Motivation

Having a motivated workforce is vital for most businesses, since it can lead to higher rates
of productivity, better quality output, and low rates of absenteeism and labour turnover.
The main factors which affect the motivation of workers are pay levels, job security,
promotional prospects, being given responsibilities, working conditions, fringe benefits,
participation in decision-making and working in a team.

Motivational Theories
There are two basic theories of motivation; content theories and process theories.
Content theories focus on what actually motivates people, they study the needs that must
be satisfied in order for the employee to be motivated.
The need is either satisfied by an extrinsic reward (e.g. pay) or an intrinsic reward (e.g.
recognition and praise). The Classical (Fayol), the Scientific (Taylor), the Human Relations
(Mayo), and the Neo-Human Relations (Maslow, Herzberg, McGregor) schools of
management thought are all content theories.

Financial Methods
There are many different methods of payment that a business can choose from, each of
which can have different effects on the level of motivation of the workforce. The main
methods are:
1.

Time-rate ('flat rate') schemes.

This payment method involves the employee receiving a basic rate of pay per time period
that he works (e.g. 5 per hour, 50 per day, 400 per week). The pay is not related to
output or productivity.
Any time that the employee works above the agreed number of hours per week may make
him eligible for overtime payments, often at 'time and a half' (e.g. 7.50 per hour instead
of 5 per hour).

2.

Piece-rate schemes.
This payment method involves the employee receiving an amount of money per unit (or
per 'piece') that he produces. Therefore his pay is directly linked to his productivity level.
However, it is possible that in order to boost his earnings, an employee may reduce the
quality and craftsmanship per unit, so that he can produce more output in a given period of
time.

3.

Commission.

This is a common method of payment for salesmen (e.g. insurance, double-glazing,

telesales). The employee receives a very small percentage (say 0.5%) of the value of the
goods that he manages to sell in a period of time.
4.

Performance-related pay (PRP).

This is a method of giving pay rises on an individual basis, related to the employee
achieving a number of targets over the past year. This is common with managerial and
professional workers.

5.

Profit sharing.
This involves each employee receiving a share of the profit of the business each year,
effectively representing an annual pay rise. It aims to increase the levels of effort,
motivation and productivity of each employee, since their annual pay-award will be related
to the profitability of the business.
However, if the business makes low profits (or even a loss) then this is likely to have a
detrimental effect on the level of motivation of the employees.

6.

Share ownership.
A common form of payment in many PLCs is what is termed 'share options'. This basically
involves each employee receiving a part of each month's salary in the form of shares
(usually at a discounted price).
This forms a profitable savings-plan for the employee, and he can sell them after a given
period of time. This should motivate the employees to work harder and increase their
efforts, since the share price will rise as the company becomes more profitable, therefore
increasing the capital gain on their shares.
Many of these different methods of pay are likely to be supplemented by fringe benefits (or
'perks') such as private health schemes, pension schemes, subsidised meals, discounts on
holidays and travel, cheap mortgages and loans, company cars and discounts when buying
the company's products. The total package of pay plus fringe benefits is known as
the remuneration package.

Non-Financial Methods
There is no universal rule for motivating employees, and there are many methods which
are used by different managers to achieve the goal of a motivated and satisfied workforce.
These include:

Delegation.

This occurs when managers pass a degree of authority down the

hierarchy to their subordinates.

Empowerment.

This involves a manager giving his subordinates a degree of power

over their work (i.e. it enables the subordinates to be fairly autonomous and to decide for
themselves the best way to approach a problem).

Job enlargement. This involves increasing the number of tasks which are involved in
performing a particular job, in order to motivate and multi-skill the employees.
Job enrichment. This is a method of motivating employees by giving them more
responsibilities and the opportunity to use their initiative.
Job rotation. This involves the employees performing a number of different tasks in turn,
in order to increase the variety of their job and, therefore, lead to higher levels of
motivation.
Quality circles. This is a group of workers that meets at regular intervals in order to
identify any problems with quality within production, consider alternative solutions to these
problems, and then recommend to management the solution that they believe will be the
most successful.
Teamworking. This is the opposite production technique to an assembly-line which uses
an extreme division of labour. Teamworking involves a number of employees combining to
produce a product, with each employee specialising in a few tasks. Cell production is an
example of teamworking.
Worker participation. This refers to the participation of workers in the decision-making
process, asking them for their ideas and suggestions.
Symptoms of poor motivation amongst the workforce include high rates of absenteeism
and labour turnover, poor timekeeping, high rates of waste, low quality output and an
increasing number of disciplinary problems.
When a poor level of motivation exists in a workforce, then the management
should:
1.

Develop a strong corporate culture and team-spirit.

2.

Ensure that pay levels are fair.

3.

Design more challenging jobs.

4.

Introduce decision-making at lower levels in the organisation.

5.

Give praise and recognition to employees for their efforts and

achievements.

6.

Ensure that communication flows are effective and that the relevant
messages get to the relevant personnel.

Theories!!!
Taylor & Scientific Management
Introduction

Taylor developed his theory of "scientific management" as he worked his way

up from a labourer to a works manager in a US steelworks.
From his observations, Taylor made three key assumptions about human
behaviour at work:
(1) Man is a rational economic animal concerned with maximising his
economic gain;
(2) People respond as individuals, not as groups
(3) People can be treated in a standardised fashion, like machines
Taylor had a simple view about what motivated people at work - money. He
felt that workers should get a fair day's pay for a fair day's work, and that pay
should be linked to the amount produced (e.g. piece-rates). Workers who did
not deliver a fair day's work would be paid less (or nothing). Workers who did
more than a fair day's work (e.g. exceeded the target) would be paid more.
The implications of Taylor's theory for managing behaviour at work were:
- The main form of motivation is high wages, linked to output
- A manager's job is to tell employees what to do
- A worker's job is to do what they are told and get paid accordingly
Weaknesses in Taylor's Approach
The most obvious weakness in Taylor's approach is that it ignores the many
differences between people. There is no guarantee that a "best way" will suit
everyone.
Secondly, whilst money is an important motivation at work for many people, it
isn't for everyone. Taylor overlooked the fact that people work for reasons
other than financial reward.

Maslow's hierarchy of needs

Maslow's Hierarchy of Needs is a "content theory" of motivation" (the other
main one is Herzberg's Two Factor Theory).
Maslow's theory consisted of two parts:
(1) The classification of human needs, and
(2) Consideration of how the classes are related to each other
The classes of needs were summarised by Maslow as follows:

How does the Hierarchy Work?

- A person starts at the bottom of the hierarchy (pyramid) and will initially
seek to satisfy basic needs (e.g. food, shelter)
- Once these physiological needs have been satisfied, they are no longer a
motivator. the individual moves up to the next level
- Safety needs at work could include physical safety (e.g. protective clothing)
as well as protection against unemployment, loss of income through sickness
etc)
- Social needs recognise that most people want to belong to a group. These
would include the need for love and belonging (e.g. working with colleague
who support you at work, teamwork, communication)
- Esteem needs are about being given recognition for a job well done. They
reflect the fact that many people seek the esteem and respect of others. A
promotion at work might achieve this
- Self-actualisation is about how people think about themselves - this is often
measured by the extent of success and/or challenge at work

Maslow's model has great potential appeal in the business world. The
message is clear - if management can find out which level each employee has
reached, then they can decide on suitable rewards.
Problems with the Maslow Model
There are several problems with the Maslow model when real-life working
practice is considered:
- Individual behaviour seems to respond to several needs - not just one
- The same need (e.g. the need to interact socially at work) may cause quite
different behaviour in different individuals
- There is a problem in deciding when a level has actually been "satisfied"
- The model ignores the often-observed behaviour of individuals who tolerate
low-pay for the promise of future benefits
- There is little empirical evidence to support the model. Some critics suggest
that Maslow's model is only really relevant to understanding the behaviour of
middle-class workers in the UK and the USA (where Maslow undertook his
research).
Herzberg two factor theory
Herzberg's Two Factor Theory is a "content theory" of motivation" (the other
main one is Maslow's Hierarchy of Needs).
Herzberg analysed the job attitudes of 200 accountants and engineers who
were asked to recall when they had felt positive or negative at work and the
reasons why.
From this research, Herzberg suggested a two-step approach to understanding
employee motivation and satisfaction:

Hygiene Factors
Hygiene factors are based on the need to for a business to avoid
unpleasantness at work. If these factors are considered inadequate by
employees, then they can cause dissatisfaction with work. Hygiene factors
include:
- Company policy and administration
- Wages, salaries and other financial remuneration
- Quality of supervision
- Quality of inter-personal relations
- Working conditions
- Feelings of job security
Motivator Factors
Motivator factors are based on an individual's need for personal growth. When
they exist, motivator factors actively create job satisfaction. If they are
effective, then they can motivate an individual to achieve above-average
performance and effort. Motivator factors include:
- Status

- Opportunity for advancement

- Gaining recognition
- Responsibility
- Challenging / stimulating work
- Sense of personal achievement & personal growth in a job
There is some similarity between Herzberg's and Maslow's models. They both
suggest that needs have to be satisfied for the employee to be motivated.
However, Herzberg argues that only the higher levels of the Maslow Hierarchy
(e.g. self-actualisation, esteem needs) act as a motivator. The remaining
needs can only cause dissatisfaction if not addressed.
Applying Hertzberg's model to de-motivated workers
What might the evidence of de-motivated employees be in a business?
- Low productivity
- Poor production or service quality
- Strikes / industrial disputes / breakdowns in employee communication and
relationships
- Complaints about pay and working conditions
According to Herzberg, management should focus on rearranging work so that
motivator factors can take effect. He suggested three ways in which this could
be done:
- Job enlargement
- Job rotation
- Job enrichment

Leadership Styles
There are three main categories of leadership styles: autocratic,
paternalistic and democratic.

Autocratic (or authoritarian) managers like to make all the important

decisions and closely supervise and control workers. Managers do not trust
workers and simply give orders (one-way communication) that they expect to
be obeyed. This approach derives from the views of Taylor as to how to
motivate workers and relates to McGregors theory X view of workers. This
approach has limitations (as highlighted by other motivational theorists such

as Mayo and Herzberg) but it can be effective in certain situations. For

example:
When quick decisions are needed in a company (e.g. in a time of crises)
When controlling large numbers of low skilled workers.

Paternalistic managers give more attention to the social needs and views
of their workers. Managers are interested in how happy workers feel and in
many ways they act as a father figure (pater means father in Latin). They
consult employees over issues and listen to their feedback or opinions. The
manager will however make the actual decisions (in the best interests of the
workers) as they believe the staff still need direction and in this way it is still
somewhat of an autocratic approach. The style is closely linked with Mayos
Human Relation view of motivation and also the social needs of Maslow.
A democratic style of management will put trust in employees and
encourage them to make decisions. They will delegate to them the authority
to do this (empowerment) and listen to their advice. This requires good twoway communication and often involves democratic discussion groups, which
can offer useful suggestions and ideas. Managers must be willing to
encourage leadership skills in subordinates.
The ultimate democratic system occurs when decisions are made based on
the majority view of all workers. However, this is not feasible for the majority
of decisions taken by a business- indeed one of the criticisms of this style is
that it can take longer to reach a decision. This style has close links with
Herzbergs motivators and Maslows higher order skills and also applies to
McGregors theory Y view of workers.
Summary of management styles

Autocratic

Paternalistic

Description

Advantages

Disadvan

Senior managers take all

the important decisions
with no involvement from
workers

Quick decision making

No two-w
can be de

Managers make decisions

in best interests of
workers after consultation

More two-way communication

so motivating

Effective when employing

many low skilled workers

Workers feel their social

needs are being met

Democratic

Workers allowed to make

own decisions.

Authority is delegated to
workers which is motivating

Some businesses run on

the basis of majority

Useful when complex

decisions are required that

Creates
between

Slows dow

Still quite
autocratic

Mistakes
if workers
experienc

decisions

need specialist skills

MARKETING
A company needs to consider the marketing mix in order to meet their
consumers' needs effectively.

Elements of the marketing mix

The marketing mix is the combination
of product, price, place and promotionfor any business venture.

Marketing Mix
No one element of the marketing mix is more important than another each
element ideally supports the others. Firms modify each element in the marketing

mix to establish an overall brand image and unique

makes their products stand out from the competition.

selling point that

What makes for an effective marketing mix?

An effective marketing mix is one which:

Meets customer needs

Achieves marketing objectives

Is balanced and consistent

Creates a competitive advantage for the business

A company can be:

-market oriented (makes decisions regarding its products according to the
market demand- established by market research)
-product oriented (focuses on making products and then trying to sell them)
The first one I will make what the people want
The second one I will make a product and (hopefully) people will want it or I
will make them want it
MARKET SHARE = the percentage of sales in the total market sold by one
business
(how much I sold compared to how much was sold in the entire market in a
period of time - %)

Q&A - What is the difference between niche and mass marketing?

In most markets there is one dominant (mass) segment and several smaller (niche)
segments
For example, in the confectionery market, a dominant segment would be the plain
chocolate bar. Over 90% of the sales in this segment are made by three dominant

producers Cadburys, Nestle and Mars. However, there are many small, specialist
niche segments (e.g. luxury, organic or fair-trade chocolate).
Niche marketing can be defined as:
Where a business targets a smaller segment of a larger market, where customers
have specific needs and wants
Targeting a product or service at a niche segment has several advantages for a business
(particularly a small business):
Less competition the firm is a big fish in a small pond
Clear focus - target particular customers (often easier to find and reach too)
Builds up specialist skill and knowledge = market expertise
Can often charge a higher price customers are prepared to pay for expertise
Profit margins often higher
Customers tend to be more loyal
The main disadvantages of marketing to a niche include:
Lack of economies of scale (these are lower unit costs that arise from operating at
high production volumes)
Risk of over dependence on a single product or market
Likely to attract competition if successful
Vulnerable to market changes all eggs in one basket
By contrast, mass marketing can be defined as:
Where a business sells into the largest part of the market, where there are many
similar products on offer
The key features of a mass market are as follows:
Customers form the majority in the market
Customer needs and wants are more general & less specific
Associated with higher production output and capacity (economies of scale)
Success usually associated with low-cost operation, heavy promotion, widespread
distribution or market leading brands

MARKET RESEARCH!!!!!!!!
=Process of collecting recording and analyzing data about customers, competition and
the market
Why?

Reduce risks associated with new product launches

Predict future demand changes
Explain patterns in sales of existing products and market trends

SOURCES OF DATA
Primary

=data collected FOR THE FIRST TIME which is directly related to the
firms needs
Observation involves watching people and monitoring and recording their behaviour (e.g.
television viewing patterns, cameras which monitor traffic flows, retail audits which
measure which brands of product consumers are purchasing).
Questionnaires are a means of direct contact with consumers and can take a variety of
forms. Personal questionnaires (such as door-to-door interviewing), postal questionnaires,
telephone questionnaires and group questionnaires (such as asking for the attitudes of a
group of consumers towards a new product). Questionnaires can be a very expensive and
time-consuming process and it can be very difficult to eliminate the element of bias in the
way that they are carried out. It is important that every respondent must be asked the
same questions in the same order, with no help or emphasis being placed on certain
questions / responses.
Experimentation involves the introduction of a variety of marketing activities into the
marketplace and then measuring the effect of each of these on consumers. For example,
test marketing, where a new product is launched in a small, geographical area and then the
response of consumers towards it will dictate whether or not the product is launched
nationally.

Secondary research
secondary data, which has previously been
collected by others and is not designed specifically for the study
in question, but is nevertheless relevant. Secondary data is far cheaper and
This is the collection of

quicker to gather than primary data, but it can be out-of-date by the time that it is
researched. The main sources of secondary data are reference books, government
publications and company reports.
The primary and the secondary research will provide the business with much data relating
to its markets and its consumers. This data can then be used to describe the current
situation in the marketplace, to try to predict what will happen in the future in the
marketplace, and to explain the trends that have occurred.
The business may also use the market research data to segment the market. This involves
breaking the market down into distinct groups of consumers who have similar
characteristics, so as to offer each group a product which best meets their needs. The
main ways of segmenting a market are:
By consumer characteristics: this involves investigating their attitudes, hobbies,
interests, and lifestyles.

By demographics: their age, sex, income, type of house, and socio-economic group.
By location: the region of the country, urban -v- rural, etc.
Effective segmentation of the market can lead to new opportunities being identified (i.e.
gaps in the market for a product), sales potential for products being realised and increased
market share, revenue and profitability.

Quantitative vs Qualitative research

Quantitative research

sample of the
population and asking them pre-set questions via a questionnaire
Quantitative research involves carrying out market research by taking a

(normally 200+ respondents) in order to discover the likely levels of demand at different
price levels, estimated sales of a new product, and the 'typical' purchaser of the company's
products. The data is numerical and can be analysed graphically and statistically. There
are several types of sample that can be used to gather quantitative data:
Random sampling - this gives each member of the public an equal chance of being used
in the sample. The respondents are often chosen by computer from a telephone directory
of from the Electoral Register.
Quota sampling - this method involves the consumers being grouped into segments
which share certain characteristics (e.g. age or gender). The interviewers are then told to
choose a certain number of respondents from each segment. However, the numbers of
people interviewed in each segment are not usually representative of the population as a
whole.
Cluster sampling - this normally involves the consumers being grouped into geographical
groups (or 'clusters') and then a random sample being carried out within each location.
Stratified sampling - the consumers are grouped into segments again (or 'strata') based
upon some previous knowledge of how the population is divided up. The number of people
chosen to be interviewed from each 'strata' is proportional to the population as a whole.
Qualitative research
Qualitative research attempts to gain an insight into the motivations that drive a consumer
to behave in a particular way. It is usually conducted through group discussions (often
called focus groups) in order to discover the rationale behind consumers' purchases. The
group discussion is often chaired by a psychologist in a relaxed manner, which should
encourage the consumers to discuss their shopping habits and pre-conceptions concerning
certain products and brands.

Product Life-Cycle
This shows the various stages that a product is expected to pass through and it also
indicates the likely level of sales that can be expected at each stage.
The length of the lifecycle will vary from product to product and from industry to industry
(e.g. Oxo Cubes, Levi Jeans and Kellogg's Cornflakes have lifecycles that have lasted for
over 50 years, but various pop groups and childrens' toys have a lifecycle that can last less
than 12 months). Generally, there are six stages to the lifecycle - development,
introduction, growth, maturity, saturation and decline, as illustrated on the
diagram below :

During the development stage, much time will be spent designing and testing the product
concept. A prototype will often be test-marketed, in order to assess the potential sales and
profitability of the new product. A decision will then be made whether or not to launch the
product. The business will, therefore, incur many expenses during the development stage
of the product lifecycle and the product will produce a large, negative cashflow.
It is estimated that only 1 in every 5 new products actually pass the development stage
and reach the introductory stage of the lifecycle.
The introduction stage commences with the launch of the product onto the market. Sales
are low and costs are still very high (especially advertising and distribution). The product is,
therefore, unprofitable at this stage. The length of this stage will vary considerably
according to the product. Some products will take a long time to reach the growth stage of
the lifecycle (e.g. new novels) whereas others will head straight from introduction into
growth in a matter of days (eg new pop-music album releases).
Once the business has made customers aware of the new product and it has managed to
achieve a high level of repeat-purchasers, then the product will head into
the growth stage of the lifecycle. This is where the product starts to become profitable.
Advertising is still extensive. Competitors may launch similar products to cash-in on the
successful new product.
The business will try to prolong the growth stage for as long as possible, but sooner or later
it will reach the maturity stage of the lifecycle. The growth in sales will start to slow down

and the product will nearly reach its maximum market share. There will be several
competing products on the market.
The saturation stage of the lifecycle will occur where the sales of the product have
reached their peak and the number of competing products will have grown significantly. It
is during this stage of the lifecycle that the business may decide to use an extension
strategy to prolong the lifecycle and boost sales, sales revenue and profits.
The final stage of the lifecycle is where the sales of the product go into decline. This is
usually an inevitable result of changing customer tastes and fashions, new technology and
the loss of market share to new products introduced by competitors.

Extension strategies
If a business believes that a product which has reached the saturation stage of the lifecycle
can still produce a higher level of sales, then it may choose to implement one or
more extension strategies to improve the product's ailing level of sales, such as :

changing the appearance and the packaging of the product;

trying to find new uses for the product;

trying to find new markets for the product;

trying to entice customers to use the product more frequently;

ltering the ingredients of the product.

Advertising is defined as any paid-for method of promotion and is the

main form of above the line promotion.
Advertising presents or promotes the product to the target audience through a
variety of media such as TV, radio, cinema, online and magazines to
encourage them to buy.
The problem with advertising is that consumers are bombarded with
advertising messages every day. How can a business cut through the
advertising noise and get a message across effectively? And how can a
business measure the effectiveness of an advertising campaign. It is often
said that businesses waste half their advertising spend the problem is that
they dont know which half!
When deciding which type of advertising to use a business needs to consider
factors like:

Reach of the media national or local; number of potential

customers it could reach; how long before the message is seen

Nature of the product the media needs to reflect the image of the
product; a recruitment ad would be placed in a trade magazine or
newspaper but a lipstick ad would be shown on TV or womens
magazines

Position in product life cycle launch stage will need different

advertising from products undergoing extension strategies

Cost of medium & size of advertising budget e.g. local

newspaper advertising is cheaper than radio, which in turn is cheaper
than TV. But the business will also want to consider cost per head if
reaching a larger audience

Online or offline there has been substantial growth in businesses

that advertise online as they swap some (sometimes all) of their
advertising budgets to reach Internet users.

Advertising can also be split into two main types:

Persuasive advertising - this tries to entice the customer to buy the

product by informing them of the product benefit

Informative advertising - this gives the customer information.

Mostly done by the government (e.g. health campaigns, new welfare
benefits)

Sometimes a business will employ an advertising agency to deal with its

needs. An agency plans, organises and produces advertising
campaigns for other businesses. The advantage of an agency managing the
campaign is that it has the expertise a business may not have, e.g.
copywriters, designers and media buyers.
The main advantages and disadvantages of advertising as method of
promotion are:
Advantages
Disadvantages

Wide coverage

Often expensive

Control of message being promoted

Impersonal

Repetition means that the message can be communicated

effectively

One way communication

Lacks flexibility

Can be used to build brand loyalty

Limited ability to close a sale

I dont know how to fix this stupid table

The main methods of promotion are:

Advertising

Public relations & sponsorship

Personal selling

Direct marketing

Sales promotion

A business will use a range of promotional activities for its product, depending
on the marketing strategy and the budget available.
The way in which promotion is targeted is split into two types:

Above the line promotion paid for communication in the

independent media e.g. advertising on TV or in the newspapers.
Though it can be targeted, it could be seen by anyone outside the
target audience.

Below the line promotion promotional activities where the

business has direct control e.g. direct mailing and money off coupons.
It is aimed directly at the target audience.