1

Name: Anil

Class / S.E.M / Sec: B.B.M / IIIrd / A

Registration No.: 10BBM20260

Subject: Marketing Management II

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1. Elaborately micro and macro environment with appropriate examples.

The micro-environment consists of stakeholder groups that a firm has

regular dealings with. The way these relationships develop can affect the costs,
quality and overall success of a business. Issues in the micro-environment include:

 Suppliers:
Suppliers are the first link in the entire supply chain of the company.
Firms must decide on issues such as who to use to supply them, on the
responsibility it takes for these suppliers and on the terms and conditions it
adopts. Some firms take quite an aggressive attitude towards their suppliers
by trying to push down the prices and delay payments. Others view the
relationship more as a partnership in which they are working together with
suppliers and that by helping each other both can benefit. The importance of
suppliers can be seen if things go wrong.

Eg: Kingfisher airline needs regular supply of fuel, food and beverages,

maintenance.

 Distributors:
The firms which distribute and sell the goods of the company to the
consumer. Marketing intermediaries plays an important role in the
distribution, selling and promoting the goods and services. often getting
products to the end customers can be a major issue for firms the challenge is
to get stores to stock your products; this may be achieved by good
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negotiating skills and offering appropriate incentives. The distributors used

will determine the final price of the product and how it is presented to the
end customer

Eg: Website, ticket booking agents are the few intermediaries.

 Customers:
Customers are obviously the key to sales. The firm must monitor
customer needs and try to anticipate how these will develop so that they can
meet these requirements effectively now and in the future. To help
understand their customers firms are increasingly trying to gather
information on. By gathering data on shopping patterns and matching this to
data on the individual shoppers firms can build up detailed pictures of their
buyers and then offer them appropriate deals. Many firms are also trying to
develop relationships with customers to help ensure they come back time
and time again. To search quickly for alternatives and compare deals more
easily; this puts pressure on firms to provide better value for money or they
will lose their customers.

Eg: Fares are average as compared to jet airways or air India launch of
kingfisher red services to target budget flyers try to increase the
perception of “More Value for Money” for the passengers.

 Competition:
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The success and behavior of any business will depend on the degree of
competition in its market. In some markets one firm is dominant. This is
called a monopoly. In other markets a few firms dominate; this type of
market structure is called an oligopoly. In oligopolistic markets there is a
high degree of interdependence and so firms will think carefully how their
rivals might react to any actions they take. This can lead to an emphasis on
non price competition; a price change is relatively easy to imitate and so
firms may rely more on methods such as branding or product development.
In more competitive markets where there are many firms providing similar
products customers have more choice; this may put downward pressure on
prices and means that excellent customer service is essential.

Eg: C losest competitor for kingfisher airlines is jet airways, as it is the

fastest growing airline in India. And targeting to the premium and executive
class of the country and providing high quality of services

 PUBLICS:
These are microenvironment groups, which helps company in
generating the financial resources, creating the image, examining the
companies’ policy and developing the attitude towards the product.

Eg: Financial publics(share holders, banks, Media publics(The Hindu, Times of

India) , Internal publics(Employees)
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Macro Environment:

The PESTLE framework is usually used to analyze the company’s macro

environment. PESTLE factors are listed as follows:

 POLITICAL ENVIRONMENT
Political and government has close relationship with the economic
system and economics policy. Certain changes in government policies such
as the industrial policy, traffic policy, fiscal policy etc. may have huge
impact on business.
The major political factors which can affect the business are:
1. Political Analysis
2. Political stability
3. Risk of military invasion
4. Legal framework for contract enforcement
5. Intellectual rights protection
6. Trade regulations and tariff
7. Favored trading partners
8. Pricing regulations
9. Taxation
10.Wage legislation
11.Mandatory employee benefits
12.Product labeling requirements
Eg: The Indian Government, as part of its "open skies policy, ended the
monopoly of IAC and AI in the air transport services by repealing the Air
Corporations Act of 1953 and replacing it with the Air Corporations
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(Transfer of Undertaking and Repeal) Act, 1994. Private operators were

allowed to provide air transport services. Foreign direct investment (FDI) of
up to 49 percent equity stake and NRI (Non Resident Indian) investment of
up to 100 percent equity stake were permitted through the automatic FDI
route in the domestic air transport services sector. However, no foreign
airline could directly or indirectly hold equity in a domestic airline
company.

 ECONOMIC ENVIRONMENT
Economic factors are of concern to marketing firms because they are
likely to influence, among other things, demand, costs, prices and profits.
These economic factors are largely outside the control of the individual firm,
but their effects on individual enterprises can be profound. Political and
economic forces are often strongly related. Factors which companies have to
take into consideration are:
1. Economic Analysis
2. Type of economic system
3. Government intervention in the free market
4. Comparative advantages of host country
5. Exchange rates & stability of host country currency
6. Efficiency of financial markets
7. Infrastructure quality
8. Labor costs
9. Business cycle stage (prosperity, recession, depression, recovery)
10.Economic growth rate
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11.Discretionary income
12.Inflation rates
13.Interest rates

Eg: Factors which had affected KFA s market are launch of new LC C , like
go air & spice jet. Jet airways acquisition with air Sahara which would make
Jet Airways India's largest airline with an almost 45% market. There were
also other challenges which affected the airline industry as a whole, like
high aviation turbine fuel (ATF) prices and congestion problems at high
traffic airports like Mumbai and Delhi.

 SOCIAL AND CULTURAL ENVIRONMENT:

As a company, it’s important to understand what is going on in
social and cultural environment, as customer’s perceptions and
behaviors are constantly changing. Sometimes brands are used as a
means of self expression, customers buy product and services that
connects with them easily
 TECHNOLOGY ENVIRONMENT:
Technology is a major macro-environmental variable which has
influenced the development of many of the products we take for granted
today, for example, television, calculators, video recorders and desk-top
computers. Marketing firms themselves play a part in technological
progress, many having their own research department or sponsoring research
through universities and other institutions, thus playing a part in innovating
new developments and new applications.
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Eg: Various developments in IT system are used for the maintenance of

aircraft. Due to advanced technologies new designs of aircrafts are being
proposed which are more efficient in performance.

 LEGAL ENVIRONMENT.
Many of the legal, economic and social developments, in our own
society and in others, are the direct result of political decisions put into
practice In summary, whatever industry the marketing firm is involved in,
changes in the political and legal environments at both the domestic and
international levels can affect the company and therefore needs to be fully
understood.
Government policies, legislations, regulations, and stability will
directly affect the business. Therefore it is inevitable for the firm to closely
monitor this environment. The political and legal forces are grouped into the
following four categories:

 ETHICAL ENVIRONMENT:
Marketing, in contemporary times, has seen a tumultuous change in
the way it's conducted in developing countries. But the outcome of such
developments is that a number of ethical issues have arisen. While the globe
is indeed becoming a smaller place, marketers have to bear in mind national,
local and cultural sensitivities. Very often, in the hope of tapping a larger
consumer base, marketers jump headlong in new markets without keeping in
mind ethnic and social issues typical to certain areas. Exploiting Social
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Paradigms In the hopes of making a fast buck, marketers often resort to

exploiting social paradigms typical to certain areas.

 NATURAL ENVIRONMENT:
Environmental concerns are growing over the years. Governments
increased regulations to manage the natural resources. Marketers should
aware of such trends in the natural environment. Some of the factors which
organizations should keep a vigil are:
1. Inadequate raw materials
2. Global warming and pollution levels
3. Regulatory world

Eg: Involves the natural resources needed by the company as inputs.

Environment concerns have grown steadily in past few years. Since airline
needs fuel which is a natural resource, so it could be a serious problem in
future economic growth of the company.

 DEMOGRAPHIC ENVIRONMENT:
The study of population characteristics like size, density, location,
gender composition, age structure, occupation and religion. Demography
statistics helps companies to develop their products in better way. These
statistics are also used in developing proper supply chain, communicating
product information and changing the product attributes.
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Demographic environment is analyzed on the basis of the following

factors:
1. Age structure of the population
2. Marital status of the population
3. Geographical distribution of the population
4. Education level
5. Migration
6. Occupation.

Eg: Kingfisher Airlines is a five star airline service and thus targets the
Upper class people. Thus income, social class and occupation are the factors
that affect the company’s marketing strategies.

2. Elaborate on the product marketing strategies with suitable

examples.

PRODUCT MARKETING STRATEGIES:

Marketing strategy is a process that can allow an organization to concentrate its

limited resources on the greatest opportunities to increase sales and achieve a
sustainable competitive advantage. A marketing strategy should be centered on the
key concept that customer satisfaction is the main goal.

Marketing strategies may differ depending on the unique situation of the individual
business. However there are a number of ways of categorizing some generic
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strategies. A brief description of the most common categorizing schemes is

presented below:

Product market
strategies

Porter’s generic
Strategies: Growth strategies:
Market
dominance:  Cost leadership  Horizontal
 Differentiation  Vertical
 Leader  Focus.  Diversification
 Challenger  Intensive:
 Follower
 Nicher

1 . Strategies based on market dominance:

In this scheme, firms are classified based on their market share or

dominance of an industry. Typically there are four types of market dominance
strategies:

o Leader
o Challenger
o Follower
o Nicher
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Market Leader’s objectives:

 Expand the total market by

 Finding new users
 Creating new uses (eg: Launch of Red Fleet)
 Encouraging more usage (eg: Travel safely, Feels like home, luxury
while travelling)
 Protect its current market share by
 Adopting defense strategies (eg: Taking over Air Deccan by holding
26% of the total shares)
 Increase its market share
 Note the relationship between market share and profitability

Market Challenger Objectives:

The market challengers’ strategic objective is to gain market share and to become
the leader eventually. How to achieve this objectives are:-

 By attacking the market leader(eg: focusing on its immediate rival – Air

Deccan)
 By attacking other firms of the same size
 By attacking smaller firms (eg: goair, spicejet etc)

Market Follower Strategies:

 Each follower tries to bring distinctive advantages to its target market--

location, services, financing
 Four broad follower strategies:
 Counterfeiter (which is illegal)
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 Cloner
 Imitator
 Adapters

Market Nicher Strategies:

 Smaller firms can avoid larger firms by targeting smaller markets or niches
that are of little or no interest to the larger firms e.g. Logitech--mice
 Nichers must create niches, expand the niches and protect them
 The major risk faced by nichers is that the niche may be attacked by larger
firms once they notice the niches are successful
 Eg: The price segments that kingfisher targets is the higher income group as
well as the upper middle class background. There are a few segments that
are majority for the youth and the high lifestyle segments. Sec A, sec B+
socio economic class mainly in the age group of 25 to 45 years are the main
segments for which there is a specific price offered by kingfisher. Some of
the services offered by kingfisher do emphasis on their policy to target those
segments which are willing to pay for luxury.

2. Porter’s Generic Strategies:-

Generic strategies outline ways that businesses can gain a competitive

advantage. If a profitable product or idea can be copied easily then other firms will
take advantage and enter the market. Rivals can also improve the product.

The original firms profits will fall, so Porter argued that successful businesses must
have a competitive advantage to prevent a profit decline due to rivals in the market
The generic strategy framework (porter 1984) comprises two alternatives each with
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two alternative scopes. There are three general strategies to maintain competitive
advantage:-

– Cost Leadership
– Differentiation
– Focus

Target Scope Advantage

Low Cost Product Uniqueness
Broad (Industry Wide) Cost Leadership Strategy Differentiation Strategy
Narrow (Market Segment) Focus Strategy Focus Strategy
(Low Cost) (Differentiation)

Cost Leadership Strategy:

The low cost leader in any market gains competitive advantage from being able to
many to produce at the lowest cost. Factories are built and maintained, labor is
recruited and trained to deliver the lowest possible costs of production. 'cost
advantage' is the focus. Costs are shaved off every element of the value chain.
Products tend to be 'no frills.' This strategy involves the firm winning market share
by appealing to cost-conscious or price-sensitive customers. This is achieved by
having the lowest prices in the target market segment, or at least the lowest price to
value ratio. To succeed at offering the lowest price while still achieving
profitability and a high return on investment, the firm must be able to operate at a
lower cost than its rivals. However, low cost does not always lead to low price.
Producers could price at competitive parity, exploiting the benefits of a bigger
margin than competitors. Firms that succeed in cost leadership often have the
following internal strengths:
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 Access to the capital required to make a significant investment in production

assets; this investment represents a barrier to entry that many firms may not
overcome.
 Skill in designing products for efficient manufacturing, for example, having
a small component count to shorten the assembly process.
 High level of expertise in manufacturing process engineering.
 Efficient distribution channels.

Differentiation Strategy:

Differentiated goods and services satisfy the needs of customers through a

sustainable competitive advantage. This allows companies to desensitize prices and
focus on value that generates a comparatively higher price and a better margin. The
benefits of differentiation require producers to segment markets in order to target
goods and services at specific segments, generating a higher than average price.
For example, British Airways differentiates its service.

The differentiating organization will incur additional costs in creating their

competitive advantage. These costs must be offset by the increase in revenue
generated by sales. Costs must be recovered. There is also the chance that any
differentiation could be copied by competitors. Therefore there is always an
incentive to innovated and continuously improve.

The loyalty of the buyers can also serve as an entry barrier-new firms must develop
their own distinctive competence to differentiate their products in some way in
order to compete successfully.

Focus Strategy:
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The focus strategy concentrates on a narrow segment and within that segment
attempts to achieve either a cost advantage or differentiation. The premise is that
the needs of the group can be better serviced by focusing entirely on it. A firm
using a focus strategy often enjoys a high degree of customer loyalty, and this
entrenched loyalty discourages other firms from competing directly.

Because of their narrow market focus, firms pursuing a focus strategy have lower
volumes and therefore less bargaining power with their suppliers. However, firms
pursuing a differentiation-focused strategy may be able to pass higher costs on to
customers since close substitute products do not exist. Firms that succeed in a
focus strategy are able to tailor a broad range of product development strengths to
a relatively narrow market segment that they know very well.

Some risks of focus strategies include imitation and changes in the target segments.
Furthermore, it may be fairly easy for a broad-market cost leader to adapt its
product in order to compete directly. Finally, other focusers may be able to carve
out sub-segments that they can serve even better.

Examples of firm using a focus strategy include Southwest Airlines, which

provides short-haul point-to-point flights in contrast to the hub-and-spoke model of
mainstream carriers. Examples of Cost Focus: Many smaller retailers featuring
own-label or discounted label products. Examples of Differentiation Focus: any
successful niche retailers; or specialist holiday operator

3. Growth strategies:

In this scheme we ask the question, “How should the firm grow?” There are
a number of different ways of answering that question, but the most common gives
four answers:
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 Horizontal integration:
Horizontal integration occurs when a firm is being taken over
by/merged with another firm, which is in the same industry and in the same
stage of production as the merged firm
 Vertical integration:
Vertical integration is the degree to which a firm owns its upstream
suppliers and its downstream buyers. Vertical integration is typified by one
firm engaged in different parts of production

A diagram illustrating vertical integration and contrasting it with horizontal

integration.

 Diversification:
Diversification is a form of corporate strategy for a company. It
seeks to increase profitability through greater sales volume obtained from
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new products and new markets. Diversification can occur either at the
business unit level or at the corporate level.

 Intensification:

With immense pressure to grow marketers share and profits, marketers

are always on the lookout for ways to grow their business. Marketers have
four variables to play with existing market, new markets, existing products
and new products.

Intensifying means the firm is strengthening its involvement and

position in existing business. Intensification strategy encompasses three
alternative routes – market penetration strategy, market development
strategy and product development strategy.

Through market penetration strategy a company achieves growth

through existing products in existing markets by increasing its market
share.Market development strategy tries to achieve growth through existing
products in new markets. There are two ways of implementing the strategy.
One, a company expands the marketing territory by capturing new markets
in terms of customers and, two, it finds new uses for its products and finds
new customers.

Product development strategy tries to achieve growth through new

products in existing markets. New products mean improved products
serving the same need of the customers. Singer India in 1990s went in for
expansion through intensification by product development route. It
introduced improved products in the range of sewing machines. It launched
Fashion maker – a decorative sewing machine and followed that up with the
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introduction of an improved version of Fashion Maker that offered 158

varieties of decorative designs. It kept on improving the product to meet its
long term objective of expansion of sales through value added products.
Companies also adopt intensification strategy by any combination of three
sub-strategies available. Generally intensification is the first and natural
choice of firms in pursuit of expansion.

KFA’s strategies that were followed to make it one of the leading Airlines in India.

 It came up with a very appealing promotional line “Fly the good times” and
it reflected in the experience the company offered to its passengers.
 KFA is also launched Kingfisher express in order to tap into the growing
LCC segment.
 It planned to re-launch its commercial air service called UB Airway again
which it had to withdraw it due to government restrictions.
 The company gave best services to its customers that were like
providing world class interiors, and in-flight entertainment systems.
 The company came up with only one class airlines rather than
other airlines that had Business Class; Economy Class the idea was to
combine Business Class experiences and Economy Class experiences in one.

Having a single class freed up more leg space for passengers when compared to
normal economy class flights.

 The company started addressing its customers as “GUEST” rather

than passengers.
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 The company made its mark by providing its guests with more legroom and
bigger seats so as to provide better comfort.

KFA’s Promotional Strategies

As part of its promotional strategy the marketing team of KFA showcased the
airline as “the new flying experience”. The following initiatives were taken as part
of its promotional strategy…

 Advertisements hoardings at airports depicted the stylish interiors of the

“Fun liners”, which conveyed youthful, fun-filled, and world class image.
 INOX multiplexes in Mumbai publicized KFA’s special offers for a month.
 KFA was the official travel airlines for the cast and crew of “Mangal
Pandey”- the movie.
 KFA made use of various fashion shows, celebrity golf matches, New Year
parties all to build its “Kingfisher” brand.
 The UB group’s monthly magazine called “Pegasus” published information
about KFA along with other information related to UB group.
 KFA launched many attractive offers to promote its sales like the “King
Card” in association with ICICI Bank, in August 2005. This was meant to
create loyal customers for KFA by providing benefits like privileged access
to lounges, restaurants, free refreshments at airports, access to 180 golf clubs
across India, special invites for lifestyle shows.
 In October, KFA launched “Chill Times Offer” in the month of August 2005
and September 2005.
 In October they launched the “King Saver Offer” which said “Fly like a
King, don’t play like one”.
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 KFA targeted the frequent fliers business traveler segment, which was
dominated by Jet Airways. By offering a “King Saver Booklet”, This
booklet contained six free flight tickets and was presented as a free gift if the
passenger bought two such booklets each worth Rs. 26,999.Passengers could
avail off this offer if they showed there Jet Privilege Member (Gold or
Platinum) card.

KFA’s financial strategies:

KFA came up with many new financial strategic moves that made it one of the
leaders of aviation industry the company had adopted following strategies:

 It purchased brand new A320 aircrafts powered by the cockpit that was a
paperless environment.

 In June 2005 KFA planned to order US$5 bn at the Paris Air Show, for 5
new A350-800 aircraft, and five A330-200 aircraft.

 KFA was first Indian carrier to place an order for A380s.

 In November 2005 it placed an order for 30 A 320 and 20 ATR72-500

aircraft at the Dubai Air Show. This ATR72-500 was worth US$750.

3. Explain the diffusion of innovation and the adoption of innovation.

PRODUCT INNOVATIONS:
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Innovations can be said to represent a change in product attribute or feature

or additional to the physical entities that comprise its product line.

Reasons for product innovations:

 To meet market changes and meet customer needs and desires.

 To adopt new technological changes.
 To avoid competitions and differentiate the product.
 To adjust related/unrelated diversifications results.
 To incorporate changes in life style.
 To effect new market segments and provide best customer satisfaction.

Classification of Product innovations:

Product innovations can be classified on basis of customer perspective (extent of

change):

 Continuous Innovations:
Where existing product undergoes marginal changes, without
altering customer habits. ‘Noticeable difference’ between existing products
and new products is perceived by customer as improvement over the existing
products. Eg: Traveler’s cheque in place of carrying cash while travelling,

 Discontinuous Innovations:
These new product are fundamentally different from products
already existing that they reshape markets and competitions. Dynamically
continuous innovations: These new products fall between discontinuous and
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continuous innovation. The changes in customer habits caused by such

innovations are not as large as discontinues innovations.

Classification based on Company’s perspective:

 Product replacement:
includes revisions, adjustment of existing products, repositioning
and cost reduction.

 Addition for existing lines:

Additions to new brands, new technology, new variety of flavor etc.

 New product lines:

Company moves to new product line that did not exist before.

 New products:
Products that create entirely new markets. Successful new products
are the concurrence of strong talents needs and emergence of an enabling
technology.

DIFFUSION OF INNOVATIONS

The diffusions of innovation in the market are concerned with four

innovations spread- how they are assimilated within a market. Diffusions is the
process by which the acceptance of an innovation is spread by communication
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(mass media, sales people, informal conversation) to members of a social system (a

target market) over the period of time. The four basic elements are :

 Innovations
 Channels of communication
 The social system
 Time.

ADOPTION OF INNOVATION:

Diffusion process looks at what is happening in the market in terms of

buyer behavior. PLC on the other hand, looks at flow of revenues & profits to the
business.

The characteristics of these are as listed below:

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 Innovators:
 Risk takers, fore runners
 Young, educated, well informed, rich
 Important to success of new products

 Early adopters

 Opinion leaders, taste makers

 Educated, rich and more successful than average

 Early majority

 Average people with respect to income, occupation, age, education

 Product no longer a novelty
 Bridge between new & old values of society
 Shrewd buyers – more thought to themselves

 Late majority

 Older, less educated, limited purchasing power

 Skeptical in their adoption
 Buy only when public opinion in favor of product
 Depend more on word of mouth & personal guidance
 Less exposed to media

 Laggards

 Cautious, conservative, price conscious

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 Rely on radio, TV and reference groups

Stages of Adoption process:

 Awareness: during the first stage, consumers are exposed to the product
innovation.
 Interest: Interest towards the product is created, which will lead to search of
information.
 Evaluation: This stage is ‘mental trial’ of the product, when satisfied will
lead to the trial of the innovative product.
 Trial: consumer use the product on a limited basis, this experience will help
in their adopting or rejecting the product.
 Adoption: based on trials and favorable evaluation, consumers decide to use
the product and accept it.
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