Download 2. Selling products/services

Marketing
Marketing is a Process of defining, anticipating, creating, and fulfilling customers’ needs and
wants for products and services
Components of marketing
The components of marketing are as under
1. Customer analysis
2. Selling products/services
3. Product and service planning
4. Pricing
5. Distribution
6. Marketing research
7. Opportunity analysis
1. Customer analysis
Customer analysis is the study of consumer information. It consists of customer surveys, market
positioning strategies, customer profiles, and market segmentation strategies.
2. Selling products/services
It comprise of advertising, sales, promotion, publicity, sales force management, customer
relations and dealer relations.
3. Product and service planning
Product and service planning is combination of test marketing brand positioning, devising
warrantees, packaging, product features/options, product style, and quality.
4. Pricing
Pricing consist of all those strategies which directly benefits customers but indirectly benefited to
firms. It’s consisting of forward integration, discounts, credit terms, condition of sale, markups,
costs and unit pricing.
5. Distribution
Distribution is the distributing products to all other related parties on demands. It consists of
Warehousing, channels, coverage, retail site locations, sales territories, inventory levels and
transportation.
6. Marketing research
Marketing research is for future planning and further advancement of products and services. It
consists of Data collection, Data input, Data analysis, Support all business functions.
7. Opportunity analysis
It tell us about the opportunities exists in the environment around organization. It consists of
Assessing costs, Assessing benefits, Assessing risks, and Cost/benefit/risk analysis.
Marketing Audit
Marketing Audit is an analysis of the internal and external factors which may affect a business's
performance. It’s a comprehensive and systematic examination of a company's or business unit's
marketing environment, objectives, strategies, and activities. Normally this includes the purpose
of identifying and understanding problem areas and opportunities, and recommending a plan of
action to implement.
Marketing audit answer about these questions
•
Are markets segmented effectively?
•
Is the organization positioned well among competitors?
•
Has the firm’s market share been increasing?
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Are present channels of distribution reliable and cost effective?
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Does the firm have an effective sales force?
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Does the firm conduct market research?
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Are product quality and customer service good?
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Are the firm's products/services priced appropriately?
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Does the firm have an effective promotion, advertising, and publicity strategy?
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Are marketing planning and budgeting effective?
•
Do the firm’s marketing mangers have adequate experience and training.
Finance/Accounting
The science that describes the management, creation and study of money, banking, credit,
investments, assets and liabilities. Finance consists of financial systems, which include the
public, private and government spaces, and the study of finance and financial instruments, which
can relate to countless assets and liabilities. Some prefer to divide finance into three distinct
categories: public finance, corporate finance and personal finance. All three of which would
contain many sub-categories.
Functions of Finance/Accounting –
1. Investment decision (Capital budgeting)
2. Financing decision
3. Dividend decision
Basic Financial Ratios
Liquidity Ratios – measure the firm’s ability to come up the cash to pay for it’s near-term
obligations.

current ratio = current assets / current liabilities
o Measures firm’s ability to satisfy short-term obligations as they come due

quick ratio = (current assets – inventory) / current liabilities
o Similar to current ratio, but excludes inventory from current assets, b/c inventory
(which may be partially assembled or obsolete) is usually the least liquid asset.
Activity Ratios – measure the speed with which the firm converts various accounts into sales or
cash.

inventory turnover = cost of goods sold / inventory
o Measures how quickly a firm sells its goods

average age of inventory = 365 / turnover ratio
o Measures firm’s efficiency at selling its goods

average collection period = accounts receivable / (annual sales / 365)
o Measures firm’s ability to collect relative to its collection terms.

average payment period = accounts payable / (annual purchases / 365)
o Measures firm’s ability to pay obligations relative to their creditors’ collection
terms.

fixed asset turnover = sales / net fixed assets
o Measures firm’s efficiency in using its fixed assets

total asset turnover = sales / total assets
o Measures firm’s efficiency in use of total assets
Debt Ratios – measure extent to which firm uses money from creditors rather than stockholders
to finance operations. Financial leverage (from fixed-cost sources of financing, such as debt or
preferred stock) increases both risk and expected return of the firm’s securities.
There are two types of debt ratios:
1) Balance sheet ratios measure outstanding debt relative to other sources of financing
2) Coverage ratios (income statement) measure firm’s ability to generate sufficient cash
flow to make scheduled interest and principal payments.

debt ratio = total liabilities / total assets
o How large liabilities are in relation to the size of the firm.

assets-to-equity (A/E) ratio (aka equity multiplier) = total assets / common stock equity
(book value)

debt-to-equity ratio = long-term debt / stockholders’ equity (book value)

times interest earned ratio = earnings before interest and taxes / interest expense
o Measures relative size of interest to earnings- firm’s ability to meet contractual
interest payments.
Profitability – relate a firm’s earnings to sales, assets or equity; among most closely-watched and
widely quoted ratios.

gross profit margin = gross profit / sales
o Percentage of each sales dollar remaining after firm has paid for the cost of goods
sold.

operating profit margin = operating profit / sales
o Percentage of each sales dollar remaining after deducting costs and expenses
other than interest and taxes.

net profit margin = earnings available for common stockholders / sales
o Percentage of each sales dollar remaining after deducting all costs and expenses
(including debt and preferred stock dividends).

return on total assets (ROA) (aka return on investment) = earnings available for common
stockholders / total assets
o Management’s overall effectiveness in using the firm’s assets to generate returns
to common stockholders.

return on common equity (ROE) = earnings available for common stockholders /
common stock equity
o Return earned on the common stockholders’ investment in the firm.
Finance/Accounting Audit
An unbiased examination and evaluation of the financial statements of an organization. It can be done
internally (by employees of the organization) or externally (by an outside firm).
Its answer these questions about firms
 Where is the firm strong and weak as indicated by financial ratio analysis?
 Can the firm raise needed short-term capital?
 Can the firm raise needed long-term capital through debt and/or equity?
 Does the firm have sufficient working capital?
 Are capital budgeting procedures effective?
 Are dividend payout policies reasonable?
 Does the firm have good relations with its investors and stockholders?
 Are the firm’s financial managers experienced and well trained?
Production/Operations
Its consist of following activities
 Process
 Capacity
 Inventory
 Workforce
 Quality
1. Process
Process means the Design of facility, Choice of technology, Facility layout, Process flow
analysis, Facility location, Line balancing, and Process control.
2. Capacity
Capacity means Forecasting, Facilities planning, aggregate planning, Scheduling, Capacity
planning, and queuing analysis.
3. Inventory
Inventory consists of Raw material, Work in process, finished goods and Materials handling.
4. Workforce
Work force comprise of Job design, Work measurement, Job enrichment, Work standards, and
Motivation techniques.
5. Quality
It insures the quality of product it consists of Quality control, Sampling, Testing, Quality
assurance, and Cost control.
Production/Operations Audit
An operational audit process is the series of steps an auditor takes to evaluate the operational
activities of a given company or other organization. The process is very similar to the processes
for other forms of audits, such as the financial audit, but the operational audit process is a much
more in-depth review of the business. It usually does not focus on a single department or project,
because each department plays a role in the overall operational process and is interconnected.
 Are suppliers of raw materials, parts, and subassemblies reliable and reasonable?
 Are facilities, equipment, machinery, and offices in good condition?
 Are inventory-control policies and procedures effective?
 Are quality-control policies and procedures effective?
 Are facilities, resources, and markets strategically located?
 Does the firm have technological competencies?
SUMMARY AND EXPLANATION
The internal steps for the marketing management process needs to be fully understood to be
successful. First, you will want to know the basics within buying behavior. Find information on
marketing while conducting your research on internal audit, accounts and finance, R & D. Next,
find the marketing factors that are the best for you. Determine where your company is now
positioned in the market against your competitor. Find the competitor potencies and compare
with you in all marketing regards. Determine your objectives and your target, figure out what
you expect your product will do in the market, and determine the strategy. Develop the strategies
within the market for each area and make your plan. Determine your budget and put the plan into
motion.