PRINCIPLES OF MARKETINGUNIT-I

MARKET:

The term market derived from Latin word “Mercatus”. It means “to trade”According to Pyle “Market includes both place and region in which the buyer and seller are in free competition with one another”

MARKETING :

INTRODUCTION:Marketing is a common process by means of which goods and services are exchange and their values are determined in terms of money. It is a human activity directed by satisfying needs and wants through exchange process.DEFINITION:According to American Marketing Association (AMA) “Marketing is concerned people and the activities involved in the flow of goods and services from the producer to the consumer”.

EVOLUTION OF MARKETING CONCEPT :

1 SELF SUFFICIENT STAGE : This will lead to starting of economic activities i.e.

agriculture. But each family then was a self sufficient unit as for as production and consumption functions were concerned.

2 BARTER SYSTEM : Barter system means an exchange of goods possessed

by one person with the goods of another person. Under this system goods are exchanged against goods without any medium of exchange. It is the primary stages of the human beings were hunters.

3 PRODUCTION ORIENTATIONDuring the early days of business activities the

emphasis was mainly on production. The then businessmen thought that they could produce anything and sell. To a certain extent they were successful too. The later phase of this stage witnessed mass production by industrial units. This has come to be called as “Industrial Revolution”.

4 SALES ORIENTATION.

The idea of mass production of goods as conceived in the previous stage did not work later. Mass production must have resulted in a condition of supply exceeding the demand. Further, with the growth of transport and communication and improvement in the lifestyles of people the attitude of businessmen has to change. They realized the need for selling efforts. Thus emphasis shifted from production to sales.

5 MARKETING ORIENTATION : In the previous stage the strategy of the marketers was

to “somehow sell” to goods produced. Marketers decided to measure the needs of the consumers. All the marketing efforts right from production of goods, fixing the price, packing, sale promotion to making sale would be in tune with the needs of the buyers.

6 CONSUMER ORIENTATION : It is an extension of the previous stage and not something different altogether. The marketers felt that measurement of consumers needs along is not enough. Their needs must be fulfilled. They decided to give all that the buyers expect in the goods and services marketed. This is mainly due to competitive pressures. As they are many alternative available in the market the consumer is not dependent on any one seller. He can select the alternative that best fulfils his needs.

7 MANAGEMENT ORIENTATION:Management is the art of getting things done by others. The techniques of management are being applied in several functional areas of business like production, financing and marketing. The present day marketers are well versed in management and they achieved by planning, organising, co-coordinating and controlling all marketing activities.

MODERN MARKETING CONCEPT: It is the focusing of all the activities of an organization to find out how best it could serve its customers.

COMPONENTS OR KEY OF MODERN MARKEING CONCEPTS:

I.PRODUCTION CONCEPTS: Consumers will favour these products that are widely available , and at low cost.II.PRODUCT CONCEPT: Consumer will favour these product their offer most quality performance.III.SELLING CONCEPT: Consumer will not buy the

organization products unless there is an aggressive selling effort.IV.SOCIAL MARKETING CONCEPT: The organization has to determine the needs, wants and interest of the target market.

FACTORS OF MODERN MARKETING CONCEPT : 1 Increasing marketing and demand of goods.2 Increasing households of families and their demand.3 If income increases purchasing power also increase.4 If income increase the consumption of luxurious goods also

will increase.5 Buyer must learn about new products.

FEATURES OF MODERN MARKETING:

1.MODERN MARKETING IS CONSUMERS ORIENTEDConsumer orientation is defined as the managerial state of mind concerned with customer satisfaction and profit and not sales volume alone. Consumer becomes important of all business decision. In consumer orientation creation of satisfied customers is the main goal of modern marketing profit can be earned only by saving the consumer needs.

2.MODERN MARKETING BEGINS WITH CUSTOMER: The producer of the last century has little care for the consumers but the situation has changed market has developed from national, to international level competition is the order of the day business man has started realizing it. Earning profit is possible only through consumer satisfaction to satisfy a customer needs are to be known. This is possible only when information is collected from consumers. Thus modern marketing starts and ends with consumer.

3.MODERN MARKETING BEFORE PRODUCTION: The early periods there was less competition and has such sales were easily made. Now essential for the producer to find out the need and desired of consumers through marketing research. The information from the market and the consumer desire will decide the future of the product. Thus product planning development is undertaken before the actual production take place.

4.MODERN MARKETING IS A GUIDING ELEMENT: At present competition is more accurate. Producer has to face a strict competition. The ability of finding a customer and to satisfy him. People may choose one among the products. They decide what to purchase and what not to purchase. Thus it can be set that modern marketing is a guiding element.IMPORTANCE OF MARKETING:

Marketing affect each personal life. It is rightly said that marketing is the heart of any business organization. So the chief executive of the organization has to scan the market trend and develop the products that satisfy the customers.

It helps in developing economic resources of our country.

Any reduction in the cost of marketing is really benefit to society.

Market process brings new varieties of useful and quality goods to consumers. This raises the standard of living of the people.

Marketing provides wide employment opportunity

Marketing is convert yesterday luxuries into today’s necessaries

Marketing convert low demand into effective demand.

Any increase in the efficiency of marketing really result in a lower cost of distribution. Lower prices to consumer mean a real increase in the national income.

Marketing creates modern cultivators.

The behavior and demand of customer keep on changing.

MACRO MARKETING: Macro marketing refers to that total marketing system. In which as a result of socio economic process the flow of need satisfying goods and services from the producer to consumer. Here the emphasis is not on the activities of an individual organization but is on how the whole system performs taking into the account of all producer and consumer.

MARKETING PROCESS:The various processes involved in finding out customers their needs into product, product features and planning the goods with customer are collectively known as the marketing process.

MARKETING SYSTEM : Marketing system integrates together the marketing concept and process. It simply the total system working in the market is called

marketing system.

MARKETING MIX: Marketing mix is the combination of the products, place, price and the promotional activities these are popularly known as four P’S.

ELEMENTS OR FACTORS OF MARKETING MIX :

I.PRODUCT: It refers the quality, feature, quantity, branding, packaging, size, service warranty of the product.

II.PRICE: It includes discount, allowance, commission terms of credit and social responsibility.

III.PROMOTION: It refers advertising, sales promotion, personal selling and publicity.

IV.PLACE: It includes in the head of physical that is transport, storage and warehouse and the other heads channels include whole seller and retailer.

FUNCTIONS OF MARKETING MIX :

I CONTROLABLE FACTORS:1 Product planning 2 Price3 Branding4 Personal selling5 Sales promotion6 Physical distribution7 Market research8 Internal competition

II UNCONTROLABLE FACTORS1 Behaviour of the consumer2 Traders behaviour. 3 Competitors position and behaviour.4 Relation of supply and demand5 Technological changes6 Government behaviour

AIMS AND OBJECTIVES OF MARKETING :

Intelligent and capable application of modern marketing policies.

To develop marketing field. To develop guiding policies and their implementation for a

good result. To suggest solution by studying the problems relating to

marketing. To find sources for further information concerning the market

problems. To revise existing marketing function. To take appropriate actions in the course. To determine marketing mix that aims to satisfy the needs

and wants of customers. To satisfy the needs and wants of customers. To raise the standard of living of the people.

ROLE OF MARKETING:

Role of Marketing In Economic Development

Marketing is considered as highly important for the society as whole. Now a days, the main object of production is distribution of goods and services through marketing and to make as much profit as possible. According to Philip Kotler, “Marketing is analyzing, organizing, planning and controlling of the firms customer-impinging resources, policies, activities with a view to satisfying the needs and wants of chosen customer groups at a profit” William J. Stanton states that “Marketing is a total system of interacting business activities designed to plan, price, promote and distribute wants-satisfying products and services to present and potential customers”. The president cannot plan, the products manager cannot manage the purchasing agent cannot purchase, the chief financial officer cannot budget and the engineer and designer cannot design unless and until the basic marketing determination has been made. Further, it is necessary to state again the remarks

made by another writer that “nothing happens in our economy until somebody sells something”.

Marketing involves a wide range of activities. It plays an important role in the growth and development of a country. The development of marketing has always kept pace with the economic development of the nation. Marketing plays a dominant role in every economy. Marketing as a business function and an economic activity influences economic development of a country.

In developed economies, the way of life itself connects a certain degree of development in marketing. In such countries, the volume of production is generally more than the demand. To maintain the level of production, it is absolutely necessary to dispose of the goods produced readily in the country itself or abroad on the basis of non-price competition. This can be done only by a very sound and advanced marketing system.

Marketing has a special significance in under developed economies. A rapid development of the economy can be achieved by adopting the modern methods of marketing. In under developed economies, marketing is still in its infancy. Industrialization and organization go hand in hand with application of modern refinements in the field of marketing. An effective marketing system alone can bring the benefits of production to the people. India sets the best example for this. Marketing is the most important “Multiplier” and an effective engine of development. It mobiles latent economic energy and thus is the creator of small business. It is the developer of standard for products and services as well as conduct integrity and reliability. Besides, economic integration is made possible through proper distribution of products. Thus the concept of marketing in under developed economies has to go a long way to catch up with the requirements of rapid industrial growth.

As in other developing countries, in our country also, marketing has been a neglected aspect of the economy. The reasons, which we have given above for the neglect of marketing in other developing countries, are applicable to India also. But before discussing the role and structure of marketing in India, it is necessary to understand the country’s economic growth and

development.Marketing has been neglected in India on account of the following reasons:

1. Our national economy is depending much upon agriculture2. There is always excess demand for many products3. Manufacturers concentrate more on production than on

marketing4. Most of the markets are sellers markets5. The management does not give much importance to

marketing functions.On account of the increasing pace of production, marketing

has gained a wide recognition. Economic growth of a country depends much on the performance of marketing activities, which stimulates the demand for goods and services, and leads to higher production. Thus, production and marketing alone with other activities become vital for economic development. Production may be the door to economic growth of an under developed and developing country. But marketing is the key to economic deadlock. Marketing, to a great extent, helps in the development of the standard of products ad services and increases the standard of various fields. Marketing, itself being a complex mechanism, involves a number of functions and sub-functions, which call for the employment of different specialized persons. The field of marketing engages about 35% of total labour force, both directly and indirectly.

DIFFERENCE BETWEEN MARKETING AND SELLING :

S.NO

MARKETING SELLING

I

II

III

IV

Selling is part of marketing

Marketing starts before production

Marketing is concerned with buyers needs

It is a changing concepts

It requires the performance of several

activities including selling

Marketing is not part of selling

Selling starts after production

Selling is concerned with sellers needs.

It is stable.

It is concerned with just

V

VI

VII

It is the starting point of all business activities.

The philosophy of marketing is “customer

satisfaction”

one aspect namely transfer of title for a

price

It is done towards the end.

The philosophy of selling is “profit maximization”

PRINCIPLES OF MARKETING UNIT-II

FUNCTIONS OF MARKETING :

MARKETING

Functions of Exchange Function of Physical Supply Facilitating

1. Buying and Assembling 1. Transportation 1. Financing

2. Selling and Dividing 2. Storage or Warehousing 2. Risk bearing

3.Standardization 4. Grading 5. Market information 6.promotion

I.FUNCTIONS OF EXCHANGE:

i. BUYING:Buying is the first step in the marketing functions. Buying is done by manufacturer, wholesaler, retailer and consumer. When the buying function is over the buyer get the possession and ownership of goods. Without buying there is no selling. Hence, buying is the foremost function in the marketing process.

ii. ASSEMBLING:Assembling refers to the collection and concentration of similar product from different sources for further distributing. A wholesaler buys and assembles similar goods from various producers.iii.SELLING:

Buying and selling are inseparable. They are complementary each other without selling function in the market, buyer can’t satisfy their needs selling converts desire into demand. The function of selling transfers, the title to a product to the buyer. Thus selling is the function on that helps to market the product.

II.FUNCTION OF PHYSICAL SUPPLY:

i.TRANSPORTATION:Marketing requires physical moment of goods or services from the place of production to the place of consumption. Commodities are providing at one place but they are also demanded at various places. Hence physical moment of products becomes necessary in the process of marketing.ii.STORAGE:All goods produced are not immediately consumed. There is a gap between the time of production and the time of consumption. Production of some commodities is seasonal but demand is regularly (i.e.) Apple, paddy etc on the other hand some goods are regularly manufactured but the demand is seasonal (i.e.) umbrella, woolen clothes etc, ware house undertakes to store the goods.

III. FACILITATING FUNCTIONS :

i.FINANCING:The wheel of marketing is set of motion only when adequate funds are available at right time at right place. Hence finance play major role in the field of marketing, commercial banks and other financial institution provide required finance.

ii.RISK BEARING:Risk means the possibility of loss by unforesean happenings all business transactions are subjected to such risk. Goods may get damaged due to fire, floods, cyclone; earthquake etc, price of a commodity may also fall resulting in loss. Marketing process involves more risks. Risk bearing is an important marketing function. Availability of various forms of insurance converse these risks.

iii.PROMOTIONPromotional activity in the marketing involves the process of stimulating demand for products. Promotion is wider term which includes advertising, salesmanship etc. It makes the marketing function easily. Promotional programs are needed for both consumer and industrial goods.

iv.STANDARDISATIONStandardisation means division of commodities into different groups. A standard is the specifications used in provide the certain basic qualities to the goods for their use. Standards are fixed on the physical characteristics of a product. The standardized products possess some uniform characteristics. For example shape, size, etc.

v.GRADING:Grading applies to certain quantitative specification like colour, taste etc.(Fruit). Grading work start, were standardisation ends. People select commodities based on the standards and grades of goods. Hence standardization and grading are essential elements in the field of modern marketing some authorized institutions are engaged in fixing standards for products. For example: BIS (Bureau of Indian Standards) and for financial service etc.

vi. MARKET INFORMATION:Market information include, size, location, characteristic of market, consumers habits, wants purchasing power etc. Adequate and accurate information helps in the form of sales policies. Decision making and success of marketing greatly depend upon the availability of correct market information.

BUYING

INTRODUCTION:Buying is the first step in the marketing functions. Buying is done by manufacturer, wholesaler, retailer and consumer. When the buying function is over the buyer get the possession and ownership

of goods, without buying there is no selling. Hence, buying is the foremost function in the marketing process.BUYING OBJECTIVES:

1 To support production schedules by maintaining supply’s2 To avoid duplication and waste of materials3 To maintain standard of quality4 To buy materials at lower cost.

FACTORS TO BE CONSIDERED IN BUYING

iQUALITY: :Decision regarding quality of materials to be bought is of

great importance.ii.QUANTITY: Determination of proper quantities to be purchased basically depends upon quantity of production.iii. TIMING: To decide when to buy in the case of seasonal products timing of purchase is a critical factors.iv. PRICE: The various aspects such as terms of credit and discounts are also to be considered carefully, before the buying decision is made besides on prices.v. SOURCES OF SUPPLY: Supplier reputation their reliability in terms of quality delivery etc. are factors to be considered in this regard.

ELEMENTS OF BUYING (BUYING PROCESS/STEPS)

I.ESTIMATING THE DEMANDThis is also referred to as “quantity decision” in buying. The quantity to be bought is depending on the purpose of buying. According to two purposes may be noted.1 Buying for consumption.2 Buying for resale.

II. ASSEMBLING:It has been defined earlier as product planning merchandising is closely related to several aspects of buying and stock management. It is the barometer of efficiency in buying and selling. The success of any firm depends on the speed with which the stocks are sold out.IV.LOCATING SOURCES OF SUPPLY:It is concerned with searching for determining the sources of supply establishing and maintaining contacts with them. With the development of communication and with the emergence of trade magazines and locating the sources of supply of products is no longer difficulties

V.MARKET NEWS:The buyer must always have the knowledge of markets especially with regard to supply position, demand position and the price variation.

VI.NEGOTIATION OF TERMSAfter considering the factors the buyer has to finalize buying. Buying takes place between two individuals i.e buyer and sellers.

VII. TRANSFER OF TITLEThe buying function ends when the seller transfers his title (ownership) over the goods to the buyer (after receiving the price).

KINDS OF BUYING:

i. HAND TO MOUTH BUYING:It is a kind of buying in small quantities house wife are preferable to adopts this method of buying. Wholesaler and retailers of fashionable goods follow this method. It is also called current need buying.

ii. FORWARD BUYING:This is practically used by the retailers, when the price move up they try to accumulate inventories to gain from the price increase. This kind of buying is usually adopted in commodity exchanges. It is also called speculative buying.

Iii .BUYING BY INSPECTION:This is the simplest method in buying before the buying decision is taken by the buyer he should examine the whole lot of goods to be purchased. This method is adopted when goods are purchased in local.

iv. BUYING BY SAMPLES:In certain cases goods may be uniform quality. In certain other cases goods could be graded different qualities. This provides in buying eliminates the labour of examining the whole quantity of goods to be purchased. But success of this method depends on the selection of a sample.

v. BUYING BY DESCRIPTION:Manufacturers of furniture items usually make available catalogues showing different models to enable their customers to choose. They

also make furniture as per the description and specification given by their clients.

vi. CONTRACT BUYINGThis method is profitable, only when the quantity to be bought is high and where a supply of material is required. It is suitable in long term contract.vii. SCHEDULED BUYING:It is another variety of contract buying. The buyer does not enter into a long term agreement. But indicate the estimated quantity that would beneeded over a period.

viii. PERIOD BUYING:When buying is made at regular and fixed intervals. It is called period buying. This method adopted by retailers.

ix BUYING BY REQUIREMENT :In certain firms their production has to be increased to meet the demands of special seasons. This happens only occasionally for e.g.: Diwali

x. OPEN MARKET BUYING:When buying is done solely attracted by the reduction in prices is called open market buying.

xi. RECIPROCAL BUYINGIt is a method of buying as agreed upon by two parties to buy and sell mutually their own productsFor e.g. : ship and Oil

xii. CONCENTRATED BUYING :When sources of supply are limited to the minimum it is called concentrated buying. It is described as “putting all eggs into one basket”. As a long range policy it is not suitable.

xiii. SCATTERED BUYING:This is just opposite to the concentrated buying method; it means buying from any source that is profit and convenient buying is made quite a large number of sources.

SELLING

The process of transferring ownership of goods from seller to the buyer is what is known as selling. Selling starts after production. The philosophy of selling is “profit maximization.

Elements of selling:

(i) Finding a buyer.(ii) To find physical nature of goods (quantity quality price, place of delivery)(iii) To find problems for the credit sales.(iv) To find correct customers(v) To set a correct price.

Types of Selling

i) Sale by inspection: The seller gives an opportunity to the buyer to examine the goods.

ii) Sale by sample: The seller offers samples in certain cases.

iii) Sale by description: The seller agrees to make certain goods as per the buyer’s description and specification.

iv) Under cover method: This method is followed in commodity exchange and also in certain unorganized market.

v) Auction: In an auction sale goods are assembled at a particular plac

FUNCTIONS OF PHYSICAL SUPPLY

There are two functions of physical supply Transportation and warehouse and storage. TRANSPORTATION

Meaning:

The goods produced in a particular place are not consumed there itself. From the place of production the goods need to be taken to the various consumption centers which are scattered throughout the country or even through the world. Transportation is concerned only with this task. It creates what is called ‘place utility’.

Functions of Transport:

It helps the business to carry the goods to the various consumption centers.

It makes available goods at the door step of the consumers.

It widens the market for the goods by catering to buyers in different regions.

It helps through business units goods are easily perishable in nature by carrying these to the market at the right time. Ex. Milk fish Vegetables etc.

It is only the development of the transportation system. It creates place utility by bridging the gap between the

production and consumption centers. It also offers employment opportunities to many.

Classification of Transport:

The modes of transport have been classified into three categories.

1) Land Transport2) Sea Transport3) Air Transport

1) Land Transport:

It is further divided into road transport and rail transport.

A) Road Transport: Bullock, Carts, Lorries, Trucks, buses, etc. are the means of road transport.Merits of Road Transport:

A) It is a economicalB) It is safe damage of goods is generally much less in road

transport because handling is minimumC) It is flexible it can reach the actual place of loading and

unloading.D) It gives access even to the common man.E) The overhead expenses are also less in the case of road

transport.Demerits of Road Transport:

(i) The carrying capacity is less.(ii) Its efficiency is very much determined by the conditions

of road.(iii) It is slow. The competitive nature of our markets makes

it in dependable.(iv) The rates are not standardized.(v) Accidents occur often in highways. This makes road

transport highly unsafe.(vi) During rainy season, the roads become unsafe and unfit

for the transportation.

1) Rail Transport:Railway plays a crucial role in the promotion of trade and industry in India.

Merits of Rail Transport:

(i) Suitable for carrying goods to distant places.(ii) Suitable for transporting bully and heavy goods.(iii) More dependable than road transport(iv) Bad weather does not affect rail transport(v) It is as economical(vi) Railway will have to strictly adhere to the time

schedule.Demerits of Rail Transport:

(i) Not all places are connected by trains.(ii) Train cannot carry goods to the door step.(iii) Rail transport is generally not suitable for short

distance.(iv) Railways have fixed routes.(v) Railways have monopoly in India.

2) Sea Transport

Ships carry consignments of different parts of the country and to different parts of the world.

(i) It is only that offers highest carrying capacity.(ii) Sea transport plays a crucial role in the

international trade of any country.(iii) Water is the gifts of nature and therefore no,

investment is required for their maintenance.(iv) The operating cost very low(v) There is not problem of traffic congestion in the

mid sea.(vi) Accident during the voyage is a rare occurrence.

Demerits of Sea Transport:

(i) It is the slowest mode of transport.(ii) It is very much affected by weather and climatic

conditions.(iii) Lack of political conditions(iv) Sea transport doesn’t offer any scope of extension

3)Air Transport:

The contribution made by air transport of the growth of trade and industry throughout the world is significant. Consignments of different nature are being sent in aircrafts daily to different parts of the country and the world.

Merits of Air transport:

(i) It is the fastest mode of transport(ii) There are generally no physical barriers to air transport(iii) For transporting easily perishable commodities(iv) As there is always strict adherence to the time schedule.(v) It otters maximum safety.Demerits:

(i) The air freight rates are very high.(ii) Like sea transport, air transport is also attached by bad

weather conditions.(iii) Transport low value goods by this mode will not be

economical.(iv) Air transport cannot connect all

WAREHOUSE

The meaning of the word “ware” is “article”. A ware house is a place where goods are stored. It is an otherwise known as a ‘Godown’. It is usually found away from the place of business of a merchant.

Merits of Warehouse:

(i) It protects the goods until they are moved to the factory.

(ii) It provides place for goods that are received in bulk.(iii) It facilities easy sale of goods when it is located near

the market.(iv) It facilities uninterrupted sale. “Out of stock”

situation is avoided.(v) It helps to equalize price by matching the demand

and supply position.(vi) It provides employment opportunities to many.(vii) It facilities large scale production of goods.

Types of Warehousing:

i) Private Warehouseii) Public Warehouseiii) Bonded Warehouseiv) Central warehousing Corporation(CWC)v) The State Warehousing Corporation(SWC)

1.Private Warehouses:

It refers to which is maintained by a merchant for his own house. Ex. Daily market goods maintain for private warehouse.

2.Public Warehouse:

A ‘public ‘ warehouse provides storage facility to any individual or business unit. Ex. Railway station and tourist places.

3.Bonded Warehouse:

It is located near ports. It enables an importer to take delivery of his goods after paying the customs duties.

4.The Central warehousing corporation:(CWC)

It provides storage facilities to individual, co-operative societies and others. It also provides facilities for transporting agricultural goods from the place of production to the place warehouse.

5.The State warehousing corporation:(SWC)

Every state in India can establish its own warehousing corporation by getting the approval of the Central Warehousing Corporation. It can also act as the agent of the central or the state Government or the Central warehousing corporation.

ADVANTAGES OF WAREHOUSE:

1 Goods can be safeguard and protected from loss, damages, fire, theft etc.

2 It offers storage facility to manufacture to manage customers.3 The user of warehouse are relieved from the burden of

expenses in construction of warehouses4 It given facility for other marketing function (i.e.) grading,

packaging etc5 Easy movement of goods is facilitated as warehouse is

located in important routes.6 The user of warehouse can dispose of goods to a buyer; the

buyer can also sell to a third party and so on.

7 Warehouse receipt can be used to get financial support.8 Large scale production is regularized because of the supply of

raw materials.9 It facilitates the user to sell the goods at the best possible

price.10 The quality of certain products increase by storing in the

warehouse. For e.g. pickles

KINDS OF WAREHOUSE:

I.ON THE BASIS OF PLACE NECESSTIY :

i. IN PLANT WAREHOUSING :Most manufacturers have their own warehouse through the size may be small. In any cases it is impossible for the manufacture. A large number of manufactures find it convenient to distribute the products from plans directly to retailers or customers.

ii. FIELD WAREHOUSING :These are centrally located warehouses form where distribution is done to wholesalers and retailers.

iii. BONDED WAREHOUSE :These warehouses are located near ports by enable the unloading of commodities from a ship safety into a place until the owner of goods takes delivery of them. Such warehouses are also necessary for outward transportation. Since a manufacture cannot wait until a ship reaches a port of loading.

II.ON THE BASIS OF OWNERSHIP

i. PRIVATE WAREHOSUE;A firm or a manufacture trader who operates a warehouse exclusively for his own purpose is called private warehouse.

ii. PUBLIC WAREHOUSE :Most widely accepted services are offered by public warehouse. The user will have to pay rental charges. It is also known as duty paid warehouse.

iii. COOPERATIVE WAREHOUSEThe ownership of these houses is vested in the hand s of a primary cooperative society. It is useful to agriculture.

III.SPECIALITY WAREHOUSE:

i. GENERAL WAREHOUSE:Store all products.

i. SPECIAL COMMODITY WAREHOUSE :These warehouse are specially constructed two house certain commodities which require special treatment. For e.g. Woolen, cotton etc.

ii. REFERIGERATED WAREHOUSEPerishable products are given a second life and made to enter international market. Farm products are really benefited by this.

STORAGE

A manufacturer needs to keep adequate stock of raw materials to ensure smooth production. A trader has to maintain adequate stock of the products he sells to meet the demand maintenance of stock of raw materials and finished products call for storage.

FUNCTIONS OF STORAGE:

1) To preserve foods that is produced only during a particular season but is demanded throughout the year (agricultural goods).

2) To preserve goods that are produced throughout the year but demanded during particular season (crackers, umbrellas, etc)

3) To preserve the quality of certain goods.4) To enable businessman to make speculative gain i.e., to

wait and sell at a higher price.5) To protect goods from pests and insects.6) To ensure smooth production and distribution.

SITUATION REQUIRES STORAGE:

i. Seasonal production but uniform consumption for e.g. Fruits, Vegetables etc.

ii. Uniform production but seasonal consumption for e.g. Refrigerator. AC, sweater etc.

iii. Protection of goods.

ADVANTAGES OF STORAGE:

All most all the farm products produced seasonally are in demand throughout the year and as such producers have to store them.

Continuous sales can be affected because of the storage facility.

Creation of employment opportunities to millions of people is made available.

Financial aid can be made available against the goods stored as a collateral security.

Storage is necessary to carry out other marketing functions such as grading, cleaning, packaging etc.

It is regarded as an important aid in equalizing prices by matching the demand and supply position.

Cold storage facilities longer life to perishable items. Storage is always essential for easy transportation

arrangement. Certain types of goods are to be preserved in the store. For

e.g. Rice and honey etc. Present era is a period of mass production.

DIFFERENT BETWEEN STORAGE AND WAREHOUSE:

S.NO

STORAGE WAREHOUSE

I

II

III

IV

V

It is generally located near the factory

It aim is for personal use

Additional marketing function cannot he performed.

It gives facility for storing raw materials

It is only a holding place

It is always located near the market.

Its aim is for commercial purpose

Additional marketing functions such as grading etc are performed

It gives facility for store finished product.

Holds the goods as a distribution centers

PRINCIPLES OF MARKETING

UNIT-IIISTANDARDISATION

Standarisation means division of commodities into different groups. A standard is the specification used in provide the certain basic qualities to the goods for their use. Standards are fixed on the physical characteristics of a product. The standardized product possess some uniform characteristics. For example shape, size, etc.

GRADING :

Grading applies to certain quantitative specification like color, taste etc.(Fruit). Grading start were standardisation ends. People select commodities based on the standards and grades of goods. Hence standardization and grading are essentials elements in the field of modern marketing some authorized institutions are engaged in fixing standards for products. For example : BIs (Bureau of Indian Standards) and for financial service etc

STANDARDISATION AND GRADING

MEANING OF STANDARDISATION:

Duddy and Revzan define “standardization is the process of determining of classes or grades of a product or service that have fixed limits.

MEANING OF GRADING:

Grading means the division of products into classes made up o unit possessing similar characteristic of size and quality.

TYPES OF STANDARDS:

1 QUANTITY STANDARD :Weights and measures are the standards usually used for the determination of quantity. The standard weights and measures are kilogram, meter, litZ

2 STANDARDS OF SIZE AND MEASUREMENT : The standards are determined on the basis of the size of the products. For et. Readymade garments.

3 QUALITY STANDARD:This is a standard which is difficult to be established. This

standard depends on the prescriptions of consumers and user.

TYPES OF GRADING:

i. FIXED GRADING:It refers to sorting out of goods on the basis of standards

(size, quality, etc). Already set, to be followed from year to year.

ii. VARIABLE GRADING :It refers to varying standards for goods from year to year.

DIFFERENT BETWEEN STANDARDISATION AND GRADING:

S.NO

STANDARDISATION

GRADING

i.

ii

iii

iv

v

vi

It is fixed before grading.

It is a process of fixing standard

It is a mental process

It is applied in agriculture as well as manufactured goods

It is meaningless without grading

ISI stands for standardisation

It follows standardization

It is a process of separating the goods on the basis of quality.It is a physical process

It is applied in agricultural products.

It is not possible without standardizationAGMARK stands for grade.

ADVANTAGES OF STANDARDISATION AND GRADING: 1. It helps to protect products in transit form damage and

reduce the cost of marketing.2. Standardization goods require less storage area.3. Sales by description or sample is possible4. The comparison of values of different qualities of a product in

a single market and the differences in price of the same

grade in different markets can be made.5. It helps to reduce risk and aid financing6. It helps to remove the element of speculation7. Standardisation and grading enable the manufacture to use

the brand names effectively.8. Advertisement by standards is more effective.

DISADVANTAGES OF STANDARDISATION AND GRADING It destroys manufacturing secrets It prevents adoption of new ideas It destroys personal skill and ability It treats the workers as machines It cannot easily apply to form products

PACKAGING

INTRODUCTION :

Packing of goods before there are transported or stored or delivered to a consumer.

DEFINITION :

Packing may be defined as” activity which is concerned with protection, economy, convenience and promotional consideration”

GROWTH OF PACKAGING:

i.SELF SERVICE

A number of products are being sold year after year through the super market on a self service bias.

i.CONSUMER AFFLUENCE :

Consumers are willing to pay a little more for convenience, appearance and prestige of better packing.

iii.COMPANY AND BRAND IMAGE :

To enjoy a attraction, there must be a good brand and packaging.

iv.INNOVATIONAL OPPORTUNITY :

Innovative packaging can being large benefits to consumers and profit to producers.

FUNCTIONS OF PACKAGING :

To assemble and arrange the contents is the desired form.

To identify the contents the brand and the maker. To protect the contents from production line through final views To provide a suitable product mix includes size, weight, prices,

grades and package. To facilitate retailers function To facilitate transporting, storage and warehouse handling. To enable the display of contents To encourage repurchase To help in legal requirements To provide opportunity and space for advertising.

ADVANTAGES OF PACKAGING :

i.PRODUCT PROTECTION :

Package protects the products and is fundamental in idea package prevents breakage etc.

ii.PRODUCT ATTRACTIVENESS :

The size and shape of the package its color printed matter on it etc must make the package the package attractive to look at automatically the sales increase.

iii.PRODUCT CONTAINMENT :

Package means using just the space in which a product will be contained

iv.PARODUCT IDENTIFICATION :

Package differentiate similar products packaging and labeling are inseparable closely related to branding.

v.PRODUCT CONVENIENCE :

The purpose of packaging is to consumer service.

vi.EFFECTIVE SALES TOOLS :

A good package stimulates sales. A design and attractive package invites customers.

DISADVANTAGES OF PACKAGING

It increase the cost of production Appearance of packaging is not satisfy for all products So many kinds of designs are there It is not convenience for all products for. Eg.Glass

All kind of packaging is not reuse purpose

KINDS OR TYPES OF PACKAGING :

i.CONSUMER PACKAGE :

It is a kind of package which holds the required volume of product from the house hold conception. For eg. Toothpaste etc.

ii.FAMILY PACKAGE :

When products are related in use and are of similar quality, the firm makes the package identical for all products by using common features on all the packages.

iii.REUSE PACKAGE :

It is also known as Dual package. A producer sales the content in such a package, which can be reused for other purpose. For eg. The glass jar of sunrise coffee.

iv.MULTIPLE PACKAGE :

The practice of placing several units in one container is known as multiple packaging. For eg. Baby cars set.

BRANDING

1. BRAND: A brand is a name, term, symbol or design a combination of them which is intended to identify the goods or services of one seller or a group of seller and to differentiate them from those of competitions. For eg: lux, hamam soap.

2. BRAND NAME: “Brand name is part of a brand consisting of a word, letter, group of words or letters comprising a name which is intended to identify the goods or services of a seller and to differentiate them. From those of competitors” (AMA) for eg: Usha fans, Godrej refrigerators

3. BRAND MARK: A mark is the part of the brand which appears in the form of a design or coloring.

4. TRADE MARK:

When brand name or brand mark is registered and legalized it becomes a trade mark.

5. TRADE NAME: A trade is the name of business, preferable the name of the organization itself.

6. PATENTS: Patents are public documents conferring certain rights when a new invention is made it is registered so that an exclusive right is obtained by the inventor to use it.

7. COPY RIGHT: This is applicable in the case of books and is used in the same meaning as that of patents.

FUNCTIONS OF BRANDING:

1 It helps it product identification and gives distinction of a product.2 Indirectly it denotes the quality of standard product.3 It ensures legal right on the product.4 It helps to create and sustain brand loyalty to particular product.5 It helps in price differentiation of products.

ADVANTAGES OF BRANDING:

1. TO THE MANUFACTURES: 1 It identifies the product.2 It widens the market for products.3 It properly promoted, brand name creates confidences in and

good will for the product.2. TO THE CONSUMER:

1 It offers an easy way for purchase by easily identification of a product.

2 The brand name indirectly assure certain quality by identifying the manufacture begin the product.

3 The brand names assure fixed prices.3. TO THE DISTRIBUTER:

1 It helps in advertising and sales promotion programs.2 It widely popular brands of the selling process and lead to

large sales.3 Special selling efforts need not be undertaken.4 Branding reduce price flexibility.

DISADVANTAGES OF BRANDING:

1. It is difficult to establish a brand and the expense of advertising in the initial stages is very high which rises the cost.2.It does not always assure good quality manufacture sometimes place inferior goods in the market under a brand name.

CHARACTERISTICS OF A GOOD BRAND NAME:

1 The name should readily come to the minds of the customer.2 The name should be easy to read and understand3 The name should be appropriate for the product4 It should be easy to remember.

KINDS OF BRAND NAMES:

1. COINED NAME: A purposely created name that stresses more an producers identify.

2. ARBITRARY NAME: A name which is neither relating to product nor the producers.

3. SUGGESTIVE NAME: A name which suggest something about the product.

4. DESCRIPTIVE NAME: A name that describes fully the product

TYPES OF BRANDS:

1. INDIVIDUAL BRANDS: A firm may denote upon a policy of adopting distinctive brands for each of the products.

2. FAMILY BRANDS: One brand name for all the products of a manufacture.

3. COMPANY NAME: We may have for all products the name of the company of the producer.

4. MULTIPLE BRANDS:

Products have individual names and company brands to indicate the firm producing them.

5. PRIVATE BRAND: Such brands are owned and control by middleman rather than manufacture.

6. NATIONAL BRAND: The same brand fused on the national level.

7. REGIONAL BRANDS: The brands of the product used for particular region.

8. ADVERTISING BRANDS: Brand stresses symbol

FEARNES OF A GOOD BRAND:

1 Brand should suggest something about the product2 It should be easy to advertise and identify3 It should be simple, short, and easy.4 It should be premature nature.5 It should be clear and attractive.6 It should be capable of being registered.7 It should be distinctive8 It must have a pleasing sound to the year, when

pronounced9 It should be economical to reproduce10 It must be original11 It should not be offensive12 It should create a good image13 It should not be pronounced in several ways.

LABELLING

INTRODUCTION:

Label is a small slip placed on or near anything (products) to denote its nature, contents, ownership etc. The functions of standardization is made perfect and known to the user through labels.

FUNCTIONS OF LABELLING:

It gives definite to the product and therefore the identification of a product is easy.

It stress the standard and other special features of the product

It enable the manufacture to give clear institutions to the consumer about the proper use of his product.

By mentioning prices undue price variations It encourage to produce only standard and quality products.

ADVANTAGES OF LABELLING:

It is a social service to customers It avoids price variation by publishing the price on the label It helps advertising activity of the organization It helps the customer to assess the superiority of the product It is a guarantee for the standard of the product.

ADVANTAGES OF LABELLING:

For an illiterate population this is of no use. It increase the cost of production It is effective only where standard is compulsory It enables the customer compare the advantages of products

before they are used.

KINDS OF LABELLING:

i.BRAND LABEL :

These labels are exclusively meant for popular the brand name of the products. For eg. Cigarettes, Sweets etc.

ii.GRADE LABEL :

These labels gives emphasis to standard this is used as an indirect method of product identification. For eg. Cloth etc

iii.INFORMATIVE LABELS

The main object of this label is to provide maximum possible information.

iv.DESCRIPTIVE LABELS :

The labels which are descriptive in nature are typified information. These made contain the product characteristic and in addition the method of using it properly.

PRINCIPLES OF MARKETING

UNIT-IV

PRODUCT PLANNING:

Product planning has been defined by AMA as “the act of making out and supervising the search, screening, development and commercialization of new products. The modification of existing lines; and the discontinuance of marginal or unprofitable items. “Simply stated, product planning decides the nature and other related aspects of the article produced and sold.

The following are the usually functions undertaken by product planning:

FUNCTIONS OF PRODUCT PLANNING:

1. Evaluation of the idea, market and the product2. Evaluation of company resources3. Finding out customer specifications4. Developing the product5. Testing the product6. Marketing the product and7. Evaluating the result

In the words of Stanton, product planning consists of “all activities which enable producers and middlemen to determine what should constitute a company’s line of products. Ideally, product planning will ensure that full complement of a firm’s product is designed to strengthen the company’s product position”.

SIGNIFICANCE OF PRODUCT PLANNING:

Product planning provides the following benefits.

1. Basis of Marketing Programme:

Product planning serves as the basis for decisions about price, distribution and promotion. A sound product policy results in precise definition of the target market and clear understanding of the impact of alternative marketing strategies. Sound product strategies help to increase the effectiveness of other elements of the marketing mix. A well – designed product consistent with market demand is easy to price, promote and distribute. It is easier to get dealers to handle the right product. It is difficult a price a poor product properly. The first and foremost area that requires

attention is the product or service. If wise decisions are made in this area, all other marketing decisions become easy.

2. For Survival:

In order to stay in the long run. A firm needs repeated sales. Every product has a limited life. As old products lose their appeal. It becomes necessary to improve them or to plan and develop new products. Through product planning a firm can continuously adapt its products to the changing demand and thereby sustain its profits and sales. Product planning can assure a reasonable return on investment.

3. To Face Competition:

Properly planned and well-developed products help place an enterprise in the strongest competitive position. Imaginative product planning has become increasingly vital to gain and hold a competitive edge in the market. A sound product ensures continuous and increasing sales.

4. To Minimise Risk:

The mortality rate of new products is quit high. Lack of adequate research to establish market needs, poor design and improper timing are common causes of product failures. Sound policies and strategies relating to the adding of new products, improvement of existing products and dropping of unprofitable ones on a contuinuing basis help to minimize and diversify risk. The waste and loss involved in product failures have increased tremendously due to heavy investments, and long gestation periods. As a result, the importance of product planning and development has increased.

5. Instrument of Growth:

Continuous and rapid growth in modern business depends largely on product innovation. In order to create new customers and increase sales, a business enterprise must come out regularly with new and better products and new uses of existing products. Modern

consumer is very discriminating and knowledgeable. Product planning helps to strengthen trade relations, to exploit business opportunities, to make optimum use of plant capacity and distributing channels etc. Product planning is necessary to achieve coordinate efforts from all departments of an enterprise.

6. To Discharge Social Responsibilities:

Products planning is an important means of discharging social responsibilities of business. The economic and social justification for the existence of a business firm is the product service it supplies. By planning and developing products that satisfy public needs, a firm helps to improve the quality of life. By avoiding wastage of national resources on undesirable goods product planning contributes to the growth and welfare of a nation.

The significance of product planning has increased with the adoption of the marketing concept.

PRODUCT OBJECTIVES AND STRATEGIES:

Product objectives should be derived from marketing objectives, which in turn originate from corporate objectives. The corporate objective invariably aims at growth and is usually measured by sales income. There could be two alternatives to acheive this : acquisition or amalgamation of firms or to increase sales of the firm. The first is the concern of legal and financial departments. The latter is the direct responsibility of the marketing department. Thus, increased sales become the marketing department’s objective. Accordingly, product objectives should be designed (this is dealt in detail in the following paragraphs)

One major management aspect involved in product policy is the decision concerning product mix. The product mix is one of the elements in the product policy. This is more important nowadays, since most of the manufacturers are diversifying their products. The product policy decisions are made at three different levels: Product mix, Product items, and Product line. These ‘three-in-one’ elements make the product planning effective.PRODUCT PLANNING FOR NEW PRODUCTS :

I.EXPLORATION :

The first stage of the new product evolution begins with an idea for the product hence this stage is also termed as “Ideal generation”. Ideas may originate form the following sources.

1 Own research and development department.2 Distributors3 Competitors4 Professional investors.

II.SCREENING :

At this stage the ideas collected are to eliminate those inconsistent with the product policies and objectives of the firms. Some ideas may already be producted by patterns and some other may not be fit for consideration because of the non availability of raw materials for production. The procedure adopted includes

1 Expanding each idea into full product concept.2 Collecting facts and opinions3 Assessing each idea for its potential value to the company

III.BUSINESS ANALYSIS :

It is a continuation phase of the above product features are analyzed and a rough program for development is fixed. This stage includes.

1 Further study on each idea in a detail manner2 Determining the desirable market features for the product.3 Developing specification and establishing a program for the

product.IV.DEVELOPMENT :

During this stage the idea on the paper is turned into a product on hand this stage is also termed as technical development. Once the management desires decide to go forward with the product idea. The following activities are under taken.

1 Establishing development projects for each projects.2 Buildings the product with the changed specification,3 Competition laboratory evaluation

V.TESTING :

The activities undertaken so for as based on certain information collected. It is at the stage of testing that one could testify the accuracy of such information on the basis of various stages were completed. Testing may be classified into three.

1 Concept testing – test ideas concept of products2 Product testing – test the product is real3 Test marketing – evidence for the success of a new product.4

VII.COMMERCIALISATION :

Commercialisation is also the phase were marketing is most active in connection with the new product. This stage is considered to be critical on for any new product and should therefore be handled carefully. For eg : It should be checked whether advertisement and personal selling have been done effedtively.

SAMPLINGINTRODUCTION:

Sample means a small group taken from a large lot. The small group selected should be a miniature cross-section and really representative in character. This selection process is called sampling

QUALITIES OF A GOOD EXAMPLE :

1 It must be random.2 It must be representative.3 It must be proportional4 It must be adequate.

TYPES OF SAMPLES :

I.PROBABILITY SAMPLES :

1.SYSTEMATIC SAMPLES :

First unit of sample is selected at random For eg : I year, II year and III year

2.STRATIFIED SAMPLING :

It is made when certain factors are known and are significant in the study. For eg : The population is divided into blocks each is samples at random.

3.CLUSTER AND AREA SAMPLING :

It is a survey conducted on a group simultaneously. This reduces cost and time since the interviewer collects the information concertedly from all belonging to a group.

4.MULTI STAGE SAMPLING :

This is in fact, a development of the principle of cluster sampling. Here sampling is done at various stages or levels.

5.SEQUENTIAL SAMPLING :

The size is determined only later and that too according some mathematical bias. So it is complex in nature.

II.NON-PROBABILITY SAMPLES :

1.CONVENIENC E SAMPLING :

This consist in the collection of information from any convenient group.

2.JUDGEMENT SAMPLING :

The group to be interviewed is selected in advance. But the method of selection is not scientific in nature.

3.QUOTA SAMPLING :

It is a distinct improvement over the above 2 approaches. These samples are referred to as quotas.DIFFERENCE BETWEEN MARKETING RESEARCH & MARKETING INFORMATION SYSTEM:

S.NO

MARKETING RESEARCH MARKETING INFORMATION SYSTEM

1.

2.

3.

It is restricted to a specific activity behavior, advertising etc,

It may be undertaken to find a solution to a problem.

In most cases it is a postmortem analysis.

It is a source of information to the MIS. It

It applies to all the activities.

It is undertaken on a regular basis to provide useful.

It provides useful information that helps the marketer to take important decisions.

It is wider in scope. It

4.

5.

is restrictive in scope.

It may not always be relevant for the future.

For eg. Review of past sales cannot determine future sales.

include ever MR.

It is always future oriented.

PRINCIPLES OF MARKETING UNIT-V

PRODUCT LIFE CYCLE:

The product thus has “Life cycle” just as human beings. From its birth a product passes through various stages, until it is finally abandoned (i.e.) discontinued from the market. These stages taken together are referred to as the product life cycle.

X I II III IV V

Y

INTR

ODU

CTIO

N

GRO

WT

H

MAT

URI

TY

SATU

RATI

ON

DECL

INE

SALE

S &

PRO

FIT

MAR

GIN SALES VOLUME

PROFIT MARGIN

STAGES

PRODUCT LIFE CYCLEINTRODUCTION: This is the first stage in the life of a product. Product is new. The awareness in market is low. The cost of marketing is high. So the profit of the product is low in this stage.

GROWTH:After the introduction stage the growth stage is started. The product has given satisfaction to the buyer. Automatically the sales volume increase rapidly and products starts generate profits. Competitors must notice the success and start planning competitive offering. In this stage sales and profit is increases.

MATURITY:Third stage of the product life cycle is maturity stage. The product reaching its maturity and sales are also good. But battle for market share is about to begin. So in this stage sales increase but the profit decrease.

SATURATION:In the saturation stage, the sales are at the peak and further increase is not possible. The demand for the product is stable. The rise and fall of sale depend upon supply and demand. The sale of existing product cannot be increased.

DECLINE:Decline is the last stage of the product life cycle when sales start decline, buyers go for new and better products. This is because of much reason. Technological advance, taste etc. At this stage the product cannot stand in the market. Many firm withdrawn from the market, when sales and profit decrease.

MANAGEMENT OF PRODUCT LIFE CYCLE :

I. MANAGEMENT OF INTRODUCTION STAGE

1 Since the product is new profits are negative or low. There is high percentage of product failure, so the marketing manager should follow. Make proper advertisement before the product realized in the market.

2 Shorter the period of introduction.

3 Give proper attention to the distribution.

II. MANAGEMENT OF GROWTH STAGE :Potential buyer start buying products new competitors enter the market. So the marketing manager should,

1 Improve product quality2 Add new products3 Reduce the price4 Increase promotional activities

III.MANAGEMENT OF MATURITY STAGE :

During this stage a manufacture get a maximum profit through maximum sales. A better substitute enters the market. For an effective management the marketing manager should

1 Improve the quality of the product.2 Give proper attention to increase sales3 Try to convert non-use in to user of the product4 Try to discover new user of the product.

IV.MANAGEMENT OF SATURATION STAGE :Since sales cannot be increase at this stage, the marketing manager should

1 Introduces new models2 Introduce new package3 If the price is heavy, offer the product on installment basis.

IV.MANAGEMENT OF DECLINE STAGE :

Sales and profit continue full at this stage. Cost control is important to generate profit by following alternatives suggested by

1 Improve the product in a functional sense2 May serve that the marketing and production programs are as efficient as possible3 Cut all cost to bear minimum level

ADVANTAGES OF PRODUCT LIFE CYCLE :

1 When the product life pattern is known, the management must be cautions.2 The firm can prepare an effective product plan by knowing the product life cycle of a product3 The product life cycle will greatly help the management in drawing future plans of the firm

PRODUCT MANAGEMENT WHY PRODUCT FAIL:

I.INADEQUATE MARKET ANALYSIS:Biased information of in proper analysis will yield only wrong data.

Ii.PRODUCT DEFECT:This arises out of technical flows in the process of production. This is fundamental reason for product failure.

Iii.HIGHER COST:Higher final cost than anticipated at the time of product is another reason for product failure.

iv. POOR TIMING :The fundamental principle to be followed in product planning is to find out the exact time at which the product is to be introducing into the market.

v.COMPETITION :This is also an important factors that leads produce to struggle hard in the market.

vi.INSUFFICIENT MARKETING EFFORT :It is wrong to assume that a manufacture job hence the movement a product is ready for sales.

vii.INADEQUATE SALES FORCE :Selling is done by personal or impersonal method.

viii.WEAKNESS IN DISTRIBUTION :The distribution of the product is one of the major marketing problem.

PRODUCT DIVERSIFICATION:

Diversification occurs when a firm seeks to enter the market with a completely new product “Diversification is a policy of an operating company, So that its business and profits come from a number of courses usually from diverse product, that differ in market or production

characteristic. Generally it means adding a new products to the existing product line.

REASONS FOR THE DIVERSIFICATION:

1 You take advantage of the existing reputation.2 To find the declining of profit margin3 To meet new product of competitors4 To use more effectively the existing facilities5 To increase the sales of existing products6 To maintain market share.7 To meet the customer demand8 To utilize the existing space capacity of factory9 To eliminate cyclical changes10 To find market expenditure11 To compensate the loss of another product12 To use undistributed earnings.

KINDS OF DIVERSIFICATION:

i.PRODUCT SHARING A COMMON BASE :

It is and introduction of new products, which are to the present line. The new products, which are introduction into the market, will not affect the present products in anyway. For eg : A sugar industry can diversity to paper product.

ii.PRODUCTS OF RETAINED INDUSTRIES :

It is an introduction of a new product a complementary item. For eg : A typewriter company may manufacture typewriter ribbon, which can be used as a complementary product to the typewriter. The new product may be used as an input for the old product.

iii.PRODUCT OF UNRELATED INDUSTRIES :

The product of unrelated industries diversification as a move to expand product line beyond the industries. For eg : HMT produce Wrist watches, electric lamps etc.