The Nature of Business and the Importance of Marketing - Essay Example

Introduction Today's markets are highly influenced by technological progress, especially in information technology. Yet, small businesses are takingthe back seat. It is necessary to expand knowledge on two distinctive things strategy and operational effectiveness. Every business strategy the he is incorporating to the readers would depend upon the nature of business, the location and definitely the country involved. Competitive strategy employed and must be properly designed, particularly to small businesses (worldwide) attempting to capture a wider market. Kotler (2005, p.191) stated out that the central question for marketers is: 'how do consumers respond to various marketing stimuli that the company might use' Kotler (2005 shares similar ideas and states that a consumer's buying behavior is influenced by cultural, social, personal, and psychological factors. Moreover, he claims that, in order to understand how consumers actually make buying decisions, three scopes have to be identified, which are who makes the buying decision, the types of buying decisions, and the steps in the buying process. This report will examine the importance of marketing to organizations in the twenty-first century. It will focus on one company, namely Mercedes Benz, and first of all show what marketing is. In addition, it will look at how Mercedes Benz uses marketing strategies and techniques. Furthermore, it will consider the reasons why marketing is essential to this organization, and how it has changed its use of marketing and how it might continue to do so in the future. In order to do this, it will be necessary to use marketing models and examples throughout. Also, a history and definition of modern marketing will be given. Next, the functions of marketing will be explained. A description of the marketing process, with particular emphasis on the development of integrated marketing strategies by organizations will also be covered. Moreover, it will state why marketing is fundamental to the successful operations of an organization. Finally, this report will outline recent changes in marketing and expected developments and challenges in the coming century, by placing particular emphasis on developments in technology and society. Use marketing models and examples throughout. It was around 1960, when marketing mix was first introduced. The concept of the marketing mix primarily revolves around marketing's four Ps, which include price, product, place and promotion (Grnroos, 1994). From then on, this basic marketing mix model remained unchallenged. It even overpowered earlier marketing models Wroe Alderson's organic functionalist approach as well as the system-oriented approaches and parameters theory advocated by Copenhagen school in Europe. Similarly, previous approaches like the commodity, functional geography-related regional and institutional schools, have long been forgotten. For a long time, the use of marketing mix has been concentrated on the simple business to customer market. For over forty years, the management paradigm of marketing mix has indeed dominated most thoughts, practice and research of marketing. As time goes, the concept of the marketing mix and the four Ps had become an irrefutable paradigm used in academic research, which in turn results to validity being taken for granted. In most parts of the marketing and academic world, researchers remain to consider the concept as the epitome of marketing truth even up to the present time. One way of using the marketing mix in generating greater understanding and communications is through the establishment of long lasting customer relationships. For years, there has been a growing interest on the study of customer relationship economics. It has been introduced by Heskett et al. (1994) that understanding the concept of market economies means the achievement of understanding the customers rather than focusing on the development of scale economies. One example cited by Reichheld (1993, p. 65) was the result of his study at MBNA, a US credit card business, wherein the integration of this extended use of the marketing mix resulted to a 5 percent increase in retention rate, which in turn provided the company a marked 60 percent increase in profit on its fifth year. Similar results from industrial studies conducted by Reichheld and Sasser (1990) were reported as well. Greater understanding and communications eventually results to the establishment of long term relationships. This is an effective use of the marketing mix as its employment enables parties, the company and its customers, to learn how to effectively interact with one another. More importantly, such extended use of marketing mix leads to the reduction of the relationship costs for the customers and the service provider or supplier. Based on the suggestions of Grnroos (1994), the relationship cost theory is characterized by the quality costs as well as the transaction costs. Applying this theory, when the relationship shared by the company and customers is mutually satisfactory, significant transaction costs can be avoided by the customers. In the same way, suppliers are able to avoid suffering needless quality costs. The marketing mix of the company is not solely focused on the knowing the needs of the customers, but the company is also extending effort in knowing its customers more through the establishment of a better customer care and consulting services. The company's marketing mix is not only on directed toward the customers. The restructuring of the HRM system can also be utilized as a provider of greater understanding and communication as its personnel will be more equipped to establish long term relation with their customers. Utilizing the company's marketing mix also results to the improvement of its reputation based on the public's perception. For instance, its efforts of showing the customers their sincerity of serving them better through their customer-oriented marketing mix, generally gives a good impression. The role of the marketing in business is indeed significant, not only for the business itself, but to its customers as well. Product place promotion & price the four P's you have to have the right product at the right price at the right place with the right promotion you have to give the right product mix to meet your target customer's needs. You have to have the correct blend of ingredients a bit like making a cake. E.g. the price should reflect the quality First a customer's buying decisions are based on psychological and economic factors. Analyses what is important to your customer. Find the key requirements meet or better still exceed these better that the competition to create a competitive advantage. Contain a history and definition of modern marketing Modern marketing can be described as the process of defining, anticipating, creating, and fulfilling customer needs and wants for product services (David, 2002). David (2002) stated that functions of modern marketing are: customer analysis; selling products/services; product and service planning; pricing; distribution; modern marketing research; and opportunity analysis. One of the strategies in customer analysis is to continually monitor present and potential customers' buying pattern (David, 2002). In selling, strategies included are modern marketing activities such as: advertising; sales promotion; publicity; personal selling; sales force management; customer relations; and dealer relations (David, 2002). Modern marketing is the craft of linking the producers (or potential producers) of a product or service with customers, both existing and potential. It is an inevitable and necessary consequence of capitalism (Knights, 1991). However modern marketing is not limited to capitalist countries. Modern marketing techniques are applied in all political systems, and in many aspects of life. Modern marketing methods are informed by many of the social sciences, particularly psychology, sociology, and economics. Modern marketing research underpins these activities. Through advertising, it is also related to many of the creative arts. Successful marketers typically have a customer orientation or focus. On the other hand, integrated modern marketing communications refers to the management concept that is designed to make all aspects of modern marketing communication such as advertising, sales promotion, public relations, and direct modern marketing work together as a unified force, rather than permitting each to work in isolation. It's a truism that organizations with more than one level of modern marketing management suffer from communications problems. This interferes with almost any measure of the organization, as well as with any corrective actions. Thus any modern marketing management effort must begin and end with communication. If those communications are effective, the organization will be better managed. Apparently, the basic trick is to assure that both the managers and workers have access to the same information. In this way, theoretically, they will be able to agree on the tasks to improve the organization, and everyone will work together in a better-coordinated way. In practice, the same incentives have to applied to managers and workers, as well, or else they develop different goals, negating the effect of the shared information. Even as late as the year 1000, villages were characterized by their agrarian, independent nature and by economic self-sufficiency. In every village attempts were made, by methods now considered crude and wasteful, to raise the necessary food supply and to produce other necessaries of existence. With the fall of the Roman Empire, trade seems to have suffered an eclipse for some centuries. Beginning with the latter part of the Middle Ages the advance from the manorial or village system to the town was rapid. The town became a place of craftsmen and traders. In this handicraft stage, skilled workers set themselves up in their homes as craftsmen, making goods to order. Enterprising craftsmen began to use apprentices and often produced a surplus which was sold at local markets or fairs (Jurkus and Willis, 2001). This resulted in the organization of markets and in the holding of fairs at periodic intervals. Craftsmen soon organized into guilds, which controlled both manufacturing and marketing by minute regulations, much to the detriment of progress in both. The domestic system, whereby the products of the craftsmen were sold by businessmen, superseded the handicraft stage. With increased protection by stronger and more stable governments, towns grew rapidly and markets gradually expanded. Toward the close of the fifteenth century a period of discoveries began. It resulted in marked improvements in maritime transportation, thereby supplying an added impetus to commerce. With the development of national governments, guilds finally outlived their usefulness, and during the early part of the sixteenth century mercantilism became the guiding principle of state policy. In brief, mercantilists argued that a country could become opulent if it sold more merchandise and services to foreigners than it bought from them (Hogg, 1993). Only in this way could it increase its stock of precious metals that was received in payment required by a "favorable balance of trade" and which, at that time, was considered the ultimate desideratum. Naturally, this movement stimulated commerce to no small degree. In the latter part of the eighteenth century the Industrial Revolution began to usher in marked improvements in form utility production. These were continued throughout the early part of the nineteenth century, but were greatly accelerated in the United States in the period following the Civil War. The domestic stage of manufacture was supplanted almost entirely by factories in which large numbers of specialized workers were employed. Elaborate steam- or motor-driven machinery replaced handicraft methods. Industry became localized, largescale output became the goal of manufacturers, and a minute division of labor began to be considered an essential prerequisite to efficient operation. It thus becomes obvious that the present middleman system is the outgrowth of changed conditions, the outcome of a growing civilization and industrial progress. As long as towns were economically self-sufficient, producer-consumer contact was feasible except for trade between countries (Hogg, 1993). As soon, however, as localized, large-scale physical production developed, and cities grew in importance, maladjustments made their appearance, marketing risks increased, and an elaborate middleman system was called into existence to bridge over the ever-widening gap that separated the consumer or business user from the manufacturer. To these factors may be added the constant pressure to increase both the scale of industrial output and production for sale instead of own use, both of which are direct results of our factory system. Even though marketing functions have long been performed and a middleman system of marketing was well established in the last century, great changes have taken place in the significance attached to marketing by all kinds of companies (Dougherty, 1996). In general, this has been a transition from emphasis on selling what a company had to the producing of goods and services that are wanted by the customers that made up the demand side of the market. In the marketing literature of the late 1950's and early 1960's, the newer emphasis has been described as the marketing concept, marketing orientation, or marketing management philosophy. The modern marketing concept (Christensen, 1997): (1) that marketing begins and ends with the needs and wants of customers, not with the goals or objectives of the business organization; (2) that marketing is a social process with many participants, not just what one organization might do; and (3) that marketing is a much broader conception than the mere selling of goods and services, having also to do with research, product and inventory planning, purchasing, physical distribution, and various facilitating services or activities. Indeed, the above quotations from recent statements by prominent company officials indicate that the business community, to a much greater extent than was formerly the case, views marketing more nearly as it has been viewed for some time in certain of the more widely accepted marketing textbooks and in many university courses on the subject. Explain the functions of marketing In order to gain a better appreciation of the role of marketing in our economy and in the everyday lives of all our people, it is necessary to obtain a clear picture or conception of marketing and its scope (Aaker and Keller, 1990). This may be done by giving consideration both to certain quantitative measures and to some basic conceptual factors that are indicative of the nature and probable extent of the marketing task. At any given time, the importance and magnitude of the marketing task may be approximated by a number of quantitative measures, including the following: Personal consumption expenditures The gross national product Volume of trade transacted Vastness of the institutional structure for the performance of marketing activities Employment in marketing, or the persons who do the job Value added by marketing In any given year, total personal consumption expenditures reflect the level of living of our people. At the same time they indicate to a large extent the magnitude of the marketing task because, except for housing, government, and certain business expenditures, they mark the end result of all economic effort including that of marketing and represent the value of goods and services currently delivered by the nation's economy to its people for use and absorption (Burn, 1993). In a sense, they also furnish a basis for judging our capacity to consume under given economic and business conditions and thus aid, in a very general way, but in a restricted sense, in measuring the marketing task. The marketing task, however, is by no means confined to the consumer area. The second most important market area has been that involving government purchases of goods and services, which account for about 20 per cent of GNP. Historically, the role of government as a provider of defense and other public services has tended to grow in importance. The most meaningful manner of judging the importance of marketing is by measuring the value that is added by the performance of marketing functions. Since widespread interest in such measurement is of recent origin, accurate data regarding the total contribution of marketing are yet to be compiled. Reasonably comprehensive, though incomplete, estimates are available for value added in the process of marketing finished consumer goods, as indicated by the spread between the value of commodities leaving the distributive system and their value when they entered it. This measures the value contributed by retailers and by wholesalers (when commodities are handled by them) between the time of sale by manufacturer and the time of sale to ultimate consumer. For all consumer goods, the total value added by such marketing establishments amounts to about 37 per cent of the final retail price (Chow and Holden, 1997). Describe the marketing process with particular emphasis on the development of integrated marketing strategies by organizations Segmentation, Targeting, Positioning Of all the components of a marketing plan, perhaps the most overlooked but most critical element is the definition of the target market. According to Donthu and Garcia (1999), it is a homogenous group of people or organizations that a company wishes to appeal to. There are two basic targets for a product or service: the user and the non-user segments. Thus, there are also two business and marketing decisions that the company must decide upon in light of the basic targets. The first is to cultivate the present market alone while the second is to go after non-users. The former can inspire consumer loyalty which is an important factor in the survival of any business. In introducing new car models of Mercedes will categorize its target market into two market segments: (1) the Mercedes cars users or those who have already tried the product, and (2) the Mercedes cars non-users. Mercedes cars users are further classified into (a) males and (b) females in order to differentiate the market appeal and competitiveness of the offered products in terms of sex as well as the specific users of the four specified models in order to determine the competitiveness of each product per se. the Mercedes car non-users, on the other hand, are further grouped into (a) those who do not use cars in general, and (b) those who use other car brands. These market segmentation schemes according to product use will provide important information regarding the overall competitiveness of the Mercedes Cars as well as viability and opportunities for encouraging car non-users to not just try any other average cars but to choose Mercedes Cars among others. Moreover, companies now face the challenge of making its target consumers respond accordingly to their marketing efforts and those who understand its consumers' responses will have a great competitive advantage (Kotler & Armstrong, 2001). In this light, the Mercedes management as well as the advertisers will keep in mind the differences that are distinct between and among the Mercedes Cars target market based on different cultural backgrounds which significantly affect the effectiveness of the campaign. The fact (Drykafmu, 2004) is, there may be ideas that will not be applicable across the diverse target market population. Studies on the relationship of consumer behavior and their personal values and cultural orientation as well as their beliefs on certain principles, the dispositions they hold and side they take on political, gender and social problems and issues will be likewise duly accounted. Positioning The positioning of Mercedes may takes place in the mind it is vital the companies influence the way consumers think (Kotler, 2005). If Mercedes can find a gap in the market and the consumers mind then your half way there. If there is no gap create one by repositioning your competitor. Being first on the market is useful providing the gap exists. It focuses on customer perceptions but customer's perceptions can vary Packaging price and the communication process all help to position the product. It involves identifying the products competitive advantages and which ones to emphasize and to implement it in the marketing mix. Four P's Customer satisfaction is the primary aim of marketing. In focusing on the future, the enterprise ensures the best possible chance of attaining long-term stability and competitive standing (Cohen, 1991). The marketing mix of the company is not solely focused on the knowing the needs of the customers, but the company is also extending effort in knowing its customers more through the establishment of a better customer care and consulting services. The creation of the marketing mix is intended for the purpose of insuring the achievement of various corporate goals such as profit, volume, image, reputation and return on investment through the satisfaction of the consumers' wants and needs. It results in the total bundle of utilities actually purchased by consumers in selecting products and services, and it is concerned with such factors as price, design, advertising, packaging and distribution channels. In relation to marketing plan, marketing mix includes both short term and long term strategies makes for a more profitable marketing mix. Long term strategies build brand/company awareness and give sales revenue a permanent, gradual boost. Short term strategies create a temporary, immediate revenue boost by giving buyers an incentive to purchase. By implementing both long and short term strategies, you can attend to immediate sales goals while building your business reputation and goodwill (Knights and Morgan, 1991). 1. Products The main product that will be developed and introduce is Mercedes Benz. The product will be different in other competition in a way that the company will maximize quality but minimize the cost to be affordable for all types of consumers. Through the use of demographics and psychographics, all needs and demands of target market will be known by the company in order to provide the customers their needs in the utmost time. The products will be available at the store located at the central market place for consumers. 2. Placement/Distribution To be known in the market place, the product will be distributed directly to its clients and consumers through its main branch/store and through the on-line marketing at the company's website. And to be known internationally, one of the strategies that the product will utilize is going on a joint venture with distinguished distributor of car decoration and care products. The company will also find a Car Decoration and Care Industry Alliance in the UK other parts of Europe. The website will be available anytime so that the consumer will avail their needs the soonest possible time. 2. Price Pricing Strategy One of the advantages of the Mercedes is when it comes to its pricing technique. In order to be known into the marketplace and as a new entrant, the company will provide its target market with an affordable cost while providing them with high quality cars. The company will be given the customers and clients a price that is lesser than its competitors so that the consumer will be encourage buying Mercedes Benz. Although, the company will provide lower cost, the company will ensure that the cost tagged to all its products is enough to give profit to the whole company. The following table will show the pricing strategy to be utilized by the company as it first enters into the marketing arena. 3. Promotion/Communication To promote the company and its car, the company will use video advertisements, print advertisements and the concept of e-marketing. These promotion and communication strategy will tend to meet the consumers form different places everywhere, especially those target markets. Moreover, since the trend in the market place today is the usage of e-marketing, the company will provide a website that any client can access. E-marketing is also known to be the online marketing strategy utilized by different company whose objective is to be the best company in their field. Thus, the Mercedes will create its own website. The main objective of utilizing e-marketing strategy is to keep in touch to different internet users to be able to attract more clients and consumers. All in all, through the website, whether the user is a customer, employee, stockholders, vendors, retailers or end customers, the true strength of e-marketing is acceleration of the business portfolio. State why marketing is fundamental to the successful operations of an organization The proper use of this marketing strategy offers an enormous ability to talk to consumers and distributors with a customized experience. If a company will be able to utilize information technology in its strategy, this will harness the advantages of direct transaction capabilities of the company. All in all, through this, whether the user of such information technology is a customer, employee, stockholders, vendors, retailers or end customers, the true strength of information technology is acceleration of the company's business value. In addition, utilizing information technology can make competitive advantage to a business firm. In the past, business paradigm is concentrated on keeping prices and margins high. In addition, the traditional business pattern was made to fit the period of segmentation, where products or services are made for a specific target. This is the direct opposite of mass marketing (Tedlow, 1999). In this new alternative strategy, the focus is on the production of simple yet good products that are appealing to the general masses. The introduction of mass marketing further stresses the fault of multinationals that adapted their traditional marketing strategies to foreign markets. In order to penetrate foreign markets, global businesses would typically identify market segments that are similar to that of their traditional targets. As mentioned, certain factors like culture, preferences and needs tend to differ from one location to another. Thus, applying the same marketing approach to a similar yet foreign market segment do not generate the same results. This then makes the market segmentation business paradigm ineffective in the context of international marketing. Recent Changes in Marketing Localization Strategies may be applied by international businesses like Mercedes Modifying businesses marketing mix in order to fit global resources to local market conditions Developed global brands into new markets Increase in product's appeal to both consumers and retailers. References Aaker, David and Kevin Keller. (1990). Consumer Evaluations of Brand Extensions. Journal of Marketing, 54(1): 27-33. Arnold, D. (2003, October 17). Strategies for Entering and Developing International Markets. In Mirage of Global Markets, The: How Globalizing Companies Can Succeed as Markets Localize. Financial Time Prentice Hall. Burn, J. M. (1993). "Information systems strategies and the management Organisational change - a strategic alignment model." Journal of Information Technology 8(): 127-136. Chow, S., & Holden, R. (1997). Toward an understanding of loyalty: The moderating role of trust. Journal of Managerial Issues, 9, 275. Cohen, W.A (1991). The Practice of Marketing Management, 2nd ed. Macmillan Publication Co. Donthu, N. & Garcia, A. (1999). The Internet shopper. Journal of Advertising Research. 39 (3), 52-58. Drkayfmu (2004). Pricing Strategies and Tactics. Retrieved on 20 April 2007, at Knights, D., and Morgan, G. (1991). "'Corporate Strategy, Organizations and Subjectivity: A Critique'", Organization Studies, 13(2): 211-28. Tedlow, R. (1999). New and Improved: The Story of Mass Marketing in America. Boston: Harvard Business School Press. Christensen, C. M. (1997). The Innovator's Dilemma. Boston, MA: Harvard Business School Press. Dougherty, D. (1996). Organizing for innovation. In S. Clegg, C. Hardy, & W. Nord (Eds.), Handbook of organization studies (pp. 424-439). London: Sage. Grnroos, C. (1994). From Marketing Mix to Relationship Marketing. Management Decision, 32(2), 4-20. Heskett, J. et al. (1994). Putting the Service-Profit Chain to Work. Harvard Business Review. (March-April), 164-174. Hogg, B. A. (1993). European managerial competences. European Business Review, 93, 21-26. Jurkus, A.F. and Willis, T. (2001). Product Development: An Essential Ingredient of Time-Based Competition. Review of Business, 22(1), 22. Kotler, P. and Armstrong, G. (2001). Principles of Marketing. Englewood Cliffs, NJ: Prentice Hall. Kotler, Philip (2005) Principles of Marketing. FT Prentice Hall; 4 Revised European Ed edition. Read More