MODULE 1

a)these are point you got to add also..for both these answer this is the answer…if
cant understand refer slides
 Current business landscape & changing demands.
 Global competitive pressures.
THE NEW MARKETING REALITIES

Network information technology:

• The industrial age was characterized by mass production and
mass consumption.
• The information age promises to lead more accurate levels of
production, more targeted communication and more relevant
pricing.
Globalization:
• Technological advances in transportation, shipping, and
communication have made it easier to market to other countries and
source products and services from other countries.
Deregulation:
• Most of the growth in the various sectors of the Indian
economy is due to the government policy of deregulation and
liberalization.
Privatization:
• Converting public companies to private ownership and
management to increase efficiencies.
Example: UK
• British Airways.
• British telecom.
Heightened competition: Resulting in rising promotion costs and shrinking
profit margins.
 Domestic brands.
 Foreign brands.
 Store brands (Private levels).
Industry convergence: New opportunities lie in the intersection of two or
more industries.
• Example: Computing and consumer electronics industries are
converging as the giants of the computer world such as Dell,
Gateway and Hewlett-Packard release a stream of entertainment
devices –from MP3 player to Plasma TVs and camcorders.
• The shift to digital technology is fueling this massive
convergence.
Consumer resistance: Due to bad or over marketing.
• A 2004 Yankelovich study found record levels of marketing
resistance from consumers.
• Negative opinions about marketing and advertizing .
Retail transformation:
• Growing power of giant retailers and “category killers”-home
shopping, e-commerce on the internet.
• Entertainment.
• Food courts.
• Demonstrations.
NEW CONSUMER CAPABILITIES

A substantial increase in buying power:

• Buyers are only click away from comparing from competitors
prices and product attributes.
A greater varieties of available goods and services:
• Amazon .com: world’s largest bookstore branched into retail
sales of music and movies ,clothing and accessories ,consumer
electronics, health and beauty aids and home & garden products.
• Buyer can order goods online from anywhere in the world.
A great amount of information about practically everything:
• Read any newspaper, in any language, from where in the
world.
Greater ease in interacting and placing and receiving orders:
• Buyers can place orders from home, office or mobile phone 24
hours a day,7 days a week and quickly receive goods at their home
or office.
An ability to compare notes on products and services:
• Social networking sites bring together buyers with common
interests.
• Compareindia.com provides competitive information ,mostly
based on consumer reviews, price features and user’s experience
pertaining to a varieties of products.
An amplified voice to influence peer and public opinion:
• The blogs.
NEW COMPANY CAPABILITIES
COMPANY ORIENTATION TOWARDS THE MARKET PLACE

The production concept: Consumer will prefer products that are widely available
and inexpensive. Therefore production-oriented businesses concentrate on
achieving high production efficiencies, low costs and mass distribution.
Example: China .
• Largest PC manufacturer ,Levono and domestic appliances giant
Haier take advantage of the country’s huge and inexpensive labor pool to
dominate the market.
Product concept: Consumer favor products that offer the most quality
,performance or innovative features.
• Focus is on making superior products and improving them overtime.
A new or improved product will not necessarily be successful unless it’s priced,
distributed ,advertized, and sold
The selling concept: Consumers and businessman, if left alone, will not buy
enough of the organization’s products.
• Therefore focus on aggressive selling and promotion efforts.(Sell what
they make ,rather than make what the market want).
• It is practiced most aggressively with unsought goods like insurance
and encyclopedias. Or it is used when the firm have overcapacity.
The marketing concept: Emerged in 1950s.
• Focus on “Customer –centered” than “product –centered”.(A “sense –
and respond” philosophy).
• The job is not to find the right customers for your products, but to
find the right products for your customers.
• Example: Dell computer –customized features as desired by the
customer.
• Selling focuses on the needs of the seller.
• Marketing focuses on the needs of the buyer.
The holistic marketing concept:
• Focus on development, design and implementation of marketing
programs, processes, and activities that recognize their breadth and
interdependencies .
• It recognizes that “Everything matters” in marketing and that a
broad, integrated perspective is often necessary.
• FOUR BRAOD COMPONENTS CHARACTERIZING HOLISTIC
MARKETING
•
INTERNAL MARKETING

INTEGRATED MARKETING

PERFORMANCE MARKETING

RELATIONSHIP MARKETING
THE VALUE DELIVERY PROCESS

THE HOLISTIC MARKETING ORIENTATION AND CUSTOMER VALUE

• Customer value can be created and delivered by way of

:
✔ Reduce costs.
✔ Improve quality of service.
✔ Time-to-market.
✔ Extend the scope of customer services .
✔ Be better capable to focus on the core competencies of the
organization.
DIFFICULTIES IN REACHING SUCCESS IN TWENTY –FIRST CENTURY
In consumer packaged goods, distribution concentration has increased
greatly:
• Much distribution is in the hands of giant corporations and
multinationals.
• Power has been transferred from manufacturers to
distributors.
• Slotting fees-exit fees, promotion fees etc.
• Hypermarket and super market chain control (in the food
sector) more than 80 percent of final consumer purchases.
• Major franchises –McDonald’s ,KFC, Subway, Domino’s Pizza-
accounts for another major shares.
• There is similar situation across all industries.
The number of competitors has been reduced, but the number of brands
has strongly increased:
• Many producers were not able to survive the strong pressure
of the giant retailers and either disappeared or were acquired by the “big
fishes’.
Product life cycle have been dramatically shortened:
• New products last for a shorter time.
• For companies ,it is easier to launch new brands due to
available resources and consumer is increasingly are ready to try the new
brands that they see advertized.
 • In the hyper markets the desperate war for shelf space
intensifies.
It is cheaper to replace than to repair:
• Hard goods do not last as long as formerly.
• Example:
• Laser printer.
• Electric razor.
• Laptop.
Digital technology has provoked a revolution in many markets:
• It has led to a whole range of products:
✔ Computer,
✔ interactive TVs,
✔ Digital phones,
✔ Smart dishwashers,
✔ Microwaves,
✔ Toasters.
The number of varieties of a given product has increased radically:
• Go to a super market and write down the names of all the
yogurts you can buy, by flavor and sizes.
• You can probably list over 50 different yogurts: Plain, with
sugar, with vanilla, with pieces of different fruits, various flavors, low fat, or
nonfat, etc.
Markets are hyper fragmented:
• Companies ,in their search for differentiation, have identified
and created more segments and niches, resulting in highly fragmented
markets.
• Ultimately this will lead to one-to-one customized products and
marketing.
Advertising saturation is reaching its highest levels and fragmentation of
media is complicating the launch of new products:
➢ A normal citizen of a large urban area is daily exposed to an
average of 2,000 advertising or communication stimuli.
➢ More than 100 television stations, 200 radio stations, 1,000
magazines.
➢ Audiences are so diverse in their media habits that
companies have to invest in many media to reach them.
Markets are much more competitive:
• Now the challenge is to fight against fragmentation,
saturation, and the storm of novelties that appear daily in the markets
where we compete.
b)
 Survey findings on international sourcing.
 International economists view on importance of sourcing.-
McKinsey's research findings
• Question: What is the EEA and which countries are EEA
countries?
• Answer: EEA stands for European Economic Area. Created in
1994, the EEA combines the countries of the European Union and member
countries of EFTA (European Trade Association).
Countries that belong to the EEA are: (30 countries).
• Austria, Belgium, Bulgaria, Czech Republic, Cyprus, Denmark,
Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy,
Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway,
Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, United
Kingdom.
• Countries that are EEA member countries but NOT part of the
European Union are:
✔ Norway,
✔ Iceland,
✔ Liechtenstein.
THE PURPOSE OF EEA
• The purpose of the European Economic Area is the
participation in the European Market trade and movement, without
having to apply to be one of the EU member countries.
• In part, Scandinavian customs regulations apply to
citizens from all EEA countries.
• Switzerland, while a member of EFTA, is neither in the EU nor
in the EEA.
GRANT THORNTON –SURVEY ON SOURCING TRENDS
• In order to continue providing up-to-the moment authoritative
coverage of the global supply chain, World Trade has partnered with the
well respected consulting firm Grant Thornton to survey sourcing trends
within leading U.S. manufacturing companies.
1. closer to home: In the following excerpt on sourcing practices
and trends, Grant Thornton reports that a substantial number of the three-
quarters of major U.S. companies currently sourcing internationally have
made changes or are planning to make changes to alter supply chains to
source closer to home. These changes are being driven by
considerations other than price, such as supply chain resiliency
(flexibility) and responsiveness, suggesting the many more—and
more complex—variables entering into supply chain decisions.
2. 77% SUPPLY CHAIN BUDGET SPENT ON INTERNATIONAL
SOURCING: Most source internationally

The vast majority of survey respondents are sourcing

internationally.
• 2008: More than three in four companies (77%) report
spending at least some of their 2008 supply chain budgets on
international sourcing.
• 2007: Essentially the same percentage as in 2007
(76%).
1. 38% SOURCING IN ASIAN COUNTRIES : Among those
sourcing internationally:
• China is the most frequent supplier country (22%),
• Other Asian countries (16%).
• Western Europe (14%).
• Canada (12%).
• Mexico (9%).
1. 77% RESPONDENTS SOURCED INTERNATIONALLY :
 % 2008 2007
Budget
spent % %
responde responde
nts nts

Supply 1 to 44% 47%

chain 25%
budget
spent 26 to 14% 14%
internati 49%
onally 51 to 19% 15%
100%

Who do Nil 23% 24%

dot source
internatio
nally

SUPPLY CHAIN BUDGET SPEND ABROAD

A growing proportion of supply chain budgets spent abroad
According to survey findings:
2008: More than four in 10 respondents (44%) spend between 1 and 25
percent of their supply chain budget on international sourcing,
2007: Down slightly from 47 percent in 2007.
2008: Nearly two in 10 survey respondents (19%) spend between 51 and
100 percent of their supply chain budgets internationally.
2007: This represents an increase from 2007, when 15 percent spent
between 51 and 100 percent of their supply chain budgets internationally.
The percentage of respondents who do not source internationally:
2008: (23%) is nearly the same as last year
2007: (24%).

2. MAJOR PRIMARY BENEFITS OF INTERNATIONAL

SOURCING IS REPORTED “LOWER COSTS” .79% RESPONDENTS

Off shoring: The good and bad

The vast majority of respondents (79%) report that they benefit from lower
costs, calling this the primary benefit of international sourcing.
Other reasons include:
• Increased production capacity (24%).
• Improved logistics for accessing international markets (22%);
• Access to technology or equipment (18%). Access to
intellectual property and ideas (11%);
• improved quality (11%).
1. LATE PRODUCT DELIVERY- 61% :The issues respondents
cite as problematic are varied.
• Although more than six in 10 respondents (61%) indicate the
prevailing problem with international sourcing is late product delivery.
Other frequently cited concerns are:
• Poor quality products (43%).
• Customs delays (38%).
• Products not built to specifications (28%).
• Nearly one-quarter (24%) complain of higher overall costs.
• More than one in 10 (11%) note problems with the loss of
intellectual property.

1. IMPACT ON ROI - MIXED FEELING 54% POSITIVE

IMPACT:
Is it profitable? Mixed feelings
Most respondents report that the return on investment (ROI) from offshoring
has been positive.
• More than half (54%) indicate that international sourcing has
increased their ROI.
• At the same time, nearly four in 10 (38%) say that there has
been no impact on ROI due to international sourcing.
An additional 9 percent say that international sourcing has worsened
their ROI.
• Considered together, the finding is striking: Nearly half of
respondents (47%) see offshoring as neutral or detrimental to their
ROI.

1. TRENDS MAY BE CHANGING AS THE COMPANIES

PREFER TO SOURCING CLOSER TO HOME
Plans for the future: Moving sourcing closer to home?
While the largest percentage of survey respondents that source
internationally relies on China (22%), this trend may be changing.
• In the coming year, many respondents are considering or
actively planning to bring their operations closer to home, relocating sourcing
to Mexico, Canada and, in some instances, the U.S.
• Nearly three in 10 respondents (28%) report that they brought
sourcing closer to the U.S. during the past 12 months.
• More than four in 10 (45%) say they plan to bring sourcing
closer to home during the next 12 months.

ECONOMIST’S VIEWS ON GLOBAL SOURCING

➢ VIEWS OF MR.JOHN MAYNARD KEYNES

John Maynard Keynes, the great British economist, is suddenly back in

vogue.
• During the current global economic downturn, you hear his
name invoked in discussions regarding stimulus packages in the United
States, China, Europe, and elsewhere aimed at preventing a 21st century
Great Depression. In writing The Economic Consequences of the Peace in
1919, he considered the state of globalization on the eve of the First World
War.
So Keynes reminds us of three basic lessons.
1. Globalization is not new.
2. The fabric of globalization is woven equally from the warp of
politics within and among countries and the weft of individual business
decisions.
3. Globalization’s progress is not inevitable..
• As Keynes and members of his generation who survived the
First World War knew well, globalization can be fragile indeed
Other economist views:
• A misguided sense of security and predictability began to
permeate sourcing decisions during the past two decades.
• International trade exploded, driven in part by the opening of
previously closed markets in both Asia and Eastern Europe.
• Sourcing from so-called low-cost countries blossomed. China
emerged as an economic powerhouse and supplier of choice in many sectors
• in the summer of 2008 The Wall Street Journal and The New
York Times both suggested high transportation costs might soon make
Asian sourcing prohibitively expensive in many industries,
• In January 2009 the Journal noted without irony that containers
are moving virtually free of charge in a sea of shipping overcapacity.
• Tracking the headlines leads to confusion, not clarity, in
thinking about an enduring strategy

➢ McKINSEY’S RESEARCH
• So how can we navigate global sourcing opportunities and
risks in the face of this uncertainty?
• McKinsey undertook a major research effort, tapping their
global network and cross-industry expertise to answer this question.
• Only charlatans or fools would pretend to predict the exact
contours of the global sourcing landscape 3 to 5 years hence, let
alone 20 years.
• However, organizations can and should confront the
uncertainties head-on in a rigorous, fact-based way, rather than
trying to wish them away.
• Deep understanding of global forces and scenario-based
analysis provides a more realistic approach to test potential sourcing
strategies than betting on a single view of the future.
• While there are many potential industry-specific subtleties that
can be teased out using this approach, three major themes emerge.
FINDING-1:
1. The underlying logic driving global sourcing will endure
despite the recent economic turbulence.
2. Whatever the scenario, global sourcing makes sense as
long as low-cost countries remain.
3. There is no reason to believe that significant gaps among
countries will disappear.
Take labor costs:
• While Chinese labor costs have been closing in on US costs in
percentage terms since the mid-1990s, the gap in absolute terms
between Chinese and US manufacturing labor costs per hour is
projected to increase to more than $26.00 in 2013, from roughly $17.50 in
1996.
• Regional variations in material inputs (such as steel) also place
offshore sourcing at an advantage in many categories.
• We should expect the expansion and increasing
sophistication of supplier networks in the major developing countries –
such as China, India, and Brazil – that will account for the majority of
global economic growth and new consumers in the coming decades.
• At the same time, balancing out basic price
considerations, time-to-market considerations (for example,
customized products with short lead times, such as some high-tech items),
sensitivities to transportation costs (automobile assembly, for instance),
and other factors will keep some level of production close to the consumer.
FINDING-2:
1. Relative cost advantages are dynamic, not static.
2. We should not be surprised to see intensifying competition
within low-cost countries, as regions vie to attract investment and jobs.
Again, consider labor costs.
• Just as there can be significant cost differences between, say,
factories in Michigan and Alabama in the United States, China is
hardly monolithic: we already see significant variations between labor costs
between Shanghai and the interior.
• likewise in India. States will compete with each other for
business.
• At the same time, companies will find intensifying competition
for their business between low-cost countries.
• In the lead-up to the current crisis, the Chinese economy’s
steady growth helped fuel wage inflation that has in turn given other Asian
“ultra” low-cost countries a potential edge.
• For example, in 1997 labor costs were roughly equal
between China and Vietnam;
• a decade later, a Chinese manufacturing worker cost nearly
three times as much as his or her Vietnamese counterpart.
• The impact of such changes is not theoretical.
• In 2009, for instance, Nike expects to make more shoes in
Vietnam than China for the first time in its history
FINDING-3:
1. Politics will matter—a lot—to the future of global
sourcing.
2. They always have, of course, but the relative stability of the
late 1990s and early 2000s masked this reality.

• Looking to the future, public policies will influence the

trajectory and pace of change across many variables commonly viewed as
simply “economic.”
• For instance, the Chinese government is not standing
idly by in the face of trends that are eroding Chinese competitiveness.
• While the Chinese government seeks to devise policies to
rebalance its economy toward more domestic consumption, value-
added tax rebates, industrial subsidies, and currency policy support
exporters.
• The Chinese government can pull all these levers and
more to flip the best case economics back in China’s favor for strategic
industries.
• But every country can play that game—and they are.
 • Whether or not countries will agree to play by common rules
in international trade or pursue their own nationalist or regional
policies will be critical
Today, the picture in overall trade policy remains mixed.
• World Trade Organization membership grew and average tariff
rates fell between 1988 and 2007.
• Businesses are more interconnected than ever before.
• Today, the picture in overall trade policy remains
mixed.
• World Trade Organization membership grew and average tariff
rates fell between 1988 and 2007.
• Businesses are more interconnected than ever before.
• Equally troubling for an open international trading system,
BBC World Service polling revealed that majorities in eight of the top ten
economies, including the United States, thought that globalization was
moving too fast for their tastes by January 2008.
• In the current economic crisis, most countries have not yet
succumbed to the temptation of significant beggar-thy-neighbor
protectionism. (sourcing near home).
• But if the downturn broadens and deepens, politicians may not
be able to resist the potential short-term political appeal of economic
nationalism or regionalism
• Last November, the ink had barely dried on G-20 2 leaders’
statement committing themselves to fight protectionism before
protectionism’s creep resumed.
• According to the World Bank, 17 of the G-20 have
implemented protectionist measures in the three months following the
Washington, DC, summit.
• The G-20 member countries are:
Argentina, Australia, Brazil, Canada, China, the European Union, France,
Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South
Africa, South Korea, Turkey, the United Kingdom, and the United States.
• So far the wealthier countries have resorted to subsidies
—think of the automobile industries in Argentina, Brazil, Canada, France,
Germany, United Kingdom, the United States, and others— while
developing countries tend to erect trade barriers.
• Security, safety, and environmental regulations could
become new forms of protectionism.
• We will not hazard to predict whether during the coming
decades globalization will resume, regionalism will rise, or extreme
economic nationalism will triumph.
• But we are confident that the companies most likely to survive
and thrive in the coming years will have internalized Keynes’
foundational insight that their global sourcing strategy must adapt to
a complex interplay of forces, both economic and political.
• As competition heats up among low-cost countries within
and among regions, successful companies will develop a deeper
understanding of the global forces influencing their sourcing economics,
thereby allowing them to anticipate potential “flips” among optimal sourcing
locations.
• In the coming years, executives will need to understand the
nuances of the local politics in their critical sourcing countries—for instance,
state politics in India—as much as they do their own home states.
• With investment in the knowledge of local politics and
suppliers, companies will be able to lobby and persuade to shape their
business environments in other countries.
• Others may diversify their sourcing portfolios across regions—
say, China and Mexico—to hedge against potential shifts in transportation,
critical input, and tariff costs.
• Some US companies may conclude the uncertainties facing
their industries are too great and thus decide to minimize risk by moving
some sourcing categories back from Asia to within NAFTA (North American
Free Trade Agreement). and DR-CAFTA (Dominican Republic–Central
America Free Trade Agreement) or even onshore again.
• Organizations will recruit, train, and retain different talent to
navigate these sourcing decisions, or be left behind.
• Whatever the future may bring, the ability to understand
global forces at play and employ fact-based analysis that envisions a range
of scenarios will provide competitive advantage over those organizations that
continue to deny the uncertainties and plan for only one “possible future.”