the champions of quality imitation.
 Organizations should select pricing objectives very carefully. Objectives guide
pricing methods, policies and strategies.
8.3 Methods of Price Determination

Historically, prices were set through bargaining between buyers and sellers. In modern
marketing, the methods of price determination are: (Figure 8-2)
 Cost-oriented pricing
 Competition-oriented pricing
 Value oriented pricing
Figure 8-2: Methods of Price Determination
8.3.1 Cost-oriented Pricing Methods

They focus on costs for setting prices. The methods can be:
a) Cost-plus pricing
b) Target return pricing
c) Break-even pricing.

a) Cost-plus Pricing (Mark-up pricing)

A desired profit margin is added to the unit cost of a product. Standard mark-up, say
20%, on all products, can be used. The formula is:
Cost-plus Price = Unit cost + Profit margin
Suppose: Unit cost is Rs. 100 and profit margin is 20%

Cost-plus price = 100 + 20 = Rs. 120.
 This is a simple method. Resellers and small manufacturers widely use it. But this
method ignores market demand, competitor's prices, output levels, and customer's
willingness to pay.
b) Target Return Pricing

A desired return on investment (ROI) is added to the total cost to set price. This is the
target return of the organization.
The formula is:
Total Cost + Desired ROI

Target Return Price = Unit Sales
Suppose: Total investment is Rs. 1,000,000

Target return on investment 20% (Rs. 200,000)
Total cost Rs. 500,000
Total sales 10,000 units
Target Return Price Per Unit
500000 + 200000 700000

= 10000 = 10000 = Rs. 70
 The meaning of investment should be defined. It could be total fixed assets or net
worth (fixed assets minus liabilities)
 This method is simple to calculate. But it ignores competitor's price and fluctuations
in demand.
c) Break-even Pricing
This method fixes price at break-even point. The break-even analysis (BEA) is done to
calculate break-even point (BEP). The break-even point is no profit-no loss point where
revenue equals costs. It can be calculated in sales units or sales value. It is generally
presented by a graph (See Figure 8-3).

Profit Total Sales

300
Total Cost
250
200
Variable Cost
150
100
50 Fixed Cost
5 10 15 20 25 30 35
Units (00)
Figure 8-3: Simple Break-even Chart
Costs are classified into variable costs and fixed costs. They together make up total
cost.
Variable costs directly vary with production levels. They are costs of direct material,
wages, power, sales commission. etc.
Fixed costs remain fixed and do not vary with production levels. They are rent, loan
interest, insurance, office salaries, etc.
 The assumptions made for calculating BEP are:
a) Total fixed costs are constant.
b) Variable costs per unit remain constant.
c) Sales price per unit remains constant
The formula used for calculating BEP is:
Total Fixed Cost

BEP (in units) = Selling Price Per Unit – Variable Cost Per unit
The difference of unit selling price and unit variable cost is known as contribution.
BEP sales selling price

■ BEP (in sales value) = in units x per unit
■ Example for BEP:

Suppose: Total fixed costs Rs. 100,000
Variable cost per unit Rs. 60

Selling price per unit Rs. 100

100000 10000
BEP in volume = 100 – 60 = 40 = 2,500 units
BEP in sales = 2,500 units x 100 = Rs. 250,000
 Profit is made when sales increase beyond the break-even point. In the above
example, sales should exceed 2500 units to make profit.
 Flexible break-even analysis can be used to evaluate several pricing and sales
alternatives. The cost structure is kept the same. For example (Figure 8-4)
Figure 8-4: Variable Break-even Chart
Unit Fixed Variable Contributi BEP

Price Costs Cost per on Rs. units
(Rs.) (Rs.) unit (Rs.)
85 100,000 60 25 4000
100 100,000 60 40 2500
110 100,000 60 50 2000
The contribution margin changes with the price changes. The smaller the margin, the
lesser the profit.

Advantages of BEA
a) It considers both costs and demand. It is useful for setting price in the short run
where cost and demand structures are stable.
b) It is simple to calculate. All organizations must break even to survive.
Disadvantages of BEA
a) Assumptions for calculating BEA are not valid in the real world. Costs, demands
and selling prices fluctuate. They do not remain constant.
b) It is difficult to classify costs into fixed and variable.
c) Fixed costs also change in the medium and long term.
d) Estimating demand can be difficult.
8.3.2 Competition-Oriented Pricing Methods

They focus on the market price. The price is set in relation to the competitor's price. The
methods can be:
a) Meet competition Method: Equal to competitor's price
b) Below competition Method: Below than competitor's price
c) Above competition Method: Higher than competitor's price
d) Sealed-bid pricing Method: Confidential price
a) Meet competition Method:

Price is set to match the prevailing market price. This method is used when the
market has many sellers (perfect competition) or few sellers (oligopoly) and the
products are similar. Prices for agricultural and mineral products are generally set
by this method. It is going rate pricing.
 This method is useful where costs are difficult to calculate.
b) Below competition Method:

Price is set below the competitor's price level. The aim is to attract more customers.
Discount retailers use this method. Some organizations eliminate services to lower
the price (no frills pricing).
 The customers may view the products as lower in quality or reliability.
c) Above competition Method:

Price is set above the competitor's price level. This is generally done for high cost
prestige brands. The product is differentiated. Rolex Watch and Mercedes Benz
Car use this method. Better positioned products also use this method for pricing.

d) Sealed-bid pricing Method:

Price is set confidentially. For winning contracts, lower price than competitor's is
required. The price is based on expectations of how competitors will price their
bids.
8.3.3 Value-Oriented Pricing Methods (Demand-oriented)

They focus on customer's value perception. Costs and market prices are not considered.
The pricing methods can be (Figure 8-5):
a) Customer value pricing
b) Perceived value pricing
Figure 8-5: Value-oriented pricing methods.
a) Value Pricing:
Value is the ratio of benefits to costs. Low price is charged for quality products to
attract a large number of value-conscious customers. It is providing high value of
low price. Some organizations feature one or two items for value pricing to attract
customers. Supermarkets use this pricing method where one or two well known
brands are offered at low price.

b) Perceived Value Pricing:

Price is based on customer's perceived value of the product. Demand and costs are
not considered. Customer's perception of product value is found through market
research. New products are priced by this method. Non-price variables such as
product, place and promotion are used to build-up perceived value in the minds of
the customers.
8.4 Pricing Policies

Policies are guidelines for marketing decision making. Pricing policies are based on pricing
objectives. They provide guidelines for pricing decisions. The pricing policies can be:
(Figure 8-6).
 Single price policy: One price to all
 Flexible price policy: Various prices charged
 Geographical price policy: Regional variations in price
 Product-mix price policy: Line or item based price.
8.4.1 Single Price Policy (One Price Policy)

One price is charged to all customers. The price is not variable according to quantity,
customers, purchase timing, etc. List price or maximum retail price are examples.
Departmental stores and supermarkets use such policy. Postage stamps have a fixed
price.
 This method has several benefits. It is easy to administer. It saves time. The
manufacturer exercises control over the price in the market. Customers feel
comfortable with one price. Retailers feel motivated to stock such products. The
product gains prestige. It is useful for mass marketing.
 The disadvantages of this method are that it ignores demand, costs, and
competition. It is difficult to implement. Internet is reversing one price trend.

Figure 8-6: Pricing Policies
8.4.2 Flexible Price Policy (Price Discrimination Policy)

Various prices are charged from various customers through price discrimination,
discounts, and allowances. It is also known as segmented pricing.
1. Price discrimination: Discriminatory prices are charged according to customers,
products, locations and time.
a) Different segments of customers are charged different prices for the same
product. For example, Nepal Zoo charges lower entrance fee from students
and higher fee from tourists.
b) Different versions of products are priced differently. For example, Guduchi
herbal tea is priced Rs. 55 per packet in Nepal. The same tea branded as
Himal Herbal tea in a glossy package is priced $ 2 for export.
c) Different locations are charged different prices for the same product. For
example, cinema tickets cost more for balcony seats than first class seats.
d) Different periods of time are charged differently for the same product. For
example, national telephone trunk calls are priced cheaper on Saturday in
Nepal.

 Price discrimination is easy to administer. They satisfy needs of various

customer segments. However, the market should be segmentable,
competition should be low, and the law should allow price
discrimination.
2. Discounts: Price can be made flexible by discounts. Discounts are price

reduction: They can be:
a) Cash Discount: It is price reduction for prompt payment. An example is "2/7,
net 30", which means that payment should be made within 30 days, but 2%
can be deducted by making payment in 7 days.
 Cash discounts improve liquidity and reduce bad debts.
b) Quantity Discount: It is price reduction for large volume. It provides incentive

to the customer to order more from the same seller. Example is Rs. 10 for one
unit, Rs. 9 per unit for a dozen.
c) Trade Discount: It is price reduction to trade channels for performing certain

functions, such as selling, storing, record keeping. Wholesalers and retailers
get discount for performing selling function.
d) Seasonal Discount: It is price reduction for buying out of season. Hotels offer
heavy seasonal discount during June-July in Kathmandu.
3. Allowances: Price can be made flexible by allowances. Allowances are payment

or price reduction. They can be:
a) Trade-in allowance: Price reduction granted for turning in old item when
buying a new one. Pressure cooker, motor cycle, television provide such
allowance.
b) Promotional allowance: Price reduction or payment made to dealers for

participating in advertising or service delivery.
8.4.3 Geographical Price Policy

The price is based on geographical variations. The pricing policy is concerned with
who pays the transportation costs. The alternatives are;
a) FOB Price (Free On Board): The price includes freight till the product is loaded on
the board of a ship, plane, train or truck. Many products imported to Nepal from
overseas are priced FOB.
b) Zone Price: Price includes average transportation costs for delivery to various
zones. Petroleum products are sold at different prices in different regions of Nepal.
But same price is charged within the region.

c) Base Point Price: Price is set for a certain base point. Buyers pay the transportation
costs from the base to their location. For example, factory location may serve as the
base point and buyer's pay all the transportation costs from factory to their
destination.
d) Uniform Delivered Price: Price includes transportation costs. Same price is charged
from all customers irrespective of location. For example, Coca Cola charges uniform
price in all locations accessible by road.
e) Freight Absorption Price: The manufacturer absorbs some position of transportation

cost payable by middle men. It is used to attract channel members.
8.4.4 Product-Mix Price Policy

This policy is used when a product is part of the product mix. It can be:
a) Product line price: Price relationship is established for product items in a product
line. For example, track shoes items can have price steps of Rs. 500, Rs. 1,000, Rs.
2,000. Customers perceive quality differences for each step.
b) Optional feature price: Separate price is charged for optional features offered. For
example, stereo system for a car can be an option at extra price.
c) Product bundling price: Products are bundled at a set price. For example, Shampoo
can be bundled with soap. The bundle costs less than buying each product
separately.
d) Two-part price: The price is in two parts- fixed charge plus variable charge. In
Nepal there is a fixed charge for specified electricity units and higher usage charge
for extra units.
e) Ancillary-product price: Some products require ancillary product for usage. The
example is blade for razor, film for camera. The policy is to charge higher prices for
ancillary products and low price for main product.
8.5 Pricing Strategies

Strategies are broad action plans for achieving pricing objectives. Pricing strategies can be:
(Figure 8-7)
1. Product life cycle strategy
2. Price change strategy
3. Price response strategy
4. Psychological pricing strategy

Figure 8-7: Pricing Strategies
8.5.1 Product Life Cycle Pricing Strategy

Pricing strategy differs according to the stage of product life cycle.
a) Introduction Stage: Pricing strategy differs for new products. They can be:
i) Skimming Pricing: A high price is charged for new products. This strategy is
used to recover heavy Research and Develop-ment costs incurred in developing
the products.
ii) Competitive Pricing: Price close to the competitor's price is charged for
modified products to match competition.
iii) Penetration Pricing: Low price is charged for new products to achieve rapid
market expansion.
b) Growth Stage: The sales rise rapidly in this stage. A slightly lower price than the
introduction stage is charged. The objective is to capture a bigger market share.
c) Maturity Stage: Competition becomes intense in this stage. Low price strategy is
used to defend the market share.
d) Decline Stage: Sales decline rapidly. Hardcore loyal and laggards buy the product.
Price is decreased.

8.5.2 Price Change Strategy

Changes in environmental forces necessitate price changes. The strategies can be:
a) Price increase strategy: Inflation, new taxes, and shortages can require price
increase. Quality improvements also require price increase.
b) Price decrease strategy: Extra production capacity, price wars, and need for greater
market share can require price decreases. Competitors generally respond by
lowering their prices as well.
c) Price Maintain Strategy: Price can be maintained by adding value to the product.
 The reaction of customers, competitors, suppliers, and the government should
be considered while initiating price changes.
8.5.3 Price Response Strategy

Organizations need to respond to price changes by competitors. The strategies can be:
a) Competitive Price strategy: Meet the competitor's price by changing own prices.
This is needed where products are similar.
b) Do nothing strategy: If the price change is to clear old stocks or seasonal sale or to
utilize excess capacity in the short run, no response is needed. The objective of
price change should be carefully considered.
c) Non-Price competition strategy: Non Price competition can be used as a response
to counter price competition. This can be through product differentiation, aggressive
promotion and effective distribution.
8.5.4 Psychological Pricing Strategy

Psychological pricing strategies encourage emotional buying. The customers perceive
the price favourably. The pricing strategies can be:
a) Prestige pricing strategy: Prices aim to provide prestige to the product. They are
set at an artificially high level. Perfumes, jewellery, watches are suitable for such
pricing strategy.
b) Odd-even pricing strategy: Odd number pricing enhances economy image of the
product, for example Rs. 199. Even number pricing enhances quality image of the
product, for example Rs. 200.
c) Psychological discounting strategy: This strategy uses deceptive discount tactics.
For example,
Original Price Rs. 5,000
Reduced To Rs. 2,500

In reality the price of the product is Rs. 2,500

Some retailers put the "SALE" sign offering discount throughout the year. In reality
there is no discount.
d) Customary pricing strategy: Pricing is based on tradition. For example, land tillers
pay 50% of production to absentee landlord in Nepal.
e) Promotional Pricing Strategy:
i) One or two well known brands are sold at low price to attract customers.
ii) Special prices are set for special events, for example during exhibitions in
Nepal.
iii) Cash rebates are provided to promote products.
iv) Warranties and services are focused to attract customers. Competitors rapidly
copy such strategies. Such strategies are short-lived.
8.6 Pricing Scenario in Nepal

Pricing is a subject of considerable importance in Nepalese marketing. It is an important
determinant of consumer choice. The following points characterize pricing scenario in
Nepal.
1. Pricing Objectives
a) Status quo-oriented pricing objective is dominant. Most Nepalese products are
imitation of Indian products. Price competition is avoided by charging the
prevailing market price to meet competition. Survival is the pricing objective for
carpet and readymade garment industries because of declining demand.
b) Profit-oriented pricing objective is pursued in terms of satisfac-tory profit. Specified
target return is generally not considered as an objective.
c) Sales-oriented pricing objectives are emerging, for example increase in market
share is the objective in instant noodle industry and liquor industry.
 Some marketers follow low pricing objective by producing low quality products
to imitate high quality imported products.
2. Factors affecting Price Determination
a) Costs are the most important factor in price determination. Because of high import
content and rugged terrain, most Nepalese products have high costs of production.
b) Promotion is emerging as an important factor in determining price. The popularity
of television, radio, hoarding boards has increased for promotion.
c) Competition from Indian and Chinese products is getting important in price
determination. Cross border smuggling also affects price.

d) Low volume of market demand also affects price. Nepal is a small fragmented
market where economies of scale are difficult to achieve.
e) Government controls also affect price. Public enterprises, especially utilities like
electricity, telephone and water, follow government directives to set price. Some
products are subject to administered price. Support prices are fixed for agricultural
products like sugarcane, wheat, rice by the government.
3. Methods of Setting Price

a) Competition oriented pricing method is dominant in Nepal to meet competition.
b) Sealed bid pricing method is used by the government and NGOs for awarding
contracts.
c) Cost-plus method is generally used by small manufacturers. Break-even pricing is
poorly practiced.
4. Pricing Policies and Strategies

a) Flexible price policy is widely used in Nepal. Price discrimi-nation is done
according to customer, place and time. Dis-counts are also used to make the price
flexible. Allowances are also used.
b) Geographical pricing policy is also popular. Uniformed delivered price policy is
used by Nepal Lever, Coca Cola and Pepsi. Zone price is used by Nepal Oil
Corporation. Base point price is used for bulky products like iron, cement etc.
c) Product mix pricing policy has not caught up in Nepal. Nepal Telecommunications
Corporation uses a two-part price policy-cheaper price after 10 PM and on
Saturday.
d) Price response strategies are common in Nepal to meet the competition. Product
life cycle pricing strategies have been gradually emerging. But the psychological
pricing strategies have remained neglected in Nepalese marketing.
 Some industries form cartels to adopt one price policy. In Nepal, this is found
for iron rods, washing soap, beer, cold drinks, transport fares.
5. Future Perspective
Global organizations have emerged in Nepal. The World Trade Organization (WTO)
has been working toward a liberalized trade regime. Nepal is a member of WTO. All
these factors will have significant effect on pricing policies and strategies in Nepal.
Competition will be everywhere. It will be mainly price-based.

1. Explain the value oriented pricing methods.
2. Explain the cost oriented pricing method and point out its limitations.
3. Explain the break-even pricing method and point out its limitations.
4. What is pricing? Describe its importance.
5. What are the objectives of pricing ? Briefly explain.
6. What is pricing? Show your acquaintances with "skimming the cream" pricing strategy.
7. Explain psychological pricing strategy.
8. What are the pricing policies generally adopted by a business organization? Explain.
9. Describe pricing scenario in Nepal.
10. Explain competition-oriented pricing methods.
11. What is price skimming?
12. Explain status quo oriented pricing objectives.
13. What is meant by price in marketing?
14. What are the strategies under Price Response strategy
ICAN Questions
1. Briefly explain pricing policies. (June 2009)
2. How pricing policy should be set for a product or service for the first time. (December
2009)
3. Describe the main price discounts popularly used by marketers in Nepal. (Dec.2010)
4. Briefly explain the push and pull strategy. (Dec.2010)
5. Briefly explain the psychological discount pricing strategy. (June 2010)
6. State and explain the methods of cost based pricing. (June2010)

CHAPTER - 9
PLACE DECISIONS (DISTRIBUTION)
9.1 Meaning of Place (Distribution)

Place gets the product to the target customers. It involves marketing channels and physical
distribution. Marketing channels make the product available to the customers. Physical
distribution makes the product accessible to the channel members and customers.
Definition :
Definition :
Distribution includes the various activities the company undertakes
to make the product accessible and available to target customers.
The components of place are:

1. Marketing Channels
2. Physical Distribution
1. Marketing Channels (Middlemen)
Channels make the product available to customers. Various intermediaries make up a
marketing channel. They make the flow of products smooth. They are partners in serving
customers. They can be:
a) Merchants: They buy, take title to, and resell products. Wholesalers and retailers
are merchant middlemen.
b) Agents: They search for customers and make negotiations but do not take title to
the product. Sales agents, brokers and sales representatives are agent middlemen.
c) Facilitators: They assist in the distribution process. They neither take title to
products nor make negotiations. Transporters, banks, insurance companies,
advertising agencies and warehouses are facilitators.
2. Physical Distribution
Physical distribution makes the product accessible to customers. It physically moves
the products from producer to customers. The major activities performed are: order
processing, warehousing, material handling, inventory management, and
transportation. (See Box 9-1)

Chapter 9 - Place Decisions (Distribution)
9.2 Importance of Place

The following points indicate the importance of distribution:
1. Efficiency: Manufacturers produce limited variety of products in large quantity.
Customers desire large variety of products in limited quantity. Place facilitates
assortment of products. Customers can get all the products to match their needs. This
promotes marketing efficiency.
The number of transactions between the manufacturer and customers decrease. This
leads to saving in time, efforts and costs. Figure 9-1 shows that the number of
transactions decrease from 9 to 6 when retailer is present.
Figure 9-1: Place Transactions
2. Communication: Place facilitates communication. It links the manufacturer and the

customer. Manufacturers can transfer messages to customers through channel members
about product, price and promotion. Channel members can supply information to
manufacturers about customers, competitors and environmental changes. They serve
and make markets. They push the products.
3. Financing: Middlemen themselves finance their operations. They store and finance
inventories. Manufacturers do not need to establish their own distribution channels.
Their inventory costs remain low. These activities finance the manufacturer's operations.
4. Value Addition: Place adds value to the product through delivery at right place, in right
time, and in right quantity. Value is essential to satisfy customer needs.
 Transportation delivers products from the place of production to the place of
consumption. This adds Place utility to the product.
 Warehousing stores the products. This adds Time utility by providing products as
and when demanded.

 Inventory management regulates product supply in right quantity and size. This
adds Quantity utility to the product.
5. Employment: Place creates employment opportunities. Market intermediaries are
important source of direct and indirect employment at retail and wholesale level.
6. Competition: Well-established channels discourage new firms to enter in the market.
This reduces competition for the manufacturer.
7. Standard of Living: Place delivers products that satisfy customer needs, ownership
and use of products improve standard of living of the users.
9.3 Objectives of Place

The objectives of place are as follows: (Figure 9-2)
Flow of Goods
Availability of Goods
Objectives of
Accessibility of Goods
Place
Efficiency
Customer Satisfaction
Figure 9-2: Objectives of Place
1. Flow of goods: Place makes smooth flow of products from manufacturer to channel
members and customers. This is the essence of exchange relationships in marketing.
Products must reach the market before they can be sold.
2. Availability of Goods: Place channels make the goods available to customers. Channels
such as wholesalers and retailers ensure availability of goods at all times. This results
in increased sales. Competition can be effectively faced.
3. Accessibility of Goods: Place makes goods accessible to customers through physical
distribution. Goods are delivered at right place, in right time and in right quantity.
Order processing material handling, warehousing, inventory and transportation are
managed. It spreads the goals to large geographical areas.

4. Efficiency: Place achieves marketing efficiency. It facilitates assortment of goods. It

reduces number of transactions between manufacturer and customers. Marketing costs
decrease by proper storage and handling of goods..
5. Customer Satisfaction: Place contributes to customer satisfaction. It adds value to
the product. It facilitates better service to customers. It delivers value to target
customers.
9.4 Channel Structure

Channels make forward movement of products. Most manufacturers do not sell products
directly to the final customers. They use marketing channels as a link between them. (See
Box 9-1)
Definition:
Definition:
Marketing channels are sets of interdependent organizations
involved in the process of making a product or service available for
use or consumption.
■ According to Stanton, Etzel and Walker
Distribution channels consist of the set of people and firms involved
in the transfer of title to a product as the product moves from
producer to ultimate consumer or business user.
Channel structure refers to type and level of channels.

1. Channel Type: It can be direct or indirect. Direct channel has no middlemen between
the manufacturer and customer. Indirect channel has middlemen between the
manufacturer and customer.
2. Channel Level: It refers to the number of participants in the channel. They can be
manufacturer, sole agent, wholesaler, retailer and customer.
Channel structures differ for consumer products and industrial products.
9.4.1 Channel Structure for Consumer Products

Consumer products are purchased for personal or household use. The participants in
this channel structure are: manufacturer, sole agent, wholesaler, retailer. The alternatives
available for channel structure of consumer products are: (Figure 9-3)

Figure 9-3: Channel Structure for Consumer Products.
a) Zero-level channel
Manufacturer  Consumer
This is the direct channel between manufacturer and consumer. The manufacturer
performs all the distribution activities. Service products are generally distributed
through zero level channel. They require personal contact. The manufacturer
should have capability and resources to use zero-level channel.
The Zero-level channels can be:
i) Door-to-door: Sales representatives go door to door sell goods in the homes of
consumers. Avon cosmetics uses this method.
ii) Mail order: Catalogues or mail are sent to consumers. E-mail, Voice Mail,
Websites are widely used.
iii) Telemarketing: Telephone is used to sell products.
iv) On-line marketing: Computer is used for selling. Internet is used. It is a global
web of computer networks. Websites are use to sell products.
v) TV marketing: Television is used to sell goods. Sky Shops on TV are increasing.
vi) Own stores: Producers open their own retail outlets. The Bakery fast food
restaurants are examples of this channel.
 The information technology is making the zero-level channel popular.
Distribution costs are the lowest. e-commerce has made its future promising.

b) One-level channel
Manufacturer  Retailer  Consumer
This channel contains retailer between the manufacturer and consumer. It is a

short channel. Many large retailers buy directly from manufacturers. Examples
are supermarket, discount houses, and department stores. Agricultural products
(perishable) are sold through this channel. The aim is selective distribution.
 The distribution costs are low. The order size needs to be large.
c) Two-level channel
Manufacturer  Wholesaler  Retailer  Consumer
This channel contains wholesaler and retailer between the manufacturer and
consumer. It is a long channel. This is the widely used traditional channel. The
aim is intensive distribution. Large number of retail outlets can be reached. Semi-
wholesalers (jobbers) can be used to cater to specific locations.
 The distribution costs are high. The products need to be durable.
d) Three-level Channel
Manufacturer  Sole Agent  Wholesaler  Retailer  Consumer
This channel contains sole agent, wholesaler and retailer between the manufacturer
and consumer. It is the longest channel. The sole agent has exclusive rights to sell
the products. Global companies use this channel where distance, language and
culture serve as barriers.
 The distribution costs are the highest.
9.4.2 Channel Structure for Industrial Products

Industrial customers buy products for business use, resell or to make other products.
The participants in this structure are: manufacturer, distributors, agents and users.
The alternatives available for channel structure of industrial products are: (Figure
9-4).

Figure 9-4: Channel Structure for Industrial Products.
a) Zero-level Channel
Manufacturer  Customer
This is the direct channel between manufacturer and customer. Capital goods
items consisting of installations and raw materials are distributed through this
channel. This channel is widely used.
 Distribution costs are the lowest. Competent salespersons are needed. Post-
sale service is important.
b) One-level Channel
Manufacturer  Distributor  Customer
This channel contains distributor between the manufacturer and customer. This
is a short channel. Distributors specialize in product lines. They provide delivery
and after-sale services. This channel is popular for accessory equipment and
operating supplies.
 Distribution costs are low. Quality, reliability and speed of after-sale services
are important. Channel dependency is high.

c) Two-level Channel
Manufacturer  Agent  Distributor  Customer

This channel contains agent and distributor between the manufacturer and
customer. This is a long channel. Agents are manufacturers' representatives. They
negotiate the sale and arrange the transfer of title to products. This channel is used
for lower priced industrial goods that require intensive distribution.
 Distribution costs are high. Decentralized inventory system is needed.
Box 9-1: Middlemen in Channel Structures
Middlemen make the flow of goods smooth between manufacturer and customer. They can
be
1. Wholesalers: They deal with retailers.
2. Retailers: They deal with consumers.
3. Agents: They represent buyer or seller but do not take title to goods.
4. Facilitators: They assist in distribution.
1. Wholesaler
Wholesalers are merchant middlemen. They take title to the goods. They deal with
retailers. They do not deal with the ultimate consumers. They buy for reselling. Their
transactions are large in volume. They cover large trade areas. They serve as an important
link between the manufacturers and the retailers. They are of many types.
Role of Wholesaler in Distribution System
Wholesalers are important not only to manufacturers but also to retailers.
Role of wholesaler for manufacturers
Role of Wholesaler in Distribution System

a) Distribution Efficiency: Wholesalers perform wholesaling functions more efficiently

than manufacturers. Transaction costs decrease due to decrease in the number of
transactions between manufacturers and customers. Distribution efficiency
increases.
b) Bulk Buying: Wholesalers buy products in large volumes (bulk buying). They sell
them in smaller lots (bulk breaking). Their activities match products with customer
needs. They maintain storage facilities. This reduces selling costs.
c) Financing: Wholesalers carry larger inventories in warehouses. They finance
manufacturers by timely payment of bills. They also make advance payment to
manufacturers.
d) Risk Bearing: Wholesalers take title to the products. They bear all the risks of
price changes, damage, spoilage, and obsolescence related to goods. They hold
inventory.
e) Market Coverage: Wholesalers operate through a network of retailers. This
facilitates intensive distribution of products. Manufacturers can realize economies
of scale through high volumes. They can cover multi-segments of market.
f) Promotion: Wholesalers push products to retailers. They undertake cooperative
advertising with manufacturers and retailers. They help to implement sales
promotion schemes.
g) Market Information: Wholesalers are near to marketplace. They provide information
to manufacturers about customer needs, competitor's activities, price changes,
new products, and environmental changes.
Role of wholesalers for retailers

a) Efficiency: Wholesalers make speedy delivery of goods to retailers. This results in
cost savings. Efficiency of retailers increases.
b) Assortment of Goods: Wholesalers buy various products from various
manufacturers. They provide an assortment of goods to meet the needs of
retailers. This helps retailers to carry small inventories. Their inventory costs
decrease.
c) Financing: Wholesalers provide credit facilities to retailers. This helps retailers to
manage their cash flow pressures.
d) Technical Support: Wholesalers provide technical support to retailers for window
display, point-of-purchase display, training of salespersons and installation of
information technology. They also provide after-sales services.
e) Promotion: Wholesalers provide promotional materials to retailers. They also
participate in promotional campaigns launched by retailers at local level by cost
sharing. They also help to implement sales promotion schemes.

2. Retailers
Retailers are merchant middlemen. They deal with customers. They link manufacturers
with ultimate consumers. Their transactions are small in volume. They take title to the
goods. They buy from wholesalers for reselling. The location, display, atmosphere, and
interpersonal skills are important factors in retailing. Retailers are of many types.
Retailing consists of activities needed to place a product in the hands of ultimate
consumer. Changing life styles, increasing income and credit availability has made
retailing popular.
Retailer is any business enterprise whose sales volume comes primarily from retailing.
The products can be sold in person, by internet, telephone, mail, or vending machine. It
can be sold in a store, street, or at home. Cyberstores are appearing fast.
Role of the Retailer in Distribution System

Retailers serve as sales specialist for wholesalers. They serve as purchasing agent for
the consumers. They play important roles for wholesalers and customers.
Role of retailer in Distribution System
Role of Retailer for Wholesalers

a) Distribution Efficiency: Retailers perform retailing functions more efficiently than
the wholesalers. Transaction costs decrease due to decrease in the number of
transactions between wholesalers and ultimate consumers. The delivery costs are
low. These activities save distribution costs.

b) Financing: Retailers carry and store inventories in small lots. They convert products
into cash through the selling function. They finance wholesaler by timely payment
of bills. They bear the risks by taking title to the goods.
c) Market Coverage: Retail outlets exist in every nook and corner of the country. They
push products in the market. Customers trust their advice. They make shopping
convenient to customers. Economies of scale can be realized through intensive
distribution.
d) Promotion: Retailers promote products to ultimate consumers. They undertake

store displays and point-of-purchase displays. They carry out local advertising.
They participate in cooperative advertising with wholesalers. They implement
sales promotion schemes.
e) Information: Retailers are nearest to the marketplace. They build long term
relationships with the consumers. They provide information about consumer needs,
behavior, and preferences. They also provide information about competitor's
activities relating to product, price and promotion. They also assist in market
surveys.
Role of Retailer for Consumers
a) Product Assortment: Retailers provide product assortments to consumers. This

facilitates exchange. Consumers can match products with needs and purchasing
power. They get choice in terms of features, advantages, and benefits of products.
b) Credit: Retailers provide credit facilities to consumers. They sell goods on hire-
purchase and arrange financing from financial institutions.
c) Information: Retailers provide information to consumers about new products,

changing fashions, price fluctuations, and sales promotion schemes. Such
information is useful for making buying decisions. Consumers get free advice
from retailers.
d) Service: Retailers offer a variety of services consisting of delivery, installation,

repair, maintenance, and supply of spare parts, They serve as authorized "Service
Centres". Large retail establishments include restaurants, health clubs, beauty
parlours, and children's play corner in their product assortment. They provide
advice to consumers.
9.5 Meaning of Physical Distribution

Customers require products in the right quantity at the right time from the right place.
Physical distribution is the process of getting products to target customers. It is the actual
flow of product from the point of origin to the point of consumption.

Definition:
Definition:
■ According to William Stanton:
Physical distribution consists of all the activities involved in the
flow of products as they move physically from producer to consumer
or industrial user.
■ According to Philip Kotler:
Market logistics involves planning, implementing, and controlling
the physical flows of materials and final goods from points of origin
to points of use to meet customer requirements at a profit.
Physical distribution activities consist of order processing, ware-housing, materials

handling, inventory management, and transportation.
Physical distribution costs account for about 35% of product cost. Transportation costs
account for almost 50% of physical distribution costs. Innovations in information technology,
material handling, and transportation modes have contributed to rapid specialization in
physical distribution.
Physical distribution aims to provide better customer service and faster delivery at reasonable
costs. It also helps stabilize prices through warehousing and product movements.
Organizations can strengthen their competitive positions through efficient market logistics.
9.5.1 Components of Physical Distribution

The components of Physical Distribution are: (Figure 9-5)
1. Order Processing
2. Warehousing
3. Material Handling
4. Inventory Management
5. Transportation
1. Order Processing
Physical distribution starts with customer order. Order processing is a set of procedures
for receiving, handling and filling orders. It can be done manually or through computer.
The activities are:
a) Receiving orders: Orders can be received directly from customer or through company
sales persons. They can be received through mail, telephone, telefax, internet and
on-line computers.
b) Handling orders: The orders are transmitted to the accounts section and warehouse.
The accounts section makes credit check. The warehouse checks the product
availability. An order is placed to the production department if products are not
available.

c) Filling orders: The ordered products are packed for shipment by the warehouse.
Invoice and shipping documents are prepared. Products are handed over to the
transporters for delivery to the customer. One copy of invoice is sent to accounts
section.
 Delays or mistakes in order processing cause customer dissatisfaction.
Figure 9-5: Components of Physical Distribution
2. Warehousing
A warehouse is a storage facility to store products until they are sold. It performs
various functions such as assembling, bulk-breaking, storing, packaging, and shipping.
Traditionally godowns performed the storage function. Today, the emphasis in
warehousing is on product movement rather than product storage. Distribution Centres
have appeared which take orders, fill them, prepare them for shipping and quickly
move them to customers.
Important decisions regarding warehousing are:
a) Private or Public Warehouse:
i) Private warehouses are owned, managed, and controlled by the organization.
Investment and operating costs are high but their design can be customized.

ii) Public warehouses are independently owned and controlled. They charge
for the storage space as and when used. The warehouse costs are variable
costs. They also provide other services like product display, order filling,
etc.
b) Number and Location of Warehouse:
i) Number of warehouses depend on geographical coverage de-sired, storage
facilities of channel members, and speed of product movement. Nearness to
market requires many warehouses.
ii) Warehouse location may be near the production facility or near the market.
Nearness to production facility involves lower operating costs and higher
transportation costs. Nearness to market involves higher operating costs but
better customer service.
3. Material Handling
Material handling involves selecting proper equipment to physically handle products.
Efficient and appropriate equipment can reduce handling costs and minimize losses
from breakage, spoilage, and theft.
The nature of the product, the size of the package, and the packaging materials
determine handling equipment. Material handling can be mechanical and non-
mechanical.
i) Mechanical Handling: Mechanical handling uses fork-lift trucks, cranes, conveyor
belts, and electrical hoists. Automated warehouses are controlled by computers.
Containers facilitate mechanical handling.
ii) Non-mechanical Handling: It uses animals and humans for material handling.
The package size should be small-sacks, boxes, and small containers. This is
extensively used in Nepal hills.
 Material handling is costly. The general rule is "minimum handling is the best".
4. Inventory Management
Inventory management involves:
 Control of inventory costs,
 Planning of inventory levels.
a) Control of Inventory Costs:

Inventory costs consist of:
i) Order-processing costs: They are ordering costs to acquire inventory. They
are related to ordering, receiving, storage, inspection, and quality control.
They are also known as acquisition costs.

ii) Carrying costs (Holding costs): They are the costs of carrying inventory. The
larger the inventory carried, the higher the carrying costs. They relate to storage
charges, cost of capital, taxes, insurance, and obsolescence. They range from
10 to 30% of inventory value.
iii) Stock out costs: They are losses likely to be suffered because of non-availability
of inventory. They consist of high costs of crash purchases, inefficient
production operations, loss in sales, decreased customer service.
 Inventory costs need to be controlled to reduce costs of physical distribution.
b) Control of Inventory Levels:
Techniques for control of inventory levels consist of:
i) Critical Inventory Levels
Maximum, minimum, and reorder levels for each unit of inventory are
predetermined.
The factors considered for fixing critical levels are rate of consumption, safety
stocks needed, delivery time needed, cost of carrying and storage, and risk of
deterioration, obsolescence and stock out. New order should be placed at
reorder level point.
ii) Economic Order Quantity (Optimal order quantity)
Economic order quantity (EOQ) is the volume at which the sum of order
processing costs and inventory carrying costs are at a minimum. As the order
size increases, order-processing costs decline (orders are fewer) and inventory
carrying costs increase (average inventory is larger).
The formula used for calculating EOQ is:
2AO
EOQ (Units) = C
Where, A = Annual requirements

O = Ordering cost per order
C = Carrying cost per unit per year
Suppose, A = 300 units; O = Rs. 30; C = 0.50
2  3000 ´ 30
EOQ = 0.5 = 600 units

iii) ABC Analysis:

Inventory items are classified according to their annual consumption costs in
A, B, C categories. "A" items which tie-up the highest investment in inventories
are continuously controlled. Control is relaxed on "C" items. Many industries
typically have the following classification:
Items Inventory value

A – 10% 70%
B – 20% 20%
C – 70% 10%
iv) Just-in-time (JIT):

Inventories are received just-in-time to be used up by production. Order
quantities are small, deliveries are frequent. The suppliers need to be highly
dependable for the JIT concept to work. Substantial savings can be done in
inventory costs through JIT.
 Computerized inventory management systems are getting popular.
Various quantitative techniques are available to optimize inventory
management.
5. Transportation
Transportation moves products from manufacturer to customers. It accounts for almost
50% of total costs of physical distribution. It consists of decisions about the carrier type
and the mode of transport.
a) Carrier Type:
They can be private, contract, or common.
i) Private Carrier: Organizations own the transport mode. The movement speed
can be controlled but investment and operating costs are high.
ii) Contract Carrier: Independent carriers that sell service on a contract basis.
They are specialists and operate efficiently.
iii) Common Carrier: They provide scheduled service between set points. They
charge standard rates and are available to all.
b) Transportation mode:
The major modes are: Road, Rail, Water, Air, Human/Animal. Pipelines are used
for liquid and gas. (Figure 9-6)

Human/
Criteria Road Rail Water Air
Animal
1. Cost High Medium Lowest Highest High
2. Speed Fast Medium Slowest Fastest Slowest
3. Consistency Good Medium Poor Excellent Good
(Reliability)
4. Safety High Lowest Medium Highest Medium
5. Availability Highest Low Medium High Lowest
Figure 9-6: Comparison of Transport Modes
Transport modes should be evaluated in terms of

i) Cost: This represents payment made as charges. Air is the most expensive
and water is the cheapest.
ii) Speed: This represents time taken in movement. Air has the best speed; human
porters have the worst speed.
iii) Consistency: This refers to regularity and reliability in meeting schedules. Air
is excellent, road and human porters are good.
iv) Safety: This refers to product safety during movement. Air is the best, rail is
the worst.
v) Availability: Not all modes may be available. Roads are not available in many
parts of Nepalese mountains.
c) Inter-modal Transportation:
Organizations generally use multiple modes of transportation. Containerization
has facilitated it. Containerization consists of putting goods in boxes or trailers
that can be transferred between transportation modes. Inter-modal examples are:
 Truck- train (piggyback)
 Ship - truck (fishy back)
 Truck - aeroplane (air truck)
 Aeroplane - humans/animals (food grains in Jumla)
High customer service at low cost is an important criterion for selecting
transportation mode. Various quantitative techniques are available to find optimal
modes.

1. Define place in marketing. Describe its importance.
2. Explain the objectives of place in marketing.
3. What are the channel alternatives for the distribution of consumer goods?
4. Show the channel structure for industrial goods.
5. Describe channel structure for consumer goods.
6. Draw the channel structure for consumer goods.
7. What do you understand by physical distribution? Briefly explain transportation and
warehousing as the two most important functions of physical distribution?
8. What do you understand by channel structure?
9. What is distribution? Discuss the marketing implications of inventory control and
order processing.
10. What do you know by channel structure? Explain the channel structure most popular
in Nepal.
11. Explain the components of physical distribution.
ICAN Questions
1. Briefly explain :
a) Retailer
b) Three level channel structure for consumer goods. (June 2009)
2. What is physical distribution? Explain its components. (Dec. 2009)
3. What is physical distribution? Explain its components. (Dec. 2009)
4. Briefly explain warehousing. (Dec.2010)
5. Briefly explain the importance of physical distribution. (June, 2010)
6. Draw the channel levels structure for consumer market and explain them in that
structure. ( June 2010).
7. Write short notes on importance of physical distribution system. (June 2010)
8. Briefly explain the Channel Dynamics. (Dec. 2011)
9. Briefly explain the resolution of channel conflicts. (June 2011)
10. Describe distribution structure for consumer goods. ( June 2011)
11. Briefly explain Physical Distribution. (June, 2012)

CHAPTER - 10
PROMOTION DECISIONS
10.1 Meaning of Promotion

Promotion is persuasive communication with the customers. It tells the target customers
about product, price and place. Promotion consists of activities that facilitate exchanges
with target customers. It stimulates demand.
Definition:
Definition:
Promotion includes all the activities the company undertakes to
communicate and promote its products to the target market.
Promotion is the element in an organization’s marketing mix that
serves to inform, persuade and remind the market of a product
and/or the organization selling it, in hope of influencing the
recipients feelings, beliefs or behaviour.
In modern marketing, promotion is a must. A good product, attractive price and accessible
distribution must be supported by effective promotion to satisfy customer needs.
Promotional mix consist of advertising, sales promotion, personal selling, publicity and
public relations.
10.2 Objectives of Promotion

Promotion has the following objectives:
 Informing  Persuading
 Reminding  Reinforcing
 Image building

Chaper 10 - Promotion Decisions
1. Informing:
Promotion disseminates information to target customers and middlemen. The
information is about a product, its price and availability. It develops awareness about
the product. It helps customers to make purchase choices. It stimulates customer demand.
2. Persuading:
Customers have many products to choose from. Organizations face intense competition
in the market. Promotion persuades customers to make the purchase decision in favor
of the promoted brand. Persuasive communication stimulates product demand. It
influences buyer behavior. It also induces middlemen to carry the product. It stimulates
demand for the brand.
3. Reminding:
Customers have short-lived memory. They have limited capacity to remember brand
names. There is intense competition for getting customer's attention in the market.
Promotion reminds customers about a brand. Even the established brands need to be
promoted to remind customers.
4. Reinforcing:
Promotion is important in the post-purchase stage of the buying process. Customers
may feel anxiety over their purchase decision. Promotion reassures them about the
product's benefits to reduce their anxiety. Repeated reinforcement leads to brand
loyalty.
5. Image Building:
Promotion builds brand images in the target market. It helps to position the brand. It
builds brand loyalty.
10.3 Meaning of Promotion Mix

Promotion mix is the combination of advertising, publicity, public relations, sales promotion
and personal selling elements. (Figure 10-1)

Figure 10-1: Components of Promotion Mix
1. Advertising
Advertising in any paid form of nonpersonal communication by an identified sponsor
to promote products. It reaches numerous buyers at low cost. It uses various media for
delivering messages.
They are:
 Print media: Newspapers, journals, newsletters, brochures.
 Visual media: Billboards, displays, point of purchase display.
 Audio media: Radio
 Audio Visual media: Television, Videotapes, cinema.
 Internet: E-mail and websites
2. Public Relations
Public relations is any unpaid form of presentation designed to promote favorable
attitudes and opinions toward organization, its policies and products. It is used to
promote favorable relationships with key stakeholders such as media, government,
community, employees, and customers.

The tools of public relations are:

 Public service activities: Charitable donations
 Sponsorship of events: Sports, culture, cleanliness
 Exhibits and displays
 Lobbying to change laws and policies
3. Sales Promotion
Sales promotion refers to short term incentives to encourage trial or purchase of a
product. It creates a stronger and quicker response. It supplements advertising and
facilitates personal selling. It can be directed at consumers, middlemen and sales force.
 Tools for consumer promotion include sample, coupons, rebate, premiums,
contests, price-off and displays.
 Tools for trade promotion include free goods, discounts, allowances, price off,
gifts, sales contests and credit facilities.
 Tools for sales force promotion include sales contests, trade shows, gift items,
promotional kits, bonus and commission.
4. Personal Selling
Personal selling is personal communication with customers to persuade them to buy
products. Customers come to salesperson or salesperson goes to customers. It permits
interaction and relationship building. Salespersons provide feedback about the market,
competitors and customers.
More money is spent on personal selling than on any other tool of promotion. It involves
greater long-term costs.
10.3.1 Factors Affecting Promotion Mix

Promotion mix is critical in achieving marketing objectives. Several factors affect
promotion mix. They are: (Figure 10–2)
1. Promotion objectives
2. Nature of the product
3. Nature of the target market
4. Stage of the Product life cycle
5. Size of the promotion budget
6. Promotion strategy

1. Promotion Objectives
The promotion objectives affect the determination of promotion mix.
 If the objective is to build awareness through informing, advertising and
publicity are important.
 If the objective is to create liking, preference and conviction, personal selling
and advertising are important.
 If the objective is to get order for the product, personal selling and sales
promotion are important.
 If the objective is to get customer attention through reminding, advertising is
important.
 If the objective is brand loyalty through reinforcement, advertis-ing and
publicity are important.
Figure 10–2: Factors Affecting Determination of Promotion Mix
2. Nature of the Product

The nature of the product affects determination of promotion mix.
 Low cost convenience products require emphasis on national advertising
and sales promotion.
 High-cost shopping products require emphasis on personal selling and local
advertising.
 Specialty products require emphasis on personal selling and publicity.
 Industrial products require emphasis on personal selling.

3. Nature of the Target Market

The nature of the target market affects determination of promotion mix. For example:
 Consumer markets need more emphasis on sales promotion and advertising
and less emphasis on personal selling and publicity.
 Industrial markets need more emphasis on personal selling and sales
promotion and less emphasis on advertising and publicity.
 Channel members need emphasis on personal selling and trade promotion.
 The market coverage affects promotion mix. Small markets need emphasis on
personal selling, local advertising and sales promotion. Large markets need
emphasis on national advertising and trade promotion. Industrial markets
require emphasis on personal selling.
4. Stage of the Product Life Cycle

The stage of the product life cycle affects determination of promotion mix.
 The introduction stage needs emphasis on advertising sales promotion and
publicity. Advertising provides brand awareness by informing target
customers.
 The growth stage needs emphasis on advertising for brand preference and
acceptance.
 The maturity stage needs emphasis on sales promotion. Advertising is done
to support sale promotion.
 The decline stage needs de-emphasis on all promotion tools.
5. Size of Promotion Budget (Box 10-1)

 The amount of money available is the ultimate determinant of the promotion
mix.
 Advertising requires ample resources because it has to be long term and of a
campaign nature.
 Personal selling is suitable for small organizations. But large sales force is
expensive.
 Sales promotion can be launched with a specified budget.
 Publicity is free when it appears in the media. However, there are costs to
develop and implement public relations.
6. Promotion Strategy
Promotion strategy affects determination of promotion mix. The marketing
promotion strategies can be push or pull: (Figure 10-3)

Figure 10-3: Push and Pull strategies of Promotion
a) Push strategy: The promotion program is directed at middlemen. The product

is "pushed" through the channel. The channel members are persuaded to
order, carry and promote product. The manufacturer promotes to wholesaler,
the wholesaler promotes to retailer, the retailer promotes to customer. The
product is pushed through the channel by manufacturer.
 Personal selling and trade promotion tools are emphasized in push
strategy. This strategy is useful where brand loyalty is low and market
share is to be protected.
b) Pull strategy: The promotion program is directed at customers. The customers
are persuaded to ask the product from the retailers, the retailers ask the product
from the wholesalers and the wholesalers order the product from the
manufacturers. The product is "pulled" through the channel by consumers.
Aggressive advertising and sales promotion are emphasized in pull strategy.
This strategy is useful where brand loyalty is high.
Box 10–1: Basis for Allocating Promotion Budget
The basis for allocating promotion budget can be:

1. Affordable Method: Budget is based on what organizations think they can afford. It is
generally based on hunch. Nepalese public enterprises use this method.
2. Incremental Method: A percentage is added to previous year's promotion expenditure.
3. Percent of Sales Method: Budget is set as a specified percentage of sales. This is the
most popular method in practice.
4. Competitive-parity method: Budget is based on the level of competitor's spending.
5. Objective-and-task method:
 Tasks are defined to achieve promotion objectives.
 Costs are estimated to perform the tasks. The sum of costs is total promotion budget.
This is the most effective method. Each task in the promotion mix is clearly spelled
out. It is also easy to implement.

10.4 Advertising
10.4.1 Meaning of Advertising
Advertising is one of the most widely used promotion tools. It is used by business, non-
government organizations, charities and service institutions. It is used for mass
communication.
Advertising is any paid form of non-personal communication by an identified sponsor
to promote products.
Definition:
Definition:
Advertising is any paid form of non-personal presentation and
promotion of ideas, goods or services by an identified sponsor.
■ According to American Marketing Association
Advertising is any paid form of non-personal presentation of goods,
services or ideas for action, openly paid for by an identified sponsor.
■ According to Stanton, Etzel and Walker
Advertising is all activities involved in presenting to an audience a
non-personal, sponsor-identified, paid-for message about a product
or an organization.
Advertising can be of four types:

1. Consumer and Trade Advertising: Consumer advertising targets the ultimate
consumers. Trade advertising targets the businesses.
2. Product and Institutional Advertising: Product advertising focuses on a particular
product brand. Institutional advertising focuses on the image of the organization.
3. Primary Demand and Selective Demand Advertising: Primary demand advertising
focuses on a generic product, for example milk. Selective demand advertising
focuses on a specific brand, for example Hulas Rice.
4. Local, National, International: Advertising can be done at local, national and
international levels.
Specialty Advertising
It is an item of product imprinted with the advertiser’s name, message
or logo. It is given free. Over 15,000 different items, such as pens,
cups, key-chains, calendars, are used for specialty advertising. It has
long life, It requires small budget.

Characteristics of Advertising
Advertising has the following characteristics:
a) Advertising involves costs: Advertising is not free. The costs are:
 Development costs: They are related with visualization copywriting,
illustrating and layout design.
 Production costs: They are related with recording, filming, photographing
and printing.
 Media costs: They are the costs charged by the media. They account for about
80% of advertising costs.
 Administrative costs: They are related with administrative aspects of
advertising.
The costs are paid by the sponsor to the media and others involved in advertising.
b) Advertising has a message: Advertising carries a message. The message is encoded
by the marketer and decoded by the customer. It can be verbal or visual. It uses
various media to transmit the message.
c) Advertising is non-personal: There is no face-to-face interaction in advertising.
Physical presence of the sender is not required. The media channels transmit the
message. It is mass communication.
d) Advertising is sponsored: Advertising must be sponsored by the organization. The
sponsor is identifiable. The sponsor pays the costs.
e) Advertising promotes products: Advertising promotes products. Business firms
advertise goods, services, ideas and image. Social organizations advertise public
awareness messages (family planning, environment protection). Political parties
advertise ideologies and candidates to improve image.
f) Advertising has objectives: The objectives of advertising can be to inform, persuade,
remind, and reinforce to achieve sales and build image.
10.4.2 Importance of Advertising

Advertising is highly visible to customers. It is important to the organization as well as
the consumers. Its importance is clear from the following points:
a) Information: Advertising educates customer. Organizations can disseminate
information about products through advertising to target customers. It is done on
a mass scale. It creates awareness about features, advantages, benefits, price and
availability of the product. Based on such information, customers can make better
buying decisions. They also change their attitudes and behavior.
b) Brand Loyalty: Advertising persuades customers in target segments to accept the
brand. It also encourages brand switching. By reminding and reinforcing the
customers, advertising helps build brand loyalty. Customers feel satisfied from
the product.

c) Market Share: Advertising persuades target customers into buying the product.
This helps to maintain market share. Demand is stimulated. Increased demand
results in increased market share. Negative rumours can be countered.
d) New Segments: Advertising creates brand awareness in new segments. It
persuades customers in new segments for trial purchase of the brand. This
stimulates demand for the product.
e) Support other promotion tools: Sales promotion is generally accompanied by
advertising. Personal selling is facilitated by advertising. It increases sales force
effectiveness.
f) Image: Advertising builds image of the organization. It can be about quality, price
and social responsibility. Social advertising enhances corporate social
responsibility.
g) Employment: Advertising is an important source of employment. A large number
of people are employed by ad business. The national economy gets stimulated by
increase in demand.
10.4.3 Objectives of Advertising

Advertising has the following objectives:
a) Information: Advertising disseminates information to target customers. The
information can be about the product's brand, uses, features, advantages, benefits,
price and availability. The aim is to create brand awareness and acceptance. New
products need advertising for customer awareness and brand recognition.
b) Persuasion: Advertising persuades target customers to make the trial purchase
decision in favor of the advertised brand. The aim is to stimulate product demand,
build brand preference, and encourage purchase and brand switching. It attracts
middlemen to carry the brand.
c) Reminder: Advertising reminds the customers about a brand. Customers have
short-lived memories about the brand name. Coca Cola ads remind customers
about the need for soft drinks every summer. Display materials also remind
customers.
d) Reinforcement: Advertising reduces customer anxiety at the post-purchase stage.
Repeated reinforcement leads to brand loyalty. Relationship marketing is facilitated.
e) Image building: Advertising build image. It creates goodwill about the organization
in the perception of customers. This adds value to the products. For example,
SONY ads focus "It's SONY" to build organiza-tional image.
f) Competition: Advertising helps to face competition. It aims to meet competition or
gain advantage over competitors.
g) Help other promotion tools: Advertising helps other promotional tools.
 Sales promotion is generally accompanied by advertising to provide
information to the customers.
 Advertising help personal selling. It informs prospective customers about the
company and its products. It increases sales force effectiveness.

10.4.4 Advertising Media

Media is the channel for transmission of advertising message. It can be of the following
types: (Figure 10-4 and 10-5)
1. Print media
2. Visual media
3. Audio media
4. Audio-Visual media
5. Internet
Figure 10-4: Types of Advertising Media
1. Print Media
It consists of advertising done through printed materials. It is mass media. It can
be classified into:
a) Newspapers: They can be daily or weekly. They cover news, ideas and opinions
about current affairs and other aspects. They are an important and powerful tool
for transmitting advertising message.
Advantages
 They are printed regularly.
 They are distributed widely.
 They give high exposure at low cost.
 They are flexible.
Disadvantages
 They have a short life.
 They need literate audience.
b) Journals and Magazines: They are published monthly, quarterly, semi-annually or
annually. Their target audience is specific group of readers. They can be related to
professions, culture, religion, health, trade, entertainment and women affairs.
"Journal of Marketing" is an example.

Advantages
 They have a longer life.
 Their quality is high.
Disadvantages
 Their circulation is limited.
 The cost is high.
c) Others: They can be directory (yellow pages), pamphlets, brochure, newsletters,

catalog, inserts, direct mail and package print.
Advantages
 They have a wide reach.
 Costs are low.
Disadvantage
 They are generally aimed at large segments in local areas only.
2. Visual Media
It consists of outdoor advertising that draws visual attention. It is visible to eyes. It
can be classified into:
a) Billboards (Hoarding): They are boards with printed ads. They remain fixed in
central locations or top of the buildings. They even incorporate motions and
colourful three dimensional figures to get increased attention. Computerized screen
painting has improved their quality.
Advantages
 Billboards represent low cost advertising.
 They can be used for products that are banned from radio and television, for
example cigarettes.
Disadvantage
 They cover small segments of customers.
b) Outdoor Displays: They consist of outdoor displays to attract the attention of
customers. They can be wall painting, posters, banners and sky writing. Electric
signs are also used.
Advantages
 They are cost effective.
 They are effective in drawing visual attention.

Disadvantages
 They are short-lived.
 They can be damaged by competitors, climatic conditions and children.
 Space availability is a problem.
c) Indoor Displays: They consist of indoor displays to attract attention of customers.

They can be window display, point of purchase displays in retail shops. They can
be exhibits in trade fairs. Poster and cut-out can be used for point of purchase
display.
 They are cost effective and catch attention.
3. Audio Media
It is electronic mass media. It consists of sound to attract attention. It can be heard
through ears. The advertising can be through messages, dialogue, drama or music.
It can be classified into:
a) Radio: It is a broadcast media. It makes audio impression on listeners. It is a popular

media for advertising. FM radio stations are increasing for local area advertising.
Advantages
 Radio advertising is cost effective.
 The message is effective both for literates and illiterates.
 The exposure is high.
 Its reach is far and wide.
 It is especially effective for rural areas.
Disadvantages
 Television is its big competitor.
 Listeners may have low level of attention to retain information.
b) Others: They can be:

a) Audio tapes and CDs (Circular Disks): They are mostly music-oriented.
Advertisements can be inserted in them. They are getting popular.
b) Telephone: It is used for direct communication of advertising messages to
customers. It is effective and gives personal touch. But it is expensive. It has
limited uses.

4. Audio-Visual Media
It is electronic mass media. It combines sound, motion and visual effects.
Advertising describes and demonstrates products. It can be classified into:
a) Television: It is the most powerful media for advertising. Falling TV prices have
made it easily accessible in households. It brings family members together.
Advantages
 TV gives wide coverage.
 It has flexibility.
 Product can be seen by the customers visually.
 Messages can be heard with attention.
 Sales appeals can be persuasive.
Disadvantages
 TV ads are expensive.
 Its reach can be limited.
 Viewers tend to switch channels during commercial breaks.
b) Others: They can be cinema and videotapes. Cinema carries commercials before
the start of film show and during half time of the show. Videotapes can also be
used to carry commercials.
 They have a limited reach.
5. Internet Media
It is a global network of computers. It is based on information communication
technology. It needs telephone, modem and computer. It is speedy. It has worldwide
reach. E-mail and websites are used for advertising and direct marketing. E-
commerce is the outcome of internet revolution. It is growing fast.
Advantages
 Large reservoir of information and its speedy transmission are the advantages
of internet.
 Its cost is decreasing dramatically.
Disadvantages
 Its reach is limited in developing countries.
 It needs computer literate audience.

Advertising Media Alternatives
Print Visual Audio Audiovisual Internet

■ Newspaper ■ Billboard ■ Radio ■ Television ■ e-
mail
■ Magazine ■ Poster ■ Audio ■ Cinema ■ Web
sites
■ Journal ■ Wall ■ tape/CD ■ Videotapes ■ Blog
■ Directory painting ■ Telephone
■ Banners
■ Catalogue ■ Sky
writing
■ Brochure ■ Point of
■ Insert purchase
■ Package display
Print ■ Exhibits
■ Newsletter
■ Direct Mail
Figure 10-5: Components of Advertising Media
10.5 Public Relations

10.5.1 Meaning of Public Relations
Public Relations (PR) promote favorable attitudes and opinions towards an
organization, its policies, and products in public. They develop favorable relationships
with groups that have interest in organization's objectives. (See Box 10-2)
Defintions:
 According to Philip Kotler

Public relations involve a variety of programs designed to promote and/or protect a
company’s image or its individual products.
 According to William Stanton
Public relations is a management tool designed to favourably influence attitudes
towards an organization, its products, and its policies.

Box 10-2: Targets and Activities of Public Relations
Target Activities Benefits

1. Customers ■ Press releases ■ Brand awareness
■ Event ■ Increase
sponsorpship credibility
2. Employees ■ Newsletters ■ Improves
■ Social activities communication
■ Increases morale
3. Suppliers ■ Articles in ■ Improves image
journals ■ Improves
■ Promotional delivery schedule
incentives
4. Community ■ News releases ■ Improves image
■ Plant tours ■ Improve
■ Support community
community relations
activities ■ Attracts better
employees
5. Government ■ Lobbying ■ Favourable
■ Mail legislation
■ Personal calls ■ Less regulation
10.5.2 Objectives of Public Relations

The objectives of public relations are:
a) Announce new products: PR can be used to announce new products. Print media
carry special columns to announce new products. This creates customer awareness
about the products. Market place excitement is built.
b) Build interest in established products: PR can be used to persuade and remind
customers about established products. It stimulates the interests of customers,
sales force and middlemen. Customer loyalty increases.
c) Announce policies and performance: New or changed policies can be announced
through PR. Public service activities can be announced to build favorable image.
Performance of the organization can be communicated to interested groups.
Relationship can be built with opinion leaders.
d) Announce technological development: Innovations or research breakthrough in
the field of technology can be announced. This promotes the corporate image of
technological leadership. Consumers become aware about new technology.
e) Counter negative publicity: Publicity can be positive or negative. Negative publicity
about organization and its products through unfounded rumors by competitors is
common. Publicity can be used to counter such rumors. It can also be used to
defend products that have encountered public problems.

10.5.3 Methods of Public Relations

Public relations build favourable relations with publics. The methods of Public relations
can be: (Box 10-3)
1. Media Relations: It consists of
 Personal communication
 News releases
 Feature articles
 Publications
2. Public Service Activities: It consists of
 Sponsorship of events
 Lobbying
 Exhibits and displays
1. Media Relations
They are publicity related. They can be:
a) Personal Communication: It can be with an individual journalist or a group of
journalists. The tools are:
 Press conferences: Media reporters are invited and briefed in organized press
conferences. Press kits are distributed. The reporters may be taken to tour the
production facilities. Executives can interact directly with the media.
 Speeches: They can be given at trade associations or sales meetings by
executives. They build image of the organization.
b) News Releases: Newsworthy information is circulated to the press. Media people
report them as news items. The news releases can be about improved performance,
new products and technology, public service activities, sponsorship of events etc.
They should be written up in a newsworthy manner to be usable. Photographs
make them effective.
c) Feature Articles: Organizations commission feature articles from skilled journalists
for publication in media. Researchers can also write and publish such articles in
course of their research work. Editorials can be based on news relating to the
organization.
d) Publications: They include annual reports, brochures, catalogues, newsletters,
house magazines and audio-visual materials. They provide information about the
organization, its policies and products to target audience.
2. Public Service Activities

a) Sponsorship of events: Sports, cultural and other social events can be sponsored.
Donations can be given. (Box 9-4).
b) Lobbying: This involves dealing with legislators and government officials
concerning legislation and regulation to promote interests of the organization or
product.

c) Exhibits and displays: Organizations participate in exhibitions to display their

products.
d) Problem Solving: Marketing people work with local community, employee groups,
social institutions to solve social problems.
Box 10-3: Public Relations by Nepalese Companies
 San Miguel Beer sponsored the first Nepali women expedition team to Mount Everest
led by Pasang Lhamu Sherpa.
 Gorkha Brewery sponsored Kaji Sherpa, the fastest Mount Everest summiteer.
 Carlsberg Beer sponsors Manang Marsyangdi team, a local football club.
 Surya Tobacco sponsors "Shikhar Sanjh" a musical programme on New Year day.
 Close up sponsored "Shivaratri Music Festival 2002".
 ICTC sponsored Sangina Baidya for Olympics in Athens.
 Unilever Nepal sponsored mobile health clinic for surrounding villages.
 Standard Chartered Bank sponsors eye surgery.
10.6 Sales Promotion

10.6.1 Meaning of Sales Promotion
Sales promotion has been increasing in popularity as a consumer promotion tool.
Marketers are using it aggressively. Sales promotion refers to short term incentives to
stimulate demand. It is used to create a stronger and quicker purchase response. It can
be directed at consumers, middlemen and sales personnel. It supplements advertising
and facilitates personal selling.
Definitions

Sales promotion refers to demand-stimulating devices designed to supplement
advertising and facilitate personal selling.
Sales promotion consists of diverse collection of incentive tools, mostly short
term, designed to stimulate quicker and/or greater purchase of particular
products/services by consumers or the trade.
Characteristics of Sales Promotion

a) Short term: The duration of sales promotion is neither too short nor too long from
launching to close. Generally, it lasts from seven days to three months. It could be
seasonal as well.

b) Incentives: Sales promotion provides "schemes", "deals" or incentives to the buyers.

The size of incentive should be attractive. Benefits in terms of economy or money
saving are directly reaped by the buyers.
c) Quicker response: Sales promotion aims at quicker results in terms of faster sales
and higher sales volume. Existing customers buy more of the product. New
customers buy the product. However, sales temporarily decline after the close of
sales promotion. They stabilize gradually.
d) Target audience: The target audience of sales promotion can be consumers, trade
channels, and sales personnel. Sales promotion tools differ according to the target
category.
10.6.2 Objectives of Sales Promotion

The basic objective of sales promotion is to achieve faster and higher sales. The specific
objectives vary with the target audience. They can be consumers, channel members,
and sales force.
1. Objectives for Consumer Promotion
a) Encourage greater purchase volume: Sales promotion encourages purchase of
larger size units by existing consumers. It also encourages greater use of the
product.
b) Attract new customers: Sales promotion is used to attract new customers to:
 Encourage trial for the product among non-users.
 Attract brand switchers from competitor's brands.
 Increase impulse buying. Sales promotion incentives persuade consumers
for impulse buying.
 Increase brand awareness.
c) Introduce new products: Sales promotion is used to introduce new products.
For example, samples may be inserted in the package of existing products for
introduction of new products. The objective is to educate consumers rather
than to increase sales.
2. Objectives for Trade Promotion
a) Carry and push new brands: Sales promotion persuades channel members to
carry new brands. They also stimulate them to push the brand to the consumers.
b) Increase inventories: Sales promotion persuades wholesalers and retailers to
carry higher levels of inventory. It encourages off-season buying.
c) Attract new channel members: Sales promotion incentives attract new channel
members to carry the brand. This facilitates intensive distribution.
d) Offset competitive promotion: Sales promotion is used to offset incentives
provided by competitors. This discourages brand switching.
e) Better store displays: Sales promotion induces retailers to make better display
of the product in the store. They provide more shelf space. In Nepal,
manufacturers reward retailers who make the best display of their product.

3. Objectives for Sales Force Promotion

a) Motivate sales force: Sales promotion motivates sales force for greater effort to
get orders from existing and new customers. It stimulates them to make off-
season sales.
b) Support new products: Sales promotion supports the efforts of sales force to
push new products. It also educates customers about product improvements.
10.6.3 Methods of Sales Promotion

Sales promotion methods differ according to the nature of target audience. They can be
directed at consumer promotion, trade promotion, and sales force promotion. (Figure
10-6)
Figure 10-6: Sales Promotion methods
1. Consumer Promotion Methods

They are directed at consumers. They consist of:
a) Free samples: Offer of a free amount of a product. Free samples can be mailed,
delivered door to door, handed out in stores and attached to another product.
They are effective to introduce a new product. This method is expensive.
b) Coupons: They are certificates that can be redeemed into cash or other product.
They can be enclosed in the product package, mailed, inserted in newspaper
ads or handed out at purchase time. They are effective for established products.
About 5% coupons are generally redeemed. They should provide 15% to 20%
saving to be attractive. (See Box 10-4)

c) Rebates: Money refunds or rebates that provide price reduction after the
purchase. Consumers mail proof-of-purchase to get rebates.
d) Premiums (gifts): They are free gifts or low cost offers for purchasing a
particular product. They could be "with pack premium" (inside the package
or on the package). Reusable packages serve as a premium. Free glasses come
with beer bottles.
e) Price-off: The product is offered at a reduced price. The packages and
newspaper ads announce such reductions. They can be 'reduced-price pack'
or 'banded pack' having two related products in one pack (tooth brush with
toothpaste). They stimulate off-season sales.
f) Contest and Prizes: They provide chance to win cash, trips or products.
Consumers submit an entry for the contest (filling questionnaire or giving
suggestions). Lotteries require consumers to submit their names in a lucky
draw. Conditions for participation in contests are specified.
g) Displays and Demonstration: They are point of purchase displays (poster,
cutout) to attract consumer attention. They persuade consumers for
impulse buying. Product demonstration in trade fairs and exhibitions
persuade consumers for purchase. Free trials can be given to the
consumers. Products can be displayed in counters, floors and points of
check out.
2. Trade Promotion Methods (Channel Promotion)

They are directed at resellers. They consist of:
a) Free goods: Offer of free goods for buying certain quantity during specified
periods. Coca Cola provides free goods to retailers who buy specified cases.
This method encourages inventory stock up.
b) Allowances: Advertising allowance is given for local advertising or cooperative
advertising of manufacturer's product. Display allowances can be given for
special displays.
c) Price-off: This is temporary discount from the list price. This is also called
Buying Allowance. They encourage quantity purchase and off season
purchase. The time period for price-off is specified.
d) Sales contest: They recognize or reward resellers through contests for
greater sales or best displays. They can be cash, trips, gift items like
watch, refrigerator, fan etc. Conditions for participation in contests are
specified.
e) Gift items: Small gift items which bear company name can be provided free to
channel members. They can be ballpoint pen, calendars, diary, key chain,
lighters, ashtrays etc. They are known as specialty advertising.

f) Credit facilities: Manufacturers provide extended credit facilities to channel

members. This provides inducement to carry new products and greater
inventories.
g) Trade shows: They involve setting booths to demonstrate products at trade
shows and exhibitions. They attract channel members.
3. Sales Force Promotion Methods

They are directed at sales force. They can be used by manufacturers and
resellers.They consist of:
a) Sales contests: They induce sales force to increase sales over a stated time
period. The prizes can be cash, trips or gifts. The indicators should be
measurable for sales contests to be effective. Conditions for participation in
contests should be made clear.
b) Trade shows and conventions: The products are demonstrated at trade
shows. Sales force develop customer contacts to get sales orders during
trade shows. Conventions of sales force are also organized. They provide
an opportunity to sales force to interact with the management and
colleagues.
c) Gift items: Sales personnel are provided with small gift items like pen, pencils,
diary, key chain, calendar, lighters etc., which bear company name. They
distribute them to customers free of cost.
d) Promotional kits: Sales personnel are provided with promotional kits that
contain catalogues, brochures and other information about the product.
Demonstration model of the product may also be provided. They facilitate
selling.
e) Bonus and commissions: They are cash awards to sales force to increase sales
over specified volumes. They induce extra efforts by sales personnel.
Box 10-4: Methods of Distributing Coupons
1. Print media: Newspapers, magazines (printed or as inserts)

2. Direct mail
3. In store
4. On or in package of products
5. Internet
6. Fax
7. Sales staff
 Less than 5% of coupons are redeemed to take advantage of price reduction.

10.7 Personal Selling

10.7.1 Meaning of Personal Selling
Personal selling is personal communication with customers to persuade them to buy
products. Customers come to salesperson or salespersons go to customers. It involves
face-to-face interactions.
Personal selling is as old as marketing. It is widely used as a promotion tool. More

money is spent on personal selling than on any other tool of promotion.
Definition:

Personal selling is the personal communication of information to persuade
somebody to buy something.
Personal selling is face-to-face interaction with one or more perspective
purchasers for the purpose of making presentations, answering questions and
procuring orders.
Personal selling has the following characteristics:

a) Personal communication: Personal interaction takes place between the salesperson
and the customer. It can take place through physical presence or through
mechanical means. There is two-way information flow between the sales person
and the customer. Salespersons provide information about products and receive
feedback from customers about products.
b) Persuasion: Personal selling involves persuasion. Salespersons persuade customers
to buy products. Presentations are made, queries are answered and orders are
received.
Personal selling is more suitable in the following situations:

i) The market is geographically concentrated, for example industrial markets or small
markets.
ii) The product is new or has a high unit value, for example specialty goods,
innovations, technical products.
iii) The order size is big.
iv) The customer needs are specific for customized products.
 The salesperson can be flexible to adopt to various situations.

10.7.2 Objectives of Personal Selling

Personal selling has the following objectives:
a) Two-way communication: The salesperson can make presentation and
demonstration about the product. The message design can be made flexible according
to buyer characteristics. Customers can ask for additional information.
Communication is two-way with prospective customers. Wasted efforts of
communication are minimized. There is personal contact.
b) Persuasion: Personal selling is the most powerful tool in persuading customers to
make purchase decisions. Several visits can be made by the salesperson to influence
customers' buying decision. They overcome buyer objections. They search new
customers. They use their skills to make a sale. They persuade the middlemen to
carry the brand. They tailor their presentations to fit buyer's characteristics. They
overcome buyer objections.
c) Relationship building: Relationships develop between the salesperson and customer
during a sale. They can be long term and mutually beneficial. Customers rely on
the salesperson's advice about style, color, model and financing. This results in
satisfied and lifelong loyal customers. Salespersons also reassure customers who
feel anxiety over purchase decision. They can do follow up on customers.
d) Non-selling functions: Salespersons perform a variety of non-selling functions.
They keep records, gather information, provide post-sale services, handle customer
complaints and build image of the organization. They serve as a link between the
customer and the organization.
 Personal selling is expensive. It should be selectively used as a promotion
tool. The recent trend is that personal selling is moving toward relationship
marketing to build up life long customer relationships.
10.7.3 Methods of Personal Selling

Personal selling methods can be classified according to:
1. Location
2. Employer
1. Personal Selling Method according to Location
a) Indoor Personal Selling: The sales persons work indoors. It can be a shop,
supermarket, department store or office. Customers come inside the store to
make purchases. The sales persons work for wholesalers or retailers.
b) Outdoor Personal Selling: The sales persons work in the field. They contact
the customers in their homes or offices. They take orders from the customers.
They are also known as travelling sales persons. They work for manufacturers
or wholesalers.
c) Indoor and Outdoor Personal Selling: This is generally technical for selling.
The sales persons are professional persons. They possess technical knowledge
about products. They provide technical information and assistance. Their
customers are industries and institutions. They work for manufacturers. They
work both indoors and outdoors.

2. Personal Selling Methods according to Employer

Personal selling methods can also be classified according to sales persons employer.
They can be:
a) Manufacturer's Salesperson (Trade selling): They work as manufacturer's
representative. They generally work outdoors. They deal with middlemen
(wholesaler, retailer).
b) Wholesaler's Salesperson: They work for the wholesaler. They deal with
retailers. They take orders, provide information to retailers. They conduct
market surveys for the wholesaler. They work outdoors.
c) Retailers Salesperson: They work for retail outlets. They deal with the
customers. They work indoors or outdoors. Indoor salespersons work at retail
counters. Outdoor sales person work from door to door.
 Personal selling involves both consumer and industrial goods.
(Also see Box 10-5 and 10-6)
Box 10-5: Personal Selling Process for Indoor Sales
The personal selling process for indoor sales consists of the following steps: (Figure 9-10)
a) Draw attention b) Ascertain needs
c) Presentation d) Handle objections
e) Close the sale
Presentation
Ascertain Handle
Needs Objections
Draw Close
Attention Sale
Personal Selling Process for Indoor Sales

a) Draw Attention: The store is beautifully decorated with signboards, point of purchase
displays, and other means. This draws the attention of customers. When the customer
enters the store, a welcome is given with friendly smile with "Can I help you?"
b) Ascertain Needs: The needs of the customers are ascertained. Polite enquiries are made
about their needs. The salesperson listens patiently to what customer is saying. The
buyer's needs are clarified.
c) Presentation: The sales person demonstrates the product desired by the customers.
Variety of goods are presented. Features, advantages and benefits of products are
described. The demonstration is done with enthusiasm. Various options are given.
d) Handling Objections: Questions raised by the customer are answered. Objections are
handled tactfully. The trust of the customer is won. The buyer is not pushed into buying.
e) Closing sale: The customer selects the product. The terms and conditions of sale are
finalized. The sale is closed. The customer makes payment. Warm thanks are offered.
Invitation is given to visit again. Small gifts like key chain, calendar or pen can be given
to delight the customer.
Box 10-6: Personal selling process for Travelling Sales

It involves the following seven steps:
Presentation
Meet
Approach
Objectives
Pre-approach Closing Sale
Prospecting Follow-up
Personal Selling Process for Travelling Sales
a) Prospecting: Researching potential buyers and choosing those most likely to buy. Buyer
information is collected.
b) Pre-approach: Gathering further information on the selected prospects to know them
well, especially their needs. Good prospects are selected for approach.

c) Approach: Initial contact with the customer for relationship building is made. It can be
personally, by telephone or mail.
d) Presentation: Actual presentation or demonstration of the product's features,
advantages, benefits are made. Audiovisual aids may be used.
e) Meeting objections: It involves answering all the questions raised by the customer and
meeting objections.
f) Closing the sale: Finalization of sale transaction. Terms and conditions of sale are
finalized. Order is taken.
g) Follow-up: This involves delivery, installation of the product, post sale services, follow-
up on customer satisfaction and establishing relationships for reordering. Relationship
is built with the customer.
 The personal selling process gets attention, holds interest, arouses desire and
obtains action (AIDA).
 Personal selling is effective where the market is concentrated, the product has a
high unit value, the order size is big, the buyer needs are specific and the product
is in the introductory stage.
10.8 Promotion Scenario in Nepal

Promotion has become an important element of marketing mix in Nepal. Its role has been
increasing. The following points present the promotion scenario in Nepal.
1. Promotion Function
The function of promotion in Nepal is largely information and persuasion to increase
sales. The reminding and reinforcement aspects are neglected. The post-purchase stage
of buying process has remained neglected by promotion.
2. Promotion Mix
Promotion mix decisions in Nepalese marketing emphasize advertising and sales
promotion. Publicity has remained neglected. Personal selling lacks professional
approach. The decisions about promotion mix suffer from:
 Lack of clear-cut promotion objectives.
 Lack of proper consideration to the nature of product and target market in selecting
the promotion tool.
 Neglect of the stage of product life cycle in designing promotion mix.
 Lack of adequate promotion budget.
 Unclear promotion strategy.

3. Advertising
Advertising is the most popular promotion tool in Nepal. It is growing at about 25%
per annum. It is widely used by business, government and social organizations. Its
total annual volume is about Rs. 3 billion.
3.1. Nepalese marketers use a variety of media for advertising.
 Print media: Nepal has about 4000 newspapers and magazines. But only
about 20% are coming out regularly. The total circulation is above one million.
Kathmandu valley accounts for about 50% of total circulation. About 12% of
the total population read newspapers. The government owned Gorkhapatra
is the oldest newspaper-more than 100 years old. It devotes 20% space to ads.
The Kantipur has the largest daily circulation of about 150,000. The private
newspapers are growing. Rural areas have largely remained illiterate and
unreached by print media. Newspapers are widely used by Nepalese
marketers for advertising.
 Visual Media: Billboards, posters and electrical display signs are getting
popular in Kathmandu and other major towns. Point of purchase displays
are also used. The use of visual media is increasing.
 Audio Media: Radio Nepal, started in 1951, has monopoly in audio media. It
reaches to almost all parts of the country-90% gross reach, 70% effective
reach. Nepalese marketers use Radio Nepal for advertising. Radio
Sagarmatha started FM broadcast in May 1997 in the private sector. Today
there are more than 60 FM stations. Radio is the most effective media of
advertising in Nepal.
 Audio-visual Media: Nepal Television, established more than 20 years ago,
has become a powerful audio-visual media for advertising. Its reach is about
65% of population. The commercials are increasing. About 60% ads are
nationally produced and 40% are produced in India. There are about one
dozen TV channels in the private sector.
Videotapes of Indian movies overwrite advertising messages of Nepalese
products. About 300 cinema halls also show slides and short ad films at the
beginning and during intermission of film shows.
 Advertising Agencies: There are more than 1000 advertising agencies in
Nepal. The first agency "Nepal Advertisers" was established in 1961. The
agencies get about 15% commission from the media. They generally collect
ads from organizations and deliver them to media. About 85% of all ads
are channelled through the ad agencies. The ad agencies have poor
technical and professional capabilities for production and development
of programs. The messages tend to be stereotype in terms of design and
encoding.

Some agencies, for example Stimulus Ad, have been creative in advertising of
social causes related to education of girl child, family planning, maternal and
child health.
International agencies like J. Walter Thompson and MARG have entered
Nepal.
3.2 Legal Provisions: Legal provisions regarding advertising has remained scattered
in various Acts of law. Censor is needed for advertising in government media. In
the past, the tax laws were detrimental to advertising growth. At present total
expenditure on advertising is tax deductible if value added tax has been paid.
Legal provisions generally favor government media.
3.3 Ethical Dilemma: Consumer and social well being is neglected by Nepalese
advertising. Deceptive ads that cheat consumers are not controlled effectively. The
government has banned tobacco and liquor ads from Radio and TV since February
1999.
3.4 Non-branding: Many agricultural products are sold unpacked and unbranded in
Nepal. Many of manufactured products are imitations of Indian brands. This has
constrained advertising.
3.5 Management Attitude: Nepalese management's attitude towards advertising has
remained lukewarm. They expect instant increase in sales through advertising.
They prefer price cutting, higher trade commissions and aggressive personal selling
to advertising. Public enterprises treat advertising as a public relations activity.
4. Sales Promotion (See Box 10-7)

The popularity of sales promotion has increased over the last 20 years. It is highly used
by noodles, soap, tea, biscuits and soft drink industries. But the government regulations
prohibit sales promotion for cigarette beer, liquor and financial sector.
4.1 Objectives: Sales promotion in Nepal is generally consumer-oriented. But the
objective of such promotion is to increase sale rather than attract new customers
or launch new products. Objectives of trade promotion are off season sales and
increase reseller's inventories. Pepsi and Coca Cola launch similar sales
promotion to offset competition. Sales force promotion has remained very much
neglected.
4.2 Methods of Sales Promotion:

 Consumer promotion: The most popular methods are coupons, premiums (gifts),
price-off, contests and prize. Free samples, rebates are not popular. Advertising
specialities are used by most of the business firms.
 Trade promotion: Free goods, price-off, allowances and contests are popular
methods.
 Sales personnel promotion: Bonus and commission, contests and gifts are used.

4.3 Program Development: Sales promotion program in Nepal are not properly
developed and implemented. The same methods get repeated year after year.
Creativity is lacking. Market research is neglected. Innovative schemes are few.
5. Public Relations
Public relation has remained an overlooked promotion tool in Nepal. It is not
professionally managed. Its tools and uses are:
 Tools: News release, and press conferences are major tools. Publications are rare
in Nepalese enterprises. Organizations generally hire a working journalist on a
part time basis.
 Organizations in Nepal use public relations to announce performance, new
policies and products. They also use it to counter negative publicity. It is used on
an ad-hoc basis and is not a continuous process.
 Use of public relations activities are also increasing.
6. Personal Selling
Marketing in Nepal is very much selling oriented. Personal selling occupies an
important place in the promotion mix. The reasons for its importance are:
 Geographically fragmented markets.
 Inability of small organizations to incur big ad outlays.
 Distribution systems directed toward wholesaler, semi wholesaler and retailers
which require personal selling.
 High importance to relationship building.
6.1. Personal selling in Nepal lacks professionalism. The salespersons are not properly
trained to practice professional selling. The salesperson has a low status in the Nepalese
organizations and the society. The salaries are low.
The entry of consumer goods-oriented global organizations like UniLever, Smith-Kline-
Beecham, Pepsi and Coco Cola indicates bright future for various promotion tools in
Nepal. The private sector banks like Standard Chartered, NABIL and Himalayan Bank
have given great importance to promotion. The entries of international ad agencies like
J. Walter Thompson, Marg are good omens for promotion. The advent of Internet has
facilitated advertising through websites.

Box 10-7: Examples of Sales Promotion in Nepal
 Pepsi and Coke caps carry various prizes.

 Glasses, key chains, peanuts are offered free for beer and liquor purchase.
 Wai-Wai and Mayos noodles puts cash and coupons in its package. Hulas Biscuits
also put coupon in biscuit pack. Horlicks biscuits provide extra quantity.
 Kantipur newspaper organized a contest for new customers. Prizes for lucky winners
included: Motor Bike, Television set, washing machine, free air tickets, carpets, suit
length, dinners. One free calculator was given on the spot to each new customer.
 Gorkhapatra provided "Yuva Manch" or "MUNA" free to new customers.
 Banks insures saving account holders for accidental death.
 Mayos provided car and diamond necklace to lucky winners.
 Exhibitors provide door prizes consisting of free tickets to Bangkok, Hongkong, London
to lucky winners as gate prizes.
 Airlines provide 10% discount for round-trip travel.
1. Differentiate between push and pull strategies of promotion.
2. What is consumer promotion? What are its various forms?
3. What is promotion mix? Discuss the factors affecting the determina-tion of the promotion
mix.
4. What is trade promotion? What are its various forms?
5. Describe any two methods of dealer promotion.
6. Explain the importance of personal selling.
7. What are the objectives of promotion? Discuss the factors affecting the determination of
the promotion mix?
8. What do you understand by public relations? What are the methods used for public
relations.
9. What is promotion? Show the differences between personal selling and sales promotion.
10. Differentiate between advertising and sales promotion.
11. Describe promotion scenario in Nepal.
12. What sales promotional techniques are getting popularity in Nepal?

ICAN Questions
1. Briefly explain advertising.(June 2009)
2. Briefly explain advertising media.(Dec. 2009)
3. Briefly explain pull and push strategies.(Dec. 2009)
4. Briefly explain the sales promotion and its methods. (Dec.2010)
5. Briefly explain pull Vs push Strategy. (Dec.2010).
Briefly explain promotion mix. (June 2010)
6. Explain briefly the promotion objectives. (June ,2010)
7. Give the meaning of advertising and explain the objectives of Advertising. (June 2011)
8. Briefly explain the personal selling. (June, 2012)
9. Highlight the importance of Advertising to the marketers. (June, 2012)

CHAPTER - 11
EMERGING CONCEPTS IN MARKETING
11.1 Relationship Marketing

Relationship marketing is building long term mutually satisfying relations with customers.
It aims to earn and retain their long term loyalty. The customer is regarded a partner in
creating value. All steps to know customers and to deliver high customer value and
satisfaction are taken.
Relationship marketing is a long term partnership between marketer and customer. Both
parties collaborate on identifying needs and developing and updating marketing mixes to
satisfy needs. It creates customer loyalty. It aims at customer retention.
It builds satisfied and loyal customers.
11.1.1 Customer Development in Relationship Marketing

Relationship marketing involves customer development. The cus-tomer development
process consists of the following steps: (Figure 11-1)
1. Prospects: People who have interest in the product and ability to pay for it. They
are likely to buy the product.
2. First Time Customers: Prospects who buy a product for the first time. They can be
brand switchers.
3. Repeat Customers: First time customers who repeatedly buy the product. They
experienced satisfaction with first time purchase. They have potential to become
loyal customers.
4. Clients: Repeat customers who are treated specially and knowledgeably by the
organization. They are loyal and satisfied customers. They buy products for a
longer period of time.
5. Members: Clients who join membership programme to take advantage of benefits.
Customer clubs are organized.
6. Advocates: Members who enthusiastically recommend the organization and its

products to others.
7. Partners: Advocates who work together actively for mutual benefits with the
organization.

Chapter 11 - Emerging Concepts in Marketing
Relationship marketing aims to convert prospects into partners. It is partnership

marketing where organizations and customers work together. They discover ways
to build mutually satisfying relations.
Relationship marketing has been driven by technology, especially the internet.
Investment in terms of time and money to build customer database is also important
for relationship marketing.
Figure 11-1: Steps in Customer Development
11.1.2 Strategies for Relationship Marketing

The following strategies can be used for developing relationship marketing(Figure 11-2)
1. Quality Assurance
Marketers promise and deliver high quality products at fair prices to customers.
This promotes long term loyalty and relationships. Consistence and conformance
to standards is ensured.

Quality Economic
Assurance Benefits
Relationship
Marketing
Technical Social
Benefits Benefits
Figure 11-2: Strategies for Relationship Marketing
2. Economic Benefits (Financial benefits)

Strong economic ties are built with customers. This can take the form of:
a) Frequency Marketing Programme: Key customers who buy frequently are given
attractive discounts and rewards. Generally 20% of customers account for
80% of the sales.
■ Many airlines offer free mileage credit to the frequently travelling

customers. Buddha and Yeti Air has this offer in Nepal.
■ Hotels provide free rooms to frequent guests.
b) Club Membership Programmes: Club membership is given to customers.

Attractive discounts and other benefits are given to the members.
3. Social Benefits
Organizations increase social bonds with customers by:
a) Individualizing and personalizing customer relationship. They provide social
recognition to the customer.
b) Organizing customer get together to meet and enjoy each other.

4. Technical Benefits
Organizations develop technical ties with their key customers. Such ties are
technology-based. They help the customer to better manage their marketing efforts
through:
 Developing EDI (Electronic Data Interchange)
Capabilities to help customers manage orders, inventory, shelf space, etc.
 Supplying computer linkages to customers, including software programme.
 Launching targeted customer loyalty programmes. They build customer
relations to retain customer and his long term loyalty.
11.2 E-commerce
This is the age of information communication technology consisting of:
 Computers: Hardware in the form of Mainframe, desktop, laptop, diary, scanners and
softwares.
 Communication Devices: Telephone, Videophone, fax, e-mail, internet, websites.
 Electronic Media: Television, videoconferencing.
Information communication technology has opened up a range of possibilities and facilities
for marketing. It has led to the growth of E-commerce (Electronic commerce) or Internet
marketing. It has linked sellers and buyers electronically. It is paperless marketing
communica-tion.
E-commerce is conducted through on-line computers. Internet serves as the communication
channel. Internet is a global web of computer networks. It has connected more than 300
million computers all over the world. It is the largest source of information. This information
is shared worldwide. Google is a powerful search engine.
E-commerce is establishing exchange relationships electronically through e-mail, internet,
and electronic platforms to satisfy individual needs of customers. It is direct marketing
based on electronic communication. It provides opportunities to sellers and customers for
interaction and individualization.
Connectivity through e-commerce
E-commerce takes a customer concept for individualized marketing. It connects the world of
marketing. It is rapidly growing. (Figure 11-3)

With Customers
• Directly
• Selectively
• For life
With Stakeholders
Internet • Other internal departments
Marketing • Employees, suppliers,
Connections competitors, intermediaries
• Strategic alliance partners
Globally
• Global customers
• Global partners
Figure 11-3: Marketing Connections through Internet
Connecting with Customers

 Internet connects directly with customers on one-to-one basis. Voice mail has
facilitated interactions with customers. Connectivity can be: Business to Consumer
(B2C), Business to Business (B2B), Consumer to Consumer (C2C) and Consumer to
Business (C2B). Databases are built to provide information about individual
customer. Cost time, distance and space are minimized.
 Internet connects with carefully selected customers. It targets profitable customers.
 Internet connects customers for a lifetime. It helps build relationships to make long
term profits. Lifetime value of customer is managed.
Connecting with Stakeholders
 Internet connects marketing with other departments inside the organization. It
promotes "customer think" among all employees.
 Internet connects with outside stakeholders, such as suppliers, competitors,
middlemen, and marketing intermediaries. Supply chain can be effectively
managed. Paper work is eliminated.
 Internet connects with strategic alliances partners. They can be related to marketing,
product, pricing, promotion and logistics.
Connecting Globally
 Internet has facilitated connections with global customers and partners. It has
expanded geographical coverage of purchasing manufacturing, and marketing.

11.2.1 Features of E-commerce

The following are the features of E-commerce:
1. Individualized Communication: Marketing communication is individualized.
Interaction is with individual customer. The customer is carefully selected.
2. Data Depository: Internet is a central depository of huge amounts of data. It can be
accessed all over the world through search engines. Millions of websites contain
information. They can be downloaded as needed.
3. E-mail and Electronic Platforms: E-mail is used for speedy transfer of messages to
conduct business. Electronic platforms can be:
 EDI: Electronic Data Interchange for placing orders to suppliers
 ATM: Automatic Teller Machine to facilitate receiving digital cash. Smart
cards are used to make payments.
 Computers receive orders from customers.
4. On-line Selling: E-commerce uses on-line selling. It has revolutionized the selling of:
 Airlines tickets and hotel bookings.
 Shares and financial services.
 Cars and other vehicles
 Computer hardware and software
 Books and music
 Consumer electronics
 Fashion goods
5. Relationship Marketing: E-commerce builds long term mutually satisfying relations.
This leads to lifetime loyal customers. The relations are based on superior customer
value and satisfaction. Long term profits are made by lifetime customer loyalty.
11.2.2 Impact of E-commerce on Marketing

E-commerce has greatly impacted marketing in the following ways:
1. Direct Marketing: E-commerce is replacing middlemen. Direct marketing between
manufacturer and customer is used to generate sales. Personal selling is
disappearing. Business to business marketing is growing fast through internet.
Comparison selling is promoted. Customer is empowered.
2. Electronic Marketing: E-commerce has led to growth of skyshops and cyberstores.
Face-to-face interactions between marketer and customer are decreasing. Time
saving is significant in marketing transactions.

3. Cost effective: Marketing has become cost effective. Middlemen commissions are
vanishing. Consumer prices are decreasing. Consumers get attractive deals.
Distribution costs are also decreasing. E-mail involves a fraction of cost of direct
mail.
4. Marketing mix: Marketing mix can be customized to meet the needs of individual
customer. Information can be gathered for market research.
5. Promotion: Promotion is through e-mail and websites. Ads are placed online.
Competition is also getting internet-based. Sales promotion is targeted.
6. Strategic Alliances: Global strategic alliances are developing to achieve global
standards in marketing. They can be for product, price, place and promotion. They
are collaborative partnerships between organizations to pursue common goal.
They transfer technology and share resources and knowledge.
11.2.3 Limitations of E-commerce

1. Limited exposure: Internet is used by a limited number of customers. It is mainly
used by upscale customers. Actual buying is also low.
2. Time consuming: Millions of websites create cluster and chaos. Browsing internet
can be time-consuming and frustrating. Consumer attention is short lived.
3. Security: Unauthorized purchases create security problems. Commercial spying
is possible.
4. Ethical concerns: Information abuse is an ethical concern. Privacy of users can be
invaded.
 E-commerce is growing explosively.
11.3 Strategic Alliances

Strategic alliance is a partnership tie-up agreement between two or more organizations to
jointly achieve mutually beneficial strategic objectives. Resources, capabilities and core
competencies are combined to pursue mutual interests. It can be to develop/manufacturer/
distribute products.
Strategic alliances involve:
a) Contractual agreements between firms for a limited lifespan to share resources and
knowledge. Their life is limited.
b) Equity investment is not involved. Ownership is not clear-cut.
c) Technology transfer is done. However, subsidiary is not established.
Strategic alliances are getting popular in service industries. Airlines and hotels are
leaders in such alliances. It is also used for product development.

11.3.1 Reasons for Forming Strategic Alliances

The reasons for forming strategic alliances can be:
a) Resource Exploitation: Alliances help to exploit current resources and competencies.
They also explore new possibilities to expand resources and competencies. Joint
management of resources is achieved.
b) Cost and Value: Alliances co-opt competitors and providers of complementary
products. This leads to cost reduction by using shared facilities. Customer
satisfaction increases through added value and increased availability of products.
Competition is avoided.
c) Co-specialization: Alliances allow each partner to specialize in their activities of
strengths. This is essential for product innovation. Productivity also increases.
d) New Market Access: Alliances provide access to new markets and new businesses.
Global companies can enter into alliances with local companies to take advantage
of market knowledge, distribution networks and customer support services.
e) Learning: Partners learn from each other. New competencies can be developed. e-
Commerce provides an example whereby expertise of one partner can be used to
develop web sites.
f) Risk Management: Alliances help manage financial, technological, and political
risks. They provide strategic advantage.
11.3.2 Forms of Strategic Alliances
Strategic alliances can take the following forms. They are: (Figure 11-4)
a) Ownership-based
i) Joint ventures
ii) Consortia
b) Contract-based
iii) Licensing arrangements
iv) Franchising
v) Subcontracting
c) Market-based
vi) Networks
vii) Opportunistic Alliances

a) Owner-based Strategic Alliances

They can be:
i) Joint Ventures: They are based on ownership sharing. They are formal
arrangements by two or more independent organizations to set up a jointly
owned new organization. The ownership can be in terms of shareholding or
agreements for profit sharing. They serve as channels for foreign direct
investment by multinationals.
 Joint ventures facilitate globalization of operations, networking, and risk
minimization. New technology can be introduced quickly.
Joint Venture
Ownership
based
Consortia
Licences
Strategic Contract
Franchise
Alliances based
Subcontract
Networks
Market
based
Opportunistic
Figure 11-4:Forms of Strategic Alliances
ii) Consortia: They involve two or more organizations in a joint venture

arrangement focused on a particular project. For example, Phulbari Hotel in
Pokhara is the result of consortia between various banks. It involves pooling
of resources and competencies. It facilitates joint bidding for projects.
b) Contract-based Strategic Alliances
They can be:
iii) Licensing: It is a contract which grants the right to manufacture a patented
product for a fee. It is common in science and technology-based industries.
iv) Franchising: It is a contract which grants the right to use a brand name for
specific activities in return for a royalty. The franchiser provides quality
assurance and training. Coca-cola is an example.
v) Subcontracting: It is subcontracting particular part of a process or service to
outside suppliers. It is outsourcing.

c) Market-based Strategic Alliances

They can be:
vi) Networks: They are arrangements whereby two or more organizations
collaborate without formal relationships. It is based on mutual advantage
and trust. It is popular in airlines industry.
vii) Opportunistic Alliances: They are based on loose arrange-ments. They focus
on particular projects. They indicate market relation-ships.'
11.3.3 Scope of Strategic Alliances

Alliances can be between potential competitors or between buyers and sellers. Their
scope can be:
1. Buyer-Seller Alliance: It can be reduce lead time for delivery, help in R & D activities,
manage inventory, and build joint information systems. IT has facilitated it.
2. Alliance to increase buying power: This facilitates coordinated buying power.
3. Alliance to build barriers to entry: R & D and market collaboration to avoid threat
of substitute products.
4. Alliance to gain entry: Geographical expansion becomes possible in new markets.
5. Alliance to share work: It is co-production with clients. E-commerce has facilitated
it. Self-service is an example.
11.3.4 Requirements for Successful Strategic Alliances

It is not easy to make alliances work. The factors that contribute to successful
management of alliances are:
a) Trust: Trust is the most important factor. It can be competency-based or character-
based. Climate of trust should be created.
b) Top management Support: Top managers of alliances should provide support to
build and sustain relationships. They should effectively manage friction and
conflicts among allies.
c) Performance Expectations: They should be clearly stated and communicated to
members of alliance. They should be based on clear objectives. The gains should
be specified.
d) Organizational Arrangements: They should be clear in terms of structure, authority,
responsibilities and accountabilities of partners in the alliance. People aspect
should be carefully considered.
e) Compatibility: This is essential at operational levels to achieve strong interpersonal
relationships.
f) Evolution and Change: The alliance should be an evolutionary process. Changes
and needed adjustments should be made in the alliance as needed.

1. What is relationship marketing? Describe customer development process in relationship
marketing.
2. Describe strategies for relationship marketing.
3. What is e-commerce? Describe its features.
4. Discuss the impact of e-commerce on marketing.
5. What is strategic alliance? State reasons for forming strategic alliances.
6. Explain various forms of strategic alliances.
7. Describe the factors that contribute to success of strategic alliances.
ICAN Questions
1. What is relationship marketing? How can relationship be retained with the customers?
Explain.(June 2009)
2. Briefly explain relationship marketing.(Dec. 2009)
3. Briefly explain B2B vs. B2C buying behavior.(Dec. 2009)
4. Briefly explain E-commerce. (Dec.2010)
5. Briefly explain E-marketing. (June 2010)
6. Write a note on usefulness of Relationship Marketing. (June,2012)

CHAPTER - 12
MARKETING CASE STUDIES
12.1 How to analyze a Marketing Case Study

A case study is a method for teaching and learning. It describes an organization's situation
at a point in time. It describes external and internal environmental forces. It raises issues
about mission, objectives and strategies. It describes the problems.
The following steps should be followed to analyze the marketing case study :
1. Read the case carefully: Determine the main points of the case. It may not provide all the
information. Carry out library and internet search. This should be for the decision date
of the case.
2. Identify the Problem: Every case is problem-based. Define the main problem clearly. Do
not confuse symptoms with the causes.
 Make reasonable assumptions about unknowns. But state them clearly.
3. Analyze the Case: Analyze the problem clearly and systematically. Understand all the
causes of the problem.
 Develop a mindset of what, why, when, how, where, who.
 Use appropriate analytical tools for analysis. They can be ratio analysis for analysis
of financial statements. Compare with industry averages.
4. Examine Relevant Alternatives: Most problems have a number of alternatives for
solution. Present the advantages and disadvantages of relevant alternatives. It can be
in terms of profitability, productivity, costs, market and others.
5. Recommend Strategies: Select a course of action in terms of strategy. There is no one
best solution to a case. It varies according to situation, time, place and people. Give
justification for your recommendation, reasons for selecting, and their implications. Be
realistic.
6. Consider implementation aspects of strategy recommended. Draw up a plan of action.
7. Presentation of Case:
 Use Charts, tables, diagrams, graphs, pictures and information technology to make
presentation about the case.
 Be creative and innovative.
 Develop cooperative spirit in group work.

 Most cases are handled by groups in the classroom situation. Be a team player.
 Work hard. Be a good listener and contributor.
12.2 Case Studies

12.2.1 Case Study: Evolution of Marketing Concepts
Everest Bakery
Ang Didi Sherpa and her husband migrated to Kathmandu from Solukhumbu twenty years
ago. Her husband works for a travel and trekking agency. She is 50 years old and has one
son and one daughter. The children are married. The son is working in USA.
Ang Didi is an excellent cook. She had successfully completed a one month training in
pastry making offered by Hotel Management Training Centre. Pastries baked by her are
delicious. However, she felt lonely and bored staying at home alone. She decided to put her
talents to use. She rented a small shop in front of Shaker Dev Campus in Putali Sadak. She
bought the necessary equipment for kitchen and shop with a cash outlay of Rs. 600,000. She
also spent Rs. 100,000 for furniture and furnishings. Half the amount of total outlay was a
loan from the Bank. She decided to call her shop "Everest Bakery".
The business has been operating for the last twelve months. Sales are slowly increasing.
The major customers are campus students who drop in for a pastry and coffee. Occasionally
professors come by with their friends for a chat over a pastry and cup of tea. Shopkeepers
and offices in the nearby area are also her regular clients who send orders for home delivery.
Households also purchase pastries over the counter. Cutomers are satisfied with the service.
But students frequently ask for Momo, Burger and Chau-chau dishes.
The business is growing rapidly. She has added new product items Momo, Burger and
Chau-Chau on the menu. The students seem very happy to visit her bakery. Order from
shopkeepers have been increasing for these items. One afternoon, she heard a group of
students talking about the marketing mix while drinking coffee in her bakery. She became
curious.
Answer the following questions:
1. What is her market?
2. What are the components of the marketing mix of the Everest Bakery?
3. What changes should be made in the marketing mix to satisfy the needs of target
market?
12.2.2 Case Study: Environmental Context of Marketing

National Medicare Hospital
The vision of National Medicare Hospital is to become a superior hospital with 300 beds by
the end of 2010 A.D.
In the private sector, Kathmandu valley alone has about 4 dozen private hospitals and
nursing homes. Their beds total about 1000.

Chapter 12 - Marketing Case Studies
The private sector initiative in the health care delivery has been a welcome step for those
who have capacity to pay and desire quality service. The government policy also encourages
private initiative in the delivery of health care service.
National Medicare Hospital has been operating at Chabel in Kathmandu for the last 15
years. In 1996, it was registered as a public limited company. The growth in patients is 10
percent per year. The hospital has 50 beds and the occupancy rate average 75 percent.
The hospital is renowned for heart treatment, dialysis of kidney and urological treatment.
It's family health care scheme is getting popular whereby members pay monthly lump-sum
to avail of health services for the family.
The product mix of National Medicare Hospital consists of:
 Cardiology (Heart)
 Nephrology (Kidney)
 Pulmonology (Blood)
 Paediatics (Child)
 Dermatology (Skin)
 Orthopaedics (Bone)
 Urology (Urine)
 General Surgery
 Ear, Nose, Throat (ENT)
 Opthalmology (Eye)
 Gynaecology (Women)
 Pathology (Women)
 Diagnostic Facilities (ECG, Echo, Treadmill Test, Ultra Sonogram, Endoscopy, X-Ray,
Audiogram, etc.)
The hospital lacks CT scanning facilities. The price charged is similar to those charged by
its competitors.
The satisfied customers through word or mouth have served as the key tool for promotion.
The hospital also organizes free medical camps which serve as publicity tool. Brochures are
distributed to persons visiting the hospital.
Questions
1. Identify the marketing environment of National Medicare Hospital.
2. Identify the marketing problems of National Medicare Hospital and give suggestions
for solving them.

12.2.3 Case Study: Market Segmentation and Targeting

Maharjan Furniture
Bekha Lal is a trained carpenter. He owns a shop called Maharjan Furnitures. It is
located in his own house in Gyaneswor. He himself works hard together with five
assistants. His customer base is growing. The catchment area consists of about 100,000
population. His key customers are new homebuilders, old home renovators, marriage-
based customers, commercial houses, boarding schools, colleges and private nursing
homes. He is confused about the amount of attention he should give to various
customers.
Questions
a) Which variables should be used by Bekha Lal to segment his market?
b) Which target market should be chosen and why?
Machan Wildlife Resort

Tourism is an important industry for Nepal. The eye catching scenic beauty, ethnic and
cultural diversity and rich flora and fauna have made Nepal a popular destination for
tourists. Their number is increasing.
Nepal has about one dozen national parks and wildlife reserves. They attract
environmentally sensitive tourists interested in flora, fauna and wildlife adventure.
The Royal Chitwan National Park is the most well known among Nepal's wildlife reserves.
The number of tourists visiting Royal Chitwan National Park is about 40,000. It is declining.
Many wildlife resorts have been established by the private sector both inside and outside
the Royal Chitwan National Park. Altogether there are seven wildlife resorts inside the
National Park. The number of resorts outside the park is in hundreds.
Machan Wildlife Resort has not differentiated its product. Market positioning also has not
been done. All the wildlife resorts provide almost the same type of services. The products of
Machan Wildlife Resort are at the growth stage in the product life cycle.
Wildlife resort business in Nepal is highly competitive. Machan Wildlife Resort has set its
price in line with the price charged by similar lodges.
The travel agencies in Kathmandu and Pokhara serve as the main channel for booking of
rooms. Machan also directly contacts customers through E-mail and fax.
Machan uses glossy travel magazines to advertise its services. Word of mouth promotion by
satisfied customers has also been an important tool of promotion. It also offers off season
summer packages at 50 percent reduced prices from May to September.

Customer Analysis
Machan Wildlife resort has targeted foreign tourists that visit Nepal for pleasure and
adventure. Indians represent about 30 percent of total tourists in Nepal, but they remain
neglected. Nepalese tourists also account for about 30 percent of visitors in the National
Park but the resort has not given attention to attract them for night stay.
Questions
1. What variables should be used for segmenting the market by Machan Wildlife Resort?
2. What is the target market of Machan Wildlife Resort?
Maiya Devi Bakery

Maiya devi is a trained cook. Pastries baked by her are delicious. She owns Everest Bakery
Shop which is located in Putali Sadak of Kathmandu. The shop is rented. She has invested
Rs. 10,00,000 for equipments and furniture. Sales are increasing steadily. The main customers
are students and teachers who drop in for a cup of coffee and pastry. Commercial outlets in
the area are also her regular customers. Householders also visit her shop to take home
pastries. Recently, students have been asking her to add new items, especially momo, chau-
chau and burger in the menu. Maiya Devi is confused.
Questions:
a) Identify the target customers of Everest Bakery.
b) Identify new segments as target customers.
12.2.4 Case Study: Marketing Information System

Surya Nepal Private Limited
Marketing environment in Nepal has been witnessing radical changes.
The Nepalese market has become highly competitive due to open door for international
companies through foreign investment policy. To remain competitive, the Nepalese
manufacturers use different components of Marketing Information System (MKIS). Surya
Nepal Pvt. Ltd. (SNPL), the largest private sector cigarette manufacturer has vigorously
used MKIS to sustain even in critical situation.,
SNPL basically uses managerial personnel and supervisors to obtain marketing information.
Besides, the company uses the internet for data bank and model bank information. It collects
primary data conducting survey and secondary data from different publications. It stores
collected data and information in computers and uses and/or reuses whenever needed for
making decisions.
The company has al so maintained the following:
 The received information are forwarded to the top level, operative level and/or lower
level depending upon the nature of the problem.

 It has the practice of preparing five copies of order-to-payment cycle and sales reports
and sending one copy each to accounting, administrative, marketing, production
departments and to the tax office.
 It mostly focuses on product research, advertising research, sales research and consumer
attitude research.
Questions:
a) What made SNPL to use MKIS with equipment and procedure?
b) What evidences are there in the case to justify that SNPL uses internal reporting system
and Decision Support System?
12.2.5 Case Study: Buyer Behavior Analysis

1. Smart Corporation
The marketing manager of Smart Corporation was wondering about the marketing strategy
for a new brand of air-conditioner that his company was shortly going to introduce. The
model of the air-conditioner, he knew, had been tested successfully for its technical qualities
and service. He felt that he did not know enough about the prospective buyers of air-
conditioners.
A research group was asked to submit their findings and recommendations.
Findings of the study

1. Need Initiator: It was found that 44 percent felt the need for an air-conditioner by
themselves and 36 percent said that the need was initiated by family members.
2. Need Influencer: It was observed that 76 percent of the respondents purchased air-
conditioners due to atmospheric conditions i.e., heat etc.
3. Awareness: Newspaper advertisement was considered in top priority followed by
television, magazines and hoardings.
4. Source and Type of Information: 39 percent of the respondents collected information
from users.
5. Product Attributes: It was observed that the most important attribute of an air-
conditioner is durability followed by service delivered by the air-conditioner and the
capacity.
6. Purchase Influencer: The purchase transaction was finalized mostly by the head of the
house, and among the fmily members, by the wife.
7. Market Segmentation: It was observed that higher income groups possessed more
number of air-conditioners.

8. Time taken for Buying Process: Two distinct groups were identified. One group purchased
air-conditioner in shorter duration (less than 6 months) and the other took as much as
two or more years.
9. Post purchase experience: It was found out that experience with regard to performance,
electricity consumption and repair service determined the extent to which users were
satisfied.
The Marketing Managers Dilemma

The marketing manager was trying to interpret the findings. He felt that while the
research study had thrown up a lot of useful information, he was not sure how he
could use this understanding of buyer behavior.
Questions
a) Identify the elements of buyer behavior in the above case.
b) Based on buyer behavior information, which buyers should be targeted.
2. Buyer Behavior in Nepal

Marketing is growing fast in Nepal. But buyer behavior has remained a dark area of
marketing. Very little research has been done on this aspect. Consumer behavior is
ignored while designing marketing mix. Very little is known about buyer behavior at
various stages of consumer buying process. The post purchase stage is forgotten. This
has created serious environmental problems of product disposal. Psychological and
social factors have been neglected for marketing purposes. Competition is increasing
from global companies.
Questions:
a) Identify the major problems of marketing in Nepal including their causes.
b) Suggest solutions to solve the problems.
12.2.6 Case Study: Product Decisions

1. Quick Solutions Company
Deepshikha Malla teaches computer at a private business college. She has a M.E. degree in
computer engineering from the Asian Institute of Technology. Santi Shakya is her friend.
She is working as a computer technician at Nepal Telecommunications Corporation. Both
of them feel frustrated in their jobs. They decided to start computer business called "Quick
Solutions Computer Company".

Shanti left her job and has been working full-time. Deepshikha devotes 20 hours a week in
the business. They provide high quality products and services consisting of:
 Computerized accounting software programme for banks
 Computer programmes as per client needs
 Computer training
 Computer consulting
 Service of hardware
The business has been in operation of three years. Sales are increasing and orders are
coming in steadily. The accounting software programme developed by them has been
popular with the banks. The competition has been stiff for computer training. Word
processing business is poor.
Deepshikha and Santi think that adjustments are needed in their product mix. They also
feel that some new products should be added.
They have asked your help to find answers to the following questions:
1. What is the product mix of the company?
2. What adjustments should be made in the product mix?
3. Should the company brand its products?
4. What new products can be offered by the company?
2. Monte Carlo in Nepal

Monte Carlo is a famous Italian brand. It is known for quality products. It started operations
in Nepal in 2007 through one dozen exclusive stores in Kathmandu. It has wide range of
new design products for men, women and children consisting of sweaters, pullovers,
thermals, shirts and pants in wool, silk, cotton and jeans. It is engaged in aggressive
promotion through TV, FM radio, print media and hoarding boards. It provides free services
for home delivery and alteration. Internet marketing is also used. The price is competitive
with similar brands. But it offers 30% discount and two for the price of one deal twice a year.
However, it is facing tough competition from competing brands.
Questions
1. Identify the marketing mix of Monte Carlo?
2. What actions should Monte Carlo take to face competition?

3. Dabur Nepal
Beauty products are getting important in Nepalese marketing. Dabur Nepal started its
operations in Nepal in 1992. It has new technology, highly trained staff and modern
manufacturing process. It has modern greenhouse facility in Banepa of Kavre for medicinal
plants. Vatika is its leading brand of herbal beauty products in Nepal. Its hair and skin care
products include vatika hair oil, shampoo, fairness facepack and soap. The market for
Vatika products is growing. It caters to two million customers through 20,000 outlets
throughout Nepal. Dabur Nepal is continuously modifying and improving its products.
The colour of Vatika hair oil bottle was changed from blue to green. The shampoo was
launched in a flip-open style bottle and contains henna, almond and shikakai. The recently
launched anti-dandruff shampoo is a big success. Dabur is thinking to diversify into new
products. Competition is increasing from big produces of beauty products, especially
Unilever Nepal Limited.
Questions:
a) Discuss the product mix strategy of Dabur Nepal.
b) What problems are being faced by Dabur Nepal and what action should it take to solve
the problems?
12.2.7 Case Study: Price Decisions

1. Angora Sweaters
Women in Development, an NGO, has promoted angora farming in Jomsom. The following
information is available about producing hand made sweaters from Angora Wool in Jomsom:
1. Four sweaters are produced in 1 kg. of Yarn, which costs Rs. 1500.
2. Carding costs Rs. 160 per kg. The loss in carding is 10%.
3. Spinning costs Rs. 100 per person per day. One person can spin 100 grams yarn per
day. The loss in spinning is 11%.
4. One person can make one sweater in two days at Rs. 75 per day.
5. One sweater weights 200 grams. The cost of air transport from Jomsom to Kathmandu
is Rs. 50 per kg.
Provide answers to the following
1. If the pricing policy was to mark up 20% on total cost, what should be the selling price
in Kathmandu ?
2. If the total annual fixed cost was Rs. 15,500, what is the break-even point in units ?
Assume selling price calculated in (1) above.

2. Majestic Tile
Majestic Tile Company started operations in 2002. It is located in Kathmandu. It produces
mosaic tile which is suitable for indoor uses. It also produces industrial tile which is suitable
for heavy duty industrial flooring. The most popular product is skid tile which is suitable
for outdoor floorings, especially pavements and narrow streets. It is used by municipalities,
hotels, households and others.
The cost of producing one skid tile is
 Rs. 12 for raw materials
 Rs. 6 for labour
 Rs. 2 for direct expenses
The selling price per skid tile is Rs. 25. The fixed cost related to skid tile is Rs. 1,040,000 per
annum.
Questions:
a) Calculate the break-even point for skid tile. What will be the break-even point if the
selling price is raised by Rs. 2 per tile?
b) Suggest alternative pricing strategies for skid tile. Which alternative should the company
choose?
3. Konka Television
In a market place like Nepal, quality and price consciousness coupled with easy availability
of cheap products have put immense pressure on premium category of products. Increasing
consumer affluence and availability of easy finance schemes have been boosting the
consumer electronics' market in Nepal by about 20 percent annually. The business is worth
over Rs. 4 billion and is growing.
Home appliances business has gone from strength to strength because of the drastic fall in
prices, new taste of consumers, and new life style, However, increased availability of grey
products across the country has hampered quality products' market.
Sanjiv Jha sells Konka products imported from China. According to him consumers are
looking for low priced products but not low-grade products. In the TV market Konka is the
best selling brand. he claims Konka has a market share of at least 20 percent. The total
market size of television in Nepal is estimated around 1,50,000 per year. Increased
purchasing power, brand awareness, and tumbling prices have helped change consumer
preferences. Although there are more than 40 brands of TVs sold in the market consumers
recognize only a few brands such as Sony, LG, Samsung, Philips, Konka, and Changong.
Distributors in general feel that the current 40% custom duty and 13% VAT has to be lowered
to expand the market size. The major demand for TV is coming from the newly electrified
villages and small towns.

Questions
1. Identify the factors that have contributed to the expansion of the electronics product's
market in Nepal.
2. Identify the factors that have influenced the pricing of TV sets in Nepal.
3. If you have to introduce a high-price, high-quality TV set in the Nepalese market how
would you formulate your pricing strategy?
12.2.8 Case Study: Place Decisions (Distribution)

1. Mero Mobile
Mero Mobile, Nepal's major communication brand, has a different story to tell. The brand's
effective and aggressive marketing and branding strategies have shot its growth to
remarkable heights since its inception only a little over two years back.
Under the main investment of Kazakistan-based Visor Group and some Nepali investors,
Mero Mobile boasts of using sophisticated and up-to-the-mark equipments by Siemens, a
German-based company.
The brand, providing both pre-paid and post-paid services, was the first in Nepal to introduce
mobile internet facility. On the networking front too, they promise to being grounded well.
One major thing that Mero Mobile is noted for is its aggressive marketing. Mero Mobile has
already garnered more than 8,00,000 users. Apart from the various attractive schemes and
easy availability of its sim cards, they have also publicised themselves in the market through
loads of advertisement, in electronic, print and outdoor media. Besides, it also organises
musical events to promote Nepali artists and strengthen its branding.
The company also provides call centre services to its customers from six in the morning to
12 at night throughout the week.
The company's immediate plans are to expand its network all over Nepal by starting out
coverage from the main cities and spreading in surrounding areas. It has plan to have its own
customer care centers for better service in the place of distributors in the coming days.
Questions:
1. Explain the marketing concept adopted by Mero Mobile.
2. Identify the distribution strategies pursued by Mero Mobile.
3. Identify the new customer segments for Mero Mobile.
4. How can Mero Mobile strengthen its distribution?

2. Bhat Bhateni Super Market

The most popular name when it comes to shopping malls in Nepal has been that of Bhat-
Bhateni Supermarket. Min Bahadur Gurung gets all the credit for bringing us an international
standard one-stop shopping centre.
The brand name

Bhat-Bhateni Supermarket and Departmental Store has now become a brand of its own
with an excellent reputation.
Of quality and variety

Bhat-Bhateni Supermarket now proudly occupies four floors with a wide range of products
and services. In the main building, the ground floor has grocery items, cosmetics and toiletries
while the first floor has kitchenware and electronics. The second floor flaunts some exclusive
readymade garments for men, women and kids whereas the third floor has an assortment of
sarees, shoes, luggages and blankets.
"We import most of our stuff, while the rest is taken from other importers, agents and
wholesalers. We make sure that every single product in our store is of optimum quality and
has the best price," claimed Gurung.
Spreading the buzz

"Our mantra is Customer is God' and our basic marketing strategy is customer satisfaction.
Bhat-Bhateni Supermarket has done a lot in all kinds of media.
It gives discounts and schemes time and again to keep our customers happy and satisfied.
Bhat-Bhateni Supermarket caters to customers from all segments of society, be it expatriates,
locals and tourists and believes in giving the best customer service possible.
And there is more to come

Gurung has a new branch in Maharajgunj, which has escalators and a bigger parking
space with more than 100,000 square feet area.
Questions:
1. Describe the product mix of Bhat-Bhateni for retailing purposes.
2. What factors were responsible for successful of Bhat-Bhateni?
3. What are the strengths of Bhat-Bhateni in retailing?
4. What future course should Mr. Gurung take for Bhat-Bhateni?

12.2.9 Case Study: Promotion Decisions

1. Ruslan Vodka
Ruslan Vodka is produced by Jawalakhel Distillery. It has 80% market share in Nepal.
It comes in three sizes: 180 ml, 375 ml, 750 ml. Romanov Vodka and Mirnov Vodka are
the two main competitors of Ruslan Vodka. The price of all brands of Vodka is
comparable.
Mirnov Vodka has launched a sales promotion campaign in the market in the form of a
questionnaire. Contestants giving right answers can win various prizes including Rs.
100,000 first prize. This campaign has been a success. Ruslan's market share has gone
down to 70%.
Questions:
a) What are the main problems in the above case and what caused the problems?
b) Design an attractive sales promotion campaign for Ruslan Vodka.
2. Himalayan Herbal Tea

Himalayan is a herbal tea produced in Nepal. Its target market is foreign tourists and
health conscious local people. It is served in selected hotels and restaurants. It comes in
various flavors, such as basil, mint, clove, jasmine, lemon grass, cardamom etc. It is
regarded as a health drink. The price per packet of 150 gm is Rs. 60 for Nepalese market
and US$ 2 for export. It is available in selected shops. No promotion has been done for
this tea.
In recent years, three new companies are providing competition to Himalayan Herbal Tea.
They have lower price of Rs. 50 per packet. They are easily available in provision shops.
They have launched aggressive sales promotion campaign through newspapers, radio and
television. The most popular is buy 2 and get 1 free. The sales of Himalayan tea have gone
down. Exports have also declined.
Questions
a) What are the main problems in the above case and why they arose?
b) Suggest marketing strategies for Himalayan Herbal tea to gain its number one position
in the market.

12.2.10 Case Study: Emerging Concepts in Marketing

Muncha.com
A regular department store under the name of Moti Man Ratna Man opened at Ason almost
80 years ago.
From supplying rovisions to business organizations to retailing, wholesaling, this store did
it all. Then in the 1930's, the store moved to New Road and got its name Muncha House.
Seeing the store's popularity and customers' trust in the name, Amrit Tuladhar, third
generation running the family business, came up with the brilliant idea of providing the
same quality service to Nepalis living all round the world.
Starting out as www.munchahouse.com, it made the previously impossible way of shopping
online accessible and glamorous to Nepalis in and outside Nepal. Over time,
munchahouse.com changed to 'muncha.com'.
Muncha.com has made sending gifts easier for those Nepalis residing outside Nepal.
There are lots of options on the site where one can choose gift items, flowers, cards and
also pets.
Muncha.com introduced their photo ite in 2002. This site enables the customers to download
their pictures on the site. If anyone wants a copy of the photo, then they can contact
muncha.com, which will not only develop the photographs, but the customers can even
choose the size, type and framing.
Three years ago, they also introduced the money transferring service, which enables Nepalis
in the US, the UK and Canada to directly transfer money to their families in Nepal at a
reasonable charge. Being a trusted name, muncha.com does not compromise on the quality
of products they provide.
With their sole motive of providing more new services, muncha.com will be launching a
second hand shopping 'bazaar.muncha.com' in couple of months. The idea behing this is to
promjote more of the local mrket of muncha.com.
The best advertisement vehicle for Muncha House so far has been the word of mouth.
However, they have a mailing list, and hoardings and banners have been put up at different
places.
After bazaar.muncha.com, they are planning to come up with song and video download
facility.
Questions:
1. Describe the product mix of Muncha House.
2. How can muncha.com improve its distribution aspects?

12.2.11 Case Study: Market Expansion Potentiality

ABC Shoes Company
An ABC shoes manufacturing Company decided to expand its business in an island. The
CEO of the company sent his Assistant to the island to observe and analyze the market
situation and report back to him whether there is potentiality of market expansion or not.
The Assistant visited the island, analyzed the market situation and reported back to his
Boss “there is no market potentiality because nobody in the island wears the shoes.”
The CEO not being very much pleased with this report decided to send his Marketing
Manager to the island for the same purpose. This time Marketing Manager visited the
island and observed the market sitation minutely and reported to the CEO “there is plenty
of market expansion potentiality in that island because no other competitors have ventured
in that island and our company can enjoy monopoly in shoes market in the island.”
Questions:
1. Whose report in your opinion is situation based and correct and why?
2. What would you do if you were the CEO of ABC Shoes Company?

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***

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CHARTERED ACCOUNTANCY PROFESSIONAL (CAP) - II

© The Institute of Chartered Accountants of Nepal

All rights reserved. No part of this publication may be translated,

Price : Rs. 350/-

First Edition : March, 2011

Second Edition : June, 2014

Third Edition : June, 2019

Designed & Printed at:

SECTION A: BUSINESS COMMUNICATION

Level of Knowledge : Working

Meaning of Marketing and Marketing Mix

Evolution of Marketing Concepts

Environmental Context of Marketing

Market Information System

SECTION A : BUSINESS COMMUNICATION

Chapter 1 - Introduction: Communicating at Work 1

Chapter 2 - Working in Groups 36

Chapter 3 - Communicating Across Culture 56

Chapter 4 - Employment Communication - 84

Chapter 2 - Evolution of Marketing Concepts 127

Chapter 3 - Meaning of Marketing Environment 137

The Institute of Chartered Accountants of Nepal 1

Other factors, considered important in the business communication context, include:

Concepts of Effective Communication

2 The Institute of Chartered Accountants of Nepal

The Institute of Chartered Accountants of Nepal 3

4 The Institute of Chartered Accountants of Nepal

The Institute of Chartered Accountants of Nepal 5

Objectives of Business Communication

6 The Institute of Chartered Accountants of Nepal

1. Succeeding in the Workplace

The Institute of Chartered Accountants of Nepal 7

 Succeeding in New Work Places

Basic Concepts: Professional Achievements

Ascribed traits Achieved traits

Perceptions Psychology Temperamental Culture Ethics Class

8 The Institute of Chartered Accountants of Nepal

The Institute of Chartered Accountants of Nepal 9

iv) Encroachment of traditional values, religion and morality in the influence of

b) Flattened mgmt. hierarchies and team based mgmt:

10 The Institute of Chartered Accountants of Nepal

IV) Paranoiac effects in human psychology and paralyzed human status .

Organizational Communication/ Communication in the Workplace

The Institute of Chartered Accountants of Nepal 11

Organizational Communication Activities: Planned organizational communication activities

2. Examining Organizational Communication Process

12 The Institute of Chartered Accountants of Nepal

The Institute of Chartered Accountants of Nepal 13

14 The Institute of Chartered Accountants of Nepal

Process of Communication in detail

More about Encoding and Decoding in Communication:

The Institute of Chartered Accountants of Nepal 15

3. Overcoming Interpersonal Communication Barriers

Obstacles That Create Misunderstanding

16 The Institute of Chartered Accountants of Nepal

The Institute of Chartered Accountants of Nepal 17

Overcoming Communication Obstacles

Ways of Overcoming Communication Barriers