recent marketing

8/14/2019 Recent Marketing

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RECENT - TREND : Network Marketing

Network marketing is an industry rich in history with a long, albeit controversial,

past-one that is deeply rooted in the traditions of face-to-face salesmanship, an

occupation honored in many societies but frequently disparaged in our own.

By the 1990s, the industry had achieved a level of acceptance and

legitimacy it never knew before. Today its impact on the economy and society

extends well beyond its still relatively small claim on total consumer sales or the

workforce, attracting a broad array of individual participants for diverse reasons. It

is clearly positioned as an attractive alternative professional lifestyle for workers

and an effective alternative distribution channel for consumer product and servicecompanies struggling to be heard in a fragmented, Internet-driven market place.

Why ? How did it come to pass that an industry that traces it roots to the

door-to-door Fuller brush salesman, the Avon lady, the Tupperware party hostess,

and the flat-waving Amway distributor become such a potent channel of

distribution for a growing number of top product and service companies ? What

has made network marketing such an attractive avenue of entrepreneurship for so

many skilled and seasoned professionals ?

Industry standards in product development, marketing, management,

financial systems, technology, and business ethics have risen substantially in

recent years, giving network marketing a "new face" based in reality and not the

customary and expected industry hype.

Network marketing has become a business that is international in scope,

powered by new technology, rich with innovative, proprietary products - and that

is thoroughly compatible with the New Professional's renewed focus on family,

lifestyle, retirement planning, and time freedom.

We will outline seven major trends that are quickly coming to define the

new face of network marketing, trends that will fuel its growth as well as its

economic and social impact for years to come. But to understand these trends

fully, it is first necessary to clear up some of the misperceptions about the industry,

perpetuated by some of the people in it, that tend to exaggerate its

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accomplishments to date. From the outset, we promised a clear-eyed view of

industry achievements and potential so that aspiring New Professionals can

thoughtfully evaluate both their interest and prospects in network marketing. This

industry has been subjected a great deal of criticism, stereotyping. and even undue

harassment by competitors and regulators over the years, but some of these attacks

have been brought on by network marketers themselves.

The "Lies" of Network Marketing

The early history of network marketing was written by strong sales personalities

with powerful communications skills. These "Type A" individuals transformed the

prospecting and product sales approach from the traditional "pitch and patter" of

door-to-door selling into a fervent, emotionally laden hard sell. This hard sell

promised not only a decent product and a good income but also an opportunity to

change lives, overcome addictions, repair failing marriages, revitalize America and

change the world !

The "sales story" had to be charismatic, captivating, and compelling to

close the sale and to keep recruits motivated. Ex-aggeration and hyperbole were

the tone of the day.

Income Claims and Emphasis on Money

Network marketing has been criticized for its preoccupation and overemphasis on

"making money." Critics argue there is too much focus on "getting rich quickly,

with no work."

The fact is, however, that the network marketing industry contains many

examples of people who, from relatively modest beginnings, have developed

substantial fortunes. For example, Dexter Yeager, arguably one of the wealthiest

practitioners of the network marketing distributor culture, began as an Amway

distributor, building the most powerful down-line organisation in Amway, and then

expanded into the "tool" business, producing sales aids and ultimately building a

diversified family financial empire. Mark Yarnell, a minister launched his network

marketing career with Nu Skin in the mid 1980s and achieved a multimillion-

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dollar annual income by the mid-1990s with a worldwide distributor organization

estimated at over 250,000 people. Building on that success, Mark has become a

best-selling author, educator, and industry speaker.

Jeff Roberti, the leading income earner in National Safety Associates

(NSA) in the 1990s; the late Ken Pontious, the top distributor in Enrich; Todd

Smith and Randy Schroeder at Rexall Showcase; Brain Bumpas with Mannat-ech;

Craig Byrson, Dave Johnson, Richard Kall, Laura Kall, Russ Karlan, and Craig

Tillitson from Nu Skin-and the list goes on and on- have all achieved multimillion-

dollar annual income status.

However, 68 percent of all network marketing distributors become involved

in the field for a wide range of different reasons beyond "making money." A lower

commitment to "business building" is evident, as the Direct Selling Association

(DSA) reported in its distributor profile that only 5 percent of the distributor

population works full-time or forty hours or more per week in network marketing;

52 percent work nine hours or less per week.

The Myth of Saturation

Critics of network marketing - some mathematical economists and theoretical

statisticians, many regulators, and lay people naive about the network marketing

process-pro-claim the myth of saturation in the network marketing industry's

growth. The saturation theme is as follows: If network marketing continues to

grow, everyone in the world will ultimately be recruited into some network

marketing company. Within the industry, enthusiastic but uninformed recruiters

promote, "Here's your chance to get in on a ground-floor business opportunity,

before the market gets saturated."

The Reality of Attrition

Attrition expressed as dropout or turnover is predictably high in the direct selling

profession. The direct selling practitioner operates in a highly competitive

environment. The network marketing, "business builder" also faces the challenges

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of entrepreneurship. The risk of failure is a reality. The rewards for success in

terms of wealth and professional development, however, can be extraordinary.

The causes of attrition are numerous and complex. Frequently, distributors

enter the network marketing arena with inadequate understanding of what is

involved in the process, without a clear business model and work plan, and with

unrealistic expectations, performance milestones, and time horizons. The new

distributors do not get adequate training work because the upline individual may

be an inexperienced new recruit with limited knowledge; a weak and

reinforcement. The "upline teaching downline" process often doesn't trainer,

communicator, and coach; or too busy to support the new distributor adequately.

Many distributors experiment with network marketing and never have any

long-term commitment or perseverance. Others achieve their short-term goals

(e.g., finance a vacation, pay off a long, buy a big screen television) and retire.

Some lack the energy level or work ethic, get fatigued, and quite. Many people are

victims of organizational "fallout" : They join an organization and participate for a

while, then lose interest and retire; or they maintain their enthusiasm, work

through various achievement/ pin levels in the group lose momentum, withdraw

from the action, and disappear into the "black hole" in network marketing space.

SEVEN MAJOR TRENDS IN NETWORK MARKETING

Now let's look at the seven major industry trends that are defining the new face of

network marketing. These trends are positioning the industry for substantial

growth in both product sales and the number of participants in this unique form of

entrepreneurship.

Trend 1 : Powerful Distribution Channel

Network marketing has developed a powerful distribution channel uniquely

adaptive to the Internet era. Product and services companies ignore it at their

peril.. Traditional corporations are now jumping on the network marketing band-

wagon, which is bringing welcome change to both business strategies.

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Traditional Corporate America Diversifies into Network Marketing

There has also been a distinct movement of traditional corporate America buying

network marketing divisions, establishing start-up network marketing

organizations, or developing strategic alliances/joint ventures with network

marketing companies as a planned strategy of diversification into this lucrative

distribution arena. Some examples :

In 1973, Gillette acquired Jafra Cosmetics, a network marketing company, as a

corporate diversification. Gillette owned Jafra for seventeen years,

experiencing a compound growth rate of 18.5 percent and reaching $ 229.5

million sales in 1997, when it was sold to a financial buyer.

In 1977, Colgate Palmolive acquired Princess House, a crystal and housewares

marketer.

In the early 1980s, MCI and Amway developed a joint venture to feature MCI

long-distance services in the Amway Personal Shopper Catalog.

In 1982, Pre-Paid Legal Services, which had been marketing its products

through traditional commission-based direct sales, added a network marketing

sales force to focus on individual sales, while its in-house team concentrates on

larger group sales.

Whatever it takes to unearth new customers ! This also explains why the

network marketing community has become a "living breathing" target market in its

own right. A growing number of traditional consumer product manufacturers and

marketers are selling their products through network marketing channels to the

network marketing distributors.

Trend 2 : The New Professionalism

Network marketing companies are dramatically increasing their investments in

professional management, information systems, technologies and strategic

planning and bringing a more businesslike demeanor to their organizations.

Business meetings are replacing pep rallies; business suits now outnumber peoplein shorts, blue jeans, and funny hats.

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One of the most impressive developments in the network marketing culture

has been the dramatic increase in professionalism across the industry, starting in

the 1990s. Companies are adopting a more professional management style in their

operations. Leading firms are investing in management tools, strategic planning

processes, competitive market positioning analyses, corporate benchmarking,

"best business practices" analysis, and data-based management software long

associated with the Fortune 100 corporate culture.

Charles King, in his role as educator, researcher, industry consultant and

expert witness in litigation cases, has had the opportunity to see confidential and

sometimes very sensitive competitive information across many large and small

network marketing firms. He reports that the leading network marketing

companies are investing in increasingly sophisticated strategic planning activities,

management processes, information technologies, and marketing research

programs. The smaller firms are also upgrading their management tools within

their financial resources.

Amway Corporation, for example, has an extensive, ongoing strategic

planning and competitive monitoring program to help Amway in its global market

expansion. Thee corporation maintains an extensive marketing research capability

to track consumer buying behavior, explore new product concepts and consumer

reactions, measure distributor motivations, and profile distributor segments at

different achievement levels.

Meanwhile, Blake Roney, chairman, and Steve Lund, CEO, Nu Skin

International galvanized into a formidable management duo in shaping the destiny

of Nu Skin during the past fifteen years. Nu Skin creatively applied sophisticated

market segmentation analyses to identify lucrative target markets, thus founding

the Nu Skin strategy of divisional diversification. Scott Schwerdt, vice president

of distributor services, vice president of strategic planning, and chief operating

officer at Big planet, and the team of operating managers that executed the Roney-

Lund charge typify the caliber and approach of the executive talent that has

developed at many network marketing companies.

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Mary Kay Cosmetics, as reported by Richard Bartlett in his book The

Direct Option, has historically had an ongoing marketing research program.

Bartlett conducted extensive marketing research probing why women join direct

selling organizations and psychologically profiling different distributor groups

based on their direct selling income success. Of key interest, the research found

"successful (direct and network marketing) sales people have a communication

style or social style that encourages the building of relationships with their

customers .......... The most successful sales leaders have a combination of

relationship and task orientation" (in their communication styles).

Network marketing firms are integrating sophisticated information

technologies into their management information systems. Entire employee groups

are communicating via digital cell phones. Most companies have comprehensive,

satellite-based, voice mail and other corporate-distributor communication

programs. E-mail and a wide range of electronic communications connections are

now being used for order entry, inventory tracking, order expediting, and shipping.

Three-way telephone conference calling, fax on demand, and Internet, on-line

product presentations and distributor training are common place.

Clearly this atmosphere marks a departure from the one normally

associated with network marketing. Both authors frequently attend meetings of

salespeople for companies such as Amway, Big Planer, Cell Tech, Excel

Communications Kaire Nutraceuticals, Mannatech, Nu Skin, Nutriation for Life,

Pharmenix, Prepaid Legal Services, and others that are similar in one and

demeanor. As the industry moves more into the mainstream, this style will likely

become the model for the future.

Motivation, excitement, and even fun are all critical components to building

a successful team, be it made up of employees in a traditional company or

independent distributors in a network marketing concern. Yet increasingly, new

entrants, particularly those from the professional world, are saying, like Sergeant

Joe Friday used to do on Dragnet, "Just the facts, ma'am."

As it seeks to build its distributor force beyond today's population, network

marketing's challenge is to retain its professional, upscale, serious demeanor while

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opening itself to potential recruits from other walks of life. Indeed, while the

Rexall Showcase Las Vegas attendees appeared evenly split along gender lines

with a broad cross-section of ages, little ethnic or income diversity was readily

apparent - at least at this meeting. The children and babies seen disrupting other

network marketing conferences with their cries and antics were nowhere to be

seen here.

Still, the maturing process underway among network marketing sales forces

will likely pay off for the industry in the long run, even if in the short run greater

numbers of less serious recruits could be signed up faster using the more

inspirational, take-it-on-faith approaches of the past.

Network marketing's growing professionalism is happening overseas as

well. The annals of network marketing's move into Asia and Latin America,

particularly in developing countries, are filled with dramatic stories of thousands

of poor but hopeful recruits standing in the rain and beating down door s to sign up

for a small silver of the American dream. But now a more cool-headed approach

is taking hold. Dave Schofield, of Rexall Showcase, reports, for example, that

during a meeting with new and potential Hong Kong distributors last year, they

prepared him with detailed questions about Rexall Showcase's market

capitalization and future business strategies.

Making the transition to a more businesslike approach should also pay

dividends as network marketing companies confront government regulators in the

United States and abroad. Unfair as it may be, a company whose management and

finances are hidden from public scrutiny, which operates under a veil of secrecy

while at the same time whipping thousands of citizens into a frenzy over its

business opportunity, is likely to trigger the suspicious and paranoia of many

governments, ranging from state attorney's general here and the more authoritarian

regimes abroad.

Trend 3 : Global Expansion

Network marketing companies and participants alike will look overseas for their

greatest sales and recruiting opportunities, building exciting and lucrative

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multinational business from their corporate headquarters and home offices.

Opportunities for foreign travel, exposure to different cultures, and sophisticated

international commercial transactions will further enrich the network marketing

experience for New Professionals.

Ninety-four percent of the world's population does not live in the United

States. Obviously, then, most of the markets, consumers, and distributors of the

future exist outside U.S. borders.

Industries across the board have been recognizing this new global economic

reality. Exports now account for nearly one-third of the entire U.S. economy, a

dramatic increase over the past twenty years. These international opportunities are

not simply confined to the largest corporations. More medium-and smaller-sized

businesses are getting into the act- and statistics show that, on the whole, firms

that are engaged in international business pay higher wages, are more profitable,

and are less likely to go out of business than those who do not participate.

For network marketers - who take pride in a business ethic whereby you

build your prosperity by helping others build theirs - the opportunities to apply

that ethic on a global scale, particularly in developing nations, are tremendous.

Today more than 33 million people participate in direct selling business all around

the world. Direct Selling Association president Neil Offen estimates that number

could soar as high as two hundred million over the next ten years.

Many network marketing firms have already extended their each around the

globe. It is of no small significance that a company like Amway, whose name was

derived from that of its incubator company (which was called the American Way),

operates in fifty-three markets worldwide and makes some 70 percent of its sales

outside the United States !

Amway is not alone. Nu Skin operates in thirty countries. Mary Kay is in

twenty-eight. Enrich sells its products in fourteen nations, and Forever Living can

be found in sixty-three.

Reigniting the Asian Miracle Let's look again at Asia, which is a principal focus

of network marketing's aggressive international expansion strategy. Even in the

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face of its recent economic crisis, Asia's potential for many industries, and

especially for network marketing, is enormous.

In his recent book Megatrends Asia, futurist John Naisbitt wrote, "The

Asian continent now accounts for half the world's population. Within five years or

less, more than half of these Asian households will be able to buy an array of

consumer goods - refrigerators, television sets, washing machines, computers, and

cosmetics. And as many as a half billion people will be what the West understands

as middle class.

Trend 4: Network Marketing and the Internet

While the explosion of e-commerce will threaten many businesses, network

marketing will empower and be empowered by it. Advances in on-line

communications technologies will bring out the more distasteful, labor-intensive,

administrative aspects of network marketing from the sales and recruiting process,

allowing networkers to concentrate more fully on building home-based,

international businesses.

The Internet, the explosion of e-commerce, and the rapid development of

affordable information and communications technology are revolutionizing

network marketing in several ways.

First, it is making the execution of the business more efficient and user-

friendly and thus more desirable for New professionals. Transactions that used to

take hours of painstaking, time-consuming work and often physical labor are now

accomplished with the push of a button or the click of a mouse.

Old-timers in the industry remember the days when they communicated

with customers and prospects on a totally face-to-face basis. This approach clearly

retains its marketing power and will always be a strong feature and selling point of

direct sales approaches. Yet it consumes tremendous blocks of time and thus

severely limits the business-building capabilities of busy people-particularly

professionals who want to start as part-timers.

Ordering products and filling out applications used to be done by hand and

then mailed or phoned in to the company headquarters. Products were often picked

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that prospect directly to the sponsor's personal or company web site, while

protecting the prospect from exposure to competing network marketing programs.

What has empowered today's entrepreneurs and puts so much business

potential within their grasp is the speed at which new communications

technologies are made available and accessible to the average person. While

technology is becoming ever more complex in what it can do, it is at the same time

becoming simpler to use and cheaper to buy.

Consider that the capacity of the microprocessor is doubling every fifteen

to eighteen months and will continue to do so for the foreseeable future. That IBM

executive illustrates the impact of this development by recalling that just ten years

ago she attempted to perform a particularly complex function on the largest

mainframe computer her company had to offer-the kind of computer that used to

fill an entire room-and "brought it to its knees." Today, she does the same function

with ease on a laptop computer at her desk.

Success magazine has summed up the marriage of network marketing and

entrepreneurship and technology this way: "[Multilevel marketing] is creating a

whole new marketplace outside the box of TV advertising, storefronts, inventory,

and middlemen, and has the power to render the conventional retail world

obsolete. That power arises from the union of modern technology-computerized

record keeping and telecommunications-with the ancient art of schmoozing."

Trend 5 : Network Marketing Gets Respect

Long considered a kind of "lunatic fringe" of business, network marketing is being

increasingly accepted as a legitimate and promising part of the economic

mainstream, as evidenced by its growing recognition in the media, academia, and

professional arenas.

When Charles King began his research on network marketing in 1990-

1991, the first step was to do the classic academic "literature search" of the

business press. Several conclusions quickly emerged.

First, there was virtually no descriptive, analytical content about the

channel. In the Business Periodicals Index, the major library reference to the

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business-related periodical literature, there was essentially no coverage of the

direct selling category. There were no key words dealing with direct selling,

multilevel-marketing, MLM, network marketing, network distribution, or referral

marketing.

Second, in the leading college marketing textbooks, passing reference was

made to selling, salesmanship, and the selling process. In the textbook topic

indexes, there were no references at all related to the field of multilevel marketing

or network marketing. Among specialized business library collections related to

selling, very limited information was available about the MLM or network

marketing industry, it size measured in sales volume or number of distributors, the

primary products distributed, or the major individual companies.

Third, the intraindustry trade news was largely commercial advertising

focusing on distributor recruiting, company products specifications and claims,

personal development, and training and sales aids. Editorial content in the trade

press revolved around industry personalities and trade folklore. Hard factual

content about the industry was very limited.

Academia Recognizes Network Marketing

In addition to the media and publishing worlds, the academic community is also

becoming increasingly aware of the economic power of network marketing as a

distribution channel and as a potential part-time or full-time professional career

path.

In 1994, Charles King, Professor of marketing, University of Illinois at

Chicago (UIC), and Mark and Rene Reid Yarnell founded the UIC certificate

seminar in network marketing, coordinated by Sandra King. The program was the

first certificate seminar in network marketing ever officered by a major institution

of higher education. The program is titled "Network Marketing : Planning,

Building and Managing a Distributor Organization" and centers on applying

proven skills of entrepreneurial management taught in colleges of business

administration to the network marketing practitioner. The program, moving into its

sixth successful year in 2000, has been conducted twelve times in the United

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States, Korea, and Australia, with over twelve hundred participants earning

certification.

A NEW BUSINESS AND WORK MODEL FOR THE TWENTY-FIRST

CENTURY.

As these seven trends gain momentum, network marketing's greatest contribution

to society in the United States and around the world will be to spur the creation of

a new business and professional model that will change the culture of commerce

and work in companies and organizations both in and out of the industry. Whether

you choose to join a network marketing company or not, you will benefit from this

new business model and the cultural changes network marketing is promoting.

Despite the condescension that remains in the attitudes of many so-called

business experts, network marketing today is having a profound impact on the

entire business world. The most successful marketing companies in the future will

be those that employ a blend of the best features of both the network marketing

and more traditional marketing approaches.

As much as they have disparaged direct selling in the past, consumer

product and services companies are realizing they can no longer afford to ignore

the potency of face-to-face (or phone-to-phone and computer) selling. They crave

the customer loyalty that is increasingly hard to come by with traditional

advertising and marketing approaches. Changing demographics are causing an

overall shortage of workers. Regulations are driving up the cost of maintaining

those workers they do find.

Again, these companies look with envy to the successful network

marketing companies where a dedicated sales force works with no guarantee of

income and no traditional employee overhead.

With mass media multiplying and with consumers becoming increasingly

segmented, how do companies reach them ? How do they cut through all the

noise? How do they cut through all the noise ? How do they appeal to a public that

is spending less and less time watching videos, and channel-surfing around one

hundred to five hundred different channels ? During those times when the nation

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does come together, such as on Super Bowl Sunday, how many firms can afford

the price of admission to a rarely unified market - $1 to $2 million for a single

thirty-second commercial ?

The smart companies have come to understand that network marketing is

an important part of the answer. Inc. magazine has observed.

From the top of Inc.'s 500 companies to the bottom are product and service

companies that have adopted multi-level marketing to control overhead, create

means of distribution, and build a national sales force on a budger. All of these

companies have tapped into a growing contingent of displace workers,

professionals worried about their future, at-home moms and couples - all looking

to get into business for themselves.

As for network marketing companies, what do they need from the more

traditional companies ? Answering that question requires some understanding of

the environment in which these companies operate today.

It is a highly competitive environment. With full employment and relative

prosperity in the United States, the pool of eager participants in these business

in limited, and the distributor forces that do sign up turn over continually.

The regulatory environment is becoming more complex, particularly in the

international arena that some companies are counting on for a significant share

of their future growth. Despite vast improvements in business ethics, these

companies are viewed with suspicion in many countries. In 1998, for example,

China overreacted to abuses by fraudulent domestic operators by shutting

down for a time the entire direct selling industry. Other countries require

network marketing concerns to invest heavily in local manufacturing and other

facilities before allowing them to sell products and recruit distributors.

The development of unique products and services to be sold through network

marketing is becoming increasingly expensive. To be competitive, you need

capital. To keep on top of the competition, you need experienced executive

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(3) Marketing Research can solve all marketing problem

It is also assumed that marketing research can solve all the problems relating to

marketing of goods. These problems may be related to the launch of product,

product profile change introduction of a new brand of product and changes in

marketing package. Though it is true to some extents and sound decision can be

taken on the basis of marketing research provided the quality of the marketing

research must be sound. In other words, how useful or effective the marketing

research will be in the above matters depends on the quality of the research. It is

regretting that the outcome of the marketing research is not fully utilised. The

major reasons are in interest in the subject declined or ceased between initiation

of the research idea and the conclusion of research and result being available (ii)

lack of faith in result, (iii) the sponsor has changed job or responsibility and the

successor's perception were different, (iv) sometimes the result does not suggest

or recommend, a sufficient practical activity for the marketing department. Hence

it is clear that marketing research can not alone solve all the problems. It is not a

replacement for decision or judgements. It may be aid to the decision process and

it is the marketing decision which creates solves or stops marketing problems.

(4) Buyers will find their own supplier :-

It is also assumed that the buyers will find their own supplier. It is true

that buyers always seek low price goods along with high quality and they always

search for this. But this has always problem due to the product information gap.

The producers talk to have ignorance gap between them and their clients. If they

are not thorough with customer segments and behaviour, how do they expect

customers to find them.

Nowadays the buyer, seller equation is changing. The seller has to reach

the buyer with his sales package. Then only the buyer may find him. This is the

reality to day; otherwise the concept will be a myth.

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(5) Product sophistication means more customer satisfaction

It is also a myth that product sophistication means more customer

satisfaction. It is true that the customers always look for best and latest things.

They need things of unproved technology. But improvement in technology can not

increase customer satisfaction. Customers always need something different. Hence

the customer does not accept a thing only because it is sophisticated.

According to Airbrey Welson " customers react to a product based on its

utility or suitability to their application not on the basis how sophisticated or

technically & superior it is"4. Hence product sophistication alone s not enough

customer's satisfaction as regards to the product is also important and this should

be taken into consideration as well.

4. Aubrey Wison "New Direction in marketing" __ Excel books, New Delhi 1995

Page 210

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EMERGING GLOBAL SCENARIO IN MANAGEMENT

The work is shrinking. It has become one economy in its expectations and its

responses. It has indeed become "a global shopping centre".

Science and Technology profoundly dominate and decisively determine the

life style, living standard and economy of people with far reaching material and

spiritual import. The wave triggered by the invention of the microchip leading to

electronic and information revolutions, has caused the net-working of nations

which has brought the distant corners of the globe within easy reach of very

human being.

The increasing interaction with the changing world shapes the thoughts and

actions process. The pace of the world grows ever swifter and now we seem to be

perfecting artificial intelligence and making advances in bio-technology, whereby

it may be possible to create human brain, plants, animals and even human beings.

The change is visible all over the world and the last decade has seen the

collapse of communism, the transformation of China into a market driven

economy, the disintegration of the erstwhile Soviet Union into numerous

independent States, the elimination of iron curtain, the liberation of Eastern

Europe, the end of the cold war, the rise of Japan as a credible economic rival to

the United States and emergence of India as a potentially great economic power

after the introduction of economic reforms, with liberalisation and globalisation of

industry and trade.

The days of isolation, protectionism, administered prices, industrial

licensing are gone. Today the technology flows are universal and coupled with

globalised marketing and brand names. The world of finance has been globalised

and funds are raised internationally. The revolution in communication and

informatics makes instant communication possible and hence the market trends all

over the world can be known at any time.

Under the situation, global competition is inevitable. Every country would

aspire to be competitive. One who offers something extra in the way of product

and service wings the race, reaslising the importance of customer satisfaction. One

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has indeed to move forward, 'from customer satisfaction to customer delight and

from customer delight to customer surprise'.

"To do business in the world today, even within one's own national

boundaries one requires 'thinking globally' and any business that operates beyond

its own national boundaries will have to make one radical change: it will have to

build a transnational top management in which people of different nationalities,

with different background and different experiences, work together as a team.

There area already a few examples. One is Nestle, the Switzerland-based

processed foods company. In its top management, half a dozen different

nationalities are represented."

"There is Coca-Cola (and other food processors)j in the US, and there is

Citibank in the financial field. These, so far, are the exceptions. To build such a

management is clearly a major task, and it is difficult. How difficult is shown by

the troubled relationships between the large Japanese consumer electronics

companies, like Sony and Matsushita, and their American 'software' subsidiaries,

the movie and programme products in Hollywood. Even where there are no

cultural differences at all; to build transnational management has not been proven

easy for anybody."

"There is one company today that has a truly European management. It is

the European management. It is the European subsidiary of the (American) Ford

Motors Company. Americans, Englishmen, Germans, Italians, and Frenchmen

work together there in a common top-management team. But it took the Ford

Motors Company twenty years of very hard work to develop this team." ---- Peter

Drucker.

While science and technology have been making swift strides, the human

society has also been rapidly changing. The dynamic social political and cultural

situations have serious conditioning effect on the management of human resource

which is at the heart of all development processes. The inter dependence of

economics and culture, social discipline and fast development of rural and

unorganised sector, educational and research facilities and infrastructure in general

have been increasing faster than ever before. People all over the world are

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becoming more and more conscious of social justice, democratisation and

transparency in business.

The social responsibility of business is another factor which has assumed

far greater importance and rightly so. Social vision is integral for the success of

the business mission and no business can operate in isolation from society. Living

in harmony and not at odds with the society is, therefore, important. An

organisation demonstrates its commitment to social responsibility by being a good

'corporate citizen' in a holistic manner which means : (a) contributing to

improving the quality of people's life through its modest service and values, (b)

participating actively in the community by stimulating the local and national

economy, hiring and providing people in a fair and non-discriminating manner,

eco-friendly approach and in general considering country's interests while making

business decisions.

Corporate citizens are talking of corporate initiatives in social development.

Corporate citizenship entails building a partnership with the community and

authorities for meeting the aspirations of the people and is becoming one of the

key attributes of Corporations operating in a global market place. Genuine

involvement in areas such as health care, poverty alleviation, sponsoring higher

education, science, culture, arts and sports and protection of environment can

make a difference to society.

Enlightened industrialists are talking of corporate initiatives in social

development. The social responsibility of companies extends far beyond the gates

of their plants. In the U.S. several owners have come up with major plants.

Corporate contributions have promoted universities. The Delware university at

Wellington owes its existence to Du Pont. Scandenavian countries contribute 10%

of their income to the welfare of the poor developing countries. There is a gradual

realisation that it is the responsibility of the corporate to head to the physical,

mental and spiritual enhancement of its people. The quality management

recognises the aspect of social responsibility as an important element of corporate

behaviour.

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Customers show preference for eco-friendly processes of production and

environment - conscious, socially driven organisations. More and more qualified

professionals show preference for working with such corporate citizens and it has

to be clearly understood that social responsibility does not mean "cheque book

philanthropy", it has to be born of conviction and has to be purposeful and

measurable.

In the prevalent competitive situation, corporate creativity and innovation

provide tremendous power to win. The implication of the adge "innovate or

perish" has much greater realisation. Innovation is the key to the development of

societies and organisations. Great nations are those which have focussed on the

application of science and development of technology to produce quality goods

and services which are globally competitive and thereby create wealth for the

nation.

SHIFT IN ECONOMIC POWER

There has been gradual shift in the centre of the economic power of the world. In

the 9th century England was the centre of world economic power. Sterling was the

most important currency. In the early 20th century United States emerged as the

great industrial power. The centre of the world economy then moved to East Asia

and Yen rose up as the most powerful currency before the recent crisis. Sleeping

giants like China and India seem to be waking up. The size of the potential market

in Asia is great and a good deal of marketing strategies of industrialized nations

relate to this emerging reality.

Another phenomenon which is strikingly noticeable is that while towards

the end of the last century economists believed that capital was the most important

determinant of the wealth of a nation, today what is of consequence is the

productivity of the capital i.e. the capital - output ratio and this productivity comes

out of effective use of technology and management of human resources. Similarly

while at one time cheap labour was considered to be an important asset, today it is

skilled and efficient labour, committed and innovative labour, not merely cheap

labour.

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In the last century the size of the territory under the command of a nation

was a measure of its power. European countries such as England, Germany,

France, Soviet Union went on adding colonies. It is not longer so. It is proper use

of technology which makes a nation powerful. Japan is smaller in territory than

most of the developed and developing nations, yet it is emerging as a powerful

entity.

In this context, it is worth noting that the concept of power itself has

undergone a radical change. In the past, harnessing of energy gave muscle and

money power but with the invention of artificial intelligence and replacement of

brain power by information power, the whole concept of power is at the threshold

of drastic changes. The sophisticated of human intelligence and the human

ingenuity to process information will determine the nature of power, not the size

of the army or the number of war-heads.

ENTERPRENEURAL MANAGER

A recent development is the entrepreneural style of management where the

professional manager is supposed to be bold and aggressive with ambitious

outlook like an entrepreneur. The characteristics of such an entrepreneural

manager consist of result orientation, assertiveness and pragmatism in taking

decisions and solving problems while foreseeing opportunities and threats. He has

flexible approach and is not necessarily bound with structured working

environment. His determination is to accomplish extra-ordinary results.

The entrepreneural manager receives compensation which includes profits

sharing. It is not merely linking remuneration to profitability but receiving a share

of total profit, without sharing loss, if it occurs. Thereby corporates attract the best

talents and motivate them. The system also encourages risk taking. It is not merely

linking remuneration to productivity.

Another interesting development is worth noting. There is more money to

be made from light industries like information technology, finance and media and

less from heavy smoke stacks and manufacturing. Bill Gates, a software maker, is

the richest man now. Next comes Warren Biffet, a financier, followed by

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Information Technology giants Paul Allen, Larry Ellison and Gordon Moore. The

nature of control has changed. Today IT, finance, media, genetics and other

knowledge intensive sectors create more wealth than manufacturing sectors.

PROTECTING BUSINESS SECRETS

Healthy competition never hurt any business. But a little spying does. Today all

types of business are targets of espionage because of fierce competition. Cases of

intellectual property loss are sharply increasing. Theft of research and

development, customer lists, pricing information, sales data, etc. has been rising.

Spices take advantage of vulnerabilities stemming from modern technology

like the internet and cellular phones and in most of the cases information theft

results from human negligence. Business managers and owners lack in appropriate

steps to defend themselves against espionage. To be guardful, it is necessary to -

a) know what is valuable and must be guarded.

b) keep employees informed of security concerns;

c) be watchful of rival firms and their spies who can snoop through desk's

go through computer files, make copies of valuable documents; and

d) destroy garbage and waste papers as they can contain copies of

confidential papers.

THE INDIAN SCENARIO OF BUSINESS MANAGEMENT

The Indian industry and trade is faced with a dramatically different business

environment today. This has been triggered by fundamental and far-reaching

changes initiated by the Government policy through the process of economic

liberalisation and globalisation in the past few years. After considerable

deliberations, India has charted a course which promises to take the country from

controlled economy to a market driven economy, opening door to vast

opportunities for maximisation of wealth and thereby improving the living

standard.

For long, industries in India had been operating under a system of controls.

Such a regimented structure caused both human and capital productivity to be

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among the lowest in the world. Technology remained outdated and innovation was

neglected. Excessive stress on capital intensive heavy industry, putting most of the

investment in state owned enterprises weakened by political unionism and

throwing away the opportunity to prosper through world trade caused serious loss

of GNP growth for about 40 years.

State ownership of enterprises slowed down both domestic and export

growth. There were poor overall return on investment in public enterprises, and

gross under utilisation of equipment, executive talent and worker skills. It also

resulted in poor infrastructure in power, telecommunication, banking roads, ports,

etc. Maladies such as serious lack of entrepreneurship, poor quality of goods and

services, over manning of industries, industrial unrest and growing industrial

sickness afflicted the nation. The economic progress was abysmal. Therefore, the

change in the economic policy with its congenial impact on trade and industry is

an eminently welcome phenomenon. Now the public sector undertaking phrases

like "public commitment", 'social responsibility', 'self sufficiency', 'development of

the core sector of economy', 'balanced regional growth', 'employment generation',

etc. will change beyond recognition.

The terms such as 'competitiveness', 'market forces', 'global market', 'export

thrust', innovation, 'creativity', 'core competence', 'TQM' (Total Quality

Management), B.P.R. ('Business Process Reengineering'), 'smartizing', ' managing

teams', 'caring for customers' and 'People, Products and Profit' will come to the

fore-front. Delicensing, decontrol of prices, liberalised imports, entry of

multinational companies, convertibility of rupees, withdrawal of budgetary

support to public sector organisations, revitalisation of government enterprises,

partly through privatisation, entry of private sector into infra-structural sector, new

EXIM policy, etc. will have far reaching effect of Indian industry, the Indian

economy and the Indian managers. The process of change is irreversible and the

pace of change will continue to remain accelerated.

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SOME STRENGTHS AND WEAKNESSES OF INDIAN MANAGEMENT

India had a great past. The richness of its culture and traditions is well known. It

has produced thinkers, philosophers and religious of great eminence whose ideas

have been respected all over the world.

In the recent past after its independence, India has made notable progress in

different areas of activities. Its food grain production has more than doubled from

70 million tonnes to nearly 200 million tonnes today. Some 18% of the world's

irrigated land is in India. It has created the world's third largest pool of scientific

and technical manpower. Infrastructure, such as energy, transportation,

communication, financing, research and development has been developed to a

great extent. The manufacturing capabilities have been built to cover almost the

entire range of factory products.

Democracy has taken firm roots. There has been political stability. Almost

90% of development expenditure is generated internally and India has the world's

highest saving rate at 22%. Natural resources, scientific and technological

institutions and willing work force provide India an ideal setting for a high growth

economy and great society.

Domestic market is large. The middle class consumer market consists of

nearly 200 million persons which can foster internal rivalry, an essential ingredient

for global competition.

But we have certain great weaknesses. The galloping growth of population

at about 2.2%, one of the lowest productivity of capital and labour and poor

quality of goods and services produce serious handicap. The poor standard of

maintenance of plant and equipment, sluggish development of technology and

application of science or scientific researchers have produced damaging effect on

the economy.

The investment has been mostly in the public sector undertakings, which

have suffered from poor return on investment, extremely low productivity, inflated

manpower, uncontrolled costs and lack of care for quality, innovation and

technology - the main stay of progress have been victims of neglect. Indian

industrialists have not faced the external competition and hence could not produce

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world class quality and therefore generation of foreign exchange earning remained

too meagre.

The human resource development has not taken place to meet the needs of

modern society. Although we have a large scientific manpower, they can hardly be

counted upon as motivated and committed. The management in the Government

itself has a great deal of weakness. Bureaucratic hurdles, red tapism and

preponderance of political considerations for business matters, politicalisation of

economic issues are road-blocks to progress.

Steps taken so far have begun to bear fruits. It is evident from the

remarkable improvement in foreign exchange reserve, export, investment of

foreign capital, rising trend of industrial growth and control of inflation, to name a

few. It appears the "sleeping tiger" is waking up. Talents of the Corporate giants

and technical experts are making increasing impact on the global scenario and the

contemporary situation as a whole is pregnant with great possibilities and

immeasurable rewards. Both in the private and public sectors, business managers

are taking advantage of new concepts. Acquisitions, mergers, collaborations and

disinvestments are some of the ways being frequently adopted to improve

competitiveness.

The practice of Business Process Reengineering (BPR) has yielded positive

benefits to companies such as, Hindustan Motors, Siemens India, Union Carbide.

Mukund Iron & Steel, Aseas Brown Bevri, Indian Aluminium (INDAL) and many

others have gone for total quality management with excellent results. Smartizing

(doing away with unviable and unproductive activities and adjusting manpower)

has been adopted by Indian Companies with highly encouraging results. Notable

among such companies with highly encouraging results. Notable among such

companies are ICI, RPG Enterprises, Asian Paints, Indian Oxygen, Glaxo India,

Ciba-Geigy, etc. Team based system on the shop floor (also known as Quality

Circles) is becoming a craze for Indian industries. The team consists of workers,

supervisors and managers with complimentary skills committed to a common

purpose. The members of the team hold themselves accountable and are self-

directed. An internal co-ordinator is chosen for smooth functioning. The effort of

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the team results in cost reduction, improvement in quality, fostering innovation

and improving worker-manager relations. Companies which have adopted the

method with great benefit are : Philips India, Modi Xerox, Cadbury India and

others. Similarly, caring for customer which means not merely satisfying but

"charming" them is now widely being accepted as a good management practice.

Some shining examples are Hindustan Lever, Videocon, Cadbury India, Britannia

Industries and the like.

Public sector undertaking are not lagging behind. Reforms are afoot in

these undertakings. They are being gradually armed to operate on business line,

rather than as Government departments. Quite a great deal, yet, however, remains

to be done. The greatest problem lies in the PSU having the character of a State

under Article 12 of the Constitution of India. Due to this status PSU's have to be

subjected to the same tests as the Government are and hence appointments,

terminations, promotions are all subject to the tests of Article 12.

The PSU has to struggle with multiple handicaps for which no credit is

given. The action of an executive in a PSU is subject to judicial scrutiny which

builds up a "play safe" psychology. Safety and security are preferred to speed and

strategy.

There is a great deal of talk of disinvestment of PSUs. This is likely to yield

good results. The present pattern of disinvement has failed primarily because

Government have been reluctant to allow representation to non-Government

shareholders on the Board of Directors of the PSUs.

Nine PSUs were recently given fall financial and operational freedom. The

ones who made the grade include the top-notches - Bharat Heavy Electrical Ltd.

(BHEL), Bharat Petroleum (BPL), Indian Oil Corporation (IOC), National

Thermal Power Corporation (NTPC), Oil and Natural Gas Commission (ONGC),

Indian Petro-Chemical Corporation Limited (IPCL), Steel Authority of India

Limited (SAIL) and Videsh Sanchar Nigam Limited (VSNL). They have been

given authority to raise resources, incur capital expenditure, enter into joint

ventures and execute financial tie-ups up to Rs. 200 crore. Non-government

shareholders are also to be taken on the Board. The problem, however, lies with

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the fact that these nine Corporations (Navratna) will still be under the clutches of

the C.A.G., the C.B.I. and the Vigilance which do not normally bother the private

industries. Besides, the ministry and the Minister will still continue to be in the

position of back-seat driving.

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