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PEOPLE IN BUSINESS
CHAPTER 1: MOTIVATION
Motivation may be defined as the willingness of a worker to exert high level of effort, assuming that
his/her needs are satisfied with appropriate rewards.
- Motivation is what causes people to act or do something in a positive way. A well-motivated
workforce will work harder and contribute more to the success of a business.
- Therefore, managers try to find out what motivate workers and use them to encourage workers
to work more efficiently. This results in higher productivity, increased output, and ultimately
higher profits.

The benefits of a well-motivated workforce:

a. High labour productivity: Motivated workers tend to exert higher level of efforts in the tasks
or jobs ascribed to them increasing the output per worker
b. Reduced absenteeism: Motivated workers have their needs satisfied (specifically social needs
– having a sense of belongingness) which makes them less absent from workplace
c. Reduced labour turnover: Motivated employee will have job satisfaction which result into
employee loyalty and thus less labour turnover

Motivation can be further classified into:

- Intrinsic Motivation (Motivation coming from the inside of a person which is associated with the
satisfaction of higher level needs)
- Extrinsic Motivation (Motivation which occurs when some form of rewards from the outside is
given to the person such as bonus)

MOTIVATION THEORIES
People work very hard when they are working for themselves. When they work for other people, they
tend to lessen their efforts. Managers have been looking into what makes employees contribute their
fullest to the company and these studies have resulted three main theories of motivation.

1. F. TAYLOR – SCIENTIFIC MANAGEMENT THEORY OF MOTIVATION

 According to Taylor, "Scientific management means knowing exactly what you want men to
do and seeing that they do it in the best and cheapest way."
 Taylor argued that money is the main motivator. If employees are paid more, they work more.
Thus their pay is based on their performance, higher efficient the worker is, higher will be their
pay.
 In this theory, work is broken down into simple processes where a worker specializes in a
particular task and more money is paid to workers which will increase their level of
productivity.
 According to Taylor, rather than scolding employees for every minor mistake, employers
should reward workers for increased productivity.
 While this theory aims for more efficient workers, it is not without flaws. Many of these
subtasks are boring and repetitive, causing workers to feel like part of an assembly line, rather
than creative additions to their team.

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2. A. MASLOW – HIERARCHY OF NEEDS
Maslow created the hierarchy of needs elaborating on 5 levels of motivation
Manager should realise that the more the higher level of needs are satisfied, the harder they will work.

Self-actualisation needs
The need to reach full
potential, gain personal
growth, sense of self
fulfilment and be promoted
Esteem needs
The need to be respected,
recognition and have a status
Social needs
The need to belong to a group with good
relationships

Safety and Security needs

The need to be physically safe from danger & secure job
Physiological needs
Basic requirement for survival [shelter, food, clothing]
According to A. Maslow, each level of the hierarchy of needs should be satisfied with appropriate
rewards.
a. Physiological needs can be satisfied with appropriate and a fair financial reward which enable them
to meet their basic needs.
b. Safety needs can be satisfied non-financially with appropriate safety equipments to protect workers
from dangers. Besides, the security needs can be satisfied with a longer-term employment contract
where the worker’s job will be more secure
c. Social needs can be satisfied non-financially with social activities like a playing teams or even
implementing teamworking inside an organisation where worker will feel a sense of belongingness to
a group bringing motivation and reducing absenteeism or labour turnover
d. Esteem needs can be satisfied non-financially with more recognition from managers or rewarding
workers with awards like ‘employee of the month award’
e. Self-actualisation needs can be satisfied non-financially with promotion where worker may feel a
sense of fulfilment.

3. HERZBERG – THE TWO FACTOR THEORY OF MOTIVATION – HYGIENE AND MOTIVATIONAL

FACTORS
To Herzberg, humans have hygiene factors and motivational factors.
 The hygiene factors are the factors that characterise the context or environment of a person's
work. If these factors are not present the worker will have dissatisfaction and whatever
motivational rewards given to them, motivation will not occur due to job dissatisfaction.
If hygiene factors are present, dissatisfaction is eliminated, then appropriate motivational
rewards given, satisfaction and motivation will occur

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 The motivational factors are the factors or drivers of human behavior related to the intrinsic
nature of the work instead of working environment. These factors make satisfaction and
motivation to result if hygiene factors are present.
Hygiene factors Motivational factors
Status Achievement
Security Recognition
Working conditions Personal growth/development
Company policies and administration Advancement/promotion
Relationship with supervisor Job satisfaction in the work itself
Relationship with subordinates
Salary

According to Herzberg, managers can use one or more motivators in order to increase the motivation
of workers. However, these motivators will not work unless there is an acceptable level of hygiene
factors to prevent job dissatisfaction.

ADDITIONAL REFERENCES FOR READING PURPOSES ONLY

MC GREGOR Mc Gregor’s theory X and theory Y types of workers
McGregor splits his theory into what managers believe. One type believes in theory X, while the other
type believes in theory Y.
Theory X (negative view) Theory Y (positive view)
Workers are motivated only by money They are motivated by a number of factors, not
only by money
They are lazy and dislike work They consider work as a place of game
They avoid and dislike work They like to take responsibilities
They are self-centered and dislike changes They can exert self-control by working in group

According to Mc Gregor, workers can be classified into two groups and there are two different
approaches (Theory X and Theory Y) that can be used to lead these two groups of workers.

Here are some differences in how a X manager will work and how an Y manager will work:
X managers believe that people are naturally lazy, Y managers believe that people want to do a
and has to be pushed with external factors to work good days work but need a good environment to
harder. (e.g. higher pay). do the work.
X managers will try to provide incentives and Y managers will try to provide a favourable
supervision for employees to work hard. environment so that employees can enjoy their
work.

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METHODS OF MOTIVATION - REWARDS
There are three ways to motivate a workforce:
 financial motivators
 Other rewards/ motivators
 Non-financial rewards or Increase job satisfaction
Financial motivators Other rewards or motivators Non- Financial rewards/
Increase job satisfaction
Time rate Fringe Benefits Job rotation
Piece rate
[Salary] + Commission Job enlargement
[Salary] + Bonus
Profit sharing Job enrichment
Performance related pay Teamwork
Share ownership Leadership Style (Democratic)

FINANCIAL MOTIVATORS (FINANCIAL REWARDS)

Pay may be the basic reason why people work, but different kinds of pay can motivate people
differently. The most common methods of payment are elaborate upon below:
(a) Wage: It is a payment for work done, usually paid weekly.
Advantages Disadvantages
Workers get paid on a regular basis and do not Weekly calculation of pay consume time and
have to wait for long for their pay money
Beyond normal working hours, workers are Additional resources needed like wage clerks to
paid overtime perform the calculation task

(b) Time rate: Time rate is payment according to how many hours an employee has worked. It is
used in businesses where it is difficult to measure the output of a worker. It is also known as the
hourly rate
Advantages Disadvantages
More quality in production is obtained Less quantity output will be produced
because of deliberate delays in order to earn
more
More practical to use this pay system when Both good and bad workers get paid the
workers work in groups same wages. Therefore, more supervisors are
needed to maintain high productivity.
Easy to calculate the wage of the employee A clocking-in system is needed to know how
many hours an employee has done which
increase costs to the business

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(c) Piece rate: Piece rates are paid depending on how many units produced. Piece rates are found in
businesses where it is possible to measure a worker’s productivity.
Advantages Disadvantages
Encourages workers to work faster and Workers will often neglect quality and will focus
produce more goods. (More Quantity) on making more output possible for high pay.
More competition is encouraged among Workers who focus on quality will earn less.
workers which will lead to increased Thus the tension is caused in the aim of
productivity. Work is more challenging producing more to earn more than others, leading
to frustration and no teamwork between them.

(d) Salaries: Salaries are paid monthly and paid to workers where efforts done cannot be
quantified. A salary is counted as an amount per year that is divided into 12 monthly payments.
Managers only need to pay their workers once a month, and since the amount is made through
standing orders, the manager loses much less time and money to calculate salary compare to
wages.
Advantages Disadvantages
Easy to calculate salary costs for the business It may not match preference of workers who
may want to see the rewards of their efforts
More liquidity available for operations during Upon fixed salary, workers may be reluctant to
the month work longer

(e) Commission (in addition to a basic salary)

It is where workers are paid a percentage of their sales realised in addition to a basic salary
offered.
Advantages Disadvantages
Sales staffs are thus encouraged to sell more. Sales staffs could persuade customers to buy
products they do not really want, impacting
negatively on the reputation of the business
It may become stressful for staffs in businesses
where sales are low due to uncontrollable
factors
Competition and rivalry between sales staff may
create frustrations

(f) Bonus (in addition to a basic salary)

It is where a worker is given an additional payment for additional efforts made. It is usually paid as
productivity bonus or attendance bonus or still at the end of the year or before holidays.
Advantages Disadvantages
Workers feel valued and their efforts recognised It may cause jealousy between workers
Giving bonuses to a team makes them work
better

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(g) Profit sharing: Employees receive a percentage of the profits made by the business.
Advantages Disadvantages
It will be easier to apply to some service sector In case of low profit made, employees may be
businesses where it may be difficult to identify disappointed with low pay
and individual’s contribution to increased
profits
Every worker gain from an increased In cases where profit shared are proportionate to
productivity as will all aim at profit their salary due to wage differentials, workers
maximisation may be demotivated as pay will never be
aligned

(h) Performance related pay: In this pay system, targets will be set for an employee to achieve,
based on some form of work measurement. The higher the target reached, the higher is the rate of
pay.
For example, a standard time is set for the employees to achieve a job, if they meet the target time,
they will receive a rate of pay while if they exceed the target time, another higher rate of pay will
be given.

(i) Share ownership: Employees receive some shares from the company. They will either benefit
from dividends or still they may sell the shares when their price has risen. They will be more
motivated because they feel like a part of the company.
They will work harder for the company to achieve higher profit, meaning more dividends for them.

OTHER REWARDS
Fringe Benefits:
Fringe benefits are incentives given to employees which act as real motivators to attract and retain
these employees in a business, apart from money. These incentives or motivators are listed below:
 Discounts on company products.
 Free Healthcare.
 Company vehicle.
 Free accommodation.
 Laptops
 Mobile phones

Fringe benefits are useful way of meeting employees’ needs. The table below shows how fringe
benefits relate to Maslow’s hierarchy:
Hierarchy of needs Examples of fringe benefits
Physiological needs Housing provides shelter
Subsidising canteen meals provide cheap food
Safety and security needs Insurance and health care benefit
Social needs Sports clubs or social activities where employees can meet and
enjoy recreation together
Esteem needs Company cars, laptop computers
Self actualisation needs Company pays for employees to go on training and
development courses. This will enable them to develop skills.
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NON-FINANCIAL REWARDS
Some non-financial methods to increase job satisfaction are elaborated below:
(a) Job rotation: Workers in a production line can change job position with each other (moving from
one job to another) and making their jobs less boring and at the same time it widen employees’
experiences and increase motivation with a feeling of being challenged.
It helps train the employee in different aspects of their jobs so that they can cover for other
employees if they are absent. However, there might be a rise in training cost and decrease in
production and even the social relationship between workers might be disrupted.

(b) Job enlargement: It involves adding tasks of a similar level to a worker's job. Job enlargement
simply gives more variety to employees' work which makes it more enjoyable.
Workers will become more experienced but however, this gives rise to high training costs and
more responsibility to workers which can be viewed as a burden.

(c) Job enrichment: It involves adding tasks of a higher level to a worker's job. Workers may need
training, but they will be taking a step closer to their potential. This increases the challenge in the
job. Workers become more committed to their job which gives them more satisfaction.

(d) Teamwork [autonomous work groups]: This is when group of workers are given total
responsibility to organise themselves and perform a task. This makes the employees feel more
important, as well as giving them a sense of belongingness when they are part of a team. They
become more involved in decision making and take responsibility for this process.
It is beneficial as there is a diversity of views relating to a problem in order to find more solution
and participate in some parts of decision making. But however, working in group may be time
consuming, clashes of ideas, minority domination and pressure to conform

(e) Leadership: A leadership has a great impact on worker's motivation. Good managers have
leadership skills that inspire their workers to work better, as well as directing them with a common
goal. Through its leadership, the manager can involve workers in decision and discuss ways to
attain objectives (democratic leadership style)

(f) Training: It is the process of improving worker’s skills or guide them towards gaining new skills.
Upon gaining these skills, workers may feel a sense of achievement while making the work more
challenging and enjoyable to perform. If they are selected for a training course, this may be viewed
as a sense of recognition for their hardwork.

(g) Promotion [Job promotion]: It is where the designated employee is being given a new job
position on a higher hierarchical level with new responsibilities. This contributes to higher
motivation to perform better. The worker may feel valued, recognised and gain a higher status.

ADDITIONAL MOTES FOR READING PURPOSES

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(h) Reduced workweek: It is the reduction in the number of hours or number of days a worker works.
This method can help businesses as it can lessen the number of days for time off (absences) but
however leads to under-utilisation of production capacity available.

(i) Flexi-time: It is a scheduled option whereby employees are required to work specific number of
hours per week but they may choose the time they want to work to some extent. This may lead to a
reduction in absenteeism or latenesses but cannot be applied to interdependent tasks

(j) Job Sharing: It occurs when two or more workers share the total working time. This can
eventually lead to the development of the variety of skills; but it is difficult to pay each worker for
their particular efforts

(k) Contingent Workers: It occurs when part-time (temporary) workers are employed to supplement
permanent workers specially in peak times. There is thus no need to pay several allowances to
permanent workers but however the company will have to pay for having new workers

(l) Telecommunication: It is a system where workers do their work at home the same way it could
have been done at workplace. They use Information Technology (IT) and Internet to perform their
work remotely.

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CHAPTER 2: LEADERSHIP
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Leadership can be defined as the process of influencing employees and guiding them to work towards
the achievement of objectives.
Leadership is a key management tool to ensure human resources and physical resources are not wasted

Qualities of a good leader

Listen to others and by others
Energetic
Ability to organize resources
Decision-maker and Disciplined
Emotionally Intelligent [aware and manage his emotions and the emotions of others]
Risk-taker
Self-confidence and Self-motivator to motivate others

Leadership styles are the different approaches to dealing with people and making decisions when in a
position of authority.

STYLES OF LEADERSHIP

Autocratic L.S Democratic L.S Laissez-Faire L.S

- Decision Taken
- Strict - Complete
after discussions
- Power in hand freedom for
between leader
of leader staffs
and staffs
A Autocratic Leadership Style
- Leader is authoritative or in total control and expect their orders being strictly followed
- They keep themselves separate from employees.
- Do not involve subordinates in decision making – leader makes all decision himself
- Expects all decisions to be followed without questioning and cannot contribute suggestions to
decisions made.
- Communication restricted to ‘top-down’ with little room for feedback [One-way
communication]
- Working methods are strictly specified where they tell employees only what they need to know

Advantages Disadvantages
 Quick decisions taken and immediate  Demotivation to staff who want to contribute
response and just have to accept responsibilities
resulting to less job satisfaction

B Democratic Leadership Style

- Leader makes decisions in consultation with employees
- Debates and discussions among employees are encouraged before leader reaches any decision
- There is two-way communication, both top-down and bottom-up.
- Workers participate in decision-making and bring in their valuable suggestions

Advantages Disadvantages

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 Full participation of workers in  Slow process/time consuming
decision-making leading to job  Unsuitable for jobs requiring quick decisions
satisfaction, increased moral,
commitment and motivation
 Better final decisions because of
valuable contribution of workers from
their work experience in decision-
making

C Laissez-Faire Leadership Style

- Leader sets broad objectives and allows the employees freedom to achieve them
- Staffs are allowed to make their own decisions and follow their individual wishes
- Communication can be difficult since clear instructions are not given.
- Leader has a very limited role

Advantages Disadvantages
 Staffs feel trusted and do their best  Poor decisions might be taken leading to
 There is creativity, innovations and poor results
sense of responsibility  Poor motivation when workers view the
delegated responsibilities as burden

Factors to be considered before choosing a leadership style

a. Organisation size (big or small)
b. Skills of subordinates
c. Training and experience of workforce
d. Degree of responsibility they are prepared to take on
e. Amount of time available for consultation and participation
f. Subordinates attitudes
- Mc Gregor Theory X type of subordinates ----------autocratic leadership style
- Mc Gregor Theory Y type of subordinates ----------democratic or laissez-faire leadership style

Conclusion
The style of leadership used can vary depending on situations where they are the most effective. The
best leadership style can be chosen while taking into consideration the nature of the work and the
company’s culture.

CHAPTER 3: THE ROLES AND FUNCTIONS OF MANAGEMENT

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Management or managers is a group of person appointed by owners of the company to run the
business on their behalf. The main aim of management is use resources of the business efficiently and
take right decisions favorable to achieve the objectives of the business.

Functions or roles of management

The main functions of management are:
a. Planning: It involves setting aims or targets and deciding on the course of action [strategies] that
all the parts of the organisation will follow. The resources needed to achieve the set targets should
be clearly planned to prevent any surpluses or shortages.
These planned aims will provide a sense of direction for everyone to work towards.

b. Organising: It involves delegating and directing activities with adequate allocated resources to
ensure that everyone is aware of what is expected of them and are working towards the set
objectives.

c. Coordinating: It involves bringing together people in an organisation. Every worker in the

business irrespective of their departments should see how they are all linked together to work
towards the same objectives.

d. Commanding: It is concerned with directing employees to see whether they are doing the work
efficiently and effectively. Managers being leaders should motivate them or influence workers
towards achieving objectives. Leaders should choose leadership style to reach the employees.

e. Controlling: It is concerned with monitoring or supervising the activities to make sure that the
employees are going as planned to reach set objectives and taking corrective actions if deviations
are listed.
Managers must measure and evaluate the work of all individuals and groups to make sure that they
are on target.
Special Notes:

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CHAPTER 4: BUSINESS STRUCTURE
Organisation Structure or Business Structure
It refers to the level of management and division of responsibilities within an organisation.

Different businesses have different types of organisational structure, which vary according to their
size, what they do, and what management feels is most appropriate for their business.

All businesses need to have a structure, which enables them to conduct, coordinate and control its
activities for the purpose of meeting their goals and objectives. The organisation structure is the basic
framework within which a manager and his subordinates operate

Organisation chart is a map or model drawn to outline the internal organisation structure of the
business.
Advantages of organisation chart
- It shows how everybody is linked together in the organisation. Employees are aware of which
communication channel is used to reach them with messages and instructions.
- Every individual can see their own position in the organisation. They can identify to whom
they are accountable and who they have authority over
- Everyone is in a department and this gives them a sense of belongingness

Disadvantages of organisation chart

- Picture of an organisation changes form or become outdated by structure and personnel
- It can sometimes be complex and confusing. If it is simplified, inaccurate structure will be
presented
- Organisation charts do not show the unofficial relationships and chains of communication

Example of an organisation chart

Board of Directors

General Manager

Production Marketing Chief Personnel/

Manager Manager Accountant HR Manager

A B C D E F G H I J K L

L
M N

O P Q R

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a. Hierarchy: It refers to the number of levels of management inside an organisation

b. Chain of command: It is the structure which allows instructions to be passed from higher
hierarchical level to lower hierarchical level (i.e top management to bottom line workers).

c. Span of Control: It refers to the number of subordinates working directly under the control and
supervision of a manager.
The factors affecting the span of control are:
- Skill of manager - Management style
- Skill of subordinates - Experience of management and staff
- Complexity of the tasks - Potential consequences of errors

Tall (Narrow) and Flat (wide) Span of Control

I. Narrow span of control [SOC = 2]
It contains more levels of hierarchy and a taller structure. It makes it possible to communicate
with people closely.

Note that: The business above has a long chain of command

Advantages of narrow span of control Disadvantages of narrow span of control

Better control over workers and their work where Distorted communication and decision-making
they are less likely to make mistakes is often slower
More managers/supervisors increases promotion More expensive because more managers are
opportunities needed
More supervision may reduce worker
motivation
More control instead of trust
This structure lead to less delegation and limits
job satisfaction

II. Wide span of control [SOC = 4]

It has fewer levels of hierarchy and flatter pyramid.

Note that: The business above has a short chain of command

Advantages of wide span of control Disadvantages of wide span of control

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Less expensive as fewer managers or supervisors Fewer managers or supervisors reduces
are needed promotion opportunities
Less supervision improves worker motivation
and feel more trusted with less direct control Less control over subordinates work may result in
Top management are less remote and can be more mistakes specially in the case of poorly
more in touch with lower levels trained workers
Faster and more accurate communication
This structure encourage more delegation, which
entails more decisions taken by themselves
resulting to increased job satisfaction

d. Authority and Responsibility: Authority is the right to use power. To have power is to have the
ability to change the behavior of others or to require others to fulfill specific duties whereas
responsibility is the obligation and accountability to perform delegated duties.

e. Delegation: It is the assignment of authority to a subordinate to him to carry out specific activities.
[Not to take any core decisions]
The manager retains the full responsibility of the consequences.
Besides, not all the tasks can be delegated as some core parts of their jobs require particular
expertise, skills and status.
Advantages of delegation Disadvantages of delegation
Gives the subordinate staff valuable experience Subordinate might have inadequate expertise or
and renders the staffs valuable training and hence not do the task satisfactorily
Encourages development of specialised skills in Abuse of manager’s trust through carelessness or
workers which helps in future effective incomplete work
promotion
Motivates staff as this structure encourage more Subordinate might exceed boundaries of delegated
trust than just controlling of subordinates authority
It also enable job satisfaction as the work
becomes more interesting and rewarding
Manager, who has the ultimate responsibility,
might feel insecure
Factors influencing extent of delegation
 Risk and consequences or errors  Leadership style and culture of
 Experience and quality of staff organisation
 Confidence of management

Empowerment v/s Participation

a. Empowerment is a kind of delegation but compared to delegation, subordinates have more
autonomy/ power to take decisions that is they can choose the way they want to do the job.
b. Participation is concerned as only coming with suggestions, there is no delegation of authority and
responsibility
When encouraging participation and empowering staffs, they feel trusted instead of being controlled.
Thus delegation should not be a mean of control which may raise frustrations, demotivation and
feeling of exploitation but should be supported with trusts and rewards for achievements.

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ROLES AND RESPONSIBILITIES WITHIN THE ORGANISATION STRUCTURE

Roles Responsibilities
Directors - They take core decisions. - The CEO and the Board of Directors
are accountable to shareholders
- They plan for expansion and any
growth opportunities. - Directors have to work towards the
aims and vision proposed to
- The Board of Directors have a shareholders
Chief Executive Officer a head
(CEO).
Managers - They have been ascribed the - To work towards the objectives
authority to give orders and take related to their functional department
decisions to put into effect in their
departments

- They directly supervise

subordinates
Supervisors - They monitor works done by - They are responsible to departmental
workers according to targets set. managers for the performance of
workers under his/her responsibility
- They directly instruct or guide
employees in their tasks and
correct any deviations
Bottom-line - To perform duties or tasks - They are responsible towards
workers ascribed to them and work as per supervisors or managers to meet
the target set targets

NOTES THAT:
Everyone working in the organisation are inter-related as they work towards the same goal broken into
objectives and targets

CHAPTER 5: TRADE UNIONS

Definition of Trade Union

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Trade Union is an employee association, having an employee representative as head who negotiate
(bargain) with company managers on behalf of the employees for the latter to benefit from better
working condition, conditions of employment and better pay.

If an employee wishes to join a trade union, they will have to pay an annual subscription. This money
will be used for employing union officials who will represent the views of the employees and pay for
administrative expenses.

Trade unions are a form of pressure group with has the ability to influence business activity.

Benefits to workers joining a trade union

 Strength in numbers:
When being grouped under the trade union, they can better bargain with managers to approve their
deal compare to if workers were fighting individually making them more vulnerable to dismissal.
 Improved conditions of employment.
Workers may better negotiate for any upgrades in their contract of employment concerning their
terms and conditions for example holidays/ leaves, rates of pay or still hours of work.
 Improved working environment
Workers will fight for better working environment towards better health and safety measures,
lowering of noise and proper ventilation.
 Advice or Financial Support
If a worker has been unfairly dismissed/made redundant or is subject to an unfair treatment, the
trade union may advice the workers and support them legally or financially [upon subscription to a
credit union] till matters have been recovered.

COLLECTIVE BARGAINING
This is when the employee representative of the trade union negotiates with the manager on behalf of
the employees and a collective agreement is made (a mutually acceptable agreement on
conditions of employment)

If collective bargaining fails, then the trade union may engage workers in industrial actions

Industrial actions
a. Picketing:
This is when workers stand outside the factory holding signs to protest and stop any people or
goods going in and out. This can halt the production process. The strikers create a negative
publicity and gives the firm a bad image. This puts pressure on the firm to settle the dispute.

b. Work to rule:
This is when workers stick rigidly to every rule and regulation in the business so that it slows
down the production process. They still get paid since they are technically doing nothing wrong,
but this still causes a lot of disruption in the workplace. Workers may also be non-cooperative that
is to refuse to work with any new rules or follow any new practices they do not approve of.
c. Overtime ban:

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Workers refuse to do any overtime. This might damage the business if they need to complete some
orders quickly.

d. Go slow:
All workers deliberately do their tasks very slowly so as to disrupt the smooth running of
operations and prevent job to be completed at due date.

e. Strikes:
Strikes are when workers stop working and leave the workplace to protest. This is the last resort
measure that unionised employees may adopt to make their deal approve. They may even go for a
hunger strike where government will be urge to intervene to conciliate or arbitrate.

Possible harmful consequences of industrial action:

 For employers:
o Loss of output.
o Loss of profit.
o Loss of customers.
o Poor reputation.
o Bad image.

 For employees:
o Loss of wages.
o They might lose their jobs if the company suffers low profits.

 For customers:
o Shortage of products.
o Deliveries not made.

Benefits to businesses
Some businesses benefits when their workers are members of trade union as:
 Negotiation can better be made via trade union to set the right benefit acceptable to all
employees.
 Managers can better know demotivation and its causes among its employees via trade union as
communication between managers and employees may improve.

Notes that:
Closed shop: It is when all employees are members of the same trade union.

CHAPTER 6: HUMAN RESOURCE MANAGEMENT (HRM)

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It may be defined as the process of obtaining and motivating the human resources (labour/employees)
required by an organization towards the objectives of the business.
In order to attain the objectives of the organization, the HR manager performs a number of roles:-
a) Recruitment f) Reward Management
b) Selection g) Health and Safety
c) Appointment h) Industrial Relations [Managing
d) Induction employer- employee relationships]
e) Training

Some of these roles are elaborated in detail below:

1. RECRUITMENT
It is defined as the process of identifying the need to employ the most appropriate candidate
required inside an organization.

The recruitment process

Job Analysis
Vacancy arise It involves gathering information relevant to the job in terms of
responsibilities and tasks. It is concerned with creating two
documents namely job description and job specification which is
Job analysis
Job description described below:
a. Job specification Job description
It consists of the responsibilities and duties of a job
holder. It is an important document as it can be used during the interview to give
Job advertisement information to the interviewee (applicant) about
responsibilities associated with a job. It might include
the following:
- C.V or application Title of job and type of work
- forms received from Place and hours of work
- candidates Pay and other benefits
- Person to whom the employee will be responsible
- Workers who will be supervised by the successful applicant
b. Job Specification [Person’s specification]
It is also known as a person’s specification. It shows the characteristics in terms of skills,
experiences and qualifications that a job holder should possess to carry out the job efficiently. It is
an important document when we need to make a series of elimination among a pool of candidates.
Contents of job specification
- The level of educational qualifications.
- The amount and type of experience.
- Special skills, talents or knowledge.
- Personal characteristics. (e.g. type of personality)

c. Job Advertisement
After completing the job specification the vacancy is advertised. It can be advertised internally (on
the company notice board or newsletter) or may be advertised externally in a newspaper or
magazine. It may include:

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- Job title - Holidays
- Description of work involved - Place of work
- Earnings or salary grade - Qualifications or experience needed
- Fringe benefits - Training and future prospects
- Hours of work - How to apply for the post
The advertisement will usually contain both the elements of a job description and job specification.

There are two sources from which a company may recruit workers.
a) Internal Recruitment – Workers may be recruited for a job from the existing pool of workers
working in the company (internally) through a notice board or company magazines
Advantages of internal recruitment
- It is less costly as there is no need for massive advertisement, interviews and inductions
- Internal recruitment is done more rapidly than external one
- It gives an opportunity for workers to get a promotion
- Less chance of making wrong decision because management knows the workers

Disadvantages of internal recruitment

- Restricted choice, which may lead to unsuitable people being appointed.
- Internal promotion may cause jealousy and frustrations among other employees not being selected
- When recruiting internally, another vacant post is created which should be filled
- The business does not benefit from people with new ideas

b) External Recruitment – Workers can also be recruited from sources outside the organization
namely:
- Schools, Colleges, Universities and Training Centres
- Recruitment agencies
- Local newspapers or National Newspapers
- Government employment centres (PSC)
- Job Centres (potential employees meet company employees)
Advantages of external recruitment
- Bigger pool of candidates and wider choice
- New ideas and views is inserted in the company from outside candidates
- No vacancy is created in the organization as compared to internal recruitment
- There is less frustration among employees
Disadvantages of external recruitment
- It is costly as it has to invest in advertising, interview and induction
- It is time-consuming to recruit externally
- The risk of making wrong decisions is higher because management do not really know the
candidate sufficiently.

After viewing the job advertisement, interested candidates may either send an application form or a
curriculum vitae to the recruiting firm.

d. Application Form

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It is a statement of questions which is set by the company and that should be filled by each
candidate. It provides the following information:
- Personal details - Experience
- Education - Hobbies/interest
- Qualifications - References
- Training
An application form can be used to select the right candidate by comparing it with the job
specification. This would help to sort a shortlist of the most appropriate candidate.

e. Curriculum Vitae
It gives similar information to that asked for in an application form, but is set out by the applicant
rather than the recruiter. It is a summary of a person’s qualifications, experience and qualities
written in a standard format. However, from the company’s point of view there is the problem that
essential information that may be omitted.

2. SELECTION
Selection is the process of screening or evaluating job candidates in order to select the most
appropriate candidate. The aim of any selection process is to increase the chance of making good
decision and get the most appropriate employee for the job.
A. Shortlisting C.V or Application Forms
Candidates’ C.V or application forms are shortlisted where those not matching the job
description and the job specification are rejected and those which match them are retained
B. Tests
An ideal candidate may require certain characteristics in terms of problem solving aptitude,
general knowledge, rapidity and physical features. In order to measure these characteristics, a
number of tests can be carried out:
Tests Details
Aptitude Test Ability towards problem solving
Intelligence Test Ability to provide general knowledge
Skills tests Ability to carry out specific tasks
Attainment Test Ability to show their rapidity
Physical Test Ability to demonstrate their physical characteristics
Personality Test Ability to work under stress, or work in a team (concerning the type of
person he/she is)
Group situation Ability to work or carry out a task under a group
Test

C. Interview
It is defined as a face-to-face contact between the employer and the candidate. During the
interview, the candidate is assessed in terms of ability to do the job, the strong personal
qualities, the general character and personality.

D. Appointment
When the right candidate is selected, it is useful to call him for an appointment. He would
therefore be required to sign a contract of employment which is an agreement between the
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employer and the new employee giving him all details relating to responsibilities, condition of
work and obligations of the employer and the employee.

PART-TIME WORKERS (part-time employment contract)

Part-time workers are those workers who work for less than the normal full work week normally
between 1 to less than 35 hours per week.
Benefits and limitations of part-time workers
Advantages Disadvantages
Lower costs as they are being paid an Lack of commitment compared to full-time
hourly wage with no other benefits workers because they spend less time at the
given (do not have to provide company (less satisfaction of social needs) and
insurance, sick leave and vacations) find it easier to leave because of the lack of full-
time income and benefits.
Thus, part-timers are more inclined to leave when
offered full-time work or higher salaries elsewhere.
Flexibility as if there is no work, no Take longer to gain experience than full-time
For employers

working schedule is made. workers because of shorter working hours

Besides, the days and times may be Besides, communication with part-timers are
decided upon by the employer and difficult.
thus, many businesses use part-time
workers to fill evening and weekend
hours not covered by full-time
workers.
As it fits with looking after children, They may work more than one job in a day,
employees (women) find it better and making it difficult to change their schedules and
ready to accept lower pay making them prone to tiredness more quickly and
more often.

Resulting from flexibility, they work They usually do not receive benefits such as health
less than a full-time day and thus, still insurance, sick leave, holiday pay or vacations.
have time to attend courses, recover When they are not working, they earn no income,
from an illness, care for family which may prove detrimental during sudden
For employees

members, or work at another job for illnesses or if they need to take a break.
extra income.
During off-peak seasons or period of low sales,
they are typically laid off before full-timers,
because they have less time on the job and do not
have the expertise of full-time workers.
Part-timers may not be promoted compared full-
time employees
Full-time workers
Full-time employees are generally considered to be those scheduled to work 35 hours per week or
more. However, employers have discretion in setting such hours.

Benefits and limitations of full-time workers

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Advantages Disadvantages
Full-timers are most likely to develop To attract and maintain strong full-time employees,
loyalty, and feel a sense of ownership in the employer may be required to offer such
the business. This can result in a benefits as health insurance and paid vacation.
committed, hardworking workforce,
willing to go through any tough times the
business may encounter
They tend to hold only one job which Less flexible compared to part-time workers as
gives the employer more control over their working hours and breaks are fixed where
their time and efforts. overtime should be paid and is not compulsory
Delegation of duties is done better Once the employer have taken an employee on full
For employers

which gives managers more free time to time and given them a contract it can be difficult
undertake core operations as they are to get rid of them
more experienced and knowledgeable
No continual re-training compared to The employer need to abide to several laws
recruiting of part-time workers protecting full-time employees

Full-time workers have more chance of They should stick to one job only and thus do
being promoted compared to part-time not have opportunity to earn extra income
workers as they have more knowledge and apart from just waiting for over-time or
experience promotion
They are more secure in their job and do
not have to fear for being laying off quickly
There are laws protecting them, their
For employees

minimum wage and their working

conditions.
Besides, they are entitled to health
insurance, vacation sick leave and holiday
pay

REMEDIAL CHAPTERWISE ACTIVITIES

Question 1
a. Define recruitment [2]
b. Identify two recruitment methods [2]
c. Differentiate between job description and job specification [4]
d. Identify and explain one advantage and one disadvantage of internal recruitment [6]
e. Identify and explain one advantage and one disadvantage of external recruitment [6]

Question 2
a. Differentiate between application form and curriculum vitae [2]
b. Define selection [2]
c. Identify and explain two methods of selection [4]
d. Identify and explain one advantage and one disadvantage to a business when employing a part-time
worker [6]

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e. Identify and explain one advantage and one disadvantage to a business when employing a full-time
worker [6]

3. TRAINING
It is defined as providing new skills or improving existing skills of workers. Training may be
provided on the following:
- Problem solving or managerial skills
- Inter-personal or communication skills
- Technical or machine operating skills
Advantages a trained workforce to the business
- Better productivity and improve efficiency.
- Decrease supervision needed.
- Better quality of final products
- Reduction in wastage
- Easier to introduce a new process or equipment.
- Motivation of employees and improve the opportunity for internal promotion
- Unskilled workers may become more valuable to the business
- Lower level of injuries
- Customer satisfaction
Advantages of training to workers
- Increase skills.
- Increase knowledge.
- Change attitude, raise awareness.

Training Methods
There are three categories namely; induction training on-the-job training (internal training) and
off-the-job training (external training)

A. Induction Training
It is the process of receiving and welcoming a new worker. It is also known as induction or
orientation.
The aims/benefits of carrying out induction training are:
- To make the worker feel at ease because normally a new worker is tense on the first day.
- To improve the goodwill of the company and show that the company care for its employees
- To help the worker to be productive as from first contact with the job.

The limitations of induction training are as follows:

- Time consuming process
- Wages are paid but still no work has started to be done.
- Induction crease delays for the employee to start their ascribed tasks

B. On-the-job training (internal training)

It is a training which is carried out at the workplace itself. Methods under on-the-job training
are:-

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- Trial and error – it is where employees learn by errors and develop their own way of
working.
- Sitting next to Daddy – it is where the trainee learn by observing an experienced
worker performing the job.
- Coaching – Management employ a coach on full-time basis to train employees.
- Job rotation – It is a job design option as well as a training method whereby an
employee moves from one department to another for a definite period of time.
Advantages of on-the job training
- No travelling expenses as employees do not need to travel way to training centres to be
trained. Training are being given by workplace itself.
- Workers contribute to production while they are being trained.
- When training courses are being given by experienced workers, it costs less compare to
off-the-job training.
- Training concerns the specific needs of the business r related to the tasks the employees
will be directly responsible to.
Disadvantages of on-the-job training
- The trainer being an experienced existing worker will not be as productive as before as
some of the working time is devoted towards training the trainees
- Any bad habit of the trainer will be passed on to the trainee
- Training qualifications obtained may not be recognized in other businesses

C. Off-the-job training (external training)

It is a training method whereby employees learn new skills far from their workplace. It may be
at IVTBs, Universities or Simulation Centres. Employees may gain a wide range of skills.
However it is a costly training method as employees should be absent from their work to
follow these off-the-job courses.
Advantages of off-the job training
- Training courses may englobes a wide range of skills specially new techniques or
innovative work practices
- Training qualifications may be recognize by a number of other businesses
- Employees become more versatile with a variety of skills that can make them rotate
around several jobs in a business
- If training are carried out in after-work sessions (weekends or evenings), the firm’s
output is not lost and still contribute to production in their working time.
- Trainers are experts and are tutors who know how to accurately pass on knowledge of
work practices.
Disadvantages of on-the-job training
- Training courses by expert trainers are expensive
- Knowledge and skills taught may not be specific to the business needs
- If training courses are being delivered during business hours, workers are being paid
though not contributing to production
- With higher qualifications, employees may be tempted to leave for better work
prospects in other businesses resulting to poaching.

IMPORTANCE OF REDUCING THE SIZE OF THE WORKFORCE

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It is important to reduce the size of the workforce leading to either redundancy or dismissal.
Their reasons will be elaborated below:
4. Redundancy
Redundancy occurs when workers lose their jobs because of either of the following reasons:
 Company closes down or closes place of business
 Falling demand of the firm’s goods or services
 Business needs less of people with particular skills
 Other reasons such as re-organisation, relocation, integration or introduction of new
technology resulting in fewer workers being needed
Redundancy causes a great sense of insecurity in all the employees. It is a big personal blow to
the person made redundant and company must try to be sensitive while informing him. It is
often difficult for the employer to select staff to be made redundant. Then usually ‘last-in first-
out’ principle is adopted. Written notice of redundancy should be given to trade union. The
whole procedure should be done in consultation with the trade union to make it transparent.
Redundancy is considered fair as long as:
- It is genuine
- Carried out in accordance with the firm’s procedures which are known to employees
- Trade Unions have been consulted
- There is no suitable alternative work available in the organisation
Rights of redundant employees:
 Redundant employees are entitled to redundancy pay. The amount depends upon their
current earnings and how long that have been working in the firm
 Right to be given notice
 Right to be paid time off work to look for another job or to arrange training
Factors to be considered when choosing which workers to be made redundant
- Workers who want to voluntarily become redundant, in pursue of another job. For early
retirement or for starting their own business.
- Shorter length of time working in the business to lower redundancy payment
- Workers with less essential skills being made redundant and will not be re-deployed to
other departments in priority
- Poor employment history of the worker in terms of poor performances and attendance

5. Dismissal
Dismissal:- Under unavoidable circumstances, company may terminate an employee’s contract
without notice and dismiss them. The grounds on which dismissal is considered ‘fair’ are:-
- Gross misconduct such as dishonesty, negligence or willful disobedience amounting to
breach of contract
- If continued employment would break the law such as a driver who has lost his drivng
license
- Other substantial reasons such as refusal to accept change in duties or incompetence
In case an employee feels that he has been dismissed unfairly, he has the right to appeal to
industrial tribunal. If the tribunal finds in favour of the employee, it can order the company to
compensate the aggrieved employee.

WHY IS THERE A NEED TO REDUCE MANPOWER IN A BUSINESS?

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1. Cost of labour increases making it impossible for the firm to bear it
2. Merger leading to staff reduction
3. Relocation of firm
4. During the off peak period, there is no need of the mass workforce as there is less demand for the
goods or services, for example hotel services.
5. When there is a need to adopt new technologies to stay in competition, labour intensive method of
production is being replaced by capital intensive method of production - automation (Labour is
replaced by machines).

LEGAL CONTROL OVER EMPLOYMENT ISSUES

Government pass laws to protect employees against exploitation and unfair treatment and these legal
control aim at lowering or preventing employment issues. These laws can regulate the following:
 Governments pass laws to create equal employee opportunities where all employees should be
treated equally in the work place and receive the same salary for doing the same job.
 People of any sex and people with disabilities are treated equally with no discrimination. So,
businesses need to be careful when advertising and treating their employees because they could be
prosecuted and fined.
 Employees are protected against unfair dismissal where the employer may be liable to prosecution
and compensation to employees
 Health and safety of employees should be catered for and the employer should abide to the legal
minimum wage fixed by the government.
 A legal minimum wage should be respected for employees to be able to have a decent living.

A. HEALTH AND SAFETY

Health and safety at work includes:
- Protecting workers from dangerous machineries through training courses
- Requirements to wear safety equipments and clothing through gloves, boots and helmets
- Hygienic conditions for employees to work through hairnets and medical screening
- Lower number of hours worked leading to higher concentration and more productivity
- Maintain a reasonable workplace temperature

Health and safety conditions are costly in the short-run but benefits businesses in the long-run in terms
of good reputation, less negligence claims and healthy workers being productive and motivated
(having their safety needs satisfied) which makes them more loyal to the firm
Sometimes in countries with weak health and safety laws, employers may still provide high health and
safety standards to show they are ethical with provision of fair and above legal treatment in favor of
employees. These businesses set a point of differentiation and also brings in motivation and loyalty.

B. LAWS AGAINST DISCRIMINATION

Discrimination suffered by employee may be in terms of racial discrimination, differing religion,
gender discrimination, age discrimination, people with disabilities. These discrimination affect
equality and fair treatment among workforce.
So government intervene with laws to protect employees against these discriminations and bring in
more equal chances to everyone on a basis of meritocracy.

C. LAWS AGAINST UNFAIR DISMISSAL

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Unfair dismissal result when workers lose their job where they are not at fault such as for joining trade
unions, being pregnant, when no prior notice being given, etc.
Workers being unfairly dismissed may appeal to the industrial tribunal and file a case against the
employer. If the workers are being proven not guilty, they may be entitle to a recovery of their job or a
compensation.

D. LEGAL MINIMUM WAGE

A legal minimum wage is a wage level set by the government where employer may be penalized if
they pay an hourly wage rate below the minimum set.
Advantages Disadvantages
Prevent employers to exploit unskilled workers It increases business costs and contribute to price
who may find it hard to be employed or hard to rise
bargain for rights
More low-skilled workers will be encourage to Employers not able to afford the legal minimum
seek for a job, lowering voluntary unemployment wage may make employees redundant, leading to
rising unemployment
Businesses will benefit from a motivated Workers being highly paid by the business may
workforce as per the Scientific Management ask for higher pay when other workers are being
theory of Motivation by F. Taylor paid the minimum wage to keep the marginal
differences in pay which increases the business
costs
According to F. Herzberg, a good pay makes
hygiene factor present and eliminate
dissatisfaction within employees

Special terms:
Labour turnover
It is the rate at which employees leave a company and are replaced by new employees.It may be due to
any reason like resignation, termination of service or demotivation.
It costs the business as while labour are leaving, the business should spend time, effort and money for
recruiting new workers and retrain them. However, some may argue that it is god for some businesses
that want to change for automation or businesses running off-peak season which lower redundancy
allowance that should have been paid.

REMEDIAL CHAPTERWISE ACTIVITIES

Question 1
a. Define training [2]
b. Identify two benefits to a business of having a trained workforce [2]
c. Identify and explain one advantage and one disadvantage of induction training [4]
d. Identify and explain one advantage and one disadvantage of on-the-job training [6]
e. Identify and explain one advantage and one disadvantage of off-the-job training [6]

Question 2
a. Differentiate between redundancy and dismissal [2]
b. Identify two reasons why a worker may be made redundant [2]

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c. Identify and explain two reasons why a worker may be made redundant [4]
d. Identify and explain two ways how employees benefit from the legal controls protecting them [6]
e. Do you think that health and safety laws negatively impact on a business? Justify your answer [6]

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CHAPTER 7: COMMUNICATION
Communication is defined as the transmission of information from one person to another person or a
group of person. Communication in a business is important as it helps to:
 motivate staff,
 help brought forward suggestions from staff,
 help take quick decisions,
 reduce risks of errors,
 strengthen coordinations between department,
 speed response to market changes.

The communication process

Medium
Sender Message Receiver

Channel

Feedback

 The Transmitter / Sender of the message is the person starting the process by sending the message.
 The Message is the information or instruction passed to the receiver by the sender.
 The Channel is the route used to transmit the message e.g vertical or horizontal.
 The Medium of Communication is the methods used to send a message e.g a letter or a meeting
 The Receiver is the person who receives the message.
 The Feedback is the reply from the receiver which shows whether the message has arrived to the
receiver and being understood.

ONE WAY V/S TWO WAY COMMUNICATION

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 One way Communication involves a message which does not call for or require a response or no
feedback.

Sender Message Receiver

 Two way Communication is when the receiver gives a message to the sender and there is a
discussion about it or feedback.
Sender Message Receiver

Feedback

EFFECTIVE COMMUNICATION
The intended meaning of the message send by the sender should be the same as the perceived meaning
by the receiver. This is said to be effective communication. Thus, the message send by the sender
would be understood fully and properly by the receiver.
Importance of effective Communication
1. For employee to know effectively what to do, why to do it, how to do it, and when to do it.
2. Effective communication improves the performance of a company as right and accurate decisions
are being taken.
3. To ensure that the right message is transmitted to staffs and work is carried out as expected.
4. To know if customers are satisfied with the product and what to improve to make customers more
satisfied.
5. To know new materials and technologies available on the market and thus being more competitive.
6. Increase in staff motivation leading to an increase in productivity
7. More suggestions and valuable ideas brought forward by employees

EXTERNAL & INTERNAL COMMUNICATION

External Communication
It is when messages are sent between one organization and another organization or an outsider.
External communication is used to create a corporate image, retain its old customers and attracting
new customers.

Internal Communication
It is when messages are sent between people working in the same organization. Internal
communication may help create a better work atmosphere and increased productivity.

CHANNEL OF COMMUNICATION (MODES OF INTERNAL COMMUNICATION)

Managing Director / Board of Directors

ommunication

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Vertical
Commu
 pward
cation
Vertical Downw
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Production Finance Marketing Human Resource

Managers Managers Managers Managers

Horizontal Communication

A B C D E F G H I J K L M N O P
R

A. Vertical Communication
It is a communication involving message exchanged between two or more organization levels. For
example; a manager communicates with its employees or with its Board of Directors. Vertical
Communication can be classified into vertical downward communication and vertical upward
communication
a) Vertical Downward Communication
It is the communication from a higher level to a lower level of the organization. For example
in the diagram above, it is the production manager communicating with employees A, B, C,
D.
b) Vertical Upward Communication
It is the communication from a lower level to a higher level of the organization. For example in
the diagram above, it is the employees M, N, O, P communicating with the Human Resource
Manager.
B. Horizontal Communication
It is the communication of two persons or groups of person on the same organization level. For
example in the diagram above, the Finance Manager is communicating with the marketing
manager.
MEDIUM / METHODS OF COMMUNICATION
1. Written Communication
 Letters internally through  Notice (pinned on
 Memorandum emails) board)
(brief notice sent  Reports  Suggestion Box
Advantages Disadvantages
1 Message recorded for future It is a one-way communication- no immediate feedback
use
2 Complex ideas can be Costly and time-consuming
explained
3 Reach wide population Misinterpretation may occur
4 Use as evidence of actions No support of body language
No evidence that messages have been received or
understood

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2. Oral or Verbal Communication

 Face-to-face meeting  Meetings or briefings
 Telephone conversations
Advantages Disadvantages
1 Immediate Response – two way No record with facts and evidence
communication leading to motivation
2 Quick correction of misunderstanding Instant conflicts may result from
disagreement
3 Body language reinforce the message Too limited audience
4 Require immediate thinking

3. Visual Communication
 Films and Videos
 Posters, pictures, powerpoints, interactive white boards
 Charts and Diagrams
Advantages Disadvantages
1 Attractive way of presenting information It is a one-way communication
2 Charts, diagrams and pictures makes written Expensive method of communication
message clearer with illustrations
3 Problem to interpret graph and charts

4. Electronic Communication (IT)

 Internet  Video conferencing

 Email  FAX
 Intranet (LAN)  Mobile phones (text messaging)
Advantages Disadvantages
1 Message passed quicker and received Staff training required (young employees)
instantly
2 Evidence of message sent Reduction in social contact
3 Reduced need for people to travel to Security issues like hacking and virus
meetings as through video-conferencing
managers can see and speak to each other
Information overload

Factors to be considered when choosing the best method of communication

1. How urgent the message is – for example, a telephone call or face-to-face conversation would be
better than a letter if the message is urgent
2. Length and complexity of the message – written communication is best for long and complex
messages, so that the receiver can read it over again to check if they have understood
3. How many people need to receive the message – letters might be expensive, but it is a good way
of contacting many people. Emails might be another method to use depending on the purpose of
the message.

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4. How far away the receiver if from the sender – Several methods could be used to communicate
over long distances, such as email, text, phone call or letter. It will depend on other factors, such as
how urgent the message is and if the receiver has access to the internet or mobile phone network.
5. How important it is for all receivers to receive the message at the same time – a meeting is the
best way of getting the same message to everyone at the same time. If this is not possible then
letters or emails could be used. Everyone will receive the same message but not necessarily at
exactly the same time.
6. The cost of media – letters are more expensive than other methods because of the postage charge.
However, emails, text messaging and telephone calls require investment in equipment and regular
payments to phone service or internet provider.
7. How important it is to have a written record of the communication – If this is important, then
the method must be a written one (such as letters, memorandums or reports) or electronic (such as
email or text messaging)
8. If the message requires discussion – meetings, telephone calls and video-conferencing are all
ways for people to discuss and debate a message
9. How confidential the message is – a letter addressed to the person concerned is the best method
for communicating a confidential message.

FORMAL AND INFORMAL COMMUNICATION

Formal Communication
It is when messages are sent through established channels and recognized by the organization using a
professional language. Examples are:
a) Attend an official meeting with a manager
b) Receive a report from employees
c) General instructions on notice-boards
Informal Communication
It is when information is sent and received casually with the use of informal languages. They are
unrecognized forms of communication and are not directly established by management. These
informal communications are often referred to as grapevine (informal workplace dialogue in its purest
form). Examples are:
a) Meeting other employees in the canteen
b) Chatting with colleagues

Advantages of Informal Communication

i. It operates faster than formal communication
ii. Sometimes very accurate
iii. Managers know what is happening in the organization

Disadvantages of Informal Communication

i. The message transmitted might not be the same as it was sent.
ii. Internal message may go out the organization which might be very detrimental.

BARRIERS TO EFFECTIVE COMMUNICATION

Communication is successful when the 5 parts of the communication process is successful. These 5
parts are:

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1.
2. Sender 4. Medium 6. Feedback
3. Message 5. Receiver
If one of these 5 parts fails, barriers to effective communication occur. The most common barriers to
effective communication are as follows:-
1. Sender
 Too long message  Wrong body language used
 Poor attitude  Difficult language used
 Unclear message/problems in choosing precise words
 Sender lacking specific information may convey an unclear message
2. Receiver
 Lack of trust  Jumping too quickly to conclusion
 Do not listen well  Information overload
 Language is different
3. Medium
 Too many people passing on the  Technical failure
message  Message may be lost
 Wrong channel used
4. Feedback
 Unclear feedback
 Feedback not sent

Problems resulting from poor communication

 Staff motivation can be reduced if they are confused about issues
 Decision taking will be slower
 Unclear or misinterpreted messages may results in costly mistakes
 Overall productivity and profitability are likely to be reduced
 Lower efficiency with wastage in the production process
 Bad image and reputation towards external stakeholders

Overcoming barriers to communication

 Use of proper language being simple, brief and clear language and less use of technical terms
 Encouraging feedback to eliminate misunderstandings and misinterpretations (follow up actions)
 Communication should be brief with elimination of unnecessary repetition and over-elaborations
 Complete attention of receiver should be sought before communicating messages (ensuring proper
listening)
 Use of right methods/medium and also ensure devices are well maintained to prevent breakdowns
 Premature evaluations should be avoided specially during upward communication (patient
listening)
 Simple organizational structure with ideal span of control within the organization
REMEDIAL CHAPTERWISE ACTIVITIES
Question 1
a. Define effective communication [2]
b. Identify two importance of effective communication to a business [2]
c. Differentiate between internal communication and external communication [4]

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d. Identify and explain two methods that a manager can use to communicate with its suppliers for
ordering raw materials [6]
e. Identify and explain two methods that a manager can use to communicate with its employees about
possible redundancies (job losses) [6]

Question 2
a. Define feedback [2]
b. Differentiate between formal communication and informal communication [2]
c. Identify and explain two methods that a manager can use to communicate with its customers about
a new product being launched [4]
d. Identify and explain two factors to be considered when choosing the most suitable communication
method [6]
e. Identify one barrier to communication and explain how it can be overcome [6]

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PREPARE YOURSELF FOR ASSESSMENT

TOPIC: MARKETING
CHAPTER 8: MARKETING

Role of marketing in a business

There is no business if there are no customers. To have customers, then plan particular needs and
wants should be find out and should be satisfied. This is where marketing comes into play.
Marketing is the identifying and anticipating (foreseeing) customers’ needs and ways to satisfy them.
For this to be possible, the right product should be at the right price, at the right place and using the
right promotion.
The main roles of marketing are:
- Identifying customer needs: Needs of customers are identified through market research or
sales trend
- Satisfying customer needs: Needs of customers are satisfied with the right product, right
price, right place and right promotion
- Maintaining customer loyalty: Loyalty of customers is maintained by resolving any
complaints and dissatisfaction while keeping being ahead of competitors. The business should
keep a close link with its customers to know if the existing products are still meeting customer
needs.
Building customer relationships: This may be done through use of ways that put customer at
the center of decision making. Some businesses use fidelity cards with gifts for accumulated
points made. Relationship is built with customers to gain information about their changing
needs and this can help to forecast any changing in customer buying behavior.

Objectives of Marketing
- To create awareness about the firm’s products
- To increase sales revenue and profitability
- To improve and maintain image of the product or the business
- To increase or maintain market share
- To target a new market or segment
- To undertake new product development

Process of Segmentation, Targeting and Positioning

Market Segmentation
Groups of customers with similar characteristics can be divided into separate groups known as
segments. This technique is based upon dividing the market into segments and categorising the
population on similar needs and wants. It is useful for marketers to not waste time or money towards
people not needing its products.
There are different ways of segmenting the market:

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 Age: Products for kids, teens, old people.
 Income: different income levels of different people
 Lifestyle: types of activities people do to spend their time.
 Region: cold, hot, wet and dry places.
 Gender: male or female.
 Behaviour: Customers who behave in similar ways
Benefits to a business of segmenting the market
 Research is simpler/help identify customer needs as know where to focus
 help increase its market share
 Identify gaps in the market so can spot new consumer groups age
 To help decide best place to sell such as e-commerce
 Help target promotion/advertising so make better use of (marketing) budget
 Help set prices
 Help increase sales/revenue.

Target market
The consumers a company wants to sell its products and services to, and to whom it directs its
marketing efforts.

Positioning
It is an effort to influence consumer perception of a brand or product relative to the perception of
competing brands or products. It usually involves placing the firm’s product high up in the mind of the
customers.

MASS MARKETS V/S NICHE MARKETS

Most markets can be divided into a number of separate segments. Mass marketing strategy ignores
segmentation and seeks to appeal to all of the customers within different segments whereas niche
marketing strategy focuses on a relatively small segment of a large market.
In-Class Activities:
1. Identify the likely advantages and drawbacks of mass marketing approach to marketing
2. Identify the likely advantages and limitations of niche marketing approach to marketing

Product-oriented business v/s Market-oriented business

A product-oriented business produce its product first then find customers to buy them whereas a
market-oriented business find out what customers want first then produce them.

In-Class Activities
Question 1
a. Define marketing [3]
b. Identify three objectives of marketing [3]
c. Define market segmentation [2]
d. Identify and explain three ways of segmenting a market [6]
e. Identify two benefits of segmenting a market [4]
f. Differentiate between mass marketing and niche marketing approach [6]
g. Identify one advantage and one disadvantage to a business of using mass marketing approach [2]

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h. Identify one advantage and one disadvantage to a business of using niche marketing approach [2]
i. Differentiate between a product-oriented business and a market-oriented business [4]
j. Identify two ways how a business may build customer relationships [2]

CHAPTER 9: MARKETING RESEARCH

Marketing research is related with collecting facts and figures from the market to assist the managers
to make correct decisions about its product.
Need for Marketing Research
Marketing research may be carried out find out:
- the likes and dislikes of the customers,
- appropriate price for the product,
- how many people might buy the product?
- finding the profile of the customers,
- the places they buy
- about competitors and;
- the promotion techniques which might be most effective

Limitations of Market research

Accurate, up-to-date information obtained by marketing research can be of enormous value to an
organisation in gaining and/or maintaining its competitive edge. However, there are a number of
reasons why these benefits may not be realised:
- Lack of finance – Expensive to gather and process data.
- Too time-consuming – doing market research take much time and decisions takes time to be taken
which might be detrimental to the company against its competitors
- The data collected might not be reliable (leading questions, unrepresentative samples, biased
interviewers)
- Legal & ethical constraints – The market researcher should be cautious upon the collection and use
of personal data collected according to the Data Protection Act (1998).

Types of Market Research (Primary Research v/s Secondary Research)

1) Primary research
It involves collection and collation (bring together, comparison) of original data through direct
contact with potential or existing customers. It is also known as field research.
Methods of Primary research are:
 Questionnaire: a set of questions focusing on finding information. It can be postal
questionnaire or online questionnaire
 Interviews: Interviews are face-to-face conversations with customers where the interviewer
has a set of prepared questions.
 Focus groups (Consumer Panels): Groups of people who are willing to provide their input
and feedback on particular products or services. Thus, small number of people brought
together with a moderator to focus on a specific product
 Observations: recording, watching or auditing a particular activity or product.
 Experiments: for new products to a limited geographical area or limited number of customers
and finding out their feedback.

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Samples
A group of people who are chosen to do market research on. There could be:
- Random sample: A random number of people are selected.
- Quota sample: People are selected for some certain characteristics.
Advantages of primary research Disadvantages if primary research
Specific data can be researched on such as Expensive as it costs much to prepare for and
consumer tastes or changes in the market carry out the primary research
Data available through primary research are Too much time consuming to prepare and
original and not available to competitors undertake the primary research
Primary data are up-to-date and recent. This Sometimes not all the target population is
makes primary research accurate and reliable for included in the research as they may be out of
the company to use. reach making the primary data not much
feasible and reliable.
The respondents may give biased feedback
or answer just for the sake of it making
primary data inaccurate.

2) Secondary Research
It is the use of information that has already been collected and is available for use by others. This type
of research is also known as the desk research. These secondary data is obtained from either internal
sources or external sources.
Internal sources External sources
Sales department records, customer records and Newspapers
sales reports
Existing market research information Government statistics and census reports
Financial statements and records Media reports
Market research agencies’ reports
Employers’ association reports

Advantages of secondary research Disadvantages of secondary research

Secondary data is the easily accessible data and The secondary data is not well detailed
saves in terms of costs to the business making its quality low. The analysis need to
be done carefully for the data to be reliable.
Collecting secondary data and analysing it saves The secondary data is sometimes not specific
time and effort. to the needs of the company..
Wide range of data can be obtained The secondary data available specially on
internet are just free small portions of the
research and expensive fees are charged for
full versions
Secondary data avoids data collection problems The secondary data are usually existing data
and can be compared more easily with less bias which may be outdated making them less
reliable to use

Factors to be considered when carrying out a market research

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- Cost: Market research is a cost on the company and these costs should be within the stated
marketing budget.
- Time: Less time taken for market research to be carried out is important as needs and wants of
customers usually changes and this makes information obtained obsolete if more time is taken.
- Accuracy: Biases should be prevented in any ways to obtained accurate information.
- Sample size: the right sample should be taken out from the whole targeted population to undertake
surveys, so that information obtained are more accurate
- If objectives have been met: After carrying out the market research, the research objectives should
be met for successfulness of the surveys or study.

PRESENTATION AND USE OF RESULTS

Presenting information in a visual way makes it easy to understand by other managers in the company
and helps to break up texts.
Graphs and charts are useful ways of presenting key points of marketing research information.

Type of clothes item Sales of these items as % of total sales

in clothes shops
Tops (T-shirts, blouses, sweaters) 30
Trousers, jeans, shorts and skirts 25
Dresses 20
Coats and jackets 15
Sportswear 10
Other clothes 5
Represent the above information in:
a. A pictogram
b. Pie Chart
c. Bar chart – Both Horizontal and Vertical

Year Amount of company’s Number of competitors

sales
2009 100 000 9500
2010 75 000 8000
2011 50 000 4500
2012 30 000 3500
2013 10 000 3000
1. Represent the above information in a line graph
2. Based on the diagram above, define
a. A pictogram
b. A pie chart
c. A bar chart
d. A line graph

IMPORTANT TERMS:
1. Marketshare – Proportion of a firm’s sales as a percentage of the total sales in a market

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Remedial Chapterwise Activities
Question 2
Zeco Ltd is a business specializing in high-profiled designer clothing. The Marketing Director Mr.
Timbali is considering the cost factor while choosing between primary research and secondary
research. He argued that ‘a better research enlightens a better product’
a. Define market research
b. Identify and explain two reasons why do Zeco Ltd do market research
c. Identify two likely problems that Zeco Ltd might come across when doing market research [2]
d. Differentiate between primary research and secondary research [4]
e. Identify and explain three methods of doing primary research [6]
f. Differentiate between quota sampling and random sampling method [4]
g. Do you think it will be advantageous for Zeco Ltd to do a primary research? Justify your answer [6]
h. Identify two internal sources and two external sources when conducting a Desk Research [4]
i. Do you think it will be beneficial to Zeco Ltd to do a secondary research? Justify your answer [6]
j. Identify and explain three factors to be considered when Zeco Ltd conducts a market research [6]
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CHAPTER 10: MARKETING MIX

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The 'marketing mix' is a set of controllable marketing tools that work together to achieve company's
objectives. Elements of the marketing mix are often referred to as 'the four Ps':
1. Product - A tangible goods or an intangible service that is produced or manufactured for
customers.
2. Price – The price is the amount a customer pays for the product. It is determined by a number of
factors including market share, competition, material costs and the customer's perceived value of
the product
3. Place – Place represents the location where a product can be purchased. It is often referred to as
the distribution channel. It can include any physical store as well as virtual stores on the Internet.
4. Promotion – Promotion represents all of the communications that a marketer may use in the
marketplace. Promotion has four distinct elements - advertising, sales promotion and public
relations.
A successful business will have the right marketing mix, being the right product at the price, at the
right place and using the right promotion.

PRODUCT
Product is the bundle of benefits in terms of goods and services aiming at satisfying wants of
customers. Products have a number of features such as shape, design, colour, size and packaging.
Features of a successful product
Every successful product has the following features:
 It satisfies the needs and wants of the customers.
 It provides value for money to the consumers.
 Usually different from other competitors’ products.
 Stimulates interest of the consumers.

Packaging
Packaging was initially described as just the wrapper of the product but this has evolved with time.
Packaging actually adds value to the products even though considered as an additional cost and create
pollution.
Roles (purposes) of packaging
 To enable the branding of the product
 To make the product look more beautiful
 To enable the easy loading, storing and transport of the product
 To protect the product from contamination
 To protect the protect from damage
 To keep product fresh
 To provide details about how to use the product
 To inform the customers about the contents, ingredients, weight, size of the product. Many
government make it compulsory to print this information on the packing of the products
Branding
A brand is the name, term, sign, symbol or design, or a combination of them intended to identify the
good and service of one seller and to differentiate it from those of competitors.
The objectives that a good brand will achieve include:
 Delivers the message clearly
 Confirms the image of the company

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 Connects to target markets emotionally
 Motivates the customer to buy and become loyal customers
Brand should reside within the hearts and minds of customers. After all the brand is the source of a
promise and first communication to consumers.

PRODUCT LIFE CYCLE

A Product life cycle shows the different stages through which a product goes from introduction to
decline.

1. Introduction Stage
 Product has been newly launched into the market.
 Sales is low and possibly the firm might not be
earning profit at this stage
 Informative advertising is done.
 Price skimming may be used if the product is new
invention and has no competitors.
OR
 Competitive pricing may be used if it already has lot
of competitors.

2. Growth Stage 3. Maturity Stage

 Sales grow rapidly at during this stage  Sales have reached the highest sales figures.
 Persuasive advertising may be used.  Competition is at the maximum level.
 Prices may be reduced if faced by fierce  Promotional pricing might be a good option.
competition.  Profits are at the highest level as the firm is also getting
 Firm starts earning profits. economies of scale.
 Repetitive advertising is done to remind the consumers.

4. Saturation Stage 5. Decline Stage

 Sales are stagnant.  Sales start to decline.
 Promotional pricing or competitive pricing  Profits start to come down and advertising is reduced.
may be a good choice.  Marketing research done to find out whether this decline
 Advertising efforts at its highest point. is permanent or temporary. If the decline is permanent
in nature then stop the production of the product,
otherwise implement extension strategies.

6. Extension stage
 Introduce new varieties of the original product
 Try to sell the product in different markets.
 Make small changes in the colour, design or
packaging (modify the product)

NEW PRODUCT DEVELOPMENT

New products are the lifeblood of all businesses. Investing in the development of new product is
crucial to business growth and profitability.
But embarking on the development of new product is risky and thus, needs considerable planning.

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Benefits of developing new products Costs of developing new products

Opportunity for the business to raise additional It costs much to invest in research and development
cash inflows for launching the new product as a lot of
experiments and tests are also performed
Status of the business will increase as new It costs much to invest in marketing activities such
product may give the business opportunities to as market research and promotion of the new
capture new markets product
It gives the perception of being an innovative Workers should be re-train to gain new skills on
business and thus may gain competitive new production methods for the new product
advantage
There may be risks of failing to achieve sales and
the product being unsuccessful
Some additional equipments or machineries should
be bought

Remedial chapterwise activities

Question 1
a. Define ‘product’ [2]
b. Define ‘packaging’ and explain 2 functions of ‘packaging’ for a product [6]
c. Define ‘Branding’ and explain 2 functions of ‘branding’ for a product [6]
d. Draw and label a Product life cycle [4]
e. Identify three extension strategies that can be used by a business to increase sales [3]
f. Identify and explain the four main stages of the product life cycle [8]
g. Do you think it is beneficial to a business of developing a new product? Justify your answer [6]
Special Notes:

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PRICE
Price is the selling value of the product. The price of the product usually depends on:
- the cost of raw materials,
- the added value to the product,
- the nature of the product,
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- the amount spent on research undertaken to develop such a product,
- the production method; customized or standardized product
- the price of competitors
- the price elasticity of demand of the product (PED)

The price of a product is determined by its demand and supply.

Price elasticity of demand

It measures the responsiveness of a change in quantity demanded due to a change in price at a given
time period.
It is important for a business to know the price elasticity of demand of its product so as to know how
to change price in order to higher its revenue.

There are two main types of price elasticity of demand (PED) namely; Elastic PED and Inelastic PED.
 If the product has an elastic PED (many competitors), the business will lower its price which
will lead to a greater increase in quantity demanded and thus higher revenue.
Elastic PED (many competitors) = lower price to higher revenue

 If the product has an inelastic PED (less competitors), the business will higher its price which
will lead to a lesser decrease in quantity demanded but higher revenue.
Inelastic PED (less competitors) = higher price to higher revenue

Pricing Methods
a. Cost Plus Pricing: It is a pricing strategy where a profit margin or mark-up is added to average cost
of a particular product to determine its price.

Total Cost + Total Cost X % mark-up = Selling price

Output Output
Cost-plus pricing is a simple and easy way to set the price for a product where surely its costs are
covered.
b. Competitive Pricing: It involves setting the prices in line with the competitors’ price or just below
their prices.
c. Promotional Pricing: It involves reducing the price of product for a limited period of time.
Summer sales are an example of Promotional pricing.
d. Psychological pricing: It is based on the idea that certain prices encourage buyers to make
purchases. These are prices that are just under a round number (Rs. 1999). Sellers use this pricing
strategy to encourage buyers to think that the product is cheaper than it is really is.
e. Price Penetration (new product in existing market): It is when a new product is launched in an
existing market, the seller puts a low price (to gain marketshare) then gradually increases it as
customers becomes loyal to it.
f. Price Skimming (new product in new market): This is where the product is launched at a high
price on the market then gradually lowers it when competitors enter the market. It is commonly
used with products which are a new invention and people are willing to pay a high price because of
the novelty factors. It is quite common with Mobile phones and other technological products.
Note that:

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Putting a low price does not guarantee increase in revenue as customer may undervalue the product
and perceive it as low-quality product.

Remedial chapterwise Activities

Question 1
a. Do you think that increasing the price of a product will increase the sales revenue? Justify your
answer
b. Differentiate between cost-plus pricing and psychological pricing [6]
c. Differentiate between penetration pricing and price skimming [6]
d. Differentiate between competitive pricing and promotional pricing [6]
Special Notes:

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PLACE
It refers making the product available to customers somewhere they can access it easily. Important
consideration should be considered to costs when choosing the appropriate distribution channel and
the price the product will be when reaching the customers.
If a product is very good, well promoted and the best prices offered still customers would not be able
to buy if it is not easily available to them. Thus, distribution is of great importance.

Channels of distribution
There are four channels of distribution through which a product reaches the customers.

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No intermediary distribution channel - Manufacturer to Consumers
Usually common for industrial products, it has become very popular in the consumer market with the
improvement in communication technology. The manufacturer sells directly to customers by mail-
order and these customers selects goods from a catalogues and purchases through the post. This is also
known as direct selling.

One intermediary distribution channel - Manufacturer –Retailer-Consumer

These retail chains buy in bulk and thus deal directly with the manufacturers. The retailer should have
either a large space area for storage or be located near the manufacturer.

Two intermediaries distribution channel - Manufacturer-Wholesaler-Retailer-Consumer

The wholesaler buys in bulk from the producer and distributes to small retailers in according to their
needs which finally deliver the products to customers. It should be noted that more intermediaries in
the distribution channel higher the price.

Three intermediaries distribution channel - Manufacturer-Agent-Wholesaler-Retailer-consumer

This channel is common when manufacturers want to sell their products in a foreign market. Because
of the unfamiliarity to the foreign market the manufacturer takes the help of an agent who assists in the
movement of goods through the network of wholesalers and retailers.

Online distribution channel – Manufacturer- (E-tailers)-Consumers

This is where manufacturers sell products to customers online from websites like E-Bay. This suit
customers which do not have to physically go for shopping and shopping is done from their computer
windows itself.
Company’s own distribution channel – Manufacturer-Warehouse-Company Shops- Consumers
This is where the manufacturer stores their products in their own warehouse and distributes them to
their own company shops which are responsible for just selling them to consumers. This emanate a
clear advantage that other competitor’s product will not be favoured and only the manufacturer’s
products will be displayed.
Activities:
Briefly explain the advantages and disadvantages of each distribution channel above

Factors to be considered when selecting the Channel of Distribution

Nature of the product: Industrial products are usually sold through a direct channel as compared to
consumer products which are distributed through wider distribution channel.
Life of the product: a product with a longer shelf life may use longer channel of distribution whereas
products which are perishable are sold directly by the producer. Fruits and bakery products will use a
short channel of distribution.
Technicality of the product: Products which need a high level of technical assistance usually are
directly sold by the producers.
Price of the product: Expensive products are sold through a company shops to emphasise its
exclusiveness and high quality.
Geographical distribution of customers: Products sold to geographically scattered customers use a
network of wholesalers and retailers. They might also use Agents if the product is sold in different
countries.

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Frequency of purchase: Products which are purchased quite often sold through a network of
wholesalers and retailers to make it available to everybody. For example, soaps and shampoos

Remedial and chapterwise Activities

a. Briefly what do you understand by the term ‘Distribution Channel’ [3]
b. Briefly identify the advantages and disadvantages of the six distribution channels [12]
c. Identify and explain two factors to be considered when choosing the right distribution channel [4]

Additional Notes for Reading Purposes

Important terms
Wholesaler: A person or a firm, who buys in bulk from the manufacturer, breaks it into smaller
quantities and supplies it to small retailers.
Role of Wholesaler
 Buys in bulk from the producer and breaks into small quantities to retailers.
 Provide storage facilities, thus reducing the need for both manufacturer and retailer to hold
such large stocks.
 Wholesalers carry out marketing efforts at their level.
 Provide credit facilities to small retailers.
 Sometimes deliver the goods to the small business outlets.
 Wholesalers usually do some amount of promotion at their level thus helping manufacturers in
their marketing efforts.
Special Notes:

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PROMOTION
With so much of competition, a successful business is one which can communicate effectively with it
customers and convince them to buy its products.
Promotion is usually thought as advertising but promotion is much more than advertising. It
involves all activities to communicate with their potential and existing customers and improve sales.

Methods of promotion
a. Advertising
It means communicating with the customers through a paid media.

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Advertising is of two types:
I. Informative advertising is when the message communicated includes information about
size, quantity, ingredients, composition, configuration or content of the product in such a
way to create awareness of such a product on the market.
II. Persuasive advertising is when the message communicated focuses on persuading the
customers to buy the product through celebrity endorsements, or use of glamour.

Medium of advertising
 Television  Posters/billboards
 Radio  Leaflets
 Newspaper and magazines

Advantages Disadvantages
Reach large number of people in a given area Advertising space in newspaper can be
expensive depending on the placements
Flexibility in deciding the advertising size and Advertising has to compete against the
placement advertising of other advertisers
Advertising can be as large as necessary to Poor photo reproduction limits creativity
communicate as much of information needed
Readers can go back to the advertising again It is addressed to the whole population instead to
when desired. the target population desiring to buy the product.
Better quality paper permits better color It has a short shelf life as advertising are usually
reproduction and full-color advertising read once and then discarded.
Advertising are highly visible and accessible,
thus competitors can quickly react new strategies
put forward.

b. Sales promotion
It is a form of promotion which incents customers for limited time to buy the product such as:
 Competitions  point of sale display,
 price reduction,  demonstrations,
 BOGOF – Buy One Get One Free  after-sales service,
 Free gifts with every purchase,  giving out free samples
c. Sponsorships
It is where the business sponsors sports events or cultural shows or fashion shows in a view to make
its business or its products known.

d. Public relations
It involves managing the flow of information from an organization to the ‘public’ in order to build the
reputation of a company and its brand. Businesses thus organise press conferences in giving out
information about new products or carrying out some social service activity.

e. Personal selling

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It is an oral communication with potential buyers of a product in the hope of making a sale. Initially,
the seller will try to build a relationship with the buyer before ‘closing up’ the sale. It is common for
products which are expensive or custom designed.

f. Direct Mail
Direct mail, often called direct marketing or direct response marketing, is a marketing technique in
which the seller sends marketing messages directly to the buyer. Direct mail includes catalogs or other
product literature with ordering opportunities; sales letters; and sales letters with brochures.
Advantages Disadvantages
Advertising message is targeted to those most Some people do not like receiving offers in their
likely to buy the firm’s product. mail, and throw them immediately without even
opening the mail.
Marketing message can be personalized, thus Can be expensive depending on the target market
helping increase positive response.
Active involvement - the act of opening the mail Long lead times are required for creative mailing
and reading it, incent readers to go through the
advertising

Effectiveness of response to the campaign can be Producing direct mail materials entail the expense
easily measured. of using various professionals - copywriter,
artists, photographers, printers, etc.
The business has total control over the
presentation of the advertising message.
Advertising campaign is hidden from competitors
until it's too late for them to react

IMPORTANT TERMS:
a. Internet Marketing
It is the marketing of the product over the internet which is also known as online marketing. It can
be used to sell the product directly to consumers, for advertising purposes and building customer
relationship after a visit/demonstration. Recently, internet has become an efficient and effective
way of doing promotion as it is largely accessible to customers and more information about the
product can be communicated to customers.
Nowadays businesses may pay to place banner adverts (on a related product’s website), or ‘pop-
up’.

b. Viral Marketing (social media marketing)

It is the use of social-networking sites (Facebook, Twitter and YouTube) or SMS text messages to
increase brand awareness or promote the products. This is becoming a marketing phenomenon
where message travels from ‘walls’ to ‘walls’ easily through ‘share’, ‘like’ and ‘comment’ leaving
‘notifications’ to other viewers. This facilitates and encourages the passing on of marketing
messages to promote products in a more time and cost saving possible way.

Remedial chapterwise Activities

a. Differentiate between advertising and sales promotion [8]

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b. Differentiate between public relation (publicity) and personal selling [6]
c. Differentiate between sponsorship and viral marketing [6]

CHAPTER 11: MARKETING BUDGET

A marketing budget shows how much a company plans to spend on marketing activities (such as
promotion, market research, changing the product or its packaging) in a given time period. In other
words, it refers to the amount of money that the company has allocated for marketing expenditure.
The sum of money in the budget will depend on the type of industry and the product; for example
marketing budget for mobile phones will be higher than marketing budget for non-branded products
like fruits so as to advertise in local newspaper.

However spending large sums of money on promotion does not always guarantee success. A business
needs to know that its marketing budget is spent cost-effectively.

Business people sometimes see marketing expenditure as a cost instead of considering the
effectiveness of the marketing activity that is its return on sales revenue.

Cost-effectiveness describes the relationship between the cost of an activity and the returns from it. A
cost-effective marketing activity is one that yields a high return compared with the budget allocated to
it.
High cost, high impact = Cost-effective
High cost, low impact = Cost- ineffective
Low cost, high impact = Cost- effective
Low cost, low impact = Cost-ineffective

The best way of judging the effectiveness of any form of marketing activity is to calculate the extra
sales revenue for each additional dollar spent on marketing. This is often called the Return On
Investment (ROI)

CHAPTER 12: E-COMMERCE

Marketing and technology
- Technology has changed ways in which businesses conduct market research and marketing of
finished goods
- Online surveys/ online questionnaires
E-commerce: It is the buying and selling over the internet

Benefits of e-commerce to the business Limitations of e-commerce to the business

Low ongoing costs once the site has been It costs a lot and is time consuming to set up a
established website
No need to have an expensive location Payment made over the internet is subject to
fraudsters and hackers who may steal the users’
bank details. This make customers reluctant to

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make purchases over the internet
More information can be given about the product As internet buyers and sellers do not have face-to-
or service on the website face contact, it is difficult to establish a
relationship
Can access a wide market through the internet Poor customer service has affected the
development of e-commerce

Benefits of e-commerce to the consumer Limitations of e-commerce to the consumer

Low cost is passed to consumers in terms of There might be fraud where a website may take a
lower prices of goods and services consumer’s money and not deliver the goods
Consumers can browse the website from home There might be hacking where a consumer’s
for shopping personal details or bank account details might be
stolen
Consumer can spent time navigating the website No personal service as there is no face-to-face
to make all comparisons before making a choice contact between the consumer and seller
Consumers do not need to be near the business
Better information available to consumers as the It can be inconvenient and expensive to return
latter may read about the goods and services goods which do not meet the consumer’s needs
available from websites of different businesses such as clothing that not fit
and the different comments and feedback of
existing customers

Remedial chapterwise Activities

a. Do you think e-commerce is advantageous to businesses? Justify your answer [6]
b. Do you think e-commerce is beneficial to consumers? Justify your answer [6]

CHAPTER 13: MARKETING STRATEGY

A marketing strategy is a plan of the marketing activities for a range of products, or for a single
product. In effect, this means choosing the right combination of marketing mix elements to support the
product/s.
The best possible mix will depend on the stage of the product life cycle.

Activities:
a. Draw a product life cycle and show at each stage of Product Life Cyscle what strategies (price,
place, and promotion) can be used

Over time, it may be necessary to change a marketing strategy which involves bringing change the
marketing mix.

CHAPTER 14: LEGAL CONTROLS RELATED TO MARKETING

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All areas of business are affected by legal controls. These controls are the laws and regulations of the
country in which a business operates. Legal controls vary from country to country and most of them
have laws that protect consumers from unfair or dangerous business activity.
The common legal controls on businesses which affect the marketing function are ones that:
- Protect consumers from faulty and dangerous goods
- Prevent businesses from using advertising to mislead consumers
- Protect consumers from being exploited in industries where there is little or no competition

Impact of legal controls on marketing strategy

a. These legal controls increase the costs of the company
b. Products may need to be changed to meet minimum quality standards, or prevent any health
and safety issues
c. Advertisements may have to be withdrawn and redesigned if they are found to contain
misleading or inaccurate information. Besides, if advertising was misleading, the company will
have to issue statements of apology in the newspapers and in the worst case being fined which
increases business costs

OPPORTUNITIES AND PROBLEMS OF ENTERING NEW MARKETS ABROAD

Entering new market abroad is a sign of expansion which greatly benefits businesses which is done
through either e-commerce or exports using traditional distribution channels.
Opportunities of entering new markets abroad
- Other countries can offer huge marketing opportunities for increased sales, revenue and profit if
local market is running on decline.
- Increased status and thus becoming well-known globally
- Learn from foreign competitors, fight with them and in turn becoming more efficient
Problems of entering new market abroad
- Different cultures and tastes – colours, numbers and symbols have different meanings and
importance in different places. Moreover, for religious or other reasons, it would not be
appropriate to use certain images in advertisements in some countries.
- Language differences – problem to interact between the company’s sales person and the
customers. Besides, some words may have a completely different meaning in another language
hence resulting in conflicts
- Economic differences – the average income of consumers may be different in other countries
making price charged in foreign countries appear to be higher compare to the price their local
products. This is common if a business in a developed country wants to sell its goods or services to
customers in developing countries
- Social differences – age structure of the population, importance of family and role of women
might generate a problem when entering overseas market in terms of sales of the product or
availability of workers (female workers)
- Lack of local knowledge
- Differences in legal controls protecting consumers

Ways to deal with these problems of entering overseas markets

- Joint venture
- Sales visit to the country targeted

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- Overseas sales agent or partners

CHAPTER 15: MARKET CHANGES

Firms’ sales may strongly vary over-time depending on the type of product. This is due to the
consumer changing behavior and spending patterns.
Reasons for changing consumer spending patterns
 Changes in the level of income of consumers towards an increased trend has changed their
spending patterns. More income shift consumers from consumption of inferior goods to
superior goods
 Changes in lifestyles has also changed the consumer spending patterns where family dinner
have changed to fast-food consumption or restaurant nights
 Changes in customer tastes and preferences has also changed the consumer spending
patterns as customers keep adjusting to new styles, tastes and fashions
 Change in technology has also changed the consumer spending patterns as they keep on
following new advent and innovations to being more comfort to life
 Change in the average age of the population has also changed the consumer spending
patterns. A shift to a more youth population (decreasing of average age) will lead to
consumption of more mobiles, playstation and fashion clothing for example while a shift to a
more ageing population (increasing of average age) will lead to consumption of more cereals,
low-fat milk, among others

The importance of changing consumer needs

Changing consumer needs have given way to more competitiveness among businesses which produce
and innovate to satisfy consumer needs to avoid failures and thus, continuously respond to changing
consumer needs.
Consumers are ‘king’ and provider of revenue for the business. So businesses, should keep
researching on consumer needs and changing pattern if they want to be successful.

Why have some markets become more competitive?

Globalisation
Transportation
E-commerce

Competitive market
Features of competitive market:
- Produce high quality products
- Selling cheap products at lower prices than rivals

The world market has become more competitive for these reasons:
a. Privatisation of industries
b. Reduction in trade barriers, providing better access to overseas market
c. Low cost of setting up new businesses specially for small and medium enterprises with
government’s supports
d. Easier and quicker means of transport
More competitive market Less competitive market

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Greater choices for customers Lesser choices for customers
Better quality product at low prices Poor quality product at high prices
Up-to-date technologies and products Out-of-date technologies and products
Consumer sovereignty Consumer exploitation
ADDITIONAL NOTES
JUST FOR READING PURPOSES
Changes in the structure of an economy

While an economy changes from under-developed to developed one, more importantly there are
changes to the levels of business activities such as primary sector loses importance while secondary
sector and tertiary sector gain importance. These changes bring advantages and drawbacks:
Benefits of changes in the economy Drawbacks of changes in the economy
More people gaining employment in a variety of New types of work may create pollution leading
jobs to medical problems
Income rises over-time which raise standard of Workers in declining sectors of the economy
living may lose their jobs
New service sector jobs offer cleaner work and Foreign companies (set up in the country) may
more pleasant conditions close down their factories
A wider variety of goods and services becomes
available in the local economy

Government Intervention
A government intervenes when it takes actions or makes decisions that affect businesses and other
members of society. Besides, government intervenes also to protect the environment and foster
sustainable development projects
Types of government intervention
a. Cost and Benefits Analysis (CBA): This is a form of analysis undertaken by the government to
assess the likely costs and benefits of business activities on the society and on the private
individual. Based on this analysis, the government may decide to allow projects or even to close
down businesses
b. Provision of goods and services to the public: Government own and run essential industries;
rails, ports and utilities. The objectives behind is to create jobs, giving merit goods at a low price
or free to increase people’s standard of living and provide under-produced public goods
c. Nationalisation: It is when the government takes over companies and run these companies for the
welfare of the population
d. Create rules ad laws: Regulation = creation of laws/rules WHEREAS deregulation = reduction in
the number of laws/rules. Too much regulations limits freedom of business make decisions while
too little regulations can lead to exploitation of employees, customers and environment
e. Protect consumers: Consumers can easily be misled through buying goods which do not fit
purpose intended. The laws protecting consumers are:
i. Consumer Protection Act: Control of trading practices and prices
ii. Weights and Measure Act: Goods sold should not be underweight and weighting equipment
should be accurate
iii. Trade Description Act: Should not give a deliberate misleading impression about a product
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iv. Consumer Credit Act: Customers should have a copy of credit agreement (including amount
due and rate of interest)
v. Sales of Gods Act: Satisfactory quality and no defects in products, fit intended purpose,
performed as described on label
f. Protecting employees: Employees need protection against discrimination at work, health and
safety at work, employment protection, wage protection. The laws protecting employees are:
i. Sex Discrimination Act: Protect employees against discrimination related to their sex or
marital status
ii. Race relations Act: Protect employees against racial discrimination that is advertise for
certain race only or promoting/dismissing person of certain race only
iii. Disable Person Act: Ensure employment of disabled persons in large firms of at least 3% of
workforce
g. Protect Businesses: (Small & medium enterprises) With a view to control output of a country
(GDP) and prevent monopolies, the government may pass laws to protect vulnerable businesses
through laws such as:
- The competition Act: Establishing legal frameworks for the control of restrictive business
practices with a view to enhance competition to provide customers with choice of goods and
services at a fairer and more competitive price
Controlling monopolies through creation of competition benefits the economy, both businesses and
consumers through prevention of exploitation
h. Taxing and subsidizing activities:
 Raising taxes create revenue for the government. The government can use this money for
attainment of economic objectives (Low inflation, stable balance of payment, low
unemployment, economic growth) and social objectives (provision of merit goods, protection
of environment)
 Raising taxes may also discourage antisocial behaviour such as smoking
 Giving subsidies to businesses generating social benefits and encourage production of certain
goods or implementation of certain technologies
 Grants and subsidies given to influence location of industries, attaining objectives of reducing
social costs and creating employment in certain areas.
Reasons for government intervention
 To control how some goods and services through health and safety laws or even children
protection laws
 To protect consumers by determining what materials and substances are allowed in goods
 To encourage certain methods of production and discourage others through taxes and subsidies
 Creation of business opportunities. While government spend on defence, education and
healthcare, this gives incentives for companies to produce complementary items such as
military aircraft, tanks or school books
 To determine what to be produced and not. Taxes and health warnings can discourage
spending on tobacco while giving subsidies to produce environmental-friendly goods.
 Government impose import tariffs to protect local firms and local jobs making local prices
cheaper than prices of imported products

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