acca paper f1 accountant in business phần 2 pps

Part A Business organisational structure, governance and management ~ 1b: Business organisation and structure

– departments and functions 35

1.5.2 Marketing strategy and corporate strategy

So, what is the relationship between marketing and strategic management? The two are closely linked

since there can be no corporate plan which does not involve products/services and customers.

Corporate strategic plans aim to guide the overall development of an organisation. Marketing planning is

subordinate to corporate planning but makes a significant contribution to it and is concerned with many of

the same issues. The marketing department is probably the most important source of information for the

development of corporate strategy. The corporate audit of product/market strengths and weaknesses, and

much of its external environmental analysis is directly informed by the marketing audit.

Specific marketing strategies will be determined within the overall corporate strategy. To be effective,

these plans will be interdependent with those for other functions of the organisation.

(a) The strategic component of marketing planning focuses on the direction which an organisation will

take in relation to a specific market, or set of markets, in order to achieve a specified set of objectives.

(b) Marketing planning also requires an operational component that defines tasks and activities to be

undertaken in order to achieve the desired strategy. The marketing plan is concerned uniquely with

products and markets.

Marketing management aims to ensure the company is pursuing effective policies to promote its products,

markets and distribution channels. This involves exercising strategic control of marketing, and the means

to apply strategic control is known as the marketing audit. Not only is the marketing audit an important

aspect of marketing control, it can be used to provide much information and analysis for the corporate

planning process.

The relationship between marketing and the overall strategic plan is specified in the Study Guide. The

marketing function has been highlighted by the examiner as one of particular importance for

organisational success, so it is vital that you take this topic area seriously.

1.5.3 Marketing orientation

Different organisations have different orientations towards the customer.

Orientation Description

Production orientation 'Customers will buy whatever we produce – our job is to make as many

as we can'. (Demand exceeds available supply.)

Product orientation, a variant

of production orientation

'Add more features to the product – demand will pick up'. Such firms do

not research what customers actually want.

Sales orientation Customers are naturally sales resistant so the product must be sold

actively and aggressively and customers must be persuaded to buy them.

Marketing orientation The key task of the organisation is to determine the needs, wants and

values of a target market and to adapt the organisation to delivering the

desired satisfactions more effectively and efficiently than its competitors.

Determine customer needs

Invest resources

Make product/service

Market the product/service (Profit

via customer satisfaction)

Market feedback

Determine whether product

can be made

Invest resources

Make product

Sell the product (profit via

increased turnover)

Market orientation Sales/production orientation

Exam focus

point

36 1b: Business organisation and structure ~ Part A Business organisational structure, governance and management

36 – departments and functions

1.5.4 Satisfying customer needs: the marketing mix

Before you continue, recall the Chartered Institute of Marketing's definition at the beginning of this section.

The last word is profitably. After all, customers would be absolutely delighted if you were to satisfy all their

needs for exotic holidays, caviar, champagne, private jets and so forth, for nothing. The marketing orientation

is a way of doing business that seeks to provide satisfaction of customer wants at a profit.

The marketing mix is the set of controllable variables and their levels that an organisation uses to

influence the target market. These variables are product, price, place and promotion and are known as the

4Ps.

There is thus a balance to be achieved between organisational capacity and customer requirements. This

balance is expressed in the marketing mix, which is the framework in which the customer and the

business deal with each other.

Product Place

Price Promotion

Customer

buys

satisfaction

Organisation

sells

product

Product

The product element of the marketing mix is what is being sold, whether this be widgets, power stations,

haircuts, holidays or financial advice. (A product could be a service.) Product issues include:

x Design (size, shape) x Safety

x Features x Ecological friendliness

x Quality and reliability x What it does

x Packaging x Image

The implication of the marketing orientation is that the product or service is not a 'thing' with 'features'

but, from the customer's point of view is a package of benefits, which meets a need or provides a

solution to a problem.

Core and augmented product

(a) The core product is a product's essential features. The core product of a credit card is the ability to

borrow up to a certain limit and pay off in varied instalments.

(b) Augmentations are additional benefits. Most credit cards offer travel insurance, for instance.

Marketing managers make the following distinction.

(a) Product class. This is a broad category of product, such as cars, washing machines and so forth.

This corresponds to the core or generic product identified above.

(b) Product form. This category refers to the different types of product within a product class. The

product class 'cars' may have several forms, including five-door hatchbacks, four-wheel drive

vehicles, hearses and so forth.

(c) Brand or make. This refers to the particular brand or make of the product form. For example, the

Nissan Micra, Vauxhall Corsa and Rover 100 are, broadly speaking, examples of the same product

form.

We have already identified the product life cycle. A product may be expected to go through the stages of

introduction, growth, maturity, decline and senility. A different marketing approach is appropriate to

each stage, and different levels of sales and profit can be expected. Note that the product life cycle is a

model of what might happen, not a law prescribing what will happen. In other words, not all products go

through these stages or even have a life cycle.

Marketing personnel do not decide how the product appears. Production and design staff must also be

consulted.

Key term

Part A Business organisational structure, governance and management ~ 1b: Business organisation and structure

– departments and functions 37

Place: distribution

Place covers two main issues.

(a) Outlets. Where products are sold, for example in supermarkets, shops.

(i) For most consumer goods, this involves one or more intermediaries, such as wholesalers,

and then retailers.

(ii) Direct distribution occurs when a firm runs its own shops or, via mail order, uses the

postal service to bypass intermediaries.

(b) Logistics

Even where intermediaries are used, a manufacturer still has to distribute products to wholesalers

and retailers. Logistics is the management of to warehouses, storage and transportation.

Promotion: marketing communications

Promotion in the marketing mix includes all marketing communications, by which the public knows about

the product or service.

Promotion is traditionally the main responsibility of marketing personnel, and is their most visible role.

Promotion is intended to stimulate the potential customer through four behavioural stages.

x Awareness of the product

x Interest in the product

x Desire to buy

x Action: an actual purchase (AIDA)

Some types of promotion

x Advertising: newspapers, TV, cinema, internet web-sites

x Sales promotion: money-off coupons, 'two for the price of one' offers

x Direct selling by sales personnel

x Public relations: crisis management, obtaining favourable press coverage

Price

Products have to be sold at a price which meets the organisation's profit objectives. Pricing is a very

practical matter and important part of marketing work.

(a) The price element of the mix itself covers the basic price, discounts, credit terms and interest free

credit.

(b) Price is influenced by demand and the product's stage in its life cycle.

(i) Penetration pricing: a low price is charged to persuade as many people as possible to buy

the product in its early stages.

(ii) Skimming: prices are set to cream off the highest level of profits even though this restricts

the number of people able to afford the product.

(c) Price is also part of the image of the product: rightly or wrongly, a high-priced product is often

assumed to be of better quality than a cheaply priced product. A high price also conveys an image

of exclusivity.

(d) Price is a weapon against competitors.

Service marketing

In addition, for services (eg hospital care, air travel) there are three more Ps.

(a) The people who deliver the service (eg smiling or surly staff).

(b) The processes by which the service is delivered (eg queuing systems at Disneyworld).

(c) The physical evidence of the service (such as a glossy brochure).

38 1b: Business organisation and structure ~ Part A Business organisational structure, governance and management

38 – departments and functions

Question Marketing concept

'An accounts department is not making goods and selling them and so does not need the marketing

concept.' Is this a fair comment?

Answer

No.

(a) The accounts department supplies information to various other parts of the organisation. Providing

information is its service, and the other parts of the organisation are, effectively, its customers.

(b) An accounts department deals with customers all the time, especially credit customers: after all it

sends out the bills and collects the money. As its activities are directly involved with customers, it

must take the marketing philosophy on board, too.

1.5.5 The ideal marketing mix

The ideal marketing mix is one which holds a proper balance between each of these elements.

(a) One marketing activity in the mix will not be fully effective unless proper attention is given to all the

other activities. For example, if a company launches a costly promotion campaign which

emphasises the superior quality of a product, the outlay on advertising, packaging and personal

selling will be wasted if the quality does not live up to customer expectations.

(b) A company might also place too much emphasis on one aspect of the marketing mix, and much of

the effort and expenditure might not be justified for the additional returns it obtains. It might for

example, place too much importance on price reductions to earn higher profits, when in fact a

smaller price reduction and greater spending on sales promotion or product design might have a

more profitable effect.

1.6 Administration

In many organisations administrative functions are carried out at head office as much as is possible. When

this is the case, the administration function is said to be centralised. A centralised administration

department involves as many administrative tasks as possible being carried out at a single central

location.

1.6.1 Advantages of a centralised administration office

(a) Consistency – for example the same account codes are likely to be used no matter which part of

the organisation submits an invoice. Everyone uses the same data and information.

(b) It gives better security/control over operations and it is easier to enforce standards.

(c) Head office is in a better position to know what is going on.

(d) There may be economies of scale available, for example in purchasing computer equipment and

supplies.

(e) Administration staff are in a single location and more expert staff are likely to be employed. Career

paths may be more clearly defined.

1.6.2 Disadvantages of a centralised administration office

(a) Local offices might have to wait for tasks to be carried out.

(b) Reliance on head office. Local offices are less self-sufficient.

(c) A system fault or hold-up at head office will impact across the organisation.