UNIT 1 INTRODUCTION TO MARKETING

Marketing is one of the key functions of management. It brings success to business organizations. A

business organization performs two key functions : (a) producing goods and services, and (b) making

them available to the potential customers for use.

An organization's business success largely depends on how efficiently the products and services are

delivered to the customers, and how differently do the customers perceive the difference in delivery in

comparison to the competitors. This is true of all firms -from large business enterprises to small firms,

from multinationals operating in different countries to small firms operating in a small market and from

giant enterprises like Sony, Lever, General Motors to the next door kirana shop. Quality production and

efficient marketing are the key success factors in building sustainable competitive

advantage for every business corporation.

In this introductory unit on Marketing Management, you will study the meaning of marketing and various

marketing concepts, evolution of marketing management philosophy, the difference between selling and

niarketingand importance of marketing in a country like India. It will also higliliglit few issues related to

contemporary marketing.

1.2 THE MEANING OF MARKETING MANAGEMENT

Marketing is a process in a social system by which tlie demand pattern for product and services can be

anticipated, enlarged, created and satisfied through the conception, production, promotion and physical

distribution of goods and services in an exchange process.

The American Marketing Association defined marketing as "the performance of business activities that

direct tlie flow of goods and services from producer to consumer or user". This definition seems

somewhat narrow because of its emphasis On flow of products that have already been produced. Thus,

according to this definition, marketing starts with the product.

According to Pliillip Kotler "marketing is a societal process by which individuals and groups obtain what

they need and want througli creating, offering and freely exchanging products and services of value witli

others. Marketing is an ongoing process of discovering and translating consumer needs and desires in to

products and services, creating demands for these products and services, serving the consumer and hiss

demand through a network of marketing channels and expanding the market base

in the face of competition".

Paul Mazur defined marketing as "the creation and delivery of a standard of living to society." A broader

approach views the firm as an organized behavior system designed to generate outputs of value to

consumers. Marketing is defined as the development and efficient distributioli of goods and services for

chosen consumer segments by which profitability is achieved through creating customer satisfaction.

Marketing activities begin witli new product concepts and designs analyzed and developed to meet

specific consumer needs.

This elaborate definition of marketing includes many other organizational activities than mere distribution

function. A correct marketingeffort is in accordance with ethical business practices and is effective from

the standpoint of both society and the individual firm. This approach emphasizes the need for efficienicy

in distribution. The nature, type and degree of efficiency are largely dependent upon the kind of

marketing environment within which the firm operates. The final assumption is that the customer

determines the marketing program. The marketer identifies those consumer segments

who will be satisfied through production and marketing activities of the firm before production.

There are various misconceptions about marketing. Unfortunately these misconceptions have emerged out

of grapevine than solid research background. A student reader of introductory tnarketing at this stage of

learning needs to test his misconceptions before proceeding further, This checklist will help him to do

introspection regarding his previous knowled,ge and subject orientation towards marketing.

So we can take the definition propounded by American Marketing Association.

According to the Alnericain M arketing Association" marketing is the performance of business activities

tliat directs the flow of goods and services from producer to Consumer or user".This definition is

undoubtedly an improvement in the description of marketing as selling. According to this definition,

nlarketing also enconipasses other activities alongwith selling.

Marketing has a process orientation olso. Based on the above, we can develop a process-oriented

definition of marketing, as "the process of ascertaining consumer needs, converting them into products or

services, and moving the product or service to the .final consumer or user to satisfy certain needs and

wants of specific consumer segment or segments with emphasis on profitability, ensuring the optimum use

of the resources available to the organization"

1.3 MARKETING MANAGEMENT PHILOSOPHIES

There are five different marketing concepts under which business enterprises conduct their marketing

activity:

1) Production concept

2) Product concept

3) Selling concept

4) Marketing concept

5) Societal concept

1.3.1 Production Concept

The Production Concept emerges out of the production orientation. The basic proposition is that

customers will choose products and services that are widely available and are of low cost. So managers

try to achieve higher volume with low cost and intensive distribution strategy. The managers believe that

consumers prefer products that are priced low and are widely available. This seems a viable strategy in a

developing market where market expansion is the survival strategy for the business. Companies interested

to take the benefit of scale economies persue this kind of orientation. It is natural that the companies can

not deliver quality products and suffer from problems arising out of impersonal behavior with the

customers.

1.3.2 Product Concept

The Product Concept has the proposition that consumers will favor those products that offer the most

attributes like quality, performance and other innovative features. The managers focus on developing

superior products and i~nprovingth e existing product lines over a period of time. The illnovations in tlie

scientific laboratory are commercialized and the consumers get an opportunity to know and use these

products.

This is called "Technology Push Model". The problem with this orientation is that the managers forget to

read the customers mind and launcll products. Many times it is observed that the innovations enter in to

the market before the market is ready for the product. Innovative products are launched without educating

the customers about the innovation and the probable advantage that the customer is going to get. The

Golden Eye Technology was brought to the Indian Market by the television major Videocon but the

market could not perceive the benefit of this advantage. On subsequent period at an advance stage of the

market LG brought the technology and made its Unique Selling Proposition for marketing success.

1.3.3 Selling Concept

The Selling Concept proposes that customers, be individual or organizations w ill not buy enough of the

organisation's products unless they are persuaded to do so through selling effort. So organisations should

undertake selling and promotion of their products for marketing success. The consumers typically are

inert and they need to be goaded for buying by converting their inert need in to a buying motive through

persuasion and selling action. This approach is applicable in the cases of unsought goods like life

insurance, vacuum cleaner, fire fighting equipments including fire extinguishers. These industries are

seen having a strong network of sales force. This concept is applicable for the frms having over capacity

in which their goal is to sell what they produce than what the customer really wants. In a modern

marketing situation the buyer has a basket to choose from and the customer is also fed with a Iligh decibel

of advertising. So often there is a misconception that marketing is all about selling. The problem with this

approach is that the customer will certainly buy the product after the persuasion and if dissatisfied will

not speak to others. In reality this does not happen and companies pursuing this concept often fail in the

business.

1.3.4 Marketing Concept

The Marketing Concept proposes that the reason for success lies in tlie company's ability to create, deliver

and communicate a better value proposition tlirougll its marketing offer in comparison to the competitors

for its chosen target market.

According to Theodore Levitt "Selling focus on the needs of the seller and marketing focuses on the

buyer. Selling is preoccupied with the seller's need to convert his product in to cash, marketing with the

idea of satisfying the needs of the customer by means of the product and the whole cluster ofthings

associated with creating, delivering and finally consuming it". The marketingc oncept is an elaborative

attempt to explain the phenolnenon that rests on four key issues like target market,

customer need, integrated marketing and profitability.

Companies are interested to increase their return on investment. Instead of spending On a mass

undifferentiated market, they have started looking for specific markets to which their product will best

match and accordingly design a marketing program that suits to the taste of this target market. The next

important act is the understanding of the need of the customer in that target market so that a suitable

marketing offer can be designed. Needs are the inner state of felt deprivation. They can be spelt and un-

spelt also. It is difficult to understmd the un-spelt need of the customer.

Marketers use various sopllisticated techniques of consumer rescarch to understand the customer need. It

is important to understarld and act upon the need of the customer because theeffort to keep a satisfied

customer is almost one fifth of the effort expended to get a new customer. The whole organization as to

be integrated to this mantra of custolner satisfaction. So business needs an integrated approach.

The integration has to start at marketing department level where various key marketing functions like

product design, distribution channel selection, advertising and promotion, customer service and marketing

research need to be integrated with common marketing goal understanding.

Marketing culture should be adopted by other departments of the enterprise also.

While external marketing targets customers outside, internal marketing targets customers inside the

organization who can be trained to serve the customer better. The ultimate goal of any business house is

to earn profit. Today's world not only looks at profit but also tries to bench mark the effort and cost

required to achieve this level of profit. In this situation profitability of the enterprise through sole goal of

efficient marketingis the key success criteria. This profitability is now treated as a byproduct of creation

of superior custonler value and better understanding of the custorner need.

1.3.5 Societal Concept

The Societal Concept proposes that the enterprise's task is to determine the needs, wants and intentions of

the target market and to deliver the expccted satisfaction more effectively and efficiently than the

competitors in a way to preserve or enlarge the consume and society's well being. It combines the best

elernents of marketing to bring social change in an integrated planning and action framework with the

utilization of communication technology and marketing techniques. It also looks for marketers to build

social and ethical considerations into the marketing practices.

The goals of profit maximization should match with the goals ofcustomer satisfaction and responsible

corporate citizenship. Social marketing often termed as cause related marketing utilizes concepts of

market segmentation, consumer research, product concept development and testing, communication to

maximize the target adopters response.

With the growing awareness of the social relevance of business, there is an attempt to make marketing

also relevant to the society. In a sense, marketing is not a business activity alone but milst take into

account the social needs. Excessive exploitation of resources, environmental deterioration and the

customer movements in particular have necessitated the recognition of the relevance of marketing to the

society. Marketing then must be a socially responsible or accountable activity. The societal concept holds

that the business organization must take into account the needs and wants of the consumers and deliver

the goods and services eflicieritly so as to enhance consumer's satisfaction as well as the society's well

being. The societal concept is an extension of the marketing concept to cover the society in addition to the

consumers.

1.4 DIFFERENCE BETWEEN SELLING AND MARKETING

Many managers use 'marketing' and 'selling' as synonyms though there is a substantial difference between

both the concepts. It is necessary to understand the differences between them for a successful marketing

manager.

Selling has a product focus and mostly producer driven. It is the action part of marketing only and has

short term goal of achieving market share. The emphasis is on price variation for closing the sale where

the objective can be worded as " I must somehow sell the product to the customer'. This short term focus

does not consider a prudential planningfor building up the brand in the market place and winning

competitive advantage through a high loyal set of customers. The end means of any sales activity is

maximizingp rofits through sales maximizationWhen the focus is on selling, the businessman thinks that

after production has been completed the task of the sales force starts. It is also the task of the sales

department to sell whatever the production department has manufactured. Aggressive sales methods are

justified to meet this goal and customer's actual needs and satisfaction

are taken for granted. Selling converts the product in to cash for the company in the

short run.

Marketing as a concept and approach is much wider than selling and is also dynamic as the focus is on the

custonier rather than the product. While selling revolves around the needs and interest of the manufacturer

or marketer, marketing revolves around that of consumer. It is the whole process of meeting and

satisfying the needs of the consumer. Marketing consists of all those activities that are associated with

product planning, pricing, promoting and distributing the product or service.

The task of marketing commences with identifying consumer needs arid does not end till feedback on

consumer satisfaction from the consu~nptiono f the product is received. It is a long chain ofactivity,

which comprises production, paclting, promotion, pricing, distribution and then the selling. Consumer

needs become the guiding force behind all these activities. Profits are not ignored but they are built up on

a long run basis. Mind share is more important than market share in Marketing. According to Prof.

Theodore Levitt 'The difference between selling and marketing is more than semantic. A truly

marketing minded firm tries to create value satisfying goods and services which the consumers will want

to buy. What is offered for sale is determined not by the seller but by the buyers. The seller takes his cues

from the buyer and the product beconles the consequence of the marketing effort, not vice versa. Selling

merely concerns itself with the tricks and techniques of getting the customers to exchange their cash for

the company's products, it does not bother about the value satisfaction that the exchange is all about. On

the contrary, marketing views the entire business as consisting of a tightly integrated effort to discover,

create, arouse and satisfy customer needs'. The differences between selling and marketing are summarized

in Table 1 .I

1.5 EVOLUTION OF MARKETING MANAGEMENT PHILOSOPHY

The origin of marketing management dates back to prehistoric period when people started settlement and

there was a division of labor for the community living. As it was difficult for every one to engage in

activities to satisfy all the need requirement, a mutual cohabitation led to this division of labor in the

society. The birth of a barter system where two parties are involved in the physical exchange of goods and

services for mutual benefits and voluntary agreement of both the parties for the transfer of ownership of

the physical goods exchanged, started the evolutionary

growth of modern day marketing.

When the volumes grew beyond the individual and community consumption, then the intermediaries

emerged in the social system that became part of the trade. These are the people who aided in the transfer

of ownership between two parties at two different periods of time. At the time of production, the producer

had the need or the value of the output for his survival and business where as the end consumer was not

ready to own the final product as the demand for consumption was at a future period of time. So

intermediaries took over the ownership, stored and distributed the ownership at the future period of time

in different assortment as desired by end consumer for benefit which was subsequently marked as trades

man's profit. The industrial revolution and progress in transportation and communication made the

business of marketing to cross geographic borders of country and marketing grew as an economic

activity.

In the initial stages of Industrial Revolution, producers were able to sell whatever they have produced. So

they concentrated on higher production. At that stage most of the enterprises adopted the production

concept. Later when the competition started building-up, producers faced difficulties to sell whatever they

produced and the need to improve the product arose. This led to the emergence of product concept and

selling concept. With the increase in competition, producers realised the

advantage of producing what consumer's need instead of selling whatever is produced.

This lead to the consumer orientation and the emergence of marketing concept. As the industry was

expected to play the role of corporate citizen and care about the welfare of the modern society, the

industry was expected to produce products and services that are contributing to the greater cause of the

society and in the process of making profit, contribute towards the building of the nation. This give rise to

the modern day concept of social marketing. In the developed countries where the markets are developed,

most of the producer adopts the marketing concept. In the developing countries markets are

heterogeneous and one can see the co-existence of all the five concepts. Thus, the concept of marketin,g

has grown along with the process of economic development.

The growth ofcivilization, the increasing standard of living, the changing life styles and technological

growth have created new wants. These can be satisfied only with a wide variety of new goods and

services apart from changes and improvements in the existing goods and services. This however the

general trend, and there are several exceptions. Markets for all products and services have to reach a

certain maturity to experience this evolutionary trend. It may not be so in the case of each and every

product or market. The rural market in India, for example, is fairly different from the urban market. Even

among a set of consumer goods, for example, cosmetics which serve the middle/upper income groups are

much more consumer oriented than the market for undergarments for men. Besides, there is a seller's

market in some goods and services, and a buyer's market in some others.

Another feature in the evolutionary process of marketing is the growing role of service marketing. The

demand for service contracts to maintain the gadgets in use have to become more easily marketable and a

reliable service commands a premium in the market. Some of the developed economies are now thriving

more on service industry than manufacturing, as the customers are looking for better service facilities

with the product and the success of a company is decided on the basis of quality of product support

services. The globe is now treated as a single market place because large numbers of players are

manufacturing and delivering products and services in a global scale where by they can achieve

economies of scale and offer a lower price to the customers. Global life styles, tastes and products have

emerged due to rapid advent of television and global media. So brands like Coca Cola, Sony, Honda are

no more identified by their country of origin. They have become global brands in true sense.

1.6 MARKETING MANAGEMENT PROCESS: AN OVERVIEW

As already dis;cussed, the effective marketing starts with the identification of consulner and his need. The

marketer develops marketing program for satisfying customer needs with a firm's products and services.

One of the myths of marketing rests with the fact that people wants and needs vary greatly, and it is

unlikely that any particular product or service can adequately satisfy everyone.

The marketing process consists of four steps: (i) analysing the marketing opportunities, (2) selecting

target markets, (3) developing the marketing mix, and (4) implementing and controling. Now let us

study each of them briefly.

1. Analysing the Marketing Environment: As discussed earlier, marketing task starts with the

idelitification of consumer needs. Therefore, the first step in the marketing process is the analysis of

marketing opportunities to identify the consumer needs. Marketer has to identify the new needs or the

existing needs not satisfied by any product offer or the needs which can be satisfied through better

product offerings. For this purpose, you have to analyse the opportunities by

scanning the marketing environment.

Marketing analysis talks about finding out the current position of the company in the form of current

market share, market power, the relevant strengths and weaknesses of the company in relation to

competitors and market opportunity and threats it is likely to face in the marketing environment. The

marketer uses various techniques like SWOT analysis, scenario building, cross impact analysis and other

environmental scanning techniques.

2. Selecting Target Markets: At the second stage, the marketer has to decide aboult the target, the

company's business mission, the category of customer markets it wants to serve, the type of strategy to

arrive at the set goals. For this reason, one of the first tasks in marketing planning is to divide the

heterogeneous market into relatively homogeneous segments. Once a particular customer group is

identified and analyzed, the marketing manager can direct company resources and activities to profitably

satisfy the selected segment. Thus, at this stage marketer divides the market into various segments, called

market segmentation. Each segment consists of consumers who respond in a

similar way to a given set of marketing efforts. Then the marketer evaluates each segment and selects one

or more segments in which lie can generate the greatest custonler value and sustain it over a long period.

This is called market targeting. After identifying the target market, you must decide market

positioning, that is the place product occupies relative to the competitors product in consumers' mind. If

the product is perceived to be exactly like competitor's product, consumers would have no reason to buy it

3. Developing the Marketing Mix: The third step in the marketing process is deciding the marketing

mix. It is easier to divided the marketing activities into four basic elements which are together referred to

as the marketing mix. These four basic elements are: 1) product, 2) price, 3) promotion and 4) physical

distribution.

As all these four start with the letter 'P', they are referred to as the four Ps of the marketing mix or the four

Ps in marketing. Thus, marketing mix may be defined as the set of controllable marketing

variables/activities that the firm blends to produce the response it wants in the target markets. The word product stands for the goods or services offered by the organisation. Once the needs are

identified, it is necessary to plan the product and after that keep on analysing whether the product still

satisfies the needs which were originally planned for, and if not, to determine the necessary changes.

Decisions such as branding packaging, after sale service etc., are to be decided.

Price is the money that the consumer has to pay. Price must be considered as worth the value of the

product to become an effective marketing tool. The product has to be reasonably priced. The

manufacturer has to take into account cost factors, profit margin, the possibility of sales at different price

levels and the concept of the right price.

Promotion is the aspect of selling and advertising or cominuilicating the benefits of the product or

service to the target customers or the market segment in order to persuade them to purchase such products

or services. It includes selling through advertising as well as the sales force. Besides, a certain amount of

proinotion is also done through special seasonal discounts, competitions, special price reductions, etc.

Physical Distribution refers to the aspect of the channels of distribution through which the product has to

move before it reaches the consumer. It also includes the logistic aspects of distribution such as

warehousing, transportation, etc., needed for geographical distribution of products. It is also concerned

with the selection of distribution channels. The organisation must decide whether it should

sell through wholesalers and then to retailers, or whether directly to the consumers. There are many ways

in which a product can be moved from the producer to the consumer. The optimum method has to be

determined in terms of both consumer satisfaction and profitability to the organisation, or optimum use of

the organisation's resources.

4. Implementing and Controlling: At the fourth stage marketing plan is to be implemented. Without a

proper implementation program, marketing planning exercise is just a paper work. The marketing

implementation revolves around executing the strategy and resources for achieving the marketing goals or

targets. The marketing managers execute the strategy by converting it to operational plans which are

achievable within a specified period of time frame.

The fourth stage also includes marketing control, which is a process of benchmarking the expended effort

and resources with the set goals. You have to get the feedback from the market whether the consumers

received the desired level of satisfaction from the product offering or not. Based on this feedback you

further plan to enhace the consumer satisfaction or overcome the deficiencies in the product offerings, if

any. The achievements are evaluated with the objectives set at the planning stage to find out the

deficiencies if any and to take modified action in the future so that the efficiency of the resource expended

increases and gets translated in to profit.

Every organization has a structure and culture that reflects its readiness and effectiveness to the ever

changing need of the customers in providing a sustained level of satisfaction. Marketing function

confined to a particular departmental structure in the organization seldom brings success. It creates goal

confusion due to functional myopia in the organization. In this context the whole organization has to

understand the urgency of market orientation and understanding of customer need for greater success. The

concept of organization structure revolves around two issues. The first is the relative importance of

marketing departnzent inside the organization and second, its relationships with other jirnctional

deparlntenls and external players in the valtre chain.

A marketing manager has to take decisions regarding various aspects of marketing. He takes these

decisions under certain environmental situations. The decision variables over which he makes decisions

are called marketing mixes and which are controllable factors for a marketing manager. He takes these

decisions under certain environnlental conditions. These environmental conditions are called

uncontrollable forces and the decisions are taken in relation to immediate players affecting business.

These players constitute the part of the micro environnlent and are called as actors.

1.7 MARKETING MANAGEMENT IN INDIAN CONTEXT

The development of marketing in India and emergence of Indian market as a force to reckon in the global

business front is an interesting subject for marketing students. There are three distinct phases in the

growth of Indian nzarket. The first phase counts to the period of independence where the colony was

subsistent in nature. The imperial government controlled the output and large number of customers did

not have adequate purchasing power. Customers were largely agriculturists debarring few salaried people

working in the British establishinents. Most of the products were froill British and the stakes of ownership

in large enterprises were vested with them. The consumers did not have any choice, as there were few

alternatives available. It was a seller's market with product orientation and consumer welfare was unheard

of.

The second phase started immediately after the independence and the new government dlecided to follow

the socialistic principles where the public sector dominated the ownership of large enterprises. There was

a rationing and quota system for the: private players and the production was limited to the whim of the

government decisions. Most of the markets remained as seller's market. The seller was in a dominating

position due to the protection from government and no formal competition. The seller dominated the

pattern of consumption with product alternatives, price propositicms and on the availability front. There

were few manufactures those who believed about product quality and consumer satisfaction. There was a

ban to the direct entry of foreign participants for giving protection to the domestic sector. The consumer

had very limited opportunity to complain about the pseudo promises and hazardous practice of the

manufacturer until the Consumer Protection Act of 1994. Lack of ef'fectiveness and non-availability of

competition allowed the manufacturer to sell the sub-standard products. The per capita income was low

and people had less purchasiing power. Majority of people spent money buying necessities, which

allowed the commodities market to grow in a snail's pace to cater to the common person. Cities grew in

size due to establishment of large manufacturing units and the1 rural and urban divide started to emerge

in urban market. Demand for quality education, decent housing and entry of women to the active

workforce brought radical change to the Indian urban market. The rural Indian market remains

unexploited due to poor econonly of average rural consumer, resultant lower purchasing power of the

rural consumer, irregularity in saving and occupation pattern. Non-availability of transportation and

communicationf acility also restricted the growth of the rural market in India.

The urban Indian market was undergoing radical changes due to emergence of a large middle class with

constant and regular income pattern. Adequate savings, support from the rural agricultural income flow to

the urban middle class and the benefits given by the welfare state to this class increased the consumption

level and demand for various products unheard before for thern. The strength of this market increased due

to increase in consumer's knowledge about their rights and redress mechanism introduced by the

government. Various products became the mark of the class and a pseudo consumption culture emerged

in the Indian market until early 1990s.

Whatever the argument may be Indian industry and consumer wake up to the global reality in the early

nineties due to the liberalizatioll process. 'This is the starting of the third phase.

The role of the public sector as seller and as buyer came down as efficiency and competition became the

mantraof survival in place of protection. The abolition of Monopoly Restrictive Trade Practice allowed

firms to have both organic and , inorganic growth. Firms started producing higher capacity for the market

as there was no quota restriction. Mergers and acquisitions saw the emergence of large conglomerates and

consolidation of business in Indian market. Government allowed foreign equity participation in the

domestic business, whicll brought large global players to Indian market. The domestic companies

liquidated a part of their ownership and allowed joint ventures for smooth flow of foreign equity capital

and technology. Large multinationals like Mindustan Lever, Proctor and Gamble, LG Electronics, Ford,

Mitsubishi, Honda, Sainsung entered in to the markel with more financial muscle and better teclinology

for Indian consumer.

Domestic and Foreign financial institutions reposed their faith on Indian industry and the industry got a

good funding through both long-term debt and equity route. The government brought drastic changes in

various draconian and imperial legislations for smooth conduct of business. The Indian industy also

responded positively by offering better products and services to the consumers. The free market

competition gave rise to a new mechanism of market power. Marketers started bridging the gap between

the urban and rural, rich and poor by offering products and services at all price points. They also

strengthened the management of the distribution channel through new methodologiest like Supply Chain

Management, Just in TimeTechnology and increased productivity through continuous improvement,

Because of such radical changes in the market, product prices came down, the quality level went up to

match the global standard, customers at various sub urban places could access the availability of various

products suiting to their pockets.

On the other hand, advent oftelevisio~an~d cable television revolution provided a larger platform to the

marketers to take their marketing communication to consumers. It was possible to disseminate product

information to a wider audience than the urban noveaue rich were. Higher demand in the product put a

time pressure for the companies who had to follow shorter product manufacturing cycles and deliver

products with global standards as customers had many options to choose from the market. Financial

institutions started provisions of periodic payments and instant ownership through installment schemes

for many products categories. This kind of support helped in the market penetration of few products

in a faster rate. 'The attitude of indian consumer also underwent swapping changes.

People started spending money in acquiring products and services for a comfortable stay than saving as in

the past. This spending orientation gave birth to a viable service sector. The service sector grew in leaps

and bounds in last few years due to advent of modern technology. People started enjoying life like never

before, businesses like airline, professional education, tourism, restaurants and hotels, telecoms, hospitals

and quality health services and computer related services grew in matching order with the manufacturing

sector. The telecom revolution brought changes in communication services expected by customers

through adoption of mobile telepliony, WLL, intenlet telephony and subsequent reduction in the

Communication cost. Rapid penetration of Personal Computers and internet services are also a significant

change happening in urban and semi urban India.

Indian market has changed from a developing market to an emerging market. The market is enroute to a

developed market as the choices in the consumption basket of consumers have increased in the last

decade. However, one cannot ignore the negative effects also. The divide between the rich and poor is

increasing day by day. A large section of tlie society is staying away from the use of benefits of these

changes. Marketing managers have to rethink at all these issues and try to take a developmental

orientation so that more and more customers will enjoy tlie benefit of liberalization and free market

economy.

The recent thrust by Hindustan Lever through its operation Bliarat, Procter and Gamble's tie up with

Marico for enhancing rural distribution, the e-Choupal strategy by ITC are indicators that the marketers

are trying to woo the rural customers for increasing their consumption. This will be only possible when

tlie income power of the rural consumer increase. Marketers have to take the developlnental approach

for building such a strategy. Hindustan Lever is now trying to market the products through self-help

groups where by the socially backward arid vulnerable people can become part of the mainstream and

earn to consume. In the long run, marketing manager's success will be measured on different parameters

than the current approach of market share, as the revenue as well as the profits from the urban

market will sure to dry down in future. There is no doubt that tlie status of the Indian consumer has

increased but the percentage is so small that tlie task now is to bring more people to the field of

consumption.

1.8 IMPORTANCE OF MARKETING AS A SUBJECT OF STUDY

In one of his classic articles, Peter Ducker said that Marketing is everything. Rest other activities in the

organization are support services to the marketirig strategy that a firm pursue. Marketing has higher

significance in an emerging economy like that of India where it not only has to satisfy tlie customer need,

but also to support the process of economic development. The success of business is known by its

achievement in marketing front in the form of market share and return on investment on marketing

programs. Marketing has significance to tlie consumer as it provides more alternatives to consumers,

controls the price mechanism ,allow the consumers to bring a balance between his income and

consumption. It is important to the economic progress of tlie country as it opens up new vistas of research

by supporting product innovation and enhancing the quality of living for the ultimate consumer.

Marketing generates resources that are ploughed back to the economic system and it fastens the process of

growth for the country. Over a period of time people in industry, government and academia have realized

the macro level importance of marketing. Therefore, special concentration is available under the domain

of marketing to understand consumer behavior, marketing for services and industrial products, advertising

and sales pro~notione ffects on consumers. Marketing brings revenue and earns goodwill for a

manufacturer or marketer, provides alternatives of choice in goods and services to consumer and enables

the society for redistribution of income, generation of additional employment through manufacturing and

trading and improvement in the over all standard of living of the

citizens of a country.

Marketing looks in to the business management challenges like environmental scanning, identification of

marketing opportunities, formulation of marketiag programs, evaluation and tracking of consumer choice

and response to business.

Marketing aids the consumers to have choices and final say in tlie acceptance of a inarketing offer

available to him. The easy availability of high quality goods and services at competitive prices is made

possible by efficient marketing system. Marketing management createstime, place and possession utility

to products and services. Products and Services are useful if they are available for consumption at the

right time and place. Management of marketing creates such utility.

Marketing generates additional employnient, increases per capita income and helps in the over all

progress of an economy. The per capita availability of essential goods is an indicator of the level of

consumption and poverty in an economic system.

1.9 LET US SUM UP

Marketing is a dynamic subject in business. The success of a business largely depends on the success of

marketing. There are various definitions to Marketing. We can generalize the definition through the

definition of the famous inarketing author, Philip Kotler. According to him, "Marketing is a social activity

directed at satisfying needs and wants through exchange process". It is a management

process of identifying consumer needs, developing products and services to satisfy consumer needs,

making these products and services available to the consumer through an efficient distribution network

and promoting these products and services to obtain greater competitive advantage in the market place.

This emphasizes the optimum utilization of resources and delivering value to customers through efficient

process and with a profit to the organization.

Marketing as a concept has evolved over a period. It has augmented the process of exchange as an

economic activity and there are five concepts associated with marketing. They are 1) Production Concept,

2) Product Concept, 3) Selling Concept, 4) Marketing Concept, and 5) Societal Concept.

The greatest confusion in understanding marketing is the confused line of difference between selling and

marketing. While selling is product focused and looks after the interest of the seller, marketing takes a

more welfare view and the key focus of marketing is consumer satisfaction than sales. Marketing explains

the whole process of identifying consumer needs, developing products and satisfying consumers through

a marketing program.

Marketing plays a pivotal role in tlie development process of a country like India.Different phases of

development in Indian market are indicators that there is a revolution undergoing in Indian market. We

envisage a greater role for marketing in Indian market whereby marketing can help in bringing more and

more people to the fold of enhanced and qualitative consumption. The recent economic and social

changes in Indian market bring a new and enterprising picture of growth of marketing in Indian business.

Marketing has to play a greater role than just satisfying the consumers in an emerging economy like that

of India. Marketing should bring significant changes affecting the quality of life eof everybody in a

country like India

UNIT 2 MARKETING ENVIRONMENT

Marketing functions are to be carried out in a given environment. Even the marketing opportunity has to

be scanned and identified by carefully observing the environment. The marketing mix is also decided in

the context of a given marketing environment. Though marketing managers cannot control the forces in a

marketing environment, they must take them into account when making marketing decisions. While

formulating the marketing strategies, the marketers must closely observe the

environ~nenitn which they are functioning. In this unit, you will study the factors that constitute the

marketing environment, and the marketing environment in India. You will also study bow various Acts

and Statutes influence the marketing decisions in India.

2.2 WHAT IS MARKETING ENVIRONMENT?

Marketing activities are influenced by several factors inside and outside a business firm. These factors or

forces influencing marketing decision making are collectively called marketing environment. It comprises

all those forces which have an impact on market and marketing efforts of the enterprise. According to

Philip Kotler, marketing environment refers to "external factors and forces that affect the company's

ability to develop and maintain successfill transactions and relationships with its target customers." For

example, the relevant environment to a car tyre manufacturer may be the car manufacturers and buyers,

the tyre manufacturing technology, the tax

structure, imports and export regulations, the distributors, dealers, competitors, etc. In addition to these,

the company may have to consider its internal environment interms of Finance, Purchasing, Accounting,

Manufacturing Technology, R&D. Top Management, etc. However, this internal environment is

controllable to a large extent. The external environment becomes important due to the fact that it is

changing and there is uncertainty. Most of these external environmental factors are uncontrollable. There

is both a threat and opportunity in these changes.

The external marketing environment may be broadly divided into two parts:

1) Micro environment

2) Macro environment

Micro Environment refers to the company's immediate environment, that is, those environmental factors

that are in its proximity. They include the company's own capabilities to produce and serve the consumer

needs, the dealers and distributors, the competitors, and the customers. These are also the groups of

people who affect the company's prospects directly.

Macro Environment refers to those factors which are external forces in the company's activities and do

not concern the immediate environment. Macro environment are uncontrollable factors which indirectly

affect the concern's ability to operate in the market effectively. These incIude demographic, economic,

natural, technological, political and cultural forces. The influence ofthese factors are indirect and often

take time to reach the company. Look at Figure 2.1 carefully which presents these forces.

The forces in the outer circle may be taken to constitute the macro environment and those in the irtner

circle as the micro environment of a company.

2.2.1 Micro Environment

Micro environmental factors whicli influence the marketing decisions of the company are: i)

organisation's internal environment, ii) suppliers, iii) marketing intermediaries, iv) competitors, and v)

consumers.

Organisation's Internal Environment

Organisation's financial, production and human resource capabilities influence its marketing decisions to

a large extent. For instance, while deciding about the sales targets, it is necessary to see whether the

existing production facilities are enough to produce the additional quantities or not. If the existing

facilities are not enough and expansion to plant and machinery is required, it is necessary to think about

financial capabilities.

You may have a responsivc research and develop~nendt epartment to develop a new product. So also the

production department may have its own facilities for producing the new product. It is also necessary to

consider how non-marketing departments in the organisation cooperate with the marketing department.

The top management may not agree with the views of the marketing department on the marketing

strategies or their implementation. Besides, the marketing department must work in close cooperation

with the other departments, especially the quality control and production departments. Sometimes it is the

sale force that must bear the major task in

the strategy.

Suppliers

For production of goods or services,'you require a variety of inputs. The individuals or firms who supply

such inputs are called suppliers. Success of the marketing organisation depends upon the smooth and

continuous supply of inputs in required quantities on reasonable terms. Hence suppliers assume

importance. The timely supplies of specified quality and quantity makes the producer to keep up the

delivery schedule and the quality of the final product. The dependence on the supplier is Naturally more

when the number of suppliers is more. During periods of shortages, sole suppliers may not supply

materials on favourable terms. Each supplier may negotiate his own terms and conditions, depending

upon the competitive position of his firms. Some suppliers, for example, expect payment in advance, and

goods are supplied on the basis of a waiting list, whereas others may be ready to supply on credit basis.

Intermediaries

Normally, it is not possible for all the producers to sell their goods or services directly to the consumers.

Producers use the services of a number of intermediaries to move their products to tlie consumers. The

dealers and distributors, in other words the marketing intermediaries, may or may not be willing to extend

their cooperation. These persons normally prefer well-established brands.

Newcomers may find it extremely difficult to find a willing dealer to stock his goods. From newcomers

they may denand favourable terms by way of discount, credit, etc., and the producer may find it difficult

to satisfy them. There are also other intermediaries like transport organisations, warehousing agencies,

etc., who assist in physical distribution. Their cost of service, accessibility, safe and fast delivery, etc.,

often influence the marketing activities.

Competitors

Competitors pose competition. Competitors' strategies also affect the marketing decisions. Apart from

competition on the price factor, there are ,other forms of competition like production differentiation.

There are also competitors who use brand name, dealer network, or close substitute products as the focal

point. Their advertising may present several real or false attributes of their product. If one advertises that

his product has an imported technology, the other may say that he is already exporting his product.

Competitor's strategies sometimes may change an opportunity in the

environment into a challenge.

Customers

There are many types of customers. A firm may be selling directly to the ultimate users, the resellers, the

industries, the Government or international buyers. It may be selling to any one or all of these customers.

Each type of consumer market has certain unique characteristics and the marketer should be fillly

acquainted with the art of persuading and selling to these consumers. The environment presented by

customer profile will have a direct influence on these marketing activities.

The population also corltains the potential consumers of the company's product. It may not be easier to

identify the persons who are likely to become the customers of a company. The goodwill built-up by a

company sometimes influences the consumers to become the customers of acompany. Companies

generally try to build good public relations and create a favourable attitude among the people or groups of

people. Government and consumer action groups are special categories with whom a negative attitude is

to be avoided. Thus, the public also constitute an element in the

environment.

2.2.2 Macro Environment

The macro environmental factors that exert influence on an organisation's marketing system are: I)

physical environment, 2) technological environment, 3) political and legal environment, 4) economic

environment, 5) demographic environment, and 6) socialcultural environment.

Physical Environment

The earth's natural renewable resources (e.g. forest, food products from agriculture, etc.) and finite non-

renewable resources (e.g, oil, coal, minerals, etc.), weather (climatic) conditions, landscapes and water

resources are components of an environment which quite often change the level and type of resources

available to a marketer for his production. For exanlple, India does not have enough petroleum resources,

and imports petrol and other products. Recently, the Gulf War drastically

affected the supply of petrol and diesel in the country. This had lot of implications for

the companies consuming petro-products.

Technological Environment

Technology is shapingthe destiny ofthe people. The revolution in computers, electronics and

communication in general may make one's production out oftune with the current products and services.

For exanlple, new printing technology like Insel. printing and desk top publishing, has already made the

labour-intensive type-set printing uneconomical.

Political and Legal Environment

Political changes bring in new policies and laws relevant to industry. Government regulation continues

wit11 different intensities and the law and the rules framed thereunder are becoming complex. Many

areas of business are brought under one law or the other, and the marketer cannot escape from the

influence of these laws. The tax laws for example, the sales tax. excise duty, income-tax, etc., have direct

bearing on the costs and prices of the products and services marketed. So also the policies

relatirig to imports and exports. Since these factors affect all the units, (they do not affect a single

marketer alone), these are considered as the forces in the macro environment.

Economic Environment

Under economic environment, a marketing manager generally studies the following factors and trends:

i) Trends in gross national product and real income growth;

ii) Pattern of income distribution;

iii) Variations in geographical income distribution and its trends;

iv) Expenditure pattern and trends.

v) Trends of consumer savings and how consumers like to hold their savings, i.e., either in the form of

bank account, investments in bonds arid securities; purchase of real estate, insurance policies, or any other

assets;

vi) Borrowing pattern, trends and governmental and legal restrictions; and

vii) Major economic variables, e.g., cost of living, interest rates, repayment terms, disposable income, etc.

These factors determine the purchasing power, along with savings and credit availability. Study and

knowledge of economic forces is essential for preparing effective marketing plans. No firm is immune to

economic forces although som e are less vulilerable than others. Anticipation of future economic

conditions will enable the firm to devise appropriate marketing strategies.

Marketing organisations are susceptible to economic conditions, both directly and through the medium of

market place. Economic conditions affect marketing directly because such organisations are themselves a

part of market place. For instance, the cost of a1 l inputs positively respond to upward swing of economic

condition. This will affect the output price and consequently affect the sales. The effect on marketplace

(consumers) also influences the marketing through changes in consumer habits. 'This is an indirect

influence. For example, in tlle event of spiraling prices, cousurners often curtail or postpone their

expenditures for luxury products. Conversely, during times of relative affluence, consumers are much less

conscious of small price differences and would buy luxury products.

Demographic Environment

Marketers are keenly interested in tlle demographic characteristics such as the size of the population, its

geographical distribution, density, mobility trends, age distribution, birth rate, death rate, the religious

composition, etc. The changing life styles, habits and tastes of the population, have potentials for the

marketer to explorc. For example, when both husband and wife go for jobs, the demand for gadgets that

make house keeping easier and tlle semi-cooked food products increase.

Socio-Cultural environment

There are core cultural values which are found stable and deep rooted, and hence change very little. There

are also secondary cultural values which are susceptible to fast changes. Some of them like hair styles,

clothing, etc. just fade. Even in a given culture, the entire population may not adopt the changes. There

are different degrees with which people adopt them. Religion is also an important component of culture

which has implications for the marketer. For example, Hindus worship the cow and do not eat beef. So

the products made out of beef meat do not have demand. Thus, the culture of the society influences the

consumption pattern to a certain extent. Culture also pervades other human activities by determining their

values and beliefs.

2.3 RELEVANCE OF ENVIRONMENT IN MARKETING

You have studied that the marketing environment of a company comprises a variety of forces. Most of

these forces are external to the company and may not be controllable by the marketing executives of the

company. So the marketing system of the company has to operate within the framework of these ever-

changing environmental forces.

This uncertain marketingenvironment offers both opportunities, and shocks and threats. Therefore, it is

necessary for a company to scan the changing environment continuously, and change the marketing mix

strategies in accordance with the trends and developments in the marketing environment.

The company responds to these environmental factors and forces by its policies depending on its own

capabilities particularly the finance, sales force and technical facilities. Among all these environmental

factors, some ofthem may be controllable by the organisation to some extent, and others may be

uncontrollable. Macro environmental factors are totally uncontrollable by the firm whereas micro

environmental factors may be controlled to some extent. For instance, organisation's interna1

environment can be controlled by the firm to a large extent. Sinlilarly, the firm can exert some influence

on suppliers, dealers and distributors by offering liberal terms. And through its advertising effort, a firm

can influence the prospective and present consumers.

Each aspect of the environment has some relevance in marketing. It is easy to imagine how various

environmental factors affect the demand and supply, the distribution and proniotional policies, etc. For

example, with the oil crisis there will be demand for more oil-efficient machines. Similarly, the popularity

of computers will create demand for more computer operators, voltage stabilizers, etc.

The following benefits ofenvironnient scanning have been suggested by various authorities:

It creates an increased general awareness of environmental changes on the part of management.

It guides with greater effectiveness in matters relating to Government.

It helps in marketing analysis.

It suggests improvements in diversification and resource allocations.

It helps firms to identify and capitalize upon opportunities rather than losing out to competitors.

It provides a base of 'objective qualitative information' about the business I environment that can

subsequently be of value of designing the strategies.

It provides a continuing broad-based education for executives in general, and the strategists in particular.

2.4 MARKETING ENVIRONMENT IN INDIA

India is a vast country populated by around 100 crore people. Its unique feature is its diversity of

religions, languages, social customs, regional characteristics, which is both a boon and a bane for the

marketer. Boon because there is tremendous scope for a wide variety of products and services to be

successfully marketed and a bane because the marketer often needs to adapt the marketing strategy to suit

different tastes and values. There are marketers who may find that the Indian environment is full of profit

potential. It means that there are buyer for anything one may produce and there is market for everything.

There are others who take a somewhat pessimistic view by considering the poverty and shortages of

requisite inputs. However, one can confidently say that the market is vast, quality consciousness among

consumers is increasing, and there is demand for new and improved products and services and these

trends may continue for a long time.

Despite more than 55 years of independence, India is still domi1;ated by villages and almost 70 percent of

population is located in the rural areas. But these rural areas are today enjoying the fruits of the Green

Revolution and the purchasing power of the rural population is increasingly demanding attention from the

marketer who had so far concentrated only in urban areas. No doubt tlie urban areas with their

concentration of numbers and inarket potential are the priority target markets, but a firns which wants

to ensure its future survival must start making in roads into the rural market as well.

Government expenditure on rural development has increased the purchasing power of the rural public.

Improvements in transport, communication, literacy, etc. have made many new markets accessible. The

capacity to see the opportunity and work out an appropriate marketing strategy can open the doors to the

marketers.

There are a large number of companies, public sector undertakings, factories and small-scale units, all of

which comprise the organisational consumers, operating in the country. While the public sector usually

follows a bureaucratic long winded and time consuming procedure for making even the smallest

purchase, the private sector decision-making is relatively quicker and free of bureaucratic procedures. If

you are marketing your products/services to both the public and private sectors, you may like to

think about having separate marketing organisations for them. Another major difference between the

public and private sector is in the timing of the purchase decision. The public sector cornpanies have an

annual budget sanctioned to them by the governmerit and the money from this is used for purchasing a

variety of products.

The public sector units feel compelled to use tlie entire budget amount, because if they do not, they run

the risk of having a reduced budget in the subsequent years. You would find a flurry of purchases during

the quarter preceding March when the financial year ends so if the public sector companies are your

major consumers, you should bear the timing factor in mind. In case of private sector companies, you

would generally not find such a peaking of purchases in any particular month of the year

unless it is linked to seasonality ofproduction or sales.

2.5 GOVERNMENT REGULATIONS AFFECTING MARKETING

A number of laws affecting business have become operational over the years. The important ones

affecting marketing are listed below:

1) The Indian Contract Act, 1872

2) Sales of Goods Act, 1930

3) The Industries (Development & Regulation) Act, 195 1

4) The Prevention of Food Adulteration Act, 1954

5) The Drugs and Magic Remedies (Objectionable Advertisement) Act, 1954

6) Tlie Essential Commodities Act, 1955

7) Tlie Companies Act, 1956

8) Tl~Te rade Marks Act, 1999

9) The Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act)

10) Tlle Patents Act, 1970

11) The Standal-ds of Weights and Measures Act, 1976

12) The Consumer Protection Act, 1986

13) The Environment Protection Act, 1986

14) The Bureau of Indian Standards Act, 1986

15) The Agricultural Produce Grading and Marketing Act (AGMARK), 1937

Some of the legislations mentioned above apply to every undertaking, irrespective of the nature of the

product sold or the service provided by it like the Indian Contract Act, the Sale of Goods Act, the

CompaniesA ct, the Trade Marks Act and the standards of Weights and Measures Act.

As against this, there are certain legislations listed above which seek to regulate certain decisions of the

undertakings engaged in the specific industries. These include The Industries (Development &

Regulation) Act, 195 1; The Drugs and Magic Remedies (Objectionable Advertisement) Act, 1954; The

Prevention of Food Adulteration Act, 1954; The Essential Commodities Act, 1955.

It would be too much to expect a marketer to know all about the various Acts listed above. But

nevertheless, it is essential for you to have a good working knowledge of the major laws protecting

competition, consuniers and the larger interest of society.

Such an understanding would help you to examine the legal implications of your decisions.

The main reasons for government control can be summarized as follows:

Protectingthe welfare of individuals and promoting higher standards of public health, general well being,

safety, etc.

Maintaining equality of opportunity for all persons irrespective of sex, nationality, race or re1 igion.

Restraining business from engaging in practices harmful to the interests of the public like making false

and misleading statements about a product or service, manipulating prices for personal gains, failing to

support warranties, etc.

Protecting small firms fro111 the threats of unfair competition by big firms.

Preventing unfair practices resulting from mergers or other forms of combinations like price fixing.

Conserving national resources especially forests, fuels, water, energy, etc.

Preventing pollution ofthe environment.

Preventing concentration of economic power and industrial wealth.

Encouragingwidely dispersed industrial growth and the growth of small scale industries.

Protecting the economy from dominance by foreign inventors and helping save the valuable foreign

exchange resources.

The Indian Contract Act, 1872

Regulates the economic and commercial relations of citizens. The scope of this Act extends to all such

decisions which involve the formation and execution of a contract. The essentials of a valid contract are

specified and examined in detail. A contract is an agreement enforceable at law between two or more

persons by which rights are acquired by one or more to act or forbearances on the part of the other or

others. The Act also specifies provisions for the creation of an agency and the rights and duties of

a principal and an agent.

Sales of Goods Act, 1930

Governs the transactions of sale and purchase. A contract of sale of goods is defined as a contract

whereby the property in goods is transferred or agreed to be transferred by the seller to the buyer for a

price. The Act also lays down rules about passing of property in goods, the rights and duties of the buyer

and seller, rules regarding the delivery of goods as well as the rights ofthe unpaid seller.

The Industries (Development & Regulation) Act, 1951

It is through this Act that the industrial I icensing system operates, in effect, it empowers the government

to licence (or permit) new investment, expansion of licensed units, production of new articles, change of

location by the licensed units and also to investigate the affairs of licensed units in certain cases and to

take over the management thereof, if cotiditions so warrant. The objectives behind these powers are, of

course, development and regulation of important industries involving fairly large investments which have

an all-India importance. It is in the actual implementation ofthese objectives that the relevant aspects of

the industrial policy are expected to be fulfilled.

Industrial licensing is a form of direct state intervention in the market to overrule its forces. The

underlying assumption here is that the government is the best judge about the priorities from the national

point of view and also that it can do the allocation in a better and socially optimal way. It must, however,

be understood that there are ecollomic costs involved in the measures of control and the benefits that are

expected to accrue at least equal to or more than the costs involved.

Prevention of Food Adulteration Act (1954)

Prohibits the publication or issue of advertisement tending to cause harm to the ignorant consulner by

consuming certain food articles. It also ensures purity in the articles of food.

Drugs and Magic Remedies (Objectionable Advertisement) Act (1954)

This Act proliibits the publication or issue ofadvertisements tending to cause the ignorant consumers to

resort to self-medication with harmful drugs and appliances. Advertisements for certain drugs for

preventing diseases and disorders like epilepsy, prevention of conception, sexual impotency, etc., are also

prohibited. The Act also prohibits advertisements making false claims for the drugs.

Essential Commodities Act (1955)

This Act provides for the control of production, supply and distribution in certain commodities declared

as essential under Section 2(a) of the Act, in the public interest. Under Section 3(a) of this Act, the

government can fix the price of such a commodity.

Companies Act (1956)

It is a piece of legislation wliicli has far-reaching effects on business by regulation of the organisation and

functioning of companies. With more tlian 650 sections, it is one of the longest legal enactments. It is

meant to regulate the growing uses of the company system as an instrument of business and finance and

possibilities of abuse inherent in that system.

Trade Marks Act (1999)

It deals with the trade and merchandise marks registered under this Act. A mark includes a device, brand,

heading, label, ticket, name, signature, word, letter, numeral, shape of goods, packaging or combination

of colours or any combination thereof. A Trade Mark is a distinctive symbol, title or design that readily

identifies the company or its product. The owner of the trademark has the right to its exclusive use

and the Act provides legal protection against infringement ofthis right. A trademark is registered for a

maximum period of 10 years and is renewable for a similar number of years, each time the period of 10

years expires.

However; no sucli trademark should be used which is likely to be deceptive or confusing or, is scandalous

or obscene or which hurts the religious sentiments of the people of India.

Monopolies and Restrictive Trade Practices Act (1969) (MRTP Act)

'This Act provides for tlie control of monopolies, for the prohibition of monopolistic, restrictive and ufair

trade practices and for matters connected therewith or incidental thereto.

It may be of interest for you to know that the first country to pass such a legislation was tlie United States

wliicli lias a free enterprise system. There, such an Act was passed as far back as 1890 and is called the

Sherman Antitrust Act, But, so far as the UnitedKingdom is concerned it was only in 1948 that the

Monopolies and Restrictive Practices (Inquiry Control) Act was passed. In 1956 and 1964 two more

Acts were added, viz., Restrictive Trade Practices Act and Resale Prices Act, respectively. Our Act is

modelled on tlie lines of the above three Acts.

Patents Act (1970)

Provisions of tliis Act are attracted especially where the company intends to produce patented products. A

patent is tlie exclusive right to own, use and dispose of an invention for a specified period. Tlie patent is

granted by the Central Government to the first inventor or his legal representative.

Standards of Weights and Measures Act (1976)

This Act specifies the quantities in which products can be packed. The products covered include bread,

butter, cheese, biscuits, cereals and pulses, cigarettes. cigar, cleaning and sanitary fluids, cleaning power,

condensed milk, tea. coffee, cooking oils, cosmetics, honey, ice cream, jams, sauces. milk powder, soaps,

spices, toothpaste, etc. I

Consumer Protection Act (1986)

ConsumerP rotection Act, 1986, as amended by the Consumer Protection (Amendment) Act, 2002, is the

latest addition to the list oftlie legislations regulating marketing decisions in India. The Act is in addition

to and not in derogation of the provisions ofany other law which influence marketing decisions. The Act

is intended to provide better protection of the interests of consumers and for that purpose make provision

fortlie establishment of Central Consumer Council, State Consumer Councils, District Consumer

Councils and other authorities for the settlement of consumers' disputes and for matters connected

therewith.

The Act has sharper teeth. One of the weaknesses of earlier legislations was the confusion regarding the

burden of proof. They never made it sufficieintly clear whether the onus of proof rested with the

manufacturer, the irader or the consumer.

This Act establishes a landmark in the sense that for the first time the onus has been shifted to the

manufacturer and the seller. Lesides, no court fee is payable. Also, the I aggrieved consumer can himself

argue his case. Moreover, decision lias to be dispensed within a given Lime-frame - 3 months, where no

testing is required and 5 montlis where testing ofthe goods complained of is required. The Act provides

the consumer the right:

to be protected against marketing of goods which are hazardous to life and People;

to be informed aboutthe quality, quantity, potency, purity, standard and price of goods thereby protecting

the consumer against unfair trade practices;

to be assured, wherever possible, access to a variety of goods at competitive prices;

to be heard and to be assured that consumers interest will receive due considerationa t appropriateforurns.

to seek redressal against unfair trade practices and unscrupulous exploitation of consumers.

to consumer education.

These objects are sought to be promoted and protected by the Consumer P rotection Councils establislied

at the Central, State and District levels.

To provide speedy and simple redressal to consumer disputes, a quasi-judicial machinery(s pecial courts

ha s been set up at the District, State and Central levels. ,

These (Special Courts) quasi-.judicial bodies observe the principles of natural justice and have been

empowered to give reliefs of a specific nature and to award, wherever appropriate, compensation to

consumers. Penalties for non-compliance of the orders given by tlie quasi-judicial bodies (Special Courts)

have also been provided.

Environment Protection Act (1986)

It provides for the protection and improvement of environment and the prevention of hazards to liuman

beings, otlier living creatures, plants and property.

Environment includes, water, air and land and the inter-relationship existing between them and tlie human

beings, living creatures, plants, etc. Any solid, liquid or gaseous substances present which may tend to be

injurious to environment is an environmental pollutant and the presence thereof is pollution.

The present enactment covers not only all matters relating to prevention, control and abatement of

environmelltal pollution but also powers and functions of the Central Government and its officers in that

regard and penalties for committing offences.

Bureau of Indian Standards Act (1986)

Provides for the establisll~nenot f a Bureau for the harmonious development of the activities of

standardisation, marking and quality certification of goods and for matters connected therewith

or.incidenta1 thereto.

It has been provided that the Bureau of Indian Standards will be a body corporate and there will be an

Executive Committte to carry on its day-to-day activities. Staff, assets and liabilities of the Indian

Standards Institution will perform all functions of the Indian Standards Institution. It has also been

stipulated that access will be provided for to the Bureau's Standards and Certification Marks to suppliers

or like products originating in General Agreement on Trade and Tariff (GATT) code countries.

The Act does not make any change in existing law except to provide a new forum for

deciding the cases effectively and without delay. When the Indian Standards I~istitutionw as establislied

in 1947, the industrial development in the country was still in its infancy. Since then there has been

substantial progress in various sectors of the Indian econolny and hence the need for a new thrust to be

given to standardisation and quality control. A national strategy for according appropriate recognition and

importance of standards is to be evolved and integrated with the growth and development of production

and exports in various sectors of the national economy. The public sector and private sectors, including

small scale industries, have to intensify efforts to produce higher standard and quality goods to help in

inducing faster growth, increasing exports and making available goods to the satisfaction of the

consumers. It was to achieve the these objectives that the Bureau of Indian Standards has been set up as a

statutory institution.

Agricultural Produce Grading and Marketing Act (AGMARK) (1937)

This Act provides for grading and standardization of agricultural commodities. The main commodities

graded are -vegetable oil, ghee, cream, buttel; eggs, wheat flour, rice, cotton, gur, maize, honey and

ground spices. The graded goods are stamped with the seal of the Directorate of Agriculture, Marketing

and Inspection, Ministry of Rural Areas and Employment - AGMARK. The seal is an assurance of

quality and purity to the buyers of the agricultural products. In case AGMARIC goods are found to be of

poor quality or defective, the consumer can complait to the Agriculture Marketing Advisor at Directorate

of Marketing and Inspection. Defective goods are replaced free of cost or money refund With

amendments of 1986, there is now a provision for penalty for misgrading and counterfeiting grade,

designation mark- imprisonment upto 6 months and fine not exceeding Rs.5,000. Consumer organisations

have been authorized to draw samples for testing.

Government Agencies

To enforce the laws, the Government has established a number of regulatory agencies like the Bureau of

Industrial Costs and Prices, the Agricultural Prices Comission and the MRTP Commission.

The Bureau of Industrial Costs and Prices was establislied by the Government in 1971 to conduct

enquiries about industrial products and recommended prices.

The Agricultural Prices Commission was set up in January 1965 to advise the government on pricing

policies for agricultural commodities. The Governmerit has also framed rules like the Prevention of Food

Adulteration Rules, 1955 and the Standards of Weights and Measures (Packaged Commodities) Rules,

1977 to enforce the provisions of the related Acts. The enforcement of these Acts is the responsibility of

the Central and the State Government.

The MRTP Commission has been established by tlie Government under Section 5 of the MRTP Act,

1969. The Commission may inquire into (a) any restrictive trade practice; (b) any monopolistic trade

practice; and (c) any unfair trade practice.

In the case of restrictive and unfair trade practice, the Commission may proceed: I

i) upon receiving a complaint of facts which constitute such practice from any trade association or from

any consumer or a registered consumers' association, whether the affected consumer is a member of that

consumers' association or not;

ii) upon a reference made to it by the Central Government or a State Government; or

iii) upon an application made to it by the Director General; or

iv). upon its own knowledge or information.

In the case of monopolistic trade practice, however, the Commission may proceed:

i) upon a reference made to it by the Central Government; or

ii) upon a reference made to iL by tlie DGIR; or

iii) upon its own knowledge or information.

In respect of complaints received from a consumer, registered consumers association and trade

associations directly, the MRTP Cornmission has to make a preliminary investigation through its Director

General of Investigation to satisfy itself that the complaint deserves a full-scale inquiry. Public interest

groups have also grown up during the last two decades or so. These groups try to influence both

government as well as business to pay more attention to consumer rights. They even take the matter to a

law court to get justice to affected consumers against unfair dealings on the part

of business enterprises.

2.6 MARKETING IMPLICATIONS OF SOME REGULATIONS

The objective of MRTP Act, as amended by the Amendment Act, 1991, is to curb monopolistic,

restrictive and unfair trade practices and these have relevance from the point of view of decision making

with respect to 4Ps of the marketing mix. If the Consumer Protection Act becomes effectively

enforceable, it would be really difficult for marketers to ignore the interests of consumers in taking

decisions about different components of the marketing mix.

The Industries (Development & Regulation) Act also is one of the major economic laws of the country

which has been designed to regulate tlle industrial activity. Certain legislations which affect marketing

decisions like the Indian Contract Act 1972, the Sale of Goods Act 1930, the Companies Act 1956, the

Trade Marks Act 1999 and the Bureau of Indian Standards Act 1986, apply to every undertaking,

irrespective of the nature of product sold or service rendered.

As against these, there are other laws which seek to regulate marketing decisions of undertakings engaged

in specific industries only. Some of these are the Industries (Development & Regulation) Act 195 1, the

Prevention of Food Adulteration Act 1954, the Drugs and Magic Remedies (Objectionable

Advertisements) Act 1954, the Essential Commodities Act 1955, and the Sales

Promotion Employees (Conditions of Service) Act 1976.

All these Acts, thus, affect decision-making in relation to different elements of the marketing mix. The

following are some examples to illustrate these. In the area of the product, the government control may

affect decision-making with regard to productline expansion, product quality and safety, provision of

adequate and efficient services, packaging, labelling, and branding, sizes and shapes of packages,

information to be given on the wrapper or container, claims with regard to sponsorship, performance,

characteristics, etc., warranty or guarantee provisions and the after-sales service. The

decisions that may get affected in the context of regulation of pricing practices by the Government may

concern collusive price fixing agreements, re-sale price maintenance and agreements for price control to

eliminate conipetition, or competitors and also excessive, deceptive, bargain or bait pricing. So far as

advertising, sales promotion and personal selling is concerned, the government tries to regulate activities

like false, misleading and deceptive advertising, bait advertising and prize contests and other sales

promotion devices. The other decision areas concern the use of deceptive or

confusing trade marks, use of advertisements to cause the ignorant consumer to resort to self-medication

with harmful drugs and appliances and regulation ofthe service conditions of sale personnel of

pharmaceutical and other industries that may be covered. Tlie main aspects in relation to wliich the

government tries to exercise control in respect of channels and distribution decisions relate to restrictive

and unfair trade practices like hoarding and cornering ofgoods, refusal to sell goods or provide services,

etc., and arrangements like sole selling agency agreements, tie-up sales, boycott, exclusive dealing,

territorial restrictions, full-line forcing, re-sale price maintenance, etc . The marketer must ensure that his

decision in all these fields conform to the relevant provisions of the various Acts.

LET US SUM UP

Marketing decisions of every business organisation is influenced by a large number of uncontrollable

factors that surround tlie company. A company's marketing environment consists of the factors and forces

outside the marketing that affect marketing management's ability to develop and maintain successful