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Along with its advantages, globalization also results in some barriers which need to be addressed

in order to perform and meet the targets set. One of the many hurdles is difference of cultures

and how to cope with the differences in such a way that there is harmony among business units

performing internationally. Amongst many others discussed below, the most common barrier is

that of communication. Different languages automatically create challenging situations for

international companies. It is the responsibility of management to understand the differences in

cultures in order to develop strategies which are equally acceptable in different cultures.

Definition of culture in the context of an organisations and organisational behavior along with

components that shape a culture are discussed below followed by analysis of impact of culture
on international business.


The most basic definition of culture is the way we do things around here by Deal & Kennedy

(1982). Although the definition is self-explanatory, it needs expansion to cover the areas that

develop culture. Numerous different definitions of culture have surfaced in the past. Kroeber and

Kluckhohn managed to compile a list of more than one hundred and sixty definitions of culture

and that too in 1950s (Adler, 1997) great deal of research has gone into this subject since then
and many experts have researched and written heavily on culture.

Two different definitions of culture that have gained wide acceptance are quoted below:

Culture is the collective programming of the mind which distinguishes the members of one
group/ category of people from another. (Hofstede, 1994)

Culture is a fuzzy set of basic assumptions and values, orientations to life, beliefs, policies,

procedures and behavioral conventions that are shared by a group of people, and that influence
(but do not determine) each members behavior and his/her interpretations of the meaning of
other peoples behavior. (Spencer, 2008)

An important feature of culture is that it is learnt and not inherited. Culture lies somewhere

between individual personality and human nature because these two traits are unique for every

individual, the behavior in-between these two extremes is identical to groups as it is learned and

acquired through others. A culture is also shared i.e. it exists in groups and societies, beliefs of

an individuals can be classified as ideas but do not necessarily form part of the overall culture.
Collection of ideas however, if similar in nature, become constituents of a developing culture.

Organisational Culture:

Every organisation has its distinct culture; managers should ideally have good understanding of

organisational culture to develop meaningful strategies. According to Barney (1986)

organisations that give due consideration to culture are able to increase their efficiency and
competitive position.

According to Schein (1990), organisational culture is developed at three different levels, i.e.

observable artifacts, Values and Underlying assumptions. Observable artifacts mostly consist of

tangible and observable things like dress code, success stories, value statements, rituals and

ceremonies etc. Values can only be observed overtime in order to understand why certain things

are done in certain distinct ways. Underlying assumptions are the dos and donts that lie in

subconscious mind of individuals. Organisational culture is manifested through a combination of

these three features.

It should be noted that the visible aspects of a culture can have different meanings in different

cultures e.g. identical hand gestures could mean different meaning in different cultures. So the

visible part of the culture i.e. artifacts etc. can be understood if their interpretation is based on the
culture in which they exist.
Every culture undergoes gradual changes, this is known as cultural diffusion, and cultural values

which have proven beneficial are adopted and incorporated into different cultures through

intelligent selection. A fine example is that of Ouchi theory Z, which took the best features of

Japanese culture and American culture of management. International organisations also look to
adopt and unify culture so that there is less friction between different business units.

Analysis of impact of culture on international businesses is made in the following text in order

ascertain the level of cultural understanding manager should possess in order to perform

Impact of culture on international business:

A business cannot simply rely on its current method of conducting business when it decides to

take its business at international level. Every country has a set of different variables which can be

new for an offshore company e.g. rules and regulation, taxation, different currency, different
holiday periods etc. Most important consideration in this regards is the difference in culture.

In a study on international negotiations between organisations,Korobkin, R. (2000) maintains

that successful negotiations not only require technical proficiency i.e. communication technique,

but also needs to understand the context in which those negotiations are being done in order to
secure profitable contracts.

Business expansion into international territories can be either through internal growth or by

mergers and acquisitions. There can be a cultural mismatch In the case of internal growth and the

decision to set up a base in a new country from scratch because it takes time learn the culture and

adopt its traits. A merger or an acquisition of an already established company is more beneficial

method of growth internationally as the parent company can gradually learn the norms and

beliefs of the target company through the acquired unit which is being operated according to the
local cultural preferences. (Morosini, 1998)
Lee et al. (2011) studied the impact of culture in international organisations in the context of

expansion into newer regions with different prevailing cultures and concluded that it is vital for

any such organisation with the intention to move into new areas that the cultural differences are

understood and mapped in order to bridge the gap between business units performing in multiple

cultures. The study further proves that a multinational company with presence in many different

cultures will have a smaller cultural gap than an organisation which is operating in a few

different cultures; the reason of this abridged gap is the learning factor from working in different

cultures. The results of Lee et al. (2011) study are not similar to Morisini (1998) as it is shown in
the study that multinational organisations prefer to have new business establishments than
acquisitions or mergers.

There can be many similarities in two cultures along with the obvious differences. The levels of

similarities between cultures vary for different countries.According to international business

theory, multinational organisations try to expand into countries which have more similarities and

fewer differences in two cultures so that cultural mismatch can be avoided. (Bilkey & Tesar,

It is hard to make an outright assumption that expansion into territories with higher cultural

differences will adversely affect the performance. There is no conclusive evidence in this

regard.In fact some researches have shown positive performance as a result of moving into
countries with greater cultural differences. (Pothukuchi, et al., 2002)

Knowledge of organisational culture is vital for managers and should be considered in the

process of feedback, intrinsic and extrinsic rewards etc. E.g. the relation between level of pay

and job satisfaction is strong in the US but weak in Japan, so an international manager will find it
hard to motivate staff through increments in Japan. (Money & Graham, 1999)

There are a number of factors that differentiate small-business operations from large-business
operations, one of which is the implementation of a formal organizational structure. Organizational
structure is important for any growing company to provide guidance and clarity on specific human
resources issues, such as managerial authority. Small-business owners should begin thinking about
a formal structure early in the growth stage of their business.

Organizational structure provides guidance to all employees by laying out the official reporting
relationships that govern the workflow of the company. A formal outline of a company's structure
makes it easier to add new positions in the company, as well, providing a flexible and ready means
for growth.

Without a formal organizational structure, employees may find it difficult to know who they
officially report to in different situations, and it may become unclear exactly who has the final
responsibility for what. Organizational structure improves operational efficiency by providing
clarity to employees at all levels of a company. By paying mind to the organizational structure,
departments can work more like well-oiled machines, focusing time and energy on productive
tasks. A thoroughly outlined structure can also provide a roadmap for internal promotions,
allowing companies to create solid employee advancement tracks for entry-level workers.

Flat Organizational Structure

There are relatively few layers of management in what is termed a flat organizational structure. In
a flat structure, front-line employees are empowered to make a range of decisions on their own.
Information flows from the top down and from the bottom up in a flat structure, meaning
communication flows from top-level management to front-line employees and from front-line
employees back to top management.

Tall Organizational Structure

There are numerous layers of management in a tall organizational structure, and often inefficient
bureaucracies. In a tall structure, managers make most operational decisions, and authority must
be gained from several layers up before taking action. Information flows are generally one-way in
a tall structure from the top down.

It is common for small businesses to lack a solid organizational structure. All employees in startup
companies can be required to perform a range of tasks outside of their official job descriptions,
and a good number of employees in startups have generous leeway in making decisions. Aside
from that, all employees in a startup generally know who they report to, since it is usually a single
person or group the owner or partners. It is very important to have a formal organizational
structure in place before your company grows so large that your workforce becomes unwieldy.
Organizational structure is about definition and clarity. Think of structure as the skeleton
supporting the organization and giving it shape. Just as each bone in a skeleton has a function, so
does each branch and level of the organizational chart. The various departments and job roles that
make up an organizational structure are part of the plan to ensure the organization performs its
vital tasks and goals.

The organizational structure is a business' skeleton. Organizations are alive and breathing, so they
require something to give them shape and support their life functions. Organizational structures
help everyone involved in a company to clarify and understand everyone else's role and scope.
They help facilitate divisions of labor, efficiency and assist in avoiding conflicts and confusion. In
turn, businesses get more done with fewer glitches and less strife.

Chain of Command
Organizational structures, among many things, help establish who is in charge or what. They
dictate how many vice presidents, department heads, managers and project coordinators there are
and what they oversee. Good organizational charts illustrate who reports to whom so that everyone
has a clear idea of how they are held accountable. This helps employees know from whom to take
direction, where they fit in to the overall scope of an operation, and the scope and limitations of
their roles.

Everyone needs to understand their role in a company's operation to do their part well. If two
people perform unnecessarily overlapping tasks, the company is wasting labor resources. If no one
is handling a particular task because they don't think it's within their role, the company faces
another form of inefficiency. Structures help to define departments, jobs and roles around the tasks
and functions the company needs executed. As companies grow, downsize or business changes,
they should periodically review their structures to make sure the structures match their efficiency

Uniformity And Controls

Some lines of business, such as banking and manufacturing, require require tasks to be done
regularly and precisely. Typically, these business require and do not allow much if any variation
in how their employees perform their jobs because the requirements of the tasks are set. Therefore,
their organizational structures tend to be very vertical -- emphasizing limited scopes for employees
at the bottom and many layers of managerial oversight above them. Everyone has a very specific
role. Other organizations, such as advertising firms and innovative computer companies,
emphasize creativity and innovation in their businesses. They employ wide or horizontal structures
with many teams dedicated to different functions with more autonomy and less oversight. The
numerous departments may work on many different tasks and are charged with driving the
business. Therefore, there are fewer layers of management and the organizational chart appears
relatively horizontal.

Departments And Division Structures

Companies often have departments and teams structured vertically. An accounting department
may be one piece of a larger finance department. A vice president for finance or a chief financial
officer may oversee that accounting department along with other financial teams. Similarly
companies often create new lines of business or acquire businesses which run semi-
independently of other company divisions. For example, if a software company acquires a
smaller company which makes medical billing software, it may place the medical billing
software in a division of its own. Or the new parent company may place its acquisition in a
division with two other software lines under a vice president who oversees medical software
products. Either way, organizational structure helps make clear where teams and departments fit
into a company's overall operations.
Organizational structures aim to make sure an organization is achieving all its required and
desired functions and to make sure everyone understands his part. The goal is to make sure there
is someone for everything and not unnecessary overlapping or duplication of work. From time to
time, companies have to revisit their organizational structures to make sure they are still working
well. Particularly when companies experience growth or change, systems and therefore
structures must change. Small, startup companies often avoid formal organizational structures at
first, which allows them the ability to adapt quickly in early growth. However, as organizations
add staff and develop, confusion and tension can set in without the clarity of an organizational

I Invite you to download the PPt presetation about the present class.

The Marketing Department plays a vital role in promoting the business and mission of an
organization. It serves as the face of your company, coordinating and producing all materials
representing the business. It is the Marketing Department's job to reach out to prospects, customers,
investors and/or the community, and create an overarching image that represents your company in
a positive lightthat is, your brand.
Depending on your company, the duties of the Marketing Department may include one or more of
the following:

Defining and managing your brand. This involves defining who you are, what you stand
for, what you say about yourself, what you do and how your company acts. This, in turn, defines
the experience you want your customers and partners to have when they interact with you.

Conducting campaign management for marketing initiatives. Marketing proactively identifies

the products and services to focus on over the course of your sales cycle, and then produces
materials and communications that get the word out.

Producing marketing and promotional materials. Your marketing department should create the
materials that describe and promote your core products and/or services, and keep them up-to-date
as those products and services evolve.

Creating content providing search engine optimization for your website. Your website is often
the first (and possibly the only) place people go for information about you. Your marketing
department will be responsible for keeping Web content current, while also working to ensure
your site comes up quickly when someone searches for your type of business.

Monitoring and managing social media. Marketing should contribute to, manage and maintain
your social media pages and accounts and carefully watch whats being posted about you online.

Producing internal communications. Your employees need to understand your company, its
values, its goals and its priorities. Marketing is often responsible for employee communications
through a newsletter and/or intranet.

Serving as media liaison. When your company is cited in the media, a member of the marketing
department often acts as spokesperson for your company, or guides executives in how to respond
to media queries.

Conducting customer and market research. Research helps you define target markets and
opportunities accordingly, and also helps you understand how your products and services are

Overseeing outside vendors and agencies. Marketing is typically responsible for selecting and
managing the agencies and vendors who produce marketing materials and or/provide marketing
support. These may include ad agencies, print vendors, PR agencies or specialists, Web providers,

That interplay raises a key issue: where your Marketing Department fits in your companys
organizational structure. The higher up the organization, the more influence the department will
have on your companys strategic direction, the higher the internal (and perhaps external)
perception of it will be, and the more potentially effective it can be.

In most cases, a Marketing Department occupies one of two positions in the organizational

1. Directly below the CEO. In this position, Marketing is a core function of and significant
contributor to the company, helping to set and implement the strategic direction of the business.
The marketing leader has a seat at the boardroom conference table, and is integrally involved in
defining target markets, pricing strategies, and other strategic issues.

2. Below or within Sales. Under this structure, Marketing is positioned as a support function for
the Sales team and assumes a much more tactical role. This role typically entails developing
sales support materials such as product brochures and sell sheets, PowerPoint presentations, and
the like.

The structure and organizational position of your Marketing Department is an important

decision, because it will define how the department collaborates and coordinates with other
present and future company functions, such as Customer Service, Public/Media Relations,
Advertising and especially, Sales.

Strategy and the Business

Writing a business strategy is an essential aspect of starting and running a business. Without a
clear strategy, it is difficult to set meaningful goals and objectives. In determining your business
strategy, a logical analysis of the environment in which you operate will both inform and influence
the outcome. This analysis -- commonly called PESTLE, for political, economic, sociological,
technological, legal and environmental -- paves the way for identifying opportunities and threats,
and effective business planning.

Political factors include how regulations and policies imposed by your national or local
government might affect the way you conduct your business. For example, import and export
tariffs may make it difficult or uneconomical to do business with certain countries. At a local
government level, there may be restrictions on the kind of businesses permissible in certain
locations, while in certain sectors of the economy, lobbying may be more or less prevalent.


The strength and performance of the local, national and international economy can all impact a
business, presenting both opportunities and threats. Different types of taxation and other duties can
also hit your bottom line hard, so a deep understanding of the fiscal environment is essential in
order to prepare viable financial forecasts.


Sociological attitudes and profiles are constantly changing. Developing a demographic profile of
your consumer base will help you understand what motivates them. Keeping abreast of issues such
as gender bias, ethnic origin and religion, as well as being conscious of social norms and lifestyle
expectations, can help you with your marketing strategy.


The only thing permanent about technology is change. With advances in technology developing at
a seemingly unstoppable rate, keeping up-to-date with changes could help you develop a market
advantage in the face of competition. Technological change is most evident in how we
communicate, with smartphones and tablet computers becoming commonplace. As a business
owner, you should look at ways to harness technological potential to identify and service new and
emerging markets.


Businesses across the world operate in a web of legal obligations and restrictions. Some of these
relate to internal obligations such as those dealing with health and safety, while others have a wider
impact on matters as diverse as waste and environmental management, import and export
restrictions and or consumer protection laws. As part of your PESTLE analysis, you should
develop a broad knowledge of all legislation that impacts your business to minimize the risk of
non-compliance leading to litigation.

Environmental concerns have become important in recent years, with the wider impact of doing
business increasingly recognized by consumers as a factor in their buyer behavior. Responsible
business owners should look for ways to minimize the environmental impact of their operations.
For example, many businesses are looking for ways to lower the impact of their energy
consumption. The positive effect of a responsible environmental attitude is that it may attract new
customers who prefer to purchase more ethically derived products.

The Difference Between Corporate Strategy & Business Strategy

Business Strategy

The decisions a company makes on its way to creating, maintaining and using its competitive
advantages are business-level strategies. After evaluating the companys product line, target
market and competition, a small business owner can better identify where her competitive
advantage lies. A gourmet candy company, for example, might find that it cannot compete on
price; larger corporations often enjoy economies of scale that keep costs low. Instead, the small
business would choose a differentiation strategy, emphasizing freshness, quality ingredients or
some other attribute consumers will value highly enough to pay extra. Business strategy will affect
the small companys functional decisions such as the selection of its promotions and distribution

Corporate Strategy

When a business identifies opportunities outside its original industry, it might contemplate
diversification. When additional businesses become part of the company, the small business owner
must consider corporate-level strategy. To be effective, the umbrella company must contribute to
the efficiency, profitability and competitive advantage to each business unit. The gourmet candy
maker may decide to enter the dried-fruit business, for example. This corporate decision is sound
only if the parent company can extend and develop a competitive advantage say economy of
scope, integrated management or procurement over both businesses. For example, the owner
may determine that her mail-order candy distribution system is perfectly suited for the dried-fruit
business and that customer research indicates existing customers will purchase items from both
companies. Or she may be able to negotiate volume discounts for raisins, dried cranberries and
dried cherries she will use in both businesses.


Often the most important corporate strategy decisions are whether to diversify and if so, how? Any
new products or services must offer potentially lucrative returns, must not present unduly high cost
of entry and must give the company a strategic advantage. If a business in a new industry meets
these qualifications, the company may increase profits by executing a strategy to diversify.

Putting it Together

Corporate and business strategies work together and influence each other in an effort to make the
business units and the corporation successful. Small businesses engaged in a single industry
already have made the only corporate-level strategic decision they have which industry to join.
Small businesses contemplating diversification, on the other hand, face a raft of additional
corporate-strategy decisions, as well as business-level decisions for the new business unit, should
it decide to diversify. Our start-up candy makers corporate decision was to enter the confectionary
market. Her business decisions were based on how to compete, which in turn influence her
operational strategies concerning distribution, manufacturing, promotion, price etc.. When she
diversifies, the addition of another unit necessitates business-level decisions for the new unit. But
it may also require a rethinking of the original candy making operations business strategy.
Describing the industry

As a business owner, you must understand what is going on not just in your own business but also
in your entire industry. The factors that are hurting and helping other players in the industry will
also impact your business. While you probably can't control all of these external factors, you can
control how your business will respond to them. In fact, the way your business responds to them
might constitute part of its competitive advantage.

Potential financiers will want to see that you have a thorough understanding of how your industry
works and where your business fits in. They will also want to understand for themselves the
industry that they will be investing in (if they don't already) and be convinced that your business
will be a profitable addition to the industry. Thats why a good business plan contains research
into the business's industry, competitors and market to give the reader a complete understanding
of the competitive landscape. How do your firm's products or services fit into their industry, and
how do they interact with market conditions to create a profitable opportunity? Explain the
concrete reasons you expect your business to flourish, and lay out the steps you will take to achieve
your company's goals.

Even if you haven't yet done all the work necessary to prepare a formal industry analysis and sector
analysis, you have likely already gathered much of the information you need. It was probably an
observation or a series of observations about the conditions in your industry that made you decide
to open your business in the first place. You noticed a trend or an opportunity that you could exploit
to earn a profit. Now you just need to put that into writing and back it up with data.

The industry analysis is the first section of your plan where you can and should go into detail
instead of merely summarizing. Include the following information in your business plan's formal
industry analysis.

Defining Your Industry

The industry overview for your business plan, also called a market analysis, should define the
industry that your business belongs to, the major characteristics of that industry and its major
existing players. Where do their strengths and weaknesses lie? How will your business be able to
compete with their strengths and improve on their weaknesses?

A local foods business, for example, would be part of the grocery store and supermarket industry.
Based on your research from a reputable business data provider such as Hoovers, you would
explain how this industry is dominated by large companies such as Kroger and Safeway but how
smaller companies can compete by serving a local market effectively, offering unique products or
providing superior customer service.

Industry Overview

Explain what's going on in your industry as a whole. What does the industry life cycle look like?
Is the industry new, expanding or stable? Is it growing faster, slower or at the same pace as the
economy as a whole? If your company is affected by seasonal and/or cyclical changes, explain
how. For example, because all of your food will come from within a 100-mile radius, your business
will be strongly affected by seasonal changes in the availability of fruits and vegetables. How will
you attract customers in the winter when you dont have tomatoes for sale but Kroger does? List
the market leaders and define their market share. Also note any other important competitors in the
industry, such as startups to keep an eye on. Analyze the main products and services provided by
the other companies in your industry, and their major competitive advantages and disadvantages.

Make sure to go into detail. For example, when looking at what products and services are provided
by grocery stores, in addition to the obvious answer grocery stores sell the food people eat on a
daily basis you should note the specialty services offered by your competitors, such as freshly
prepared hot meals, grocery delivery, butchers, freshly brewed coffee, pharmacies, gift card sales,
lottery tickets, movie rentals, banking services and so on. When describing your major
competitors, you would include not just other grocery stores, but also mass merchandisers,
warehouse stores, and online stores that sell food.
What is 'Market Share'

Market share represents the percentage of an industry or market's total sales that is earned by a
particular company over a specified time period. Market share is calculated by taking the
company's sales over the period and dividing it by the total sales of the industry over the same
period. This metric is used to give a general idea of the size of a company in relation to its market
and its competitors.

BREAKING DOWN 'Market Share'

A company's market share is its portion of total sales in relation to the market it operates within.
For example, if a company sells $100 million worth of tractors a year domestically, and the total
tractors sold in the United States is $200 million, the company's US market share for tractors would
be 50%.

The Importance of Market Share

Investors look at market share increases and decreases carefully, because they can be a sign of the
relative competitiveness of the company's products or services. As the total market for a product
or service grows, a company that is maintaining its market share is growing revenues at the same
rate as the total market. A company that is growing its market share will be growing its revenues
faster than its competitors.

Market share increases can allow a company to achieve greater scale in its operations and improve
profitability. Companies are always looking to expand their share of the market, in addition to
trying to grow the size of the total market by appealing to larger demographics, lowering prices,
or using advertising.

The calculation for market share is usually done for specific countries, such as Canada-only market
share or US-only market share. Investors can obtain market share data from various independent
sources, such as trade groups and regulatory bodies, and often from the company itself. However,
some industries are harder to measure with accuracy than others.

An Example of Market Share

All multinational companies measure success based on the market share of specific markets. China
has been an important market for companies, since it is untapped and is growing. Apple, Inc., for
example, uses its market share numbers in China as a key performance indicator for the growth of
its business. However, the numbers were not good in the second quarter of 2016. Apple saw iPhone
sales in China dip to an 11% market share in May 2016. This decline in market share stemmed
from a 26% decrease in the company's revenue for the first quarter of 2016, the first time it's seen
a quarterly decline since 2003.

What is 'Strategic Financial Management '

Strategic financial management refers to specific planning of the usage and management of a
company's financial resources to attain its objectives as a business concern and return maximum
value to shareholders. Strategic financial management involves precisely defining a company's
business objectives, identifying and quantifying its resources, devising a plan for
utilizing finances and other resources to achieve its goals, and establishing procedures for
collecting and analyzing data, making financial decisions, and tracking and
analyzing variance between budgeted and actual results to identify problems and take appropriate
corrective actions.

BREAKING DOWN 'Strategic Financial Management '

The term "strategic" essentially refers to financial management that is focused on long-term

Financial management involves managing all of a company's assets and liabilities, including
monitoring operational financing items such as expenditures, revenues, accounts receivable and
accounts payable, cash flow, and profitability. Strategic financial management encompasses all
of the above, along with ongoing evaluation and planning to keep company focused and on
track to attain short-term and long-term goals with an overarching focus on maximizing the
company's profitability and value.

Part of strategic financial management may involve sacrificing or re-adjusting short-term goals
in to attain the company's long-term objectives more efficiently. For example, if a company
suffers a net loss for the year, then it may choose to reduce its asset base through facility closures
or staff reductions, thereby decreasing its necessary operating expenses. Taking such steps may
result in restructuring costs or other one-time items that negatively impact the company's
finances further in the short term, but they put the company in a better overall position to move
toward its long-term goals.

Elements of Strategic Financial Management

Strategic financial management is applied throughout a company's organizational operations and

involves elements designed to make the maximum efficient use of the company's financial
resources. Key elements of strategic financial management include budgeting, risk management,
and review and evaluation.

Careful budgeting of a company's financial resources and operating expenses is essential in

strategic financial planning. Budgeting helps a company function with general financial
efficiency, and it aids in identifying areas of the company that incur the largest amount of
operating costs or that regularly exceed budgeted cost. Budgeting includes ensuring sufficient
liquidity to cover day-to-day operating expenses without accessing outside financial resources.
Budgeting also addresses the question of how a company can invest earnings to achieve long-
term goals more effectively.
Strategic financial management also involves risk assessment and risk management, evaluating
the potential financial exposure a company incurs by making capital expenditures (CAPEX) or
by instituting certain workplace policies.

Since strategic financial management is all about maintaining focus on attaining a company's
long-term business goals, it necessarily includes developing and putting in place regular
procedures for review and evaluation of how well the company is doing in terms of staying on

Finance Vocabulary

1. amortization

reducing the value of an asset over a period of years

2. arbitrage

a hedged investment capturing slight differences in price

3. asset

a useful or valuable quality

4. bankruptcy

inability to discharge all your debts as they come due

5. bond

a certificate of debt issued by a government or corporation

6. boom

a state of economic prosperity

7. broker

a businessman who buys or sells for another

8. capital

assets available for use in the production of further assets

9. certificate of deposit

a debt instrument issued by a bank; usually pays interest

10. commodity

articles of commerce

11. cost of capital

the opportunity cost of the funds employed as the result of an investment decision; the rate of
return that a business could earn if it chose another investment with equivalent risk

12. cumulative

increasing by successive addition

13. debt

the state of owing something, especially money

Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

14. deficit

an excess of liabilities over assets

15. depreciation

decrease in value of an asset due to obsolescence or use

16. dividend

earnings of a corporation distributed to its shareholders

17. economy

the system of production and distribution and consumption

18. entrepreneur

someone who organizes a business venture

19. equity

the ownership interest of shareholders in a corporation

20. exchange traded fund

a mutual fund that is traded on a stock exchange

21. fiduciary

relating to or of the nature of a legal trust

22. fund

a reserve of money set aside for some purpose

23. growth stock

stock of a corporation that has had faster than average gains in earnings and is expected to
continue to

24. internal revenue

government revenue from domestic sources (excluding customs)

25. intrinsic

belonging to a thing by its very nature

26. invest

lay out money or resources in an enterprise

27. investor

someone who commits capital to gain financial returns

28. invoice

an itemized statement of money owed for goods or services

29. leverage

investing with borrowed money to amplify potential gains

30. liability

an obligation to pay money to another party

31. margin account

an account with a securities brokerage in which the broker extends credit

32. margin call

a demand by a broker that a customer deposit enough to bring his margin up to the minimum

33. money market

a market for short-term debt instruments

34. mortgage

a conveyance of property as security for repaying a loan

35. mutual fund

the pooled money that is invested in assets

36. paycheck

a check issued in payment of wages or salary

37. portfolio

a list of financial assets held by a person or institution

38. premium

the amount that something is valued above its nominal value

39. profit

gain money or materially

40. real estate

property consisting of houses and land

41. recession

a situation in which the state of the economy declines

42. return

the income or profit arising from such transactions as the sale of land or other property

43. revenue

the entire amount of income before any deductions are made

44. savings

a fund of money put by as a reserve

45. shareholder

someone who holds shares of stock in a corporation

46. stock

capital raised by a corporation through the issue of shares

47. trade

a particular instance of buying or selling

48. value

the quality that renders something desirable

49. vendor

someone who exchanges goods or services for money

50. volatility

the trait of being unpredictably irresolute



Advertising is one of the most visible forms of communication. It is often the most important part
of the communications mix, especially for consumer goods. Therefore, advertising budget
decisions are critical. Choosing the promotional budget can be a tough process, so study the
available methods carefully!

Every advertisement campaign involves advertising budget decisions. How much can it cost, and
how should the promotional budget be allocated across markets and over time? Several methods
for making proper advertising budget decisions exist. Remember: the advertising budget decisions
cannot be regarded in isolation. They have to be seen as one element of the overall marketing mix.
Approaches and Methods for Advertising Budget Decisions

Affordable Approach

The most basic approach to decide on the promotional budget is the affordable approach. It means
that advertising budget decisions are led by what the firm can afford. Thus, they are based on what
the company, or the marketing department, believe the firm can afford to spend on advertising.
Consequently, such advertising budget decisions are not based on any clear objective. Problems
result, since the firm may spend too little or too high amounts on advertising in relation to its true

Percentage of Sales Approach

Under the percentage of sales approach, the company will automatically allocate a fixed
percentage of sales to the advertising budget. Therefore, these advertising budget decisions link
the promotional budget directly to a measure of profit.

This method involves several advantages:

For firms selling in many countries, this simple method can guarantee equality among the markets.
Each market gets the advertising it deserves.
The promotional budget can be justified easily in budget meetings, as it is objective.
It guarantees that the company only spends on advertising as much as it can afford. The firm can
decide on the margin it can spend on advertising.

However, also some disadvantages exist:

The method uses historical performance rather than future performance to decide on the percentage
of sales allocated to advertising.
The possibility that extra spending on advertising may be necessary when sales are declining is
neglected. The sales trend can thus not be reversed by reboosting the product life cycle curve with
The firms marketing goals across countries (which may differ) are not taken into account.
Local management is encouraged to maximize sales by using the easiest and most flexible
marketing tool: the price. Lowering the price only to increase sales may be harmful.
The methods simplicity encourages management not to pay real attention to the relationships
between advertising and sales or the overall effectiveness of advertising campaigns.
This approach to advertising budget decisions is unsuitable for launching new products or entering
new markets (zero sales = zero advertising).
Competitive Parity Approach

The competitive parity approach involves an assessment of competitors promotional budgets. It

means estimating and duplicating the amounts spent on advertising by major rivals. However,
determining the marketing expenditures of competitors, especially of foreign-based competitors,
is rather difficult. Financial accounts may not be open to public inspection, and their promotional
activities are not always immediately obvious the moment they occur. Most important, however,
is the fact that blindly following competitors budgets means blindly trusting in their competence.
Competitors are not necessarily right!

In addition, the competitive parity approach to advertising budget decisions does not recognize
that the company is in different situations in different markets. If the firm is new to a market, its
relationships with customer are different from those of already existing and established
competitors. This difference should be reflected in the promotional budget.

Objective and Task Approach

The final (and maybe best) approach to advertising budget decisions is the objective and task
approach. The weaknesses of the above approaches for deciding on the promotional budget has
led many firms to follow this method. The objective and task approach involves determining the
advertising objectives first and then ascertaining the tasks needed to attain these objectives. This
method does therefore exactly meet the needs of the specific situation, time, product and market.

The objective and task approach also includes a cost-benefit analysis. In this analysis, objectives
are related to the costs of achieving them. Only when the total benefits are greater than the costs
of achieving them, the advertising budget decisions are right.

Of course, good knowledge of the local market is needed to use the objective and task approach
efficiently. Objectives should be established in the most precise manner possible, being
quantitative, measurable, realistic but challenging, understandable and justifiable, and congruent
among the firms markets, products and divisions.
Budget Vocabulary
Note: an Acronym Chart is located on the last page of this document
Accounting system: The total set of records and procedures which are used to record, classify
and report information on the financial status and operations of an entity.
2.Accrual basis of accounting: A basis of accounting in which debits and credits are recorded at
the time they are incurred as opposed to when cash is received or spent.
3. Activity: A specific unit of work or service performed within a division or department.
4.Ad valorem tax:A tax levied on the assessed value of real property. This tax is also known as
property tax.
5.Appropriation:An authorization made by the city council which permits expenditures of public
resources. Appropriations are usually made for fixed amountsand are typically granted for a one
-year period.
6.Appropriation ordinance:An ordinance through which appropriations are given legal effect.
7.Assessed valuation: The estimated value place on real and personal property by the chief
appraiser of the appra isal district as the basis for levying property taxes. All appraisal activity is
the responsibility of the county assessors office. The assessed value is calculated by multiplying
the appraised value of the property by the assessment ratio of that property.
8. Assessment ratio: Percent of fair market value of the property upon which the tax rate will be
9.Audit:A methodical examination of the use of resources. It concludes in a written report of the
auditors findings, and it is a test of management s accounting system to determine the extent to
which internal accounting controls are both available and being used. A financial audit is a
review of the accounting system and financial information to determine how government funds
were spent and whether expenditures complied with the legislative bodys appropriations.
10.Bond:A written promise to pay a specified sum of money, called the face value or principal
amount, at a specific date(s) in the future, called the maturity dates(s), together with periodic
interest at a specified rate. The difference between a note and a bond is that a bond runs for a
longer period of time and requires more legal formality. (See General obligation bonds and
Revenue bonds.)
11.Budget:A comprehensive financial plan of operation which incorporates an estimate of
proposed expenditures for a given period and the proposed means offinancing them.
12.Budget basis:Generally referred to as cash basis accounting. Cash basis accounting records
revenue when cash is received, and expenses when they are paid in cash
.13.Budget calendar:The schedule of key dates or milestones which the city followsin the
preparation and adoption of the budget.
14.Budget document: The official written statement prepared by the Finance Department which
represents the proposed city budget as presented to council for approval.
15.Budget message:A general discussion of the proposed budget presented in writing as a part of
the budget document. The budget message explains principal budgetissues against the
background of the present economy and financial experience inrecent years.
16.Budgetary control:The control or management of a governmental unit or enterprise in
accordance with an approved budget for the purpose of keeping expenditures within the
limitations of available appropriations and available revenues.
17.Capital equipment:Equipment with a minimum established value and an expected life of more
than one year.
18.Capital improvements:Physical assets that have an established mnimum construction or
purchase cost. Capital improvements typically involve streets, wter and wastewater systems,
and recreational facilities.
Coding: A system of numbering or otherwise designating accounts, entries, invoices, voucher s,
etc. in such a manner that the symbol used quickly reveals necessary information. Other uses of
coding occur in accounting journal entries and other types of audit information.
20.Current taxes:Taxes levied and becoming due within one year.
21.Debt:An obligation resulting from borrowed money or from the purchase of godos and/or
services. Debts of government include bonds and notes.
22.Debt limit:The maximum amount of general obligated debt which is legally permitted. The
State of South Carolina forbids cities from incurring debt in excess of eight percent of the total
assessed valuation of taxable property within the city with some exceptions.
23. Debt service: The payment of principal and interest on borrowed funds such as bonds.
24.Deficit:1) The excess of liabilities of a fund over its assets. 2) The excess of expenditures over
revenues during an accounting period. 3) In the case of proprietary funds, the excess of expenses
over income during an accounting period.
25.Delinquent taxes:Taxes that remain unpaid after the date they are due, includes penalties for
26.Department:A major administrative division of the city which manages an operation or group
of related operations within a functional area.
27.Depreciation: The decrease in value of physical assets due to use and passage of time.
28.Enterprise fund: A fund established to account for operations (a) that are financedand
operated in a manner similar to private business enterprises. It is the governing
bodys intent that the costs of providing goods and services to the general public on a continuing
bas is be financed or recovered primarily covered through user charges.
Examples are those for water, wastewater and electric utilities.
29. Expenditures: The amount of cash paid or to be paid for a service rendered, godos received
or an asset purchased.
30.Fisca l year: Any consecutive 12-month period designated as the budget year.
31.Fixed assets: Assets of long-term character which are intended to continue to be held or used,
such as land, buildings, machinery and furniture.
32.Fund: An accounting entity that has self - balancing accounts and that records all financial
transactions for specific activities or government functions.
33. Fund balance: The excess of an entitys assets over its liabilities.
34.Generally Accepted Accounting Principles: A body of accounting and financial reporting
standards set by the Governmental Accounting Standards Board for state and local governments
and by the Financial Accounting Standards Board for private sector organizations.
35.General fund: The fund used to account for all financial resources except those required to be
accounted for in another fund.
36.General obligation bonds:When the city pledges its full-faith and credit to the repayment of
the bonds it issues, those bonds are considered general obligation bonds. Sometimes the term is
used to refer to bonds which are repaid from taxes and other general revenue.
37.Governmental Accounting Standards Board:The authoritative accounting and financial
reporting standard-setting body for government entities.
38.Grant:A contribution by a government or other organization to support a particular function.
Grants may be classified as either categorical or block, depending upon the amount of discretion
allowed the grantee.
39.Interfund transfers:Amounts transferred from one fund to another.
40.Intergovernmental revenue:Revenue received from other governments, either local, state or
federal, usually in the form of grants, entitlements, shared revenues or payments in lieu of taxes.
41.Investment: Securities and real estate purchased and held for the production of income in the
form of interest, dividends, rentals or base payments.
42.Levy:To impose taxes, special assessments or service charges for the support of city
43.Long-term debt:Any unmatured debt that is not a fund liability because it is not currently due.
44.Mill:Property tax rate which is based on the valuation of property. A tax rate of one mill
produces one dollar of taxes on each $1,000 of property valuation.
45.Millage rate: The amount of tax applied to assessed value of property.
46. Modified accrual accounting:A basis of accounting in which expenditures are accrued but
revenues are accounted for on a cash basis. This accounting technique is a combination of cash
and accrual accounting because expenditures are immediately recorded as a liability while
revenues are not recorded until they are actually received or are measurable and available for
expenditure. Because this type of accounting basis is a conservative financial approach, it is
recommended as the standard for most governmental funds.
47. Operating budget: A budget for general expenditures such as salaries, utilities and supplies.
48.Performance measurement:A method of evaluation that uses measurable performance of
activities to determine achievement of goals.
49.Personal property: Motor vehicles, boats, airplanes, etc.
50.Property tax:Property taxes are levied on both real and personal property according to the
propertys assessed valuation and the tax rate applied.
Budget Vocabulary
51.Real property: Building and land property.
52.Reserve: An account used to indicate that a portion of a funds balance is legally restricted for
a specific purpose and is, therefore, not available for general appropriation.
53.Resources:Total dollars available for appropriations including estimated revenues, fund
transfers and beginning fund balances.
54.Revenue:Income generated by taxes, business licenses, user fees, fines and forfeitures,
reimbursements and investments.
55.Revenue bonds:When a government issues bonds which do not pledge the full faith and credit
of the jurisdiction, it issues limited liability revenue bonds.
Typically, pledges are made to dedicate one specific revenue source to repay these bonds.
Revenue bonds are not included in the eight percent general obligation debt
limit set by the State.
56.Special assessments: A compulsory levy made against certain properties to defray part or all
of the cost of a specific improvement or service deemed to primarily benefit those properties.
57.Special revenue fund: A fund used to account for the proceeds of specific revenue sources
that are legally restricted toexpenditures for specified purposes.
58.Shared revenues:Revenues received by the state government but shared on a predeter mined
basis, often in proportion to the amount collected at the local level.
For example, state shared revenue include taxes on income, alcoholic beverages and
motor transportation collected at the state level and returned to local governments.
59.Taxes:Compulsory charges levied by a government for the purpose of financing services
performed for the common benefit. This term does not include specific charges made against
particular persons or property for current or permanent
benefits such as special assess ments. Neither does the term include charges for services rendered
only to those paying such charges, such as sewer charges.
60. Unencumbered balance: An amount appropriated for a project or department that has not
been spent and has not been earmarked for a specific task.
Budget Vocabulary
Abbreviation and Acronym Chart
FASB Financial Accounting Standards Board
FYFiscal Year
GAAP Generally
Accepted Accounting Principles
GASB Governmental Accounting Standards Board
GOGeneral obligation bonds
Marketing Process and the Steps involved in Marketing Process

The marketing process is a process of analyzing the opportunities in the market, selection of the
target markets, and development of the Marketing Mix and management of the marketing efforts.
Below are the 4 marketing process steps that involved in targeting the right audience in the market.

Marketing Process Steps

1. Analysis of the opportunities in the market.

2. Selection of the target market.

3. Development of marketing mix.

4. Management of marketing efforts.

1. Analysis of the Opportunities in the Market

The first component of the Marketing Process is to analyze the market in order to find the
opportunities that should be availed. These opportunities are related to the needs and wants of the
customers that are not properly satisfied by the competitors in the market. A company that is
initiating the marketing process focuses the opportunities that would be beneficial in the long run
success so that its performance would be effectively improved. For this purpose, the company
gets help from the marketing information system (MIS), which plays a significant role in
providing useful information about the market.

The company also conducts effective market research that would tell him the value able
information about the customers, competitors, general trends, and any extraordinary change
occurred in the market that can be useful for the company. Then company identifies the potential
opportunities from the collected information and split the whole market into different segment.
These segments are based on some factors like age group, geographical location etc. The
company evaluates each segment separately to check the potential of the segment in the light of
its strengths and weaknesses. Finally, it selects the target market segment to proceed further.

2. Selection of the Target Market

This is the most important step of the marketing process in which the target customers are
selected. For this purpose, the company conducts a careful analysis of the target markets in order
to choose the final customers. As it is obvious that the company do not satisfy the needs and
wants of the whole market therefore it must divide the whole market into different segments and
choose the segment that will best meet its strengths and opportunities. In this regards, there are
certain step you need to follow.

Market Segmentation:

The process in which the whole market is split into different units of consumers, each unit
having similar wants, characteristics and behavior of consumers which need different marketing
mixes and strategies.

Market Targeting

In this process the targeted segments of the total market are evaluated to ascertain the attractiveness
of each segment so that the one or two most suitable and potential segments should be selected
and entered. The simple rule of selecting the target unit or segment is that it must provide the
opportunity to the company to create potential customer value in the long run. Another important
rule is that a certain company has the option to satisfy the needs and wants of one or two segments.
In this case the company focuses on that relevant segments and develops its products and strategies
for them only. Such small segments are called niches. The company has also another option to
split the whole market into different segments and offers different products and marketing mixes
to each segment of the market. But the most effective method is to focus on one or two segments
and after succeeding in those segments, further new segments should be targeted.

Market Positioning:

This concept relates to the positioning of the product of a company in the minds of the customers
as compared to the products of competitors. In other words the company tries to maintain a clear
and specific perception in customers about its products. When a company wants to position its
product, it first specifies the competitive edge for which it offers competitive advantages to its
target customers. The whole marketing program of the company should concentrate its identified
positioning strategy. The positioning is effective when the company truly provides the efficient,
competitive offering to its customers in order to give them maximum value as compared to the
offering of competitors.

3. Development of Marketing Mix

After setting of a complete marketing strategy of a company, then it is ready to initiate the
planning of its marketing mix.
Marketing Mix

Marketing Mix is composed of certain variables of markets that are mixed by the company in order
to generate certain desired response in the targeted segments.

In fact the demand of the product is influenced by the use of certain activities of the marketing
mix. The marketing mix is composed of the following four Ps.

01- Product: means any offering (goods or services) to the market by the company.

02- Price: means the money paid by the customers to obtain the product.

03- Place: means the efforts which ensure the availability of the product in the market to

04- Promotion: means all the efforts by the company that ensure the sale of products to customers
through better provision of information about the advantages of the product.

A company develops an effective marketing program in which a suitable combination of marketing

mix is blended so that they are efficiently coordinated into a useful program to provide the greater
customer value in order to accomplish the companys objectives.

4Ps of marketing mix are from the seller perspective. In certain cases the 4Cs are replaced by
the 4Ps which are

1. Product means Customer Solution

2. Price means Customer Cost

3. Place means Convenience

4. Promotion means Communication

4. Management of Marketing Efforts

This is actually the action phase of the development marketing program in which a suitable
marketing mix is set for a target market. For the management of marketing efforts four functions
are adopted which are as follow.

01- Analysis of the Market in which the company identifies the internal strengths and weaknesses
along with the external opportunities and threats.

02- Marketing Planning in which certain marketing plans or strategies are developed so that the
overall objective of the marketing should be accomplished.
03- Marketing Implementation in which the developed plans and strategies are practically
implemented in order to achieve the marketing objectives.

04- Marketing Control in which the performance results of the marketing plans and strategies
are evaluated and necessary steps are taken to ensure the accomplishment of overall marketing
objectives of the company.

Brand Strategy

Your brand is more than your logo, name or slogan its the entire experience your prospects
and customers have with your company, product or service.
Your brand strategy defines what you stand for, a promise you make, and the personality you
convey. And while it includes your logo, color palette and slogan, those are only creative elements
that convey your brand. Instead, your brand lives in every day-to-day interaction you have with
your market:

The images you convey

The messages you deliver on your website, proposals and campaigns

The way your employees interact with customers

A customers opinion of you versus your competition

The Value of Creating a Defined Brand Strategy

Branding is crucial for products and services sold in huge consumer markets. Its also important
in B2B because it helps you stand out from your competition. Your brand strategy brings your
competitive positioning to life, and works to position you as a certain something in the mind
of your prospects and customers.
Think about successful consumer brands like Disney, Tiffany or Starbucks. You probably know
what each brand represents. Now imagine that youre competing against one of these companies.
If you want to capture significant market share, start with a strong brand strategy or you may not
get far.
In your industry, there may or may not be a strong B2B brand. But when you put two companies
up against each other, the one that represents something valuable will have an easier time reaching,
engaging, closing and retaining customers.
Successful branding also creates brand equity the amount of money that customers are
willing to pay just because its your brand. In addition to generating revenue, brand equity makes
your company itself more valuable over the long term.
Does your company follow a defined strategy for your brand? Which case do you fall under?

Best Case Neutral Case Worst Case

The market may not You dont have a

Prospects and
have a consistent view brand strategy and it
customers know
or impression of your shows. Its more
exactly what you
product and company, difficult to
deliver. Its easy to
but in general you communicate with
begin dialogue with
think its positive. prospects and
convince them to buy.
prospects because You havent thought a
they quickly lot about branding They dont have an
understand what you because it doesnt impression of your
necessarily seem product/service or
stand for.
relevant, but you why its better.
You acquire admit that you can do
customers quickly a better job of What you do, what
because your communicating you say and how you
prospects experience consistently with the say it may contradict
with you supports market. each other and confuse
everything you say. your prospects.
Youre not helping
You can charge a yourself but youre not Competitors typically
premium because your hurting yourself have an easier time
market knows why either. acquiring customers.
youre better and is
willing to pay for it.

Marketing Process and Management

Marketing Channels

Marketing channels are the ways that goods and services are made available for use by the
consumers. All goods go through channels of distribution, and your marketing will depend on the
way your goods are distributed. The route that the product takes on its way from production to the
consumer is important because a marketer must decide which route or channel is best for his
particular product.

Manufacturer to Customer
Manufacturer makes the goods and sells them to the consumer directly with no intermediary, such
as a wholesaler, agent or retailer. Goods come from the manufacturer to the user without an
intermediary. For example, a farmer may sell some produce directly to customers. For example, a
bakery may sell cakes and pies directly to customers.

Manufacturer to Retailer to Consumer

Purchases are made by the retailer from the manufacturer and then the retailer sells the
merchandise to the consumer. This channel is used by manufacturers that specialize in producing
shopping goods. For example, clothes, shoes, furniture and fine china. This merchandise may not
be needed immediately and the consumer may take her time and try on the items before making a
buying decision. Manufacturers that specialize in producing shopping goods prefer this method of

Manufacturer to Wholesaler to Customer

Consumers can buy directly from the wholesaler. The wholesaler breaks down bulk packages for
resale to the consumer. The wholesaler reduces some of the cost to the consumer such as service
cost or sales force cost, which makes the purchase price cheaper for the consumer. For example,
shopping at some of the warehouse clubs, the customer may have to buy a membership in order to
buy directly from the wholesaler.

Manufacturer to Agent to Wholesaler to Retailer to Customer

Distribution that involves more than one intermediary involves an agent called in to be the
middleman and assist with the sale of the goods. An agent receives a commission from the
producer. Agents are useful when goods need to move quickly into the market soon after the order
is placed. For example, a fishery makes a large catch of seafood; since fish is perishable it must be
disposed of quickly. It is time consuming for the fishery to contact many wholesalers all over the
country so he contacts an agent. The agent distributes the fish to the wholesalers. The wholesalers
sell to retailers and then retailers sell to consumers.

What is the importance of Marketing channels and distribution?

But before we discuss the importance of these we should first define what is marketing channel
and distribution. Marketing channel is a series of ways or activities needed essentially to transfer
the ownership of goods, and to move goods, from the point of production to the point of
consumption. This consists of the institutions and all the marketing activities in the marketing
process. The distribution channel on the other hand is defined as a chain of intermediaries, each
passing the product down the chain to the next organization, before it finally reaches the
consumer or end-user. This process is known as the distribution chain or the channel. Each of
the elements in these chains will have their own specific needs, which the producer must take
into account, along with those of the all-important end-user
Distribution is one of the most important features that one must consider in undertaking even a
simple marketing. Distribution (Place) is the fourth traditional element of the marketing mix. The
other three are Product, Price and Promotion. It is one of the fundamental factors specifically the
4Ps that marketers should master in marketing. Distribution channels are very important
because these distribution channels are the ones who help and simplify how every consumer gets
their needed and wanted products. Let me expound more on the nature of distribution channels,
Most businesses use third parties or intermediaries to bring their products to market. They try to
forge a distribution channel which can be defined as a passage where all the organizations
products must go through between its point of production and consumption.
I being a marketing student cant help myself but ask why we need this intermediaries using
intermediaries means giving up some control over how products are sold and who they are sold
to. The answer lies in efficiency of distribution costs. Intermediaries are specialists in selling.
They have the contacts, experience and scale of operation which means that greater sales can be
achieved than if the producing business tried run a sales operation itself.
Another important thing we should learn is that even though the distribution channel may sound
simple, it can be very complicated especially with the ever-changing demands of the market. A
simple one way distribution channel can change drastically to multiple channels instantly.
Marketing plan now has to be versatile and should not be directed toward one market but should
have a wide outlook for every distribution channel. There are six factor that is very important:
The trade channels price-value positioning; The trade-channels merchandise display; The trade
channels delivery needs; The trade channels preferred advertising and promotion method; The
trade channels packaging need; and lastly The channels core versus noncore product. Each of
these must be carefully studied and take into consideration seriously by anyone doing marketing
because this is now a reality rather than mere point of views.
Marketing channel is also very important for marketers, organizations and businesses because,
how does one get his products and services efficiently to consumers that are willing to pay for it?
Marketing channels illustrate the organizations that work together tog get your product and
service to the end-user.
Many producers of products and services do not sell directly to their end users. They use a
marketing channel. In its most basic form, a marketing channel performs the work of moving
goods from producers to consumers.
A marketing channel includes one or more marketing intermediaries who perform a variety of
functions. Each channel member: Provides value, performs a function and expects an economic
return. Marketing channel often speak about the sale of products. However, it is not limited to
the distribution of physical goods. Providers of services and ideas also benefit from marketing
channel. Marketing channels offer better services at costs lower than offerings without the
assistance of channel members. Organizations can achieve differentiation through their
distribution channels. Each of these channels may offer different coverage, skill, and
performance. They may also realize economies of scale that channels of distribution often offer.
Marketing channel decisions are among the most critical decisions facing an organization. The
chosen channels closely affect all other marketing decisions. The organizations pricing depends
on whether it uses mass merchandisers or high-quality boutiques. The firms sales force and
advertising decisions depend on how much training and motivation the dealers need.
Marketing channel intermediaries exist because they offer value in making goods and services
more available and accessible to the targeted markets.
Channel intermediaries offer contacts, experience, specialization, and economies of scale to
organizations that cannot offer these attributes on their own. Marketing channels allow producers
to realize the benefits that only larger organizations may be able to support. Each channel
intermediary provides value that is very much needed for a marketing channel to operate
successfully. In order for a marketing channel to successfully run each channel members must
effectively execute their parts well.
Distribution and marketing Channels are very important because they are the ones who help us
find the products and services that we greatly need.
1 .implementation carrying into effect
2 .internal controlan accounting procedure or system designed to promote efficiency or assure
the implementation of a policy or safeguard assets or avoid fraud and error etc.
3 .quantitative analysis chemical analysis to determine the amounts of each element in the
4 .promotional materiala message issued in behalf of some product or cause or idea or person or
5. enhancement an improvement that makes something more agreeable
6. pricing the evaluation of something in terms of its price
7. optimize make optimal; get the most out of; use best
8. profitability the quality of affording gain or benefit or profit
9. promotional of or relating to serving as publicity
10. analytical using or skilled in using reasoning
11.maximize make as big or large as possible
12. interpersonal occurring among or involving several people
13. problem solving the thought processes involved in solving a problem
14. return on investment (corporate finance) the amount, expressed as a percentage, that is
earned on a company's total capital calculated by dividing the total capital into earnings before
interest, taxes, or dividends are paid
15. functionally with respect to function
16. deadline the point in time at which something must be completed
17. pertinent being of striking appropriateness
18. forecasting a statement made about the future
19. metric based on a decimal unit of measurement
20. market research research that gathers and analyzes information about the moving of good or
services from producer to consumer
21. Servicing the act of mating by male animals Advertising Management
Management though is a complex process of employing various media to sell a product or
. This process begins quite early from the marketing research and encompasses the
media campaigns that help sell the product.
Without an effective advertising management process in place, the media campaigns are not that
fruitful and the whole marketing process goes for a toss. Hence, companies that believe in an
effective advertising management process are always a step ahead in terms of selling their goods
and services. As mentioned above, advertising management begins from themarket research
phase. At this point, the data produced by marketing research is used to identify what types of
advertising would be adequate for the specific product. Gone are the days when there was only
print and television advertising was available to the manufacturers. These days apart from print
and television, radio, mobile, and Internet are also available as advertising media. Advertising
management process in fact helps in defining the outline of the media campaign and in deciding
which type of advertising would be used before the launch of the product.

If you wish to make the adverts ing effective, always remember to include it from the
market research time . Market research will help to identify the niche segment of the population
to which the product or service has to be targeted from a large population. It will also identify
why the niche segment would opt for the product or service. This information will serve as a
guideline for the preparation of advertising campaigns.

Once the niche segments are identified and the determination of what types of advertising will be
used is done, then the advertising management focuses on creating the specifics for the overall
advertising campaign. If it is a radio campaign, which type of ads would be used, if it is a print
campaign, what write ups and ads will be used, and if it is a television campaign, what type of
commercials will be used.

There might also be a mix and match advertising in which radio might supplement television
advertising and so on. It is important that through advertising management the image is
conveyed that all the strategies complement each other. It should not look to public that the radio
advertising is focusing on something else while television on something else. The whole process
in the end should benefit the product or service.

The role of people designing the advertising campaign is crucial to its success. They have been
trained by seasoned professionals who provide the training in the specific field. Designing an
advertising campaign is no small a task and to understand the consumer behavior from the data
collected from market research is a very important aspect of the campaign.
A whole lot of creativity and inspiration is required to launch an adequate advertising campaign.
In addition, the management skills come into play when the work has to be done keeping the big
picture in mind.

It would be fruitful for the company if the advertising campaign lasts well over the lifetime of a
product or service, reach the right customers, and generate the
desired revenue
Importance of Advertising Advertising plays a very important role in todays age of competition.
Advertising is one thing which has become a necessity for everybody in todays day to day life,
be it the producer, the traders, or the customer. Advertising is an important part. Lets
have a look on how and where is advertising important:
1.Advertising is important for the customers Just imagine television or a newspaper or a radio
channel without an advertisement! No, no one can any day imagine this. Advertising plays a very
important role in customers life. Customers are the people who buy the product only after they
are made aware of the products available in the market. If the product is not advertised, no
customer will come to know what products are available and will not buy the product even if the
product was for their benefit. One more thing is that advertising helps people find the best
products for themselves, their kids, and their family. When they come to know about the range of
products, they are able to compare the products and buy so that they get what they desire after
spending their valuable money.
Thus, advertising is important for the customers.
2.Advertising is important for the seller and companies producing the products Yes, advertising
plays very important role for the producers and the sellers of the products, because
Advertising helps increasing sales
Advertising helps producers or the companies to know their competitors and plan accordingly
to meet up the level of competition.
If any company wants to introduce or launch a new product in the market, advertising will
make a ground for the product. Advertising helps making people aware of the new product so
that the consumers come and try the product.
Advertising helps creating goodwill for the company and gains customer loyalty after reaching
a mature age.
The demand for the product keeps on coming with the help of advertising and demand and
supply become a never ending process.
3.Advertising is important for the society Advertising helps educating people. There are some
social issues also which advertising deals with like child labour, liquor consumption, smoking,
family planning education, etc. thus, advertising plays a very important role in society.
Classification of Advertising
Advertising is the promotion of a companys products and services though different mediums to
increase the sales of the product and services. It works by making the customer aware of the
product and by focusing on customers need to buy the product. Globally, advertising has
become an essential part of the corporate world. Therefore, companies allot a huge part of their
revenues to the advertising budget. Advertising also serves to build a brand of the product which
goes a long way to make effective sales.

There are several branches or type s of advertising which can be used by the companies.
Let us discuss them in detail. Classification of Advertising
1. Print Advertising-The print media has been used for advertising since long. The
newspapers and magazines are quite popular modes of advertising for different
companies all over the world. Using the print media, the companies can also promote their
products through brochures and fliers. The newspaper and magazines sell the advertising space
and the cost depends on several factors. The quantity of space, the page of the publication, and
the type of paper decide the cost of the advertisement. So an ad on the front page would be
costlier than on inside pages. Similarly an ad in the glossy supplement of the paper would be
more expensive than in a mediocre quality paper.
2. Broadcast Advertising-This type of advertising is very popular all around the world. It consists
of television, radio, or Internet advertising. The ads on the television have a large audience and
are very popular. The cost of the advertisement depends on the length of the ad and the time at
which the ad would be appearing. For example, the prime time ads would be more costly than
the regular ones. Radio advertising is not what it used to be after the advent of television and
Internet, but still there is specific audience for the radio adstoo. The radio jingles are quite
popular in sections of society and help to sell the products.
3. Outdoor Advertising-Outdoor advertising makes use of different tools to gain customers
attention. The billboards, kiosks, and events and tradeshows are an effective way to convey the
message of the company. The billboards are present all around the city but the content should be
such that it attracts the attention of the customer. The kiosks are an easy outlet of the products
and serve as information outlets for the people too. Organizing events such as trade fairs and
exhibitions for promotion of the product or service also in a way advertises the product.
Therefore, outdoor advertising is an effective advertising tool.
4. Covert Advertising-This is a unique way of advertising in which the product or the message is
subtly included in a movie or TV serial. There is no actual ad, just the mention of the product in
the movie. For example, Tom Cruise used the Nokia phone in the movie Minority Report.
5. Public Service Advertising-As evident from the title itself, such advertising is for the public
causes. There are a host of important matters such as AIDS, political integrity, energy
conservation, illiteracy, poverty and so on all of which need more awareness as far as general
public is concerned. This type of advertising has gained much importance in recent times and is
an effective tool to convey the message.
Media Strategy in Advertising Every work to be done needs a plan of action so that the work is
done in a desired and correct manner. Media Strategy plays a very important role in Advertising.
The role of Media Strategy is to find out the right path to transfer or say deliver the message to
the targeted customers.
How many people see or hear or read all the advertisements or promotional offers and buy the
product or service? The basic intention of media strategy is not only procuring customers for
their product but also placing a right message to the right people on the right time and of course
that message should be persuasive and relevant. So, here the planners of the organization decide
the Media Strategy to be used but keeping the budget always in mind.
The Media Strategy process has three Ws to be decided.
They are
Where to advertise ?
When to advertise ?
What media type to use ?
Where is the place for showing or delivering advertisement
.In short it means the geographical area from where it should be visible to the customers who use
or are most likely to use the product or services offered. The place does not mean only TV or
radio but it can also be newspapers, blogs, sponsorships, hoardings on roads, ads in the movie
break in theatres, etc.
The area varies from place to place like it can be on national basis, state basis and for local
brands it can be on city basis.
When is the timing to show or run advertisement. For e.g. you cannot show a raincoat ad in the
winter season but you need to telecast ad as soon as the summer season is coming to an end and
rainy season is just about to begin. The ad should be delivered with perfect timing when most
customers are like to buy the product. The planners need to plan it keeping the budget in mind as
the maximum of 20% of revenues of the company can be used in the advertisement section.
Different products have different time length for advertisements. Some products need year long
ads as they have nothing to do with seasonal variations e.g. small things like biscuits, soaps,
pens, etc and big services like vehicle insurance, refrigerators, etc.
Some products need for three or four months. E.g. umbrellas, cold creams, etc. So the planners
have to plan the budget according to the time length so that there is no short of money at any
time in this process.

What is what type of media is to be used for delivering the message.

There are basically two media approaches to choose from.
Media Concentration approach
Media Dispersion Approach
In media concentration approach, the number of categories of media is less. The money is spent
on concentrating on only few media types say two or three. This approach is generally used for
those companies who are not very confident and have to share the place with the other
competitors. They dont want anyone to get confused with there brand name so this is the safest
approach as the message reaches the target consumers.

In media dispersion approach, there are more number of categories of media used to advertise.

This approach is considered and practiced by only those people who know that a single or two
types of media will not reach their target. They place their product ads in many categories like
TV, radio, internet, distributing pamphlets, sending messages to mobiles, etc.
Selection of Media Category Whichever category is selected by the planners of the organization,
they should select a proper media to convey their message.
If the product is for a big amount of customers then a mass media option can be selected like TV,
radio or newspaper. The best examples for this type are detergent ads, children health drinks and
major regular used products such as soap, shampoo, toothpastes etc.

If the planners want to change the mind of people doing window shopping or just doing shopping
for sake of name, then point of purchase type can be opted by the company. This helps the
company to explain their point to the buyers and convince the buyers to go for their product.
If the planners want to sell their product on one to one basis, then the third option is direct
response type. Here, the company people directly contact the customers via emails, text
messages, phone calls or meeting for giving demos. The best example of this type of media is the
Life cell Cord Blood Banking. They go to their customers, explain them what it is all about and
try to convince them.

Thus, this process of media strategy plays an important and vital role in the field of Advertising.
Steps in Advertising Process``
Mass demand has been created almost entirely through the development of AdvertisingCalvin
Coolidge in the New York Public Library.
For the development of advertising and to get best results one need to follow the advertising
process step by step.
The following are the steps involved in the process of advertising:
1. Step 1 -Briefing: the advertiser needs to brief about the product or the service which has to be
advertised and doing theSWOT analysis of the company and the product
2. Step 2 -Knowing the Objective: one should first know the objective or the purpose of
advertising. i.e. what message is to be delivered to the audience?
3. Step 3 -Research: this step involves finding out the market behavior, knowing the competitors,
what type of advertising they are using, what is the response of the consumers, availability of the
resources needed in the process, etc.
4. Step 4 -Target Audience: the next step is to identify the target consumers most likely to buy
the product. The target should be appropriately identified without any confusion.
For e.g. if the product is a health drink for growing kids, then the target customers will be the
parents who are going to buy it and not the kids who are going to drink it.
5. Step 5 -Media Selection: now that the target audience is identified, one should select an
appropriate media for advertising so that the customers who are to be informed about the product
and are willing to buy are successfully reached.
6. Step 6 -Setting the Budget: then the advertising budget has to be planned so that there is no
short of funds or excess of funds during the process of advertising and also there are no losses to
the company.
7. Step 7 -Designing and Creating the Ad: first the design that is the outline of ad on papers is
made by the copywriters of the agency, then the actual creation of ad is done with help of the art
directors and the creative personnel of the agency.
8. Step 8 -Perfection: then the created ad is re examined and the ad is redefined to make it perfect
to enter the market.
9.Step 9 -Place and Time of Ad: the next step is to decide where and when the ad will be shown.
The place will be decided according to the target customers where the ad is most visible clearly
to them. The finalization of time on which the ad will be telecasted or shown on the selected
media will be done by the traffic department of the agency.
10. Step 10 -Execution: finally the advertise is released with perfect creation, perfect placement
and perfect timing in the market.
11. Step 11 -Performance: the last step is to judge the performance of the ad in terms of the
response from the customers, whether they are satisfied with the ad and the product, did the ad
reached all the targeted people, was the advertise capable enough to compete with the other
players, etc. Every point is studied properly and changes are made, if any.
If these steps are followed properly then there has to be a successful beginning for the product in
the market.
Advertising Techniques -13 Most Common Techniques Used by the Advertisers
Oday every company needs to advertise its product to inform the customers about the product,
increase the sales, acquire market value, and gain reputation and name in the industry. Every
business spends lot of money for advertising their products but the money spent will lead to
success only when the best techniques of advertising are used for the product. So here are some
very common and most used techniques used by the advertisers to get desired results.
1. Emotional Appeal
This technique of advertising is done with help of two factors-needs of consumers and fear
Most common appeals under need are:
need for something new
need for getting acceptance
need for not being ignored
need for change of old things
need for security
need to become attractive, etc.
Most common appeals under fear are:
fear of accident
fear of death
fear of being avoided
fear of getting sick
fear of getting old, etc.
2.Promotional Advertising
This technique involves giving away samples of the product for free to the consumers.
The items are offered in the trade fairs, promotional events, and ad campaigns in order to gain
the attention of the customers.
3.Bandwagon Advertising This type of technique involves convincing the customers to join the
group of people who have bought this product and be on the winning side. For e.g. recent
Pantene shampoo ad which says 15crores women trusted Pantene, and you?
4.Facts and Statistics Here, advertisers use numbers, proofs, and real examples to show how
good their product works. For e.g. Lizol floor cleaner cleans 99.99% germs or Colgate is
recommended by 70% of the dentists of the world or Eno -just 6 seconds.
5. Unfinished Ads The advertisers here just play with words by saying that their product works
better but dont answer how much more than the competitor. For e.g. Lays
-no one can eat just one or Horlicks -more nutrition daily. The ads dont say who can eat more or
how much more nutrition.
6.Weasel Words In this technique, the advertisers dont say that they are the best from the rest,
but dont also deny. E.g. Sunsilk Hairfall Solution -reduces hairfall. The ad doesnt say stops
7.Endorsements The advertisers use celebrities to advertise their products. The celebrities or star
endorse the product by telling their own experiences with the product. Recently a
diamond jewellery ad had superstar Amitabh Bacchan and his wife Jaya advertising the product.
The ad showed how he impressed his wife by making a smart choice of buying this brand.
Again, Sachin tendulkar, a cricket star, endorsed for a shoe brand.
8.Complementing the Customers Here, the advertisers used punch lines which complement the
consumers who buy their products. E.g. Revlon says Because you are worth it.
9.Ideal Family and Ideal Kids The advertisers using this technique show that the families or kids
using their product are a happy go lucky family. The ad always has a neat and well furnis
hed home, well mannered kids and the family is a simple and sweet kind of family. E.g. a dettol
soap ad shows everyone in the family using that soap and so is always protected from germs.
They show a florescent color line covering whole body of each family member when
compared to other people who dont use this soap.
10.Patriotic Advertisements These ads show how one can support their country while he uses
their product or service. For e. g some products together formed a union and claimed in their ad
that if you buy any one of these products, you are going to help a child to go to school. One more
cellular company ad had a celebrity showing that if the customers use this companys sim card,
then they can help control population of the country.
11.Questioning the Customers The advertisers using this technique ask questions to the
consumers to get response for their products. E.g. Amway advertisement keeps on asking
questions like who has so many farms completely organic in nature, who gives the strength to
climb up the stairs at the age of 70, who makes the kids grow in a proper and nutritious ways, is
there anyone who is listening to these entire questions. And then at last the answer comes -
Amway: We are Listening.
12. BribeThis technique is used to bribe the customers with some thing extra if they buy the
Product using lines like buy one shirt and get one free, or be the member for the club for two
years and get 20% off on all services.
13. Surrogate Advertising This technique is generally used by the companies which cannot
advertise their products directly. The advertisers use indirect advertisements to advertise their
product so that the customers know about the actual product. The biggest example of this
technique is liquor ads. These ads never show anyone drin king actual liquor and in place of that
they are shown drinking some mineral water, soft drink or soda.
These are the major techniques used by the advertisers to advertise their product. There are some
different techniques used for online advertising such as web banner advertising in which a
banner is placed on web pages, content advertising using content to advertise the product online,
link advertising giving links on different sites to directly visit the product website
Advertising Myths - Ifs and Buts of the Advertising Industry
Advertising is considered as the best tool to make people aware of the product a company wants
to sell. This is the best way to communicate with the audience and to inform them about the product
but with a proper media selection and of course timing. But there are some myths which have been
creating problems in the path of successful advertising. We have tried to clarify some
misinterpretations about the ifs and buts of the advertising industry.

Advertising Myths
1. Advertising works only for some business

Wrong. Advertising works for each and every company or business it only it is executed
properly. But due to bad advertising, many ad campaigns fail to work in desired way and
the people think that advertisements are not their cup of tea. They must understand one
simple rule of advertising - it should be for right people at right time through right medium
on right place.

2. Advertising is only needed when business is slow

Wrong. Who said that the big and successful brands dont advertise their products?
Advertising is a continuous process with some renovations whenever needed. But, yes,
when the business really is going slow or at its low, the advertising will have to be heavy
and more in number. This will help the product to improve its market value and make
people aware of the product.

3. If the product is not selling, advertise it

This is just not true. Just think about it. If you are selling a product which is not at all in
vogue, and no one is using it, how will it get clear from the shelf. You need to understand
the need of customers and then sell the product. Advertise doesnt mean selling anything
you want but it means selling what customers wants.

4. Advertise creates needs

No. The people already had cassettes to play and listen to music they liked when they didnt
have the option of CDs. It is technology which came in, and it was only then CDs were
advertised and sold. Advertise only replaces the old things with new, it doesnt creates

5. Advertise effects persist for decades

Its the quality of the product which persists. Advertise no doubt helps increasing sales of
the product and stays in memory of the people, but minds are captured by the product itself.

6. Humuor in ads

Sometimes humour gets in the way of delivering message properly to the consumers but
not every time it creates problems. Many of the times it helps people to remember the ad
and the product and helps creating a positive attitude towards the advertise.

7. Sex sells

Not always. Some advertisers use sex for just increasing the sales and forget that the
product doesnt need this type of ad at all. Remember once models Milind Soman and
Madhu Sapre posed naked for a shoe brand. It was really irrelevant.

8. Creativity is the most important factor

The ad should be no doubt creative enough to attract consumers but it not the only selling
factor. There has to be good message to deliver, best media selection, and best quality of
the product to make the product and ad both successful.

9. Advertising costs so much

Advertise needs money but one has to also consider the results in forms of increased sales,
increased reputation in industry, recognition for product and also increased market value
of product which advertisements brings along. Lets consider advertising as investment and
not expense.

Thus these are the most common myths of the ad industry which are working as hurdles in the way
of bright future of advertisers and advertising and we need to overcome these hurdles and rise.

- Great man theories
-Trait theories
-Contingency theories
-Situational theories
-behavioral theories
-Participative theories
-Management theories
-Relationship theories
Great man theories

Trait theories

Contingency theories
Situational Theories

Behavioral theories

Participative Theories
Management theories

Relationship theories
Product leadership as a competitive strategy

Definition: Product Leadership is one of the 3 possible value disciplines.

Product leaders recognize that excellence in creativity, problem solving and teamwork is critical to
their success.

Product Leadership and organizations

Most of these product leaders in the technology field are young organizations, headed by single or a
group of young innovators who have managed to grow their ideas as successful ventures.
Whether an organization is young or old, the breakthrough in innovation

Different organizations pursue product development in different ways while companies like apple

Though organizations develop new products, it takes a while for the market demand to pickup and
the consumers to accept new products.
Four business models to choose from to dominate your market

Operational Excellence

Operational Excellence Main features

Product leadership

Product leadership

Main features

Customer Intimacy
Customer Intimacy

Main features:

Distribution Dominance

What in culture?
Culture is the characteristics and knowledge of a particular group of people

Impact of language on business.

Impact of language on business

Impact of language on business

The language diversity has created problems

Comments on managing with cultural Differences

Organizational culture and communication

After studying this chapter, you should be able to:

Organizational Culture

A system of shared meaning held by members

Seven Characteristics of organizational Culture.

Strong Cultures

Culture Versus formalization

Cultures five basic functions

Culture as a liability

Creating Culture

Keeping a Culture Alive

A Socialization Model

Dimensions of Socialization Programs

How Organization Cultures form

Creating an ethical organizational Culture.

Creating a positive organizational Culture

Global Implications

Implications for managers.

Keep in Mind

The marketing department

Marketing department sample organization chart

The 10 responsibilities of marketing departments

Problem Statement

Common situation
As a result marketing departments do not take care of their real duties

# 1 Listening to customer needs

To plan the necessary means for receiving customer feedback:

# 2 Track trends and monitor competition

# 3 Work and transmit brand values

# 4 Coordinate efforts with partners

# 5 Innovate

# 6 Communicate with the rest of the company

# 7 Help improve sales processes and customer

#8 manage marketing budgets

#9 calculate ROI