MoM Complete Summary

EFM Academy Summary: Essentials of contemporary management, Gareth R. Jones, Jennifer M. George / Marketing Real People, Real Choices, Solomon / Marshall / Stuart

Author: Kathrin Khler 1

Essentials of Contemporary Management

Chapter 1 The Management Process Today

What is Management? Management is the planning, organizing, leading and controlling of human and other resources to achieve organizational goals efficiently and effectively Achieving high performance: a mangers goal

- Organizational performance is a measure of how efficiently and effectively managers

use resources to satisfy customers and achieve organizational goals. - Efficiency is a measure of how well or how productively resources are used to achieve

goals; o Organizations are efficient when the amount of input resources or the amount of

time needed to produce a given output of goods or services is minimized - Effectiveness is a measure of the appropriateness of the goals that managers have selected

for the organization to pursue and of the degree to which the organization achieves its goals

o Organizations are effective when appropriate goals are chosen and achieved

Low efficiency High efficiency High effectiveness A product that the

customer want, but that is too expensive for them to buy

A product that customers want at a quality and price that they can afford

Low effectiveness A low-quality product that customers do not want

A high-quality product that customers do not want

Managerial Functions are planning, organizing, leading and controlling how well managers perform these functions determines how efficient and effective their

organizations are Planning is a process that managers use to identify and select appropriate goals and course of action Three steps in the planning process are:

1. deciding which goals the organization will pursue 2. deciding what courses of action to adopt to attain these goals 3. deciding how to allocate organizational resources to attain those goals



The outcome of planning is a strategy, a cluster of decisions concerning what organizational goals to pursue, what actions to take, and how to use resources to achieve goals Organizing is a process used to establish a structure of working relationships that allows to interact and cooperates to achieve organizational goals

The outcome of organizing is the creation of an organizational structure, a formal system of task and reporting relationships that coordinates and motivates members so that they work together to achieve organizational goals determines how an organizations resources can be best used to create goods and services Leading is articulating a clear vision for organizational members to follow and energizing and enabling organizational members so that they understand the part they play in achieving organizational goals Leadership depends on the use of power, influence, vision, persuasion, and communication skills to coordinate the behaviours of individuals and groups so that their activities and efforts are in harmony and to encourage employees to perform at a high level. Controlling is evaluating how well an organization is achieving its goals and take action to maintain or improve performance Types of Managers Organizations employ three types of managers: first-line managers, middle managers, and top managers grouped into departments (or functions) A department (e.g. manufacturing, accounting..) is a group of people who work together and possess similar skills or use the same kind of knowledge, tools or techniques to perform their jobs Levels of management

First-line managers (or supervisors)

o Responsible for the daily supervision of the nonmanagerial employees who perform many of the specific activities necessary to produce goods and services

o Work in all departments or functions Middle managers

o Supervising first-line managers o Responsible for finding the best way to organize human and other resources to

achieve organizational goals



o Help first-line managers and nonmanagerial employees to find better ways to use resources to reduce costs or improve customer service

o Makes decisions about the production of products and service Top managers

o Responsible for the performance of all departments ( cross-departmental responsibility)

o Establish organizational goals o Decide how different departments should interact o Monitors performance of middle managers

Chief executive officer (CEO) is a companys most senior and important manager, the one whom all other top managers report Creates a smoothly functioning top-management team, a group composed of the

CEO, the COO, and the department heads most responsible for helping achieve organizational goals

Chief operating officer (COO) is often used to refer to the top manager who is being

groomed to take over as CEO

together are responsible for developing good working relationships among the top managers of various departments

The lower that managers positions are in the hierarchy, the more time the managers spend leading and controlling first-line managers or nonmanagerial employees

Recent changes in managerial hierarchies Tasks and responsibilities of managers at different levels have been changing dramatically in recent years global competition advances in new information technology (IT) and e-commerce Restructuring and Outsourcing Restructuring involves the use of information technology to downsize an organization or

to shrink its operations by eliminating jobs of large numbers of top, middle, or first-line mangers and nonmanagerial employees

Outsourcing involves contracting with another company, usually in a low-cost country abroad, to have it perform an activity the organization previously performed itself

o Promotes efficiency by reducing costs and by allowing an organization o make better use of its remaining resource

Empowerment and self-managed teams two steps to reduce costs and improve quality: empowerment of a companys workforces by using powerful new software programs to

expand employees knowledge, task, and responsibilities creation of self-managed teams groups of employees given responsibility for

supervising their own activities and for monitoring the quality of the goods and services they provide



o teams input results of their activities in computers, so middle managers have immediate access to what is happening

o first-line managers act as coaches or mentors, provide advice and guidance, and help teams find new ways to perform their tasks more efficiently

IT and Managerial Roles and Skills A managerial role is a set of specific task that managers are expected to perform because of their position in an organization Managerial roles identified by Mintzberg Henry Mintzberg reduced to 10 roles the thousands of specific tasks that managers need to perform as they plan, organize, lead and control organizational resources grouped the ten roles into three broad categories: decisional, informational, and

interpersonal

Entrepreneur developing innovative goods and services or expanding markets

Disturbance Handler dealing with both internal and external crises of the organization

Resource Allocater sets budgets

Decisional

Negotiator works with other organizations to establish agreements

Monitor evaluates managers and takes corrective action Disseminator informs workers about changes in the internal

and external environment

Informational

Spokesperson informs the local community about the organizations activities

Figurehead explains the organizations goals to employees Leader provides an example for employees to follow

Interpersonal

Liaison coordinates the work of managers in different departments

Being a manager Being a manager often involves acting emotionally and relying on gut feelings. Quick, immediate reactions to situations rather than deliberate thought and reflection are an important aspect of managerial action Managerial skills Conceptual skills are demonstrated in the ability to analyze and diagnose a situation and to distinguish between cause and effect



Human skills include the ability to understand, alter, lead, and control the behavior of other individuals and groups. The ability to communicate, to coordinate, and to motivate people and to mold individuals into a cohesive team, distinguishes effective from ineffective managers Technical skills are the job-specific knowledge and techniques required to perform an organizational role

- effective managers need all three kinds of skills - the term competencies is often used to refer to the specific set of skills, abilities, and

experiences that gives one manager the ability to perform at a higher level than other managers

Challenges for Management in a Global Environment Four main challenges stand out for managers in todays world: Building a competitive advantage, maintaining ethical standards, managing a diverse workforce, and utilizing new information systems and technologies. Building a competitive advantage

Increasing efficiency -- reducing the resources needed to produce goods Increasing quality -- total quality management (TQM) Increasing speed, flexibility, and innovation Increasing responsiveness to customers -- employees need to be trained to be responsive

to customer needs Maintaining ethical and socially responsible standards Avoiding bribes and other unethical behaviour Managing a diverse workforce Treating employees in a fair and equitable manner that does not discriminate based on age, gender, race, religion, sexual preference, or income level.




Chapter 2 Values, Attitudes, Emotions and Culture: The Manager as a Person

Enduring Characteristics: Personality traits Personality traits: Enduring tendencies to feel, think, and act in certain ways The Big Five personality traits Effectiveness is determined by a complex interaction between the characteristics of managers (including personality traits) and the nature of the job and the organization they are working in.

(1) Extraversion is the tendency to experience positive emotions and moods and feel good about oneself and the rest of the world

+ (extroverts) sociable, affectionate, outgoing and friendly (introverts) less inclined toward social interactions, less positive outlook

(2) Negative affectivity is the tendency to experience negative emotions and moods, feel distressed, and be critical of oneself and others

+ Feel angry and dissatisfied and complain about their own and others lack of progress

Not tend to experience many negative emotions, moos, and are less pessimistic and critical of themselves and others

(3) Agreeableness is the tendency to get along well with other people + Likeable, tend to be affectionate, and care about other people Distrustful of others, unsympathetic, uncooperative, and even at times

antagonistic (4) Conscientiousness is the tendency to be careful, scrupulous, and preserving

+ Organized and self-disciplined Lack direction and self-discipline

(5) Openness to experience is the tendency to be original, have broad interest, be open to a wide range of stimuli, be daring, and take risks

+ Likely to take risks, be innovative in planning and decision making Less prone to take risks, more conservative in planning and decision making

Other personality traits that affect managerial behavior Locus of control

Belief in how much control people have over what happens to people and around them Internal locus of control is the tendency to locate responsibility for ones fate

within oneself External locus of control is the tendency to locate responsibility for ones

fate in outside forces and to believe that ones behaviour has little impact on outcomes



Self-esteem

Is the degree to which individuals feel good about themselves and their capabilities

Needs for achievement, affiliation and power Need for achievement is the extent to which individuals have strong desire to

perform challenging tasks well and to meet personal standards for excellence Need for affiliation is the extent to which individuals are concerned about

establishing and maintaining good interpersonal relations, being liked, and having the people around them get along with each other

Need for power is the extend to which individuals desire control or influencing others

Values, Attitudes, and Moods and Emotions capture how managers experience their jobs as individuals

- values describe what managers are trying to achieve through work and how they think they should behave

- attitudes capture their thoughts and feelings about their specific jobs and organizations - moods and emotions encompass how managers actually feel when they are managing

Values: terminal and instrumental

A terminal value is a personal conviction about lifelong goals or objectives often lead to the formation of norms, informal rules of conduct

An instrumental value is personal conviction about desired moods of conduct or ways of behaving

Attitudes collection of feelings and beliefs job satisfaction is the collection of feelings and beliefs that managers have about their

current job + like their jobs, are being fairly treated, believe their jobs have many desirable

features and characteristics satisfied managers be more likely to got to the extra mile for their organization

or perform organizational citizenship behaviours (OCBs), behaviours that are not required of organizational members but that contribute to and are necessary for organizational efficiency, effectiveness, and gaining a competitive advantage

organizational commitment is the collection of feelings and beliefs that managers have about their organization as a whole + believe in what their organizations are doing, are proud of what these organizations

stand for, and feel high degree of loyalty towards their organization

Moods and emotions



affect the behavior of managers and all members of an organization

- A mood is a feeling or state of mind - Emotions are more intense feelings than moods, often directly linked to whatever

caused the moods, and are more short-lifed Emotional Intelligence is the ability to understand and manage ones own moods and emotions and the moods and emotions of other people Organizational Culture comprises the shared set of beliefs, expectations, values, norms, and work routines that influence how members of an organization relate to one another and work together to achieve organizational goals Managers and organizational cultures

managers play a particularly important part in influencing organizational culture founders also play an important role Benjamin Schneider developed a model that helps to explain the role that founders

personal characteristics play in determining organizational culture attraction-selection-attrition (ASA) framework, explains how personality may

influence organizational culture The role of values and norms in organizational culture Values of the founder

- founders of an organization can have profound and long-lasting effects on organizational culture

- founders set the scene for the way cultural values and norms develop because their own values guide the building of the company

- subordinates imitate the style of the founder and transmit their values and norms to their subordinates

Socialization Over time, organizational members learn from each other which values are important in an organization and the norms that specify appropriate and inappropriate behaviours Organizational socialization is the process by which newcomers learn an organizations values and norms and acquire the work behaviours necessary to perform Ceremonies and rites formal events that recognize incidents of importance to the organization as a whole and to specific employees



Most common rites that organizations use to transmit cultural norms and values to their members are:

- rites of passage determines how individuals enter, advance within, or leave the organization

- rites of integration build and reinforce common bonds among organizational members - rites of enhancement let organizations publicly recognize and reward employees

contributions and thus strengthen their commitment to organizational values - stories and languages

stories about organizational heroes and villains and their actions provide important clues about values and norms

characteristic slang or jargon that people use to frame and describe events provides important clues about values and norms

Culture and managerial action Culture influences the way managers perform their four main functions:

1) planning 2) organizing 3) leading 4) controlling




Chapter 5 Decision Making: Learning, Creativity, and Innovation

The Nature of Managerial Decision Making Decision making is the process by which managers respond to the opportunities and threats that confront them by analyzing the options and making determinations, or decisions, about specific organizational goals and courses of action

- Decision making in response to opportunities occurs when managers search for ways to improve organizational performance to benefit customers, employees, and other stakeholder groups

- Decision making in response to threats occurs when events inside or outside the organization are adversely affecting organizational performance and managers are searching for ways to increase performance

Programmed and nonprogrammed decision making

Programmed decision making is a routine, virtually automatic process

- decisions that have been made so many times in the past that managers have developed rules or guidelines to be applied when certain situations inevitably occur

- managers do not need to repeatedly make new judgements about what should be done Nonprogrammed decision making is required for nonroutine decisions

- made in response to unusual or novel opportunities and threats - occurs when there are no ready-made decision rules - situation is unexpected or uncertain - make decisions by

intuition, feelings, beliefs, and hunches that come readily to mind, require little effort and information gathering, and result in on-the-spot decisions

reasoned judgement, decisions that take time and effort to make and result from careful information gathering, generation of alternatives, and evaluation of alternatives

The classical model is prescriptive, which means that it specifies how decisions should be made

- condition to use the classical model is that once managers recognize the need to make a decision, they should be able to generate a complete list of alternatives and consequences and make the best choice

- assumes that managers have access to all the information they need to make the optimum decision, which is the most appropriate decision possible in light of what they believe to be the most desirable future consequences for the organization

The administrative model by March and Simon



is an approach to decision making that explains why decision making is inherently uncertain and risky and why managers usually make satisfactory rather than optimum decisions Bounded rationality

human decision-making capabilities are bounded by peoples cognitive limitations that is, limitations in their ability to interpret, process, and act on information

describes the situation in which the number of alternatives a manager must identify is so great and the amount of information so vast that it is difficult for the manager to even come close to evaluating is all before making decisions

Incomplete information information is incomplete because the full range of decision-making alternatives is unknowable risk and uncertainty

risk is present when managers know the possible outcomes of a particular course of action and can assign probabilities to them

when uncertainty exists, the probabilities of alternative outcomes cannot be determined and future outcomes are unknown

ambiguity ambiguous information is information that can be interpreted in multiple and

often conflicting ways time constraints and information costs

managers have neither the time nor the money to search for all possible alternative solutions and evaluate all the potential consequences of them

Satisficing exploring a limited sample of all potential alternatives

Steps in the Decision-Making Process

1) Recognize the need for a decision 2) Generate alternatives 3) Evaluate alternatives

(1) Legality (2) Ethicalness (3) Economic feasibility (4) Practically

4) Choose among alternatives 5) Implement the chosen alternative 6) Learn from feedback

(1) Compare what actually happened to what was expected to happen as a result of the decision

(2) Explore why any expectations for the decision were not met (3) Derive guidelines that will help in future decision making

Group Decision Making Group decision making is superior to individual decision making in several respects

- choices of alternatives are less likely to fall victim to the biases and errors



- able to draw on the combined skills, competencies, and accumulated knowledge of group members and thereby improve ability to generate feasible alternatives and make good decisions

- allows to process more information and to correct one anothers errors - probability that the decision will be implemented successfully increases - groups often take longer than individuals to make decisions

The perils of groupthink

Groupthink is a pattern of faulty and biased decision making that occurs in groups whose members strive for agreement among themselves at the expense of accurately assessing information relevant to a decision

- embark on a course of action without developing appropriate criteria to evaluate alternatives

- pressures for agreement and harmony within a group have the unintended effect of discouraging individuals from raising issues that run counter to majority opinion

Devils advocacy

is a critical analysis of a preferred alternative to ascertain its strengths and weaknesses before it is implemented The devils advocate critiques and challenges the way the group evaluated alternatives and chose one over the others

Diversity among decision makers

Bringing together managers of both genders from various ethnic, national, and functional backgrounds broadens the range of life experiences and opinions that group members can draw on as they generate, assess, and choose among alternatives Organizational Learning and Creativity - organizational learning is the process through which managers seek to improve

employees desire and ability to understand and manage the organization and its task environment so that employees can make decisions that continuously raise organizational effectiveness

- a learning organization is one in which managers do everything possible to maximize the potential for organizational learning to take place

- at the heart of organizational learning is creativity, the ability of a decision maker to discover original and novel ideas that lead to feasible alternative courses of action

- when new and useful ideas are implemented in an organization, innovation takes place Creating a learning organization

1. develop personal mastery 2. build complex, challenging mental models 3. promote team learning



4. build shared vision 5. encourage system thinking

Promoting individual creativity People must be given the opportunity and freedom to generate new ideas Creativity results when employees have an opportunity to experiment, to take risks, and to make mistakes and learn from them

Promoting group creativity To encourage creativity at the group level, organizations can make use of group problem-solving techniques that promote creative ideas and innovative solutions Brainstorming is a group problem-solving technique in which mangers meet face-to-face

to generate and debate a wide variety of alternatives from which to make a decision; main reason for loss of productivity in brainstorming appears to be production blocking, which occurs because group members cannot always simultaneously make sense of all the alternatives being generated, think up additional alternatives, and remember what they were thinking

Nominal group technique is often used to avoid production blocking; provides a more structured way of generating alternatives in writing and gives each manager more time and opportunity to come up with potential solutions

Delphi technique is a decision making technique in which group members do not meet face-to-face but respond in writing to questions posed by the group leader




Chapter 6 Planning, Strategy, and Competitive Advantage

The Nature of the Planning Process Planning is a process that managers use to identify and select appropriate goals and courses of action for an organization.

- Organizational plan results from planning process and details goals of the organization and specifies how managers intend to attain these goals

- Cluster of decisions and actions to achieve the goals is strategy - Planning is goal-making and strategy-making process - Planning is three step activity:

1. Determining the organizations mission and goals Mission statement (=broad declaration of an organizations overriding

purpose Intended to identify an organizations products and customers and

to distinguish organization from competitors

2. Formulating strategy analyzing the current situation, then develop strategies to attain goals

and mission 3. Implementing strategy

decision how to allocate resources and responsibilities required

Levels of Planning

division a business unit that has its own set of managers and functions or departments and competes in a distinct industry

1. Corporate level -- top management

- corporate-level plan -- top managements decisions pertaining to the organizations mission, overall strategy and structure

- corporate- level strategy -- a plan that indicates in which industries and national markets an organization intends to compete

2. Business (division) level -- business units that compete in an industry - business-level plan -- divisional managers decisions pertaining to divisions

long-term goals, overall strategy and structure - business-level strategy -- a plan that indicates how a division intends to compete

against rivals in an industry 3. Department (functional) level -- manufacturing, R&D, marketing, etc.

- functional-level plan -- functional managers decisions pertaining to the goals that they propose to pursue to help the division attain its business-level goals



- functional-level strategy -- a plan that indicates how a function intends to archive its goals.

Who plans?

Corporate level top management Business level divisional managers Department level department managers

Time horizons of plans Long-term plan -- five or more years Intermediate plan -- one to five years Short-term plan -- up to one year Rolling plan (updated every yearchanging environment) -- extends over five years or

more

Standing plans and single-use plans standing plans used in situations in which programmed decision making is

appropriate o policy general guide to action o rule formal, written guide to action o standard operating procedures written instruction describing the exact series

of actions that should be followed

single-use plans developed to handle nonprogrammed decision making in unusual situations

o programs integrated sets of plans for achieving certain goals o projects specific action plans created to complete various aspects of a program

Why planning is important

1. gets managers to participate in decision making about appropriate goals and strategies 2. gives the organization a sense of direction and purpose 3. helps coordinating managers of different functions and divisions to ensure that all pull

in the same direction 4. can be used to control managers performance

Scenario planning The generation of multiple forecasts of future conditions followed by an analysis of how

to respond effectively to each of those conditions; also called contingency planning



Determining the Organizations Mission and goals is the first step of the planning process Defining the business

1. Who are our customers? 2. What customer needs are we satisfying? 3. How are we satisfying customer needs?

Establishing major goals

Once the business is defined, managers must establish a set of primary goals to which the organization is committed. Although goals should be challenging, they should be realistic. Moreover, the time period in which a goal is expected to be achieved should be stated

Formulating strategy analyzing the current situation and then develop strategies to accomplish a mission and

achieve goals SWOT analysis = planning exercise to identify the organizations

- internal strengths (S) - internal weaknesses (W) - external opportunities (O) - external threats (T)

The five forces model by Michael Porter helps managers isolate particular forces in the external environment that are potential threats

The level of rivalry among organizations in an industry o The more that companies compete against one another for customers, the lower

is the level of industry profits The potential for entry into an industry

o The easier it is for companies to enter an industry, the more likely it is for industry prices and therefore industry profits to be low

The power of suppliers o If there are only a few suppliers of an important input, then suppliers can drive

up the prices of that input, and expensive inputs result in lower profits for the producer



The power of customers o If only a few large customers are available to buy an industrys output, they can

bargain to drive down the price of that output producers make lower profit

The threat of substitute products o Companies that produce a product with a known substitute cannot demand high

prices for their products keeps their profits low

Formulating Corporate-level Strategies are plans of action concerning which industries and countries an organization should invest its resources in to achieve its mission and goals (1) concentrating on a single business

Focusing on one single business or industry

(2) diversification Related diversification entering a new business in order to create a competitive advantage in one of the

organizations existing businesses Unrelated diversification entering a new industry that are not related to the organizations current businesses

(3) internal expansion global strategy sell the same standardized product in each national market in which it competes and use

same basic marketing approach multidomestic strategy customize products and marketing strategies to specific national conditions

choosing a way to expand internationally there are four basic ways to operate in the global environment o importing and exporting o licensing and franchising licensing = company (licenser= allows foreign organization (licensee) to take charge

of both manufacturing and distributing one or more of its product in the licensees country in return for a negotiated fee

franchising = selling to a foreign organization the rights to use a brand name and operating know-how in return for a lump-sup payment and share of the profits

o strategic alliances an agreement in which managers share their organizations resources and know how

with a foreign company, and the two organizations share the rewards and the risks of starting a new venture

o wholly owned foreign subsidiaries



investigation in establishing production operations in a foreign country independent of any local direct involvement

(4) vertical integration ... is the corporate-level strategy through which an organization becomes involved in

producing its own inputs (backward vertical integration) or distributing and selling its own outputs (forward vertical integration)

Formulating Business-Level Strategies by Michael Porter There are two basic ways of increasing the value of an organizations products: differentiating the product to add value or lowering the costs of value creation Low cost strategy Focusing the energy of all the organizations departments or functions on driving the organizations costs down below the costs of its rivals to gain a competitive advantage Differentiation strategy Focusing all the energies of the organizations departments or functions on distinguishing the organizations products from those of competitors on one or more important dimensions (e.g. product design, quality ) Focused low-cost and focused differentiation strategies Focused low-cost strategy

- serving only one or a few segments of the overall market and aim to make their organizations the lowest-cost company serving that segment

Focused differentiation strategy

- serving just one or a few segments of the market and aim to make their organization the most differentiated company serving that segment

Formulating Functional-Level Strategies Functional-level strategy is a plan of action to improve the ability of an organizations functions to create value. There are two ways in which functions can add value to an organizations products:

1. Functional managers can lower the costs of creating value so that an organization can attract customers by keeping its prices lower than its competitors prices

2. Functional managers can add value to a product by finding ways to differentiate it from the products of other companies

Planning and Implementing Strategy



After identifying appropriate strategies, managers have to put those strategies into action:

1. Allocating responsibility for implementation of plans 2. Preparing detailed actions plans that specify how strategy will be implemented 3. Establishing a timetable for implementing the plans 4. Allocating resources needed to implement the plans 5. Holding individuals and groups responsible for achieving the goals of the plan


Chapter 9 Motivation

The Nature of Motivation Motivation may be defined as psychological forces that determine the direction of a persons behaviour (=many possible behaviours that a person could engage in) in an organization, a persons level of effort, and a persons level of persistence (= whether people keep trying or give up) in the face of obstacles

Intrinsically motivated behaviour -- the motivation comes from doing the work for its own sake

Extrinsically motivated behaviour -- the behaviour is based on the rewards (social or material), not from the behaviour itself

People can be either intrinsically or extrinsically motivated or both. Outcome is anything a person gets from a job or oranization. Input is anything a person contributes to his/her job or organization. Expectancy Theory Expectancy theory (Vroom) assumes that workers believe that high effort will lead to high performance and that high performance will lead to desired outcomes. Expectancy -- the degree to which effort will result in a certain level of performance Instrumentality -- the degree to which a certain level of performance will lead to desired outcomes Valence -- the desirability of each outcome to the worker Bringing it all together the theory assumes that high motivation results from high expectancy, high instrumentality, and high valence Need theories



A need is a requirement for survival and well-being. Maslows Hierarchy of Needs All people try to satisfy five basic needs:

- physiological needs food, water, shelter (lowest-level) - safety needs security, stability, safe environment - belongingness needs social interaction, friendship, love - esteem needs to feel good about oneself, to be respected etc - self-actualization.needs to realize ones full potential (highest level)

The lowest level of unsatisfied needs motivates behaviour; once this level of needs is satisfied, a person tries to satisfy the needs at the next level. Only one level of needs is motivational at a time. Herzbergs Motivator-Hygiene Theory Motivator needs -- related to the nature of the work itself (challenge, autonomy, responsibility, growth and development, a sense of accomplishment) Hygiene needs -- related to the context in which the work is performed (working conditions, pay, job security, relationships with co-workers, type of supervision) For motivation/high job satisfaction motivator needs must be met. McClellands Needs for Achievement, Affiliation and Power need for achievement - personal standards for excellence need for affiliation - concern for good interpersonal relationships need for power - the desire to control/influence others

Equity Theory Equity theory concentrates on peoples perceptions of the fairness of their work outcomes relative to their work inputs. Equity -- exists when a person perceives that his outcome/input ratio is equal to that of a referent Inequity -- a lack of fairness exists when a persons outcome/input ratio is perceived as not equal to that of a referent Underpayment inequity -- a persons outcome/input ratio is perceived as less than that of a referent Overpayment inequity -- a persons outcome/input ratio is perceived as greater than that of a referent Ways to restore equity: reduce ones working hours, change ones perception of his own or the referents inputs or outcomes



Motivation is highest when as many people as possible in an organization perceive that they are being equitably treated their outcomes and inputs are in balance. Goal-Setting Theory Goal-setting theory focuses on identifying the types of goals that are most effective in producing high levels of motivation and performance and explaining why goals have these effects. To stimulate high motivation and performance, goals must be specific and difficult. Specific goals are often quantitative (e.g. serve 150 customers per day); difficult goals are hard but not impossible to attain. People often develop action plans (strategies, timetables, schedules) to reach them. Learning Theories Learning is a relatively permanent change in knowledge or behaviour as the result of practice or experience. Operant conditioning theory (B.F. Skinner) People learn to do behaviours that lead to desired consequences or learn not to do behaviours that lead to undesirable consequences. (All behaviour is controlled/determined by its consequences) Positive reinforcement is giving people outcomes they desire when they perform organizationally functional behaviour. (pos. Verstrkung) Negative reinforcement is eliminating or removing undesired outcomes when people perform organizationally functional behaviours. (neg. Verstrkung) Identify the right behaviours for reinforcement: choose behaviours over which subordinates have control and which contribute to organizational effectiveness Extinction is to eliminate whatever is reinforcing negative behaviours. Punishment is administering a negative consequence when an undesirable behaviour is performed Social learning theory Motivation results from rewards and punishments and also from the individuals thoughts and beliefs. Vicarious learning is becoming motivated by watching another person perform a behaviour and being positively reinforced for doing so Self-reinforcement are desirable outcomes that people give to themselves for good performance. Self-efficacy is the individuals belief about his ability to perform a behaviour successfully.



Pay and Motivation Merit pay plan is a compensation plan that bases pay on performance. Basing Merit Pay on Individual, Group or Organizational Performance Salary increase or Bonus? In comparison to salary increases bonuses tend to have more motivational impact for at least three reasons:

- the absolute level of the salary is based largely on factors unrelated to current performance

- a current salary increase may be affected by other factors in addition to performance, such as cost of living increases etc

- because organizations rarely reduce salaries, salary levels tend to vary less than performance levels do

Bonus levels can be reduced when an organizations performance lags and they can be linked directly to performance and vary from year to year and employee to employee employee stock option is a financial instrument that entitles the bearer to buy shares of an organizations stock at a certain price during a certain period of time or under certain conditions. Examples of merit pay plans - Piece-rate pay -pay is based on the number of units produced by each worker - Commission pay -pay is based on a percentage of sales (e.g. real estate brokers) - Scanlon Plan - cost-savings accomplished are shared with the workers



Marketing Real People, Real Choices

Chapter 1 Welcome to the World of Marketing: Creating and Delivering Value

The Value of Marketing Marketing is an organizational function and a set of process for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders Marketing Is About Meeting Needs Stakeholders are buyers, sellers, investors in a company, community residents, and even citizens of the nations where goods and services are made or sold in other words, any person or organization that has a stake in the outcomes A Consumer is the ultimate user of a good or service. The Marketing Concept is a management orientation that focuses on identifying and satisfying consumer needs to ensure the organizations long-term profitability. Need: The recognition of any difference between a consumers actual state and some ideal or desired state. the specific way a need is satisfied depends on an individuals history, learning experiences,

and cultural environment. Want: The desire to satisfy needs in specific ways that are culturally and socially influenced. Demand: Customers desire for products coupled with the resources to obtain them.



Benefit: The outcome sought by a customer that motivates buying behavior that satisfies a need or want. A market consist of all the consumers who share a common need that can be satisfied by a specific product and who have the resources, willingness, and authority to make the purchase Marketing Is About Creating Utility Utility refers to the sum of the benefits we receive from using a product or service.

- Form utility: transforming raw materials into finished products - Place utility: making products available where customers want them - Time utility: storing products until they are needed - Possession utility: allowing the consumer to own, use, and enjoy the product

Marketing Is About Exchange Relationships Exchange occurs when something is obtained for something else in return at least two people/organizations are involved, each must have sth the other wants What Can Be Marketed? Popular culture consists of the music, movies, sports, books, celebrities, and other forms of entertainment that the mass market consumes Marketing messages often communicate myths, stories containing symbolic elements that express the shared emotions and ideas of a culture A product is a tangible (sichtbar) good, service, idea, or some combination of these that satisfies consumer or business customer needs through the exchange process; a bundle of attributes including features, functions, benefits, and uses. Consumer Goods and Services Consumer goods are the tangible products that individual consumers purchase for personal or family use. Services are intangible products that we pay for and use but never own.

The consumer is looking to obtain some underlying value, such as convenience, security,

or status, from a marketing exchange. Business-to-Business Goods and Services Business-to-business marketing is the marketing of goods from one organization to another Goods bought by individuals or organizations for further processing or for use in doing

business are called industrial goods E-commerce is the buying or selling of goods and services electronically, usually over the internet. Not-for-Profit Marketing



Not-for-profit organizations: Organizations with charitable, educational, community, and other public service goals that buy goods and services to support their functions and to attract and serve their members. Many not-for-profit organizations like museums, zoos, and even churches practice the

marketing concept. The Marketing of Value Value refers to the benefits a customer receives from buying a product or service. The value proposition is a marketplace offering that fairly and accurately sums up the value that will realize if he or she purchases the product or service. Value from the Customers Perspective Value of a product to a customer often goes beyond its function Relationship between product and customer results in a successful value proposition

Value from the Sellers Perspective Calculating the value of a customer

lifetime value of a customer show how much profit companies expect to make from a particular customer, including each and every purchase she will make from them now and in the future; to calculate lifetime values, companies estimate the amount the person will spend and then subtract what it will cost the company to maintain this relationship

Providing value to stakeholders by creating a competitive advantage a firm has a competitive advantage when it is able to outperform the

competition, providing customers with a benefit the competitor cannot to gain a competitive advantage:

1) identify the companys distinctive competency, their capability that is superior to that of its competition

2) turn distinctive competency into a differential benefit, that sets a product apart from competitors products by providing something unique that customers want

effective product benefits must be both different from the competition and be

wanted by customers Adding value through the value chain A value chain refers to a series of activities involved in designing, producing,

marketing, delivering, and supporting any product; each link in the chain has the potential to add or remove value from the product the customer eventually buys

The main activities of value chain members include the following: bringing in materials to make the product (inbound logistics) converting the materials into the final product (operations) shipping out the final product (outbound logistics) marketing the final product (marketing and sales)



servicing the product/customer (service)

Marketing as a Process Marketing Planning is a big part of the marketing process The marketing plan is a document that describes the marketing environment, outlines the marketing objectives and strategy, and identifies who will be responsible for carrying out each part of the marketing strategy A mass market consist of all possible customers in a market regardless of the differences in their specific needs and wants marketing planning becomes a matter of developing a basic product and a single strategy

for reaching everyone A market segment is a distinct group of customers within a larger market who are similar to one another in some way and whose needs differ from other customers in the larger market. the chosen market segment becomes the firms target market on which it focuses its

marketing plan and toward which it directs its marketing efforts a products market position is how the target market perceives the product in

comparison to competitors brands Marketings Tools: The Marketing Mix In determining the best way to present a good or service for consumers consideration, marketers have many decisions to make, so they need many tools. The marketers strategic toolbox is called the marketing mix, which consists of the tools that are used to create a desired response among a set of predefined consumers. The elements of the marketing mix work hand in hand. They are also called the 4 Ps: Product (includes the design and packaging of a good, as well as its physical features and

any associated services, such as free delivery)

Price is the assignment of value or the amount the consumer must exchange to receive the offering.

Promotion includes all the activities marketers undertake to inform consumers about their products and to encourage potential customers to buy these products

Place refers to the availability of the product to the customer at the desired time and location.

When Did Marketing Begin? The Evolution of a Concept The production era



Production Orientation, which works best in sellers market when demand is greater than supply because it focuses on the most efficient ways to produce and distribute products

The selling era Selling Orientation means that management views marketing as a sales function, or a

way to move products out of warehouses to reduce inventory. The Consumer Era Consumer Orientation: A management philosophy that focuses on ways to satisfy the

customers needs and wants. Total Quality management (TQM): A management effort to involve all employees from

the assembly line onward in continuous product quality improvement. The New Era New era orientation means building long-term bonds with customers rather than

merely selling them stuff today Customer-Relationship Management (CRM), which involves systematically tracking

consumers preferences and behaviors over time in order to tailor the value proposition as closely as possible to each individuals unique wants and needs

Focusing on accountability - measuring how much value is created by marketing activities


Chapter 2 Strategic Planning and the Marketing Environment: The Advantage is Undeniable

Business Planning: Seeing the Big Picture Business Planning is an ongoing process of making decisions that guide the firm both in the short term and for the long haul (Strecke)

- identifies and builds on a firms strengths - helps managers at all levels make informed decisions in a changing business

environment - means that an organization develops objectives before it takes action

A business plan includes the decisions that guide the entire organization or its business unit A marketing plan is a document that describes the marketing environment, outlines the marketing objectives and strategies, and identifies how the strategies will be implemented, monitored, and controlled. The Three Levels of Business Planning Planning occurs at three levels: strategic, functional and operational.



Strategic Planning is the managerial decision process that matches the firms resources

and capabilities to its market opportunities for long-term growth. define the firms purpose and specify what the firm hopes to achieve in the next

few years Functional Planning gets its name because it is accomplished by the various functional

areas of the firm, such as marketing, finance, and human resources decision process that concentrates on developing detailed plans for strategies and

tactics fort short term that support an organizations long-term strategic plan Operational Planning focuses on the day-to-day execution of the functional plans and

includes detailed annual, semiannual, or quarterly plans

Strategic planning Functional planning Operational planning

Who does it? Top level corporate management

Top functional-level management

Supervisory managers

What they do? 1. define the mission 2. evaluate the internal

and external environment

3. set organizational or SBU objectives

4. establish the business portfolio

5. develop growth strategies

1. perform a situation analysis

2. set marketing objectives

3. develop marketing strategies

4. implement marketing strategies

5. monitor and control strategies

1. develop action plans to implement the marketing plan

2. use marketing metrics to monitor how the plan is working

Strategic Planning: Driving a Firms Success Because relying on one product can be risky, companies become multi-product with self-contained divisions organized around products or brands Strategic business units individual units representing different areas of business within a

firm that are each different enough to have their own mission, business objectives, resources, managers, and competitors

Step1: Define the mission

A mission statement is a formal document that describes the organizations overall goal and what it hopes to achieve in terms of its customers, products, and resources

Step2: Evaluate the Internal and External Environment internal environment means all the controllable elements inside a firm that influence

how well the firm operates can identify a firms strengths and weaknesses

external environment consists of elements outside the firm that my affect it either positively or negatively can identify a firms opportunities and threats includes consumers, government regulations, competitors, the overall economy,

and trends in popular culture Managers often summarize the results of a situation analysis into a format called SWOT

analysis



Step3: Set Organizational or SBU goals

Organizational objectives are a direct outgrowth of the mission statement and broadly identify what the firm hopes to accomplish within the general time frame of the firms long-range business plan.

If the firm is large enough to have separate SBUs, each SBU will have its own objectives that are relevant to its operations.

Step4: Establish the Business Portfolio

make decisions about how to best allocate resources across the SBUs to ensure growths for the total organization

each SBU has its own focus within the firms overall strategic plan, and each has its own target market and strategies for reaching its objectives

each SBU has its own profit center is responsible for its own costs, revenues, and profits

the range of different businesses that a large firm operates is called business portfolio a diversified business portfolio reduces the firms dependence on one product line or

one group of customers to assess the potential of a firms business portfolio, management uses portfolio

analysis ( helps to decide which SBUs should receive more or less of the firms resources, and which of them are most consistent with the firms overall mission)

BCG growth-market share mix is one model to assist management in the portfolio analysis process (developed by the Boston Consulting Group)

focuses on determining the potential of a firms existing successful SBUs to generate cash that the firm can then use to invest in other businesses

Stars

have dominant market share in high-growth market stars generate large revenues, but also require large amounts of funding to keep

up with production and promotion demand Cash Cows

have a dominant market share in low-growth market not much opportunities for new companies, competitors dont often enter a

market



firms usually milk cash cows of their profits to fund the growth of other SBUs Question Marks

(problem children) SBUs with low market shares in fast-growth markets Firm has failed to compete successfully

Dogs small share of a slow-growth market businesses that offer specialized products in limited markets that are not likely to

grow quickly Step5: Develop Growth Strategies Marketer use the product-market growth matrix to analyze different growth strategies Market penetration strategies seek to increase sales of existing products to existing

markets Market development strategies introduce existing products to new markets Product development strategies create growth by selling new products in existing

markets Diversification strategies emphasize new products to new markets to achieve growth

Strategic planning includes developing the mission statement, assessing the internal and

external environment (SWOT), setting objectives, establishing the business portfolio, and developing growth strategies.

Functional Planning: From Strategic Planning to Marketing Planning Strategic plan does not provide details about how to reach the objectives that have been set. Thus, marketers must develop functional plans (i.e., marketing plans). The Four Ps of the marketing mix remind us that success firms must have viable products at prices consumers are willing to pay, the means to get the products to the place consumers want to buy, and a way to promote the products to the right consumers. Steps in marketing planning are quite similar to those of strategic planning: Step1: Perform a Situation Analysis

conduct an analysis of the marketing environment SWOT analysis

Step2: Set Marketing Objectives develop specific marketing objectives

more specific to the firms brands, sizes, product features, and other marketing mix-related elements

business objectives guide the entire firms operations, while marketing objectives state what the marketing function must accomplish if the firm is ultimately to achieve its overall objectives

Step3: Developing Marketing Strategies

make marketing strategies make decisions about what activities they must accomplish to achieve the marketing objectives

deciding which markets to target and actually developing the marketing mix strategies (4 P's) Selecting a target market



The target market is the market segment selected because of the firms belief that its offerings are most suited to winning those customers

Firm assesses the potential demand and decides it has the distinctive competencies that will create a competitive advantage in the marketplace among target consumers

Developing market mix strategies identify how marketing will accomplish its objectives in the firms target markets Product strategies Pricing strategies Promotion strategies Distribution strategies

Step4: Implement Marketing Strategies

Once a plan is developed, its time to get to work and make it successful Step5: Monitor and Control Marketing Strategies

Marketers must have some mean to determine whether they are meeting their marketing objectives Control this process entails measuring actual performance, comparing this

performance to the established marketing objectives, and then making adjustments to the strategies or objectives on the basis of this analysis

Operational Planning: Day-to-Day Execution of Marketing Plans Operational plans focus on the day-to-day execution of the marketing plan

cover a shorter period of time than either strategic plans or marketing plans include detailed directions for the specific activities to be carried out, who will be

responsible for them, and timelines for accomplishing the task Analyzing the Environment INTERNAL ENVIRONMENT

much of the internal environment of a firm is related to its corporate culture corporate culture is made up of the values, norms, and beliefs that influence the

behavior of everyone in the organization if firm is totally focuses on economic profit management attitudes will be profit

centered EXTERNAL ENVIRONMENT The Economic Environment state of the economy in which a firm does business is vital to the success of its

marketing plans the overall pattern of changes or fluctuations of an economy is called the business cycle

all economies go through cycles of prosperity (Erfolg, Wohlstand), recession (Konjunkturrckgang), and recovery (Besserung)



a severe recession is a depression, a period in which prices fall but there is little demand because few people have money to spend and many are out of work

inflation occurs when prices and cost of living rise while money loses its purchasing power because the cost of goods escalates; dollar incomes may increase, but real income what the dollar will buy decreases because goods and services cost more

business cycle is important because it effects customer purchasing behavior The Competitive Environment Analyzing the market and competition

Before developing strategies, a firm hast to know who its competitors are and what they are doing

Many firms use competitive intelligence (CI) activities, a process of gathering and analyzing publicly available information about rivals

Successful CI means learning all about a competitors new products, its manufacturing, or the management styles of its executives firm uses information to develop superior marketing strategies

Competition in the microenvironment means the product alternatives from which members of a target market may choose we can think of these choices at three different levels:

i. at a broad level, many marketers compete for consumers discretionary income: the amount of money people have left after paying for necessities such as housing, utilities, food, and clothing understanding all the alternatives consumers consider for their

discretionary income ii. 2nd type of choice is production competition, in which competitors

offering different products attempt to satisfy the same consumers needs and wants

iii. 3rd type of choice is brand competition, in which competitors offering similar goods or services vie for consumers dollars

Competition in the macroenvironment

marketers need to understand the big picture the overall structure of their industry four different structures describe different amounts of competition

i. a monopoly exists when one seller, the only supplier of a particular product, is able to control the price, quality and supply of that product

ii. in a oligopoly, there are a relatively small number of sellers, each holding a substantial market share, in a market with many buyers

iii. in monopolistic competition, there are many sellers who compare for buyers in a market; each firm offers a slightly different product, and each has a small share of the market

iv. perfect competition exists when there are many small sellers, each offering basically the same good or service; in such industries, no single firm has a significant impact on quality, price or supply

The Technical Environment technology is an investment firm cannot not afford to make



it provides many firms with important competitive advantages changes in technology can dramatically transform an industry

The Legal Environment refers to the local, state, national, and global laws and regulations that affect businesses legal and regulatory controls can be prime motivators for many business decisions

The Sociocultural Environment include the characteristics of the society, the people who live in that society, and the

culture that reflects the values and beliefs of the society first step to understand the characteristics of a society is to look at its demographics

statistics that measure observable aspects of a population, such as size, age, gender, ethnic group, income, education, occupation, and family structure

understanding consumers attitudes, beliefs, and ways of doing things in different part of the country or world is especially important to firms when developing marketing strategy these differences in values often explain why marketing efforts that are a big hit in

one country can flop in another To summarize, business planning, a key element of a firms success, occurs in several

different stages. Strategic Planning takes place at both the corporate and the SBU level in large firms and in a single stage in smaller businesses. Marketing planning, one of the functional planning areas, comes next. Operational planning ensures proper implementation and control of the marketing plan.


Chapter 3 Think Globally / Act Ethically

Welcome to the New Era of Marketing Many manager consider social profit, which is the net benefit both the firm and society

receive from a firms ethical practices and socially responsible behavior New Era firms create both economic and social profit through commitment to ethical

business behavior, social responsibility, and quality Doing It Right: Ethical Behavior in the Marketplace ethics are rules of conduct how most people in a culture judge what is right and what

is wrong Business ethics are basic values that guide a firms behavior



These values govern decisions managers make about what goes into their products, how they are advertised and sold, and how they are disposed of

Because each culture has its own set of values, beliefs, and customs, ethical business behavior varies in different parts of the world Bribery (Bestechung) occurs when someone voluntarily offers payment to get an illegal

advantage Extortion (Erpressung) occurs when payment is extracted under duress by someone in

authority Many firms develop their own codes of ethics written standards of behavior to which

everyone in the organization must subscribe

The High Costs of Unethical Marketplace Behavior Unethical practices hurt the firm both financially and in terms of a firms reputation Consumerism: Fighting Back Consumerism is the social movement directed toward protecting consumers from harmful business practices In 1961, President John F. Kennedy outlined what became known as the Consumer Bill of Rights: The right to be safe: products should not be dangerous when used as intended The right to be informed: businesses should provide consumers with adequate

information to make intelligent product choices The right to be heard: consumers should have the means to complain or express their

displeasure in order to obtain redress or retribution from companies The right to choose freely: consumers should be able to choose from a variety of

products

Ethics in the Marketing Mix Marketing managers are responsible for determining the most ethical way to price, package, promote, and distribute their offerings to reach profit and market-share objectives Making a product safe Pricing the product fairly Promoting the product ethically

Corrective advertising, messages that clarify or qualify previous claims Puffery claims of superiority that neither sponsors nor critics of the ads can

prove are true or false Making the product available to consumers ethically

Slotting allowance - a fee paid in exchange for agreeing to place the manufacturers products on the retailers valuable shelf space

Doing It Right: A Focus on Social Responsibility



The 2nd part of social profit ist social responsibility, a management philosophy in which organizations engage in activities that have a positive effect on society and promote the public good These activities include promoting environmental stewardship (Verwaltung), engaging in

cause marketing, and promoting cultural diversity

Serving the Environment New Era firms assume a position of environmental stewardship when they make socially responsible business decisions that also protect the environment. Many firms preserve the environment by following a strategy called green marketing, which describes efforts to choose packages, product design, and other aspects of the marketing mix that are earth friendly but sill profitable. Serving Society: Cause Marketing Cause marketing is a strategy of joining forces with a not-for-profit organization to tackle a social problem Today New Era firms make a long-term commitment to tackle a social problem, such as illiteracy or child abuse Serving the Community: Promoting Cultural Diversity Cultural diversity is a management practice that actively seeks to include people of different sexes, races, ethnic groups, and religions in an organizations employees, customers, suppliers, and distribution channel partners Playing on a Global Stage The successful global business needs to set its sights on diverse markets around the world, but it needs to act locally by being willing to adapt business practices to uniqueconditions in other parts of the globe. World Trade refers to the flow of goods and services among different countries the value of all the exports and imports of the worlds nations understanding the big picture of who does business with whom is important to

marketers when they devise global strategies counter trade is a type of trade in which goods are paid for with items instead of with

cash easiest way to enter the global marketplace is by exporting



firms that export generally use the same marketing strategies wherever they do business born-global firms are companies that deliberately try to sell their products in multiple

countries from the moment they are created rather than taking usual path of developing business in their local market and then slowly expanding into other countries

first step in deciding whether and how to go global is to examine some basic market conditions: domestic demand, the market potential abroad, and a firms ability to have a competitive advantage in foreign markets

firms need to capitalize on their home countrys assets and avoid competing in areas in which they are at a disadvantage

Borders, Roadblocks, and Communities Protected Trade in some cases, a government adopts a policy of protectionism in which it enforces rules

on foreign firms designed to give home companies an advantage many government set import quotas on foreign goods to reduce competition for their

domestic industries; quotas are limitations on the amount of a product allowed to enter or leave the country; they can make goods more expensive

an embargo is an extreme quota that prohibits specified goods completely governments also use tariffs, or taxes on imported goods, to give domestic competitors an

advantage in the market place by making foreign competitors goods more expensive established after world war II, the General Agreement on Tariffs and Trade (GATT)

did a lot to reduce the problems that protectionism creates this regulatory group is now know as the World Trade Organization (WTO) through a series of trade negotiations (rounds) that set standards for how much countries

are allowed to favor their goods and services, the WTO has become a global referee for trade

Economic Communities groups of countries may also band together to promote trade among themselves and make

it easier for member nations to compete elsewhere these economic communities coordinate trade policies and ease restrictions on the

flow of products and capital across their borders the economic community in Europe is the European Union (EU) the North American Free Trade Agreement (NAFTA) is the worlds largest economic

community The Global Marketing Environment Companies that enter foreign markets need to consider how and whether to adapt local conditions in a country or region The Economic Environment Indicators of economic health



Most commonly used measure of economic health of a country is the gross domestic product (GDP), the total dollar value of goods and services a country produces within its borders in a year

A similar but less frequently used measure is the gross national product (GNP), which measures the value of all goods and services produced by a countrys individuals or organizations, whether located within the countrys border or not

Marketers also need to consider whether they can conduct business as usual in another country The economic infrastructure is the quality of a countrys distribution, financial,

and communication systems Level of economic development

Economics look past simple facts such as growth in GDP to decide which level of development a country is in

A less developed country is a country at the lowest stage of economic development In most cases, its economic base is agricultural A countrys standard of living is an indicator of the average quality and quantity of

goods and services consumed by the country A developing country is a country shifting its emphasis from agriculture to industry,

standards of living, education, and the use of technology rise A developed country boasts sophisticated marketing systems, strong private enterprise,

and bountiful market potential for many goods and services; such countries are economically advanced

The Political an Legal Environment When entering a market, a firm must carefully weigh political and legal risks Political issues

A country may impose economic sanctions that prohibit trade with another country, so access to some markets may be cut off

Internal pressures may prompt the government to take over the operations of foreign companies doing business within its borders It is called nationalization when a domestic government reimburses a foreign

company (often not for the full value) for its assets after taking it over Expropriation is when a domestic government seizes a foreign companys assets (and

that firm is just out of luck) Regulatory issues

Government and economic communities impose numerous regulations about what products should be made of, how they should be made, and what can be said about them

Local content rules are a form of protectionism stipulating that a certain proportion of a product must consist of components supplied by industries in the host country or economic community

Human rights issue Some governments and companies are vigilant about denying business opportunities to

countries that mistreat their citizens The Cultural Environment A firm needs to understand and adapt to the customs, characteristics, and practices of its citizens



Values

Every society has a set of cultural values, or deeply held beliefs about right and wrong ways to live, that it imparts to its members

In collectivist cultures (e.g., Venezuela, Greece, Pakistan, Turkey ) people tend to subordinate their personal goals to those of a stable community

In individualist cultures (e.g., GB, USA, Australia, NL, D ) consumers tend to attach more importance to personal goals, and people are more likely to change memberchips when the demands of the group become too costly

Norms and customs A custom is a norm handed down from the past that controls basic behaviors, such as

division of labor in a household Mores are customs with a strong moral overtone; they often involve a taboo, or

forbidden behavior, such as incest or cannibalism Conventions are norms regarding the conduct of everyday life

Language Language barriers can be big obstacles to marketers breaking into foreign markets

because they affect product labeling and usage instructions, advertising, and personal selling Vital to work with local people who understand the subtleties of language to avoid

the confusion that may result Ethnocentrism

The tendency to prefer products or people of ones own culture over those from other countries is called ethnocentrism

How Global Should a Global Market Strategy Be? If a firm decides to expand beyond its home country, it must make important decisions about how to structure its business ad whether to adapt its product marketing strategy to accommodate local needs Company-Level Decisions: Choosing a Market Entry Strategy Exporting

If a firm chooses to export, it must decide whether it will attempt to sell its products on its own or rely on intermediaries (Zwischenhndler) to represent it in the target country

These representatives are specialists known as export merchants who understand the local market and can find buyers and negotiate terms

Contractual agreements Licensing is an agreement in which one firm (the licenser) gives another firm (the

licensee) the right to produce and market its product in a specific country or region in return for royalties (Gebhren)

Franchising is a form of licensing that gives the franchisee the right to adapt an entire way of doing business in the host country

Strategic alliance Firms seeking an even deeper commitment to a foreign market develop strategic

alliance with one ore more domestic firms in the target country These relationships often take the form of a joint venture: a new entity owned by two

or more firms is created to allow the partners to pool their resources for common goals



Strategic alliances allow companies easy access to new markets, especially because the partnerships often bring with them preferential treatment in the partners home country

Direct investment A deeper level of commitment occurs when a firm expands internationally by buying a

business outright in the host country Direct investment allows a firm to take advantage of a domestic companys political

savvy and market position in the host country Product-Level Decisions: Choosing a Marketing Mix Strategy The famous 4 Ps may need to be modified to suit local conditions Standardization versus Localization standardization offer the same product in all markets localization customize the product so that it suits to local conditions Product Decisions A straight extension strategy retains the same product for domestic and foreign

markets A product adaptation strategy recognizes that in many cases people in different

cultures do have a strong and different product preferences A product invention strategy means a company develops a new product as it

expands to foreign markets Promotion Decisions Marketers must decide whether it is necessary to change product promotion a

foreign market Price Decisions Coasts associated with transportation, tariffs, differences in currency exchange rates,

and even bribes paid to local officials often make the product more expensive for the company to make for foreign markets than in its home country

One danger of pricing too high is that competitors will find ways to offer their products at a lower price, even if it is done illegally

Gray market goods are items manufactured outside a country and then imported without the consent of the trademark holder

Another unethical and often illegal practice is dumping, in which a company prices its products lower than they are offered at home often removing excess supply from home markets and keeping prices up there

Distribution Decision


Chapter 6 Business-to-Business Markets: How And Why Organizations Buy

Busi

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