UNIT 1 INTRODUCTION TO MARKETING
Marketing is one of the key functions of management. It brings success to business organizations. A
business organization performs two key functions : (a) producing goods and services, and (b) making
them available to the potential customers for use.
An organization's business success largely depends on how efficiently the products and services are
delivered to the customers, and how differently do the customers perceive the difference in delivery in
comparison to the competitors. This is true of all firms -from large business enterprises to small firms,
from multinationals operating in different countries to small firms operating in a small market and from
giant enterprises like Sony, Lever, General Motors to the next door kirana shop. Quality production and
efficient marketing are the key success factors in building sustainable competitive
advantage for every business corporation.
In this introductory unit on Marketing Management, you will study the meaning of marketing and various
marketing concepts, evolution of marketing management philosophy, the difference between selling and
niarketingand importance of marketing in a country like India. It will also higliliglit few issues related to
contemporary marketing.
1.2 THE MEANING OF MARKETING MANAGEMENT
Marketing is a process in a social system by which tlie demand pattern for product and services can be
anticipated, enlarged, created and satisfied through the conception, production, promotion and physical
distribution of goods and services in an exchange process.
The American Marketing Association defined marketing as "the performance of business activities that
direct tlie flow of goods and services from producer to consumer or user". This definition seems
somewhat narrow because of its emphasis On flow of products that have already been produced. Thus,
according to this definition, marketing starts with the product.
According to Pliillip Kotler "marketing is a societal process by which individuals and groups obtain what
they need and want througli creating, offering and freely exchanging products and services of value witli
others. Marketing is an ongoing process of discovering and translating consumer needs and desires in to
products and services, creating demands for these products and services, serving the consumer and hiss
demand through a network of marketing channels and expanding the market base
in the face of competition".
Paul Mazur defined marketing as "the creation and delivery of a standard of living to society." A broader
approach views the firm as an organized behavior system designed to generate outputs of value to
consumers. Marketing is defined as the development and efficient distributioli of goods and services for
chosen consumer segments by which profitability is achieved through creating customer satisfaction.
Marketing activities begin witli new product concepts and designs analyzed and developed to meet
specific consumer needs.
This elaborate definition of marketing includes many other organizational activities than mere distribution
function. A correct marketingeffort is in accordance with ethical business practices and is effective from
the standpoint of both society and the individual firm. This approach emphasizes the need for efficienicy
in distribution. The nature, type and degree of efficiency are largely dependent upon the kind of
marketing environment within which the firm operates. The final assumption is that the customer
determines the marketing program. The marketer identifies those consumer segments
who will be satisfied through production and marketing activities of the firm before production.
There are various misconceptions about marketing. Unfortunately these misconceptions have emerged out
of grapevine than solid research background. A student reader of introductory tnarketing at this stage of
learning needs to test his misconceptions before proceeding further, This checklist will help him to do
introspection regarding his previous knowled,ge and subject orientation towards marketing.
So we can take the definition propounded by American Marketing Association.
According to the Alnericain M arketing Association" marketing is the performance of business activities
tliat directs the flow of goods and services from producer to Consumer or user".This definition is
undoubtedly an improvement in the description of marketing as selling. According to this definition,
nlarketing also enconipasses other activities alongwith selling.
Marketing has a process orientation olso. Based on the above, we can develop a process-oriented
definition of marketing, as "the process of ascertaining consumer needs, converting them into products or
services, and moving the product or service to the .final consumer or user to satisfy certain needs and
wants of specific consumer segment or segments with emphasis on profitability, ensuring the optimum use
of the resources available to the organization"
1.3 MARKETING MANAGEMENT PHILOSOPHIES
There are five different marketing concepts under which business enterprises conduct their marketing
activity:
1) Production concept
2) Product concept
3) Selling concept
4) Marketing concept
5) Societal concept
1.3.1 Production Concept
The Production Concept emerges out of the production orientation. The basic proposition is that
customers will choose products and services that are widely available and are of low cost. So managers
try to achieve higher volume with low cost and intensive distribution strategy. The managers believe that
consumers prefer products that are priced low and are widely available. This seems a viable strategy in a
developing market where market expansion is the survival strategy for the business. Companies interested
to take the benefit of scale economies persue this kind of orientation. It is natural that the companies can
not deliver quality products and suffer from problems arising out of impersonal behavior with the
customers.
1.3.2 Product Concept
The Product Concept has the proposition that consumers will favor those products that offer the most
attributes like quality, performance and other innovative features. The managers focus on developing
superior products and i~nprovingth e existing product lines over a period of time. The illnovations in tlie
scientific laboratory are commercialized and the consumers get an opportunity to know and use these
products.
This is called "Technology Push Model". The problem with this orientation is that the managers forget to
read the customers mind and launcll products. Many times it is observed that the innovations enter in to
the market before the market is ready for the product. Innovative products are launched without educating
the customers about the innovation and the probable advantage that the customer is going to get. The
Golden Eye Technology was brought to the Indian Market by the television major Videocon but the
market could not perceive the benefit of this advantage. On subsequent period at an advance stage of the
market LG brought the technology and made its Unique Selling Proposition for marketing success.
1.3.3 Selling Concept
The Selling Concept proposes that customers, be individual or organizations w ill not buy enough of the
organisation's products unless they are persuaded to do so through selling effort. So organisations should
undertake selling and promotion of their products for marketing success. The consumers typically are
inert and they need to be goaded for buying by converting their inert need in to a buying motive through
persuasion and selling action. This approach is applicable in the cases of unsought goods like life
insurance, vacuum cleaner, fire fighting equipments including fire extinguishers. These industries are
seen having a strong network of sales force. This concept is applicable for the frms having over capacity
in which their goal is to sell what they produce than what the customer really wants. In a modern
marketing situation the buyer has a basket to choose from and the customer is also fed with a Iligh decibel
of advertising. So often there is a misconception that marketing is all about selling. The problem with this
approach is that the customer will certainly buy the product after the persuasion and if dissatisfied will
not speak to others. In reality this does not happen and companies pursuing this concept often fail in the
business.
1.3.4 Marketing Concept
The Marketing Concept proposes that the reason for success lies in tlie company's ability to create, deliver
and communicate a better value proposition tlirougll its marketing offer in comparison to the competitors
for its chosen target market.
According to Theodore Levitt "Selling focus on the needs of the seller and marketing focuses on the
buyer. Selling is preoccupied with the seller's need to convert his product in to cash, marketing with the
idea of satisfying the needs of the customer by means of the product and the whole cluster ofthings
associated with creating, delivering and finally consuming it". The marketingc oncept is an elaborative
attempt to explain the phenolnenon that rests on four key issues like target market,
customer need, integrated marketing and profitability.
Companies are interested to increase their return on investment. Instead of spending On a mass
undifferentiated market, they have started looking for specific markets to which their product will best
match and accordingly design a marketing program that suits to the taste of this target market. The next
important act is the understanding of the need of the customer in that target market so that a suitable
marketing offer can be designed. Needs are the inner state of felt deprivation. They can be spelt and un-
spelt also. It is difficult to understmd the un-spelt need of the customer.
Marketers use various sopllisticated techniques of consumer rescarch to understand the customer need. It
is important to understarld and act upon the need of the customer because theeffort to keep a satisfied
customer is almost one fifth of the effort expended to get a new customer. The whole organization as to
be integrated to this mantra of custolner satisfaction. So business needs an integrated approach.
The integration has to start at marketing department level where various key marketing functions like
product design, distribution channel selection, advertising and promotion, customer service and marketing
research need to be integrated with common marketing goal understanding.
Marketing culture should be adopted by other departments of the enterprise also.
While external marketing targets customers outside, internal marketing targets customers inside the
organization who can be trained to serve the customer better. The ultimate goal of any business house is
to earn profit. Today's world not only looks at profit but also tries to bench mark the effort and cost
required to achieve this level of profit. In this situation profitability of the enterprise through sole goal of
efficient marketingis the key success criteria. This profitability is now treated as a byproduct of creation
of superior custonler value and better understanding of the custorner need.
1.3.5 Societal Concept
The Societal Concept proposes that the enterprise's task is to determine the needs, wants and intentions of
the target market and to deliver the expccted satisfaction more effectively and efficiently than the
competitors in a way to preserve or enlarge the consume and society's well being. It combines the best
elernents of marketing to bring social change in an integrated planning and action framework with the
utilization of communication technology and marketing techniques. It also looks for marketers to build
social and ethical considerations into the marketing practices.
The goals of profit maximization should match with the goals ofcustomer satisfaction and responsible
corporate citizenship. Social marketing often termed as cause related marketing utilizes concepts of
market segmentation, consumer research, product concept development and testing, communication to
maximize the target adopters response.
With the growing awareness of the social relevance of business, there is an attempt to make marketing
also relevant to the society. In a sense, marketing is not a business activity alone but milst take into
account the social needs. Excessive exploitation of resources, environmental deterioration and the
customer movements in particular have necessitated the recognition of the relevance of marketing to the
society. Marketing then must be a socially responsible or accountable activity. The societal concept holds
that the business organization must take into account the needs and wants of the consumers and deliver
the goods and services eflicieritly so as to enhance consumer's satisfaction as well as the society's well
being. The societal concept is an extension of the marketing concept to cover the society in addition to the
consumers.
1.4 DIFFERENCE BETWEEN SELLING AND MARKETING
Many managers use 'marketing' and 'selling' as synonyms though there is a substantial difference between
both the concepts. It is necessary to understand the differences between them for a successful marketing
manager.
Selling has a product focus and mostly producer driven. It is the action part of marketing only and has
short term goal of achieving market share. The emphasis is on price variation for closing the sale where
the objective can be worded as " I must somehow sell the product to the customer'. This short term focus
does not consider a prudential planningfor building up the brand in the market place and winning
competitive advantage through a high loyal set of customers. The end means of any sales activity is
maximizingp rofits through sales maximizationWhen the focus is on selling, the businessman thinks that
after production has been completed the task of the sales force starts. It is also the task of the sales
department to sell whatever the production department has manufactured. Aggressive sales methods are
justified to meet this goal and customer's actual needs and satisfaction
are taken for granted. Selling converts the product in to cash for the company in the
short run.
Marketing as a concept and approach is much wider than selling and is also dynamic as the focus is on the
custonier rather than the product. While selling revolves around the needs and interest of the manufacturer
or marketer, marketing revolves around that of consumer. It is the whole process of meeting and
satisfying the needs of the consumer. Marketing consists of all those activities that are associated with
product planning, pricing, promoting and distributing the product or service.
The task of marketing commences with identifying consumer needs arid does not end till feedback on
consumer satisfaction from the consu~nptiono f the product is received. It is a long chain ofactivity,
which comprises production, paclting, promotion, pricing, distribution and then the selling. Consumer
needs become the guiding force behind all these activities. Profits are not ignored but they are built up on
a long run basis. Mind share is more important than market share in Marketing. According to Prof.
Theodore Levitt 'The difference between selling and marketing is more than semantic. A truly
marketing minded firm tries to create value satisfying goods and services which the consumers will want
to buy. What is offered for sale is determined not by the seller but by the buyers. The seller takes his cues
from the buyer and the product beconles the consequence of the marketing effort, not vice versa. Selling
merely concerns itself with the tricks and techniques of getting the customers to exchange their cash for
the company's products, it does not bother about the value satisfaction that the exchange is all about. On
the contrary, marketing views the entire business as consisting of a tightly integrated effort to discover,
create, arouse and satisfy customer needs'. The differences between selling and marketing are summarized
in Table 1 .I
1.5 EVOLUTION OF MARKETING MANAGEMENT PHILOSOPHY
The origin of marketing management dates back to prehistoric period when people started settlement and
there was a division of labor for the community living. As it was difficult for every one to engage in
activities to satisfy all the need requirement, a mutual cohabitation led to this division of labor in the
society. The birth of a barter system where two parties are involved in the physical exchange of goods and
services for mutual benefits and voluntary agreement of both the parties for the transfer of ownership of
the physical goods exchanged, started the evolutionary
growth of modern day marketing.
When the volumes grew beyond the individual and community consumption, then the intermediaries
emerged in the social system that became part of the trade. These are the people who aided in the transfer
of ownership between two parties at two different periods of time. At the time of production, the producer
had the need or the value of the output for his survival and business where as the end consumer was not
ready to own the final product as the demand for consumption was at a future period of time. So
intermediaries took over the ownership, stored and distributed the ownership at the future period of time
in different assortment as desired by end consumer for benefit which was subsequently marked as trades
man's profit. The industrial revolution and progress in transportation and communication made the
business of marketing to cross geographic borders of country and marketing grew as an economic
activity.
In the initial stages of Industrial Revolution, producers were able to sell whatever they have produced. So
they concentrated on higher production. At that stage most of the enterprises adopted the production
concept. Later when the competition started building-up, producers faced difficulties to sell whatever they
produced and the need to improve the product arose. This led to the emergence of product concept and
selling concept. With the increase in competition, producers realised the
advantage of producing what consumer's need instead of selling whatever is produced.
This lead to the consumer orientation and the emergence of marketing concept. As the industry was
expected to play the role of corporate citizen and care about the welfare of the modern society, the
industry was expected to produce products and services that are contributing to the greater cause of the
society and in the process of making profit, contribute towards the building of the nation. This give rise to
the modern day concept of social marketing. In the developed countries where the markets are developed,
most of the producer adopts the marketing concept. In the developing countries markets are
heterogeneous and one can see the co-existence of all the five concepts. Thus, the concept of marketin,g
has grown along with the process of economic development.
The growth ofcivilization, the increasing standard of living, the changing life styles and technological
growth have created new wants. These can be satisfied only with a wide variety of new goods and
services apart from changes and improvements in the existing goods and services. This however the
general trend, and there are several exceptions. Markets for all products and services have to reach a
certain maturity to experience this evolutionary trend. It may not be so in the case of each and every
product or market. The rural market in India, for example, is fairly different from the urban market. Even
among a set of consumer goods, for example, cosmetics which serve the middle/upper income groups are
much more consumer oriented than the market for undergarments for men. Besides, there is a seller's
market in some goods and services, and a buyer's market in some others.
Another feature in the evolutionary process of marketing is the growing role of service marketing. The
demand for service contracts to maintain the gadgets in use have to become more easily marketable and a
reliable service commands a premium in the market. Some of the developed economies are now thriving
more on service industry than manufacturing, as the customers are looking for better service facilities
with the product and the success of a company is decided on the basis of quality of product support
services. The globe is now treated as a single market place because large numbers of players are
manufacturing and delivering products and services in a global scale where by they can achieve
economies of scale and offer a lower price to the customers. Global life styles, tastes and products have
emerged due to rapid advent of television and global media. So brands like Coca Cola, Sony, Honda are
no more identified by their country of origin. They have become global brands in true sense.
1.6 MARKETING MANAGEMENT PROCESS: AN OVERVIEW
As already dis;cussed, the effective marketing starts with the identification of consulner and his need. The
marketer develops marketing program for satisfying customer needs with a firm's products and services.
One of the myths of marketing rests with the fact that people wants and needs vary greatly, and it is
unlikely that any particular product or service can adequately satisfy everyone.
The marketing process consists of four steps: (i) analysing the marketing opportunities, (2) selecting
target markets, (3) developing the marketing mix, and (4) implementing and controling. Now let us
study each of them briefly.
1. Analysing the Marketing Environment: As discussed earlier, marketing task starts with the
idelitification of consumer needs. Therefore, the first step in the marketing process is the analysis of
marketing opportunities to identify the consumer needs. Marketer has to identify the new needs or the
existing needs not satisfied by any product offer or the needs which can be satisfied through better
product offerings. For this purpose, you have to analyse the opportunities by
scanning the marketing environment.
Marketing analysis talks about finding out the current position of the company in the form of current
market share, market power, the relevant strengths and weaknesses of the company in relation to
competitors and market opportunity and threats it is likely to face in the marketing environment. The
marketer uses various techniques like SWOT analysis, scenario building, cross impact analysis and other
environmental scanning techniques.
2. Selecting Target Markets: At the second stage, the marketer has to decide aboult the target, the
company's business mission, the category of customer markets it wants to serve, the type of strategy to
arrive at the set goals. For this reason, one of the first tasks in marketing planning is to divide the
heterogeneous market into relatively homogeneous segments. Once a particular customer group is
identified and analyzed, the marketing manager can direct company resources and activities to profitably
satisfy the selected segment. Thus, at this stage marketer divides the market into various segments, called
market segmentation. Each segment consists of consumers who respond in a
similar way to a given set of marketing efforts. Then the marketer evaluates each segment and selects one
or more segments in which lie can generate the greatest custonler value and sustain it over a long period.
This is called market targeting. After identifying the target market, you must decide market
positioning, that is the place product occupies relative to the competitors product in consumers' mind. If
the product is perceived to be exactly like competitor's product, consumers would have no reason to buy it
3. Developing the Marketing Mix: The third step in the marketing process is deciding the marketing
mix. It is easier to divided the marketing activities into four basic elements which are together referred to
as the marketing mix. These four basic elements are: 1) product, 2) price, 3) promotion and 4) physical
distribution.
As all these four start with the letter 'P', they are referred to as the four Ps of the marketing mix or the four
Ps in marketing. Thus, marketing mix may be defined as the set of controllable marketing
variables/activities that the firm blends to produce the response it wants in the target markets. The word product stands for the goods or services offered by the organisation. Once the needs are
identified, it is necessary to plan the product and after that keep on analysing whether the product still
satisfies the needs which were originally planned for, and if not, to determine the necessary changes.
Decisions such as branding packaging, after sale service etc., are to be decided.
Price is the money that the consumer has to pay. Price must be considered as worth the value of the
product to become an effective marketing tool. The product has to be reasonably priced. The
manufacturer has to take into account cost factors, profit margin, the possibility of sales at different price
levels and the concept of the right price.
Promotion is the aspect of selling and advertising or cominuilicating the benefits of the product or
service to the target customers or the market segment in order to persuade them to purchase such products
or services. It includes selling through advertising as well as the sales force. Besides, a certain amount of
proinotion is also done through special seasonal discounts, competitions, special price reductions, etc.
Physical Distribution refers to the aspect of the channels of distribution through which the product has to
move before it reaches the consumer. It also includes the logistic aspects of distribution such as
warehousing, transportation, etc., needed for geographical distribution of products. It is also concerned
with the selection of distribution channels. The organisation must decide whether it should
sell through wholesalers and then to retailers, or whether directly to the consumers. There are many ways
in which a product can be moved from the producer to the consumer. The optimum method has to be
determined in terms of both consumer satisfaction and profitability to the organisation, or optimum use of
the organisation's resources.
4. Implementing and Controlling: At the fourth stage marketing plan is to be implemented. Without a
proper implementation program, marketing planning exercise is just a paper work. The marketing
implementation revolves around executing the strategy and resources for achieving the marketing goals or
targets. The marketing managers execute the strategy by converting it to operational plans which are
achievable within a specified period of time frame.
The fourth stage also includes marketing control, which is a process of benchmarking the expended effort
and resources with the set goals. You have to get the feedback from the market whether the consumers
received the desired level of satisfaction from the product offering or not. Based on this feedback you
further plan to enhace the consumer satisfaction or overcome the deficiencies in the product offerings, if
any. The achievements are evaluated with the objectives set at the planning stage to find out the
deficiencies if any and to take modified action in the future so that the efficiency of the resource expended
increases and gets translated in to profit.
Every organization has a structure and culture that reflects its readiness and effectiveness to the ever
changing need of the customers in providing a sustained level of satisfaction. Marketing function
confined to a particular departmental structure in the organization seldom brings success. It creates goal
confusion due to functional myopia in the organization. In this context the whole organization has to
understand the urgency of market orientation and understanding of customer need for greater success. The
concept of organization structure revolves around two issues. The first is the relative importance of
marketing departnzent inside the organization and second, its relationships with other jirnctional
deparlntenls and external players in the valtre chain.
A marketing manager has to take decisions regarding various aspects of marketing. He takes these
decisions under certain environmental situations. The decision variables over which he makes decisions
are called marketing mixes and which are controllable factors for a marketing manager. He takes these
decisions under certain environnlental conditions. These environmental conditions are called
uncontrollable forces and the decisions are taken in relation to immediate players affecting business.
These players constitute the part of the micro environnlent and are called as actors.
1.7 MARKETING MANAGEMENT IN INDIAN CONTEXT
The development of marketing in India and emergence of Indian market as a force to reckon in the global
business front is an interesting subject for marketing students. There are three distinct phases in the
growth of Indian nzarket. The first phase counts to the period of independence where the colony was
subsistent in nature. The imperial government controlled the output and large number of customers did
not have adequate purchasing power. Customers were largely agriculturists debarring few salaried people
working in the British establishinents. Most of the products were froill British and the stakes of ownership
in large enterprises were vested with them. The consumers did not have any choice, as there were few
alternatives available. It was a seller's market with product orientation and consumer welfare was unheard
of.
The second phase started immediately after the independence and the new government dlecided to follow
the socialistic principles where the public sector dominated the ownership of large enterprises. There was
a rationing and quota system for the: private players and the production was limited to the whim of the
government decisions. Most of the markets remained as seller's market. The seller was in a dominating
position due to the protection from government and no formal competition. The seller dominated the
pattern of consumption with product alternatives, price propositicms and on the availability front. There
were few manufactures those who believed about product quality and consumer satisfaction. There was a
ban to the direct entry of foreign participants for giving protection to the domestic sector. The consumer
had very limited opportunity to complain about the pseudo promises and hazardous practice of the
manufacturer until the Consumer Protection Act of 1994. Lack of ef'fectiveness and non-availability of
competition allowed the manufacturer to sell the sub-standard products. The per capita income was low
and people had less purchasiing power. Majority of people spent money buying necessities, which
allowed the commodities market to grow in a snail's pace to cater to the common person. Cities grew in
size due to establishment of large manufacturing units and the1 rural and urban divide started to emerge
in urban market. Demand for quality education, decent housing and entry of women to the active
workforce brought radical change to the Indian urban market. The rural Indian market remains
unexploited due to poor econonly of average rural consumer, resultant lower purchasing power of the
rural consumer, irregularity in saving and occupation pattern. Non-availability of transportation and
communicationf acility also restricted the growth of the rural market in India.
The urban Indian market was undergoing radical changes due to emergence of a large middle class with
constant and regular income pattern. Adequate savings, support from the rural agricultural income flow to
the urban middle class and the benefits given by the welfare state to this class increased the consumption
level and demand for various products unheard before for thern. The strength of this market increased due
to increase in consumer's knowledge about their rights and redress mechanism introduced by the
government. Various products became the mark of the class and a pseudo consumption culture emerged
in the Indian market until early 1990s.
Whatever the argument may be Indian industry and consumer wake up to the global reality in the early
nineties due to the liberalizatioll process. 'This is the starting of the third phase.
The role of the public sector as seller and as buyer came down as efficiency and competition became the
mantraof survival in place of protection. The abolition of Monopoly Restrictive Trade Practice allowed
firms to have both organic and , inorganic growth. Firms started producing higher capacity for the market
as there was no quota restriction. Mergers and acquisitions saw the emergence of large conglomerates and
consolidation of business in Indian market. Government allowed foreign equity participation in the
domestic business, whicll brought large global players to Indian market. The domestic companies
liquidated a part of their ownership and allowed joint ventures for smooth flow of foreign equity capital
and technology. Large multinationals like Mindustan Lever, Proctor and Gamble, LG Electronics, Ford,
Mitsubishi, Honda, Sainsung entered in to the markel with more financial muscle and better teclinology
for Indian consumer.
Domestic and Foreign financial institutions reposed their faith on Indian industry and the industry got a
good funding through both long-term debt and equity route. The government brought drastic changes in
various draconian and imperial legislations for smooth conduct of business. The Indian industy also
responded positively by offering better products and services to the consumers. The free market
competition gave rise to a new mechanism of market power. Marketers started bridging the gap between
the urban and rural, rich and poor by offering products and services at all price points. They also
strengthened the management of the distribution channel through new methodologiest like Supply Chain
Management, Just in TimeTechnology and increased productivity through continuous improvement,
Because of such radical changes in the market, product prices came down, the quality level went up to
match the global standard, customers at various sub urban places could access the availability of various
products suiting to their pockets.
On the other hand, advent oftelevisio~an~d cable television revolution provided a larger platform to the
marketers to take their marketing communication to consumers. It was possible to disseminate product
information to a wider audience than the urban noveaue rich were. Higher demand in the product put a
time pressure for the companies who had to follow shorter product manufacturing cycles and deliver
products with global standards as customers had many options to choose from the market. Financial
institutions started provisions of periodic payments and instant ownership through installment schemes
for many products categories. This kind of support helped in the market penetration of few products
in a faster rate. 'The attitude of indian consumer also underwent swapping changes.
People started spending money in acquiring products and services for a comfortable stay than saving as in
the past. This spending orientation gave birth to a viable service sector. The service sector grew in leaps
and bounds in last few years due to advent of modern technology. People started enjoying life like never
before, businesses like airline, professional education, tourism, restaurants and hotels, telecoms, hospitals
and quality health services and computer related services grew in matching order with the manufacturing
sector. The telecom revolution brought changes in communication services expected by customers
through adoption of mobile telepliony, WLL, intenlet telephony and subsequent reduction in the
Communication cost. Rapid penetration of Personal Computers and internet services are also a significant
change happening in urban and semi urban India.
Indian market has changed from a developing market to an emerging market. The market is enroute to a
developed market as the choices in the consumption basket of consumers have increased in the last
decade. However, one cannot ignore the negative effects also. The divide between the rich and poor is
increasing day by day. A large section of tlie society is staying away from the use of benefits of these
changes. Marketing managers have to rethink at all these issues and try to take a developmental
orientation so that more and more customers will enjoy tlie benefit of liberalization and free market
economy.
The recent thrust by Hindustan Lever through its operation Bliarat, Procter and Gamble's tie up with
Marico for enhancing rural distribution, the e-Choupal strategy by ITC are indicators that the marketers
are trying to woo the rural customers for increasing their consumption. This will be only possible when
tlie income power of the rural consumer increase. Marketers have to take the developlnental approach
for building such a strategy. Hindustan Lever is now trying to market the products through self-help
groups where by the socially backward arid vulnerable people can become part of the mainstream and
earn to consume. In the long run, marketing manager's success will be measured on different parameters
than the current approach of market share, as the revenue as well as the profits from the urban
market will sure to dry down in future. There is no doubt that tlie status of the Indian consumer has
increased but the percentage is so small that tlie task now is to bring more people to the field of
consumption.
1.8 IMPORTANCE OF MARKETING AS A SUBJECT OF STUDY
In one of his classic articles, Peter Ducker said that Marketing is everything. Rest other activities in the
organization are support services to the marketirig strategy that a firm pursue. Marketing has higher
significance in an emerging economy like that of India where it not only has to satisfy tlie customer need,
but also to support the process of economic development. The success of business is known by its
achievement in marketing front in the form of market share and return on investment on marketing
programs. Marketing has significance to tlie consumer as it provides more alternatives to consumers,
controls the price mechanism ,allow the consumers to bring a balance between his income and
consumption. It is important to the economic progress of tlie country as it opens up new vistas of research
by supporting product innovation and enhancing the quality of living for the ultimate consumer.
Marketing generates resources that are ploughed back to the economic system and it fastens the process of
growth for the country. Over a period of time people in industry, government and academia have realized
the macro level importance of marketing. Therefore, special concentration is available under the domain
of marketing to understand consumer behavior, marketing for services and industrial products, advertising
and sales pro~notione ffects on consumers. Marketing brings revenue and earns goodwill for a
manufacturer or marketer, provides alternatives of choice in goods and services to consumer and enables
the society for redistribution of income, generation of additional employment through manufacturing and
trading and improvement in the over all standard of living of the
citizens of a country.
Marketing looks in to the business management challenges like environmental scanning, identification of
marketing opportunities, formulation of marketiag programs, evaluation and tracking of consumer choice
and response to business.
Marketing aids the consumers to have choices and final say in tlie acceptance of a inarketing offer
available to him. The easy availability of high quality goods and services at competitive prices is made
possible by efficient marketing system. Marketing management createstime, place and possession utility
to products and services. Products and Services are useful if they are available for consumption at the
right time and place. Management of marketing creates such utility.
Marketing generates additional employnient, increases per capita income and helps in the over all
progress of an economy. The per capita availability of essential goods is an indicator of the level of
consumption and poverty in an economic system.
1.9 LET US SUM UP
Marketing is a dynamic subject in business. The success of a business largely depends on the success of
marketing. There are various definitions to Marketing. We can generalize the definition through the
definition of the famous inarketing author, Philip Kotler. According to him, "Marketing is a social activity
directed at satisfying needs and wants through exchange process". It is a management
process of identifying consumer needs, developing products and services to satisfy consumer needs,
making these products and services available to the consumer through an efficient distribution network
and promoting these products and services to obtain greater competitive advantage in the market place.
This emphasizes the optimum utilization of resources and delivering value to customers through efficient
process and with a profit to the organization.
Marketing as a concept has evolved over a period. It has augmented the process of exchange as an
economic activity and there are five concepts associated with marketing. They are 1) Production Concept,
2) Product Concept, 3) Selling Concept, 4) Marketing Concept, and 5) Societal Concept.
The greatest confusion in understanding marketing is the confused line of difference between selling and
marketing. While selling is product focused and looks after the interest of the seller, marketing takes a
more welfare view and the key focus of marketing is consumer satisfaction than sales. Marketing explains
the whole process of identifying consumer needs, developing products and satisfying consumers through
a marketing program.
Marketing plays a pivotal role in tlie development process of a country like India.Different phases of
development in Indian market are indicators that there is a revolution undergoing in Indian market. We
envisage a greater role for marketing in Indian market whereby marketing can help in bringing more and
more people to the fold of enhanced and qualitative consumption. The recent economic and social
changes in Indian market bring a new and enterprising picture of growth of marketing in Indian business.
Marketing has to play a greater role than just satisfying the consumers in an emerging economy like that
of India. Marketing should bring significant changes affecting the quality of life eof everybody in a
country like India
UNIT 2 MARKETING ENVIRONMENT
Marketing functions are to be carried out in a given environment. Even the marketing opportunity has to
be scanned and identified by carefully observing the environment. The marketing mix is also decided in
the context of a given marketing environment. Though marketing managers cannot control the forces in a
marketing environment, they must take them into account when making marketing decisions. While
formulating the marketing strategies, the marketers must closely observe the
environ~nenitn which they are functioning. In this unit, you will study the factors that constitute the
marketing environment, and the marketing environment in India. You will also study bow various Acts
and Statutes influence the marketing decisions in India.
2.2 WHAT IS MARKETING ENVIRONMENT?
Marketing activities are influenced by several factors inside and outside a business firm. These factors or
forces influencing marketing decision making are collectively called marketing environment. It comprises
all those forces which have an impact on market and marketing efforts of the enterprise. According to
Philip Kotler, marketing environment refers to "external factors and forces that affect the company's
ability to develop and maintain successfill transactions and relationships with its target customers." For
example, the relevant environment to a car tyre manufacturer may be the car manufacturers and buyers,
the tyre manufacturing technology, the tax
structure, imports and export regulations, the distributors, dealers, competitors, etc. In addition to these,
the company may have to consider its internal environment interms of Finance, Purchasing, Accounting,
Manufacturing Technology, R&D. Top Management, etc. However, this internal environment is
controllable to a large extent. The external environment becomes important due to the fact that it is
changing and there is uncertainty. Most of these external environmental factors are uncontrollable. There
is both a threat and opportunity in these changes.
The external marketing environment may be broadly divided into two parts:
1) Micro environment
2) Macro environment
Micro Environment refers to the company's immediate environment, that is, those environmental factors
that are in its proximity. They include the company's own capabilities to produce and serve the consumer
needs, the dealers and distributors, the competitors, and the customers. These are also the groups of
people who affect the company's prospects directly.
Macro Environment refers to those factors which are external forces in the company's activities and do
not concern the immediate environment. Macro environment are uncontrollable factors which indirectly
affect the concern's ability to operate in the market effectively. These incIude demographic, economic,
natural, technological, political and cultural forces. The influence ofthese factors are indirect and often
take time to reach the company. Look at Figure 2.1 carefully which presents these forces.
The forces in the outer circle may be taken to constitute the macro environment and those in the irtner
circle as the micro environment of a company.
2.2.1 Micro Environment
Micro environmental factors whicli influence the marketing decisions of the company are: i)
organisation's internal environment, ii) suppliers, iii) marketing intermediaries, iv) competitors, and v)
consumers.
Organisation's Internal Environment
Organisation's financial, production and human resource capabilities influence its marketing decisions to
a large extent. For instance, while deciding about the sales targets, it is necessary to see whether the
existing production facilities are enough to produce the additional quantities or not. If the existing
facilities are not enough and expansion to plant and machinery is required, it is necessary to think about
financial capabilities.
You may have a responsivc research and develop~nendt epartment to develop a new product. So also the
production department may have its own facilities for producing the new product. It is also necessary to
consider how non-marketing departments in the organisation cooperate with the marketing department.
The top management may not agree with the views of the marketing department on the marketing
strategies or their implementation. Besides, the marketing department must work in close cooperation
with the other departments, especially the quality control and production departments. Sometimes it is the
sale force that must bear the major task in
the strategy.
Suppliers
For production of goods or services,'you require a variety of inputs. The individuals or firms who supply
such inputs are called suppliers. Success of the marketing organisation depends upon the smooth and
continuous supply of inputs in required quantities on reasonable terms. Hence suppliers assume
importance. The timely supplies of specified quality and quantity makes the producer to keep up the
delivery schedule and the quality of the final product. The dependence on the supplier is Naturally more
when the number of suppliers is more. During periods of shortages, sole suppliers may not supply
materials on favourable terms. Each supplier may negotiate his own terms and conditions, depending
upon the competitive position of his firms. Some suppliers, for example, expect payment in advance, and
goods are supplied on the basis of a waiting list, whereas others may be ready to supply on credit basis.
Intermediaries
Normally, it is not possible for all the producers to sell their goods or services directly to the consumers.
Producers use the services of a number of intermediaries to move their products to tlie consumers. The
dealers and distributors, in other words the marketing intermediaries, may or may not be willing to extend
their cooperation. These persons normally prefer well-established brands.
Newcomers may find it extremely difficult to find a willing dealer to stock his goods. From newcomers
they may denand favourable terms by way of discount, credit, etc., and the producer may find it difficult
to satisfy them. There are also other intermediaries like transport organisations, warehousing agencies,
etc., who assist in physical distribution. Their cost of service, accessibility, safe and fast delivery, etc.,
often influence the marketing activities.
Competitors
Competitors pose competition. Competitors' strategies also affect the marketing decisions. Apart from
competition on the price factor, there are ,other forms of competition like production differentiation.
There are also competitors who use brand name, dealer network, or close substitute products as the focal
point. Their advertising may present several real or false attributes of their product. If one advertises that
his product has an imported technology, the other may say that he is already exporting his product.
Competitor's strategies sometimes may change an opportunity in the
environment into a challenge.
Customers
There are many types of customers. A firm may be selling directly to the ultimate users, the resellers, the
industries, the Government or international buyers. It may be selling to any one or all of these customers.
Each type of consumer market has certain unique characteristics and the marketer should be fillly
acquainted with the art of persuading and selling to these consumers. The environment presented by
customer profile will have a direct influence on these marketing activities.
The population also corltains the potential consumers of the company's product. It may not be easier to
identify the persons who are likely to become the customers of a company. The goodwill built-up by a
company sometimes influences the consumers to become the customers of acompany. Companies
generally try to build good public relations and create a favourable attitude among the people or groups of
people. Government and consumer action groups are special categories with whom a negative attitude is
to be avoided. Thus, the public also constitute an element in the
environment.
2.2.2 Macro Environment
The macro environmental factors that exert influence on an organisation's marketing system are: I)
physical environment, 2) technological environment, 3) political and legal environment, 4) economic
environment, 5) demographic environment, and 6) socialcultural environment.
Physical Environment
The earth's natural renewable resources (e.g. forest, food products from agriculture, etc.) and finite non-
renewable resources (e.g, oil, coal, minerals, etc.), weather (climatic) conditions, landscapes and water
resources are components of an environment which quite often change the level and type of resources
available to a marketer for his production. For exanlple, India does not have enough petroleum resources,
and imports petrol and other products. Recently, the Gulf War drastically
affected the supply of petrol and diesel in the country. This had lot of implications for
the companies consuming petro-products.
Technological Environment
Technology is shapingthe destiny ofthe people. The revolution in computers, electronics and
communication in general may make one's production out oftune with the current products and services.
For exanlple, new printing technology like Insel. printing and desk top publishing, has already made the
labour-intensive type-set printing uneconomical.
Political and Legal Environment
Political changes bring in new policies and laws relevant to industry. Government regulation continues
wit11 different intensities and the law and the rules framed thereunder are becoming complex. Many
areas of business are brought under one law or the other, and the marketer cannot escape from the
influence of these laws. The tax laws for example, the sales tax. excise duty, income-tax, etc., have direct
bearing on the costs and prices of the products and services marketed. So also the policies
relatirig to imports and exports. Since these factors affect all the units, (they do not affect a single
marketer alone), these are considered as the forces in the macro environment.
Economic Environment
Under economic environment, a marketing manager generally studies the following factors and trends:
i) Trends in gross national product and real income growth;
ii) Pattern of income distribution;
iii) Variations in geographical income distribution and its trends;
iv) Expenditure pattern and trends.
v) Trends of consumer savings and how consumers like to hold their savings, i.e., either in the form of
bank account, investments in bonds arid securities; purchase of real estate, insurance policies, or any other
assets;
vi) Borrowing pattern, trends and governmental and legal restrictions; and
vii) Major economic variables, e.g., cost of living, interest rates, repayment terms, disposable income, etc.
These factors determine the purchasing power, along with savings and credit availability. Study and
knowledge of economic forces is essential for preparing effective marketing plans. No firm is immune to
economic forces although som e are less vulilerable than others. Anticipation of future economic
conditions will enable the firm to devise appropriate marketing strategies.
Marketing organisations are susceptible to economic conditions, both directly and through the medium of
market place. Economic conditions affect marketing directly because such organisations are themselves a
part of market place. For instance, the cost of a1 l inputs positively respond to upward swing of economic
condition. This will affect the output price and consequently affect the sales. The effect on marketplace
(consumers) also influences the marketing through changes in consumer habits. 'This is an indirect
influence. For example, in tlle event of spiraling prices, cousurners often curtail or postpone their
expenditures for luxury products. Conversely, during times of relative affluence, consumers are much less
conscious of small price differences and would buy luxury products.
Demographic Environment
Marketers are keenly interested in tlle demographic characteristics such as the size of the population, its
geographical distribution, density, mobility trends, age distribution, birth rate, death rate, the religious
composition, etc. The changing life styles, habits and tastes of the population, have potentials for the
marketer to explorc. For example, when both husband and wife go for jobs, the demand for gadgets that
make house keeping easier and tlle semi-cooked food products increase.
Socio-Cultural environment
There are core cultural values which are found stable and deep rooted, and hence change very little. There
are also secondary cultural values which are susceptible to fast changes. Some of them like hair styles,
clothing, etc. just fade. Even in a given culture, the entire population may not adopt the changes. There
are different degrees with which people adopt them. Religion is also an important component of culture
which has implications for the marketer. For example, Hindus worship the cow and do not eat beef. So
the products made out of beef meat do not have demand. Thus, the culture of the society influences the
consumption pattern to a certain extent. Culture also pervades other human activities by determining their
values and beliefs.
2.3 RELEVANCE OF ENVIRONMENT IN MARKETING
You have studied that the marketing environment of a company comprises a variety of forces. Most of
these forces are external to the company and may not be controllable by the marketing executives of the
company. So the marketing system of the company has to operate within the framework of these ever-
changing environmental forces.
This uncertain marketingenvironment offers both opportunities, and shocks and threats. Therefore, it is
necessary for a company to scan the changing environment continuously, and change the marketing mix
strategies in accordance with the trends and developments in the marketing environment.
The company responds to these environmental factors and forces by its policies depending on its own
capabilities particularly the finance, sales force and technical facilities. Among all these environmental
factors, some ofthem may be controllable by the organisation to some extent, and others may be
uncontrollable. Macro environmental factors are totally uncontrollable by the firm whereas micro
environmental factors may be controlled to some extent. For instance, organisation's interna1
environment can be controlled by the firm to a large extent. Sinlilarly, the firm can exert some influence
on suppliers, dealers and distributors by offering liberal terms. And through its advertising effort, a firm
can influence the prospective and present consumers.
Each aspect of the environment has some relevance in marketing. It is easy to imagine how various
environmental factors affect the demand and supply, the distribution and proniotional policies, etc. For
example, with the oil crisis there will be demand for more oil-efficient machines. Similarly, the popularity
of computers will create demand for more computer operators, voltage stabilizers, etc.
The following benefits ofenvironnient scanning have been suggested by various authorities:
It creates an increased general awareness of environmental changes on the part of management.
It guides with greater effectiveness in matters relating to Government.
It helps in marketing analysis.
It suggests improvements in diversification and resource allocations.
It helps firms to identify and capitalize upon opportunities rather than losing out to competitors.
It provides a base of 'objective qualitative information' about the business I environment that can
subsequently be of value of designing the strategies.
It provides a continuing broad-based education for executives in general, and the strategists in particular.
2.4 MARKETING ENVIRONMENT IN INDIA
India is a vast country populated by around 100 crore people. Its unique feature is its diversity of
religions, languages, social customs, regional characteristics, which is both a boon and a bane for the
marketer. Boon because there is tremendous scope for a wide variety of products and services to be
successfully marketed and a bane because the marketer often needs to adapt the marketing strategy to suit
different tastes and values. There are marketers who may find that the Indian environment is full of profit
potential. It means that there are buyer for anything one may produce and there is market for everything.
There are others who take a somewhat pessimistic view by considering the poverty and shortages of
requisite inputs. However, one can confidently say that the market is vast, quality consciousness among
consumers is increasing, and there is demand for new and improved products and services and these
trends may continue for a long time.
Despite more than 55 years of independence, India is still domi1;ated by villages and almost 70 percent of
population is located in the rural areas. But these rural areas are today enjoying the fruits of the Green
Revolution and the purchasing power of the rural population is increasingly demanding attention from the
marketer who had so far concentrated only in urban areas. No doubt tlie urban areas with their
concentration of numbers and inarket potential are the priority target markets, but a firns which wants
to ensure its future survival must start making in roads into the rural market as well.
Government expenditure on rural development has increased the purchasing power of the rural public.
Improvements in transport, communication, literacy, etc. have made many new markets accessible. The
capacity to see the opportunity and work out an appropriate marketing strategy can open the doors to the
marketers.
There are a large number of companies, public sector undertakings, factories and small-scale units, all of
which comprise the organisational consumers, operating in the country. While the public sector usually
follows a bureaucratic long winded and time consuming procedure for making even the smallest
purchase, the private sector decision-making is relatively quicker and free of bureaucratic procedures. If
you are marketing your products/services to both the public and private sectors, you may like to
think about having separate marketing organisations for them. Another major difference between the
public and private sector is in the timing of the purchase decision. The public sector cornpanies have an
annual budget sanctioned to them by the governmerit and the money from this is used for purchasing a
variety of products.
The public sector units feel compelled to use tlie entire budget amount, because if they do not, they run
the risk of having a reduced budget in the subsequent years. You would find a flurry of purchases during
the quarter preceding March when the financial year ends so if the public sector companies are your
major consumers, you should bear the timing factor in mind. In case of private sector companies, you
would generally not find such a peaking of purchases in any particular month of the year
unless it is linked to seasonality ofproduction or sales.
2.5 GOVERNMENT REGULATIONS AFFECTING MARKETING
A number of laws affecting business have become operational over the years. The important ones
affecting marketing are listed below:
1) The Indian Contract Act, 1872
2) Sales of Goods Act, 1930
3) The Industries (Development & Regulation) Act, 195 1
4) The Prevention of Food Adulteration Act, 1954
5) The Drugs and Magic Remedies (Objectionable Advertisement) Act, 1954
6) Tlie Essential Commodities Act, 1955
7) Tlie Companies Act, 1956
8) Tl~Te rade Marks Act, 1999
9) The Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act)
10) Tlle Patents Act, 1970
11) The Standal-ds of Weights and Measures Act, 1976
12) The Consumer Protection Act, 1986
13) The Environment Protection Act, 1986
14) The Bureau of Indian Standards Act, 1986
15) The Agricultural Produce Grading and Marketing Act (AGMARK), 1937
Some of the legislations mentioned above apply to every undertaking, irrespective of the nature of the
product sold or the service provided by it like the Indian Contract Act, the Sale of Goods Act, the
CompaniesA ct, the Trade Marks Act and the standards of Weights and Measures Act.
As against this, there are certain legislations listed above which seek to regulate certain decisions of the
undertakings engaged in the specific industries. These include The Industries (Development &
Regulation) Act, 195 1; The Drugs and Magic Remedies (Objectionable Advertisement) Act, 1954; The
Prevention of Food Adulteration Act, 1954; The Essential Commodities Act, 1955.
It would be too much to expect a marketer to know all about the various Acts listed above. But
nevertheless, it is essential for you to have a good working knowledge of the major laws protecting
competition, consuniers and the larger interest of society.
Such an understanding would help you to examine the legal implications of your decisions.
The main reasons for government control can be summarized as follows:
Protectingthe welfare of individuals and promoting higher standards of public health, general well being,
safety, etc.
Maintaining equality of opportunity for all persons irrespective of sex, nationality, race or re1 igion.
Restraining business from engaging in practices harmful to the interests of the public like making false
and misleading statements about a product or service, manipulating prices for personal gains, failing to
support warranties, etc.
Protecting small firms fro111 the threats of unfair competition by big firms.
Preventing unfair practices resulting from mergers or other forms of combinations like price fixing.
Conserving national resources especially forests, fuels, water, energy, etc.
Preventing pollution ofthe environment.
Preventing concentration of economic power and industrial wealth.
Encouragingwidely dispersed industrial growth and the growth of small scale industries.
Protecting the economy from dominance by foreign inventors and helping save the valuable foreign
exchange resources.
The Indian Contract Act, 1872
Regulates the economic and commercial relations of citizens. The scope of this Act extends to all such
decisions which involve the formation and execution of a contract. The essentials of a valid contract are
specified and examined in detail. A contract is an agreement enforceable at law between two or more
persons by which rights are acquired by one or more to act or forbearances on the part of the other or
others. The Act also specifies provisions for the creation of an agency and the rights and duties of
a principal and an agent.
Sales of Goods Act, 1930
Governs the transactions of sale and purchase. A contract of sale of goods is defined as a contract
whereby the property in goods is transferred or agreed to be transferred by the seller to the buyer for a
price. The Act also lays down rules about passing of property in goods, the rights and duties of the buyer
and seller, rules regarding the delivery of goods as well as the rights ofthe unpaid seller.
The Industries (Development & Regulation) Act, 1951
It is through this Act that the industrial I icensing system operates, in effect, it empowers the government
to licence (or permit) new investment, expansion of licensed units, production of new articles, change of
location by the licensed units and also to investigate the affairs of licensed units in certain cases and to
take over the management thereof, if cotiditions so warrant. The objectives behind these powers are, of
course, development and regulation of important industries involving fairly large investments which have
an all-India importance. It is in the actual implementation ofthese objectives that the relevant aspects of
the industrial policy are expected to be fulfilled.
Industrial licensing is a form of direct state intervention in the market to overrule its forces. The
underlying assumption here is that the government is the best judge about the priorities from the national
point of view and also that it can do the allocation in a better and socially optimal way. It must, however,
be understood that there are ecollomic costs involved in the measures of control and the benefits that are
expected to accrue at least equal to or more than the costs involved.
Prevention of Food Adulteration Act (1954)
Prohibits the publication or issue of advertisement tending to cause harm to the ignorant consulner by
consuming certain food articles. It also ensures purity in the articles of food.
Drugs and Magic Remedies (Objectionable Advertisement) Act (1954)
This Act proliibits the publication or issue ofadvertisements tending to cause the ignorant consumers to
resort to self-medication with harmful drugs and appliances. Advertisements for certain drugs for
preventing diseases and disorders like epilepsy, prevention of conception, sexual impotency, etc., are also
prohibited. The Act also prohibits advertisements making false claims for the drugs.
Essential Commodities Act (1955)
This Act provides for the control of production, supply and distribution in certain commodities declared
as essential under Section 2(a) of the Act, in the public interest. Under Section 3(a) of this Act, the
government can fix the price of such a commodity.
Companies Act (1956)
It is a piece of legislation wliicli has far-reaching effects on business by regulation of the organisation and
functioning of companies. With more tlian 650 sections, it is one of the longest legal enactments. It is
meant to regulate the growing uses of the company system as an instrument of business and finance and
possibilities of abuse inherent in that system.
Trade Marks Act (1999)
It deals with the trade and merchandise marks registered under this Act. A mark includes a device, brand,
heading, label, ticket, name, signature, word, letter, numeral, shape of goods, packaging or combination
of colours or any combination thereof. A Trade Mark is a distinctive symbol, title or design that readily
identifies the company or its product. The owner of the trademark has the right to its exclusive use
and the Act provides legal protection against infringement ofthis right. A trademark is registered for a
maximum period of 10 years and is renewable for a similar number of years, each time the period of 10
years expires.
However; no sucli trademark should be used which is likely to be deceptive or confusing or, is scandalous
or obscene or which hurts the religious sentiments of the people of India.
Monopolies and Restrictive Trade Practices Act (1969) (MRTP Act)
'This Act provides for tlie control of monopolies, for the prohibition of monopolistic, restrictive and ufair
trade practices and for matters connected therewith or incidental thereto.
It may be of interest for you to know that the first country to pass such a legislation was tlie United States
wliicli lias a free enterprise system. There, such an Act was passed as far back as 1890 and is called the
Sherman Antitrust Act, But, so far as the UnitedKingdom is concerned it was only in 1948 that the
Monopolies and Restrictive Practices (Inquiry Control) Act was passed. In 1956 and 1964 two more
Acts were added, viz., Restrictive Trade Practices Act and Resale Prices Act, respectively. Our Act is
modelled on tlie lines of the above three Acts.
Patents Act (1970)
Provisions of tliis Act are attracted especially where the company intends to produce patented products. A
patent is tlie exclusive right to own, use and dispose of an invention for a specified period. Tlie patent is
granted by the Central Government to the first inventor or his legal representative.
Standards of Weights and Measures Act (1976)
This Act specifies the quantities in which products can be packed. The products covered include bread,
butter, cheese, biscuits, cereals and pulses, cigarettes. cigar, cleaning and sanitary fluids, cleaning power,
condensed milk, tea. coffee, cooking oils, cosmetics, honey, ice cream, jams, sauces. milk powder, soaps,
spices, toothpaste, etc. I
Consumer Protection Act (1986)
ConsumerP rotection Act, 1986, as amended by the Consumer Protection (Amendment) Act, 2002, is the
latest addition to the list oftlie legislations regulating marketing decisions in India. The Act is in addition
to and not in derogation of the provisions ofany other law which influence marketing decisions. The Act
is intended to provide better protection of the interests of consumers and for that purpose make provision
fortlie establishment of Central Consumer Council, State Consumer Councils, District Consumer
Councils and other authorities for the settlement of consumers' disputes and for matters connected
therewith.
The Act has sharper teeth. One of the weaknesses of earlier legislations was the confusion regarding the
burden of proof. They never made it sufficieintly clear whether the onus of proof rested with the
manufacturer, the irader or the consumer.
This Act establishes a landmark in the sense that for the first time the onus has been shifted to the
manufacturer and the seller. Lesides, no court fee is payable. Also, the I aggrieved consumer can himself
argue his case. Moreover, decision lias to be dispensed within a given Lime-frame - 3 months, where no
testing is required and 5 montlis where testing ofthe goods complained of is required. The Act provides
the consumer the right:
to be protected against marketing of goods which are hazardous to life and People;
to be informed aboutthe quality, quantity, potency, purity, standard and price of goods thereby protecting
the consumer against unfair trade practices;
to be assured, wherever possible, access to a variety of goods at competitive prices;
to be heard and to be assured that consumers interest will receive due considerationa t appropriateforurns.
to seek redressal against unfair trade practices and unscrupulous exploitation of consumers.
to consumer education.
These objects are sought to be promoted and protected by the Consumer P rotection Councils establislied
at the Central, State and District levels.
To provide speedy and simple redressal to consumer disputes, a quasi-judicial machinery(s pecial courts
ha s been set up at the District, State and Central levels. ,
These (Special Courts) quasi-.judicial bodies observe the principles of natural justice and have been
empowered to give reliefs of a specific nature and to award, wherever appropriate, compensation to
consumers. Penalties for non-compliance of the orders given by tlie quasi-judicial bodies (Special Courts)
have also been provided.
Environment Protection Act (1986)
It provides for the protection and improvement of environment and the prevention of hazards to liuman
beings, otlier living creatures, plants and property.
Environment includes, water, air and land and the inter-relationship existing between them and tlie human
beings, living creatures, plants, etc. Any solid, liquid or gaseous substances present which may tend to be
injurious to environment is an environmental pollutant and the presence thereof is pollution.
The present enactment covers not only all matters relating to prevention, control and abatement of
environmelltal pollution but also powers and functions of the Central Government and its officers in that
regard and penalties for committing offences.
Bureau of Indian Standards Act (1986)
Provides for the establisll~nenot f a Bureau for the harmonious development of the activities of
standardisation, marking and quality certification of goods and for matters connected therewith
or.incidenta1 thereto.
It has been provided that the Bureau of Indian Standards will be a body corporate and there will be an
Executive Committte to carry on its day-to-day activities. Staff, assets and liabilities of the Indian
Standards Institution will perform all functions of the Indian Standards Institution. It has also been
stipulated that access will be provided for to the Bureau's Standards and Certification Marks to suppliers
or like products originating in General Agreement on Trade and Tariff (GATT) code countries.
The Act does not make any change in existing law except to provide a new forum for
deciding the cases effectively and without delay. When the Indian Standards I~istitutionw as establislied
in 1947, the industrial development in the country was still in its infancy. Since then there has been
substantial progress in various sectors of the Indian econolny and hence the need for a new thrust to be
given to standardisation and quality control. A national strategy for according appropriate recognition and
importance of standards is to be evolved and integrated with the growth and development of production
and exports in various sectors of the national economy. The public sector and private sectors, including
small scale industries, have to intensify efforts to produce higher standard and quality goods to help in
inducing faster growth, increasing exports and making available goods to the satisfaction of the
consumers. It was to achieve the these objectives that the Bureau of Indian Standards has been set up as a
statutory institution.
Agricultural Produce Grading and Marketing Act (AGMARK) (1937)
This Act provides for grading and standardization of agricultural commodities. The main commodities
graded are -vegetable oil, ghee, cream, buttel; eggs, wheat flour, rice, cotton, gur, maize, honey and
ground spices. The graded goods are stamped with the seal of the Directorate of Agriculture, Marketing
and Inspection, Ministry of Rural Areas and Employment - AGMARK. The seal is an assurance of
quality and purity to the buyers of the agricultural products. In case AGMARIC goods are found to be of
poor quality or defective, the consumer can complait to the Agriculture Marketing Advisor at Directorate
of Marketing and Inspection. Defective goods are replaced free of cost or money refund With
amendments of 1986, there is now a provision for penalty for misgrading and counterfeiting grade,
designation mark- imprisonment upto 6 months and fine not exceeding Rs.5,000. Consumer organisations
have been authorized to draw samples for testing.
Government Agencies
To enforce the laws, the Government has established a number of regulatory agencies like the Bureau of
Industrial Costs and Prices, the Agricultural Prices Comission and the MRTP Commission.
The Bureau of Industrial Costs and Prices was establislied by the Government in 1971 to conduct
enquiries about industrial products and recommended prices.
The Agricultural Prices Commission was set up in January 1965 to advise the government on pricing
policies for agricultural commodities. The Governmerit has also framed rules like the Prevention of Food
Adulteration Rules, 1955 and the Standards of Weights and Measures (Packaged Commodities) Rules,
1977 to enforce the provisions of the related Acts. The enforcement of these Acts is the responsibility of
the Central and the State Government.
The MRTP Commission has been established by tlie Government under Section 5 of the MRTP Act,
1969. The Commission may inquire into (a) any restrictive trade practice; (b) any monopolistic trade
practice; and (c) any unfair trade practice.
In the case of restrictive and unfair trade practice, the Commission may proceed: I
i) upon receiving a complaint of facts which constitute such practice from any trade association or from
any consumer or a registered consumers' association, whether the affected consumer is a member of that
consumers' association or not;
ii) upon a reference made to it by the Central Government or a State Government; or
iii) upon an application made to it by the Director General; or
iv). upon its own knowledge or information.
In the case of monopolistic trade practice, however, the Commission may proceed:
i) upon a reference made to it by the Central Government; or
ii) upon a reference made to iL by tlie DGIR; or
iii) upon its own knowledge or information.
In respect of complaints received from a consumer, registered consumers association and trade
associations directly, the MRTP Cornmission has to make a preliminary investigation through its Director
General of Investigation to satisfy itself that the complaint deserves a full-scale inquiry. Public interest
groups have also grown up during the last two decades or so. These groups try to influence both
government as well as business to pay more attention to consumer rights. They even take the matter to a
law court to get justice to affected consumers against unfair dealings on the part
of business enterprises.
2.6 MARKETING IMPLICATIONS OF SOME REGULATIONS
The objective of MRTP Act, as amended by the Amendment Act, 1991, is to curb monopolistic,
restrictive and unfair trade practices and these have relevance from the point of view of decision making
with respect to 4Ps of the marketing mix. If the Consumer Protection Act becomes effectively
enforceable, it would be really difficult for marketers to ignore the interests of consumers in taking
decisions about different components of the marketing mix.
The Industries (Development & Regulation) Act also is one of the major economic laws of the country
which has been designed to regulate tlle industrial activity. Certain legislations which affect marketing
decisions like the Indian Contract Act 1972, the Sale of Goods Act 1930, the Companies Act 1956, the
Trade Marks Act 1999 and the Bureau of Indian Standards Act 1986, apply to every undertaking,
irrespective of the nature of product sold or service rendered.
As against these, there are other laws which seek to regulate marketing decisions of undertakings engaged
in specific industries only. Some of these are the Industries (Development & Regulation) Act 195 1, the
Prevention of Food Adulteration Act 1954, the Drugs and Magic Remedies (Objectionable
Advertisements) Act 1954, the Essential Commodities Act 1955, and the Sales
Promotion Employees (Conditions of Service) Act 1976.
All these Acts, thus, affect decision-making in relation to different elements of the marketing mix. The
following are some examples to illustrate these. In the area of the product, the government control may
affect decision-making with regard to productline expansion, product quality and safety, provision of
adequate and efficient services, packaging, labelling, and branding, sizes and shapes of packages,
information to be given on the wrapper or container, claims with regard to sponsorship, performance,
characteristics, etc., warranty or guarantee provisions and the after-sales service. The
decisions that may get affected in the context of regulation of pricing practices by the Government may
concern collusive price fixing agreements, re-sale price maintenance and agreements for price control to
eliminate conipetition, or competitors and also excessive, deceptive, bargain or bait pricing. So far as
advertising, sales promotion and personal selling is concerned, the government tries to regulate activities
like false, misleading and deceptive advertising, bait advertising and prize contests and other sales
promotion devices. The other decision areas concern the use of deceptive or
confusing trade marks, use of advertisements to cause the ignorant consumer to resort to self-medication
with harmful drugs and appliances and regulation ofthe service conditions of sale personnel of
pharmaceutical and other industries that may be covered. Tlie main aspects in relation to wliich the
government tries to exercise control in respect of channels and distribution decisions relate to restrictive
and unfair trade practices like hoarding and cornering ofgoods, refusal to sell goods or provide services,
etc., and arrangements like sole selling agency agreements, tie-up sales, boycott, exclusive dealing,
territorial restrictions, full-line forcing, re-sale price maintenance, etc . The marketer must ensure that his
decision in all these fields conform to the relevant provisions of the various Acts.
LET US SUM UP
Marketing decisions of every business organisation is influenced by a large number of uncontrollable
factors that surround tlie company. A company's marketing environment consists of the factors and forces
outside the marketing that affect marketing management's ability to develop and maintain successful