This page contains the CBSE entrepreneurship class 12 chapter Enterprise Marketing notes. You can find the questions/answers/solutions for the chapter 3 of CBSE class 12 entrepreneurship in this page.
What did you perceive by the term goal setting?
- Either long or short term
- includes deadlines to accomplish these objectives.
- have quantifiable measure
What is David Aaker’s definition of marketing strategy?
A process what would allow an organization to concentrate its resources on the optimal opportunities with the goals of increasing sales and achieving a sustainable competitive advantage.
What are the various components comprising the marketing mix?
Marketing mix is the term used to describe the combination of the four inputs which constitutes the core of a company’s marketing system:
- the product
- the price structure
- the promotional activities
- the distribution system.
Among the channels of distribution which one is the most simple one?
What are the various elements comprising a sales strategy leading to success?
- Knowledge in various elements like
- Science (metrics)
- Skills (art)
Give a brief of your understanding of the term branding.
- a tool
- a strategy
- a process
- an orientation
followed by the entrepreneurs to differentiate they products or services from those of the competitors where in the product / service is either of
- a logo
- a sign
- a name
- a symbol
What is the significance of the logo in marketing?
- Logos are critical for the business marketing and represent the business brand.
- They act as the Identity of the business unit.
- Provide necessary information to the customer about the brand using a combination of colors, images etc
- The logo regarded as the shortcut route for advertising and other marketing aspects.
- Logos will be the visual representations of the business units and project their brand identity.
Define tagline. State how it helps the business.
- unique features
and any other important message through simple yet powerful wording. It is usually a short sentence that delivers a thought and framed with a dramatic impact.
For instance recently Samsung started to launch its mobile phones with the tagline Next is now. This gives a message that the future generation mobile technology is available now itself and what the competitors are going to achieve in the future is achieved now itself.
Give a brief of your understanding of the packaging?
What is the labelling used for?
- the product itself
- or the container of the product
- or the packaging
When someone asks you about the advertising how do you define it?
Name and define the process in which the parties involved arrive at a mutually agreeable conclusion.
What is customer relationship management?
When do we say that a business has turned out to be a failure? Watch Video🎥
- The business is not able to make any profits.
- The business is not able to generate substantial income to meet its expenses.
ATL primarily promotes to a large group of audience.
- Direct marketing
- Personal Selling
- Public relations
- Sales Promotions
BTL primarily promotes to a targeted group of audience. The companies using these strategies will have a complete control on these strategies.
For example a youtube ad (ATL) can redirect the users to click on a link to get the coupon code which the can use in stores to get a discount(BTL).
Here ATL has redirected the targeted audience towards BTL.
- Relevant: The business goals set should be completely relevant to the business under consideration. In other words, the goal should be profitable in someway or the other. It doesn’t necessarily generate monetary benefit but should be oriented towards benefiting the business in some way or the other.
- Actionable: The business goals should be definable in terms of specific actions. These actions should be such that they can be executed and evaluated for their impact. Due to this fact the goals should be neither too abstract nor vague. They should be very clear.
- Achievable Stretches: A too ambitious goal will result in disappointment and failure. On the other hand a low ambitious goal will not bring enough motivation to achieve this. Due to this fact the business goal should have an achievable stretch which will motivate us to achieve it. It should be worth considering and at the same time achievable.
- All the basic and long-term activities in the field of marketing. These activities are related to the strategic initial position of the enterprise.
- evaluation and
of the market-oriented strategies. There by it helps the company to move towards its goals and marketing objectives.
- Numerous growth strategies and the marketing mix.
- Direct sales strategy: Direct sales strategy also known as “negative selling” is a strategy where in the business compare the features of their products or services with those of the competitors there by attaching their competitors when directly talking to the customer.
- Indirect sales strategy: This is the more sophisticated, positive sales approach adopting the modern sales strategies discovered through research and analysis. In this type of sales strategy the companies highlight the features and benefits available only in their products or services and not available in competitor’s products or services. In this sales strategies the companies won’t point to the competitors by name.
|Trade Mark||Brand Mark|
|Trade mark is a brand or part of the brand which legally prevents other firms from using it.||Brand mark is a recognizable but non-vocalizable part of the brand.|
|It is a legal term. It provides a firm exclusive ownership of the brand name or symbol.||It is a logo or design or a specific color scheme that help to immediately recognize the firm.|
|Examples include ‘Girl’ of Amul, ‘Maharaja’ of Air India||Examples include Swoosh Symbol of Nike, the striped logo of Adidas, Puma cat of Puma|
- Logo represents a company graphically and form the anchor to represent the company’s brand. It is vital part of marketing.
- Logos standout as a unique representation of the corporate. Thus they bear the identity of the organization..
- Logo is formed as a combination of one or more of the following elements.
Thereby the logos provide the required information about the enterprise there by informing the customers to get an idea of the enterprise’s primary brand.
- Logos serve as a means to achieve a shortcut for the marketing and promotional activities.
- Logo is the primary visual representation of the company’s brand identity.
Businesses spend money in advertising because advertising primarily increase their product sales and thereby generating more profits. Other reasons include
- To popularize the product or service and hence the business in the public.
- Develop a good image and increase goodwill.
- Provide information to the public about their products or services and inform them.
- Make the public know that their business is selling specific products or services.
- Create enthusiasm in the customers to get more information about their product or services
This process is majorly implemented by the human resources department. The HR team takes the responsibility of training and coaching the managers and other executives about how to develop and maintain effective relationship with employees. They also keep track of these relationships to determine how effectively the objectives are being met.
|Employee Management||Vendor Management|
|Employee management refers to the process of effectively managing the human resources or employees||Vendor management refers to the process of researching, evaluating and finalizing the business with the vendors.|
|Employee management is handled by the human resource managers.||Vendor management is handled by the vendor managers.|
|Employee management is an ongoing operation in the business.||Vendor management will be required only when a business process/product need to be outsourced or purchased from the external vendors.|
|Target||Mass audience||Specific small group of individuals|
|Promotions||To establish brand identity.||Generate sales|
|Measurability||Hard to measure||Easy to measure.|
- Specific: The goals set should be well-defined and focused.
- Measurable: The goals should be measurable. This helps to know where we’re standing at any point of time and whether we’re on track or not.
- Attainable: The goals should be attainable and not far from reality. Getting acquainted with the current growth in the industry helps to set attainable goals.
- Relevant: The relevant environment should be taken into account to considering the present conditions and the realities prevailing in the market.
- Time-Based: Specific time-line should be set to achieve the goals. It should be clearly statement that in how many days or months or years, the goal should be met.
- If the competitors start selling the same products at a lower price, it will let the consumers think that the company sells the products at high prices. This will result in consumer dissatisfaction and affects the reputation. The consumers might also stop purchasing the other products of the company thinking that they too are high in prices.
- When the legal and government policies are stringent, price skimming result in legal issues.
- There is a danger of losing reputation among the consumers. So, the consumers will wait and keep a watch on the price. This results in consumers purchasing a new product not immediately but after few months when the price is fallen.
- Simple and easy to pronounce. It helps to keep it short.
- Should grab attention, easy to identify and remember.
- Should sound pleasant when pronounced.
- Free from negative, obscene, offensive and vulgar nature.
- Should be compatible with lebelling and packaging needs. It should also be compatible with various promotional media and languages.
- Should be associated to a product and should grab immediate attention from viewers.
- It should be contemporary, should be suitable for registration. It should be such that it is easy to obtain legal protection.
- Aim: The central aim of the company will be analyzed. Need to decide on the aim of the advertising like
- is it for providing information and inform the consumers?
- Is it for improving the image of the business?
- Improving the sales
- Improving the produce listings.
- Target: The primary target need to be determined. Based on that a specific segment of customers like
- College Going Students
- Working professional
- Media: Considering the aim of the advertising and the targeted segment determin which media best suits for advertising. The media like
- Banner posters/hoardings
- Competitors: Compare with the advertising strategies followed by the competitors. Based on the results achieved by the competitors, a decision will be taken regarding the approach to be followed.
- Attention: The advertising will be appealing to the targeted audience and should stand out from the advertisements from the competitors.
- Interest: Raises interest and causes significant impact through the message or the offering.
- Desire: Creates enthusiasm to learn more about the product or to possess the product or service.
- Action: It will trigger an action so that the sole objective of the advertisement is achieved. In other words, it inspires the potential customer to buy or possess the product or service.
- Be Persuasive: Sales persons meet the customers in-person. They should be effective in communication and ensure that they are able to persuade the potential customer to buy the product. They directly communicate with the customers and provide an oral presentation about the product to generate a sale. Good communication skills plays significant role in this regard.
- A service provider: They offer the sale of service and create awareness about the product there by generating interest in the customer to buy the product.
- Be informative: The should have substantial information about the product and be able to answer any questions the customer has about the product. This ensures that the customer is impressed by the information about the product and this in turn will lead to a sale.
Thus public relations ensures that good relationship is maintained with the public or stakeholders of the business. This in-turn help the company to acquire good publicity and develop and maintain goodwill. Public relations also ensures help the companies to handle negative events, stories and rumours effectively.
Good public relations not just helps in maintaining good relationships with the existing customers but also ensures that the business is expanded through referrals.
- Community Groups
- Financial institutions
- Local communities
- Strategic partners
Maintaining good public relations with all the stake holders help the company to increase the goodwill which intun help in improving the business through referrals.
- Issuing of
- Audio-visual presentations
- Annual reports
- Community activities/events, sponsorship
- Conducting special events like organizing news conferences, product launches and grand openings.
- Conducting educational programs
- Creating the news content and distributing it to various media channels.
- Delivering speeches and presentations
- All the business data is maintained and accessed from a central location.
- Availability of all the data related to various departments like customer service, HR, marketing and sales at a central location helps the management and the employees to have immediate access to the up-to-date information whenever they want it.
- Collaboration among various departments in the organization becomes easier. This in turn help the organization to come up with efficient automated processes. This intern result in efficient business processes.
- Round the clock availability of information related to customers, customer needs and market needs.
- All the available data can be integrated with the current system to achieve consolidation of all the business information.
Merits of penetration pricing:
- Faster reach to the customer base and helps in increasing the market share at a faster pace. The desired market rates can be achieved before the competitors notice and take appropriate measures.
- It will lead to good will among the customers who adopt the product or service. This will lead to more referrals.
- The organization is relieved from the cost control and cost reduction pressures right from the beginning. This intern lead to higher efficiency.
- Due to lower cost, the competitors stay away from entering this segment.
- Stock turnover is increased throughout the various distribution channels.
- Generates significant enthusiasm and support in the channel.
Demerits of penetration pricing:
- Once the lower price of the product is determined, it becomes difficult to increase the price at a later point of time. Few of the consumers can switch away to a competitor products as soon as the price is increased.
- It becomes complicated regarding deciding whether to increase the prices in steps over a number of years or to increase the price to a higher value instantaneously. However, to overcome this dilemma, organizations will release the product at a regular price but offer the product at a lower price through discount coupons.
- This works only for short term. As the primary goal of the organization is to generate profits quickly, this penetration pricing will not be suitable for long term goals.
Usually from the perspective of entrepreneurs the brand names can be considered in the following ways.
- Individual brand name: Each product in the portfolio is given a different brand name.
- Family brand name: A range of products in the portfolio are offered with the same name. The name used can be either the entrepreneur’s name or the business name. This type of branding is also referred to as umbrella branding. Ponds offering its various products under one umbrella name refers to this type of strategy.
- Corporate names: In this type of branding the company’s name or logo along with some brand names of individual products. For instance Philips company offers its one of shavers are Philips aquatouch, and Samsung offering its phones as Samsung Galaxy
- Alpha-numeric names: The alpha-numeric names are used to highlight the physical characteristics of a product. This strategy ensures that each product will have its own unique identity. For instance Philips aquatouch AT620/14 and Philips Aquatouch AT890/16 are distinguished by the alphanumerics AT620/14 and AT890/16.
- Identifying the objectives: The objective of employee relationship management are first identified and determined. Once these objectives are identified all the employee relationship management revolves around attracting talented employees and taking measures to retain them. The success of this effectiveness depends on how much time it takes to hire, turnover time and overall satisfaction among employees.
- Deciding on the employee needs: The needs of employees change depending on the age, gender, marital status, role played in the organization etc. The best way to find the needs of an employee is to directly discuss with the employees by setting up a one to one conversation and ask about what their needs are. Organizations do this continuously through various means like polls, surveys etc.
- Work-life balance: Ensuring that the employees get enough work life balance is the modern factor to be considered for effective employee relationship management. Organizations achieve this through various means like part-time, flexi hours, off-site assignments etc.
- Open and honest communication: Communication plays a key role to achieve effective employee management. Managers should occasionally communicate with the employees about the issues that affect their work. This communication should be as honest as possible. The effectiveness of employee relationship management depends on to what extent the organizations are being open and honest to their employees. This strategy helps in building strong employee relationship and loyalty, improve the productivity of the employees. It will also reduces the turnover and dissatisfaction.
- Measuring and monitoring the impact: The management should be vigilant and attentive to recognize discontent. They should also monitor the results of assessment more seriously and share these results with employees.
- Maintaining Interpersonal relationships: The effectiveness of the employee relationship management depends on how effectively the management is understanding the needs and desires of the employees and how well they strive to meet these needs and desires. Management should interact with the employees both inter-personally and also formally. They should put contiguous efforts to improve the results.
- find the vendors
- Evaluate them and ensure that they are qualified
- conducting business with the vendors.
The process usually starts once the need arises to outsource a given task to a vendor. Organizations perform the following activities to accomplish vendor management..
- Researching vendors who can perform the required tasks
- Negotiating and enter into contract.
- Price quotation
- Performance evaluation
- Preparation and maintenance of the vendor related documents
- Processing of the payments.
The organizations research and come up with a list of vendors who can perform the task and deliver it with quality. All the chosen vendors are then evaluated based on the following factors.
- Past history or goodwill
Initially quotations are obtained from each of the vendors, their references are checked, and then the company is researched thoroughly through online resources. Once this is done their financial stability, certifications are insurance details are evaluated.
Once a list of vendors are chosen, the responsibility of the vendor managers lies in
- Managing a list of vendors
- Allocating tasks or contracts when necessary
- Keep a check on their performance
- Ensure that the agreed upon contract rules are followed.
Big organizations will usually have a pool of vendors. Depending on the past performance a specific vendor might be best suited for a specific task while secondary preference is given to other vendors. When the preferred vendor is not able to take up a project or task or unable to deliver then the other vendors will be allocated with the assignment.
Vendor management usually requires huge documentation work. The databases need to be integrated with various accounts payable systems. In this process it usually requires obtaining vendor information like contact information, insurance/tax related documents etc. When the vendors have access to confidential information it is essential to get the non-disclosure or similar agreement signed in from them and documented. All such documents thus procured should be updated each year.
- Cost Plus pricing
- Penetration Pricing
- Skimming or Creaming
- Variable Price method
- Cost Plus Pricing: Cost plus pricing is the most common and simple pricing strategy. As per this strategy the price is determined by calculating the sum of the cost of production and appropriate profit. However, this strategy does not stress on the optimum utilization of all available resources.
This strategy completely depends on the manufacturing estimates. Costs associated with manufacturing are calculated to
- Justify the planned capital expenditure
- Calculate the cost of production for a new or re-designed product
- Optimize the use of high cost areas.
The estimation is done by computing the factors like volume of resources, the cost associated with these resources and the duration for which these resources will be used. When it is required to justify the capital-expenditure, the depreciation and cash-flow analysis is done using accounting methods.
- The information required to calculate the price i.e., amount of expenditure and the desired profit is readily available.
- It is simplest strategy as the price is computed just by adding all the cost incurred and the desired profit.
- As the information used is with the company itself, it can immediately take corrective measures by analysing the facts if it sees an increase in expenses.
- The base for estimating the pricing is to consider the demand in the coming days. This method does not take this factor into account. This is a biggest drawback.
- As this method does not consider the competitors strategies to determine the pricing, companies depending completely on this method might fail.
- As this method considers the sunk cost and does not take opportunity cost into account there is a possibility of overestimating the price. In addition to this, the personal bias need to be added to the product.
- Penetration Pricing: This strategy requires the price to be set to a value lower than the market price. This is usually done to acquire new customers. The whole idea is that the customers will switch to the new brand due to the lower prices. This is a short-term strategy and is usually used to increase the market share or sales volume rather than to incur huge profits. Once the required market share is achieved the prices are increased to regular values.
- The market share and sales volumes are increased in a short term and before the competitors notice and react.
- Increases the goodwill among the customers who switch to this product. They intern refer the product to other customers and thereby contributing to the increased sales volumes.
- It increases the efficiency by introducing the cost control and cost reduction pressures right from start.
- Due to the lower price competitors hesitate entering into this area.
- Stock turnover is increased throughout the distribution channel.
- This method generates very critical and important enthusiasm and support in the channel.
- The customers expect that the price will stay lower for the coming days and the company might be branded for its lower price. As a result, it becomes difficult to increase the prices in future.
- It is also possible that some of the customers will only stay with the product as long as the prices are low and they immediately switch to other brands as soon as the price is increased.
- It is not yet clearly determined whether it will be effective if the prices are increased suddenly or if they are increased over a period of time.
- Due to very small profit margin, the companies can not stick to this strategy for a longer term as it might result in losses for the company.
Note: To overcome these disadvantages companies adopt a slightly modified version of this strategy where in they do not reduce the price initially. In this case they provide good discounts to the customers initially. This works as the customers do not have expectation that the price will be lower for a longer term.
Skimming or Creaming: In skimming or creaming, few goods are sold at a high price so as to reach the break-even point as quickly as possible. The sale of products will last for a limited period of time so that most of the investment is recovered. The organization has to let go of the higher number of sales in this case. This strategy is usually employed in the electronics industry, for example, smart phones. This strategy targets the early adopters, who have lower price-sensitivity, which can be because of their need for the product out-weighs their
- need for economics
- more value attributed by them to the product
- having high disposable income
Once skimming is period is over, the seller must revert back to other pricing strategies like economy or penetration.
- The cost associated with the research and development are recovered fast.
- This strategy is more effective when the consumers targeted are more quality concious than price concious.
- It backfires if there are more competitors for the same product. The consumers might think that this company is over-pricing their products and stop purchasing any products from the company.
- In case the government and legal regulations are stringent, this is not feasible option.
- When the consumers notice that the company always follows skimming for all their products, they’ll wait and purchase the products after skimiing period is over.
Variable price method: In this, the same goods or services are sold at different prices to different customers. This is usually found in cultures where dickering is common or where bidding or auction is taking place. Even in place where fixed pricing is standard, the prices may vary depending on the volume of the products purchased by the consumer. To avail this the customers must comply with certain criteria. The following are examples.
- Siblings joining the same school get lower fee compared to others.
- Bulk packings have lesser unit price as compared to the single packing or small volume packings
- The more the bargaining power of the customer, the lesser will be the price.
- Depending on the consumer’s ability to pay, the price might vary.
Advantages: It helps the sellers to sells the goods and services that failed to perform as expected there by helping them to make some profits or atleast avoid losses.
Disadvantages: When the customers who paid higher price realize that the products were sold to them at a price higher than the others, the seller might lose them.
- Unit value of the product: Expensive products like diamond ornaments or industrial equipment use a small distribution channel. Less expensive products use long distribution channels.
- Customized or Standard size product When the product is customized then the manufacturer should be directly in touch with the customer to ensure that the product is matching the customized requirements of the customer. So a small distribution channel is used. On the other-hand standard products are distributed through long distribution channels.
- Perish-ability of the productsPerishable products like food items etc choose shortest distribution channel so as to deliver the product to the customer. On the other-hand if the product is durable then long distribution channel is used.
- Technical nature: When the product is technically more complex then the product is directly delivered to the customer so as to give them good insight into the technical intricacies of the product. On the other hand a product which is technically not so complicated is delivered through long distribution channels.
- Advertising:Companies pay for advertising where in the communication targeted to persuade the potential customers to incline towards the product or service as against the competitors’ products or services. Advertising will be more effective when it is targeted towards the potential customers who will be more likely to purchase the product or service. Advertising aims to let the customer know about the name and benefits of the products or service and work towards creating a goodwill and positive image. It also encourages the customers to get more educated about the product or service.
Usually this is carried out through the following media:
- Directory listings
- Direct mailing
- Office front or window display
- Point of sale
- Personal Selling:
Personal selling is carried out by reaching the prospective customer in-person and giving them a presentation of the product or service, thereby creating awareness of the product or service. This is usually carried out through salespersons. The sales person thus acts as an ambassador of the company and plays the following roles.
- Be informative
- Be persuasive
- Service provider
- Sales promotion: The customer is provided with short-term incentives or activities that persuade the customer to choose the product or service over that of competitors’. This promotion strategy is a “below the line” strategy. This form of sales promotional activities are targeted towards final buyers, business customers, wholesalers, retailers and the team of sales force. Few examples of the promotional activities are:
- Business promotions
- Consumer promotions
- Sales force promotions
- Trade promotions
- Public relations: Public relations is aimed to maintain deliberate, planned and sustained effort to create and maintain relation between the organization and its public. It strives to maintain good relations with all the stakeholders/public through publicity, building a positive corporate image, ensuring that the negative events/rumors/stories are strategically handled. This ensures that the customer is satisfied and becomes a source of referrals. Usually the following various tools are used in public relations.
- Annual reports, newsletters, magazines
- Community events and sponsoring
- Distribution of news through media.
- Event organization through news conferences, product launches and grand openings
- Favourable speeches and presentations.
- Ambient: Ambient advertising is any type of advertising to target the potential customers outside the home. Examples include the the ads that appear behind the utility bills, the ad that appears when the lift door in the shopping mall is closed, displaying the branded coasters at a local club, projections onto the buildings, distribution of branded mugs etc. The scope is as limitless as the imagination.
- Directory listing: The business details are printed in yellow or white pages, local business directories, trade or union directories. The business reaches the customers who use this media.
- Direct mailing: Catalogues, pamphlets, newsletters or letters are sent to the customer through email or post or fax. This form of advertising is broadly used by the businesses.
- Internet: Now-a-days, Internet became a widely adopted media for advertising. Ads are placed on the websites. These ads are in the form of links from one website to the other. Other forms include publishing the content on the blogs, providing online games, social networks, forums and search engines.
- Movies: Businesses purchase cinema advertising for a number of screenings or “runs”. This can be either on a particular cinema or screen. The advertisers usually offer the production and screening of the advertisement. In addition to this, businesses sponsor movies and include their advertising as part of the movie itself.
- Office front or window display: In this form of advertising, the business office or shop’s exterior is very well maintained with clear and bold sign. The windows are maintained bright and attractive and well lit during the night hours. It projects the business logo and stresses on the fact that why their product or service is worth trying. To summarize, it should have very good impact to grab the attention from onlookers.
- Outdoor: This form of advertising displays static advertising in the form of billboards, backside of street benches, bus shelters. In some other form it appears as mobile advertising with the ads displayed on autos, buses, trains, taxis etc.
- Point of sale:Customers are targeted through floor stickers, digital advertising in the store or super markets, signage attached to the shopping carts, posters at the billing counters, posters in the shelf, conducting surveys about the product in the store. This helps the business to change customer decision and make them think to buy the product or service.
- Press:Ads are displayed in the journals, magazines and news papers. Businesses adopt this form of advertising to build the image, spreading of information and to conduct the sales campaigns. This is more suitable for small businesses.
- Radio: Radio advertising is effective to reach targeted audience like teenagers, racing followers or book lovers etc. It is usually in the form of spot advertisements (spanning 15 to 30 seconds), promotions or talk-shows/RJ discussions. Many radio stations offer production and extension of these campaigns through their websites too.
- Stationary: Businesses print stationary like business cards, envelops, letterheads etc to promote their business image or to spread the name of their business. The stationary used is of good quality and will provide everyday presentation of the business image.
- Television: Television if one of the most powerful advertising medium as it uses sight, sound and movement to grab the attention of the viewers. Due to high cost involved in producing and getting the airtime to play the ads, this form of advertising is mostly suitable for well established businesses.
- Consumer Promotions: These are targeted towards final buyers and include
- Appearance of Celebrities in the store, In-store sampling, demonstrations
- Bonuses, multi-packs, On-pack offers
- Competitions, coupons, sweepstakes, games
- Display material near the point of sale
- Loyalty reward programs.
- Business Promotions: These are targeted towards business customers and include
- Capability documents
- Conference Presentations
- Direct mail campaigns and telemarketing
- Event Sponsorship
- News Letters
- Seminars and workshops
- Tradeshow display
- Trade promotions: These are targeted towards retailers and wholesalers and include
- Bonus stock
- Corporate entertainment
- Reseller staff incentives
- Reward incentives linked to purchases or sales
- Sales Force Promotions: These are targeted towards members of the sales force and include
- Awards or prizes after sales competitions
- Back to top
- Informal day-to-day interactions
- Formal transactions (for instance negotiations related legal contracts, sale agreement, lease agreement, service delivery requirements etc)
Good negotiations play a critical role in business success as they help in
- Avoiding conflicts or issues in the future
- Build and maintain good relations
- Providing long-term, quality solutions
The following are the various negotiation techniques.
- Integrative: Integrative negotiations, also known as win-win, requires the parties involved to arrive at a solution which makes everyone a winner. This might require that the parties involved make a trade off, consider multiple issues and try to enlarge the pie instead of dividing it. Integrative negotiations promote the development of good working relations and trust
- Distributive:Distributive negotiations, also known as win-lose, are the ones in which one party wins and gets what it needs while the other party loses and has to give up something. Consider the case of buying an asset like a land for the firm. In this case the buyer will try to reduce the price as much as possible while the seller will try to get as much as possible. It appears that the parties have conflicting interests. Distributive negotiations will not promote lasting/good working relations.
- Inductive: This type of negotiation start with working on small details and continue to work upwards until an agreement is made. An example is the case where the labour union is negotiating with the factory managment regarding the provision of facilities for the employees, employee pension scheme and investment plan. They start with negotiating small details initially and then start moving up onto the bigger things.
- Deductive: In this case, the involved parties arrive at an agreed upon strategy to start the negotiations. the negotiations start in accordance with the established principles and considering a formula to arrive at a negotiation while working out the details.
- Mixed: This is most commonly used form of negotiation and is a mix of both the inductive and deductive methods of negotiation.
The following are the various reasons that could cause a business to fail.
- Adequate cashflow Deficit: Cashflow is defined as a business’s capacity to maintain enough funds to meet its day-to-day expenses related to the business activities. When a business is not able to estimate the incoming and outgoing cashflow, it is prone to failure. This is especially true in case of small businesses. Due to this reason it is very critical for the entrepreneurs to get enough accounting knowledge so that they can make cashflow projections. This will help them to estimate how much they can spend each month.
- Bad/Poor Business Planning: The most common cause for around 90% of business failures is poor business management competencies and planning. A well prepared business plan incorporates
- Business mission
- Cost Structure
- External influences
- Strengths and Weaknesses
Other details like
- Marketing Plan
- Operating Plan
can also be included.
When these details are poor, it leads to business failure.
- Competition Ignorance: When the business fails to keep a watch on competitors and positioning of the products, the customers, who are always looking for a better/best offers will move out to the competing business which is offering a better product or service or lower price. This will make the customer a winner at the cost of business losing. This will lead to failure of business.
- Decreased customer base: Businesses tend to lose customers under competition. Small businesses are better to focus on a customer strategy that suits well for them. They should also be looking for alter strategies instead of completely sticking to one. It is essential for the business to have a difersifying customer base. The business should always be ready to adapt new ideas and trends. Failure to do so will lead to failure.
- Entrepreneurial skill deficit/lack: Inadequate entrepreneurial skills, especially during the start up phase, are critical for making a business successful. During the later phases having administrative and management skills pays off. The success of a small business depends on
- Owner behaviour
- Owner characteristics
- Environmental influences
Entrepreneurs being high risk takers and have a greater need for achievement and social awareness, their personal and personality characteristics might lead to business failure.
- Faulty/Poor System of Control: A business has no control over the external environment but it has easy access and control to internal environment. Failure to exercise control on the internal environment will lead to business failure. The should be controlling factors for
- Quality of production
- Quantity of production
- Financial control to ensure financial performance
The control system should be capable of establishing standards, measure performance, compare performance against standards and take corrective measures to eliminate deviation from the standards. Failure to do so will cause the business to fail.
- Growth Spurt: Uncontrollable growth, if not dealt with properly, will cause the business to fail. There should be professional management team, flexibility in the business, appropriate systems and controls in place for the business to succeed. The business can achieve this through proper planning. When this is not considered, it might lead to failure.
- Having incompetent Management:When the management is incompetent or inexperienced it will not be possible to manage and effectively implement and monitor the strategic and operational plan of the business. Though a business have an excellent strategic plan, its effectiveness depends on the management’s competence to implement it. Management incompetency is also the root cause of around 90 percent of business failures.
- Inappropriate Location: Chosing an unsuitable location will cause business failure. This factor is not applicable for all the businessses but for some business being at the right location is very important. Failure to establish the business at the correct location will cause the business to fail.
- Inadequate Financing: Finance is the life-blood for the business to grow at all stages. Non availability of funds, lack of proper planning for funding to grab growth opportunity will cause the businesses to fail. The financial planning should be done well in advance. The entrepreneurs should
- possess enough knowledge about the cost involved in raising the capital
- have proper alternate plans to procure the funds from different sources
- consider choosing a combination of debt and equity to finance the business
- consider growing the business to overcome financial crisis
Failure to do so will lead to business failure.
- Unworkable Goals: It is essential that the entrepreneurs should not just set goals but should also set workable goals. As the entrepreneurial pursuits often involve uncertainity, it is essential to set realistic/achievable goals in the scope of acceptable risk taking and optimism. Failure to do so will lead to business failure.
- Industry Experience Deficit: The resources available for the business must be compatible to meet the demands of the environment with which the firm deals with. This can happen when the business have good industry experience. The structure of the industry will dectate the performance of the business greatly. Failure to have the industry experience will lead to failure.
- Create a brand name
- Create a logo and tagline
- Reach the potential customers through pomphlets/direct mailing/through local TV network or Social Media
- Sponsor any local events where in there is social gathering.
- Distribute samples
- Encash any of the upcoming festivals/events through promotional strategies like discounts/offers/sweepstakes etc.
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