Master of Business ManagementSemester IV MB0052 Strategic Management and Business Policy - 4Credits(Book ID: B1314) Assignment Set- 1 1.

.What is meant by Strategy? Differentiate between goals and objectives. Ans: Strategy Strategy is the method by which an organization systematically achieves its future objectives. A business cannot progress for a long term without a reliable strategy. In this unit, you will learn meaning of business strategies, its conceptual evolution,scope and its importance, distinction between goals and objectives, analysing strategic intent through vision and mission statements and finding out the significance of core competencies of business and critical success factors. Difference between Goals and Objectives of BusinessGoalsObjectives Are long termAre usually meant for short term Are general intentions with broad outcomeAre precise statements with specific outcome Cannot be validatedCan be validatedAre intangible can be qualitative as well as quantitative Are tangible are usually quantitative and measurable Are abstract Are concrete 2. Define the term Strategic Management. What are the types of strategies? Answer: trategic Management Strategic management is a systematic approach of analysing, planning and implementing the strategy in an organization toensure a continued success. Strategic management is a long term procedure which helps the organization in achieving along term goal and its overall responsibility lies with the general management team. It focuses on building a solid foundation that will be subsequently achieved by the combined efforts of each and every employee of the organization. Types of Strategies Corporate level The board of directors and chief executive officers are involved in developing strategies at corporate level. Corporate levelstrategies are innovative, pervasive and futuristic in nature Business level Business level strategy relates to a unit within an organization. Mainly strategic business unit (SBU) managers are involved in this level. It is the process of formulating the objectives of the organization and allocating the resources among various functional areas. Business level strategy is more specific and action oriented. It mainly relates to how a strategy functions rather than what a strategy is in corporate level. Tactical of functional level The functional strategy mainly includes the strategies related to specific functional area in the organization such asproduction, marketing, finance and personnel (employees). Decisions at functional level are often described as tactical decisions. Operational level Operational level is concerned with successful implementation of strategic decisions made at corporate and business level.The basic function of this level is translating the strategic decisions into strategic actions. 3. Describe Porters five forces Model. Answer: Porters Five Force model Michael E. Porter developed the Five Force Model in his book, Competitive Strategy. Porter has identified five competitiveforces that influence every industry and market. The level of these forces determines the intensity of competition in anindustry. The objective of corporate strategy should be to revise these competitive

forces in a way that improves the positionof the organisation.Figure 3.4 describes forces driving industry competitions. Figure 3.4 Forces Driving Industry Competitions Forces driving industry competitions are: Threat of new entrants New entrants to an industry generally bring new capacity; desire to gain market share and substantial resources. Therefore, they are threats to an established organization. The threat of an entry depends on the presence of entry barriers and the reactions can be expected from existing competitors. An entry barrier is a hindrance that makes itdifficult for a company to enter an industry. Suppliers Suppliers affect the industry by raising prices or reducing the quality of purchased goods and services. Rivalry among existing firms In most industries, organisations are mutually dependent. A competitive move by oneorganisation may result in a noticeable effect on its competitors and thus cause retaliation or counter efforts. Buyers Buyers affect an industry through their ability to reduce prices, bargain for higher quality or more services. Threat of substitute products and services Substitute products appear different but satisfy the same needs as the original product. Substitute products curb the potential returns of an industry by placing a ceiling on the prices firms can profitably charge. Other stakeholders - A sixth force should be included to Porters list to include a variety of stakeholder groups. Some of these groups include governments, local communities, trade association unions, and shareholders. The importance of stakeholders varies according to the industry. 4. What is strategic formulation and what are its processes? Answer: Strategy Formulation Strategy formulation is the development of long term plans. It is used for the effective management of environmental opportunities and for the threats which weaken corporate management. Its objective is to express strategical information to achieve a definite goal. The main processes involved in strategy formulation are as follows: Stimulate the identification - Identifying useful information like planning for strategic management, objectives to achieve the goals of the employees and the stakeholders. Utilization and transfer of useful information as per the business strategies - A number of questions arising during utilisationand transfer of information have to be solved The questions that arise during utilisation and transfer of information are thefollowing:Who has the requested information? What is the relationship between the partners who holds the requested information? What is the nature of the requested information?How can we transfer the information? 5. Explain strategic evaluation and its significance. Answer: Strategy Evaluation The core aim of strategic management succeeds only if it generates a positive outcome. Strategic evaluation and controlconsists of data and reports about the performance of the organization. Improper analysis, planning or implementation of thestrategies will result in negative performance of the organization. The top management needs to be updated about theperformance to take corrective actions for controlling the undesired performance. The five step process of strategic evaluation and control is illustrated in figure 5.1.

Importance of effective strategic evaluation The strategic-evaluation process with constantly updated corrective actions results in significant and long-lastingconsequences. Strategy evaluation is vital to an organisations well-being as timely evaluations can alert the managementabout potential problems before the situation becomes critical. Successful strategists combine patience with a willingness totake corrective actions promptly, when necessary.The process of evaluating the implemented strategy is explained in Figure 5.2.

6. Define the term Business policy. Explain its importance. Business Policies Business policies are the instructions laid by an organisation to manage its activities. It identifies the range within which thesubordinates can take decisions in an

organization. It authorizes the lower level management to resolve their issues andtake decisions without consulting the top level management repeatedly. The limits within which the decisions are made are well defined. Business policy involves the acquirement of resources through which the organizational goals can be achieved. Business policy analyses roles and responsibilities of top level management and the decisions affecting the organization inthe long-run. It also deals with the major issues that affect the success of the organization. Importance of Business Policies A company operates consistently, both internally and externally when the policies are established. Business policies shouldbe set up before hiring the first employee in the organization. It deals with the constraints of real-life business. It is important to formulate policies to achieve the organizational objectives. The policies are articulated by the management. Policies serve as a guidance to administer activities that are repetitive in nature. It channels the thinking and action indecision making. It is a mechanism adopted by the top management to ensure that the activities are performed in the desired way. The complete process of management is organised by business policies.Business policies are important due to the following reasons: Coordination Reliable policies coordinate the purpose by focusing on organizational activities. This helps in ensuring uniformity of action throughout the organization. Policies encourage cooperation and promote initiative. Quick decisions Policies help subordinates to take prompt action and quick decisions. They demarcate the section within which decisions are to be taken. They help subordinates to take decisions with confidence without consulting their superiors every time. Every policy is a guide to activities that should be followed in a particular situation. It saves time by predicting frequent problems and providing ways to solve them Effective control Policies provide logical basis for assessing performance. They ensure that the activities are synchronisedwith the objectives of the organisation. It prevents divergence from the planned course of action. The management tends todeviate from the objective if policies are not defined precisely. This affects the overall efficiency of the organization. Policiesare derived objectives and provide the outline for procedures. Decentralization Well defined policies help in decentralisation as the executive roles and responsibility are clearly identified.Authority is delegated to the executives who refer the policies to work efficiently. The required managerial procedures canbe derived from the given policies. Policies provide guidelines to the executives to help them in determining the suitableactions which are within the limits of the stated policies. Policies contribute in building coordination in larger organisations.

Set 2 Q1.What is meant by Business Continuity Plan (BCP)? Discuss the steps involved in BCP. Ans: - According to the Business Continuity Institute, a Business Continuity Plan (BCP) isdefined as: A document containing the recovery timeline methodology, test-validated documentation, procedures, and action instructions developed specifically for use in restoring organisation operations in the event of a declared disaster. To be effective, most Business Continuity Plans also require testing, skilled personnel, access to vital records, andalternate recovery resources including facilities. BCP is a collection of procedures which is developed, recorded and maintained in readiness for use in the event of an emergency or disaster. Steps in Business Continuity Plan The BCP is senior management committee is responsible for the initiation, planning, approval, testing and audit of the BCP. The BCP is senior management committee also implements the BCP, coordinates its activities, supervises its creation and reviews the results of quality assurance activities. These stepsare discussed below: Initiation Business impact analysis Disaster readiness strategies Develop and implement the plan Maintenance and testing 1 Initiation: The senior management initiates the project and conducts the meetingto review the following: Establish a business continuity planning committee The senior managementidentifies a team and discusses the business continuity planning project with them.The management forms a team and clearly defines the roles of project teammembers. Draw up business continuity policies The team establishes the basic principles andframework necessary to ensure emergency response for resumption and recovery,restoration and permanent recovery of the organisational operations and businessactivities during a business interruption event. 2 Business impact analysis (BIA): BIA is the most important element of thecontinuity plan. BIA reveals the financial and operational impact of a major disruption. BIAreport describes the potential risks specific to the organisation. It will provide theorganization with the following details: The identification of time sensitive business operations and services. An analysis of the organisation s financial status and operational impacts. The time-frames in which the time-sensitive processes, operations and functionsmust resume. An estimation of the resources necessary for successful resumption, recovery andrestoration. The BIA will provide a basis and cost justification for risk management, response,recovery and restoration. 3 Disaster readiness strategies: The disaster readiness strategies include thefollowing activities: Define business continuity alternatives Using the information from BIA, theproject team should assess the alternative strategies that are available to theorganisation and identify two or three strategies that are more credible.

 Estimate cost of business continuity alternatives Based on these strategies, theorganisation develops the budgetary plan. The resumption timeframe plays animportant role in examining which elements may require pre-positioning. Recommend disaster readiness strategy - Based on the needs of the business andevaluation of alternatives, the project team should develop recommendations of strategies to provide funds for implementation. Prepare a formal report based on thefindings of the BIA for the strategy alternatives that were developed and analysedTake approval from senior management to proceed with the project. 4 Develop and implement the plan: Develop and implement the plan includes thefollowing activities: Emergency response and operations It establishes a crisis management processto respond to these incidents. Develop and implement a business continuity plan The plan describes specificallyhow to deal with the incidents. It should focus on the priorities of overall businesscontinuity strategy. Apply business unit plans for each department Describe the roles that eachdepartment has to perform in the event of an emergency. Example It should detailthe actions that the IT department will have to carry out if IT services are lost. 5 Maintenance and testing: Maintenance and testing includes the followingactivities: Establish a plan exercise program BCP should develop and schedule the exercisesto achieve and maintain high levels of competence and readiness. Document theobjectives of each exercise and it should include the measurement criteria. Evaluatethe results of each exercise against prestated values and document the resultsalong with proposed plan enhancement. Awareness and training plans It should ensure that the personnel is aware of theimportance of business continuity plan and can operate effectively in case of anevent .Review the effectiveness of awareness training and identify the need forfurther training. Sample emergency response exercises Emergency response exercises should beongoing. The exercises can be repeated using alternate setup and it should involvewhole organisation within a particular facility that may be affected by a systemdisaster. Audit and update the plans regularly It should regularly audit the plans to check if it meets the needs of the organisation and ensures that the documentation remainsaccurate and reflects any changes inside or outside the business. Q 2. What is meant by Business plan? Describe the strategies to create a business plan. Answer: - A business plan is a complete internal document that summarises the operationaland financial objectives of a business. It also contains the detailed plans which show howthe objectives are being accomplished. An accurately made business plan helps to allocateresources properly, to handle unforeseen complications like financial crisis and to makegood business decisions.

Strategies for creating a business plan This section describes the strategies for creating a business plan. Every entrepreneurcreates a business plan and its completion will determine the feasibility of the plan. Thestrategies for creating a business plan are as follows: Define your business vision You must clear the following queries while definingthe business vision: Who is the customer? What business are you in? What do you sell (product/service)? What is your plan for growth? What is your primary competitive advantage? Make a list of your goals You must create a list of goals after proper research. Incase of a start up business, more effort must be put on the short-term goals. Certain things must be kept clear before setting up your goal. They are listedbelow: What do you want to achieve? How much growth you want to achieve? Describe the quality and quantity of the service and the customer satisfactionlevels? How would you describe your primary competitive advantages? Understanding the customer Understanding the customer is essential for a perfectbusiness plan. You must understand the customer in terms of the following factors: Needs The following customer requirements should be understood clearly: o What unmet needs do your customers have? o How does your business meet those needs? Problems Customers buy things to solve their specific problems. Always bespecific about the advantages of the product/services of your business which resolve the customers problems. Perceptions Always try to know the perception of the customer. Clarify the doubtsof the customer regarding your profession and the products/services of yourbusiness. Learn from your competitors You can learn a lot about the business and thecustomers by looking at the business of your competitors. Always get the answers of the following questions which will assist you in learning from your competitor andfocusing on your customer. What do you know about your target market? What competitors do you have? How are competitors approaching the market? What are the competitors weaknesses and strengths? How can you improve upon the competition s approach?

 Resolving financial matters Several questions might arise when we need to makefinancial decisions. They are as follows: How will you make money? What is the profit potential of your business? You can resolve the financialissues by taking smart strategic investment decisions. Identify your marketing strategy Identifying the marketing strategy is anotheressential skill which you must have. The following are the four steps to create amarketing strategy for your business: Identify all the target markets Qualify the best target markets Identify the tools, strategies and methods Test the marketing strategy and tools Q3. What are the benefits of MNCs?Answer: MNCs have certain unique advantages in their operations that are not benefitedby domestic oriented companies. The international success of MNCs is mainly because of theability to capitalise the advantages. The advantages widely depend on the nature of individual corporations and the type of their business. Benefits are 1 To the company Superior technical knowledge The most important advantage of MNCs is thepatented technical knowledge which enables them to compete internationally. LargeMNCs have access to advanced levels of technology which are either developed oracquired by the corporation. These technologies are patented. It can be in the areasof management, services or production. Extensive application of these technologies gives a competitive advantage to the MNC in international market, as it results inefficient, low-priced, hi-tech products and services that dominate a largeinternational market. This results in efficient production and services like that of IBMor Microsoft. Large size of economy Generally, MNCs are large like Wal-Mart and ExxonMobilwhich has sales larger than the gross national products of many countries. The largesize gives the advantage of significant economic growth to the MNCs. The highervolume of production leads to lower fixed costs per-unit for the company s products.Competitors, whose volume of production of goods is smaller, must raise the price torecover the higher fixed costs. This situation implies to capital-intensive industrieslike steel, automobiles etc., in which fixed costs form a major proportion of totalcosts. Example MNC like Nippon Steel of Japan can sell its products at lower pricesthan those of companies with smaller plants. Lower input costs due to large size The production levels of MNCs are large andthus the purchase of inputs is in large volumes. Bulk purchases of inputs enable thecorporation to bargain for lower input costs and obtain considerable amount of discount. Lower input costs means less expensive and more competitive products. Example

Nestle, which buys huge quantities of coffee from the market, can bargainfor lower prices than small buyers can. Wal-Mart sells products at lower pricesrelative to its competitors due to bulk purchasing and efficient inventory control. Byidentifying which product sell effectively, Wal-Mart combines low-cost purchasingwith efficient inventor to achieve competitive advantage in retail market. Ability to access raw materials overseas By accessing raw materials in foreigncountries, many MNCs lower the input and production costs. In many cases, MNCssupply the technology to extract raw materials. Such access can give MNCsmonopolistic control over raw materials because they supply technology in exchangefor monopolistic control. This control enables them to supply or deny raw materialsto their competitors. Ability to shift production overseas Another advantage of MNCs is the ability toshift the production overseas. MNCs relocate their production facilities to takeadvantage of lower labour costs, raw materials and other incentives offered by thehost countries. They take advantage of the lower costs by exporting lower-costgoods to foreign markets. Many MNCs have set up factories in low-cost areas likeChina, India, Mexico, etc. Brand image and goodwill advantage Most of the MNCs possess product lines thathave created a good reputation for quality, value and service. This reputation spreadto other countries through exports and promotion and adds to the goodwill or brandimage of the company. MNCs are able to influence this brand image by standardizingtheir product lines in different countries. Example Sony PlayStations do not haveany modifications for different countries and the parent factory producesstandardised products for the world market. Brand names like Sony help thecompany to charge premium prices for its products, because the customers areready to buy quality products at premium prices. Information advantage MNCs have a global market view with which it collects,analyses, and processes the in-depth knowledge of worldwide markets. Thisknowledge is used to create new products for potential market niches and expandthe market coverage of their products. The MNCs have good information gatheringcapabilities in all aspects of their operations. Through this information network, theMNC is able to forecast government controls and gather commercial information. Thenetwork also helps in providing important information about economic conditions,changing market trends, social and cultural changes that affect the business of MNCsin different countries. With these information MNCs can position themselvesappropriately to contingencies. Managerial experience and expertise The MNCs function in large number indifferent countries simultaneously. This enables them to integrate wealth for valuablemanagerial experience. This experience helps them in dealing with different businesssituations around the globe. Example An MNC located in Japan can attainknowledge of Japanese management techniques and apply them successfully in adifferent location. 2 To the nations where it operates (domestic nations) : MNCs bring advantageto the countries in which they operate. The benefits of MNCs to the nations where it operateare: Economic growth and employment

An MNC comes to a country with more amountof money to invest than any local company. The countries from where the MNCsoperate are also called host countries. It brings inward investment to the hostcountries. This helps in boosting the national economy. Example Constructing newplants requires resources like land, capital and labour. It provides employment to alarge number of people which helps in dealing with the unemployment problem inthe host countries. The inward investment can help in generating wealth in the localeconomy because it increases the spending ability of the people by providing thememployment. As the MNCs provide employment to the people, they pay taxes to thelocal government. The people have more money to spend which provides market forlocal companies to sell their goods. The MNCs also attracts other smaller firms to thearea where it is located. These firms provide different services to the MNCs. Skills, techniques and quality human capital The MNCs bring with them new ideasand new techniques to improve the quality of production. This helps in improving thequality of human capital in the host country. The MNCs employ local labour and trainthem in new skills to improve productivity and efficiency. Example Sunderland isone of the most productive car manufacturing plants in Europe. The workers had toget used to different ways of working that were used in other British firms. This canbe a challenge and can also lead to improvement in productivity. The skills that theworkers build up can be passed on the other workers which help in improving thesupply of skilled labour in that area. Availability of quality goods and services Generally, production in a host countryis aimed at the export market. However, in some cases, the inward investment cangain access to the host country market to avoid trade barriers. Availability of qualitygoods leads to improved quality in other related industries. Example The UK hasaccess to high quality vehicles at cheaper price; this competition has led toimprovement in prices, working practices and quality in other related industries. Improvement in infrastructure The MNCs invest in a country for production and distribution facilities. In addition to this, the company might also invest in additional infrastructure facilities like road, port and communication facilities. This can benefitthe entire country. Q 4. Define the term Strategic Alliance. Differentiate between Joint ventures and Mergers.Answer: Strategic alliance is the process of mutual agreement between the organisationsto achieves objectives of common interest. They are obtained by the co-operation between the companies. Strategic alliance involves the individual organizations to modify its basic business activities and join in agreement with similar organizations to reduce duplication of manufacturing products and improve performance. It is stronger when the organizations involved have balancing strengths. Strategic alliances contribute in successful implementation of strategic plan because it is strategic in nature. It provides relationship between organizations to plan various strategies in achieving a common goal. The various characteristics of strategic alliances are:

 The two independent organisations involving in agreement have a similar idea of achieving objectives with respect to alliances. The organisations share the advantages and organise the management of allianceuntil the agreement lasts. To develop more areas in alliances, the organisations contribute their ownresources like technology, production, R&D, marketing etc to increase theperformance. According to Faulkner (1995) Strategic alliance is the inter-organisational relationship in which the partners make substantial investment indeveloping a long-term collaborative effort, and obtain common orientation. In Joint Ventures or JVs two or more companies come together and form a new entity topursue some business activity.It may be uneconomical for a company to pursue a business activity all alone. This is why itmay go in for a JV.In a JV, the two companies can combine their capabilities and strengths and share thebusiness risks. This way they can overcome all difficulties and hurdles effectively. Merger Strategy : - A merger takes place two or more companies join together to form asingle company.Types of Mergers: Horizontal Mergers: The combining companies are of the same business. Vertical Mergers: The joining companies are at different stages of the productionprocess of the same product. Concentric Mergers: The Joining companies are from similar businesses. Theyhowever, have no buyer seller relationship. Conglomerate Mergers: In Conglomerate Mergers the combining companies are fromunrelated or completely different businesses. Reverse Merger: When profit making company merges with the financially weakercompany. Q 5. What do you mean by innovation? What are the types of innovation? Innovation Innovation is the production or implementation of ideas. Innovation can be described as anaction or implementation which results in an improvement; a gain, or a profit. The NationalInnovation Initiative (NII) defines innovation as "The intersection of invention and insight,leading to the creation of social and economic value." 1 Components of innovation: Innovation involves the whole process fromopportunity identification, invention to development, prototyping, production, marketing andsales, while entrepreneurship only needs to involve commercialisation.The components of innovations are as follows:

Implementation Creativity Implementation It is to put ideas into practice. Implementation is made up of three aspects; idea selection, development and commercialisation. Organisationsneed processes, procedures and frameworks for achieving implementation. Someorganisations in spite of having all right processes, procedures and frameworks,are yet to be innovative. Creativity Creativity is less straight forward than implementation. Creativity isnot about establishing a new process or structure. People think differently to becreative and behave differently to be innovative. Types of innovation Innovation is defined as using new ideas to apply current thinking in different ways thatresults in a significant change. The types of innovation are as follows: Architectural innovation This innovation defines the basic configuration of theproduct and the process. It will establish the technical and marketing agendas thatwill guide subsequent developments. Market niche innovation This innovation involves development of new marketingmethods for the existing products. It provides the scope for improvement in productdesign, product promotion, and pricing. Regular innovation This innovation involves the change that is applied onestablished technical and production competence of the existing markets andcustomers. The effect of these changes is to develop the existing skills andresources. Revolutionary innovation This innovation disrupts and renders establishedtechnical and production competence that out of date, yet it is applied to existingmarkets and customers. Q6. Describe Corporate Social Responsibility.Answer: - Corporate Social Responsibilities (CSR) Corporate Social Responsibility(CSR) is the continuing obligation of a business to behave ethically and contribute to theeconomic development of the organisation. It improves the quality of life of theorganisation. The meaning of CSR has two folds. On one hand, it exhibits the ethicalbehaviour that an organisation exhibit towards its internal and external stakeholders. Andon the other hand, it denotes the responsibility of an organisation towards the environmentand society in which it

operates. Thus CSR makes a significant contribution towardssustainability and competitiveness of the organisation. CSR is effective in number of areassuch as human rights, safety at work, consumer protection, climate protection, caring forthe environment, sustainable management of natural resources, and such other issues. CSRalso provides health and safety measures, preserves employee rights and discouragesdiscrimination at workplace. CSR activities include commitment to product quality, fairpricing policies, providing correct information to the consumers, resorting to legal assistancein case of unresolved business problems, so on. Example TATA implemented social welfareprovisions for its employees since 1945. Features of CSR CSR improves the customer satisfaction through its products and services. It also assists inenvironmental protection and contributes towards social activities. The following are thefeatures of CSR: Improves the quality of an organisation in terms of economic, legal and ethical factors CSR improves the economic features of an organization by earning profitsfor the owners. It also improves the legal and ethical features by fulfilling the lawand implementing ethical standards. Builds an improved management system CSR improves the management systemby providing products which meets the essential customer needs. It developsrelevant regulations through the utilization of innovative technologies in theorganisation Contributes to countries by improving the quality of management CSR contributeshigh quality product, environment conservation and occupational health safety tovarious regions and countries. Enhances information security systems and implementing effective security measures CSR enhances the information security measures by establishingimproved information security system and distributing them to overseas businesssites. The information system has improved by enhancing better responses tocomplex security accidents. Creates a new value in transportation CSR creates a new value in transportationfor the greater safety of pedestrians and automobiles. This is done by utilising information and technology for automobiles. The information and technology helps inestablishing a safety driving assistance system. Creates awareness towards environmental issues CSR serves in preventing global warming by reducing the harmful gases emitted into the atmosphere during theprocess of business activities.

Roles played in terms of ethical conduct: CSR plays a significant role in maintaining ethical conduct in an organization. The following are the roles played by CSR: Improves the relationships with the investment community and develops betteraccess to capital and risks Enhances ability to recruit, develop and retain staff Improves the reputation and branding of the organization Improves innovation, competitiveness and market positioning Improves the ability to attract and build effective and efficient supply chain relationships Improves relationships with regulators Reduces the costs through re-cycling process Enhances stronger financial performance and profitability through operational efficiency gains Master of Business Administration - Semester 4 MB0053: International Business Management (4 credits) (Book ID: B1315) ASSIGNMENT- Set 1 1. Define international business. What are the advantages of international business? Ans: International Business Definition International business includes any type of business activity whether goods or services that crosses national boundaries. A number of definitions of international business can be found but no single universally accepted definition exists for the term international business. Some people define international business as an organization that buys and/or sells goods and services across two or more countries. Some others consider it as big enterprises which have operating units outside their home country. Still others consider it as joint ventures with locally owned business or with foreign governments. International business has become massive in scale and has come to exercise a major influence over political economic and social forces because of many types of

comparative business studies and knowledge of many aspects of foreign business operations. In fact, sometimes the foreign operations and comparative business are used as synonymous for international business. Foreign business refers to domestic operations within a foreign country. Comparative business, on the other hand, focuses on similarities and differences among countries and business systems. Scope of International Business The distinguishing feature of international business is that international firms operate in environments that are highly uncertain. Moreover, the rules of the game are often ambiguous, contradictory and are changing rapidly as compared to domestic environment. International managers have to learn the factors which are unique to the country of their operations. Managers who are shrewd in identifying new ways of doing business that satisfy the changing priorities of foreign governments have an obvious and major competitive advantage over their competitors who cannot or will not adapt to these changing priorities. An international business firm should incorporate a global perspective. The firms should explicitly define their guiding principles in terms of an international mandate rather than allow the firms guiding principles in terms as an incidental adjunct to its domestic activities. Incorporating an international outlook into the firms basic statement of purpose will help focus the attention of managers on the opportunities outside the home economy. The dynamic factors in foreign countries have impact on all stages of evolving and implementing business plans by an international business firm. First, it must define the firms guiding principles for the market place. The guiding principles should, in addition to other things, provide a long term view of what the firm is striving to become and provide direction to divisional and subsidiary managers. Nowadays, many large enterprises operate internationally and hence awareness of the major issues in international business is a valuable asset for international managers. The study of international business helps an individual to supplement his knowledge of practices, systems, styles, problems and solutions used in the other countries. It develops a persons sensitivity to foreign cultures, values and social norms and enables him to adopt broader perspective and hence improve his overall managerial efficiency. Motives of International Business Businesses undertake international operations because of a number of benefits that arise from international business. Motives of international business are as follows: i) International business helps a firm in spreading the commercial risk across several countries. When demand of a product in one country is depressed, the production may be exported to other countries, cold weather, for instance may depress soft drink consumption in one country but all countries do not have winter at the same time. In fact, some countries are relatively warm throughout the year. Such markets provide outlets for production of soft drinks even in winter. ii) International business helps a firm in increasing their overall sales and profit. Many firms in USA have done well because of their international sale. iii) Many firms resort to international business with a motive to survive. Some firms may not have large market in home country. There may be intense competition in

the home country. Under such a situation, the firm would look towards foreign markets. iv) International business operations explore management to new ideas and different approaches to solving problems. This in turn will help individual executives to develop their general management skills and personal effectiveness. They become innovative and adopt broader horizons. All these factors can give a firm a competitive edge in the home country. v) Many firms conduct international business to harness the economics of scope. Economies of scope provide benefits like unit cost reductions resulting from undertaking range of activities using common services and inputs useful for each activity. 2. Discuss in brief the absolute and comparative cost advantage theories. Absolute advantage and comparative advantage are two basic concepts to international trade. Under absolute advantage, one country can produce more output per unit of productive input than another. With comparative advantage, if one country has an absolute (dis)advantage in every type of output, the other might benefit from specializing in and exporting those products, if any exist. A country has an absolute advantage economically over another, in a particular good, when it can produce that good at a lower cost. Using the same input of resources a country with an absolute advantage will have greater output. Assuming this one good is the only item in the market, beneficial trade is impossible. An absolute advantage is one where trade is not mutually beneficial, as opposed to a comparative advantage where trade is mutually beneficial. A country has a comparative advantage in the production of a good if it can produce that good at a lower opportunity cost relative to another country. The theory of comparative advantage explains why it can be beneficial for two parties (countries, regions, individuals and so on) to trade if one has a lower relative cost of producing some good. What matters is not the absolute cost of production but the opportunity cost, which measures how much production of one good, is reduced to produce one more unit of the other good. 3. How is culture an integral part of international business. What are its elements? Ans: Ethics is significant in all areas of business and plays an important role in ensuring a successful business. The role of business ethics is evident from the conception of an idea to the sale of a product. In an organisation, every division such as sales and marketing, customer service, finance, and accounting and taxation has to follow certain ethics. Public image In order to gain public confidence and respect, organisations must ascertain that they are honest in their transactions. The services or products of a business affect the lives of thousands of people. It is important for the top management to impart high ethical standards to their employees, who develop these services or products. A company that is ethically and socially responsible has a better public image. People tend to favour the products and services of such organisations. Investors trust is just as important as public image for any business. A company that practices good ethical creates a positive impression among its stakeholders.

Managements credibility with employees Common goals and values are developed when employees feel that the management is ethical and genuine. Managements credibility with employees and the public are intertwined. Employees feel proud to be a part of an organisation that is respected by the public. Generous compensations and effective business strategies do not always guarantee employee loyalty; organisation ethics is equally significant. Thus, companies benefit from being ethical because they attract and retain good and loyal employees. Better decision-making Decisions made by an ethical management are in the best interests of the organisation, its employees, and the public. Ethical decisions take into account various social, economic and ethical factors. Profit maximisation - Companies that emphasise on ethical conduct are successful in the long run, even though they lose money in the short run. Hence, a business that is inspired by ethics is a profitable business. Costs of audit and investigation are lower in an ethical company. Protection of society In the absence of proper enforcement, organisations are responsible to practice ethics and ensure mechanisms to prevent unlawful events. Thus, by propagating ethical values, a business organisation can save government resources and protect the society from exploitation.

4. What is country risk analysis? Describe the tools and methods of country risk analysis. Ans: Overview of Country Risk Analysis Country Risk Analysis (CRA) identifies imbalances that increase the risks in a crossborder investment. CRA represents the potentially adverse impact of a country's environment on the multinational corporation's cash flows and is the probability of loss due to exposure to the political, economic, and social upheavals in a foreign country. All business dealings involve risks. An increasing number of companies involving in external trade indicate huge business opportunities and promising markets. Since the 1980s, the financial markets are being refined with the introduction of new products. When business transactions occur across international borders, they bring additional risks compared to those in domestic transactions. These additional risks are called country risks which include risks arising from national differences in socio-political institutions, economic structures, policies, currencies, and geography. The CRA monitors the potential for these risks to decrease the expected return of a crossborder investment. For example, a multinational enterprise (MNE) that sets up a plant in a foreign country faces different risks compared to bank lending to a foreign government. The MNE must consider the risks from a broader spectrum of country characteristics. Some categories relevant to a plant investment contain a much higher degree of risk because the MNE remains exposed to risk for a longer period of time. Analysts have categorised country risk into following groups: Economic risk This type of risk is the important change in the economic structure that produces a change in the expected return of an investment. Risk arises from the negative changes in fundamental economic policy goals (fiscal, monetary, international, or wealth distribution or creation).

 Transfer risk Transfer risk arises from a decision by a foreign government to restrict capital movements. It is analysed as a function of a country's ability to earn foreign currency. Therefore, it implies that effort in earning foreign currency increases the possibility of capital controls. Exchange risk This risk occurs due to an unfavourable movement in the exchange rate. Exchange risk can be defined as a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged. Location risk This type of risk is also referred to as neighborhood risk. It includes effects caused by problems in a region or in countries with similar characteristics. Location risk includes effects caused by troubles in a region, in trading partner of a country, or in countries with similar perceived characteristics. Sovereign risk This risk is based on a governments inability to meet its loan obligations. Sovereign risk is closely linked to transfer risk in which a government may run out of foreign exchange due to adverse developments in its balance of payments. It also relates to political risk in which a government may decide not to honor its commitments for political reasons. Political risk This is the risk of loss that is caused due to change in the political structure or in the politics of country where the investment is made. For example, tax laws, expropriation of assets, tariffs, or restriction in repatriation of profits, war, corruption and bureaucracy also contribute to the element of political risk. Risk assessment requires analysis of many factors, including the decision-making process in the government, relationships of various groups in a country and the history of the country. Country risk is due to unpredicted events in a foreign country affecting the value of international assets, investment projects and their cash flows. The analysis of country risks distinguishes between the ability to pay and the willingness to pay. It is essential to analyse the sustainable amount of funds a country can borrow. Country risk is determined by the costs and benefits of a countrys repayment and default strategies. The ways of evaluating country risks by different firms and financial institutions differ from each other. The international trade growth and the financial programs development demand periodical improvement of risk methodology and analysis of country risks. 5. Write short notes on Foreign exchange market. Ans: Foreign exchange market The Foreign exchange or the forex markets facilitates the participants to obtain, trade, exchange and speculate foreign currency. The foreign exchange market consists of banks, central banks, commercial companies, hedge funds, investment management firms and retail foreign exchange brokers and investors. It is considered to be the leading financial market in the world. It is vital to realise that the foreign exchange is not a single exchange, but is created from a global network of computers that connects the participants from all over the world. The foreign exchange market is immense in size and survives to serve a number of functions ranging from the funding of cross-border investment, loans, trade in goods, trade in services and currency speculation. The participant in a foreign exchange market will normally ask for a price.

The trading in the foreign exchange market may take place in the following forms: Outright cash or ready foreign exchange currency deals that take place on the date of the deal. Next day - foreign exchange currency deals that take place on the next working day. Swap Simultaneous sale and purchase of identical amounts of currency for different maturities. Spot and Forward contracts - A Spot contract is a binding obligation to buy or sell a definite amount of foreign currency at the existing or spot market rate. A forward contract is a binding obligation to buy or sell a definite amount of foreign currency at the pre-agreed rate of exchange, on or before a certain date. The advantage of spot dealing has resulted in a simplest way to deal with all foreign currency requirements. It carries the greatest risk of exchange rate fluctuations due to lack of certainty of the rate until the deal is carried out. The spot rate that is intended to receive will be set by current market conditions, the demand and supply of currency being traded and the amount to be dealt. In general, a better spot rate can be received if the amount of dealing is high. The spot deal will come to an end in two working days after the deal is struck. A forward market needs a more complex calculation. A forward rate is based on the existing spot rate plus a premium or discounts which are determined by the interest rate connecting the two currencies that are involved. For example, the interest rates of UK are higher than that of US and therefore a modification is made to the spot rate to reflect the financial effect of this differential over the period of the forward contract. The duration will be up to two years for a forward contract. A variation in foreign exchange markets can be affected to any company whether or not they are directly involved in the international trade or not. This is often referred to as Economic foreign exchange and most difficult to protect a business. 6. Discuss the importance of transfer pricing for MNCs. Ans: Transfer pricing Transfer pricing is the process of setting a price that will be charged by a subsidiary (unit) of a multi-unit firm to another unit for goods and services, which are sold between such related units. Transfer pricing is a critical issue for a firm operating internationally. Transfer pricing is determined in three ways: market based pricing, transfer at cost and costplus pricing. The Arms Length pricing rule is used to establish the price to be charged to the subsidiary. Transfer pricing can also be defined as the rates or prices that are utilised when selling goods or services between a parent company and a subsidiary or company divisions and departments that may be across many countries. The price that is set for the exchange in the process of transfer pricing may be a rate that is reduced due to internal depreciation or the original purchase price of the goods in question. When properly used, transfer pricing helps to efficiently manage the ratio of profit and loss within the company. Transfer pricing is a relatively simple method of moving goods and services among the overall corporate family.

Many managers consider transfer pricing as non-market based. The reason for transfer pricing may be internal or external. Internal transfer pricing include motivating managers and monitoring performance. External factors include taxes, tariffs, and other charges. Transfer Pricing Manipulation (TPM) is used to overcome these reasons. Governments usually discourage TPM since it is against transfer pricing, where transfer pricing is the act of pricing commodities or services. However, in common terminology, transfer pricing generally refers TPM. TPM assists in saving the organisations tax by shifting accounting profits from high tax to low tax jurisdictions. It also enables to fix transfer price on a non-market basis and thus enables to save tax. This method facilitates in moving the tax revenues of one country to another. A similar trend can be observed in domestic markets where different states try to attract investment by reducing the Sales tax rates, and this leads in an outflow from one state to another. Therefore, the Government is trying to implement a taxing system in order to curb tax evasion. Master of Business Administration - Semester 4 MB0053: International Business Management (4 credits) (Book ID: B1315)

1. What is globalisation and what are its benefits? Ans: Globalisation is the process of increasing connectivity and interdependence of the worlds market and businesses. It is a way of interacting among countries to develop global economy. Globalisation is the integration of economies of the world through trade and mutual exchange of technology and knowledge. In India, globalisation refers to the opening up of the economy to foreign direct investment by offering facilities to foreign companies to invest in various areas of economic activity. Globalisation had a strong impact in all sectors and business in India. It has created challenge for technical manpower in India. Globalisation has helped India in the following ways to: Open up Indian economy to foreign direct investments and to facilitate foreign companies to invest in different sectors of economic activities. Enable Indian companies to enter into foreign collaboration. Remove restrictions for the entry of multinational companies. Have a direct and indirect impact on Indian currency and enable inflow of foreign exchange into India. 2. Describe the theories of international business. Ans: When a company exports services or goods to other countries, it is termed as international business. Let us learn the definition and evolution of international business in detail. 1.2.1 Definition

International business can be defined as any business that crosses the national borders of the country for its establishment. It includes importing and exporting; international movement of goods, services, employees, technology, licensing, and franchising of intellectual property (trademarks, patents, copyright and so on). International business includes the investment in financial and immovable assets in foreign countries. Contract manufacturing or assembly of products for local sale or for export to other countries, establishment of foreign warehousing and distribution systems, and import of goods from one foreign country to a second foreign country for subsequent local sale is part of international business. There are various factors that affect international business. These factors include economic environment, culture, political environment, financial and banking systems, regulatory bodies, human capital, trade policies and so on, of the target country. Figure1.1 represents the various factors affecting international business.

3. Explain the importance of ethics in international business. Ans: Importance of Business Ethics Ethics is significant in all areas of business and plays an important role in ensuring a successful business. The role of business ethics is evident from the conception of an idea to the sale of a product. In an organisation, every division such as sales and marketing, customer service, finance, and accounting and taxation has to follow certain ethics. Public image In order to gain public confidence and respect, organisations must ascertain that they are honest in their transactions. The services or products of a business affect the lives of thousands of people. It is important for the top management to impart high ethical standards to their employees, who develop these services or products. A company that is ethically and socially responsible has a better public image. People tend to favour the products and services of such organisations. Investors trust is just as important as public image for any business. A company that practices good ethical creates a positive impression among its stakeholders. Managements credibility with employees Common goals and values are developed when employees feel that the management is ethical and genuine. Managements credibility with employees and the public are intertwined. Employees feel proud to be a part of an organisation that is respected by the public. Generous compensations and effective business strategies do not always guarantee employee loyalty; organisation ethics is equally significant. Thus, companies benefit from being ethical because they attract and retain good and loyal employees. Better decision-making Decisions made by an ethical management are in the best interests of the organisation, its employees, and the public. Ethical decisions take into account various social, economic and ethical factors. Profit maximisation - Companies that emphasise on ethical conduct are successful in the long run, even though they lose money in the short run. Hence, a business that is inspired by ethics is a profitable business. Costs of audit and investigation are lower in an ethical company. Protection of society In the absence of proper enforcement, organisations are responsible to practice ethics and ensure mechanisms to prevent unlawful events. Thus, by propagating ethical values, a business organisation can save government resources and protect the society from exploitation. 4. What do you understand by regional integration? List its types.

Ans: Regional integration can be defined as the unification of countries into a larger whole. Regional integration also reflects a countrys willingness to share or unify into a larger whole. The level of integration of a country with other countries is determined by what it shares and how it shares. Regional integration requires some compromise on the part of countries. It should aim to improve the general quality of life for the citizens of those countries. In recent years, we have seen more and more countries moving towards regional integration to strengthen their ties and relationship with other countries. This tendency towards integration was activated by the European Union (EU) market integration. This trend has influenced both developed and developing countries to form customs unions and Free Trade Areas (FTA). The World Trade Organisation (WTO) terms these agreements of integration as Regional Trade Agreements (RTA). Types of Integration In the previous section an overview and the need for regional integration was covered. A whole range of regional integrations exist today. Different types of regional integration are discussed in this section. 14.3.1 Preferential trading agreement Preferential trading agreement is a trade pact between countries. It is the weakest type of economic integration and aims to reduce the taxes on few products to the countries who sign the pact. The tariffs are not abolished completely but are lower than the tariffs charged to countries not party to the agreement. India is in PTA with countries like Afghanistan, Chile and South Common Market (MERCOSUR). The introduction of PTA has generated an increase in the market size, and resulted in the availability and variety of new products. 14.3.2 Free trade area Free Trade Area (FTA) is a type of trade bloc and can be considered as a second stage of economic integration. It is made up of all the countries that are willing to or agree to reduce preferences, tariffs and quotas on most of the services and goods traded between them. Countries choose this kind of economic integration if their economical structures are similar. If the countries compete among themselves, they are likely to choose customs union. The importers must obtain product information from all the suppliers within the supply chain, in order to determine the eligibility for a Free Trade Agreement (FTA). After receiving the supplier documentation, the importer must evaluate the eligibility of the product depending on the rules surrounding the products. The importers product is qualified individually by the FTA. The basis on which the product will be qualified is that the finished product should have a minimum percentage of local content. 14.3.3 Common market Common market is a group formed by countries within a geographical area to promote duty free trade and free movement of labour and capital among its members. European community is an example of common market. Common markets levy common external tariff on imports from non-member countries. A single market is a type of trade bloc, comprising a free trade area with common policies on product regulation, and freedom of movement of goods, capital, labour

and services, which are known as the four factors of production. This agreement aims at making the movement of four factors of production between the member countries easier. The technical, fiscal and physical barriers among the member countries are eliminated considerably as these barriers hinder the freedom of movement of the four factors of production. The member countries must come forward to eliminate the barriers, have a political will and formulate common economic policies. A common market is a first step towards a single market. It may be initially limited to a FTA with moderate free movement of capital and services, but it is not capable of removing rest of the trade barriers. Benefits and costs A single market has many advantages. The freedom of movement of goods, capital, labour and services between the member countries, results in the efficient allocation of these production factors and increases productivity. A single market presents a challenging environment for businesses as well as for customers, making the existence of monopolies difficult. This affects the inefficient companies and hence, results in a loss of market share and the companies may have to close down. However, efficient companies can gain from the increased competitiveness, economies of scale and lower costs. Single market also benefits the consumers in a way that the competitive environment provides them with inexpensive products, more efficient providers of products and increased variety of products. A country changing over to a single market may experience some short term negative effects on the national economy due to increased international competition. The national companies that earlier benefited from market protection and subsidies, may find it difficult to cope with their efficient peers. If the companies fail to improve their methods, they may have to close down leading to migration and unemployment. 14.3.4 Economic union Economic union is a type of trade bloc and is instituted through a trade pact. It comprises of a common market with a customs union. The countries that are part of an economic union have common policies on the freedom of movement of four factors of production, common product regulations and a common external trade policy. The purpose of an economic union is to promote closer cultural and political ties, while increasing the economic efficiency between the member countries. Economic unions are established by means of a formal intergovernmental legal agreement, among independent countries with the intention of fostering greater economic integration. The members of an economic union share some elements associated with their national economic jurisdictions. These include the free movements of: Goods and services within the union along with a common taxing method for imports from non-member countries. Capital within the economic union.

 Persons within the economic union. Some form of cooperation usually exists when framing fiscal and monetary policies. 14.3.5 Political union A political union is a type of country, which consists of smaller countries/nations. Here, the individual nations share a common government and the union is acknowledged internationally as a single political entity. A political union can also be termed as a legislative union or state union 5. What are the challenges faced by Indian businesses in global market? Ans: Challenges for Indian Businesses India is a developing country and every developing country has its own organisational problems. In the past decade, some Indian companies have made remarkable progress by reaching the international platform in short time. India has transformed from being primarily domestic players into confident global corporations. The TATA Jaguar deal was one prominent example of an Indian global power house to acquire an internationally reputed automotive company 15.4.1 Brand India Brand India is a phrase that describes the campaign which projects India as an emerging destination for business in various fields such as information technology, manufacturing, infrastructure, service sector and so on. Country names can amount to brand names and assist consumers in evaluating the products before purchasing them. Brand India is receiving a positive response. However, Brand India is weak in many ways. In developed countries, people are yet to associate India with world-class standards. The initial market entry strategy of a company from a developing country is to offer cheaper products of acceptable quality, example, China and Korea. The customers of developed countries buy those products only on the basis of price. Brand India is comprised of a large number of sub-brands that are relatively established. It reflects the economic reforms and liberalisation process that Indian economy has undergone. The famous brands from India are Indian information technology (IT) companies such as Infosys, Wipro and Tata. The positive image of these companies help in changing consumer perceptions and also help in rebranding India as a leading manufacturing and service hub by improving Indias brand equity. Brand equity is the worth derived from the goodwill and name recognition acquired over a period of time. It improves sales volume and profit margins. The India Brand Equity Foundation (IBEF) was established to promote brand India. 15.4.2 Government and bureaucracy The political environment of a country influences the business to a large extent. The political environment includes political stability in the country, nature and extent of bureaucracy, ideology of government, party in power and so on. Another challenge that influences business is bureaucracy. Industrial incentives are administered by an elaborate and expensive bureaucracy. The relationship of government to international business is based on the concept of sovereignty. The concept identifies that the nation has complete control over the international affairs. The

infrastructure such as airport, road or port upgradation takes years for completion or are stalled for many years. This affects the business in India negatively. Government policy and procedures in India are very complex and confusing. Government policy and bureaucratic culture in India do not encourage international business. Unnecessary government interference can hinder globalisation. Government support is essential to encourage globalisation. Government support is extended in the form of policy reforms, development of infrastructure, financial market, R&D support and so on. Changes in government and political instability disrupt business. Good business thrives on predictability which is lacking in India. 15.4.3 Corporate governance Corporate governance is a process of promoting corporate transparency and accountability. It is set of policies that affect the way a company is administered and controlled. Quality corporate governance is a tool for socio-economic development. Corporate governance deals with power and accountability for the safety of assets and resources entrusted to the operating team of the firm. The objective of the corporate governance is to attain highest standards of procedures and practices that are followed by the corporate world. The new emerging corporate India needs guiding principles for corporate governance. The common aspects for the failure of corporate governance are misuse of power, frauds, misappropriation of funds and so on. Good corporate governance promotes accountability in relation to public satisfaction and responsive delivery of service. In India, corporate governance initiatives are undertaken by Ministry of Corporate Affairs (MCA) and the Securities and Exchange Board of India (SEBI). Ethics Corporate governance is about ethical conduct of the business. Ethics is related to the code of values and principles that helps a person to choose between right or wrong. Managers make decisions based on a set of values and principles that are influenced by the culture of the organisation. Ethical leadership is important for the business to be conducted by meeting the expectations of all the stakeholders. Corporate governance is the ethical framework under which corporate decisions are taken. Ethics is a generalised value system avoiding discrimination in recruitment and adopting fair business practices. Business ethics provide a general guidelines within which a management can operate. An organisation has to be ethical because it has to exist in the competitive world. The varying ethical norms and social values make international business environment complex. The ethical norms vary from country to country. Labour practices Ethical concerns are at the core of dispute regarding the labour practices. The multinational enterprises are charged of unjust treatment of workers in developing nations. The labour law enforcement is weak. The laws that force firms to obtain permission from the government prior to retrenchment are not enforced properly. Hiring labors to contractor and subcontracting non-core activities to other companies provides flexibility to the firms that seek to manage their labour force in volatile context. Child labour is used in the manufacture of exports from the developing countries is criticised by people in the developed countries. For example, in India the carpet industry uses child labour and social activists in developed nations demand ban on the import goods embodying child labour. Consumers tend to boycott such goods and this in turn adversely affects the business.

15.4.4 Managing diversity Most of the international businesses face problems in managing multicultural diversity. Previously, MNCs had a country specific business strategy but now it is moving towards a global one. Managing diversity is a process of establishing workforce to perform in an unbiased environment where no member has an advantage or disadvantage. For an international manager, managing diversity is a challenge. The challenge is to create a work environment where every person performs to his full potential and compete for rewards and promotions that based on merits. The success of an MNC is determined by its ability to manage diversity. In an international organisation, the workforce consists of variety of cultures. Today, a typical firm is a combination of diverse workforce in terms of gender, race and so on. Most companies encourage exchange programs where employees from one country come and interact with employees of other countries. There are some practical steps taken by managers to manage diversity. They are: Focusing on bringing in best talent. Establishing programmes among employees of same and different race. Developing an age, gender and race profile of the workforce. Promoting minorities and other sections to decision-making positions. Providing extended leaves, flexible time, and job sharing opportunities. 6. Write short notes on WTO. Ans: WTO In this section we will discuss about the World Trade Organisation (WTO). WTO was established on 1st January 1995. In April 1994, the Final Act was signed at a meeting in Marrakesh, Morocco. The Marrakesh Declaration of 15th April 1994 was formed to strengthen the world economy that would lead to better investment, trade, income growth and employment throughout the world. The WTO is the successor to the General Agreement of Tariffs and Trade (GATT). India is one of the founder members of WTO. WTO represents the latest attempts to create an organisational focal point for liberal trade management and to consolidate a global organisational structure to govern world affairs. WTO has attempted to create various organisational attentions for regulation of international trade. WTO created a qualitative change in international trade. It is the only international body that deals with the rules of trades between nations.

Master of Business Administration - Semester 4 ML0015 Services Marketing and Customer Relationship Management 4 Credits Assignment Set- 1 Q1. What do you understand by customer defined service standards? Explain its relevance in services marketing. Ans: Customer Defined Service Standards Hard and Soft We shall first start out learning by understanding the meaning of service standards and then learn about customer defined services. Standards of service are shortened to form service standards. Service standards are not only concerned with service delivery and waiting times. It is also associated with customer expectations of service, cost of service, and remedial action when the service is not up to the mark. The five essential elements of service standards that service providers must follow are: Describe the service and the benefits that the customers are entitled to. Explain the quality of service based on the principles of the company. Set delivery targets that help in maintaining timelines. Calculate costs involved in service delivery. Form complaints and service recovery mechanisms that the company can use when the service delivered is not up to the standards. Service standards can be of two types, company defined service standards and customer defined service standards. Productivity implication, cost implication, company process blueprint and company view of quality are the basis for company defined service standards. Customer defined service standards are the ones that are based on customer expectation and reflect the view point of customers. The sources of customer service defined standards are customer expectations, customer process blueprint, customer experience and observations. Customer defined standards are the standards that close the provider gap. Company defined service standards are internal and based on productivity, efficiency, costs, and technical quality. Customer defined service standards are based on the requirements that are assessed and measured by customers. There are two types of customer defined standards namely hard and soft. These two types will be discussed in the next two sections. Hard customer defined standard

The services that can be counted, timed or observed through audits are known as hard customer defined standards. Customers emphasise on reliability and fulfilment of promises. In order to provide reliable service, the firms adopt the policy of do it right the first time and honour your promises. An example for do it right the first time would be that a customer receives exactly what he ordered for without any damage. Right on time would refer to a delivery that would take place on time. Hard customer defined standards need to be adapted according to the different countries. This is because what is considered a prompt service in one country may not be the same in another country. For hard customer defined standards, let us consider the example of a service station for vehicles. The following can be considered as hard customer defined services: Appointment for servicing available within a single day of customer placing request. Within a minute of inquiry service status is provided. The vehicle is serviced at the first visit. The serviced vehicle is delivered exactly on the mentioned delivery date. Soft customer defined standard Opinion based measures that cannot be observed and must be collected by talking to customer. This is purely based on the input obtained from customers. Soft customer defined standards are known as second category of customer defined standards. These standards are opinion based and cannot be measured. Soft standards are established by talking to customer, employees and so on. Direction guidance and feedback are obtained by soft customer defined standards. Customer perceptions and beliefs are measured in defining soft standards. Soft standards are important for person to person selling of processes. For soft customer defined standards let us consider the example of a service station for vehicles. The following can be considered as soft customer defined services. Customers are asked about the service requirements and they are recorded on a repair form. Explaining clearly to customers about the work done and the costs involved. Q2. Explain the concept of service design and service delivery in services marketing. Ans: Service Design and Delivery Process We already know that services marketing concentrate on selling services. However, selling process and marketing approach for services can be tricky. Organisations will have to offer innovative operational methods, as part of its strategies for attracting customers and delivering quality services. They can implement their own innovative operational methods for delivering quality service, and use it as a key component in its competitive strategy. Let us see the manner in

which various service firms embrace operational competitiveness in following four stages: 1. Available for service: In this stage, operations department attempts to avoid errors and reduce back office support in order to reduce costs. They also attempt to minimise technological investment and investment in training for front-line personals. 2. Journeyman: when operations department reach this stage, the level of competitiveness would have increased. Organisation seeks feedback from clients on costs and perceived quality of service. At this specific point, operations department become more outward looking and focus on benchmarking. 3. Achieving of competitiveness: In this stage, service operations reach a point where organisation master service and realise complexity of changing such operations. The back office will be seen as valuable as front office personal and technology will be used to improve the quality of delivery process to customers. 4. World class service delivery: To maintain high quality level of performance, organisation will have to not only excel, but also be fast and innovative. The back office must be proactive, develop capabilities and generate opportunities. Q3. Mention the different types of services with few examples and briefly give a note on service sector. Ans: Types of new services The following could be considered as different types of new services: Major or radical innovations are services associated with markets that are not defined yet. Start-up businesses consist of new services for markets that already have products that meet customer needs. . New services for currently served market are associated with offering customers with new services that were previously not offered by the company. Service line extensions are the expansion of the existing service line. Service improvements represent changes in the already existing services; this could changes in features of existing services. Style changes are the simplest service innovation and have a significant effect on customer perception, emotions and attitudes. Q4. Construct a service gap for an imaginary service based company assuming that there are several gaps found in its functioning. Ans: Service Gaps Framework Now, let us discuss the framework of service gaps. Parasuraman, Zeithaml, Berry at Texas A & M and North Carolina Universities, USA were the ones who first developed in 1985, an initial theory of gaps model in services. Gradually, they developed the

service gaps model framework in services marketing. The customer gap is the difference between the expectations of the client and the perceptions. The expectations of the customer are standards or reference points which bring the clients back into the service experience. The expectations of the client include the faith; the customers have regarding what will or should happen. The satisfaction of the customer and client focus is very important for the competitiveness of the firms. Any organisation that is interested to deliver of quality service must first get a clear understanding of its customers. The sources of client expectations are pricing, advertising, and sales promises. The GAP model This model offers an incorporated view of the relationship between the customer and the company. This model is based on a substantial research performed by several service providers. As in the Gronroos model, it shows the perception gap and summarise the contributory elements. The provider gaps are those that happen within the organisation. It is the difference between the expectations of the customer and the understanding; the firm has regarding those expectations. Most of the organisations fail to meet the client expectations due to their lack of understanding of those aspirations. The provider gaps include GAP 1, GAP 2, GAP 3, GAP 4 and GAP 5. Each GAP occurs due to the inconsistencies and discrepancies in the quality management process. Let us assess these provider gaps and the factors that cause those gaps. GAP 1: This is known as the management perception gap. This occurs mainly due to the difference between the service expected by the customers and the perception the management have regarding the customer expectations. Failure in understanding the client expectations leads the services organisations into trouble. The lack of proper understanding of the client expectations might cause a sequence of bad decisions and result in poor quality perception by the clients. Services organisations must examine the gap in a proper way and try to fill it up. Q5. Examine the recent issues in services marketing. Ans: We are familiar with the fact that services sector plays an important role in the economic development of the country. In country like India where services contribute to more than 50% to the GDP, it becomes very important to be aware of the new and emerging trends in the service marketing. In an emerging economic power like India, service sector has seen high growth rates in past couple of decades. This has also caused several new competitors coming into the market, which led to the demand for marketing. Service providers are forced to come up with new and different ideas so as to remain in market and maintain their market share. The development in the technology has also boosted this trend of using new and innovative ideas in the service sector. e-Commerce and e-marketing are the trends that started as the effect of technological development and need of new marketing strategy in the service sector. and helps the organisations to reach the technologically aware public and provides them the ability to search the potential customers. Even customers can directly reach the service providers and seek service, making it more cost effective than the traditional approaches. Approach like telemarketing helps companies to target customers individually and provide the desired service. It can generate good sales figure if telemarketing is done effectively. The new emerging issues in the service marketing also affect the market. Different organisations are trying different strategies to find out the answers to these new emerging issues. Innovative marketing strategies for services are required not only in urban and global marketing, but also in the rural marketing. In

context to Indian economy, rural market provides great potential for the organisation in order to utilise them. But the service marketing strategies in rural market differ from the global market. Q6. ABC Components Ltd. wants to use technology in its CRM system. Kindly help the company with suitable suggestions. Ans:

Master of Business Administration - Semester 4 ML0015 Services Marketing and Customer Relationship Management 4 Credits Assignment Set- 2 Q1. What is services marketing? Explain its importance. Ans: Over a decade we have seen several changes across the globe in the economy. Services have played a crucial role in these changes as they decide the way in which the organisations meet their desired markets. The quote, Services are going to move in this decade to being the front edge of the Industry by former CEO of IBM, Louis V. Gerstner, illustrates the changes sweeping across industry today. The huge and growing percentage of the Worlds Economy is represented by Services. Organisations have realised the importance of services they provide to the customers, which helped them in achieving a competitive edge over their forerunners. Service marketing is essential for the organisations as its target is people who can act and react. The concepts, strategies, and frameworks of services marketing were developed as a result of the combining forces of the industries and organisations, which have realised its importance in the present world economy. This has made service a necessity other than an option. Communication between the customers and service employees are important in enabling the delivery of the product in a successful way. Rendering of quality service depends upon the way in which the employees behave. Education of the customers is a major factor, as it makes them aware of the quality products and the services which they deserve. Therefore, service organisations must adapt themselves to the views of the customers. This evaluation will help them to assess whether the products provided by them is better than the ones that are provided by other service providers.

Q2. (a) What do you mean by CRM? Is it important in services marketing? (b) Give a note on integrated service marketing mix. Ans: Meaning and Definition of CRM

A management system is required to manage this relationship between the company and customer. This management system is called Customer Relationship Management (CRM). CRM provides information regarding the customers to the organisation. This information helps the organisation in framing policies for sales and marketing, which can help to attract new customers and can help in increasing the revenue. It also helps the organisation to build a healthy relationship between company and customer. In this unit, we would discuss about the CRM, importance of CRM for the organisation, advantages of using CRM and the challenges faced by CRM. Let us now discuss an important aspect of service marketing, which is Customer Relationship Management. CRM can be defined as the process or methodology, which is used to learn more about customers' needs and behaviours in order to develop stronger relationships with the customers. It brings together lots of pieces of information related to customers, marketing, effectiveness, responsiveness, sales, and market trends. Companies use CRM to manage its relationship with the customer. Generally, it is implemented as software. It is software solution for the entire customer interaction related queries of a company and it automates the company-customer interaction process. The following are the features of CRM: It helps the company to manage the database of the customer in better and efficient manner and help the company to communicate better with the customers. It helps the company to unify its process with the company and the customer views his interaction with the company as a single entity. It uses the latest technologies from the information technology. It is a blend of the management and the information technology. It is a customer centric approach, wherein its core has the customer and all the process and policies revolve around it. It keeps track of customer information, analysis the changing trends in the customer taste by different surveys and logs. It provides a communication channel between the company and customer. It ensures that customer experiences the quality of the service offered to them. Q3. Mention the 5 engines of e-CRM and explain the process involved. Ans: Five engines of e-CRM Companies understand that Electronic Customer Relationship Marketing (e-CRM) has significant potential, but they face the challenge of building the required technology infrastructure quickly and cost effectively. A knee-jerk reaction is to buy off-the-shelf applications, cobble together a database of web traffic and online purchase information, and launch an e-CRM initiative. Unfortunately, many such efforts have met with poor results. Recent research indicates that 39% of online shoppers failed in shopping attempts and a staggering 66% of loaded online

shopping carts were abandoned before the checkout process. Less than 5% of unique visitors become customers. A more sound approach is to install a comprehensive software platform of five engines that together enable the e-CRM business process. There are five e-CRM engines they are, The Customer Centric Information Store. The Analysis and Segmentation Engine. The Personalisation Engine. The Broadcast Engine. The Transaction Engine. Now let us explain each of these engines in brief: 1. The customer-centric information store: This helps in consolidating information about millions of customers together with preferences, permissions, and information that may be useful to them. 2. The analysis and segmentation engine: This helps in leveraging this customer information to build a business campaign strategy and evaluate its success. 3. The personalisation engine: This helps in personalising the entire customer experience, configuring unique sets of messages and offers to each customer. 4. The broadcast engine: This helps to proactively deliver information and offers to every customer via the media of his or her choice. 5. The transaction engine: This engine helps to facilitate the interactions between customer and the company, either exchanging information or driving transactions. Properly configured, these five engines collectively form a robust, scalable, and flexible platform for e-CRM. Prefabricated and custom-made software can be seamlessly integrated into the platform to provide a virtual shopkeeper to millions of customers. Equipped with such infrastructure, companies can continually create significant customer value at Internet speed, automating the who, what, when, where, and how of sales and marketing. These five engines together provide the platform for an e-CRM business process. Without these five engines, e-CRM is not a scaleable, defensible business proposal practice for a company. Q4. Explain the concepts of customer retention and Customer life time value with its applicable strategies. Ans: Customer Retention

Various managers within an organisation evaluate the organisations value differently, depending upon whom you approach within a service operation. This section mainly focuses on the concepts of customer retention and its importance. Customer retention is a key strategy in todays leading organisations and it reflects a more promising future than does the concept of customer satisfaction. Customer satisfaction measures the customers current state of evaluation but fails to look into customers set of changing needs. Customer retention refers to focusing the organisations marketing efforts towards the existing customer base. Rather than seeking new customers, organisations engaged in customer retention efforts, works to satisfy existing customers with the intent of developing long term relationships between the organisation and its current client. Most of the examples of successful customer retention efforts are based on the firms ability to redefine its existing business. Companies are challenging internally, more than ever before to look at what the product really provides to their customers. Understanding consumer uses the product and the steps required by consumers to obtain the product often leads to ideas that assist the firm in differentiating itself from its competition. Providing value added services to the consumer reshapes the traditional and argumentative supplier customer relationship into more of a partnership. Now let us know the meaning of customer satisfaction. Customer satisfaction Customer satisfaction is a business term which is a measure of how products and services supplied by a company meet or go beyond customer expectation. It is a key performance indicator within business. Customer satisfaction is a concept and the actual expression of the state of satisfaction will vary from person to person and product/service to product/service. The state of satisfaction always depends on a number of both psychological and physical variables which correlate with satisfaction behaviours such as return and recommend rate. The level of satisfaction also varies depending on other factors the customer, such as other products against which the customer can compare the organisation's products. For example, confidence and customer satisfaction at [2]Brooklyn Union Gas was steadily declining. As long as it remained a monopolistic value, little attention was given to customers. After all, they had no choice. No attempt was made to enhance or even to consider customer satisfaction. However, Brooklyn Unions monopolistic status changed when the federal government deregulated the nations natural gas business in 1992. Customers were free to purchase gas from any vendor of their choice. Here, the customer satisfaction was important. The first customer satisfaction surveys taken after deregulation altered Brooklyn union gas to a major problem. For customers with no interaction with the company, satisfaction was high. For customers with only one interaction, customer satisfaction fell drastically, to 40%. It was even lower for customers with more than one interaction. Part if retaining customers is management of customer to customer interactions. Customers may be pleased with the service, but not return because of actions of

another customer. Hence, customer retaining is always based on customer satisfaction. Importance of customer retention Now that we have come to know that, customer retention and customer satisfaction goes hand in hand, we need to know the importance of customer retention. There are few reasons why customer retention is so very important to us. We all know that the businesses operate on the basis of customers and the purchases made by them. It is always is very important to keep the customer base that is already present. Keeping the same customers returning back to you for more of your products on a repeated basis helps to make sure that you receive the income which is necessary to run your business. A steady customer base and retaining the usual customers, helps to gain a steady income. We can always think of other reasons also, which shows that a business having a good reputation, since it can keep a steady customer base. Businesses which show customer retention year after year can be said to be reputable/trustworthy in nature, as the same customer always return to their store for more and more purchases and will be ready to avail the new services too.

Q5. Mentor Institute provides educational support services to different colleges and universities. Now, they want to start consulting services for distance education programmes and career counseling. Suggest some steps on how to market their consulting services once it gets initiated. Ans: Q6. According to you, what are the customer expectations and customer responses if they dont receive the desired service quality? If you were the service provider, how would you address customer complaints and conflicts? Ans:

Master of Business Administration - Semester 4 ML0016 Advertising Management and Sales Promotion B1329 Assignment Set- 1

Ans.: Effect of Advertising in Marketing: It will be useful to refer to direct or perceived benefits of advertising which include the following: 1) Information Consumers need information about various goods and services. Due to ignorance, a consumer may purchase an inferior product and pay higher prices or even may not know that a particular product exists. Information given in an advertisement may be about the company and its products or service. The advertisement for Zenith refrigerator, introduced in the year 1980, for example, incorporated details regarding the product feature. The inclusion of a water cooler in the refrigerator was

emphasized. It was highlighted that this facility was available only in this brand of refrigerator, considering the need for coldwater in a tropical country like India. 2) Brand Image Building Very often, advertising is used to build a brand image. Images are mental pictures of brands that may appeal to different segments of the target audience in varying degrees. These may have their origin in realor assumed features. The images projected are geared to match the needs and expectations of the target audience. Favorable images will help in generating brand loyally and a disposition to buy that brand in preference to another. Certain advertisements of toilet soaps in India aim at image building through opinion leaders. A well-known campaign of longstanding for Lux toilet soap uses film stars (Exhibits 1.4). Thecampaign for VIP travel luggage seeks to achieve the objective of attributing a superior image through the association of the product with affluent foreign nationals in a series of VIP interviews. 3) Innovations Advertising is seen to perform this task most effectively for new products. In a way, it reduces the risk of innovation. The cost of innovation can be more than the profit recovered by the sales which advertising may generate and this encourages manufactures to undertake research and development. New brand launches seem to abound in the toiletry, cosmetic pharmaceutical, confectionery and tobacco markets advertising. At the same time, it must be pointed out that advertising does not guarantee the success of all new products. 4) New Product Launch Various strategies, including advertising, are employed to make potential buyers aware of new products. The term new product may include modifications of existing products, imitations of competitive products and product line acquisitions. Advertising can be used to promote new products and call attention to changes in old products. Advertising for the soft drink concentrate under the brand name Rasna aimed at enhancing the awareness of the product and creating a favourable disposition towards it. 5) Growth of Media The acceptance of advertising enhances the potential for raising revenues. This in turn helps the launching of new publications and expanding the media. This development has been a characteristic of the Indianmedia scene in recent years. A number of periodicals and newspapers have been launched during the seventies and this trend continued through the early eighties 6) Long-term and Indirect Benefits Advertising is a feature of free competitive enterprise and can be a contributory factor towards greater availability of goods. It increases distribution not only of the advertised products, but of other products aswell. Advertising helps to reduce the cost sold to the consumer. The costs of production and selling are lower when goods are produced and sold in larger quantities. It is also an important factor in product improvement. Advertising helps to make the purchase of commonplace products emotionally more satisfying. This may apply, for instance, to the consumers of Lijat Papad who may derive satisfaction out of buying advertised product, or for that matter, users of perfumes and lipsticks where association with advertising may be instrumental in reducing dissonance 7) Limitations of Advertising Advertising has several limitations. There is a view that advertising increases the cost of goods sold to the consumer. Advertising can be wasteful considering that only a small section of the audience covered by the media used may relate to the product advertising. The qualitative aspect of advertising is its strength. It can also be a major weakness when stereotyping an innovation. Advertising may encourage unsound or false values especially through its effect on children and youth. It creates an emotional appeal. Critics point out that any emotional appeal, in contrast

to a rational appeal, is misleading. Finally, advertising can endanger competition. Big advertisers can monopolize the market. Role of Advertising in Marketing: Advertising is an all-pervasive facet of most growing communities. Ithas important consequences for the advertisers who use it and for individuals who are exposed to it. However, its economic and social impact is a subject of continuous controversy. The following aspects illustrate the basic purpose of advertising: 1) Communication with Consumer There is an increasing need for information about a wide variety of products as the economy expands andgrows more complex. Advertising is a major way of establishing communications between manufactures and other Organizations providing services or trying to put across ideas and concepts, on the one hand, and customers, buyers and potential acceptors, on the other. Advertising is a reminder to the existing consumersand it aims at cultivating new prospects as well. Advertising has, therefore, been described as effective communication with the target audience. 2) Persuasion Advertising attempts to persuade prospective buyers to buy a product/service. According to Clyde Miller, all success in business, industry and similar activities depends upon the process of planned persuasion. In modern markets, the producer who is content with advertising that merely identifies or informs may soon find himself in a vulnerable position. The consumer should be aware of the advertisers persuasive interest, no matter how restrained or informative the message may be. 3) Contribution to Economic Growth Advertising contributes to economic growth by helping to expand the market, particularly for new products, and by helping to develop new market segment. A company, which invests in research and development in order to develop new products, has to depend on advertising for establishing the market for these products. In the board social context, advertising can be motivating factor for the less privileged for increasing their purchasing power. Advertising is also a potent vehicle for achieving acceptance of desirable and useful concepts and ideas where the profit motive is minimal or missing altogether. This may be seen in the case of non-profit objectives, such as preventive aspects of public health, developing thesmall family norm especially in over-populated countries, dissuading drunken driving, and so forth. 4) Catalyst for Change Creativity inherent in advertising leads to the discovery of new relationship that can change the perceptionof a prospect. Two aspects are of special significance: the originality of the message communicated, andthe eventual effect on consumers standards of living. The ability to bring about changes comes fromoriginality, ingenuity, innovation and imagination in advertising. This may be seen in promoting new products and ideas, as well as in the upgrading of products/ brands used by consumers. The contribution of advertising in bringing about a change is of special relevance to developing countries. Q2. Explain the advertising theories and its relevance. Ans: Advertising theories and its relevance: Every day, consumers are exposed to no less than 1000 commercial messages. Of all the different techniques and strategies that try to make an advertisement most effective, there is an underlying principle persuasion. The whole point of any marketing ploy is to get the audiences attention and then changetheir mind to believe that their product or service is the best. There are a variety of different media in which consumers are exposed to advertisements: television, radio, magazines, newspapers, billboards, and public transportation. In all types of media, persuasion is used; yetthere is not one theory that can establish a single hypothesis as to the direct route a message takes to make favorable

judgment. In order to have a holistic knowledge about the psychology behind persuasion, seven main theories of persuasion will be examined. The CognitiveResponse Model explains that the persuasion process takes place when a person reflects onthe content of the message and has cognitive responses to the message. Cognitive responses are thoughts that develop while the process of elaborating on the message occurs. Cognitive responses can be relating the message to other messages previously exposed to or already existing knowledge of that product or service that is trying to be sold. This suggests then that persuasion happens when cognitive responses arefavourable to the message.The proposition of the DualProcess Model is that there is more than one means to persuade the mind. Commonly known as the Elaboration Likelihood Method, this theory states that there are two routes to persuasion; the central route and the peripheral route. The central route to persuasion is demonstrated when an active and conscious process is made to determine the merit of a claim. Either favourable or unfavorable thoughts towards the argument are made to establish the decision of whether it has any value. The peripheral route, however, does not analyze the messages because an audience is exposed to an enormous amount of messages a day, too many to actively process. The Resource-Matching Theory asserts that in order for persuasion to be successful, the demand for cognitive responses and the supply of cognitive responses to a message must be comparable. For example, the Tide Rapid Action Tablets Advertisement provides a phrase to attempt persuasion. If this slogan,Almost as Easy as Having Your Mom Do It, requires less thought response than a person is going to provide, message recipients may generate thoughts that question the claim or produce irrelevant thoughtsthat tend to be less favourable. If, on the other hand, an audience devotes less processing of a message than what the message requires, they are less likely to make favourable judgments because the claim was notentirely processed or was processed superficially.A continuation of the Resource-Matching Theory, The Influence of Alternative Types of Elaboration onPersuasion hypothesizes that during message processing; elaboration can consist of two types itemspecific and relational. Item-specific elaboration centers on the specific product and/or brand and theunique features that are presented in the message. Relational elaboration, however, focuses on findingsimilarities that categorize or connect individual concepts. It is found that a person will only makefavourable judgments towards the unique features if both types of elaboration are considered while processing the message.A quite recent and in need of more refinement theory of persuasion is the Experiential Bases of Persuasionwhich states that judgments may be based on sensations or feelings that are triggered by a message. A judgment based on sensations and feelings does not need an abundant level of cognitive resources to befavourable, but is most effective when processing is limited. In fact, when people engage in carefulresource processing they tend to experience frustration.The Accessibility and Diagnostic as Determinants of Judgment theory suggests what information is likelyto make judgments as opposed to how judgments are made. If a message evokes relative information thatis accessible and comes to mind readily, it will tend to influence judgments of a claim.Further investigation of persuasion theories leads to the Context Effects and Attitude Correction theory thatconsiders whether or not once judgments are formed they are subject to further consideration or adjustment(Gilbert 1991). Contextual and other irrelevant information can affect judgments, although, in most casescomply with the original judgment. As Meyers-Levy and Malaviya found, there are three conditions thatmust be met in order for a person to undertake correction of a judgment: first, the person must realize thatirrelevant information may have influenced their initial conclusion about the persuasive message. Second,the person must identify a nave theory that might account for why, how, and to what extent the biasingdata could have had this effect. Thirdly, the audience must be willing to generate further cognitiveresponses. If these conditions are not met the assimilated judgments stay intact whereas if the conditionsare met, people will try to discard the influences that biased their opinion/judgments about the message.This theory is much more applicable to the persuasion process as it recognizes that even after a judgmenthas been made favourable or unfavourable towards a message it is still highly flexible.

As in the Tideadvertisement, although an initial reaction to the claim may be to believe it, future use may proveotherwise, thus altering the judgment on the merit of the initial message.Considering that persuasion is used in almost every advertisement is relevant to discuss the media persuasive messages are delivered. Other than television and radio, print advertising is most commonlyused to promote a product or service. It is found by Krugman, Reid, Dunn and Barban (1994) that of every5 readers only four get past the headline. Taking this into account, it is most important for advertisingcreators to acknowledge the different theories of persuasion and how one message can greatly differ ineffectiveness from another simply by the persuasive strategy used. Q3. Explain the factors that have an effect on Indian advertising. Ans: There are several factors affecting Indian Market.1) It first runs on market sentiments.2) Global market based on that Indian market opens Foreign Institutional Investors heavy buy or sellingleads to positive or negative3) Political news of India4) Government action on any increase or decrease on tax.5) Trend in positive trend points like inflation, crude oil price hike, RBI policy like CRR,6)Interest Rate hike does not effect much to market.In down trend the same factors pulls down Indian market and heavy selling occurs.Whether you're selling a product or service to a select group of consumers, creating a marketing plan helpsoutline how you will inform, persuade or remind the customers about what your businessoffers. Anessential part of this plan includes coming up with a budget for advertising expenditures. While eachcompany's advertising budget may differ, there are several factors that can affect even the smallestadvertising budget. 1) Projected Annual Gross Sales When entrepreneurs prepare to create advertising budgets for their businesses,it's important to take projected annual gross sales into account. This method helps protect entrepreneurs from spending too muchor too little on advertising. "Entrepreneur," an online resource and magazine for business owners, suggestscalculating your minimum and maximum advertising budget figures by calculating 10 percent and 12 percent of your projected annual gross sales. Then, multiply each figure by the markup you make on your average sales transaction. This figure can vary year-to-year depending on both your company's performance and your product markups. 2) Marketing Objectives Marketing objectives vary across organizations and can greatly affect what appears on a company'sadvertising budget. Determine which marketing objective will help you reach your annual business goals.Marketing objectives might include obtaining 5 percent more repeat customers, experiencing growth eachmonth or increasing annual sales by 10 percent. The objectives you come up with help you definemarketing strategies and tactics, which ultimately give insight into how and where you advertise, both of which are things that can affect your budget 3) Target Market While one business is targeting customers whose annual household income is at least $500,000, another business may target recent college graduates who make at least $33,000 a year. The target market you'retrying to reach has an impact on your advertising budget. Once you define your target market, you gaininsight on how to reach them learning information such as what they read, where they shop, who they getadvice from, their needs and wants and what motivates them to buy. 4) Types of Media A print advertisement in a local publication may cost less than running an online advertisement with a popular, credible website. The types of media you select to promote your product, whether it's radio, print,web, email, billboards or direct marketing, can impact your advertising budget.

5) Time of Year Advertising pricing may change during different times of the year, such as a new season or during popular holidays. While some advertisers may offer discounting, others will increase their prices if they feel their readership or viewer ship may peak during specific times or events. If you're trying to place anadvertisement in a magazine's most popular issue of the year or a television commercial during a highlytelevised event, such as the Super Bowl, you can expect a change in the amount you spend to promote your product or service. 6) Product Launch vs. Existing Product If you're introducing a new product to the market, consider this as you create your advertising budget, as itmay affect how much you spend. When products are launched, business owners often go into overdrivecoming up with various ways to advertise and promote their new product or service to potential clients.This may cause an advertising budget to be higher than it would be for a product that customers are alreadyaware of and have purchased in the past. Q4. Is it important to have communication objectives in advertising? Why or why not? Ans: Triangle of Communication: The process of advertising communication may be succinctly expressed inthe form of the eternal triangle of communication. The advertisers objective is to communicate with theaudience in order to obtain the desired results arising from the responses of the audience. 1) Advertiser: The advertiser is commonly interpreted as a commercial organization, which has the paramount objective of making profits out of business activities. Profits are usually generated throughmarketing or trading activity, apart from the financial investments. Even in the last case, marketing has arole to play as the yield for investments in order companies and assets will, in turn, depend on themarketing activity of the latter. The communication logic will, however, also apply to the types of advertisers, which may have a societal or political objective. Advertising for family planning, road safetyand the like, and election campaigns are no way different in this respect. 2) Audience: The team audience has to be interpreted with care. Readers of newspapers of magazine,listeners to the radio, or viewers of cinema or television would not necessarily constitute the audience for an advertiser. The audience for specific advertising has to be defined and idea segmentation, which wouldhelp in defining and identification of the target audience, is no way less important for noncommercialadvertising. The concept of target audience will, therefore, be applicable in all situations whether anadvertising campaign or a detailed advertising programme for a product or service is under consideration. 3) Media: The third element of the triangle of communication is the media and that is where advertisingtends to differ from other forms of communication. Advertising, as a rule, will not control the media.Hence, they will have to depend on the availability of media, and its appropriateness, to reach their targetaudience. 4) Dynamic Concept: Thus the triangle of communication consists of advertisers who are trying to conveyadvertising message to their target audience through media which are independent of advertisers. The basicconcept, however, is not constrained to a static situation. First, the triangle may be interpreted both at themicro and macro levels, i. e. for an advertiser or for one campaign and collectively for several advertisers ina community or a country. More importantly, all three elements of the triangle are subject to continuouschange. Audiences alter their patterns of behaviour under the influence of factors such as education,occupation, mobility and so forth. Definitions

of target audience invariably need revision. Advertisers produce and market products and services, which may cater to the needs and tastes of their clientele.Primarily audiences to whom they have to relate influence the media, serving as the link. The costeconomics of media, at the same time, involves advertising revenues. Both advertisers and media areultimately dependent on the mass of buyers from amongst who both select their respective target audience. 5) Choice and Competition: The creative aspect of advertising comes into play when an advertiser formulates an appropriate message to be beamed across to its target audience for a specific campaign. Even if we assume that segmentation has been efficiently done, it will be necessary to formulate the message and present it in such a way that it should appeal to the audience. This is essential when there is choice, andcorrespondingly, competition. The importance of appeal will obviously be less when there is little or limited choice, unless the advertiser has the objective of market development. 6) Advertising Agency: An advertising agency, working in unison with the advertiser, lends its professional services to the advertiser for formulation and presentation of message. However, it is themedia, which provides basic sustenance to the advertising agency by allowing 15% commission (as inIndia) on the billing of advertisers. The system obviously has its origin in free market operations arisingfrom competition within the media. The agency makes its recommendation as to whether a specific mediavehicle is suited to the target audience and the advertising message. 7) Matching Message with the Media: The media has two major roles. First, it is the question of matchingaudience to media, the type of person who constitutes the readership, listener ship and viewer ship of themedia vehicles. The second dimension is that of the frequency with which a specific media vehicle can putacross the message to the target audience and the choice available to the advertiser. Both these dimensionsare combined with the concept of exposure, which is translated into Opportunity To See (or hear),commonly known as OTS. A further dimension of the suitability of certain types of message to a specificmedia, whether print, audio or audio-visual, should also be kept in mind.The achievement of an advertisers objectives is dependent on the appeal of the message to the targetaudience and the reach of the media. The qualitative aspects of creation of advertising and the quantitativeestimation of exposures, which each unit of the target audience is subject to, must also have to beconsidered. It must also be pointed out that the reception of the advertisers message is also dependent to agreat extent on various distractions and disturbances operating on the audience. These are inherent in the process of advertising communication. People select media primarily according to their interest and preferences. Advertising which may appear in these media is per se peripheral to the audiences criteria of selection of media. 8) Distractions for the Audience: The following two factors aggravate the disturbances and distractionsoperating on the audience:a. Competition between media: A number of media vehicles would normally compete for the attention of the audience. b. Situational setting: Reception of the advertising message may also be affected by the time and occasionof reading, listening or viewing of the audience.Considering the data available on exposures, for audiences in the USA and India, may indicate thecumulative effect of the above features. According to an estimate presented by Edwing W. Abel, VicePresident and Marketing Director of General Foods Corporation, to the West Cost Meeting of theAssociation of National Advertisers, a typical metropolitan family in the USA would be exposed every dayto 1518 advertising message. Such a family, i. e. husband, wife and children, would spend the nationalaverage amount of time on newspapers, magazines, home and car radios and television. On an average day,Adel as below estimated the estimated exposures:Display advertisements in their specific newspapers read by a commuting husband and an active suburbanwife. Radio commercials heard at breakfast, lunch or in the car. Advertisements in two specific nationalmagazines read by the wife. TV commercials from dinnertime to 10.30. Subway (underground train andstations) posters and car cards along the husbands

route. Advertising in comics read by the coupleschildren.In India, Clasrion Mc Cann Advertising Company obtained similar estimate of possible advertisingexposures for the city of Bombay in 1965. An educated man commuting to work to the commercial center of the city or suburb may be subject to exposures of about 300 advertisements. Admittedly, the average for non-metro cities and towns, to say nothing of rural areas, would be lower.The above estimates, although somewhat out of date, bring forth the following observations: An average person belonging to the target audience of an advertiser is subject to a rather large number of advertisingexposures. As a corollary of the above, the number of advertisements actually seen or head, in full or partare likely to be much smaller than the maximum possible Opportunities To See (OTS), ranging from about300 per person in India to about 700 in the USA, according to the above data. 9) Resource Constraints: Completing the cycle of communication, it is obvious that advertisers have their own resource constraints, both of funds as well as time. They can only afford to spend a certain amount of money on advertising in accordance with their marketing and advertising appropriation. The preparation of advertisements needs time. Finally, the feedback from the audience is an important input for theadvertisers. Q5. Examine the role of visual strategies in ad copy design. Give suitable examples. Ans: Role of visual strategy in ad copy design :Freelance designers who produce marketing materials will know that design and copy should be developedtogether to work well.But sometimes there arent enough budgets for teaming with a copywriter. Or the client needs a project in ahurry. Thats when being able to produce concept and copy in addition to design can be a powerful business advantage. It goes without saying that an ability to write is fundamental. But you dont have to be a copywriter to produce strong concepts and write copy for many smaller projects.Think of the concept as a hook, a lead-in that will grab readers attention and persuade them to read on.Think of the copy as a fulfillment of the concepts premise, the fleshing out of the product story.Avoid trying to do too much, bombarding readers with multiple copy and visual messages. For any piece to be persuasive and memorable, its design, headlines, visuals, and copy must work together to communicateone single and strong message.As idea starters, below are thirteen simple concept/copy approaches. Each has been proven to help deliver sales results. 1. Focus on a particularly persuasive benefit. This is a fail-safe approach to communicating the product message in advertising. Brainstorm a list of product benefits and focus on the benefit your reader will find most appealing.Product: Beds. Headline: Turn your back on aches and pains. Visual: Profile of woman, back to camera,lying comfortably on a mattress. 2. Create a needthen show how the product fulfills it. A proven way to position a product is to show how it solves a need or a problem. The problem can berealProduct: Kitchen appliances. Message: Everyone knows showers are more efficient than baths. So why dodishwashers work like baths? Visual: Photo of shower cubicle alongside product. Or the problem can be imaginedProduct: Teaching (recruitment drive). Headline: Children have an energy and spontaneity that just arentfound in many office jobs. Visual: Happy child contributing in a classroom activity. 3. Focus on the products Unique Selling Point. The product youre selling doesnt need to fill an obvious gap in the market to have a Unique Selling Point(USP).A USP can be a fact about the product (such as sales history, brand reputation, or product origination)Product: Muesli. Headline: The original Swiss muesli. Visual: Idyllic Swiss landscape.A USP can be a product feature (something the product has that no other product has)Product: TV.

Headline: Color like no other. Visual: Bright-colored paint splashing across a television set.Or a USP can be a product benefit (something a product does that no other product does)Product: Educational textbook. Headline: At last, a course book that puts you in control of your lessons.Visual: confident looking teacher walking into the classroom.. 4. Associate the product with a connected idea, feeling, or emotion. Metaphor is commonly used in consumer advertising, corporate-identity, and brandbuilding publicity. Itcan be particularly effective in activating an archetype that connects an emotion with the brand.Product: Cognac. Headline: Let the conversation flow. Visual: Glass of cognac in focus; a group of people in conversation after dinner out of focus. 5. Prove how popular the product is. People trust popular products because they are seen as reliable and imply good quality. Popularitymessages also respond to deep emotional needs to feel part of a community.Product: Telecommunications. Headline: Thousands of people are coming back to XYZ Telecom.Visual: Woman opening door to friendly telecom engineer. 6. Use a case study. Case studies prove validity by showing how people have already benefited from the product in the past.They are particularly useful for highlighting success stories, before-and-after, or for demonstrating theversatility and universality of the product.Product: Weight-loss milkshake. Headline: I lost 18 pounds in just one month on the Thin Quick Plan!Visual: Before and after photos of individual alongside close-up of product. 7. Endorse the product. People trust respected figures in society. Your lead copy could be a published testimonialor have theclient pay a respected figure to put his/her name to the product.Product: Rowing machine. Headline: The Gold Standard. Visual: Snapshot of Olympic rower presenting product, with his signature. 8. Tell the products story. A product with an interesting background has real news value, and news makes for an attention-grabbingmessage, appealing to the readers sense of curiosity. Product stories can also initiate desire for the product by developing the readers emotional attachment to the brand.Product: French Beer. Headline: When Edmund Williams created Bertillon Noir, he didnt just break themould. He broke the law. Visual: Melodramatic black-and-white photo of character nervously hiding behind a door. 9. Put the product to the test. You can test the product to highlight its key features such as convenience, strength, and versatilityor toshow how the product compares with the competition.Product: Battery. Headline: Duromax lasts up to three times longer than conventional alkaline batteries.Visual: Battery-powered toy rabbit beating his competitors in a race. 10. Announce something new. The word New is one of the most powerful words in advertising copy. Sometimes the most effectivemessage is simply to announce the products newness.Product: Cat food. Headline: Introducing new finest cuts from Feleba. Visual: Plate of gourmet cat foodhidden by a silver cover. 11. Guarantee the product. A guarantee quickly dissolves any scepticism your reader has about the reliability of the product.Guarantees can be based around results, quality, durability, strength, customer satisfaction, a commitmenton behalf of the company, fixed price promises, and lowest price claims.Product: Golf clubs. Headline: Guaranteed! Cut six to eight strokes off your game or your money back! Visual: Product photo overlaid with guarantee stamp. 12. Announce how much and where to buy. If the product is particularly good value for money, you cant go wrong with the three Ps: show theProduct, show the Price, and show where to Purchase.Product:

Clothes. Headline: Back-to-school sweat-shirts from just $4. at Berkleys (oppositeMacDonalds). Visual: Photo of mothers and children choosing sweatshirts in-store, with map of wherethe shop is. 13. State the offer. People are always looking for a bargain, which is why the word Free is another powerful word in theadvertisers lexicon. If you have a good offer to tell readers about, lead with it.Product: Newspaper. Headline: Get a free Mozart CD in tomorrows Sunday Bugle. Visual: HugeFREE flash alongside product.This list of advertising concepts is hardly exhaustive, but can be used as a framework for brainstormingideas. Whatever your concept, ask yourself this: Am I effectively communicating the product messagethrough my headline, visual, and body copy? If youre not, the chances are your concept is toocomplicatedyou need to strip it down and focus on just one thing.

Q6. What is sales promotion? Explain in detail. Ans: Meaning of Sales Promotion 1. Sales promotion refers to activities, materials, devices, and techniques, which are used to supplement theadvertising and marketing efforts and help to co-ordinate the advertising with the personal selling effort.Sweepstakes are among the most well known sales promotion tools, but other examples include specialdisplays, coupons, promotional discounts, contests, and gift offers. 2. Casually, these are combined activities employed to sell a product or service Importance of Sales Promotion: Sales promotion is an important component of the overall marketing strategy of a small business along with advertising, public relations, and personal selling. The American Marketing Association (AMA) defines sales promotion as "media and non-media marketing pressure applied for a predetermined, limited periodof time in order to stimulate trial, increase consumer demand, or improve product quality." But this definition does not capture all the elements of modern sales promotion. One should add that effective sales promotion increases the basic value of a product for a limited time and directly stimulates consumer purchasing, selling effectiveness, or the effort of the sales force. It can be used to inform, persuade, and remind target customers about the business and its marketing mix. Some common types of sales promotion include samples, coupons, sweepstakes, contests, in-store displays, trade shows, price-off deals, premiums and rebates. Businesses can target sales promotions at three different audiences: consumers, re-sellers, and the companys own sales force. Sales promotion acts as a competitive weapon by providing an extra incentive for the target audience to purchase or support one brand over another. It is particularly effective in spurring product trial and unplanned purchases.Most marketers believe that a given product or service has an established perceived price or value, and theyuse sales promotion to change this price-value relationship by increasing the value and/or lowering the price. Compared to the other components of the marketing mix (advertising, publicity, and personal selling), sales promotion usually operates on a shorter time line, uses a more rational appeal, returns a tangible or real value, fosters an immediate sale, and contributes highly to profitability. In determining the relative importance to place on sales promotion in the overall marketing mix, a small business should consider its marketing budget, the stage of the product in its life cycle, the nature of competition in the market, the target of the promotion and the nature of the product. For example, sales promotion and direct mail are particularly attractive alternatives when the marketing budget is limited, as itis for many small businesses.In addition, sales promotion can be an effective tool in a highly competitive market, when the objective isto convince retailers to carry a product or influence consumers to select it over those of competitors.Similarly, sales promotion is often used in the growth and maturity stages of the product life cycle to stimulate consumers and re-sellers to choose that

product over the competition rather than in theintroduction stage, when mass advertising to build awareness might be more important. Finally, sales promotion tends to work best when it is applied to impulse items whose features can be judged at the pointof purchase, rather than more complex, expensive items that might require hands-on demonstration. Tools and Techniques of Sales Promotion Consumer sales promotions are steered toward the ultimate product users typically individual shoppers inthe local market but the same techniques can be used to promote products sold by one business toanother, such as computer systems, cleaning supplies, and machinery. In contrast, trade sales promotionstarget re-sellers wholesalers and retailers who carry the marketers product. Following are some of thekey techniques used in consumer-oriented sales promotions. 1 Price Deals A consumer price deal saves the buyer money when a product is purchased. The main types of price dealsinclude discounts, bonus pack deals, refunds or rebates and coupons. Price deals are usually intended toencourage trial use of a new product or line extension, to recruit new buyers for a mature product, or toconvince existing customers to increase their purchases, accelerate their use, or purchase multiple units.Price deals work most effectively when price is the consumers foremost criterion or when brand loyalty islow.Buyers may learn about price discounts either at the point of sale or through advertising. At the point of sale, price reductions may be posted on the package, on signs near the product, or in storefront windows.Many types of advertisements can be used to notify consumers of upcoming discounts, including fliers andnewspaper and television ads. Price discounts are especially common in the food industry, where localsupermarkets run weekly specials The manufacturer, the retailer, or the distributor may initiate Price discounts. For instance, a manufacturer may "pre-price" a product and then convince the retailer to participate in this short-term discount throughextra incentives. For price reduction strategies to be effective, they must have the support of all distributorsin the channel. Existing customers perceive discounts as rewards and often respond by buying in larger quantities. Price discounts alone, however, usually do not induce first time buyers.Another type of price deal is the bonus pack or banded pack. When a bonus pack is offered, an extraamount of the product is free when a standard size of the product is bought at the regular price. Thistechnique is routinely used in the marketing of cleaning products, food, and health and beauty aids tointroduce a new or larger size. A bonus pack offers rewards to present users but may have little appeal tousers of competitive brands. A banded pack offer is when two or more units of a product are sold at areduction of the regular single-unit price. Sometimes the products are physically banded together, such asin toothbrush and toothpaste offers.A refund or rebate promotion is an offer by a marketer to return a certain amount of money when the product is purchased alone or in combination with other products. Refunds aim to increase the quantity or frequency of purchase, to encourage customers to "load up" on the product. This strategy dampenscompetition by temporarily taking consumers out of the market, stimulates the purchase of postponablegoods such as major appliances, and creates on-shelf excitement by encouraging special displays. Refundsand rebates are generally viewed as a reward for purchase, and they appear to build brand loyalty rather than diminish it. Coupons are legal certificates offered by manufacturers and retailers. They grant specified savings on selected products when presented for redemption at the point of purchase. Manufacturers sustain the cost of advertising and distributing their coupons, redeeming their face values, and paying retailers a handling fee. Retailers who offer double or triple the amount of the coupon shoulder the extra cost. Retailers who offer their own coupons incur the total cost, including paying the face value. In this way, retail coupons are equivalent to a cents-off deal.Manufacturers disseminate coupons in many ways. They may be delivered directly by mail, dropped door to door, or distributed through a central location such as a shopping mall. Coupons may also be distributed through the media

magazines, newspapers, Sunday supplements, or freestanding inserts (FSI) in newspapers. Coupons can be inserted into, attached to, or printed on a package, or a retailer who uses themto generate store traffic or to tie in with a manufacturers promotional tactic may distribute them. Retailer-sponsored coupons are typically distributed through print advertising or at the point of sale. Sometimes, though, specialty retailers or newly opened retailers will distribute coupons door to door or through direct mail. 2 Contests/Sweepstakes The main difference between contests and sweepstakes is that contests require entrants to perform a task or demonstrate a skill that is judged in order to be deemed a winner, while sweepstakes involve a random drawing or chance contest that may or may not have an entry requirement. At one time, contests were morecommonly used as sales promotions, mostly due to legal restrictions on gambling that many marketers feared might apply to sweepstakes. But the use of sweepstakes as a promotional tactic has grown dramatically in recent decades, partly because of legal changes and partly because of their lower cost. Administering a contest once cost about $350 per thousand entries, compared to just $2.75 to $3.75 per thousand entries in a sweepstake. Furthermore, participation in contests is very low compared to sweepstakes, since they require some sort of skill or ability. 3 Special Events According to the consulting firm International Events Group (IEG), businesses spend over $2 billion annually to link their products with everything from jazz festivals to golf tournaments to stock car races. Infact, large companies like RJR Nabisco and Anheuser-Busch have special divisions that handle nothing butspecial events. Special events marketing offer a number of advantages. First, events tend to attract a homogeneous audience that is very appreciative of the sponsors. Therefore, if a product fits well with the event and its audience, the impact of the sales promotion will be high. Second, event sponsorship often builds support among employeeswho may receive acknowledgment for their participationand within the trade. Finally, compared to producing a series of ads, event management is relatively simple. Many elements of event sponsorship are pre-packaged and reusable, such as booths, displays, and ads. Special events marketing are available to small businesses, as well, through sponsorship of events on the community level. 4 Premiums A premium is tangible compensation that is given as incentive for performing a particular act usually buying a product. The premium may be given for free, or may be offered to consumers for a significantly reduced price. Some examples of premiums include receiving a prize in a cereal box or a free garden toolfor visiting the grand opening of a hardware store. Incentives that are given for free at the time of purchase are called direct premiums. These offers provide instant gratification, plus there is no confusion about returning coupons or box tops, or saving bar codes or proofs of purchase. Other types of direct premiums include traffic builders, door openers, and referral premiums. The garden tool is an example of a traffic-builder premium an incentive to lure a prospective buyer to a store. A door-opener premium is directed to customers at home or to business people in their offices. For example, a homeowner may receive a free clock or radio for allowing an insurance agent to enter their home and listening to his sales speech. Similarly, an electronics manufacturer might offer free software to an office manager who agrees to an onsite demonstration. The final category of direct premiums, referral premiums, rewards the purchaser for referring the seller to other possible customers. Mail premiums, unlike direct premiums, require the customer to perform some act in order to obtain a premium through return mail. An example might be a limited edition toy car offered by a marketer in exchange for one or more proofs-ofpurchase and a payment covering the cost of the item plus handling. The premium is still valuable to the consumer because they cannot readily buy the item for the same amount. 5 Continuity Programs Continuity programs retain brand users over a long time period by offering ongoing motivation or incentives. Continuity programs demand that consumers keep buying

the product in order to get the premium in the future. Trading stamps, popularized in the 1950s and 1960s, are prime examples. Consumers usually received one stamp for every dime spent at a participating store.The stamp company provided redemption centers where the stamps were traded for merchandise. A catalog listing the quantity of stamps required for each item was available at the participating stores. Today, airlines frequent-flyer clubs, hotels frequent-traveler plans, retailers frequent-shopper programs, and bonus-paying credit cards are common continuity programs. When competing brands have reached parityin terms of price and service, continuity programs sometimes prove a deciding factor among those competitors. By rewarding long-standing customers for their loyalty, continuity programs also reduce thethreat of new competitors entering a market. 6 Sampling A sign of a successful marketer is getting the product into the hands of the consumer. Sometimes, particularly when a product is new or is not a market leader, an effective strategy is giving a sample product to the consumer, either free or for a small fee. But in order for sampling to change peoples future purchase decisions, the product must have benefits or features that will be obvious during the trial.There are several means of disseminating samples to consumers. The most popular has been through the mail, but increases in postage costs and packaging requirements have made this method less attractive. Analternative is door-to-door distribution, particularly when the items are bulky and when reputable distribution organizations exist. This method permits selective sampling of neighborhoods, dwellings, or even people. Another method is distributing samples in conjunction with advertising. An ad may include a coupon that the consumer can mail in for the product, or it may include an address or phone number for ordering. Direct sampling can be achieved through prime media using scratch-and-sniff cards and slim foil pouches, or through retailers using special displays or a person hired to hand out samples to passing customers. Though this last technique may build goodwill for the retailer, some retailers resent the inconvenience and require high payments for their co-operation. A final form of sample distribution deals with specialty types of sampling. For instance, some companies specialize in packing samples together for delivery to homogeneous consumer groups, such as newlyweds, new parents, students, or tourists. Such packages may be delivered at hospitals, hotels, or dormitories and include a number of different types of products. 7 Trade Promotions A trade sales promotion is targeted at re-sellers wholesalers and retailers who distribute manufacturers products to the ultimate consumers. The objectives of sales promotions aimed at the trade are different from those directed at consumers. In general, trade sales promotions hope to accomplish four goals:1) Develop in-store merchandising support, as strong support at the retail store level is the key to closingthe loop between the customer and the sale. 2) Control inventory by increasing or depleting inventory levels, thus helping to eliminate seasonal peaks and valleys. 3) Expand or improve distribution by openingup new sales areas (trade promotions are also sometimes used to distribute a new size of the product). 4)Generate excitement about the product among those responsible for selling it. Some of the most common forms of trade promotions profiled below include point-of-purchase displays, trade shows, sales meetings, sales contests, push money, deal loaders, and promotional allowances. 8 Point-of-Purchase (POP) Displays Manufacturers provide point-of-purchase (POP) display units free to retailers in order to promote a particular brand or group of products. The forms of POP displays include special racks, display cartons, banners, signs, price cards, and mechanical product dispensers. Probably the most effective way to ensure that a reseller will use a POP display is to design it so that it will generate sales for the retailer. High product visibility is the basic goal of POP displays. In industries such as the grocery field where a shopper spends about three-tenths of a second viewing a product, anything increasing product visibility is valuable. POP displays also provide or remind consumers about important decision information, such as the products

name, appearance, and sizes. The theme of the POP display should co-ordinate with the theme used in ads and by salespeople. 9 Trade Shows Thousands of manufacturers display their wares and take orders at trade shows. In fact, companies spend over $9 billion yearly on these shows. Trade shows provide a major opportunity to write orders for products. They also provide a chance to demonstrate products, disseminate information, answer questions, and are compared directly to competitors. Related to trade shows, but on a smaller scale, do manufacturers or wholesalers sponsor sales meetings. Whereas trade shows are open to all potential customers, sales meetings are targeted toward the companys sales force and/or independent sales agents. These meetings are usually conducted regionally and directed by sales managers. The meetings may be used to motivate sales agents, to explain the product or the promotional campaign, or simply to answer questions. For re-sellers and salespeople, sales contests canalso be an effective motivation. Typically, a prize is awarded to the organization or person who exceeds a quota by the largest percentage. 10 Push Money Similarly, push money (PM) also known as spiffs is an extra payment given to salespeople for meetinga specified sales goal. For example, a manufacturer of refrigerators might pay a $30 bonus for each unit of model A, and a $20 bonus for each unit of model B, sold between March 1 and September 1. At the end of that period, the salesperson would send evidence of these sales to the manufacturer and receive a check inreturn. Although some people see push money as akin to bribery, many manufacturers offer it. 11 Deal Loaders A deal loader is a premium given by a manufacturer to a retailer for ordering a certain quantity of product.Two types of deal loaders are most typical. The first is a buying loader, which is a gift given for making aspecified order size. The second is a display loader, which means the display is given to the retailer after the campaign. For instance, General Electric may have a display containing appliances as part of a special program. When the program is over, the retailer receives all the appliances on the display if a specified order size was achieved. 12 Trade Deals Trade deals are special price concessions superseding, for a limited time, the normal purchasing discount given to the trade. Trade deals include a group of tactics having a common themeto encourage sellers tospecially promote a product. The marketer might receive special displays, larger-than-usual orders, superior in-store locations, or greater advertising effort. In exchange, the retailer might receive special allowances, discounts, goods, or money.In many industries, trade deals are the primary expectation for retail support, and the marketing funds spentin this area are considerable. There are two main types of trade deals: buying allowances and advertising/display allowances. 13 Buying Allowances A buying allowance is a bonus paid by a manufacturer to a reseller when a certain amount of product is purchased during a specific time period. For example, a reseller who purchases at least 15 cases of product might receive a buying allowance of $6.00 off per case, while a purchase of at least 20 cases would resulting $7.00 off per case, and so forth.The payment may take the form of a check or a reduction in the face value of an invoice. In order to take advantage of a buying allowance, some retailers engage in "forward buying." In essence, they order more merchandise than is needed during the deal period, then store the extra merchandise to sell later at regular prices. This assumes that the savings gained through the buying allowance is greater than the cost of warehousing and transporting the extra merchandise. Some marketers try to discourage forward buying, since it reduces profit margins and tends to create cyclical peaks and troughs in demand for the product. The slotting allowance is a controversial form of buying allowance. Slotting allowances are fees retailers charge manufacturers for each space or slot on the shelf or in the warehouse that new products will occupy. The controversy stems from the fact that in many instances this allowance amounts to little more than paying a bribe to the

retailer to convince them to carry your companys products. But many marketers are willing to pay extra to bring their products to the attention of consumers who are pressed for time in the store. Slotting allowances sometimes buy marketers prime spaces on retail shelves, at eye level or near the end of aisles. The final type of buying allowance is a free goods allowance. In this case, the manufacturer offers a certain amount of product to wholesalers or retailers at no cost if they purchase a stated amount of the same or a different product. The allowance takes the form of free merchandise rather than money.

Master of Business Administration - Semester 4 ML0016 Advertising Management and Sales Promotion B1329 Assignment Set- 2 Q1. Outline those elements that are considered important in advertising execution. Give examples. Ans: Advertising Execution: Developing Media Strategies To achieve the key plan objectives of who (target), where (location), when (time frame), how long(duration), and what (the size of the ad), media planners use a selection process of choosing the bestalternatives and methods to satisfy the plans needs. In all cases, the final media strategy that companiesuse to meet advertising objective are: target audience, geographic, timing and duration, and size and length strategies. Target Audience Strategies: New Technology of Measurement: Media planers are limited by mass media audience research. However, further developments may help them overcome this limitation so that they can better execute their target audience strategies. Retail Scanners: Many retail outlets, especially Supermarkets, use electronic scanners. When you shop at Safeway, each product you buy has an electronic bar code that contains the name of the product and its price. The regionalSafeway system may decide to establish a consumer panel so that it can track sales among hundreds of other customers, and would complete a fairly extensive questionnaire, and be assigned and ID number. Youmight receive a premium or a discount on purchase, for your participation. Each time you make a purchase,you also submit tour ID number. Therefore, if Safeway runs a two-page newspaper ad, it can track actualsales to determine to what extent the ad worked. Your panel questionnaire will also contain a list of media that you use; so media can also be evaluated. Q2. Do demographic factors influence advertising strategies? Explain. Ans: Demographic factors and advertising strategies: The demography of a region includes population size and composition, as well as key socio-economic attributes such as literacy levels and wide or narrow disparities in a society's distribution of income.Theoretically, the larger the total population in a region, the larger the potential market that will exist. Inaddition, the composition of a population in terms of age and sex will also influence the potential demand for specific products. For example, if a company wishes to market disposable nappies abroad, the number of women in a particular target market who are of child-bearing age is an important influence on the potential demand for that product.In effect, demographic factors such as literacy levels serve to stratify the total population into two different segments - those people who are likely to be potential consumers and those who are not.An overall increase in population size is therefore relevant to potential demand. Stratification of the overall market by demographic characteristics also helps to identify significant changes in potential marketing opportunities. For example, the ageing of the post-War 'baby-boomers' is creating a

growing worldwidemarket for products and services geared to affluent and middleincome families. Competitive and complementary products The current size and future growth of a potential market can be meaningfully evaluated only in relation to the share of the market, which a company can reasonably hope to attain. This, in turn, requires that you assess both existing competitors in the foreign market place as well as potential competitors. In order to effectively analyse competition, you need to focus on a number of structural and behavioural determinants of competition, including barriers to entry and exit, the number of competitors, the goals and capabilities of competitors, and the state of evolution of the industry concerned.The size and distribution of firms will have an important bearing on competitive conditions in the industry concerned. For example, competition in an industry made up of a number of large, well-financed firms islikely to be different from the competition in an industry made up of many medium-sized, expansion-minded firms. In evaluating the potential rivalry from substitute products, you need to consider the goalsand objectives of the different competitors, as well as their competitive strengths and weaknesses. Thus,large but relatively complacent firms may offer less competition than smaller, expansion-minded firmsmay. Since the export firm is often operating (or contemplating operating) in unfamiliar markets, the task of identifying the likely strategies of its overseas competitors may be difficult. Competition and prices The extent of competition in the industry or sector will also influence the prices can be obtained for thegoods and/or services. For instance, the widespread availability of substitute products makes consumers quite sensitive to price differences in the market place, and this places restrictions on the prices that can becharged without losing a large share of the market. On the other hand, a scarcity of good substitutes presents an opportunity of charging higher prices without suffering a significant decrease in market share. Availability of complementary products While it is sometimes overlooked, the availability of complementary products can enhance the economic outlook for a particular product. Complementary products are goods or services used in conjunction withthe products that a company is contemplating introducing into foreign markets. For example, videocassettes are complementary to videocassette recorders. The widespread availability of complementary productsmakes the introduction of any new product in foreign markets a more attractive business opportunity.Indeed, the availability of complementary products may even be essential to the successful launch of a product. Government policies toward foreign investment The policies of foreign governments toward international trade and investment constitute one of the most important influences on competitive conditions in foreign markets. Many governments, particularly indeveloping countries, protect local producers with a combination of tariff and non-tariff barriers. enables firms already established in a particular domestic industry to maintain their share of the localmarket while charging prices substantially higher than the cost of production. Industrialized vs. developing countries A company's export marketing strategy will depend to a large extent on whether the target market is to befound in an industrialized or a developing country. Industrialized countries The terms industrialized or developed countries generally refer to the member countries of the Organization for Economic co-operation and Development (OECD) they are also often referred to as the First World(perhaps unfairly so) They include the United States, Canada, the western European countries, Japan, Australia and New Zealand. They tend on the whole to be wealthy (i.e. they have a higher per capitaincome than most other countries) and they are oriented towards a free market economy. Population growth is often stagnant and the population tends to be

an ageing one. Industrialized countries offer markets for awide range of products in the luxury and high-tech categories. Developing countries Developing countries on the other hand refer to the more than 150 African, Asian and Latin Americancountries, which are economically less advanced than the First World. Some of the characteristics of developing countries are:A low average real per capita income A high proportion of the labour force being involved in agriculture and other primary activities Low life expectancy A high rate of illiteracyA high rate of population growthIn contrast to developed countries, third world countries tend:To have serious shortages of foreign exchangeTo be more protectionists about there economies and industries than industrialized countries. (i.e. Trade isrestricted in order to protect local producers against competition from foreign produces of the same product(s), as well as to stimulate employment).Developing countries have a burgeoning youthful population and a great need for necessities at low prices.They often provide lucrative markets for services and products associated with infrastructure upgrading, particularly where development aid is available to fund certain projects. Economies in transition Since the fall of the Berlin Wall, a new category, Economies in Transition, has come about. These includemost of the former Soviet Union countries and often include South Africa. Conditions are not as bad as indeveloping countries but neither are they developed. The potential in these markets is great, as are the risks. Q3. Which are the evolving consumer segments in the market? How do they affect advertising? Ans: Consumer segments in the market: Segmentation is a means of focusing attention onto the needs of groups of customers, rather than having a"one size that fits all approach". Gordon Wyner, (2002) vice president of Mercer Management Consulting,writes that effective segmentation enables companies to allocate investment resources towards targetedcustomers that are most likely to be attracted to offers. Success is measured in terms of how well theorganisation acquires and retains profitable customers.A target market itself is a specific group of potential purchasers having needs and wants towards which organisations desire to direct their marketing efforts. The identification and analysis of target markets provides a foundation for which the appropriate marketing mix (product, pricing, promotion anddistribution) and a focused marketing strategy can be developed. The target market may be further segmented to match the particular needs of customers within that market.A Focus Marketing Strategy (FMS) is designed to address a particular segment of the marketplace, productform, or cost management process. Focus marketing, or niche marketing, is based on the concept of servinga particular group of customers in such an exceptional manner that it becomes very difficult for another party to compete it that market. Focus or niche markets commonly involve smaller market segments,however with minimal competition profit margins can be very high. Note, in addition to the terms used above, targeted marketing, focused marketing, and niche marketing areamong additional terms that are used in association with customer market segmentation. Customer market segmentation is a powerful and commonly used mechanism enabling organisations to: Divide markets into meaningful and measurable segments, which are aligned according tocustomers' needs, past behaviour, value to the organisation, or demographic profiles; Determine the profit potential of each segment by analyzing the revenue and cost impactsassociated with serving the segments; Target specific segments according to their profit potential, and to the organisation's ability toserve them in a beneficial and unique way; Better invest resources in tailored products, services, marketing, and distribution programs whichmatch the needs of targeted segments;

 Measure the performance of each segment, and to adjust the segmentation approach progressivelyas market conditions change.Customer market segmentation strategies can lead to greater profits realization. This can result through: Better communications with, and understanding of, the target market; Improved design of products and services which better fit the needs of the desired segment; Efficiencies gained through segmentation; Gaining a reputation for expertise and quality in serving specific segments of the market; Enabling the most profitable customer groups to be given special attention thus improving loyalty and retention; Enabling less profitable groups to be retained without over-investment; Enabling unprofitable groups to be handled appropriately.In summary segmentation of customer markets is used: To better match customers' needs and requirements; To enhance business profits by reaching untapped revenue streams; To provide opportunities for growth; Q4. Discuss media planning in detail. Ans: Media Planning is the process of determining how to use time and space to achieve advertising objectives. One of those objectives is always to place the advertising message before a target audience. A medium is a single form of communication (television, billboards and online media). Combining media(using TV, Radio and magazines) is a media mix. A media vehicle is a single program, magazine, or radiostation. Although these terms have specific meanings, people in the advertising industry typically use theterm media in most situations. For simplicitys sake, we use that term, too. Media planning demands the biggest portion of the advertisers budget (cost for space and time). Media planning is systematic and complex. But in fact, a media plan may be quite simple and some what haphazard. A psychotherapist operating out of his home may purchase small Yellow Pages along with amuch smaller ad in the local newspaper, when his finances permit. Thats it-say $ 590 per year on media.Even a small sporting goods store may focus on a somewhat larger directory ad, along with a print ad placed biweekly in the local newspaper. The latter is likely paid for the various manufactures whose brand she carries. Total media costs, say $2,850 per year .Regardless of whether a company is spending a few hundred dollars on one medium or millions of dollarson thousands of media alternatives, the goal is still the same: to reach the right people, at the right time ,with right message. The same principles of media planning apply. Audience Measures Used in Media Planning In the same way that a carpenter uses feet, inches and a printer and picas, the media planner uses specific measurements to evaluate media plan: groups impressions and gross rating points. Even through acarpenter is building your home, it would still be important for you to understand the jargon so that youcould discuss the project in an intelligent manner. Likewise, everyone working on an ad should understandthe language of the media planner. Gross Impression: An impression is a persons opportunity to be exposed to a program, newspaper,magazine, or outdoor location anywhere in an ad. Impressions are a measure of the size of the audience either for one media (one announcement or one insertion) or for a combination of vehicles as estimated bymedia research. If the David Letterman Show has an audience of 100,000 viewers, then each time the advertiser buys timeon that program to advertise (usually a 30-second commercial) in each of four consecutive broadcasts, thetotal viewer impressions would be 100,000 times 4, or 400,000. In practice, media planners use grossimpressions as a primary measure. Gross impressions are the sum of the audiences of all the media vehicles used during a certain span of time when multiple vehicles are used.

The summary figure is calledgross because the planner has made no attempt to calculate how many different people were in theaudience. Gross Rating Points: Gross impression figures become very large and difficult to remember. The gross rating (percentage of expose) is an easier measurement to work with because it converts the raw figure to a percentage. The sum of the total exposure potential expressed as a percentage of the audience population iscalled gross rating points (GRPs). GRPs are calculated by dividing the total number of impressions by thesize of the audience multiplying by 100.To demonstrate GRP calculations, lets revisit our David Letterman example views (total number of households with televisions, whether the sets are on or off) at that hour. The 100,000 viewers watching Letterman out of the possible 500,000 would represent 20 percent of views, or a 20.0 rating point total onfour telecasts would be 80 (20 rating X 4 telecasts). 2 Media Buying Functions Media buyers have specific skills to implement these duties. In this section, we example the most important buyer functions: providing information to media planners, selecting the media, negotiating costs,monitoring the media choices, evaluating the media choice after the campaign, and handling billing and payment Q5. How is ad-spend on a particular ad campaign decided? Explain. Ans: Evaluating Advertising Campaigns Advertising can take a number of forms, including advocacy, comparative, cooperative, and direct mail ,informational, institutional, outdoor, persuasive, product, reminder, point-of-purchase, and specialtyadvertising.1. Advocacy Advertising: Advocacy advertising is normally thought of as any advertisement, message, or public communication regarding economic, political, or social issues. The advertising campaign is designed to persuade public opinion regarding a specific issue important in the public arena. The ultimate goal of advocacy advertising usually relates to the passage of pending State or Federal legislation. Almost all non- profit groups use some form of advocacy advertising to influence the publics attitude toward a particular issue. One of the largest and most powerful non-profit advocacy groups is the American Association of Retired Persons (AARP). The AARP fights to protect social programs such as Medicare and Social Security for senior citizens by encouraging its members to write their legislators, using television advertisements to appeal to emotions, and publishing a monthly newsletter describing recent State andFederal legislative action. Other major non-profit advocacy groups include the Environmental Organization Green-peace, Mothers Against Drunk Driving (MADD), and the National Rifle Association (NRA).2. Comparative Advertising: Comparative advertising compares one brand directly or indirectly with oneor more competing brands. This advertising technique is very common and is used by nearly every major industry, including airlines and automobile manufacturers. One drawback of comparative advertising is thatcustomers have become more skeptical about claims made by a company about its competitors because accurate information has not always been provided, thus making the effectiveness of comparison advertising questionable. In addition, companies that engage in comparative advertising must be careful notto misinform the public about a competitors product. Incorrect or misleading information may trigger alawsuit by the aggrieved company or regulatory action by a governmental agency such as the Federal Trade Commission (FTC).3. Co-operative Advertising: Co-operative advertising is a system that allows two parties to share advertising costs. Manufacturers and distributors, because of their shared interest in selling the product ,usually use this co-operative advertising technique. An example might be when a soft-drink manufacturer and a local grocery store split the cost of advertising the manufacturers soft drinks; both the manufacturer and the store benefit from

increased store traffic and its associated sales. Co-operative advertising isespecially appealing to small store-owners who, on their own, could not afford to advertise the product adequately.4. Direct Mail Advertising: Catalogues, flyers, letters and post-cards are just a few of the direct mail advertising options. Direct mail advertising has several advantages, including details of information, personalization, selectivity, and speed. But while direct mail has advantages, it carries an expensive per-head price, is dependent on the appropriateness of the mailing list, and is resented by some customers, whoconsider it "junk mail."5. Informational Advertising: In informational advertising, which is used when a new product is first being introduced, the emphasis is on promoting the products name, benefits, and possible uses. Car manufacturers used this strategy when sport utility vehicles (SUVs) were first introduced.6. Institutional Advertising: Institutional advertising takes a much broader approach, concentrating on the benefits, concept, idea, or philosophy of a particular industry. Companies often use it to promote image- building activities, such an environmentally friendly business practices or new community-based programs that it sponsors. Institutional advertising is closely related to public relations, since both are interested in promoting a positive image of the company to the public. As an example, a large lumber company maydevelop an advertising theme around its practice of planting trees in areas where they have just been harvested. A theme of this nature keeps the companys name in a positive light with the general public because most people view the replanting of trees positively.7. Outdoor Advertising: Billboards and messages painted on the side of buildings are common forms of outdoor advertising, which is often used when quick, simple ideas are being promoted. Since repetition isthe key to successful promotion, outdoor advertising is most effective when located along heavily travel edcity streets and when the product being promoted can be purchased locally. Only about 1 percent of advertising is conducted in this manner.8. Persuasive Advertising: Persuasive advertising is used after a product has been introduced to customers. The primary goal is for a company to build selective demand for its product. For example,automobile manufacturers often produce special advertisements promoting the safety features of their vehicles. This type of advertisement could allow automobile manufactures to charge more for their products because of the perceived higher quality that the safety features offered.9. Product Advertising: Product advertising pertains to non-personal selling of a specific product. An example is a regular television commercial promoting a soft drink. The primary purpose of the advertisement is to promote the specific soft drink, not the entire soft-drink line of a company.10. Reminder Advertising: Reminder advertising is used for products that have entered the mature stageof the product life cycle. The advertisements are simply designed to remind customers about the product and to maintain awareness. For example, detergent producers spend a considerable amount of money eachyear promoting their products to remind customers that their products are still available and for sale.11. Point-of-Purchase Advertising: Point-of-purchase advertising uses displays or other promotional items near the product that is being sold. The primary motivation is to attract customers to the display sothat they will purchase the product. Stores are more likely to use point-ofpurchase displays if they havehelp from the manufacturer in setting them up or if the manufacturer provides easy instructions on how to use the displays. Thus,

promotional items from manufacturers who provide the best instructions or help aremore likely to be used by the retail stores.12. Specialty Advertising: Specialty advertising is a form of sales promotion designed to increase public recognition of a companys name. A company can have its name put on a variety of items, such as caps,glassware, gym bags, jackets, key chains, and pens. The value of specialty advertising varies depending onhow long the items used in the effort last. Most companies are successful in achieving their goals for increasing public recognition and sales through these efforts. Areas of Assessment of Effectiveness A meaningful measurement of the effectiveness of advertising will be possible only by divagating the total area to be covered and preparation of advertising and to the hierarchy of its possible effects. Research techniques may accordingly be applied at four stages:1. A continuous analysis of past advertising experience, in search of guidelines for an analytical framework, is a very useful first step except in the case of new advertising strategy.2. Surveys of buyer behaviour and consumer preferences are helpful in developing advertising objectivesand strategy. Such research will also be useful in monitoring changes in the target segment. 3. The third area involves pre-testing advertisements before their release. This is very important in the evaluation of advertising effectiveness. Pre-testing provides an indication of the likely acceptance of anadvertisement or a campaign by the target audience. Results of pre-testing will obviously be used for making improvements and changes as suggested by research. It will also bring forth limitations, if any, since media costs account for most of the cost advertising. A qualitative as well as quantitative aspect of evaluation of the media may also be required.4. The post-test research involves testing of the reach and impact of advertising after it has been released.Pre-production research and post-testing are complementary. The former is diagnostic and is concerned with evaluation of notice ability, recognition, recall, comprehension and behavioural changes, if any, brought about by the advertising. Pre-placement Evaluation of Advertising Although past experience and a feel for the market would always remain valuable aids for advertising executives, a systematic and methodical approach for estimating the possible effectiveness of theadvertising before its release would be a worthwhile effort and might also be helpful in avoiding possible adverse effects later.One of the first advertising decisions may require searching and screening of suitable advertising ideas.This may entail:1. Quest for new ideas or for new expressions of old ones.2. Collection of facts about what people knows or feels about a company.3. Prediction of how people will probably react to a new advertising idea.Testing of creative approaches and themes, prior to development of creative strategy, can give an earlyindication of effectiveness. Themes, product ideas, brand names, slogans and other element to be includedin an advertisement can thus be evaluated Q.6 Supreme Ad agency is thinking about setting up two separate specialized agenciesunder it. If they do so, how do you think the working of departments and integration of services will be? Will it be beneficial to the clients? Ans.: Points to be noticed while setting up of new advertising agency: Advertising is a measure of the growth of civilization and an indication of the striving of the human racefor betterment and perfection. Maslow has succinctly summed up the drive for survival and satisfaction and limits of human endeavour in his holistic, dynamic theory, which brings together several schools of thought on the subject. Maslows theory also has the advantage of experimental validity. There are five better known stages in Maslows hierarchy of needs, viz. physiological needs, safety needs, need for love and belongingness, self esteem needs and self actualization needs. There are two further goals to achieve, namely knowledge and beauty. The aspiration for knowledge arises from the need to know more and to develop greater understanding. The longing for beauty represents the ultimate in aesthetic satisfaction. Maslows hierarchy of needs may be analytically viewed as a

two dimensional paradigm. The satisfaction of physiological or safety needs, at the lower range of the hierarchy, may not be entirely devoid of the manifestation of needs of belongingness and love. For instance, a dish specially prepared for an occasion, such as an anniversary celebration, serves a dual purpose of a meal as well as a form of expression of closeness for the period concerned. Advertising has both forward and backward linkages in the process of satisfaction across the entire spectrum of needs. The explicit audience aware of the existence.