Friday, March 25, 2011

Which are the determinants of the price elasticity? Explain in brief.


The determinants of the price elasticity are :

1. Availability of close substitutes

Goods with close substitutes tend to have more elastic demand because it is easier for consumers to switch from that good to other. For example, butter and margarine are easily substitutable.

By contrast, because eggs are a food without a close substitute, the demand for eggs is less elastic than the demand for butter.

2. Necessities versus Luxuries

Necessities tend to have inelastic demands, whereas luxuries have elastic demands.

Of course, whether a good is a necessity or a luxury depends not on the intrinsic properties of the good but on the preferences of the buyer. For avid sailors with little concern over their health, sailboats might be a necessity with inelastic demand and doctor visits a luxury with elastic demand.

3. Definition of the Market

The elasticity of demand in any market depends on how we draw the boundaries of the market. Narrowly defined markets tend to have more elastic demand than broadly defined markets because it is easier to find close substitutes for narrowly defined goods. For example, food, a broad category, has a fairly inelastic demand because there are no good substitutes for food. Ice cream, a narrower category, has a more elastic demand.

4. Time Horizon  :

Goods tend to have more elastic demand over longer time horizons. When the price of gasoline rises, the quantity of gasoline demanded falls only slightly in the first few months. Over time, however, people buy more fuel efficient cars, switch to public transportation, and move closer to where they work. Within several years, the quantity of gasoline demanded falls substantially.

Economists compute the price elasticity of demand as the percentage change in the quantity demanded divided by the percentage change in the price. That is,



Price            Percentage change in quantity demanded
elasticity  =    - - -  - - - - - - - - - -  -
of demand             Percentage change in price



e.g. suppose that a  15 percent increase in the price of an ice cream cone causes the amount of the ice cream to fall by 30%, the elasticity of demand is calculated as follows :


Price            30
elasticity  =    - - -   =  2
of demand        15

In this example the elasticity is 2, reflecting the change in the quantity demanded in proportionately twice as large as the change in price.

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What is Integrated Marketing?


The marketer’s task is to devise marketing activities and assemble fully integrated marketing programs to create, communicate, and deliver value for consumers. McCarthy classified these activities as marketing mix tools of four broad kinds, which he called the four Ps of marketing:

i.              Product,
ii.             Price,
iii.            Place, and
iv.           Promotion.

The particular marketing variables under each P are shown below :



Marketers make marketing mix decisions for influencing their trade channels as well as their final consumers. Once they understand these groups, marketers make or customize an offering or solution, inform consumers recognizing that many other sources of information also exist set a price that offers real value, and choose places where the offering will be accessible.
Two Key themes of integrated marketing are that
 (1) Many different marketing activities communicate and deliver value and 
(2) When coordinated, marketing activities maximize their joint effects.

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Thursday, March 24, 2011

What is a mission statement and how to Define the Corporate Mission?


Ans : An organization exists to accomplish something: to make mobile phones, make cars, manage finance, provide hospitality services , and so on. These objectives may change over a period of time, to take advantage of new opportunities or respond to new market conditions.

To share their purpose of existence, Organization Develop mission statements. It is shared with all those who help in accomplishment like managers, employees, and (in many cases) customers. A clear, thoughtful mission statement provides employees with a shared sense of purpose, direction, and opportunity.

Mission statements are at their best when they reflect a vision, an almost “impossible dream” that provides a direction for the company for the next 10 to 20 years. Sony’s former president, Akio Morita, wanted everyone to have access to “personal portable sound,” so his company crated the Walkman and portable CD player.

Like organizations, individuals can also use Mission statements to help guide and direct their efforts towards fulfilling their life purpose, setting and achieving goals.

Good mission statements have following major characteristics.:

1. They focus on a limited number of goals.

2. The Mission statements stress the company’s major policies and values. They narrow the range of individual discretion so that employees act consistently on important issues.

3. They define the major competitive spheres within which the company will operate.

**          ***          ****
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Saturday, March 19, 2011

Explain the Holistic Marketing Concept?

The holistic marketing concept is based on the development, design, and implementation of marketing programs, processes, and activities that recognizes their breadth and interdependencies. Holistic marketing recognizes that “everything matters” in marketing and that a broad, integrated perspective is often necessary.

Holistic marketing is thus an approach that attempts to recognize and reconcile the scope and complexities of marketing activities. The  four broad components characterizing holistic marketing are:

i. Relationship marketing,

ii. Integrated marketing,

iii. Internal marketing, and

iv. Performance marketing.

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What is Total Marketing Orientation?

Narver and his colleagues argue that more advanced, high level innovation is possible if the focus is on customers’ latent needs. Narver calls this a proactive marketing orientation.

Companies such as 3M, Hewlett Packard, and Motorola have made a practice of researching latent needs through a “probe and learn” process.

Companies that practice both a reactive and a proactive marketing orientation are implementing a total market orientation and are likely to be the most successful.

What are the functions of CMO?

There are five key functions for a Chief Marketing Officer (CMO )in leading marketing within the organization:

1. Strengthening the brands
2. Measuring marketing effectiveness
3. Driving new product development based on customer needs
4. Gathering meaningful customer insights
5. Utilizing new marketing technology.


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Wednesday, March 16, 2011

Profit Addition through CFO

All CFOs view profitability as a central part of their existing jobs, still they are not viewed as the person getting profit to the company.  The CFOs need to restructure their role in the organization. For this objective, CFOs must go beyond broad, departmental performance measures to build grassroots profitability management processes into their companies' core management activities. This task has three key components.

First and foremost, the effective CFO needs to develop a systematic understanding of the company's baseline profitability through profit mapping.

This will reveal

1.Areas of high profitability, of
2.Low profitability, and
3.Negative profitability

Second, building a set of ongoing organizational processes for profitability management is a critical CFO job. i.e. integrating profit map information into day-to-day jobs throughout the company.

Third, transition management from the existing compartmentalized system to the dynamic integrated operational system.

Together, these can lead to major increases in revenues, profits, and cash flow of the company with the existing infrastructure  and not with any major capital investments.

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Tuesday, March 15, 2011

Basic Principles of Economics.

The ten basic principles of Economics are as follows. First four of these are related to individuals, next three are related to producers and last three to the governments:


1. People Face Trade Offs
2. The Cost of something is what you give up to get it.
3. Rational people think at the margin
4. People respond to the incentives
5. Trade can make everyone better off
6. Markets are usually a good way to organize economic activity
7. Governments can sometimes improve market outcomes
8. A country’s Standard of living depends on its ability to Produce Goods and Sevices
9. Prices Rise when the Government Prints too much Money
10. Society Faces a Short run Trade off between inflation and unemployment.

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Friday, March 4, 2011

Redefining Strategy Through Logo

The consumers or brand fans most of the time accept change of logo as a mark of change, yet sometimes they fail to react positively. Result – like GAP, the brand has to resurrect the old logo. PepsiCo's Tropicana re-branding expedition had also met with a similar fate.

The reaction and involvement of brand followers of GAP on internet through face book and twitter opened a new avenue to involve consumers in the brand. Airtel tried this by inviting them to name the logo like Nike's Swoosh and Michelin's Bibendum.

The logo is the first identity that comes across the consumers. It is the face of the company. Hence, rebranding it has its own dangers. Still, the marketers have to do it some times. The reasons can be:

1. A need to inject vitality and youthfulness in to the brand (the colour in the Godrej logo).
2. Make it contemporary and more importantly connectable (Café Coffee Day's dialogue box logo);
3. Diversification and brand extensions (Starbucks removed the word coffee from its logo),
4. Expansions into new geographies (Airtel, Mahindra & Mahindra),
5. A change in the strategy of company.(Dell, American Express and Arvind)
6. Ventures in to new businesses (Videocon) and
7. In some cases re-branding happens when companies' try to draw attention.

The iconic Apple logo didn't always have bite. The first logo depicted Sir Isaac Newton under an apple tree. The changed identity may not find immediate acceptance by all. If it is well thought off and connect connects with the consumers then it becomes an integral part, like the current logo of Apple.

According to Young Kim, creative director, Siegel+Gale, "Re-branding is not just about changing a logo. It has to be strategic." Re-branding fails if enough time has not been spent on planning and communicating the reason for the change, both internally and externally.

Some companies use a rebranding exercise as a catalyst to refresh their manifesto, recharge their employees and boost trade sentiments. Such initiatives unless supported by deeper intent which has to be long-term impact on product, promise and experience — would come through as superficial changes which do not have any enduring values.

Indian companies see the logo as a quick fix. They want to be more contemporary, cooler and youthful. But they do not go through real transformation to change the culture and align the organisation to support what the logo is meant to convey.

A logo is the ultimate and most visible manifestation of a brand, the picture that is supposed to say a thousand words, and evoke a thousand conversations conducive for the brand's existence, acceptance and growth.

The logo is an influential branding instrument and can turn on a range of human emotions. But a logo change is certainly no more a private affair, it needs a lot of research.

First, correctly estimate the equity in a pre-existing logo, and sometimes go as far as looking at the different parts of the identity in isolation and decide which parts still have relevance and which do not.

Understanding and developing a logo is both art and Science.

• The art of a logo is about the personality reflected through iconology, colour, fonts, shapes spaces within. The art is in the feeling and emotion and surprise associated with a mark.

• The science is about reflecting facts, logic & messaging. The science behind the development of a logo is part research — the mark needed to create an impact and also part design, to shape an idea in a distinctive way.

Both have to work in tandem — and in sync to work for the brand. It can be as simple as a unique colour, type treatment, or even a symbol. But this must be applied in context with the audience's culture.

The two successful transformations have been of the Café Coffee Day and British Petroleum (BP). Café Coffee Day changed its logo to an open dialogue box to position itself to a social hub. British Petroleum (BP) for example understood that using the colours of green and yellow would signal environmental sustainability and help change the perception of the company.

The colour of the logo plays an important part both in its appeal and communication. Each colour has its own significance.

1. Yellow and black is the most readable (scientifically proven) combination — highway signs are done in this combination mostly.

2. Blue is vast, calming, and relaxing and is known to create a connect with expertise, precision, technology and efficacy, hence brands in blue are likely to become believable quickly.

3. Pink and orange evoke certain taste-buds and are generally great for creating a multi-sensorial experience just through colour.

Old Airtel Logo
4. Red colour is supposed to be exciting, aggressive, and passionate and therefore evokes a subconscious emotional response from the viewer. Red stimulates and engages the most.

The colours keep changing as brands and markets evolve. So when the over 110 years old brand Godrej decides to add vigour to itself, they kept the logo intact and added colour — Green for Harmony, Blue for the imagination and technology and Ruby for Passion and Dynamism.

But as far as branding is concerned the king of all colours is Red. A brand in red has the advantage of being noticed and registered in the minds of receivers. But, if the brand fails to create distinction in form or shape (or typography), it would get lost in the red ocean. Red needs black or white to contain it and create distinction.

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