College of Business and Economics

Department of Management
1. Theme One Introduction to Management, International and Principle of Marketing

Course Guide Book for Introduction to management

The aim of this course guide book is designed to equip students with the basic concepts and
principles of management; significance of management; managerial functions an overview;
levels of management and types of managers; managerial roles and skills; universality of
management and is management an art, science, or profession. This course guide books help to
understand the students about introduction to Management Thoughts, forces Backing
Management Thoughts, a framework for the Management Thoughts, major Contributions of
Leading Management thinkers and approaches to the Study of Management. It helps them to
identify the concepts and need for planning; types of plans; planning process; objectives and
planning techniques. Meaning of decision-making: rational decision-making process; types
(programmed and non-programmed decisions). Under here you will see concept of organizing
and organization; formal and informal organization; organization chart; departmentalization:
meaning and bases; span of management; authority and power: source of power; line and staff
authority; delegation, centralization and decentralization and groups and committees. After jobs
are identified, grouped and structure is created then comes the other managerial task staffing
function; training and development function; maintenance and utilization and separation. It also
gives students to understand about concept and meanings of leadership theories; concept and
meaning of leadership styles; motivation; the concept of motivation and theories of motivation.
Finally you will understand about meaning and need for control; control process; types of
control; techniques of control and effective control system.

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UNIT 1: Fundamentals of management

Contents: Definition of Management; Significance of Management; Managerial Functions an

Overview; Levels of Management and Types of Managers; Managerial Roles and Skills;
Universality of Management and Is Management an art, Science, or profession?

Management has been given various but mutually supportive definitions by different authors and
scholars. Among others, the following are several of them:
Management is the art of knowing what you want to do in the best and cheapest way.
Management is a distinct process consisting of activities of planning, organizing, actuating
(motivating), and controlling, performed to determine and accomplish stated objectives with the
use of human beings and other resources.
To manage is to forecast and plan, to organize, to command, to coordinate, and to control.
Management is defined as the process of planning, organizing, staffing, leading and controlling
the efforts of organization members and of using all other organizational resources to achieve
stated organizational goals.
Significance of Management: ever since people began forming group to accomplish activities,
they could not achieve as individuals. Management has been essential to ensure the coordination
of individual efforts. As society has come to rely increasingly on group effort, and as many
organized groups have become large, the task of managers has been rising in importance.
Managerial Functions an Overview: Planning: It is a decision making process which involves
selection of missions and objectives and choose the best course of action to achieve them among
alternatives. Organizing: A managerial activity involves establishing an intentional structure of
roles for people to fill in an organization. Staffing: It is the process of filling and keeping filled
positions in the organization structure. Leading: It is influencing, motivating and directing people
so that they will contribute to organization and group goals. Controlling: It is the measuring and
correcting of activities of the subordinates to ensure that events conform to plans. The controlling
function involves the following steps; establishing standards of performance; measuring actual
performance and comparing it against the plan the goal; taking corrective measures if there are
devotions and actual results may differ from desired results in any area, but the three areas that
require the most attention are product quality, worker performance, and cost control.

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Levels of Management and Types of Managers: Top Managers: - composed of a comparatively
small group of executives and they are responsible for the overall management an organization.
Middle level Managers: these are managers who direct the activities of lower level managers and
sometimes extend to supervision of operating employees. First line Managers- Managers who are
responsible for the work of operating employees only and do not supervise other managers; they
are the first or lowest levels of managers in the organizational hierarchy First level management is
often called supervisors.
Functional and general managers: Functional Managers: -These are managers who are responsible
for only one organizational activity. General Managers:-these managers, on the other hand,
oversee a complex unit, such as a company, a subsidiary, or an independent operating division.
Managerial Roles and Skills: Managerial roles are specific categories of behavior/managerial
behavior. These ten roles can be separated into three categories /general groupings.
Interpersonal roles: three managerial roles are enacted when the manager engages in interpersonal
relationship. They are: Figurehead role: Managers, who are required to perform duties of
ceremonial and symbolic in nature such as signing documents, receiving visitors. Leader role: -
managers play this role through hiring, training, motivating and disciplining employees to get the
job done properly. Liaison role: - managers play this role by contacting people outside the group,
by serving as a link in a horizontal (as well as vertical) chain of communication. Informational
roles: All managers, to some degree, will receive and collect information from organizations and
institutions outside his or her own. Monitor/Nerve Center Role: - as a monitor /nerve center, the
manager tries to keep informed about what is happening in the organization or group.
Disseminator role: - the information a manager gathers, as a monitor must be gleaned (collected)
and transmitted to appropriate members of the organization. Spokesperson role: - it is the role of a
manager in transmitting selected information to outsiders. Decisional Roles: Both interpersonal
and informational roles are really includes to the decisional role. It involves decision-making. The
manager plays this role as: Entrepreneur: managers as an entrepreneur initiate and oversee new
projects that will improve their organization's performance. (Designing and initiating changes
within the organization. Disturbance handler: - taking corrective actions in none routine
situations/the manager deals with situations which he or she has little control. Resource allocates:
Managers play this role when they are in a position to decide exactly who should get what

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resources. Negotiator: participating in negotiating sessions with other parties to make sure the
organizations interests are adequately represented.
Managerial Skills: Technical skills:-These skills are the abilities of a manager that are necessary
to carry out a specific task. Human Skill: the ability to work with, motivate, direct individuals or
groups in the organization whether they are subordinates, pears, or superiors and the ability to
resolve conflict. Conceptual skill:-the ability of a manager to see the big picture of the
organization /to view the organization from a broad perspective.
Universality of Management: Basic applications of management in any organizations are the
same whether it is small or complex, business or non-business. The concept of universality of
management is also applicable to all levels of management within an organization.
Is Management an art, Science, or profession? Science: - It is an organized/systematized body of
knowledge constituting concepts, theories and principles concerning a particular field of study.
Art: Art is a skill or know-how, which can be modified to accomplish a desired concrete result. It
is doing things in light of the prevailing realities of a situation.
Profession:- is a vocation (carrier) requiring, body of specialized knowledge and Technical
proficiency If an organization needs to have rational and scientific decision making ability,
managers have to be specialized on a systematic body of management.

Unit 2- EVOLUTION OF MANAGEMENT THOUGHTS

Contents: Introduction to Management Thoughts, forces Backing Management Thoughts, a
framework for the Management Thoughts, major Contributions of Leading Management
Thinkers and approaches to the Study of Management.
Introduction to Management Thoughts: Organized endeavors, directed by people, responsible for
planning, organizing, leading and controlling activities have been in existence for thousands of
years. Forces Backing Management Thoughts: Management thoughts have took birth/evolved
under the anxiety of political, social and economic forces. A framework for the management
thoughts: In the past, the business houses, particularly corporate, did not have a high academic
stature and position in the society and it certainly compelled the scholars inculcate the academic
interest in the study of business management so that its real fruits could be realized for the
stakeholders under reference. Contribution of leading thinkers: 1. Classical School: The classical
development of management thoughts can be divided into- the scientific management, the
organizational management, the behavioral management and the quantitative management. The

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first two (scientific management school and organizational) emerged in late 1800s and early
1900s were based on the management belief that people were rational, economic creatures
choose a course of action that provide the greatest economic gain. These schools of management
thoughts are explained as below: Scientific Management School: Scientific management means
application of the scientific methods to the problem of management. It conducts a business or
affairs by standards established by facts or truth gained through systematic observation,
experiments, or reasoning. The followings individuals contribute in development of scientific
management school of management thoughts. They dedicated to the increase in efficiency of
labor by the management of the workers in the organization‟s technical core. They are: Charles
Babbage (1792-1871), Fredrick W. Taylor (1856-1915), Henry Gantt (1861-1919), Frank (1868-
1924) and Lillian (1878-1972) Gilbreth. Organizational School: The organizational school of
management placed emphasis on the development of management principles for managing the
complete organization. The contributors of organizational schools are: Henri Fayol (1841-1925),
max Weber (1864-1920), James D. Mooney and Alan C. Reilly, Chester Barnard (1886-1961)
and Herbert A. Simon. Behavioral School: The school of behavioral management theory
involved in recognition on the importance of human behavior in organization. The major
contributors: Robert Owen (1771-1858), Hugo Munsterberg (1863-1916), George Elton Mayo
(1880-1949), Mary Parker Follett (1868-1933) and etc. Quantitative School: With the
revolutionary change in the application of information technology came the quantitative school
of thoughts, which finds its foundation in decision theory, the application of statistics in
decision-making and the evolution of mathematical/econometric models that are nurtured by
computer technology.
Approaches to the study of management: A. Classical Approach The classical approach is also
known as traditional approach, management process approach or empirical approach. The main
features of this approach are as follows: It laid emphasis on division of labor and specialization,
structure, scalar and functional processes and span of control. Thus, they concentrated on the
anatomy of formal organization. Management is viewed as a systematic network (process) of
interrelated functions. Scientific Management Approach: The impetus for the scientific
management approach came from the first industrial revolution. Because it brought about such
an extraordinary mechanization of industry, this revolution necessitated the development of new
management principles and practices. Administrative Approach to Management: The advocates

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of this school perceive management as a process involving certain functions such as planning,
organizing, directing and controlling. Human Relation Approach to Management: The criticism
of the Scientific and Administrative Management as advocated by Taylor and Fayol,
respectively, gave birth to Human Relation Approach. Social System Approach to Management:
It is developed during social science era, is closely related to Human Relation Approach. It
includes those researchers who look upon management as a social system. Chester I. Barnard is
called as the spiritual father of this approach. Decision Theory Approach to Management:
Decision Theory is the product of management science era. The decision theorists emphasize on
rational approach to decisions, i.e. selecting from possible alternatives a course of action or an
idea. Major contribution in this approach has come from Simon.

UNIT 3 - managerial planning

Contents: Concepts and Need for planning; Types of plans; Planning process; Objectives and
Planning Techniques
Concepts and Need for planning: Planning is the primary function of management. The chief
function of management is to attain the objectives of the enterprise. For this, it is to plan not only
in the beginning but throughout the operations.
Several of the definitions are: Determining specified objectives & how to accomplish them. The
process by which managers set objectives, assess the future, & develop courses of action to
accomplish these objectives.
Types of plans: Duration /Time dimension/: Some plans are in effect for short periods, whereas
others stretch decades into the future. Hence, there are three planning horizons that can be
identified for classifying plans. Short range plans, Intermediate range plans and Long range plans
Scope dimension: Strategic Plans: These plans are comprehensive (full, broad) in scope & reflect
long-term needs & direction of the organization. Tactical planning: refers to the process of
developing action plans through which strategies are accomplished. Operational planning: is most
specific and detail. Repetitiveness: Single use plans: - are plans that are used once, and then
discarded. Program (project)- Programs are a complex of goals, policies, procedures, rules, task
assignments, steps to be taken, resources to be employed and other elements necessary to carry
out a given course of action; they are ordinarily supported by budgets. Budget- is statements of
expected results or resources set aside for specific activities expressed in numerical or quantitative

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terms. Standing plans: - are used to guide activities that occur over a period of time. Standing
plans exist in the form of (a) Policies- are general statements or understandings which guide or
channel thinking in decision-making. (b) Procedures/ Standard operating procedures- are plans
that describe a series of action to be taken in a given situation. (c) Rules & Regulations- are plans
that describe exactly how one particular situation is to be handled. Planning process: Identifying
and defining the real problem; establish clear-cut objectives; establishing the planning Premise;
identify alternative courses of action; evaluating Alternative Courses; selecting a course of action
/best Alternative; formulating derivative plans; numbering Plans by Budgeting and implementing
the plan. Importance/purpose of planning: To offset uncertainty; to focus attention on objectives;
to gain economical operation and to facilitate control
Objectives: an objective is an end result upon which the existence of an organization depends.
Classification of objectives: A. Hierarchy of Objectives
Strategic Objectives; Strategic objectives are broad statements describing where the organization
wants to be in the future. They pertain to the organization as a whole rather than a specific
department or division. Tactical Objectives; Tactical objectives are set by the middle management
level. These objectives define the outcomes that major departments and divisions must achieve in
order for the organization to reach overall objectives. Operational Objectives; Operational
objectives are specified and measurable results expected from departments, first-level managers,
work groups and individuals within an organization. Time Frame Objectives: Long-term
Objectives These objectives extend up to 5 years. They must be accomplished to ensure the long-
term survival of the organization. Intermediate Objectives These objectives cover a time period
between the short-term objectives and long-term objectives- probably 1-3 years. Short-term
Objectives These objectives can be accomplished in less than a year.
Characteristics of sound objective: Specific and Measurable; Not all objectives can be expressed
in numeric terms, but they should be quantified when possible. Challenging but Realistic;
Objectives should be challenging but not unreasonably difficult, i, e, objectives should be
challenging but attainable, given the resources and skills available. Cover Key Result Areas;
Objectives cannot be set for every aspect of employee behavior or organizational performance; if
they were, their sheer number would render them meaningless. Defined Time Period; Objectives
should specify the time period over which they will be achieved. A time period is a deadline
specifying the date on which objective attainment will be measured. Linked to Reward; the

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ultimate impact of objectives depends on the extent to which salary increases, promotions and
awards are on objective achievement. Priority of objective: The phrase priority of objectives
implies that at a given time, accomplishing one objective is more important than accomplishing
others. Measurement of objective: Objectives must be understandable and acceptable to those
who will help to achieve them. In fact, many people believe that specific, measurable objectives,
increase the performance of both employees and organizations and that difficult objectives, if
accepted by employees, result in better performance than do easier objectives. Management
expert Peter Drucker has stated that objectives should be established in at least eight areas of
organizational performance: (1) market standing, (2) innovations, (3) productivity, (4) physical
and financial resources,(5) profitability, 6) manager performance and responsibility, (7) worker
performance and attitude, and (8) social responsibility.
Planning Skills and Techniques: Forecasting and Decision Making
Forecasting: is the attempt to predict outcomes and future trends that can serve as basis for
planning, by inferences from known facts. Qualitative Forecasting:- it is a judgment-based
forecasting technique used when hard data are scarce or difficult to use.

UNIT 3 - Decision-making
Contents: Meaning of decision-making; rational decision-making process; types (programmed
and non-programmed decisions).
Decision Making: is defined as the process of selecting or choosing best course of action based
on some criteria from the number of alternatives. Rational decision-making process: Ascertain
the need for a decision/Identify the problem: The decision making process begins by determining
a problem exists; that is, there is an unsatisfactory condition. Establish decision criteria: Once the
need for a decision has been determined, there comes a need to establish decision criteria which
requires identifying those characteristics that are important in making the decision. Allocate
weights to criteria: - the identified criteria should be weighted based on their importance and
arranged in priority. This is because some are obviously more important than others and we need
to weight each criterion to reflect its importance in the decision. Develop alternatives: This
involves developing a list of the alternative that may be viable in dealing with the stated
problem. Evaluate alternatives: - Once the alternatives are enumerated. The decision maker must
critically evaluate each one and identify the strong and weak points when compared against the
criteria and the weights established. Select the best alternative: - After we evaluate the

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alternatives, the next logical step is to select the best alternative that suits to solve our decision
problem. Putting decision into action: After selecting the best alternative, we implement or put it
into action. This requires communication of decisions to subordinates, getting acceptance of the
decisions, and getting support and cooperation for converting the decision in to effective action.
Following up decisions: - Having implemented the decision, the manager should compare the
results of that course of action with the desired outcome, if necessary, take corrective action.
Types (programmed and non-programmed decisions): Programmed decisions: are the kinds that
managers face time and again. These decisions are programmable because of a specific
procedure can be worked out to resolve them based on experience in similar situations. Non-
programmed Decisions: are used to solve nonrecurring problems. Decision making situations:
Decisions under certainty:- decisions made in which the external conditions are identified and
very predictable /whenever there is complete data & information/
Decisions under risk:- those decisions in which probabilities can be assigned to the expected
outcomes of each alternative.

UNIT 4 - THE ORGANIZATION FUNCTION

Contents: Concept of organizing and organization; formal and Informal Organization;
organization chart; departmentalization: Meaning and Bases; span of Management; authority and
power: source of power; line and staff authority; delegation, centralization and decentralization
and groups and Committees.
Concept of organizing and organization: To begin with the definition of organizing, there is no
universally accepted definition of organizing. Different authors gave various but supplementary
definitions. Among others the following are a few. It is the establishing of effective behavioral
relationships among persons so that they may work together efficiently and gain personal
satisfaction in doing selected tasks under given environmental conditions for the purpose of
achieving some goals and objectives
Formal and Informal Organization: The organizing function results in an intentional formal
organization structure of roles in a legally and formally organized enterprise. The design
(framework) of an organization can be divided into two categories: The formal and informal
organization. Formal Organization: It is an organization, which is established with intentional
structure of roles in a formally organized enterprise. Informal Organization: It is a network of

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personal and social relations not established or required by the formal organization but arising
spontaneously as people associate with one another. Organizational Structure, chart and Manual
Organizational Structure: can be defined as the arrangement and interrelationship of the
component parts and positions of a company. Organizational Charts: - are diagrams of the
organizational structure, showing the functions, departments, or positions of the organization and
how they are related. Organizational Manual:- is the description of the organizational chart, and
is designed to promote, understanding of the basic organizational structure by means of
descriptions of the various jobs that may be listed only by title on the charts.
The most common bases of departmentation used by organizations are: Functional
Departmentation, Product Departmentation, Geographic / Territorial Departmentation, Customer
Departmentation, Process Departmentation and Matrix /project/ and task force.
Functional Departmentation: refer to the various responsibility areas of an organizational
component. It is the process of grouping the organization's activities in to units in logical manner
on the basis of essential functions that must be performed to attain organizational
objectives/goals. Product Departmentation: It is the grouping of activities on the basis of product
or product line. It is adopted by (commonly used by) manufacturers who produce and sell a
number of product lines made up of several different items. Departmentation by Geographical
Area/Territory: It is often referred to as area or territorial Departmentation, and it groups
business activities on the basis of geographic region or territory, enabling a firm to adapt to local
customs and laws and to survey customer more quickly. Customer Departmentation: It is the
grouping of enterprise activities based on customers' interests. Companies that must provide
special services to different groups set up departments by types of customers, using customer
departmentation.
Process or Equipment Departmentation: is the grouping of enterprise activities according to the
products' manufacturing process. This method of departmentation is logical and used when the
machines or equipment used require special skill for operating and are of large capacity which
eliminate organizational diving or have technical facilities which strongly suggest a concentrated
location. Matrix departmentation: It is an organizational arrangement that developed because of
the need for quick completion of highly technical projects that required significant contributions
by two or more functional groups. It begins with functional stricture and then another structure
organized by product or by client /customer or by project is overlaid upon the original structure.

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Span of Management /span of control/- refers to the number of subordinates that a single
manager can directly, immediately and effectively supervise. It is related to the levels.
Authority and power: source of power: Authority is the right to command subordinates action. It
is defined as the legitimate power a manager possesses to act and make decisions in caring out
responsibilities. Responsibility is the obligation of the manager to carry out assigned duties.
Line and staff authority: The concept of line and staff is related to authority and
positions/functions. This is the relationship between different types of authority exercised by
managers of an organization. These three forms of authority are called line staff and functional
authority. Line authority: the authority of those managers directly responsible, throughout the
organization chain of command, for achieving organizational goals. It enables a manager to tell
subordinates what to do. Both line and staff managers have line authority over their subordinates.
Staff authority: The authority of those groups of individuals who provide line managers with
advice and services. People in staff positions assist and advice line managers. Line and staff
positions/functions: To classify a position as line or staff, it is related to the degree to which the
function in question contributes to the direct achievement of organizational objectives.
Delegation, centralization and decentralization: of human limitation, a single person can't do all
tasks necessary for accomplishing a group purpose. By the same taken, as enterprises grow, it is
difficult for one person to exercise all the authority for making decisions. To solve these
problems managers share their authority and responsibility to their subordinates which is
delegation. Delegation is the act of assigning formal authority and responsibility for completion
of specific activities to a subordinate. Delegation is the assignment to another person of authority
and responsibility to carry out specific activities. Centralization is the tendency to disperse
decision-making authority in an organized structure. Decentralization is the opposite of
centralization. In a centralized set up, decision making authority is concentrated in a few hands at
the top. Groups and committees: The collection of individuals or group of individuals may
consider as groups. Groups of a given organization may serve as represented committees if they
have duties and responsibilities to make some decisions about their organization and about their
own issues in particular.

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UNIT 5 - Staffing and organization
Contents: The staffing function; training and development function; maintenance and utilization
and separation.
Staffing function: The managerial function of staffing is defined as filling and keeping filled
positions in the organizational structure through identifying work-force requirement,
inventorying the people available recruiting, selecting, placing, promoting, appraising,
compensating the training and/or developing both candidates and current job holders to
accomplish their tasks effectively and efficiently.
Staffing process: Human resource planning /Manpower planning/; Recruitment; Selection;
Orientation and Induction; Training and Development; Performance Appraisal; Transfer;
(Promotion, demotion, lateral transfer) and Separation. Human resource planning /Manpower
planning/; It specifically deals with: - The determination of HR requirements both in quality and
quantity and their recruitment, selection and placement. The HRP is the process of determining
the need of the right person at the right time to the right job, Recruitment: It is the process of
reaching out and attempting to attract potential candidates who are capable of and interested in
filling available positions of an organization. It is concerned with developing a pool of job
candidates, in line with the human resource plan. Sources of Recruitment: Sources of supply are
the places, agencies, and institutions to which recruiters go to seek potential candidates that will
fill the vacant positions or the job needed. Internal Recruitment / recruitment from within: this
involves recruitment within the organization; it could be through promotion lateral transfer,
demotion or any others from. External /outside/ recruitment: It involves recruitment outside the
organization. The major alternative sources are: Direct application; Employee referrals /word of
mouth/ ; Advertising; Educational institutions; Private/public employment agency and Other
sources such as professional associations. Selection: It can be defined as the process of
determining from among applicants which one fills best for the job description and specification
which is offered to the job within the organization. Orientation and socialization/induction/: It is
designed to provide a new employee with the information he/she needs in order to function
comfortably and effectively in the organization. Training and development: Organizing human
resources is a dynamic activity. Job demands change, which requires altering and updating an
employee's skills. Training methods: On-the-job training: involves learning methods and
techniques by actually doing a job (performing the work) and increasing the levels of skills of the

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employee. Off the job training: This technique involves participation of employees in a series of
events removed from the actual performance of the organization and the work situation.
Factors Affecting composition Decision: External: - the government through wage controls and
guidelines, wage and hour regulations Unions influences demanding, economic conditions the
labor market. Internal: - size and wage of the organization Labor budget (resources allocation
strategies) Managerial philosophy, method of payment, the time they worked.
Fringe benefits (supplementary composition): There are extra payments given to an employee in
addition to salary or wage. Fringe benefits constitute a significant portion of the employee pay
(some time up to 40% of payroll expenses. There are two types of fringe benefits. Time-off pay:
- payment for the time not worked and includes, paid vacations, paid holidays, paid sick leave.
Non-pay benefits: - not paid in cash but include expenditures on items such as medical service,
transportation, and accommodation, insurance, cafeteria service, education programs, child care
facilities. Performance Appraisal: It is the process used to determine whether an employee is
performing according to what is designed or intended. Transfer: It is a shift of a person from one
job, organization level, or location to another. The transfer may be a promotion, demotion, or a
shift to another same level position /lateral transfer. / Promotion: refers to a shift for
advancement of an employee to a higher job with more employment and prestige, higher status,
and higher responsibility. Demotion: refers to a shift of an employee to a lower position in the
hierarchy due to inefficiency, and incompetence to fulfill assigned tasks. Lateral transfer: refers
to the movement of an employee from one job or position to another without involving any
significant change in the employment and status. Separation: This refers to those factors that
bring the termination or ceasing of the relationship between the organization and the employee.
Separation may result from such factors as resignation, layoff, discharges, and retirement.

UNIT 6 - Directing function

Contents: Concept and meanings of Leadership theories; concept and meaning of Leadership
Styles; motivation; the concept of motivation and theories of motivation.
Leading is the process of influencing people so that they will contribute to organization and
group goals.
Element of directing or directing: A. Leadership theories; Leadership is the process of
influencing individuals and groups to set and achieve goals. Theory of leadership: The trait
theory of leadership:- Traits are inborn and inherent personal qualities of individuals. The

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behavioral theory of leadership:- The behavioral theory of leadership focused on what leaders do
rather than their traits. Studies showed that one set of traits/leadership style might not be equally
appropriate in all situations. The situational /contingency/ theory of leadership: According to this
theory, leadership is strongly affected by a situation from which a leader emerges and in which
he/she works. Leadership styles: Autocratic style -I approach: - Is a leadership approach in which
a manager does not share decision-making authority with subordinates. Participate (democratic)
styles-We approach:- It is a leadership approach in which a manager shares decision making
authority with subordinates. Free-rein style-They approach: - It empowers individuals or groups
to function on their own, without direct involvement from the managers to whom they report.
The style relies heavily on delegation of authority, and works best when the parties have expert
power, when participants have and know how to use the tools & techniques needed for their
tasks. Motivation refers to the forces to a person that arouse enthusiasm and persistence to pursue
a certain course of action. Rewards are of two types: Intrinsic reward - the satisfaction a person
receives in the process of performing a particular action. The completion of a complex task may
bestow a pleasant feeling of accomplishment, or solving a problem that benefits others may
fulfill a personal mission. Extrinsic rewards - given by another person, typically the manager,
and include promotion and pay increases.
Theories of motivation
Hierarchy of Needs Theory (Abraham Maslow) It proposes that humans are motivated by
multiple needs and that these needs exist in hierarchy order: Physiological needs - the need for
food, water air & sex, Safety needs - the need for security & safety, Belongingness/Social needs
the need for friendship, interaction and love and Esteem needs - the need for respect &
recognition Self-actualization needs - the ability to reach one's potentials.
The Two-Factor Theory (Herzberg 1975): The findings of the two-factor theory suggested that
the work characteristics associated with dissatisfaction are quite different from those pertaining
to satisfaction which prompted the notion that two factors influence work motivation. These
factors are hygiene factors and motivation factors. Hygiene factors (salary, job security, working
conditions, status; Company policies; quality of technical supervision and quality of
interpersonal, relationships among peers, supervisors, and subordinates) are the primary elements
involved in job dissatisfaction. When present in sufficient quality, they have no effect; when
absent, they can lead to job dissatisfaction. Motivation factors (achievement, recognition,

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responsibility, advancement, the work itself, and possibility of growth) are the primary elements
involved in job satisfaction. When present, they can stimulate personal and psychological
growth. Theory X and Theory Y (Douglas McGregor 1960): Theory X is a philosophy of
management with negative perception of subordinates‟ potential for work and attitudes toward
work. Theory Y is a philosophy of management with a positive perception of subordinates'
potential for and attitudes toward work. Communication is the tool in which we exercise to
influence others, bring about changes in the attitudes and views of our associates, motivate them,
establish and maintain relations with them. Communication is the transfer of information from
one person /sender/ to another person /receiver/ to achieve goals. Communication process
Communication takes place in the relationship between a sender and a receiver. It can flow in
one direction and ends there. A model of the communication process: Sender: The sender/source
of message initiates the communication. In an organization the sender will be a person with
information, needs or desires and a purpose for communicating them to one or more other
people. Receiver: The person whose senses perceive the sender's message. Encoding: It takes
place when the sender translates the information to be transmitted into a series of symbols.
Decoding: The process by which, the receiver interprets the message and translates it into
meaningful information. Channel: The formal medium of communication between a sender and a
receiver. Noise: Any factor that disturbs confuses or interferes with communication. Noise can
arise along what is called the communications channel or method of transmission. Message: The
encoded information sent by the sender to the receiver.
Feedback: It's the response of the receiver to the sender, also passes through the same process.
Communication can be: Formal Communication
a) Downward communication: Messages from higher authority levels to lower levels.
b) Upward communication: Messages from subordinates to supervisors and to higher levels.
c) Horizontal communication: that flows between persons of equal status in the organization.
d) Vertical communication: May be downward or up word communication.
ii) Informal Communication: Grapevine and Gossip, etc.

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UNIT 7: The controlling function
Contents: Meaning and need for control; control process; types of control; techniques of control
and effective control system.
Controlling is the measurement and correction of performance in order to make sure that
enterprise objective and plans are accomplished.
The control process: The control process has the following four steps: Establish; Standards and
methods of measuring performance; Measure the performance; Comparing the performance with
the standards and Take corrective action. Types of control: Prevention control: focus on
establishing conditions that will make it difficult or impossible for deviations from norms to
occur. Feed forward controls are in process controls, because they allow people to act on a
process or activity while it is proceeding, not after it is completed. Feedback controls are post
action and focus on the results of the process. The information derived is not used for corrective
action on a project because it has been completed. Making controls effective: Managers face a
number of challenges in designing control systems that provide accurate feedback in a timely,
economical fashion that is acceptable to organization members. If controls are to work, they
must be specially customized to plans, to the individual, managers and to the needs for efficiency
and effectiveness.
These are guidelines for making controls effective: Identifying key performance areas,
identifying strategic control points, tailoring controls to plans and positions, tailoring controls to
individual managers, objectivity of controls, flexibility of control, fitting the organizational
climate and economy of controls. Techniques of control
A. Budgetary methods; Budgets are formal quantitative statements of the resources set aside for
carrying out planned activities over given periods of time. Operating budgets: The most common
types of operating budgets are the expense, revenue and profit budgets. Expense Budgets: are of
two types – engineered cost budgets and discretionary cost budgets. Engineering cost budgets
usually describe the material and labor costs involved in each production item as well as the
estimated overhead costs. Discretionary cost budgets are typically used for expense centers-
administrative, legal, accounting, research etc. Revenue Budgets: are meant to measure
marketing and sales effectiveness. It is the most critical part of a profit budget. They consist of
the expected quantity of sales multiplied by the expected unit-selling price of each product.
(Q*P) Profit Budgets: combine cost and revenue budgets in one statement. They are also called

16
master budget, which consists of a set of projected financial statements and schedules for the
coming year. Variable budgets: Variable budgets are cost schedules that show how each cost
should vary as the level of output varies. Variable budgets are used where operations are
repetitive, where there are a large number of different expenses and where these expenses can be
accurately estimated. Three types of costs are: fixed costs are those that are unaffected by the
amount of work being done. Variable costs are expenses that vary directly with the quantity of
work being performed ex: raw material. Semi variable costs are those that vary with the volume
of work performed but not in a directly proportional way ex: short term labor costs. Zero base
budgeting: The enterprise programs are divided into packages composed of goals and activities
and then costs are calculated from the base. By starting the budget of each package from base
zero, costs are calculated afresh for each budget period, without referring the changes from the
previous period. B. Non-budgetary control methods: Statistical Data: Statistical analysis with
wider application of tools and techniques, and the clear presentation of statistical data, whether
of a historical or a forecast nature, are important to control.
Special Reports and analysis: For control purposes, special reports and analyses help in
particular problem areas. Auditing: validates the honesty and fairness of financial statements to
provide a critical basis for management decisions. It is a process of appraisal.
External audit is largely a verification process involving the independent appraisal of the
organization‟s financial accounts and statements. Internal audit or operational auditing is carried
out by members of the organization. Its objectives are to provide reasonable assurance that the
assets of the organization are being properly safeguarded and that financial reports are kept
reliably and accurately enough for the preparation of financial statements. 4. Personal
Observation: Managers have the risk of seeing that enterprise‟s objectives are accomplished by
people and go to the area of activities and taking notice of what is being done. Modern methods
of control. Program Evaluation And Review Technique: (PERT) is a refinement of the original
Gantt charts, which were designed to show in bar chart form, the various things that must be
done, and when in order to accomplish a program, using the sequence of events and the times
required for each program, one can determine the critical path. Management Information System
(MIS): is a formal system of gathering, integrating, comparing, analyzing and dispersing
information internal and external to the enterprise in an effective and efficient manner.

17
Computers: are extensively used and their impact on managers at various organizational levels
differs. Computer networks link workstations with each other.
References
 C.B Gubta, “Business Organization and Management”, Sultan Chand & sons, New Delhi.
 David R. Hampton, “contemporary management”, McGraw Hill Inc., New York, 1981.
 Ernest Dale. “Management. Theory and Practices.” McGraw Hill Inc. New York, 1981.
 Fred Luthans, “Introduction to Management, A Contingency Approach”, McGraw Hill
Book Company New York, 1973.
 George R. Terry and Stephen G. Franklin, “Principles of management”, All India Traveller
book Sellen New Delhi, 1991.
 Harold Koonz, Cyril O‟Donnell and Heinz Weihrich, “Management”, McGraw Hill
International New York, 1980.
 Henry sisik, “Management and Organization”, South Western publishing Co., Chicago,
1982.
 Peter F. Druker, “Management: Task and Responsibility”, IIaper& Row, New York, 1973.
 Peter F. Druker,” The practice of management” Haper& Brothers, New York, 1986.
 Samul C. Certo, “Principles of Modern Management”, Allyn and Bacon Inc., Boston, 1986.
 Y.K Bushan, “Fundamentals of business Organization and Management”, Sultan chand&
sons, New Delhi.
 Robert N. Lussier, Management: concepts, Applications, and skill development, “South
western college publishing, 1997.
 Richard m. Hodgets& Donald F. Kuralko, “Management,” Harcount Brace Jovanovich
publishers, 1991, third ed.
 Plunkett and Attner, Introduction to management, Wadsworth publishing company, 1994.
5thed and 6thed.
 R.D Agrawal “ Organization & Management” New Delhi
 Bantieet.al. Introduction to Management.
 Basu C. R., Business Organization and Management, 2nd Edition, Tata McGrawHill Ltd.
 Brech, E. F. L., Organization: The Framework of Management, 2nd Edition, Longman.
 Louis A. Allen, Management and Organisation, McGraw-Hill Kogakusha, Ltd.
 Laurie J. Mullins, Management and Organizational Behaviour, Pitman.
 Robbins Stephen P. and Mary Coulter, Management, 2002, Prentice Hall of India.
 Robbins Stephen P. and Decenzo David A., Fundamentals of Management, 3rdEdition,
Pearson Education Asia.

18
Model excises
1. The purchasing manager of XYZ factory discusses and bargains with raw material suppliers
to purchase raw materials with high quality that will be used in production of cement. Which
role is he playing?
A. Liaison role C. Spokesperson
B. Negotiator D. Entrepreneur
2. The production manager of Techno Mobile Company designed a new model of cell phone
which is faster, durable, and convenient with additional features that are easy to use and
understand when compared with competitors. Which role is he playing?
A. Liaison role C. Negotiator
B. Figure head role D. Entrepreneur
3. Which one is odd about Importance/purpose of planning?
A. To offset uncertainty
B. To focus attention on objectives
D. To gain economical operation
C. To facilitate control

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4. Operational plan refers to;
A. is most specific and detail C. is mainly short-range
B. is concerned with the day-to-day activities D. It is mainly long-range
5. In controlling managerial function when deviations from the plan exist which one of the
following is the next task of the manager?
A. Establishing standards of performance
B. Measuring actual performance
C. Comparing actual performance against the plan, the goal /the established standard
D. Taking corrective measures
6. The general manager of XYZ factory provide a press conference to the government,
customers and other concerned bodies about its current operation. What kind of role is he
play?
A. Disseminator role C. Negotiator role
B. External Liaison role D. Spokesperson role E. figure head role
7. Dr. Rahel who works in TikurAnbesa Specialized Hospital undertakes a closed meeting with
the government, foreign donors and other concerned stakeholders about the health care
practice of the Hospital. So, which level of management do you think she is?
A. Top level manager C. Lower level manager
B. Middle level manager D. Firs line manager
8. The interpersonal aspect of management, which deals directly with influencing, and
motivating the subordinates for the accomplishment of the pre-determined objectives.
A. Organizing C. Controlling
B. Planning D. Staffing
9. MrBelachew is a manager of XYZ PLC which produces and supplies house hold utensils.
But now he needs to develop managerial plan for the development of new additional
products. In which horizon will the plan categorized?
A. Short range plan C. Intermediate plan
B Long term plan D. Time dimension
10. All are examples of tactical plan, except
A. Developing annual budget for each department, division
B. Choosing specific means of implementing strategic plans
C. Deciding on course of action for improving current operations
D. Deciding on course of action for improving future operation
11. A firm have got difficulty in meeting payments for salary to its employees; so the manager of
the firm try to maintain cash balance more important than achieving minimum profitability.
What kind of objective is this?
A. Priority of objective
B. Short - term profits versus long - term growth
C. Profit margin versus competitive position
D. Direct sales effort versus development effort
12. One is among the examples of marketing objectives.
A. Ratio output to capital costs C. Inventory turnover
B. Number of outlets D. Return to capital
13. Which one refers to the process of influencing the behavior of people by making them strive
voluntarily towards the achievement of organizational goals?
A. Supervision C. Communication

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 B. Leadership D. Motivation
14. Which style of management would be most effective in an emergency situation?
A. Autocratic C. laissez-faire
B. Delegating D. Participating
15. According to Herzberg, in order to provide employees with job satisfaction, managers should
concentrate on which one?
A. Hygiene factors C. External factor
B. Motivation factors D. Compensation
16. Which style of leadership takes account of others‟ views, opinions and ideas?
A. Laissez-faire style C. Autocratic style
B. Democratic style D. Situational style
17. Among the component of communication process, one is encoder?
A. Sender of a message C. Receiver of a message
B. Communication media D. Noise
18. Which approaches to the study of leadership emphasize on personality of the leader?
A. Contingency Theory C. Behavioral Theory
B. Trait Theory D. Situational Theory
19. Among the following which one revealed the terms “employee-centered” and “production-
centered” to describe leader behavior?
A. Ohio State Leadership Studies C. Contingency theory
B. Michigan Studies D. Trait theory
20. Contingency theories of leadership are based on the belief that:
A. There is no single style of leadership appropriate to all situations
B. There is a single style of leadership appropriate to all situations.
C. There is a single style of leadership appropriate to all situations.
D. Democratic leadership style is the best leadership style.
21. Which of the following is INCORRECT about the characteristics of motivation?
A. Determined by human needs C. An ending process
B. May be financial or non-financial D. Determined by human needs
22. Downward communications refer to the flow of communication from:
A. One departmental manager to another C. Superior to subordinate
B. Subordinate to superior D. Similar department
23. Which of the following ways help in improving communication effectiveness?
A. Ensuring proper feedback C. Being a good listener
B. Ensuring follow up patience D. All of the above
24. Which of the following statements does not highlight the relationship between planning and
controlling?
A. Planning and controlling are separable twins of management functions.
B. Planning without controlling is meaningless; controlling without planning is blind.
C. Planning is prescriptive, controlling is evaluative.
D. Planning and controlling are interrelated and interdependent management functions.
25. Distinguish the stage at which the preventive control takes place.
A. Input C. Output
C. Process D. Can‟t be determined

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26. Among the following, which one is NOT important for controlling function in an
organization?
A. It ensures order and discipline. C. It restricts coordination in action.
B. It helps in judging the accuracy. D. It improves employee motivation.
27Assume you are HR manager of a factory and set to reduce the workers absenteeism in a
factory by 20% is an example of:
A. Quantitative standard C. Qualitative standard
B. Deviation D. Process
28. Among the following process of controlling, which one is comes at the third steps of the
process?
A. Take corrective action C. Compare performances
B. Establish standards D. Measure performances
29. A type of control that mainly focus to prevents different problems rather than to correct
them:
A. Feedback control C. Feed forward control
B. Concurrent control D. Ongoing control
30. One of the following statements is incorrect about on-the job training?
A. Trainees are passionate to practice on the job training because they are not removed from
their day-to-day activities.
B. It is not inconvenient for small number of employees
C. It creates disinterest of trainees because they are not removed from their day to day activities
D. It is widely applicable in organizations than off- the job training
31. The process used to determine whether an employee is performing according to what is
designed or intended is concerned with
A. Fringe benefits C. Transfer
B. Performance appraisal D. Orientation
32. It is the mutual process whereby the organization decides whether to make a job offer and the
candidate decides on the acceptability of the offer.
A. Human resource planning C. Recruitment
B. Performance Appraisal D. Selection
33. All are an examples of external recruitment, except
A. Direct application C. Employee referrals
B. Advertising D. Promotion
34. One of the following statements is incorrect about Orientation?
A. General information about the daily work routine
B. A detailed presentation, perhaps in a brochure
C. A review of the organizations history
D. An appraise of the employee work performance

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2. Course Guidebook for Principles of Marketing Course

CHAPTER 1: An Overview Of Marketing And Marketing Management

The concept of market is very important in marketing. The American marketing Association
defines a market as “The aggregate demand of the potential buyers for product or a product or
services “. Philip Kotler defines “A market as an area of potential exchanges”.
 "Marketing is the human activity directed at satisfying needs & wants through exchange
process" (Philip Kotler)
 "Marketing management is the process of planning and executing the conception, pricing,
promotion, and distribution of ideas, goods, and services to create an exchange that
satisfy individual and organizational goals." (Philip Kotler)
To conclude, marketing definitions has the following implications.
 The entire system of business activities should be customers oriented. Customer wants
must be recognized & satisfied.
 Marketing activities start with an idea about a want – satisfying product and should not

end until the customer wants are completely satisfied, which may be some time after the

Marketing starts with human needs & wants. People need food, air, water, clothing, and shelter

to survive. Beyond this, People have a strong desire for recreation, education, and other services.

Human need is a state of deprivation of some basic satisfaction. People require food, clothing,

shelter, safety, and belonging & esteem. Wants are desires for specific satisfiers of needs. Human

wants are continually shaped & reshaped by social forces & institutions, including churches,
schools, families and business cooperation. E.g. A person needs food but wants Ingera etc.

Demands are wants for specific products that are backed by ability and willingness to buy

them. Wants become demands when supported by purchasing power.. A product is anything

that can be offered to satisfy a need or want. Value is the consumer‟s estimate of the products

overall capacity to satisfy his or her need.

Exchange is the act of obtaining a desired product from someone by offering something in
return. A transaction is a trade of values between two or more parties.
E.g. If Mr. A give X to Mr. B and received Y in return, this is a transaction.

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 Relationship marketing is the practice of building long-term satisfying relations with key
parties. A market consists of all potential customers sharing a particular need or wants who
might be willing and able to engage in exchange to satisfy that need or want. Marketers are
skilled in stimulating demand for a company's products, but this is too limited view of the
tasks they perform.
Types of Demand
 Negative demand - Consumers dislikes the product and may even pay a price to avoid it.
 Nonexistent demand - Consumers may be unaware or uninterested in the product
 Latent demand - Consumers may share a strong need that cannot be satisfied by an existing
product.
 Declining demand - Consumers begin to buy the product less frequently or not at all.
 Irregular demand - Consumer purchases vary on a seasonal, monthly, weekly, daily, or even
hourly basis.
 Full demand - Consumers are adequately buying all products put into the market place.
 Overfull demand - More consumers would like to buy the product than can be satisfied.
Marketing is important globally, to the economy and in an individual organization. Marketing
plays a major role in any individual and individual organization in the socio-economic system of
a given country and further in the global economy. Marketing people are involved in marketing
10 types of entities: goods, services, experiences, events, persons, places, properties,
organizations, information, and ideas.

In Production concept the company mainly tries to increase production irrespective of demands
of the customer. The selling concept believes that customers will not buy products unless
persuaded to do so. The product concept says that customers will always buy products which are
better in terms of quality performance and features. Marketing Concept just like selling is a
necessity, similarly branding and marketing are a necessity in some products. The marketing
concept proposes that the success of a firm depends on the marketing efforts of the company in
delivering a value proposition. The societal marketing concept leads to a company orientation
which believes in giving back to the society what it had received from the society.

Possession utility is created when a customer buys the product. Time utility refers to having a
product available when you want it. Place utility exists when a product is readily accessible to
potential customers. Information utility is created by informing prospective buyers that a product
exists. Form utility is associated primarily with production – the physical or chemical changes
that makes a product more valuable.

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CHAPTER 2: MARKETING ENVIRONMENT
The company‟s marketing environment consists of the actors and forces external to the
marketing function of the firm that impinge on the marketing management ability to develop and
maintain successful transactions with its target customers

External macro environment affects all firms includes demographics, economic conditions,

culture, and law. External micro environment affect a particular firm; consists of suppliers,

marketing intermediaries, and customers. Successful marketing depends largely on a company's

ability to manage its marketing programs within its environment.

Six largely uncontrollable external forces influence an organization's marketing activities. They
are:

1. Demography: The statistical study of human population and its distribution is

demography.
2. Economic condition: People alone do not make a market. They must have money to
spend and be willing to spend it.
3. Competition: A Company's competitive environment obviously is a Major influence on
its marketing programs.
4. Social and cultural forces: The task facing marketing executives is becoming more
complex because our culture patterns- life styles, social values, beliefs-are changing
much more quickly.
5. Political and legal forces: Every company's conduct is influenced more and more by the
political and legal process in the society.
6. Technology: Technology has a tremendous impact on the life style, consumption pattern,
and the economic well-being.

Three environmental forces that are external, but are a part of a company's marketing system, are
that firm's market, its suppliers, and its marketing intermediaries
 The market really is what marketing is all about- how to reach it and serve it profitably and is
a socially responsible manner. A market can be defined as 'a people or organizations with
wants (needs) to satisfy, money to spend, and the willingness to spend it
 The people or firms who supply the goods or services that we need to produce what we sell
are critical to our marketing success. And that is why we consider a firm's suppliers as part of
its marketing system.
 Marketing intermediaries are independent business organizations that directly aid in the flow
of goods and services between a marketing organization and its markets. There are two types
of intermediaries:-
 Wholesalers

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  Retailers
INTERNAL MARKETING ENVIRONMENT
Internal forces that are controllable also shape an organization's marketing system by
management. These internal influences include a firm's production, financial, and personal
activities.

CHAPTER3: BUYING BEHAVIOR

Consumer behavior is the actions a person takes in purchasing and using products and services,
including the mental and social processes that precede and follow these actions. Consumer
Buying Behavior refers to the buying behavior of final consumers. Individuals & households
who buy goods and services for personal consumption.

Types of Buying Decision Behavior:

1. Complex Buying Behavior: Complex buying behavior involves a three step-process. First, the
buyer develops beliefs about the product. Second, he/she develops attitudes about the product.
Third, he/she makes a thoughtful choice, consumers engage in complex buying behavior when
they are highly involved in a purchase and aware of significant differences among brands.

2. Dissonance – Reducing Buying Behavior: Sometimes the consumer is highly involved in a

purchase but sees little difference in brands. The high involvement is based on the fact that the
purchase is expensive infrequent and risky. In this case, the buyer will shop around to learn what
is available but will buy fairly quickly, perhaps responding primarily to a good price or to
purchase convenience

3. Habitual Buying Behavior: Many products are bought under conditions of low involvement
and the absence of significant brand differences. Consider salt, consumers have little
involvement in this product category. They go to the store and reach for the brand. If they keep
reaching for the same brand, it is at of habit, not strong brand loyalty.
4. Variety Seeking Buying Behavior: Some buying situations are characterized by low
involvement but significant brand differences. Here consumers often do a lot of brand switching.
Think about cookies. The consumer has some beliefs about cookies, chooses a brand of cookies
without much evaluation, and evaluates the product during consumption.

26
Buyers to reach a buying decision pass through five stages:
 Problem recognition: The buying process starts when problem or need is recognized.
 Information search: An aroused consumer may or may not search for more information
 Evaluation of alternatives: The marketer needs to know about alternative evaluation that is,
how the consumer processes information to arrive at brand choices.
 Purchase decision: the consumer‟s purchase decision will be to buy the most preferred brand,
but two factors can come between the purchase intention and the actual purchase.
 Post purchase behavior: After purchasing the product; consumer will be satisfied or
dissatisfied and will be engaged in post purchase behavior of interest to the market.
Factors influencing Consumer Buying Behavior
The factors influencing a consumer‟s buying behavior are
 Cultural Factors: The roles played by the buyer‟s culture, subculture, and social classes
are particularly important on consumer.
 Social Factors: Reference groups, family and roles and status are social factors.A person‟s
reference group consists of all the groups that have a direct (face-to-face) or indirect
influence on the person‟s attitudes or behavior
 Personal Factors: A buyer‟s decisions are also influenced by personal characteristics. These
include, the buyer‟s age and stage in the life cycle, occupation, economic circumstance,
lifestyle, personality, and self-concept.

 Psychological Factors: A person‟s buying choices are influenced by four major psychological
factors- motivation, perception, learning, beliefs, and attitudes.

Organizational Behavior: Buying behavior is the business market differs significantly from
consumer behavior is several ways. These differences stem from the producers, markets, and
buyer – seller relationship is business markets.
- Four demand characteristics differentiate the business market from the consumer market:
Demand is derived; Demands tend to be inelastic; Demand is widely fluctuating; and the
market is well informed.

Buying Situation in Organizational Buying

Straight Re-buy: This situation is similar to repeat buying situations of consumer/household
buying; in this buying situation, only purchasing department is involved.
Modified Re-buy: In a modified re-buy situation, a buyer may change the product specifications
or may even change to a substitute product for economic and performance considerations.
New task Buy: In this situation, the buyer is buying the product for the first time.

CHAPTER 4: MARKETING SEGMENTATION, TARGETING AND POSITIONING

Market Segmentation is the process of identifying and profiling distinct group of buyers who
might require separate products or marketing mixes. It is the process of defining and subdividing

27
a large homogenous market into clearly identifiable segments having similar needs, wants, or
demand characteristics.
A market segment is a group of people who share one or more common characteristics, lumped
together for marketing purposes.
Bases of Segmenting the Market: The most common segmentation bases are:
 Geographic segmentation: Segmenting by country, region, city or other geographic basis.
 Demographic segmentation: Segmenting based on identifiable population characteristics,
such as age, occupation, marital status and so on.
 Psychographic segmentation: This segmentation approach involves an understanding of a
consumer‟s lifestyle, interests, and opinions.
 Benefit segmentation: This approach segments consumer on the basis of specific benefits
they are seeking from the product, such as convenience, or status, or value, and so on.
 Behavioral segmentation: Segmenting the market based on their relationship with the product
or the firm. Examples include: heavy or light users, brand loyal or brand switchers, and so
on.
Market segmentation is important to increase the focus of a firm on market segments, to increase
the firm competitiveness, to expand the market, to retain customers, to have better
communication and to increase profitability.
Levels of Market Segmentation
Market segmentation is an effort to increase a company‟s precision marketing. The starting point

of any segmentation discussion is mass marketing. In mass marketing, the seller engages in the

mass production, and mass promotion of one product for all buyers.The arguments of mass

marketing are that it creates the largest potential market, which leads to the lowest costs, which

turn can lead to lower prices or higher margins.

1. Segment Marketing: A market segment consists of a large identifiable group within a market
with similar wants, purchasing power, geographical location, buying attitudes, or buying
habits.
2. Niche Marketing: A niche is a more narrowly defined group, typically a small market whose
needs are not well served. Marketers usually identify niches by dividing a segment into sub
segments or by defining a group seeking a distinctive mix of benefits. I.e. the segments of
heavy smokers include those who are trying to stop smoking and those who don‟t care.

An attractive niche is characterized as the customers in the niche have a distinctive set of needs;
they will pay a premium to the firms that best satisfies their needs; the niche is not likely to
attract other competitors; the nicher gains certain economies through specialization; and the
niche has size, profit and growth potential.

28
3. Local Marketing: Target marketing is leading to marketing programs being tailored to the
needs and wants of local customer groups (trading areas, neighborhoods, even individual
stores).
4. Individual Marketing: The ultimate level of segmentation leads to “Segments of One”
customized marketing, „or‟ one-to-one marketing. For countries, consumers were served as
individuals: The tailor made the suit and the cobbler designed shoes for the individual

Market Segmentation Procedure: The three steps procedure for identifying market segments:
survey analysis and profiling.

Step One: - Survey Stage: The researcher conducts exploratory interviews and focus groups to

gain insight into consumer motivations, attitudes, and behavior. Then the researcher prepares a

questionnaire and collects data on attributes and their importance ratings; brand awareness and

brand ratings; product usage patterns, attitudes toward the product category; and demographics,

geographic, psychographics, and media graphics of the respondents.

Step Two: - Analysis Stage: Researches apply factories analysis to the data to remove highly
correlated variables, and then apply cluster analysis to create a specified number of maximally
different segments.

Step Three: - Profiling Stage: Each cluster profiled in terms of its distinguishing attitudes,
behavior, demographics, psychographics, and media patterns. Each segment is given a name
based on its dominant characteristic.

TARGET MARKET STRATEGIES

Meaning of Market Targeting: Select one or more market segments to enter (Market Targeting).
The company can follow one of three strategies:

 Market aggregation
 Single-segment concentration
 Multiple –segment targeting

Aggregation Strategy (Undifferentiated Marketing):By adopting a market aggregation strategy

also known as a mass-market or un-differentiated market strategy –a seller treats its total market

as a single segment. Single Segment Strategy (Concentrated Marketing):A single-segment (or

concentration) strategy involves selecting one segment from within the total market as the target

market. Multiple-Segment strategy (Differentiated Marketing):Under a multiple-segment

strategy two or more difficult groups of potential customers are identified as target markets

29
MARKET POSITIONING

Meaning of Market Positioning

Product positioning is what comes to mind when your target market thinks about your product
compared to your competitor‟s products. When you hear Apple phone, what do you think?
Probably: highest-end luxury and exclusivity. That‟s their positioning. There‟s no confusing the
positioning of Apple phone.
Why is positioning important? Product positioning is a crucial ingredient in the buying process
and should never be left to chance. It‟s your opportunity to influence the market‟s perception of
your products.

Tools for competitive differentiations

A company must try to identify the specific way it can differentiate its products to obtain a
competitive advantage. Differentiation is the act of designing a set of meaningful differences to
distinguish the company‟s offering from competitors offering.

 Product Differentiation: Differentiation of physical products takes place along a continuous.

At one extreme we find highly standards products that allow little variation.
 Features: Features are characteristics that supplement the products basic function. The
starting point of feature differentiation is a stripped down, or “bare bones”, version of the
product.
 Performance Quality: Most products are established initially at one of four performance
levels, low, average, high and superior. Performance quality refers to the level at which the
products primary characteristics operate
 Conformance Quality: Buyers expect products to have a high conformance quality.
Conformance quality is the degree to which all the produced units are identical and meet the
promised target specifications.
 Durability: Durability is a very important product attribute to most buyers. Durability is a
measure of the product‟s expected operating life under natural and/or stressful conditions.
 Reliability: Buyers normally will pay a premium for product with more reliability. Reliability
is a measure of the probability that a product will not manufacture or fail within a specified
time period. Buyers want to avoid the high costs of product breakdowns and repair time.
 Reparability: Buyers prefer products that are easy to repair. Reparability is a measure of the
ease of fixing a product that manufactures or fails. Thus, an automobile made with standard
parts that are easily replaced has high reparability
 Style: Buyers are normally willing to pay a premium for products that are attractively styled.
Style describes the product‟s looks and feel to the buyer.
 Design: As competitions intensify, designs will offer one of the most patent ways to
differentiate and position a company‟s products and services. Design is the totality of
features that affect how a product looks and functions in terms of customer requirements.
 Service Differentiation/Personal Differentiation: In addition to differentiating its physical
products, a firm can also differentiate its services.

30
  Ordering Ease: Ordering ease refers to how easy it is for the customer to place an order
with the company. For example, some companies have eased the ordering process by
supplying customers with computer terminals through which they sell orders directly to
the seller.
 Delivery: Delivery refers to how well the product or service is delivered to the customers.
 Installation: Installation refers to the work done to make a product operational in its
planned location. Buyers of heavy equipment expect good installation service from the
vendor..
 Customer Training: Customer training refers to training the customer‟s employees to use
the vendor‟s equipment properly and efficiently
 Customer consulting: Customers consulting refer to data, information systems, and
advising services that the seller offers free or for a price to buyers.

 Maintenance and repair: Maintenance and repair describes the company‟s service
program for helping customers keep this purchased product in good working order..

 Personal Differentiation
Companies can gain a strong competitive advantage through hiring and training better people
than their competitions do. Better-trained personnel exhibit six characteristics:

 Competence –The employees possess the required skill and knowledge.

 Courtesy –The employees are friendly, respectful and considerate.
 Credibility –The employees are trust worthy.
 Reliability –The employees perform the service consistently and accurately.
 Responsiveness –The employees respond quickly to customer‟s requests and problems.
 Communication –The employees make an effort to understand the customer and
communicate clearly.

CHAPTER FIVE: MANAGING MARKETING MIX ELEMENTS

Product Planning is the process of creating a product idea and following through on it until
the product is introduced to the market. Additionally, a small company must have an exit
strategy for its product in case the product does not sell.
Product is anything that can be offered to satisfy a need or want. A product consists of as
many as three components: Physical good(s) service(s) and idea (s).
Levels of a product: There are three levels of a product: The core product, the actual product, and
the augmented product.
 The core product - This is the most basic level, which answers the question, what is the
buyer really buying?
 The tangible product- The core product must be turned into a tangible product. Perfume,
computers, lipsticks, political candidates, cars, shoes are all tangible products.

31
  The augmented product - Includes the additional services and benefits offered around the
core and actual products.
Product Classification
Marketers have traditionally classified products on the basis of varying products characteristics:
durability, tangibility, and use (consumer or industrial

Durability and Tangibility

Products can be classified into three groups, according to their durability, tangibility and use.

a). Durability: Products based up on Durability could be classifies as Durable and Non-Durable
goods

 Non-durable goods: are tangible goods that normally are consumed in one or few uses.
i.e. soap, beet etc.
 Durable goods: are tangible goods that normally service many uses. i.e. refrigerators,
machine tools, clothing etc.

b). Tangibility: Products further more could be classified based upon tangibility. On this basis
we could find: Tangible and Intangible Products.

Intangible Product/Service: Intangible products (Service) are those products that cannot be
touched, seen, felt etc. Tangible Products: Tangible products are those products that can be seen,
touched, felt etc. E.g Refrigerator, Car, Stereo.

c)Use: Products further could be classified based up on their use. Accordingly, they will be
classified as: Consumer Goods and Industrial Goods. Consumer -Goods classification:
Consumers buy a vast array of goods. These goods can be classified on the basis of consumer
shopping habits. They can be classified as convenience, shopping, specialty and unsought
goods. Convenience goods: are goods that the customers usually purchase frequently,
immediately, and with a minimum of efforts, i.e. soaps, newspapers, etc. Shopping goods: are
goods that the customer, in the process of selection and purchase, characteristically compares on
such bases as suitability, quality, price, and style. i.e. furniture, clothing, cars & major
appliances etc. Specialty goods: are goods with unique characteristics and/or brand identification
for which a significant group of buyers is habitually willing to make a special purchasing effort
i.e. specific brands and types of fancy goods, cars stereo components, photographic equipment
etc. Unsought goods: are goods that the consumer does not know about or knows about but does
not normally think of buying.

B. Industrial goods classification: Organizations buy a vast array of goods and services.
Industrial goods can be classified in terms of how they enter the production process and their
relative costliness. They are classified as: material & parts, capital items, and supplies and
business services.

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 Product life cycle
Introducing a new product at the proper time will help maintain a company's desired level of
profit. The Life cycle of a product consists of four stages: Introduction, growth, maturity and
decline. A product life cycle consists of the aggregate demand over an extended period of time
for all brands comprising a generic product category.

Introduction Growth Maturity Decline

Sales,
Profit
Sales Value

Profit

Loss
Time in years
Rapid skimming strategy, slow skimming strategy, rapid penetration strategy, slow penetration
strategy, marketing modification, b. product modification and marketing mix- modification are
the different types of marketing strategies throughout the product life cycle
New product development process
Generating new product ideas: New product development starts with an idea. Screening ideas:
At this stage, new product ideas are evaluated to determine which one warrant further study.
Business Analysis: A surviving idea is expanded in to a concrete business proposal.

Prototype development: If the result of the business analysis is feasible, then a prototype (or trail
model) of the product is developed. Market tests: Unlike the internal tests conducted during
prototype development, this test involves actual customers. Commercialization: In this stage,
full-scale production and marketing programs are planned and finally, implemented, up to this
point in development, management has virtually complete control over the product.

Concept of product mix and product line

Meaning of Product Line: A broad group of products, intended for essentially similar uses and
having similar physical characteristics, constitutes a product line.

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Meaning of Product Mix: The set of all products offered for sale by a company is a called a
product mix. Product Mix Strategies
1 Positioning the Product: Positioning means developing the image that a product projects in
relation to competitive products and to the firm's other products.

2 Product Mix Expansions: Product mix expansion is accomplished by increasing the depth with
in a particular line and/or the number of lines a firm offers to consumers.

3 Alterations of Existing Products: Product alteration is often improving an established product.

4 Product Mix Contractions: Product mix contraction is carried out either by eliminating an
entire line or by simplifying the assortment with in a lien.

Introduction to branding, packaging and labeling: Branding: Branding is the art and cornerstone
of marketing. The American marketing association defines a brand as follows: -

Meaning of a Brand: A Brand is a name, term, sign, symbol, or design, or a combination of them,
intended to identify the goods or services of one seller or group of sellers and to differentiate
them from those of competitors".
Packaging: "Packaging includes the activities of designing and producing the container or
wrapper for a product." Labeling: Labeling which is closely related to packaging is another
product feature that requires managerial attention. A label is a part of a product that carries
information about the product and the seller.

Price decision: All profit organizations and many non-profit organizations set prices on their
products.

Meaning of Price: Price is the amount of money and/or other items with utility needed to acquire
a product. Objectives of Pricing

 Profit oriented - To achieve a target return

- To maximize profit

 Sales oriented - To increase sales volume

- To maintain or increase market share

 Status quo-oriented - To stabilize prices

- To meet competition
Factors Affecting Price Decision
Before a firm develops the pricing strategy, it should take into consideration the different factors
which affect price decisions. These factors are external as well as internal. External Factors:
Demand, Competition, Channel Members and Economic Conditions and Government and
Internal Factors: Organizational Factors, Marketing Mix, Product Differentiation, Cost of the
Product, Objectives of the firm
General Approach to Pricing

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  Cost Plus/ Mark up Pricing: Cost plus pricing means setting the price of one unit of a
product equal to the total cost of the unit plus the desired profit on the unit.
 Market Pricing: The seller price may be set right at the above or below the market price

Placing the product

Placing is the movement of goods and services from the source through a distribution channel,
right up to the final customer, consumer, or user, and the movement of payment in the opposite
A channel of distribution is the whole series of marketing intermediaries who join together to
transport and store goods in their path from producers to consumers. A wholesaler is a marketing
intermediary that sells to other organizations. A retailer is an organization that sells to ultimate
consumers. Factors influencing channel decision: The factors affecting the choice of distribution
channels are Product Differentiation, Market Considerations, and Company considerations.
Promoting the product: Product promotions are designed to increase sales of a product or service.
In sales, promotion refers to a different sort of advancement. A sales promotion entails the
features - via advertising and/or a discounted price - of a particular product or service. Business
promotion is communicating with the public in an attempt to influence them toward buying your
products and/or services. The words promotion and advertising are often used interchangeably,
but they're not the same thing.
The Purpose of Promotion
 To move ahead in the ranks, gain more experience, receive honor and benefits in an
organization, influence sales positively, raise awareness of a brand or business, Highlight
the benefits or value of its products to attract sales or help to change the image of a firm,
Initiating awareness amongst non-customers or increasing knowledge of new offers for
existing customers, Generating interest for and creating desire to have the product and
ensuring action to purchase.
Promotional Mix Elements
Promotion is the fourth marketing- mix tool. Includes all the activities the company undertakes
to communicate and promote its products to the target market. Company‟s has to hire, train, and
motivate sales-people. It has to set up communication and promotion programs consisting of
advertising, sales promotion, public relations, and direct and online marketing; though that the
4ps represent the seller‟s view of the marketing tools available for influencing buyers. Form a
buyer‟s point of view, each marketing tool is designed to deliver a customer benefit.
Advertising: The word advertising came from the Latin word' advert ere' means "to turn the mind
toward”. The American Marketing Association (AMA) recommends the definition, "Advertising
is any paid form of non-personal presentation and promotion of ideas, goods and services by an
identified sponsor". Sales Promotion: Sales promotions are those promotional activities that are
intended to stimulate customer demand and improve the marketing performance of sellers.
Companies use sales promotion tools to create a stronger and quicker response. Some of the sales
promotional tools are; Trade shows or exhibitions, Samples, Demonstrations, Coupons and
Consumer contest. Public Relation and Publicity: “Public Relations are the deliberate, planned

35
and sustained effort to establish and maintain mutual understanding between on organization and
its publics.”- Publicity: Publicity means gaining attention for products and or your company
without any financial compensation. Personal Selling: Personal selling, unlike advertising or
sales promotion, involves direct relationships between the seller and the prospect or customer. In
a formal sense, personal selling can be defined as a two-way flow of communication between a
potential buyer and a salesperson.
CHAPTER SIX: VALUE CHAIN ANALYSIS
The Global Value Chains Initiative “The value chain describes the full range of activities that
firms and workers do to bring a product from its conception to its end use and beyond. This
includes activities such as design, production, marketing, distribution and support to the final
consumer.
“The value chain describes the full range of activities which are required to bring a product or
service from conception, through the different phases of production (involving a combination of
physical transformation and the input of various producer services), delivery to final consumers,
and final disposal after use. Considered in its general form, it takes the shape as described in
Figure 1. As can be seen from this, production per se is only one of a number of value added
links. Moreover, there are ranges of activities within each link of the chain. In the real world, of
course, value chains are much more complex than this. For one thing, there tend to be many
more links in the chain. In addition to the manifold links in a value chain, typically intermediary
producers in a particular value chain may feed into a number of different value chains.”
“Supply chains and value chains have clear definitions in business literature and operational
thinking. Where a supply chain typically refers to the chain of suppliers inputting to a final
product, value chain also encompasses thinking about the value created by the chain, particularly
for end-use customers. In reflecting on how sustainability is incorporated into conventional
supply chains, [we need] to consider the wider context of the value of that activity to the
suppliers themselves, but also to the end-use customer and a range of other stakeholders,
including communities and governments. „value chain‟ refers to all of the upstream and
downstream activities associated with the operations of the reporting company, including the use
of sold products by consumers and the end-of-life treatment of sold products after consumer
use.”
.1. Porter’s Value Chain

“The idea of the value chain is based on the process view of organizations, the idea of seeing a
manufacturing (or service) organization as a system, made up of subsystems each with inputs,
transformation processes and outputs. Inputs, transformation processes, and outputs involve the
acquisition and consumption of resources - money, labor, materials, equipment, buildings, land,
administration and management. How value chain activities are carried out determines costs and
affects profits. Most organizations engage in hundreds, even thousands, of activities in the
process of converting inputs to outputs. [According to Porter (1985) these] activities can be

36
classified generally as either primary or support activities that all businesses must undertake in
some form.”

“The concept of the global value chain recognizes that the design, production and marketing of
many products now involves a chain of activities divided among enterprises located in different
places. The value chain describes the activities required to bring a product from its conception to
the final consumer.

The value chain concept has several dimensions. The first is its flow, also called its input-output
structure. In this sense, a chain is a set of products and services linked together in a sequence of
value-adding economic activities. A value chain has another, less visible structure. This is made
up of the flow of knowledge and expertise necessary for the physical input-output structure to
function. The flow of knowledge generally parallels the material flows, but its intensity may
differ. The second dimension of a value chain has to do with its geographic spread. Some chains
are truly global, with activities taking place in many countries on different continents. Others are
more limited, involving only a few locations in different parts of the world. The third dimension
of the value chain is the control that different actors can exert over the activities making up the
chain. The actors in a chain directly control their own activities and are directly or indirectly
controlled by other actors. Since value chain there‟s a temptation to use “value chain” and
“supply chain” interchangeably, but there is a difference in the concepts that is significant. The
supply chain model – which came first – focuses on activities that get raw materials and
subassemblies into a manufacturing operation smoothly and economically. The value-chain
notion has a different focus and a larger scope. A supply chain is simply a transfer of a
commodity from one stakeholder to another in a chained manner. The value chain is the value
addition at different stages of transfer. In different stages of value chain, different stakeholders
add value to the product to increase the end product value. In other words, a value-chain analysis
looks at every step from raw materials to the eventual end-user – right down to disposing of the
packaging after use. The goal is to deliver maximum value to the end user for the least possible
total cost. That makes supply-chain management a subset of the value-chain analysis

37
References
Baker, M.J. Marketing strategy and management. (Basingstoke: Palgrave Macmillan, 2007)
sixth edition
Cram, T. „Pricing‟, in Baker, M.J. and S.J. Hart (eds) The marketing book. (Oxford: Butterworth-
Heinemann, 2008) sixth edition
Kotler, P. Marketing management. (Englewood Cliffs, NJ: Prentice Hall, 1991) seventh edition
Kotler, P., S.H. Ang, S.M. Leong and C.T. Tan Marketing management – an Asian perspective.
(Singapore: Prentice Hall, 1996) and (Prentice Hall, 2004) third edition
Kotler, Philip. Principles of Marketing. (Prentice-Hall Inc, New Delhi, 2004) 10th Ed.
Lambin, J. Market driven management: strategic and operational marketing. (Basingstoke:
Macmillan, 2000)
Lambin, J. and I. SchuilingMarket-driven management: strategic and operational marketing.
(Basingstoke: Palgrave Macmillan, 2012) third edition.
Nagle, T. and R.K. Holden The strategy and tactics of pricing: a guide to profitable decision
making. (Englewood Cliffs, NJ: Prentice Hall, 1994)
Nagle, T. and R.K. Holden The strategy and tactics of pricing: a guide to growing more
profitably. (Upper Saddle River, NJ: Prentice Hall, 2006).
Peter, J.P. and J.C. Olson Consumer behavior and marketing strategy. (New York: McGraw-
Hill, 2005) and (McGraw-Hill, 2010) ninth edition
Trott, P. Innovation management and new product development. (Harlow: Pearson, 2012) fifth
edition
Webster, F.E. and Y. Wind „A general model for understanding organizational buyer behaviour‟,
in Enis, B.M. and K.K. Cox (eds) Marketing classics. (Boston, MA: Allyn and Bacon,
1991)
West, D., J. Ford and E. Ibrahim Strategic marketing: creating competitive advantage. (Oxford:
Oxford University Press, 2006)
Wedel & Kamakura. Marketing Management. (Prentice-Hall Inc, New Delhi, 2000) 5th
edition.Prentice-Hall Inc, New Delhi

Multiple Choice Questions

1) Which one is an attractive characteristic of niche market?

A). Customers in the niche have a distinctive set of needs
B). They will pay a premium to the firms that best satisfies their needs C).
Niche is not likely to attract another competitors D). Niche
has size, profit and growth potential
2) XYZ Company dividing it markets at Mekele, Gambela and Hawassa. This type of
segmentation is:
3) A). Demographic C). Psychographics
B). Geographic D). Customer
4) __________is the act of designing the company's offering and image so that they occupy a
meaning full and distinctive competitive position in the target customer's minds.

38
5) A). Market positioning C). Performance quality
B). Product differentiation D). Conformance Quality
6) The ultimate level of segmentation leads to “Segments of One” customized marketing, „or‟
one-to-one marketing is:
A). Individual Marketing C). Target marketing
B).Niche marketing D). Mass marketing
7) _________is the totality of features that affect how a product look and functions in terms of
customer requirements.
A). Durability C). Reparability
B). Design D). Style
8) Objective of pricing which is to stabilize prices is:
A). Status quo-oriented C). Profit oriented
B). Sales oriented D). Market share oriented
9. _________is the total volume that is bought by a customer group(s) in a definite time period,
in a definite geographical area.
A). Need C). Want
B). Demand D). Marketing
10. __________is a market situation in which there are too many small buyers and sellers, each
with the complete market information no single buyer or seller
A). Negative demand C). Pure competition
B). Monopolistic Competition D). Monopoly
11. _______is delivered pricing, the same delivered price is quoted to all buyers regardless of
their locations.
A). Zone delivered pricing C). Odd Pricing
B). Uniform delivered pricing D). Value Pricing
12. _______is the pricing firm pays less attention to its own costs or demand and bases its price
largely on competitors‟ prices
13. A). Going rate pricing C). Sealed Bid Pricing
B). Perceived Value Pricing D). Discriminatory pricing
14. Any Paid form of non-personal presentation and promotion of ideas, goods, or services by an
identified sponsor.
15. A). Advertising C). Direct Marketing
B). Sales promotion D). Public relation
16. From the following one is not conditions for exchange potential to exist:
A). There should be more than three parties
B). Each party has something that might be of less value to the other party.
C). Each party is capable of communication & delivery
D). Each party is obliged to accept the exchange offer.
17. Regarding post purchase behavior of consumers, which one is not correct if they are
satisfied?

39
 A). Will purchase the product again D). Pays attention to buy the product
again
B). Talks favorably about the product
C). Warn friends not to buy it
18. ________is buying behavior that are characterized by low involvement but significant brand
differences and consumers often do a lot of brand switching.
A). Complex Buying Behavior C). Habitual Buying Behavior
B). Dissonance – Reducing Buying D). Variety Seeking Buying Behavior
Behavior
19. ________is the kind of utility referring to having a product available when you want it:
A). Place utility C). Information utility
B). Form utility D). Time utility
20. A growing child acquires a set of values, perceptions, preferences, and behavior through his
or her family and other key institutions. These forces are __________.
A). Social C). Psychological
B). Cultural D). Personal
21. From the market segmentation base that involves an understanding of a consumer‟s lifestyle,
interests, and opinions is:
A). Geographic C). Demographic
B). Psychographic D). Behavioral
22. ________is the level of product that includes the additional services and benefits offered
around the core and actual products:
A). Tangible product C). Core product
B). The augmented product D). A & C
19. Consumer goods that the customers usually purchase frequently, immediately, and with a
minimum of efforts are known as:
A). Convenience goods C). Specialty goods
B). Unsought goods D). Shopping goods
20. Which one is not the marketing strategy throughout the product life cycle at introductory
stage?
A). Rapid skimming strategy C). Slow skimming strategy
B). Rapid penetration strategy D). Slow penetration strategy
21. _______ is a group of buyers and sellers interested in negotiating the terms of purchase/sale
for goods or services.
A). Demand C). Marketing
B). Market D). Want
22. Marketing is the human activity directed at satisfying needs & wants through exchange
process. This concept is
A) Demand B) Market

40
 C) Marketing D) Marketing management
23. The external environment that requires people must have money to spend and be willing to
spend it is:
A). Social and cultural forces C). Competition
B). Economic condition D). Political and legal forces
24. External environment that affects organizations‟ marketing activities, their products, pricing,
distribution systems, and promotional programs is:
A). Social and cultural forces C). Competition
B). Economic condition D). Political and legal forces
25. From the following one is not external micro environment:
A). Suppliers C). Customers
B). Marketing intermediaries D). Demographics
26. __________are independent business organizations that directly aid in the flow of goods and
services between a marketing organization and its markets.
A). Suppliers
B). Marketing intermediaries
C). Customers
D). Demographics

41
 3. Course Guide Book for International Marketing

This course guide book is designed to equip students with the basic concepts of international
marketing. In the era of globalization, international marketing is given much emphasis and plays
crucial role in the development of a nation and understanding it will help students to know the
world marketing practices. This guide book includes basic concepts of international marketing
and its environment; relationship between international marketing and international trade; theory
of comparative advantage; world trade situation and international marketing, analysis of
marketing across national trade blocks' applications of marketing principles to international
marketing, analysis of marketing across national boundaries, different levels of international
marketing involvement; various ways of international market entry strategies, marketing-mix
element decision in international marketing process of practical international marketing;
opportunities and challenges of international marketing.
Chapter One: The concept of International Marketing
Contents: meaning of international marketing, domestic market vs International marketing,
benefits, barriers of international marketing, international trade, comparative advantage and
absolute advantages and international product life cycle (IPLC).
The fundamentals of marketing apply to international marketing in the same way they apply to
domestic marketing. The American Marketing Association defines the term international
marketing as the multinational process of planning and executing the conception, pricing,
promotion and distribution of ideas, goods, and services to create an exchange that satisfy
individual and organizational objectives. To understand the concept of international marketing it
is important to examine how international marketing differs from such similar concept as
domestic marketing, foreign marketing, comparative marketing, international trade and
multinational marketing.
The international marketing manager must become aware of factors that limit standardization.
Such factors can be categorized into four major groups: market characteristics, competitive
conditions, marketing infrastructure, and regulatory conditions. International Product Life Cycle
(IPLC) describes the diffusion process of an innovation across national boundaries. There are
five distinct stages in the IPLC: local innovation, overseas innovation, maturity, worldwide
imitation and reversal.

42
A business man operating in the international environment is faced with a two price system: the
price of the product and price of the currency. Any adjustment in the exchange rate of developed
countries would mean implications on trade and balance of payments in the price levels existing
in the developed country‟s economy. Balance of payment is the measure of all economic
transactions between the nations and others. The balance of payments divided (BOP) is divided
into three main categories: the current account, the capital account, and the financial account.
The major legal, political and economic forces affecting international marketers are barriers
created by governments to restrict trade and protect domestic industries. It includes tariff and
import quota.

Chapter Two: Marketing Environment

Content: marketing environment meaning, cultural environment, economic environment,
political & legal environment and technological environment, regional economic integrations.
The marketing environment can be defined as a combination of both internal environmental
factors and external environmental factors. These marketing environments surround a business
and influence the operations of the business. The external marketing environment can be divided
into macro and micro environment. The macro environment includes the cultural, economic,
political legal forces.
Culture is a set of traditional beliefs and values that are transmitted and shared in a given society.
Culture is prescriptive and subjective, socially shared and learned, facilitates communication,
enduring, cumulative and dynamic. Culture influences the consumption pattern, the thinking
process and the communication process.

The economic environment is a significant force that affects the marketing activities of just about
any organization. Firms are very sensitive for the economic factors like: energy price; interest
rates; exchange rates; taxation; inflation/deflation and economic growth of the nation. There is
also a range of economic factors at an industry level such as the availability of land, capital and
labor in different economies and regions.
A command economy is one in which the government makes all decisions about production and
distribution. A market economy is one in which individuals and private firms make the major

43
decisions about production and consumption. A mixed economy is a blend of free market and
government intervention, aiming to balance efficiency and welfare.

Even though a nation will be benefited from international marketing, dealing in international
market is subject to some barriers. Government will impose several barriers to discourage
international trade: depending upon the political situation; economic development; imports
adverse effect to balance of payment of a country; etc. Some of the barriers imposed by most
government to protect the local industries could be broadly classified under two major heads:
tariff barriers and non-tariff barriers.

Political and legal factors often play a critical role in international marketing activities. Even the
best business plans can go wrong as a result of unexpected political or legal influences, and the
failure to anticipate these factors can be the downfall of an otherwise successful business
venture. The political environment that a firm operates in international market faces a complex
one, because they must cope with the politics of more than one nation. The complexity forces to
consider that environment as composed of three different types of political environment: foreign,
domestic and international. Economic systems provide another basis for classification of
governments. These systems serve to explain whether businesses are privately owned or
government owned, or whether there is a combination of private and government ownership.
Basically these systems can be identified as communism, socialism and capitalism. To
understand and appreciate the varying legal philosophies among countries, it is useful to
distinguish between the two major legal systems common law and statue law.

Intellectual property is a general term that describes inventions or other discoveries that have
been registered with government authorities for the sale or use by their owner. Such terms as
patent, trademark, copyright or trade secret fall in to the category of intellectual property.
Firms are unfairly competing with their competitors in the form of infringement, counterfeiting,
gray market, and bribery. Economic integration has been one of the main economic
developments affecting world markets since World War II. Countries have wanted to engage in
economic cooperation to use their respective resources more effectively and to provide larger

44
markets for member-country producers. Types of economic integrations include free trade area,
customs union, common market, and economic union.

Chapter Three: Market Analysis and Entry Strategy

Content: analyze international marketing, international market entry mode, direct export
activities, agents, distributors, franchising, and licensing, direct investment activities, wholly
owned subsidiaries, mergers/acquisitions and joint ventures.
Marketing opportunities existed in all countries regardless of the level of economic development.
Countries or markets must be screened based on certain relevant criteria for comparing
opportunities. Such criteria may include market potential, economic growth, political risk,
available natural resources available labor, and trade barriers. Once a company decides to target
a particular country, it has to determine the best mode of entry. Its broad choices are indirect
exporting, direct exporting, licensing, joint ventures and direct investments. Each succeeding
strategy involved more commitment, risk, control and profit potential. There are a number of
characteristics that determine the appropriateness of entry strategies, and many variables affect
which strategy is chosen. These characteristics include political risks, regulations, type of
country, type of product, and other competitive and market characteristics.

Chapter Four: Product Policy Decision

Content: product standardization/modification, branding and its types, brand piracy, packaging
and after sales service.
A product may have to change in a number of ways to meet physical or mandatory requirements
of a new market, ranging from simple package changes to total redesign of the physical core
product.

Product standardization means that a product designed originally for a local market is exported to
other countries with virtually no change, except perhaps for the translation of words and other
cosmetic changes. Product adaptation refers to the process of making changes to a product to
reach new or foreign customers and markets. Legal, economic, political, technological, and
climatic requirements of the local marketplace often dictate product adaptation.

45
A product is multidimensional, and the sum of all its features determines the bundle of
satisfactions (utilities) received by the consumer. A product has three distinct components core
component, packaging component, and support services component.
Branding is the art and corner stone of marketing. A Brand is a name, term, sign, symbol, or
design, or a combination of them, intended to identify the goods or services of one seller or
group of sellers and to differentiate them from those of competitors. A trademark is defined as
a brand that is given legal protection. Brand positioning can be done at any of three levels: on
product attributes, on benefits and on beliefs and values. Branding makes pricing possible
because of better identification, awareness, promotion, differentiation, consumer confidence,
brand loyalty, and repeats sales. For developing brands, a company has four choices: line
extensions, brand extensions, multiband or new brands. Companies can protect their brands by
registering trademarks. Types of brands include corporate, personal, product, and service
brands.
After a product is developed and branded, packaging is critical. Packaging which consists of
all activities of designing and producing the container or wrapper. Packaging is a business
function and a package is an item. Packaging includes the activities of designing and producing
the container or wrapper for a product." The container or wrapper is called the package.
Packaging serves two primary purposes functional and promotional. A package must be
functional means that it should be capable of protecting the product at minimum cost. Labeling
which is closely related to packaging is another product feature that requires managerial
attention. A label is a part of a product that carries information about the product and the seller.
A label may be part of the package, or it may be a tag attached to the product. Obviously, there
is a close relationship among labeling, packaging, and branding.

After sale service defined as, those activities taking place after the purchase of the product and
devoted to supporting customers in the usage and disposal of the goods to make them loyal.
After-sales services are often referred to as “product support activities”, meaning all activities
that support the product centric transaction. The main objective of the after-sales is to keep the
customer satisfied through trust, credibility and sense of security conveyed by the organization,
and building lasting relationships that contribute to increased performance for sustainable results.

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Chapter Five: Promotion Strategy in International Context
Contents: personal selling, exhibitions trade fairs, Public relation/publicity, sales Promotion,
advertising in the global situation.
Once a product is developed to meet target market needs and is properly distributed, intended
customers must be informed of the product's value and availability. Companies must also
communicate with their present and potential customers, retailers, suppliers, other stakeholders,
and the general public. The purpose of promotion is both to communicate with buyers and to
influence them. To communicate effectively, marketers need to understand the fundamental
elements underlying effective communication.

Several tools that facilitate the promotion objective of a firm are collectively known as the
Promotion Mix. The Promotion Mix is the integration of advertising, personal selling, sales
promotion, public relations. Advertising, sales promotion, and public relations are the mass
communication tools available to customers. Mass communication uses the same message for
everyone in an audience. Personal selling tailors a message to each prospective customer.
Advertising is any paid form of non-personal presentation and promotion of ideas, goods, or
services by an identified sponsor. Advertising objectives can be classified according to whether
their aim is to inform, persuade, or remind. Personal selling is the personal communication of
information to persuade somebody to buy something. Personal selling is an “oral presentation in
a conversion with one or more prospective purchases for the purpose of making sales. Personal
selling is the individual, personal communication of information, in contrasts to the mass,
impersonal communication of advertising, sales promotion, and other promotional tools.
Personal selling is more flexible than these other tools. Sales promotion consists of those
promotional activities other than advertising, personal selling, and publicity.
The common sales promotion techniques used are coupons, games contests, price-offs,
demonstrations, premiums, samples, money, refund offers, and trading stamps. Sales promotion
is a key ingredient in marketing campaign. Public relations (PR) involve a variety of programs
designed to promote and/or protect a company's image or its individual products..Public relations
are a management tool designed to favorably influence attitudes toward an organization, its
products, and its policies.

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Chapter Six: Pricing and Terms of Payment
Contents: international pricing strategies versus domestic pricing strategies, price
standardization, methods of payment, bartering and counter trading.
Determining the price is one of the most difficult tasks facing the international marketer. A
product's price must reflect the quality/value the consumer perceives in the product. Whether
exporting or managing overseas operations, the international marketing manager is responsible
for setting and controlling the actual price of goods as they are traded in different markets. The
marketer is confronted with new sets of variables to consider with each new market: different
tariffs, costs, attitudes, competition, currency fluctuations, and the marketing strategy of the firm.
Firms must decide when to follow a skimming or a penetration pricing policy. A company uses
skimming when the objective is to reach a segment of the market that is relatively price-
insensitive and thus willing to pay a premium price for the value received. A penetration pricing
policy is used to stimulate market growth and capture market share by deliberately offering
products at low prices. Taxes and tariffs affect the ultimate consumer price for a product and, in
most instances; the consumer bears the burden of both. There are three efforts whereby costs
may be reduced in attempting to lower price escalation: lowering the cost of goods, lowering the
tariffs, and lowering the distribution costs.
A cartel exists when various companies (countries) producing similar products or services work
together to control markets for the types of goods and services them produce. Companies doing
business in foreign countries encounter a number of different types of government price setting.
To control prices, governments may establish margins, set prices and floors or ceilings, restrict
price changes, compete in the market, grant subsidies, and act as a purchasing monopoly or
selling monopoly. A quotation describes a specific product, states the price for that product as
well as a specified delivery location, sets the time of shipment, and specifies payment terms.
When a company receives an inquiring from abroad, the quotation must be very detailed in terms
of weight, volume and so on because of the customer‟s unfamiliarity with foreign products,
places, and terms.
The International Chamber of Commerce (ICC) has developed Incoterms. There are several
payment methods in international marketing. These payment methods include consignment, open
account, cash in advance, bill of exchange (draft), bankers‟ acceptance, letter of credit, and
revocable letter of credit.

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Chapter Seven: Placement (Distribution Strategies in International Context)
Contents: meaning of logistics, Access foreign market channels of distribution, use of Free
ports, distribution channel
Goods must be physically transported from where they are produced to where they are needed.
Services ordinarily cannot be shipped but rather are produced and consumed in the same place.
Distribution channels are responsible for the assembly, storage, sorting, and transportation of
goods from manufacturers to customers. Logistics is the task of coordinating material flow and
information flow across the supply chain. It comprises outbound and inbound logistics.
Companies used two principal channels of distribution when marketing abroad indirect selling
and direct selling. The six Cs must be considered in building an economical, effective
distribution organization within the long-range channel policies of the company. These are: cost,
capital requirement, control, coverage, character, and continuity. There are three fundamental
modes of transportation: air, water (Ocean and inland), and land (rail and truck). To collect
payment an invoice is needed and there are two kinds of invoices pro-forma invoice and
commercial invoice. A certificate of origin is a document prepared by the exporter and used to
identify or declare that the merchandise originated in a certain country. A packing list is a
document that lists the type and number of pieces, the contents, weights, and measurement of
each, as well as the marks and numbers. An airway bill is basically a bill of lading issued by air
carriers for air shipments. Bill of lading is a document issued to record shipment transportation.
A certificate of insurance is a negotiable document issued to provide coverage for a specific
shipment. As in the case of an inspection certificate, an importer may request other special
documents, such as a certificate of weight/measurements and certificate of analysis in order to
protect the importer's interest. Other documents may include - inspection report, warranty, bank
permit, etc. A free port is a well-defined geographical area or zone normally within a port or
airport where goods are generally introduced free from payment of any duties or taxies, and thus
consider as being outside the customs territory and not subject to the usual customs formalities.

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 Model Questions
1. Which one of the following is a tax imposed on a product entering a country used to protect
domestic producers and / or to raise revenue?
A. Tariff
B. Quota
C. Embargo
D. Sanctions
2. Which one of the following statements refers to the measure of all economic transactions
between the nations and others.
A. Balance of payment
B. Foreign exchange
C. Export
D. Import
3. Which one of the following is an orientation that considers the whole world rather than any
particular country as the target market?
A. Ethnocentric
B. Polycentric
C. Geocentric
D. Regiocentric
4. Which one of the following is a correct statement?
A. In domestic marketing there are no uncontrollable variables.
B. Domestic marketing is much more complex than international marketing.
C. In international marketing different cultural, legal, and political forces encounters.
D. Domestic marketer faces uncontrollable variables originating from various countries.
5. Which one of the following is an incorrect statement?
A. International trade is the flow of goods & capital across national borders.
B. International marketing focuses on micro level of a market & a company is a unit of
analysis.
C. International Marketing is the flow of goods & capital across national borders.
D. The word international implies that a firm is not a corporate citizen of the world but
rather operates form a home base.
6. Why a firm moves beyond domestic markets into international trade?
A. The existence of foreign markets
B. Domestic markets saturation
C. Possession of a technological advantage
D. None of the above
7. Which one refers to a number of very large companies whose business interests,
manufacturing plant and offices are spread throughout the world?
A. Multinational Marketing
B. International Marketing

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 C. Domestic Marketing
D. Foreign Marketing
8. Which one of the following is a false statement about culture?
A. Culture is prescriptive
B. Culture is socially shared and learned
C. Culture facilitates communication
D. Culture is objective
9. Which one of the following is a tariff barrier?
A. Government Participation in Trade
B. Customs Entry Procedures
C. Quota
D. Value added tax (VAT)
10. One of the following is know-how or manufacturing methods, formulas, plans and so on that
is kept confidential with in a particular business?
A. Copyright
B. Trade mark
C. Trade secret
D. Patent
11. A manufacturer ends up with unintended channel of distribution that performs activities
similar to the planned channel refers to__.
A. Infringement
B. Counterfeiting
C. Gray market
D. Bribery
12. Which one is the least restrictive and loosest form of economic integration among nations
and all barriers to trade among member countries are removed?
A. Free Trade Area
B. Customs Union
C. Common Market
D. Economic Union
13. Which one of the following is a correct statement?
A. Exporting adds costs of establishing manufacturing operations in the host country.
B. A company can hire foreign based distributors or agents to sell its goods.
C. High transport costs can make exporting economical.
D. Tariff barriers are the advantages of exporting.
14. The governments of many oil rich countries have set out to build their own petroleum
refining industries and, a step toward that goal, have restricted FDI in their oil and refining
sectors. Which strategy the use for this purpose?
A. Manufacturing
B. Management Contract

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 C. Turnkey operations
D. Export
15. Which one best describes the merger of Facebook and Instagram that took place in 2012?
A. Horizontal merger
B. Vertical merger
C. Concentric merger
D. Conglomerate merger
16. Which one refers to a marketing offering is redesigned in a way to fit the needs and the
demands of a local market?
A. Product Adaptation
B. Product Standardization
C. Price adaptation
D. Promotion standardization
17. A component of a product that consists of the physical product the platform that contains
the essential technology and all its design and functional features.
A. Core component
B. Augmented component
C. Packaging Component
D. Support Services Component
18. Sony puts its name on most of its electronic products and instantly establishes a connection
of the new products high quality. What type of branding strategy the company is using?
A. Line extension
B. Brand Extension
C. Multi brands
D. Co-brands
19. All are the benefits of branding except one.
A. Brand name makes it easier for the seller to process orders and track down problems.
B. Branding does not have any relationship with market segmentation.
C. Branding gives the seller the opportunity to attract more customers.
D. Strong brands help build the corporate image, and gain acceptance by distributors.
20. Which one is part of a product that carries information about the product and the seller?
A. Label
B. Packaging
C. Brand
D. Promotion

21. Which one of the following is not included in components of after sales service?
A. Installation
B. Maintenance and repair
C. User training manual
D. Label

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22. Which one of the following is anincorrect statement?
A. Though marketing is universal, different marketing approaches are required for different
countries.
B. The main objective of imposing quantitative restrictions on imports is to increase the
demand for homemade items.
C. International marketing and multinational marketing are very similar to each other, in fact
almost the same thing.
D. Ethnocentric companies are centralized in their business approaches.
23. Which one of the following stands for EPRG?
A. Ethical, Political, Regional or Geographical orientation
B. Ethnographic, Polygraphic, Regiographic or Geographic orientation
C. Ethnocentric, Polycentric, Regiocentric or Geocentric orientation
D. Ethical, Political, Regional or Geometrical orientation
24. Which one of the following refers to the selling of the products below the cost of production
or at below the ongoing price in the market
A. Gate pricing
B. Dumping
C. Cheap pricing
D. Countertrade
25. If the manufacturer of a sophisticated new consumer electronics product determines that
many target consumers qualify as "innovators" and "early adopters" with relatively inelastic
demand curves, which pricing strategy the company should use?
A. Gray market
B. Skimming
C. Penetration
D. Market holding
26. Tiktok, Facebook, Google, Twitter, and Wikipedia represent which element of the marketing
mix?
A. Product
B. Place
C. Promotion
D. People
27. Which one of the following is a form of one way mass communication about a product or
service, paid for by an identified sponsor?
A. Personal selling
B. Advertising
C. Sales promotion
D. Publicity
28. Which one of the following is the only element in the marketing mix that produces revenue;
all other elements present costs?

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 A. Product
B. Promotion
C. Place
D. Price
29. Which pricing policy is used to stimulate market growth and capture market share by
deliberately offering products at low prices and is used to acquire and hold share of market as
a competitive maneuver?
A. Penetration pricing
B. Skimming pricing
C. Odd-even pricing
D. Competition based pricing
30. The Organization of Petroleum Exporting Countries (OPEC) is a group of 13 oil-producing
countries whose mission is to coordinate and unify the petroleum policies of its member
countries and ensure the stabilization of oil markets. Which one describes OPEC?
A. Free Trade Area
B. Customs Union
C. Cartel
D. Economic Union
31. International commercial terms (Incoterms) clarify the rules and terms buyers and sellers use
in international and domestic trade contracts. When the latest Incoterms were updated?
A. 2020
B. 2023
C. 2010
D. 1936
32. Which one is not included in Incoterms rules for sea and inland waterway transport?
A. FOB: Free on Board
B. CFR: Cost and Freight
C. CIF: Cost, Insurance, and Freight
D. EXW: Ex Works
33. Which is a legal instrument; it is a written undertaking by a bank through prior agreement
with its client to honor a withdrawal by a third party for goods and services rendered?
A. Letter of Credit
B. Bankers‟ acceptance
C. Consignment
D. Bill of exchange (Draft)

34. Which one of the following is a false statement?

A. Direct distribution is a direct-to-consumer approach where the manufacturer controls all
aspects of distribution.
B. Indirect distribution involves third parties, like warehouses, wholesalers, and retailers.

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 C. Indirect distribution gives companies more control over the whole process.
D. Indirect distribution may allow companies to focus on their core business while
outsourcing distribution to an expert.
35. Which one is a document that lists the type and number of pieces, the contents, weights, and
measurement of each, as well as the marks and numbers that its purpose is to facilitate
customs clearance, keep track of inventory of goods, and assists in tracing lost goods?
A. Airway bill / Bill of lading
B. Packing list
C. Certificate of origin
D. Commercial Invoice
References
 Coteora, Philip R., International Marketing, 13 editions, Boston Irwin Inc. 2006.
 International marketing by Francis Charonican 1999
 International marketing by BS Bathor and other 1997
 Philip Kolter, Marketing Management, Analysis, planning implementation and control, 9th
edition.
 William J. Stanton, Fundamentals of Marketing, 10th edition.
 Kolter and Armstrong, principle of Marketing, 8th edition.
 International Marketing, John J. Saw, SakOukvist, 2nd edition

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