CHAPTER FIVE

MARKETING AND NEW VENTURE DEVELOPMENT

5.1 Marketing Research

The American Marketing Association formally defines marketing research as follows:
Marketing research is the function that links an organization to its market through the gathering of
information. This information allows for the identification and definition of market-driven
opportunities and problems .The information allows for the generation, refinement and evaluation of
marketing actions. It allows for the monitoring of marketing performance and improved understanding
of marketing as a business process.
Marketing research is one aspect of Marketing Information System (MIS). It is concerned with
acquiring of routine, non routine internal as well as external information for marketing decision
making. If properly conducted, it can assist a manager in making decisions which are more likely to be
correct. Marketing research is defined as follows: It is the systematic, objective, and formal process of
identification, collection, analysis, interpretation and dissemination of actionable information for the
purpose of improving decision making related to the identification and solution of problems and
opportunities in marketing.
5.1.1 The Marketing Research Process
I. Marketing problem or Opportunity identification
The research process begins with the recognition of a marketing problem or opportunity. As changes
occur in the firm’s external environment, marketing managers are faced with the questions. “Should
we change the existing marketing mix? If so, how? Marketing research may be used to evaluate
product, promotion, place (distribution), or pricing alternatives. In addition, it is used to find and
evaluate new market opportunities.
The research process builds a foundation for the reminder of the text. The process begins with the
recognition of a marketing problem or opportunity.
Once a problem has been sensed, the marketing researches come into the picture. The first
responsibility of the researcher, whether from an internal staff or outside consulting firm, is to work
with the marketing manager to precisely define or in cover the problem whose symptoms have been
observed. Certainly, no area of marketing research requires more insight and creativity than the process
of problem definition. It is the first step in arriving at a solution. It is also the most critical part of the
marketing research process. Proper definition of a problem also provides a guidance and direction for
the entire research process. Truly, a well defined problem is “half the battle” of conducting research.

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 II. Definition of the Research Objectives
The culmination of the problem/opportunity formulation process is a statement of the research
objectives. These objectives are stated in terms of the prices information necessary and desired to solve
the marketing management problem. Well formulated objectives serve as a road map in developing the
research project. They also serve as a standard which enables managers to evaluate the quality and
value of the work were the objectives met and do the recommendations flow logically from the
objectives and the research findings? Objectives must be a specific and unambiguous as possible.
Remember that the entire research effort in terms of time and money is geared toward achieving the
objectives.
[Link] the Research Design
The research design is the plan to be followed to answer the research objectives or hypotheses. In
essence, the researcher develops a structure or framework to solve a specific problem. There is no
single, best research design. Instead, the investigator faces an array of choices, each with certain
advantages. Ultimately, trade- offs are typically involved. A common trade off is between research
costs and the quality of decision –making information provided.

Generally speaking, the more precise and error free the information obtained, the higher the cost.
Another common trade off is between time constraints and the type of research design selected. In
summary, the researcher must attempt to provide management with the best information possible
subject to the various constraints under which he or she must operate.
IV. Choosing a basic method of Research
A research design, either descriptive or casual, is chosen according to a project’s objectives. The next
step is to select a means of gathering data. There are three basic research methods: survey, observation
and experiment. Survey research is often descriptive in nature, but can be causal. Experiments are
almost always casual, whereas observation research is typically descriptive.
V. Selecting the sampling procedures
The sample is actually part of the research design but is a separate step in the research process. A
sample is a subset from a larger population. Several questions must be answered before a sample is
selected. First, the population or universe of interest must be defined. This is the group from which the
sample will be drawn. It should include all the people whose opinions, behavior, preferences, attitudes,
and so on will aid the marketer’s decision making.

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A probability sample is characterized by every element in the population having a known non-zero
probability of being selected. Such samples allow the researcher to estimate how much sampling error
is present in a given study.

Non probability samples include all samples that cannot be considered probability samples
specifically; any samples in which little or no attempt is made to ensure that a representative cross
section of the population is obtained can be considered a non-probability sample. The researchers
cannot statistically calculate the reliability of the sample: that is, they cannot determine the degree of
sampling error that can be expected.
vi. Collecting the Data
Most data collection is done by marketing research field services. Field service firm, found throughout
the country, specialize in intervene for data collection on a subcontract basis. Typical research study
involves data collection in several cities and requires working with a comparable number of field
service firms. To ensure that all subcontractor do everything exactly the same way, detailed field
instructions should be developed for every job.
Besides interviewing, field service firms provide group research facilities, mail intercept locations, test
product storage, and kitchen facilities to prepare test food products.
Vii. Analyzing the Data
After the data have been collected the next step in the research process is data analysis. The purpose of
this analysis is to interpret and draw conclusions from the mass of collected data. The marketing
researcher may use techniques beginning with simple frequency analysis and ultimately culminating to
complex multivariate techniques.
Viii. Preparing and Writing the Report
After completing the data analysis, the researcher must prepare the required to present both written and
oral reports on the project. When preparing and presenting these reports, the researcher should keep in
mind the nature of the audience. The report should begin with a clear, concise statement of the research
objectives, followed by a complete, but brief and simple, explanation of the research design or
methodology. A summary of major findings should come next. The report should end with a
presentation of conclusions and recommendations for management.
5.2 Marketing Intelligence
A marketing intelligence system is a set of procedures and sources used by managers to obtain their
everyday information need about pertinent development in the marketing environment.

Information in this case can be obtained from:

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1. Internal - Research and Development

- Internal records

- Employees

2. External - Customers

- Distributors

- Suppliers

- Government bodies
Marketing managers often carry on marketing intelligence by reading books, newspapers, and trade
publications; talking to customers, suppliers, distributors, and other outsiders; and talking with other
managers and personnel within the company.
In order to improve the quality and quantity of marketing intelligence:
1. Motivating and train sales forces- to gather information from the market.
2. Providing incentives to marketing intermediaries
3. Buying information from outside suppliers
4. Develop (establish) internal marketing information center.
5.3 Competitive Analysis
A competitive analysis is essentially a structured method of examining an organization or industry in
order to provide a clear understanding of factors that affect a business.
It is made based on Porter’s five forces of competition:
 Bargaining power of suppliers
 Bargaining power of buyers
 Bargaining power of existing firms
 Availability of substitute products
 Barriers to entry
These five forces determine industry profitability and in turn are a function of industry structure- the
underlying economic and technical characteristics of the industry.
 These can change over time but the analysis does emphasis the need to select industries
carefully in the first place.
 It also provides a framework for predicting, a priori the success or otherwise of the small firm.
For example, a small firm competing with many other small firms to sell a relatively
undifferentiated product to a few large customers in an industry with few barriers to entry is

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 unlikely to do well without some radical shifts in its marketing strategies. How many firms
face just such a situation?

Potential
Entrants
Threat of
New entrants
Bargaining Power of
Industry
Suppliers of Bargan
Competitors Bargaining power of buyer

Suppliers Buyer

Rivalry among
Threat of
Existing Firms Threats of Substitute products
Substitute
Substitutes

Figure 5.1 Porter’s five competitive forces

Bargaining Power of Suppliers
Supplier power is likely to be high when there are only few suppliers giving an entrepreneur few
options to shop for inventory.
 Whenever suppliers are few in number
 When products are not substitutable each other
Bargaining Power of Buyers
To what extent buyers impose a considerable influence on producers(suppliers)
Under the following conditions buyers influence producers:
 Whenever buyers are few in number and purchase in large volume relative to the total industry
sales.
 Whenever products are not differentiated and can be easily substituted
 When switching cost of buyers is low
 When buyers have the ability to integrate backward and start to produce its input internally.
Rivalry among Existing Firms
It is concerned with competition among existing firms. This depends on:

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  Size of firms -When firms have relatively similar size (either small or large), each of them can
make similar type of decision.
 Perishability of products- If organizations are engaged in selling perishable products, they sell
their products at the existing price.
 Low switching cost of buyers- tends to increase competition among existing firms.
 Attractiveness of the industry in terms of profit-when the industry profitable, it attracts more
competitors and competition increases.
 The numbers of firms in the industry –When there are many firms (when firms are many in
number), competition will increase.
Availability of Substitute products
When there are products which either serve similar purpose or satisfy similar needs and wants of
customers.
Barriers to Entry
It includes forces that protect position of a firm from other or new competitors (entrants).
 Capital requirement-amount of capital required to operate in the market. If the type of business
requires a large initial capital investment, fewer entrepreneurs are likely to enter the industry. For
example, manufacturing computer requires millions of dollars in technology, facilities, and skilled
people.
 Economies of scale- closely related to the capital requirement are the nature of a business that
requires a large sales volume to offer a product or service at a competitive price.
 Reputation and good will of existing firms- when existing firms have good reputation- entry is
difficult.
 Switching cost of buyers –When buyers assume low switching cost-entry will be easy.
-when switching costs are high, entry is difficult.
 Differentiation –The extent to which an enterprise can establish a brand image, service, product
innovation, or reputation describes its differentiation or distinctive competency.
 Customer’s loyalty- If an existing firm builds hard core loyal customers, it will be difficult for new
entrants. If customers are switchers (customers who purchase what is available), entry will be easy.
 Regulatory forces-The extent to which the government protects the industry. Example, ETV
 Access to distribution channels, necessary input and technological knowhow.

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 5.4 Marketing Strategy
Using this focus, organizations can achieve their objectives in two ways. They can better manage what
they are presently doing and/or find new things to do. In choosing either or both of these paths, the
organization must then decide whether to concentrate on present customers or to seek new ones, or
both. Accordingly the following four marketing strategies are identified; market penetration, market
development, product development and diversification. A two dimensional model known as Ansoff’s
product/market matrix is developed to analyze alternative strategies available to an organization for
achieving its objectives.
Ansoff’s product/market matrix (Organizational Growth strategies)
Product

Current New
Current
Market penetration Product development
Market strategy strategy
New Market Development Diversification
strategy

Market penetration strategies

These strategies pursued for present market and product. These strategies focus on improving the
position of the organizations present products with its present customers and are effective when the
market is growing or become saturated for existing products. There are three major approaches to
increase current product’s market share in the current market.
i. Encourage existing customer to buy more of the product.
ii. Attract competitor’s customers through attractive promotion
iii. Convince non-users of the product to use the product.
In order to carry out this strategy and implement these three approaches certain tactics can be used:
price reduction, advertising that stresses the different benefits of the product, packaging the product in
different sized packages or making the product available in different locations.
Market Development Strategy
This strategy is the strategy of seeking new market for the existing product. The strategy is that:
i. Enter in to a new geographical market
ii. Identify a new marketing segment for current product
iii. Use additional new distribution channels.

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For example:
 A government social service agency may seek individuals and families who have never utilized
the agency’s services.
 A manufacturer of automobiles may decide to sell automobiles in a new region which it has not
entered before.
 An athletic clothing and footwear company may decide to develop a line of fitness clothing for
children

Product Development Strategy

This strategy may enforce management to consider some new product development possibilities such
as: design and develop a new product, modify the quality of existing product, and modify the features
of existing product. For example:
 A candy manufacturer may decide to produce biscuits and offer to its customers.
 A social service agency may offer additional services to present clients.
 A hotel adds a new item in its menu.
Diversification
This strategy makes the business to be less dependent on one or few products in the market place. This
strategy can also be pursued whenever there is a good opportunity outside the current business market
and product.
Types of diversification
Diversification is of four types:
1. Horizontal integration
2. Vertical integration
3. Concentric diversification
4. Conglomerate diversification
1. Horizontal integration: in this type of diversification, a company adds up same type of products
at the same level of production or marketing process. This may happen internally or externally.
Internally a company may decide to enter a parallel product market condition to the existing
product line. Externally, a company combines with a competing firm. Two or more competing
firms are brought together under single ownership and control. For example a dairy, producing
cheese adds a new type of cheese to its products.
2. Vertical integration: in this type of growth strategy new products or services are added which are
complementary to the existing product or service line. New products serve the firm’s own needs by

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 either supplying inputs or serve as a customer for its output. It involves moving backward or
forward from the present product or service. Linkages are established between products, processes
or distribution systems. For example, if you have a company that does reconstruction of houses and
offices and you start selling paints and other construction materials for use in this business
3. Concentric diversification: when a firm enters into some businesses, which is related with its
present business in terms of technology, marketing or both, it is called concentric diversification. It
is employed for one of the following purposes
 To counteract cyclical fluctuations in the present products or services
 To utilize the cash flows generated by the existing products or services
 To face saturation of demand for present product or service
 To gain managerial expertise in new fields of business or services
 To capitalize on the reputation of present product or service
4. Conglomerate diversification: in this growth strategy, a firm enters into business, which is
unrelated to its existing business both in terms of technology and marketing. It may be adopted for
the following reasons:
a) to achieve a growth rate higher than what can be realized through expansion
b) to make better use of financial resource with retained profits exceeding immediate
investment needs
c) to avail of potential opportunities for profitable investment
d) to achieve distinctive competitive and greater stability
e) to spread the risk and
f) to improve the price earnings ratio and market price of the company’s shares

This means that there is a technological similarity between the industries, which means that
the firm is able to leverage its technical know-how to gain some advantage. For example, a company
that manufactures industrial adhesives might decide to diversify into adhesives to be sold via retailers.
The technology would be the same but the marketing effort would need to change.

It also seems to increase its market share to launch a new product that helps the particular
company to earn profit. For instance, the addition of tomato ketchup and sauce to the existing
"Maggi" brand processed items of Food Specialties Ltd. is an example of technological-related
concentric diversification.

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 The company could seek new products that have technological or marketing synergies with
existing product lines appealing to a new group of customers. This also helps the company to tap
that part of the market which remains untapped, and which presents an opportunity to earn profits.

5.5. International Marketing

Defnition
International marketing is the performance of business activities designed to plan, price, promote,
and direct the flow of a company's goods and services to consumers or users in more than one
nation for a profit. The only difference in the definitions of domestic marketing and international
marketing is that marketing activities take place in more than one country. This apparently minor
difference ". . . in more than one nation . . ." accounts for the complexity and diversity found in
international marketing operations. Marketing concepts, processes, and principles are universally
applicable, and the marketer's task is the same whether doing business in Dimebox, Texas, or Dar es
Salaam. Tanzania. Businesses' goal is to make a profit by promoting, pricing, and distributing products
for which there is a market. If this is the case, what is the difference between domestic and
international marketing? The answer lies not with different concepts of marketing but with the
environment within which marketing plans must be implemented. The uniqueness of foreign marketing
comes from the range of unfamiliar problems and the variety of strategies necessary to cope with
different levels of uncertainty encountered in foreign markets.

Competition, legal restraints, government controls, weather, indecisive consumers, and any
number of other uncontrollable elements can, and frequently do, affect the profitable outcome of good,
sound marketing plans. Generally speaking, the marketer cannot control or influence these
uncontrollable elements, but instead must adjust or adapt to them in a manner consistent with a
successful outcome. What makes marketing interesting is the challenge of molding the controllable
elements of marketing decision(product, price, promotion, and distribution) within the framework of
the uncontrollable elements of the marketplace (competition, politics, laws, consumer behavior, level
of technology, and so forth) in such a way that marketing objectives are achieved. Even though
marketing principles and concepts are universally applicable, the environment within which the
marketer must implement marketing plans can change dramatically from country to country or region
to region. The difficulties created by different environments are the international marketer's
primary concern.

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1.2 The International Marketing Task
The international marketer's task is more complicated than that of the domestic marketer because the
international marketer must deal with at least two levels of uncontrollable uncertainty instead of one.
Uncertainty is created by the uncontrollable elements of all business environments, but each foreign
country in which a company operates adds its own unique set of uncontrollable. Exhibit 5-1 illustrates
the total environment of an international marketer.

The inner circle depicts the controllable elements that constitute a marketer's decision area, the second
circle encompasses those environmental elements at home that have some effect on foreign-operation
decisions, and the outer circles represent the elements of the foreign environment for each foreign
market within which the marketer operates. As the outer circles illustrate, each foreign market in which
the company does business can (and usually does) present separate problems involving some or all of
the uncontrollable elements. Thus, the more foreign markets in which a company operates, the greater
the possible variety of foreign environmental uncontrollables with which to contend. Frequently, a
solution to a problem in country market A is not applicable to a problem in country market B.

Marketing controllables

The successful manager constructs a marketing program designed for optimal adjustment to the
uncertainty of the business climate. The inner circle in Exhibit 5-1 represents the area under control of
the marketing manager. Assuming the necessary overall corporate resources, the marketing manager
blends price, product, promotion, and channels-of-distribution activities to capitalize on anticipated
demand. The controllable elements can be altered in the long run and, usually, in the short run, to
adjust to changing market conditions, consumer tastes, or corporate objectives.
The outer circles surrounding the market controllables represent the levels of uncertainty that are
created by the domestic and foreign environments. Although the market can blend a marketing mix
from the controllable elements, the uncontrollables are precisely that and there must be active
evaluation and, if needed, adaptation. That effort, the adaptation of the marketing mix to the
uncontrollables, determines the ultimate outcome of the marketing enterprise.

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 Exhibit 5-1:The International Marketing Task

Structure of
distribution

Foreign environment
(Uncontrollables)

Economic
Political/ Forces
Legal
forces
Domestic-Environment Environmental
(Uncontrollables) uncontrollables country
market A

Political/ (controllables) Environmental

Legal uncontrollables country
forces Competitive market B
Cultural Price Product Structure
Forces Competitive
forces

Promotion Channels of
distribution
Environmental
uncontrollablescontry
market C

Economic Climate Level of

Technology
Geography &
infrastructure

Structure of
distribution

The second circle in Exhibit 1-1, representing the domestic uncontrollables, includes home-country
elements that can have a direct effect on the success of a foreign venture and are out of the immediate
control of the marketer: political and legal forces, economic climate, and competition.
Foreign Uncontrollables
In addition to uncontrollable domestic elements, a significant source of uncertainty the number of
foreign uncontrollables (depicted in Exhibit 5-1 by the outer circles). A business operating in its home
country undoubtedly feels comfortable in forecasting the business climate and adjusting business

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decisions to these elements. The process of evaluating the uncontrollable elements in an international
marketing program, however, often involves substantial doses of cultural, political, and economic
shock.

A business operating in a number of foreign countries might find polar extremes in political stability,
class structure, and economic climate-critical elements in business decisions. The dynamic upheavals
in some countries further illustrate the problems of dramatic change in cultural, political, and economic
climates over relatively short periods of time.
The more significant elements in the uncontrollable international environment, shown in the outer
circles of Exhibit 1-1, include (1) political/legal forces, (2) economic forces, (3) competitive forces, (4)
level of technology, (5) structure of distribution, (6) geography and infrastructure, and (7) cultural
forces. They constitute the principal elements of uncertainty an international marketer must cope with
in designing a marketing program.

The level of technology is an uncontrollable element that can often be misread because of the vast
differences that may exist between developed and undeveloped countries. A marketer cannot assume
that the understanding of the concept of preventive maintenance for machinery and equipment or the
level of technical support are the same in other countries as in the United States. Technical expertise
may not be available at a level necessary for product support and the general population may not have
an adequate level of technical knowledge to properly maintain equipment. In those situations, a mar-
keter will have to take extra steps to make sure that the importance of routine maintenance is
understood and carried out. Further, if technical support is not readily available, locals will have to be
specially trained or the company will have to provide the support.

Political and legal issues face a business whether operating at home or in a foreign country. However,
the issues abroad are often amplified by the "alien status" of the company, which increases the
difficulty of properly assessing and forecasting the dynamic international business climate. There are
two dimensions to the alien status of a foreign business: alien in that foreigners control the business,
and alien in that the culture of the host country is alien to management. The alien status of a business
means that, when viewed as an outsider, it can be seen as an exploiter and receive prejudiced or unfair
treatment at the hands of politicians and/or legal authorities. Political activists can rally support by
advocating the expulsion of the "foreign exploiters," often with open or implicit approval of authori-
ties. The Indian government, for example, gave Coca-Cola the choice of either revealing its secret
formula or closing up shop and leaving the country. Coke chose to leave. When it was welcomed back

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several years later, it faced harassment and constant interference with its operations from political
activists, inspired by competing soft drink companies.

The uncertainty of different foreign business environments creates the need for a close study of the
uncontrollable elements within each new country. Different solutions to fundamentally identical
marketing tasks are often in order and are generally the result of changes in the environment of the
market. Thus, a strategy successful in one country can be rendered ineffective in another by differences
in political climate, stages of economic development , levels of technology, or other cultural variation.

Challenges of International Marketing

The most cost-effective method to market products or services worldwide is to use the same program
in every country, provided environmental conditions favor such an approach. However, invariably (as
we have seen in the previous section), local market characteristics exist that may require some form of
adaptation to local conditions. One of the challenges of international marketing is to be able to
determine the extent to which a standardized approach may be used for any given local market. To do
this, the international marketing manager must become aware of any factors that limit standardization.
Such factors can be categorized into four major groups: market characteristics, competitive
conditions, marketing infrastructure, and regulatory conditions.

The debate over the amount or extent of standardization is one of the longest in the field of
international marketing. Some see markets as becoming more similar and increasingly more global
while others point out the difficulties in using a standardized approach, as experienced by many
companies and the research of many academics.

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