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Sean’s Certified FBLA Review Notes: Chapter 7
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07 Marketing and Operation Management
7.1 Marketing
Definition
a) Study and management of exchange relationships
b) The business process of identifying, anticipating, and
satisfying customers’ needs and wants.
c) One of the primary components of business
management and commerce.
d) Direct product to other businesses or directly to
consumers
International Marketing
a) Application of marketing principles in more than one
country, by companies overseas or across national
borders.
b) Based on an extension of a company’s local
marketing strategy, with special attention paid to
marketing identification, targeting, and decisions
internationally.
7.2 Marketing Mix
a) Includes multiple areas of focus as part of a
comprehensive marketing plan, referring to the
common classifications: Product, price, placement,
and promotion.
b) Focusing on a mix helps organizations make
strategic decisions when launching new products or
revisiting existing ones.
Product
1. Refers to a good or service that a company offers, and
should fulfill a consumer demand.
2. Type of product can also dictate how much a business can
charge for it, where they should place it, and how they
should promote it.
Price
1. The cost that consumers pay for a product.
2. Marketers must link price for the product to the real and
perceived value, but must also consider supply costs,
seasonal discounts, and competitors’ prices.
3. Business executives may raise the price to make a product
seem more luxurious, or lower it to make it more common
for consumers to try.
4. Pricing strategies include:
a. Penetration pricing: a strategy of setting a relatively
low price often supported by strong promotion to
achieve a high volume of sales. They adopt such
method because they want to use mass marketing in
order to gain a large market share, in which they can
slowly increase their price later on.
b. Market Skimming: pricing strategy of setting a high
price for a new product when a firm has a unique or
highly differentiated product with low price
elasticity.
c. Perceived-value pricing: method used in markets
where demand is known to be inelastic and a price is
placed upon the product that reflects its value.
d. Price discrimination: takes place in markets where it
is possible to charge different groups of consumer’s
different prices for the same product.
e. Loss-Leader Pricing: A product or service that is
offered at a price that is not profitable, but sold to
attract new customers or to sell additional products
and services to those.
f. Price gouging: defined as charging a price that is
higher than normal or fair (usually during times of
natural disaster or other crises).
g. Cost-plus Pricing: used by retailers, who take the
price that they pay the producers or wholesalers for
the product, and just add a percentage mark-up.
Place
a. Outlines where a company sells a product and how it
delivers the product to the market.
a. Direct selling to consumer: manufacturer-consumer
(such as Amazon.com), where the company contacts
customers directly and the products are also sent
directly.
b. Single-intermediary channel: manufacturer—
retailer—consumer. Growth in retailer size means
that it has become economic for manufacturers to
supply directly to retailers rather than through
wholesalers.
c. Two-intermediary channel: manufacturer—
wholesaler—retailer—consumer. The most common
distribution channel: for small retailers with limited
order quantities, the use of wholesalers make sense.
Buy in bulk from producers and sell smaller
quantities to numerous retailers. Wholesalers
dominate where retail oligopolies are not dominant.
Promotion
a. Communicating with actual or potential customers
b. 5 main aspects of a promotional mix:
a. Advertising:
i. Presentation and promotion of ideas,
goods, or services by an identified
sponsor.
b. Personal selling
i. A process of helping and persuading one
or more prospects to purchase a good or
service or to act on any idea through the
use of an oral presentation.
c. Sales promotion
i. Media and non-media marketing
communication are employed for a predetermined, limited time to increase
consumer demand, stimulate market
demand or improve product availability.
d. Public relations
i. Paid intimate stimulations of supply for a
product, service, or business unit by
planting significant news about it or
favorable presentations of it in the media.
7.3 Foreign Market Entry
a) Exporting: easiest and least-risky way to enter the
marketing: exports that can be direct or indirect.
b) Foreign Direct Investment (FDI): investment made
by a firm or individual in one country into business
interest located in another. Usually takes place when
an investor establishes foreign business operations or
acquires foreign business assets in a foreign
company.
c) Franchise: Domestic company enjoys the higher
control as it allows the franchise to function on its
behalf and in line with the terms and conditions of
the domestic company, McDonald’s. Disadvantages
include difficulty maintaining control or evaluating
performances over franchisees.
d) Licensing: One of the ways to globalize, where the
domestic company issues the license to the foreign
company to use the manufacturing process
trademark, patent, name of the domestic company
while facilitating the sales.
e) Joint Venture: The companies can go international
by combining with other country-based companies
with the intention to monetize their existing
relationships with the local customers. A JV is an
arrangement where parties agree to pool their
resources for the purpose of accomplishing a task.
f) Management Contract: An arrangement under which
operational control of an enterprise is vested by
contract in a separate enterprise that performs the
necessary managerial functions in return for a fee.
7.4 Ecommerce
a) Business model that lets firms and individuals buy
and sell things over the internet.
a. Business-to-Business (B2B): Both participants
are businesses, resulting in a high-volume,
high-value partnership.
b. Business-to-Consumer (B2C): Businesses
serve directly to consumers, such as Amazon,
where the needs for physical stores are
eliminated.
c. Consumer-to-Business (C2B): Consumers
originate requirements that businesses fulfill,
such as a job board where consumers place
project requirements, and companies bid for a
project.
d. Consumer-to-Consumer (C2C): Companies
such as eBay enables consumers to sell to other
consumers—a form of e-commerce also known
as C2B2C.
e. E-commerce offers the consumers the
following advantages:
i. Convenience:
a) Occurs 24 hours a day, seven days a
week: transaction costs largely
decrease.
ii. Increased Selection:
a) Stores offer a wider array of
products online than they carry in
their traditional stores.
f. Ecommerce offers the consumers the following
disadvantages:
i. Limited customer service:
a) If shopping online, you cannot
simply ask an employee to
demonstrate a particular model’s
feature in person.
ii. Lack of instant gratification:
a) When buying an item online, you
must wait for it to be shipped.
iii. Inability to touch products:
a) Images are not able to “convey the
whole story” about the item, so ecommerce purchases may not be as
satisfying.
iv. Intense competition:
a) Ecommerce businesses, although
easy to start, are tough as the
competition for online services is
steeper given that “the digital noise
is louder”.
7.5 Operational Management
a) Customer relationship management (CRM) refers to the
principles, practices, and guidelines that organizations
follow when interacting with their customers. The
ultimate goal is to enhance the customer’s overall
experience.
b) There are three stages in the CRM model:
a. Acquire: a new customer perceived value of a
superior product/service;
b. Enhance: superior customer service and crossselling/up-selling;
c. Retain: proactively identify and reward the most
loyal and profitable customers.
c) Quality Management:
a. Act of overseeing all activities that must be
accomplished to maintain a desired level of
excellence, which includes the determination of a
quality policy, creating and implementing quality
planning and assurance, and quality control and
quality improvement.
b. Total quality management (TQM) is the continual
process of detecting and reducing or eliminating
errors in manufacturing, streamlining supply chain
management, improving the customer experience,
and ensuring that employees are caught up.
d) Facility Management:
a. Encompasses a range of disciplines and services to
ensure the functionality, comfort, safety, and
efficiency of a build environment – buildings and
grounds, infrastructure, and real estate.
b. Divided into two basic areas:
i. Hard Facilities Management (Hard FM): deals
with physical assets such as plumbing, heating
and cooling, elevators.
ii. Soft Facilities Management (Soft FM): focuses
on tasks performed by people such as custodial
services, lease accounting, catering, security,
grounds keeping.
e) Inventory Management:
a. Term for goods available for sale and raw materials
used to produce goods available for sale: represents
one of the most important assets of a business
because turnover represents one of the primary
sources of revenue generation and earnings.
b. Holding inventory for long periods of time might be
disadvantageous given storage costs and the threat of
obsolescence.
c. Inventory can be valued in three ways:
i. First in—First out: cost of goods sold is based
on the cost of the earliest purchased materials,
while the carrying cost of remaining inventory
is based on the cost of the latest purchased
materials.
ii. Last in—First Out states that the cost of goods
sold is valued using the cost of the latest
purchased materials, while the value of the
remaining inventory is based on the earliest
purchased materials.
iii. Weighted average method requires valuing
both inventory and the cost of goods sold based
on the average cost of all materials bought
during the period.