Transcript BUSINESS ADMINISTRATION

BUSINESS STUDIES
Unit 1: Introduction to marketing
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Pedro Fernández Sánchez
INSTITUT Milà i Fontanals
1.1 Marketing
A. What’s marketing?
B. Importance of marketing.
C. Marketing mix.
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A. What’s marketing?
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
Detects customers’ needs and wants.

It is a management process.

Supplies customers with goods and services
to make profit (mutually beneficial).
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B. Importance of marketing.
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
sa_ _ _ _ _ _ tion.
There is a need for customer satisfaction.

sp_ _ _ _ _ _ tion.
There is a need for business specialization.

_ _ _ _ ment of an economy.
Shows the de_
development
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C. Marketing mix.


It is a combination of elements that affects
customers’ decision to buy.
The elements are the 4 Ps:
–
–
–
–
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Product.
Price.
Promotion.
Place.
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Product

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Is the good or service that a company sells.
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Price

Quantity or amount of money a customer
pays.
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Promotion

How customers are informed about the
product.
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Place

How the product will be distributed.
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BUSINESS STUDIES
Unit 2: Marketing mix
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Pedro Fernández Sánchez
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Unit 2. Marketing mix
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
2.1 Product

2.2 Price

2.3 Promotion

2.4 Place
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2.1 Product
A. Concept
B. Types of products
C. Product portfolio
D. Product life cycle
E. Packaging
F. Brand (or Trademark)
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A. Concept


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Good or service that satisfies customer’s
need and her desire to buy it.
Product differentiation is when a company
chooses features to distinguish it from others
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B. Types of products
a) Consumption goods: they satisfy people’s
needs directly. There are two types.
–
Non-durable goods: they disappear when we use
them.
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Examples:________________________________
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B. Types of products
–
Durable goods: we can use them many times.
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For example:___________________________
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B. Types of products
b) Industrial goods: they are used to make
other goods. They do not satisfy people’s
needs directly.
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For instance:___________________________
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B. Types of products
c) Services: are non-physical products or
economic activities.
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Examples:_____________________________
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ACTIVITY 3 – Classifying products
GOODS
Consumption Goods
Non-durable Durable

Wood
Toothpaste


Machine

Clock
Water


Education

Theatre ticket


Microwave
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Industrial goods Services
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ACTIVITY 3 – Classifying products
GOODS
Consumption Goods
Non-durable Durable
Industrial goods Services

Belt

Wash & Laundry
Sheets of paper



Tools

Lorry
Chalk




Restaurant Meal

Calculator
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NESTLÉ
Baby Food
Cereals
Chocolate
Dairy
Culinary &
Frozen Food
Ice creams
Coffee
Drinks
Nestlé
Chocapic
Kit Kat
La Lechera
Buitoni
Extreme
Nestcafe
Nestea
Nativa
Golden
Grahams
Crunch
Sveltesse
Litoral
Nestlé Gold
Nestlé Gold
Nesquick
Nidina
Cheerios
Caja Roja
Ideal
Solís
Maxibon
Bonka
Eko
Naturnes
Crunch
Cereals
Nestlé Noir
La Cocinera
Nestlé
Dolce Gusto
Viladrau
Pirulo
Ricoré
Dolca
After Eight
Aquarel
San Narciso
Vittel
Perrier
S.Pellegrino
Width =
8 products lines
Length =
40 products
NESTLÉ
Baby Foods
Cereals
Chocolate
Culinary &
Frozen Foods
Dairy
Ice creams
Coffee
Drinks
Nestle
Chocapic
Kit Kat
La Lechera
Buitoni
Extreme
Nescafe
Nestea
Nativa
Golden
Grahams
Crunch
Sveltesse
Litoral
Nestle Gold
Nestlé Gold
Nesquick
Nidina
Cheerios
Caja Roja
Ideal
Solís
Maxibon
Bonka
Eko
Naturnes
Crunch
Cereales
Nestlé Noir
La Cocinera
Nestlé
Dolce Gusto
Viladrau
Pirulo
Ricoré
Aquarel
Dolca
After Eights
San Narciso
Product line
Line depth =
Vittel
5 products
Perrier
S.Pellegrino
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C. Product portfolio
a) Length (of product mix): the total quantity of
goods that the company sells. It is the group
or set of product lines.
b) Width (of product mix): the number of
different products line.
c) Product line: is a set of goods with similar
characteristic.
d) Line depth: number of products in a line.
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D. Product Life Cycle (PLC)
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PRODUCT LIFE CYCLE (PLC)
S
A
L
E
S
(€
)
Product
Concept: It is the period of time from the introduction until the withdrawal of a product.
Life
Cycle
Curve
TIME (Years)
STAGES PLC
Introduction
The product is new; there are
low sales and slow growth.
There are high costs of
developing, making and
advertising the product.
Usually the product makes a
loss.
Adverts objective: Inform
customer
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Growth
Sales increase when more
customers buy the product.
The production increases
and costs fall (economies of
scale).
Competitors enter the
market when the product
starts to make a profit.
Adverts objective:
Differentiate from other
products.
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Maturity
Decline
The product reaches
maximum sales and profits.
There is more competition
until the market reaches
saturation.
Adverts objective: Maintain
or increase market share
Sales and profit fall until the
product makes a loss.
Adverts objective: Remind
customers
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E. Packaging
PRODUCTS THAT WE CAN
SELL QUICKLY AT
RELATIVELY LOW COST.
a) Importance.
 It is important because it helps to sell and to
distinguish the product (differentiates)
 More so for Fast Moving Consumer
Goods (FMCG)
 Examples of FMCG: chocolates, soft
drinks…
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E. Packaging
a) Characteristics:
BEFORE BUYING
 Easy to identify (e.g.______________)
 Attractive (encourages buying our product)
 e.g._______________
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Packaging characteristics
Inform about its content for non transparent
packaging (e.g. _________________)
AFTER BUYING
 Easy to open (e.g. _________________)
 Convenient to use (especially if we use
often) e.g. _________________________
 Ease of transportation and storage
e.g._______________)

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F. Brand (trademark)
a) Concept: is a name (pronounced), symbol,
logo (image), slogan or design that
distinguishes a seller’s goods or services in
the market.
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F. Brand (trademark)
b) Characteristics:
 Short
 Easy to remember
 Associated with product (e.g.___________)
 Sometimes we use brand to talk about
product (e.g._____________________)
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Brand Strategies
I.
II.
Global brands.
Multibrands.



Individual brands
Product line brand
Second brand
III. Own-brands.
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I. Global brands

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When the company uses the same name for
all the products. E.g. __________________
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II. Multi-brands
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Individual brands: we use a different brand
for each product. E.g. Procter & Gamble,
Henkel, Uniliver, Sara Lee
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II. Multi-brands
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Product line brand: we use the same brand
for similar products. E.g. Pascual - Zumosol
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II. Multi-brand

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Second brand: Companies with an exclusive
/ luxury brand; they want to find another
market segment (low price) to sell another
brand. E.g. Rolex - Tudor
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III. Own-brands

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When big supermarkets sell their own
products, made by other companies, at a
lower price. E.g. Dia, Mercadona, Carrefour
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2.1 Price
A. Concept
B. Fixing prices
- Market based pricing
- Cost based pricing
- Competition based pricing
C. Price strategies
- Price skimming or creaming.
- Penetration pricing
- Psychological pricing
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A. Price concept

Price tells us the money that a company can
earn selling its product (revenue).
B. Fixing prices
MARKET BASED PRICING
 It uses the market demand to calculate price.
 Demand is the quantity of goods a consumer
wants to buy.
 Supply is the quantity of goods that a
company wants to produce and sell.
Demand & Supply Law

-
-
-
The basic law of demand and supply says:
If price goes up, then demand falls and
supply increases.
If price falls, then demand goes up and
supply decreases.
At the equilibrium, demand equals supply
and we have a market price.
GRAPH: Demand - Supply Law &
Equilibrium
€10 Pe
Price (€ - Euros)
m
Supply (curve)
As price falls
As price
falls
Equilibrium (40 units, €10 )
Quantity of
demand falls
Quantity of
demand goes up
40 units (Qe)
Demand (curve)
QUANTITY (units)
B. Fixing prices
COST BASED PRICING


It uses production costs to work out
price.
It takes fixed costs and variable cost, and
adds a fixed percentage of the cost of
making the product, called mark-up.
Selling price = unitary production cost + mark-up;
production cost = fixed cost + variable cost
COST BASED PRICING: A Practical
Example

A manufacturer business has a production
unitary cost of €20/unit. Find the selling price
if the company wants to get a 15% mark-up.
DATA:
SOLUTION:
Cu = €20/unit
Selling price = Cu + Mark-up
Mark-up = 15% o/Cu
Sell. price = €20/unit + 0.15 (€20/unit)
Sell. price = €20/unit + €3/unit = €23/unit
COST BASED PRICING: Exercise

A small firm has a unitary: fixed cost of €10/unit and
a variable cost of €5/ unit. Find the selling price if the
company wants to get a 30% mark-up.
DATA:
SOLUTION:
CFu = €10/unit
Selling price = Cu + Mark-up
CVu = €5/unit
Selling price = (CFu + CVu) + Mark-up
Cu = (€10 + €5)/unit
Sell. price = €15/unit + 0.3 (€15/unit)
Mark-up = 30% o/Cu
Sell. price = €15/unit + €3.5/unit =
€18.5/unit
B. Fixing prices
COMPETITION BASED PRICING
Sets price based on competitors’ prices. There
are three possibilities:
 Similar price (for similar products’ features).
 Lower price (we earn more selling big
quantities).
 Higher price (we have a famous product or
better quality).
COMPETITION BASED PRICING
If the market has a leader (e.g. Telefónica),
Then other businesses can:
 Follow the leader (similar prices)
 Set independent price (it can provoke a price
war)
C. Price strategies

Price skimming or creaming

Penetration pricing

Psychological pricing
C. Price strategies

Price skimming or creaming: company
starts with a high price (market segment) and
reduces it later (to increase the market).
It is used for:
- products with no competitors
- new products (e.g. latest
Channel)
______________)
- fashionable products (e.g. ______________)
New Diesel jean)
- technological products(e.g. ____________)
Iphone4)
C. Price strategies

Penetration pricing: when a product has a
low initial price to enter the market.
When sales go up, the price is increased.
E.g. New
Airplane Company.
___________________)
C. Price strategies
Psychological pricing: It is based on how
customers associate a price with a feature of
a product.
TYPES:
- Regular price
- Premium prices
- Price on customers’ expectation
- Critical price point

C. Psychological pricing (TYPES)
TYPES:
 Regular price (daily used product such as
milk,
tea, sugar…)
e.g.___________________)
 Premium prices (or prestige pricing, for
luxury products; (e.g.__________________)
e.g. Ferrari limited edition)
 Price on customers’ expectation (depending
on customer satisfaction)
 Critical price point (e.g.______________)
(e.g. €99.99 or €4.95)
PRICE Mind Map (Grid)
________ ________
Supply (curve)
m
Equilibrium (40 units,€10)
€10 Pe
Price (€ - Euros)
GRAPH: Demand - Supply Law &
Equilibrium
Demand (curve)
40 units (Qe)
QUANTITY (units)
3. Promotion (or promotion-mix)
A. ADVERTISING
B. SALES PROMOTION
C. PERSONAL SELLING
D. PUBLIC RELATIONS
A. Advertisement
a)
b)
c)
d)
e)
Concept.
Basic objectives (AIDA Model).
Principles.
Advertising media.
Stages to design an advertisement
message.
Concept of Advertisement

It is a message that companies (firms) send
to inform customers and/or to persuade them
to buy a product.

It uses a channel of communication or
media so you need to pay (cost).
Basic objectives of Advertising
(AIDA Model)




A – Attention (attract customers’ attention).
I – Interest (raise customers’ interest
demonstrating advantages).
D – Desire (convince customers that our
product will satisfy their needs).
A – Action (convince customers to buy, most
important and difficult).
Principles of Advertising




Be simple (don’t make them think too much).
Be creative (your product will be different
from others).
Be repetitive (to remember the message:
slogans, songs…).
Be honest (you cannot cheat a customer
twice).
Advertising Media (I)
TYPES
PROS
TV
-Can
Radio
-It
CONS
reach a lot of people -It is very expensive
and target customers
-Good for mass-market
products
-It is profitable
is short, dynamic &
very repetitive
-Low cost
-Can
target listeners
(only sound)
-Small audience
Advertising Media (II)
TYPES
The Press
PROS
-It
is easy to target
effectively.
Poster &
-Have high visual
Billboards impact.
-Many people see
them
Internet
-Global coverage
-Low costs
CONS
-It
is silent and static.
-Only
see them for a
few seconds.
-Limited information
-Security
problems
-Great competition
Stages to design an advertisement
message
1. Market research. The business needs to know:
- If the product has a market.
- If the product raises interest for futures sales.
2. Advertisement strategies.
- Define the market segment (customers we
target).
- How much the firm wants to earn.
- Show Special qualities that the company has to
offer.
Stages to design an advertisement
message
3. Advertisement message.
- Media (the ads depend on the media we
choose), e.g. magazines play with colour.
e.g. TV plays with sound, voice, music.
- Target audience (it depends on the market
segment).
e.g. small car, low price.
B. Sales Promotion
a) Concept. Businesses use it to produce a
short-term increase in sales.
b) Reasons:
- Increase market share
- New product or new use
- Cash needs
- Stock surplus
B. Sales Promotion
c) Examples:
- Special offers (buy one get one free)
- Free gifts
- Sales (in January / July, 50% off)
- Discount vouchers (€5 off the next book
you buy)
- Free samples of the product.
C. Personal Selling
a) Concept.
–
–
There is direct contact between the
sales person and the customer.
The sales person can satisfy
customers’ needs better.
C. Personal Selling
b) Characteristics:
– Transmits the image of the
company.
– Informs, persuades the customer to
buy.
– It has a quick response.
– Sales person needs to know the
product very well.
D. Public Relations
a) Purpose. It is to improve and keep
good relations between company and
the public.
b) How?
• In charity events, sponsorships,
concerts, conferences…
D. Public Relations
c) When?
• Change the company’s image
• Update the company’s image
• The company is in a new market
• The company has been discredited
4. Place
A.
B.
C.
D.
E.
CONCEPT
FUNCTIONS
INTERMEDIARIES
CHANNELS
STRATEGIES
A. Place concept

The product needs to be at the right time, in
the right amount and in the right market.

The product usually passes through
intermediaries before arriving at the
customer (e.g. wholesalers, retailers…).
B. Place Functions
a) Transport. We need to decide lot size and
frequency to choose one. It depends on
type and price of the product. E.g. FMCG
(see packaging).
b) Store. Intermediaries buy goods in large
quantities (bulk), and then divide them into
smaller quantities  breaking bulk process.
B. Place Functions
c) Customers’ information & advice: important
to introduce a product into a new market.
C. Intermediaries
a) Types:
 Wholesalers. Buy goods from
manufacturers and sell to other wholesalers
or retailers. Types: specialised (e.g.
PLATAFORMA) and general (e.g. MAKRO)
 Retailer. They only sell to final customers
C. Intermediaries
b) Functions: (they justify their added value)
 Physical Distribution. It cuts down the
number of transactions between
manufacturers and retailers. It makes
distribution simpler.
 Financing. Wholesalers pay the total
amount for the products to the
manufacturer. This way manufacturer does
not have to wait to charge.
D. Place Channels
a) Concept: It is the route a product takes from
the producer
__________ to the consumer.
__________
b) Types:
_______
 Channel 1. Producer
 _______
Customer
(e.g.______,
(e.g.
jewellery, it is important to give
customer’s advice)
(________
______)
D. Place Channels
b) Types:
_______
_______
 Channel 2. Producer
 Retailer

Customer (e.g.
Supermarkets)
_______
(e.g.____________)

_______
_______ 
Channel 3. Producer
 Wholesaler
Retailer  Customer
(e.g. _______
FMCG –
_______(e.g.
_______
traditional distribution)
D. Place Channels
c) Alternative channels:
 E-commerce. It is becoming a more and
___________ your
more important way to distribute
__________.
products.
 Franchising. It is when a firm
____ (franchisee)
uses the business
model of another
__________________
company (franchisor). The franchisee has to
____
_____________________
pay the franchisor (e.g. Pan’s
& Company)
D. Place Channels
c) Alternative channels:
 Teleshopping. Goods are bought on the
_______ with credit
phone
card.
_____________.

_____________,
Vending machines. E.g. tobacco,
_____________,
_________...
soft-drinks, _________,
cinema, theatre…
E. Place Strategies
a) Intensive distribution.
b) Exclusive distribution.
c) Selective distribution.
A. Intensive
distribution
B. Exclusive
distribution
C. Selective
distribution
Concept
Distribution of
low priced or
impulse
purchase
products
Limits the
distribution to a
single retailer
Small number of
retailers chosen
with large
geographical
distribution
Channel
Channel 3
Product
FMCG or
impulsive
purchase
product
Examples Chocolates, soft
drinks,…
Channel 2
Channel 2
Important to give Computers,
customers’
TVs,…
advise
Bang & Olufsen, Computers:
iPod,…
Media Markt, PC
City,…
E. Place Strategies
a) Intensive distribution.
c) Selective distribution.
Strategies a) and c) require selecting an
_________, credibility
_________,
intermediary which has experience,
_________.
and is known by the target audience.
BUSINESS STUDIES
Unit 3: Merchandising
Photo: Morguefile.com
Pedro Fernández Sánchez
INTITUT Milà i Fontanals
1. Elements of merchandising.
A. CONCEPT
_____________ to a
It is a way of attracting consumers
________.
product and persuading them to buy
it.
B. POINT-OF-SALE (POS) material
___________ form of
It is the most important
merchandising.
___________________.
Examples of POS
_______
_______ and cases
Display stands
____________ in-store displays
________ or illuminated
 Moving
 ____________
Pavement models, such as palm tree in
summer
 _____________,
Wire racks, like those that store packets of
crisps
 Show _______,
cards, ______________...
posters…

Examples of POS
High quantity of products (especially
for dairy
(_________________
______________________________________)
products to show they are fresh)
(_________________________
 Pile presentation (no
need to have a perfect
___________________________________)
look, untidiness)
 Hypermarket displays (height levels 1-2-3,
_________________
_________________________,
impulse purchase products, well
known
_________,
brands…) _________________________,

POS Hypermarket displays (examples)
Height levels 3-2-1
Level 3 (eyes):
to level 1 –32%; to level 2 –20%
Level 2 (hands):
to level 1 –40%; to level 3 +63%
Level 1 (feet):
to level 2 +34%; to level 3 +78%
POS Hypermarket displays (examples)
Height levels 3-2-1