Business Studies Unit 2 - Marketing

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Definition etc.

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What is in market analysis included?

Market research, Market segmentation

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What is included in Market Strategy?

Niche and Mass Marketing, Product life cycle and Product portfolio analysis.

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What is in Marketing Planning included?

Marketing Mix and elasticy of demand.

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Define the term Marketing

is the process by which a firm tries to anticipare and satisfy customers needs and wants and at the same tim meet its own objectives.

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What does effective marketing require?

exchange process, understanding of customers needs (primary & secondary Marketing research and even experience and intuiton

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Market Analysis Definition

undertaking of detailed examination of the characteristics of a market, essential to market planning

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Market Analysis usually involves estimates of?

1. market size, 2. market growth, 3. market segments, to identify existing market conditions and ident. poss. opportunities and threats etc.

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Asset-led approach

a firm bases its decisions on customer requirements AND its own strenghts.

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Extrapolation

method of predicting future trends

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Why is extrapolation important?

firm must plan to consider staffing levels, procution levels and distribution strategies->which ALL depend on expected level of sales

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Problems of Extrapolation

1.it is only effective if market trends actually CONTINUE, 2.many markets are however, ver DYNAMIC and change rapidly i.e. cameras, 3. Recession, 4. Competitors launching new product, 5. Problems with production

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Correlation Definition

can have a value between -1 and +1, have to be treated with caution

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Why is correlation important?

can identify crucial factors that influence sales->use for marketing planning by for instance change marketing mix accordingly, or market areas that are targeted

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Give examples of Marketing Objectives..

1. level of sale, 2. composition of sale, 3. timing of sales, they contribute to the overall corporate onjective

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What has to be considered when deciding on a marketing strategy?

1. niche or mass-marketing?, 2. match competitors offerings? Cheaper? Differentiation?, 3. compete in particular regions?

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Product placement

advertising within movies for instance, advertising on sports events etc

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Celebrity endorsement

celebrities advertising for a product

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Why is marketing research important?

business are only successful if output produced satisfies customers wants and needs->Info on customers wants will help business decide what to produce

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State 5 areas that market research could concentrate on.

1. Market, 2. Competition, 3. Promotion, 4. Distributing product, 5. Pricing Product

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Desk research

secondary data, opposite is field research

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Advantages/Disadvantage Postal Questionnaires.

Pros: 1. cheap, 2. no interviewers bias, 3. wide area can be covered, Cons: 1. poor response rate, 2. can take long time, 3. questions must be "designed"

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what are the 4 methods of sampling?

1. random, 2. quota, 3. stratified, 4. cluster sampling

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Cluster sample

respondents drawn from a relatively small area selected to represent particular aspects of a products target market.i.e. seaside town: sunlotion

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Marketing Mix

the main variables through which a firms carries out ist marketing strategy -> known as the 4 P's: Product (incl. Range of pack sizes, flavours colours), Price (long-term pricing strategy and pricing method), Promotion (branding, advertising, packaging

and sales promotion), Place (choosing distribution channesl and seeking shop distribution) Most important element of the marketing mix is the product which needs to be designed to meet requirements of target market

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Marketing objectives

are the goals of the marketing dept. Must acheive in order to help the company to achieve it's overall objectives. They include: 1. Halting a decline in market share, 2. Making brand image younger, 3. Boosting awareness of a brand

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Quota sample

recruitment of respondents to a market research exercise in proportion to their known demographic profile. -> usually cheaper than random sampling

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Random sample

every member of population has equal change of being interviewed-> hard and expensive to achieve.

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Stratified sample

sampling method that draws respondents from a specified subgroup of the population. I.e.res. Of 18-30 year old men

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Boston Matrix

a method of analysing current position of products within a firm's portfolio, in terms of market share and growth within their market-place->far more sophisticated than product life cyle. It not only points out importance of market share, but also that

firms want products that can support each other's development. Agening brand -> cash cow which is milked to benefit a rising star or to finance the changes needed to a problem child.

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Defensive Extension

stratega medium to long-term plan for lengthening the life-cycle of a product. -> likely to be implemented during maturity or early declining stage.They can be defensive (->postpone obsolence of product by 1 or 2 years until replacemet life-cycle

a medium to long-term plan for lengthening the of a product. -> likely to be implemented during maturity or early declining stage.defensive (->postpone obsolence of product by 1 or 2 years until replacement is launched, by special editions, dif

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Offensive Extension strategy

a medium to long-term plan for lengthening the life-cycle of a product. -> likely to be implemented during maturity or early declining stage

ffensive:(trying to revitalise or reposition prod.) both can be done by: redesign and reformulate (new improved), add extra feature, repositioning (downmarket, cheaper), changing advert(younger)

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Mapping

selecting key variable that differentiates the brands and plotting the position of each one.Enables a firm identifying gaps or niches in the market that are unfil.

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Pricing methods

different ways in which a firm can decide on the price level to set for products: 1. Cost based or 2. Market-based methods.

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Pricing strategy

medium to long-term plan of the price level that a firm whishes to set for a product.There are 2 main strategies: Market Penetration (pricing low to maximise sales) or skimming the market (pricing high to maximise profit margins)

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Product life cycle

a theory that all products follow a similar life course of conception: 1. Birth, 2. Growth, 3. Maturity, 4. Decline, at different speeds.Factors affecting the lenght of a product's life cycle: 1. Durability, (->if too long market saturation is short),

2. fashion, 3. technological change.important implication of the theory is that every product will eventually decline and die, -> continually new products are needed.

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Production portfolio analysis

is the range of products or brands held by a company that provide it with diversified sources of income. Should range over different markets and different stages in the product life cycle. Usefull tool to do this is the Boston Matrix.

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Cost based pricing

1. Mark-up pricing, 2. Cost-plus pricing

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Market-based pricing

1. Competetive pricing, 2. Contribution pricing, 3. Profit maximisation pricing

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Mark-up pricing

used by small firms-> adding standard profit proportion to direct costs (i.e.+ 30%)

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Cost-plus pricing

sim. To mark-up pric.->profit is added to the fill cost of good or service -> allowance for overheads is added to direct costs and then profit % added to the total.

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Competetive Pricing

taking price level from competitors

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Contribution Pricing

different products priced differently in relation to DIRECT COSTS. more sophisticated-> different prices can be charged at different circumstances -> i.e. train ticket after 9, cinema Monday

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Profit maximising pricing

achieved by research to find likely demand at different prices and calculating which one is the most profitable.

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Batch production

is the manufacture of a limited number of identical products. Within each stage of the production process, work will be completed for the whole batch, before moving to the next stage. -> provides some economies of scale compared with job production ,

, but less than flow production.

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Capacity utilisation

(Actual output per Period x 100) / Full capacity per Period is the extent to which the maximum capacity of the firm is being used. I.e. actual output as % of max pot output

this is of considerable financial importance, because of the impact of fixed overheads per unit on profit margins->High capacity utilisation keeps fixed costs per unit down.

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Cell production

splits a continuous-flow production line into self-contained units. Each cell produces significant part of the finished article enabling cell workforce to feel committed to their complete unit of work.

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Flow production

manufacture of an item in a continually moving process. Each stage is linked with the next by a conveyor belt. ->needs high capacitity utilisation, ie. A lot of money to invest->therefore high demand level is needed to spread fixed costs over many units o

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Just in time (JIT)

manufacturing system which is designed to minimise the costs of holding stocks-> requires very carefull planned schedules, efficient ordering system, and delivery reliability-> it is usually implemented with a shift from mass to cell production.

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Just in case

producting a one-off item, often small firms or building of ships bridges etc. ->no economy of scale->often combination of batch and job method

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Lead Times

lenght of time a firm needs between receiving an order and delivering the finished product. -> the quicker the better customer satisfaction and turnover.

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Lean Production

range of waste saving measures inspired by jap. Firms. Include just-in-time, shorter product development times and flexible specialisation. -> has replaced mass production-> efficieny stems from focus upon minimising waste through checking and re-working

the output of others is time wasted->therefore focus on getting the work fight first time->kaizen groups are encouraged

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Quality assurance

ensure quality standards are agreed and met throughout the organisation ensuring customer satisfaction. Considering ,

1. Time, effort and technology, 2. Quality of supplies of materials, 3. Commitment of workforce, 4. System of quality monitoring and control, 4. ability do deliver on time, 5. provide after sales service

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Quality circles

discussion group that meets regularly to identify quality problems, consider solutions etc. usually from factory floor->it's success is a form of consultation and job-enrichmen. There are 2 principles:

1. Shop-floor workers understand production problem better than management (untapped asset) 2. workers appreciate opportunity to show their knowledge

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Quality control

process of checking accuracy or work bought-in or completed. Carried out by quality inspectors or sometimes by employees->encourages personal responsibility and self-checking.

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Stock control

involve proceedures needed to ensure that stock is ordered, delivered and handled with efficiency, to meet cust. Demand. -> Carefull stock rotation, (stock reordering system based upon predetermined min & max stock levels)

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Total Quality Management

(=TQM) establishing a culture of quality affecting attitudes and actions of every employee by trying to get every work-group

1. to think of those they work for as customers, 2. Use of quality circles, 3. Emphasis upon service and after-sales service, 4. idea that high quality (->low costs) stem from getting thins right first time.

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Benefits of market research

1. aid to decision making, 2. Reducing Risk, 3. link to outside world, 4. PR

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Drawbacks of sampling

can be bias because: 1. overweighting of subgroups, 2. not large enough sampling group, 3. snowballing sampling, 4. uncareful constructed questionnaires

5. behaviour of interviewer can affect result

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Advantage of segmenting market.

1. information allows to sell more products->more profitable, 2. gain greater knowledge->suit products accordingly, 3. target part. groups, 4. prevent promotion to wrong group

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Strategy

means of achieving an objective->long-term plan->implemented through (marketing) tactics

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Tactics

short.term actions taken to achieve (marketing) strategy

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Ansoff's Matrix

4 types of marketing strategies: 1. Marketing Penetration, 2. Marketing Development, 3. New Product Development, 4. Diversification

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Extension Strategies (6)

1. increase USE of product, 2. encourage USE of product, 3. reduce PRICE, 4. ADAPT product, 5. PROMOTIONAL offers, 6. change IMAGE

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Capacity

is the MAXIMUM amount of a firm can produce at any given time

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Capacity utilisation

measures existing outpur in relation to POTENTIAL outpur

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Product Portfolio Analysis

when firms have different products, includes BOSTON MATRIX, market share and growth

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Pricing influences

1. has to be greater than cost per unit, 2. competitors, 3. objectives of firm, 4. level of demand, 5. stages of product lifecycle, 6. other elements of marketing mix

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Marketing Objectives Examples

1. target NEW market, 2. achieve/maintain market share, 3. RANGE of prod., 4. increase profitability/revenue, 5. prevent losses/declining sales

6. Market positioning, 7. create competitive advantage

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Advantages niche marketing

1. suitable for SMALL firms, 2. spreading risk if ceveral, 3. if first, market is often secured, 4. consumer willing to pay PRICE PREMIUM,

5. competition may be avoided, 6. focus on needs of consumer group

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Price elasticy of demand

measures sensitivity of demand to change in price

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What determines price elasticy?

1. availabiltiy of similar products, 2. time, 3. type of product (convenience, luxury goods), 4. brand versus product

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Above the line promotion

advertising through media, TV, magazines, newspapers, radio etc.

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What criterias might firms use to decide on appropriate advertising?

1. Costs, 2. audience reached, 3. Competitiors, 4. Impact, 5. Law, 6. marketing mix

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Below the line promotion

1. point-of-sale displays, 2. sampling, 3.

Cons: 1. expensive, 2. outcome difficult to predict, 3. limited duration, 4. sometimes disliked by customers

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Factors influencing distribution channels

1. Product (perishable), 2. Market, 3. company

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Time-based Managemtn

reduces amount of time business take carryong out tasks -> elimination of waste->time

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Job production pros & cons

Pros: 1. unique, 2. specification, 3. motivated workers, 4. more demanding work, 5. team spirit, 6. simple to organise/supervise, 6. high quality product

Cons: 1. labour intensive, 2. time of each employee doing job->long, 3. no economy of scale, 4. lead time can be long, 5. high selling costs?

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Batch Production Pros&Cons

Pros: 1. larger quantities than jobprod., 2. flexibility (comp.flowprod), 3. WORK STUDY, 4. unskilled/cheap employees, 5. less variety of machinery than flowprod, 6. partly finished goods->stored

Cons: carefull planing/coordination needed, 2. machinery needs cleaning/adjustment/maintenance, 3. delayes?, 4. less motivated workforce, 5. if small batches->high unit costs, 6. money tied-up in work-in-progress?

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Flow Production Pros and Cons

Pros: continuous sequence->stages interlinked->minimes production time-> high efficiency, large quantities prod., standardised prod.

Cons: needs high capacity utilisation, 2. expensive, 3. mainenace, 4. need high demand to spread fixed costs, large amnts of machinery, large stocks of raw materials needed

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what factors affect business decision on production?

1. nature of product, 2. relative prices of labour/machinery, 3. size of firm, 4. quality needed

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Labour intensive

production method which rely on large workforce relative to amount of machinery

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Productive intensive

production methods which minimise unit costs.

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Lean Production

reduce quantity of resources used up in production, (factory space, materials, stocks, suppliers, labour, capital

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Just-in-time Production Pros & Cons

Pros: 1. improve cash flow, 2. reduce waste, 3. more factory space available, 4. stockholding costs reduced, 5. motivation/relation with suppliers/workforce improved

Cons: 1. suppliers need to be reliable, 2. increased ordering/admin costs, 3. advant. bulk buying might be lost, 4. break in supply->machinery breakdown, 5. diff. if sharp price increase, 6. delays->loss of reputation

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Time based Management

reducing amnt of time businesses take carrying out certain tasks such as launching new products or cutting lead times->time is money

Cons: 1. customer benefit, 2. shorter lead times, 3. higher efficiency, 4. quality of products improved, 5. time spent reduced

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Reasons for growth

1. survival, 2. economy of scale, 3. future profitability, 4. market share, 5. reducing risk

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Technical economy of scale

reducing costs by replacing people with machineries

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Market Research / how does it assist in Market Orientation?

1. secondary dara helps identifying change in markets (health awareness, trends, etc), 2. can anticipate/respond quickly to market changes, 3. more confidend about new products, 4. monitor popularity and service, 4.

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Analyse effects that being understocked might have on Sandwhich maker?

1. difficult to satisfy consumers demand, 2. machinery/workers may be idle, 3. lead to loss of business, 4. lead to loss of goodwill as customers become disatisfied, 5. loss relationship with M&S ->loss of sales..

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Assess the extent to which Pret a Manger can achieve economies of scale.

1. advertising economies, 2. being able to borrow at competetive interest rates, 3. strong company image, 4. bulk buying discounts?, 5. admin. difficulties->expensive communication equipment, 6. training, worldwide?can be expensive, 7. control difficult,

8. pricing may be difficult in different countries - exchange rates, different level of costs, etc.

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Postal Surveys appropriate to assess companies ?

Pros: 1. cheap, 2. no interviews bias, 3. wide area , 4.

Cons: 1. poor response rate, 2. can take long time to collect, 3. need to be short->or poor response, 4. must be well designed/piloted, 5. volume needed, 6. must be specific ,

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What are pros/cons of telfor foods supplying M&S?

Pros: 1. increased sandwhich sales, 2. increased product based, 3. marketing responsibility of M&S,

Cons: 1. may have to offer cheaper supply, 2. may have to drop other customers bcs of large volume orders , 4. "all egg one basket", 5. high quality needed by M&S->increased costs?, 5. anonymity, 6. reliance on fortune of M&S

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Cost Plus Pricing

calculates the average costs and add a MARK UP->Pros:1. quick and simple, 2. ensures selling price is greater than average total cost

Cons: 1. ignores market need and indirect costs are NOT allocated

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Contribution Pricing

prices are set in relation to DIRECT COSTS per unit and then firm considers contribution required to indirect costs

Pros: 1.flexibility, 2. less succesfull products can make lower contribution

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Absorption Costing

(Full Costing) INDIRECT COSTS are allocated to each product and MARK UP is added Pros: 1. indirect costs are accounted for

Cons: 1. Prices will tend to be higher

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Market Oriented Pricing

1. Penetration Pricing, 2. Market Skimming, 3. Price discrimination

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Cost Based Pricing

1. Cost Plus Pricing, 2. Contribution Pricing, 3. Absorption or Full Cost Pricing

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Price discrimination

same product offered at different prices->markets have to be separated

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Below the line Promotion examples

1. Direc Mail, 2. Merchandising, 3. Sales Promotion, 4. Packaging, 5. Branding, 6. PR

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