Friday, July 31, 2009

Price Management

New product pricing strategy, Product mix pricing strategy, responding to price change.
Price is the one element of the marketing mix that produces revenue, the other element produce cost. Pricing also communicates to the maker the companies intended value positioning of its product or brand.Price is usually expressed in terms of money. It can also be a combination of money and other items of value. Price is generally closely guarded business secret. It is an important positioning variably.

The firm has to consider many factors in setting its pricing policy. Following are the six steps of pricing policy.

1. Selecting the Pricing Objective
2. Determining Demand
3. Estimating Costs
4. Analyzing Competitors cost, price, and others
5. Selecting a pricing method
6. Selecting the final price

Pricing Strategy

Pricing strategies usually change as the product passes through its life cycle. Hence, organization used different price in different stage of product life cycle. We can differentiate between pricing a product that imitates existing product and pricing an innovative product.

Product Mix pricing Policy;

1. Product Line Pricing
2. Optional Feature Pricing
3. Product Bonding Pricing:
Salver offer bundle product and features. Pure Bundling, if one company sign Bhusan Dahal, they had to use all other talent associated with Mr. Dahal and company, such as cameraman, graphic, editing etc. and In mix bundling, the seller offers goods both individually and in bundle.

4.Captive Product: Some product require captive product to use, such as razor and camera. Hence, company charge less on razor and camera but price high for blade and film. Similarly, if you buy one year secretion form Mere mobile, they will offer one mobile free.

5.By Productive Pricing
6.Product Bundle Pricing
7.Two Part Pricing

Service firm and organization often charge two part pricing. Take example of Nepal Telecommunication, any sorrier of Nepal Telecommunication Post paid mobile or Land line has to pay certain fixed charge on monthly basis and additional if they used any more. Similarly, if you visit Doctors, you have to pay fix charge for each visit and if you need any other facility you have to pay extra as two part pricing.

Initiating and Responding to Price Change:

Company often has to go through various problems, it may have to cut the price or increase the price as per the requirement of environment.

Initiating the Price Cuts:
Company has to use price cut as the pricing strategy to gain market share or hold more volume and build possible traps.

• Low Quality Trap
• Fragile Market share trap
• Shallow pocket trap

Initiating Price Increase:

If a company increase price, it may get good margin of profit if it is able to raise price as required or it may face a big trap that lead to end of organization.

Why company has to increase price?

• Cost Inflation
• Anticipatory Pricing
• Over Demand

Reaction to price change:
Any change in pricing will bring some reaction among customers, competitors and distributors.Customer often questions the motivation behind the price change. If they cut the price customer may say, that the product is of low quality, unsold product, financial treble .In similar manner, if price is hiked, sale may detour but carry positive message such as product is hot.Competitor may react differently, hence company has to understand, how the competitors are take the price change.

Responding to competitors price change:

It needs to know

Whey competitor changes the price?
Does the competitor plan to make change temporary or permanent?
What will happen to companies market and market share?
What are competitors and other firm’s response likely to be to each passable action?

What it can do?

1. Maintain Price
2. Maintain price and add value
3. reduce Price
4. Increase price and improve quality
5. Launch a low price fighter line

Place Management

Marketing channel are set of interdependent organization involved in the process of making a product or service available for use of consumption. Marketing channel decision is among the most critical decision facing management. The Channel chosen intimately affect all the other marketing decisions. Marketing channel make the product available to the customer. Physical distribution makes the product accessible to the channel members and customers. Organization often goes through tough time while deciding about channel. Hence, it has to properly designed the channel decision.

Channel Design Decision:
A new firm often starts with as a local operation selling in a limited market, using existing intermediaries. All the intermediaries must be local and linked with the manufacturer. Deciding about best channel might not be a problem.If the firm is successful, it might branch into few markets. It might have to use different channel in different markets. In small market, the firm might sell directly to retailers, in large market, it might sell through distributors.

While managing intermediaries, company uses push and pull marketing. A Push strategy manufacture uses its sales force and promotion budget to induce intermediaries. Push strategy is approximate where brand loyalty is low; brand choice is made at store etc. A Pull strategy manufacture uses the promotion and advertising to induce consumers to ask intermediate is for the product. This strategy is appropriate when there is high brand loyalty and when people choose the brand before go the shopping.

Designing a channel system involves four steps

1. Analyzing Customers desired service output levels
2. Establish objective and constraints
3. Identifying major channel alternative
4. Evaluating major channel alternative

Analyze Customers desired service output levels:

In designing the marketing channel, the marketer must understand the service output levels desired by target customers. Channel produce five service output

a) Lot Size
b) Waiting time
c) spatial Convenience
d) Product Variety
e) Service backup

A) Establishing Objective and Constraints

Channel objective vary with product characteristics. Base on product design and its use and sales, organization has to establish the channel objective. In same manner, channel design must take in account the strength and weakness of different type of intermediaries.

B) Identify major Channel alternative

Organization can use various channel intermediaries, sales force, wholesaler, dealers, agent, direct mail etc. Each channel has it own strength and weakness. Hence, it can decide by using three step while deciding abut channel

Type of Intermediaries:

Number of intermediaries:
Exclusive distribution, Selective distribution, Intensive distribution

Terms and responsibility of channel member:

Price policy, Condition of sales, Distributors territorial right

c) Evaluate the major alternatives:
Each channel alternative needs to be evaluated against economics, control and adaptive criteria. To evaluate, we can use two major criteria, which are Economics and Control Adaptive Criteria.

Economic Criteria:

Each channel alternative will produce a different level of sales and cost. As indicated on below mention figure. Seller would try to replace high cost channels with low cost channels when the value added per sales was sufficient. When seller discovers a continent lower cost channels they try their customer to use it.

Channel Management:

After a company has chosen alternative, individual intermediaries must be selected, trained, motivated and evaluated. Channel arrangement must be modified over time.

Selecting channel members:

Channel members are the key player between manufacturer and customer. To customer, the channel member is the company. Any negative impression by channel member toward manufacturer will affect the consumers buying decision. While deciding about recruit intermediaries, they should at least determine what characteristic distinguish the better intermediaries.
They should evaluate the number of years in business, other lines carried, growth and profit record, financial strength, cooperativeness and service reputation. If the intermediaries are sales agents, producer should evaluate the number and character of other line carried and the size and quality of sales force.

Training Channel Member:

Manufacturer need to plan and implement careful training program for their intermediaries, because they will viewed as the company by the end users. Channel intermediaries consist of Distributors, distributor’s sales force, Sales Agent, Sales Representative, Sale Person, manufactures sale force etc. Proper presentation by this group to end user will reflect the real impact or mirror of the manufacture to the end user. Hence, proper training to channel member is necessary to bring product close to reality.

Motivating Channel Member:

Manufacturer need to understand that channel intermediaries as important as the end users. The manufacturer needs to provide training program, market research program and other capability building program to improve intermediary’s performance. The company must communicate its vies that the intermediaries are partners in a joint effort to satisfy end user of the product.

Evaluating Channel members:

Manufacturer need to evaluate its channel member periodically , it can manage it evaluation base performance against such standards as sales quota attainment, average inventory levels, customers delivery time, treatment of damaged and lost goods and cooperation in promotion and training program.
Channel Dynamics

Product innovation developments are the key reason for the channel dynamics. New wholesaling and retailing institutions emerge, and new channel systems evolve.

Component of Business Environment

Business environment refers to forces that influence the performance and outcomes of business organization. The component of business environment can be broadly divided into:-

1. Internal environment ( Micro environment )
2. External environment ( Macro environment )

Both the internal and external environment are interrelated and interdependent.


Internal environment consist of conditions and forces within the business organization that affect its performance and outcomes. It is located in the organization. It provides strengths and causes weakness to the organization. It is controlled by organization.
Strength is inherent capacity which organization can use to gain strategic advantage over the competitors where as weakness is inherent limitation which creates a strategic disadvantage for the business organization in relation to competitors.
An organization’s internal environment has the following components.

1. Employees
2. Structure
3. Corporate culture
4. Shareholders
5. Unions

External Environment:
It is the outer environment of business.It is uncontrollable by the business management. The external environment of business are as follows:
Political and legal Environment
Sociological and cultural Environment
Economic Environment
Technological Environment

Wednesday, July 29, 2009

Importance of Sound Organization

As we are of management field, sound organizations the backbone of management. It is establishing authority-responsibility relationship among various positions. It is cycle through which management directs, coordinates and controls business. World famous industrialist of USA Mr. Andrew Carnegie “Take away all our money, our mines, and cook ovens, but leave us our organization and a few years, I shall have re-established myself”. It means there is no alternate or substitute for a good organization. If we have our organization we can again re-establish it and can take the organization in higher position than it was.

1) Specialization:
It promotes the specialization, speedy performance of tasks and efficiency. The activities are divided and subdivided into compact and convenient jobs and are also grouped on the basis of similarity.

2) Avoids omissions and duplications of works :
In organization process specific jobs are assigned to individuals and work-groups so that to avoid omission and duplication of works or overlapping of works.

3) Clear-cut authority and responsibility relationship:
A sound organization structure clearly separate or defines the authority and responsibilities of various position and this helps employees to know their role in jobs and how is he/she related to others and when will direct to whom.

4) Facilitates coordination and communication :
A sound organization facilitates coordination and communication among the various departments within the organization. Smooth coordination is one of the process which leads to smooth organizational activities.

5) Facilitates growth and diversification :
A sound organization is flexible in nature so it facilitates the scope for growth of the organization through creating more departments, enlarging existing department, widening span of control, etc.

6) Scope for technological innovations :
Sound organization is not rigid. It is flexible and provides some space for adoption of new technology. It helps in introducing charge in the enterprise by modifying the authority and responsibility relationships in the wake of new development.

7) Better industrial relations :
An effective organization coordinates the group effort. If the organization have group effort than the team spirit will be developed and make the confidence level high. Moreover systematic fixation of authority, responsibility and adequate training and development leads to better industrial relations.

8) Facilitates staffing :
The total requirement of employees at various departments and section such as need of manager, employees and workers facilitates staffing

9) Facilitates ‘management by exception’ :
This principle suggests that the higher level manager should attend to exceptional matters only and rest matters should be taken at lower levels. So, they can concentrate themselves on that matter.

Concept and Meaning of Leadership/Leading

Leader is a person who is capable of influencing and shaping the behavior of people in the group. Thus, leadership is a quality or ability of a person to influence and guide the attitude and behavior of the people in a group or an organization to achieve some common goals.

According to the encyclopedia of social sciences, “Leadership is the relation between an individual and a group around some common interest and behaving in a manner directed or determined by him.”

According to Hodge and Johnson, “Leader is the ability to shape the attitude and behavior of others whether in formal or informal situations.”

Qualities of good leadership

Leadership is the key to making organizational life not only more productive but also more humane. Effective leaders have some qualities. Such leaders are truly trans formative. An effective leader should have these qualities:

1.A clear sense of purpose or the ability to define and share the vision and mission with subordinates. The leaders must be clear about the purpose of the organization of what it wants to achieve.

2.Good judgment or the ability to understand the effect of one’s action on coworkers, on the organization, and on customers, suppliers, and the community at a large.

3.Self-knowledge or the ability to be aware of one’s own strengths and abilities, and know how to maximize and use them.

4.Objectivity or the ability to see all sides of a situation, and be impartial in reaching conclusions.

5.Emotional maturity or the ability to acknowledge the importance of individuals and their opinion.

6.Initiative or being a self-starter and overcoming obstacles to achieve organizational goals.

7.A perpetual desire for learning or the ability to continue their own professional development, learning about their own organizations and developing the skills necessary to their own organizations, and developing the skills necessary to their organization’s continued success.

8.Cooperativeness or the ability to work well with others and foster teamwork to achieve goals.

9.Integrity or the ability to be honest, trustworthy, and fair in implementing organizational policies and decisions.

10.Adaptability or the ability to adapt quickly to new situations. The leader must have the stability to adjust to changing situations.

Other qualities like Intelligence, Communication skills, Physical features, and Technical skills are also some of the important qualities of leadership.