Booklet 4:

Business Management – Management processes

(Marketing and Human Resources)
Preliminary Business Studies

2021
Name:……………………………………………………

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9.2 Preliminary topic: Business management
40% of indicative time

The focus of this topic is the nature and responsibilities of management in the
business environment.

Outcomes
The student:

P2 explains the internal and external influences on businesses

P4 assesses the processes and interdependence of key business functions
P5 examines the application of management theories and strategies
P6 analyses the responsibilities of business to internal and external stakeholders
P7 plans and conducts investigations into contemporary business issues
P8 evaluates information for actual and hypothetical business situations
P9 communicates business information and issues in appropriate formats
P10 applies mathematical concepts appropriately in business situations

Content

Students learn to:

examine contemporary business issues to:

 discuss strategies that could reconcile the conflicting interests of stakeholders
 compare and contrast approaches to management
 explain the benefits of quality management practices

investigate aspects of business using hypothetical situations and actual business case
studies to:
 identify the qualities of managers who have exhibited high personal and ethical
standards
 analyse different ways of coordinating key business functions for an SME
 examine effective cash flow management
 assess the role of the income statement and the balance sheet when describing the
financial performance of a business
 explain how SMEs manage change effectively

Students learn about:

management process
 coordinating key business functions and resources
 operations
– goods and/or services
– the production process
– quality management
 marketing

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 – identification of the target market
– marketing mix
 finance
– cash flow statement
– income statement
– balance sheet
 human resources
– recruitment
– training
– employment contracts
– separation – voluntary/involuntary
 ethical business behaviour

management and change

 responding to internal and external influences
 managing change effectively
– identifying the need for change
 business information systems
– setting achievable goals
– resistance to change
– management consultants

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Marketing

Why is it important?

Without some form of marketing, customers may not even be aware of a product’s existence
regardless of how ‘record breaking’, ‘new and improved’ or ‘revolutionary’ it may be. Statistics
reveal that more than 70 per cent of new products launched on the market self-destruct in the first
year of operation, mainly because of poor marketing.

What is Marketing?

A simplified definition of marketing is a total system of interacting activities designed to plan, price,
promote and distribute products to present and potential customers. At the heart of these
activities is the most fundamental question all businesses should continually ask: ‘What do
customers want to buy — now and in the future?’ This is the essence of marketing — finding out
what the customers want then attempting to satisfy their needs.

Sometimes ‘selling’ and ‘marketing’ are used synonymously. Many people think that marketing is
just a fancy name for selling; however, there is much more involved. Selling is merely getting rid of
existing stock, whereas marketing takes a much broader view. Successful marketing involves
bringing the buyer and seller together and making a sale. The current view of marketing is such that
it does not even have to involve the selling of a product — for example, not-for-profit organisations
may want to inform the public of the services they provide.

All businesses, regardless of size, need to undertake some form of marketing, otherwise customers
will not be informed about the business’s products.

Role of Marketing

Marketing is much more than placing an advertisement in the local media. It is a way of thinking.
Everything a business does should be directed towards putting the customer at the centre of its
thinking. To do this successfully requires adopting a customer-oriented approach to marketing.
Business owners need to view their business in terms of the needs and wants of their customers
(see figure below). As competition intensifies, it will be their marketing philosophy that will help
their business face the competition and succeed.

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For businesses that adopt a customer-oriented approach, the customer relationship does not end
with the sale; it begins there. These businesses will continuously strive to not simply meet but
exceed customer expectations. This means that, at every level of the business, employees should
work towards customer satisfaction by establishing positive relationships with customers.

Source: Chapman et al, 2019.

Question 1: Define marketing.

Question 2: Outline the importance of undertaking marketing activities for small businesses.

Question 3: Explain how a business can become a more marketing driven customer oriented
business.

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Identifying the Target Market

A target market is a group of customers with similar characteristics who presently or who may in
the future purchase the product. To identify your target market there are three ways that
businesses will go about it. These are mass marketing, market segmentation, and niche marketing.

Before setting the marketing strategy for the 4Ps (Product, Price, Promotion and Place) a business
will first spend significant time and effort to determine who the business’ potential customers are
and who the business will target with its goods and services. The process of determining these
potential customers is called segmenting the market.

Every company has a detailed profile of their potential customers, and that profile then informs all
the elements of the marketing strategy. By first segmenting the market the business can determine
the number of people in the target segment, plan appropriate price, product, promotion and place
strategies and then be able to forecast revenue and profit depending on the various levels of
success in selling products or services in that segment.

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Activity 1: Draw the three broad approaches when selecting target market
Mass Marketing Approach Market Segmentation Approach Niche Marketing Approach

Question 4: Define target market.

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Mass marketing approach

The first is known as mass marketing. A mass marketing approach seeks a large range of
customers. The business develops a single marketing mix, and directs it at the entire market for the
product. This means that there is one type of product with little or no variation, one promotional
program aimed at everyone, one price and one distribution system used to reach all customers. In
a mass market, the seller mass produces, mass distributes, and mass promotes one product to all
buyers.

A mass marketing approach seeks a large range of customers. The business develops a single
marketing mix and directs it at the entire market for the product. This means there is one type of
product with little or no variation, one promotional program aimed at everyone, one price, and one
distribution system used to reach all customers.

Few products today, apart from basic food items, water, gas and electricity, are marketed to the
mass market. As a result of greater choice, higher personal incomes and customers seeking more
individualised products, the mass market has been replaced by segmented or niche markets.

Case study focus: Kleenex uses a mass marketing approach

Kleenex is one of those names which almost everyone will recognize. A whole generation
of people have grown up thinking “Kleenex” is a word meaning “tissue paper” – including
tissue paper by rival brands. That’s some next-level marketing. Kleenex wasn’t always
selling disposable tissue papers. It started out in 1920s as make-up remover and
a cleansing tissue. However, they quickly discovered (from customer feedback as well as
observing the market) that a lot of customers preferred to use their tissues as a substitute
for handkerchiefs. Kleenex saw the opportunity and took it, running ad campaigns for
Kleenex both as make-up removers as well as disposable handkerchiefs. It paid off
handsomely, doubling their sales, and the rest is history

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Market Segmentation approach

The second is known as market segmentation. Market segmentation occurs when the total market
is subdivided into groups of people who share one or more common characteristic. A business
segments its market so it can better direct its marketing strategies to specific groups of customers
rather than the mass market. The ultimate aim of market segmentation is to increase sales and
profits by better understanding and responding to the desires of the target customers. They do this
by categorising the market in the 4 sections below.

In the example below the population in 3 states has been segmented according to age, income
level, gender and geographical location. The business sells premium ladies handbags and is trying
to identify the most appropriate target market. In order to maximise their chances of success the
business has identified its primary market as medium to high income women in the 2 largest capital
cities. The primary market is the one that will derive the most revenue and customers in this
segment share common characteristics and behaviours. The secondary market has been identified
as high income males over 25 in 2 capital cities. A secondary market is made up of consumers who
are different than those in the primary market. A business will diversify its target market segments
as it can’t just focus on one target market. This will increase its chances of achieving sales.

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Source: Parsons

Once the market has been segmented, the business selects one of these segments to become the
target market. This approach allows the business to better satisfy the wants and needs of a
targeted group because the business can:

● use it's marketing resources more efficiently

● better understand the consumer buying behaviour of the target market. (Consumer buying
behaviour refers to the decisions and actions of consumers when they purchase goods and
services for personal household use)
● collect data more effectively and make comparisons within the target market overtime
● refine marketing strategies used to influence consumer choice.

Activity 2: Classify the elements under each category for segmenting target markets.

Demographic Geographic Psychographic Behavioural

population characteristics where people live personality loyalty to a product
characteristics

Case study focus: Market segmentation in Lego and McDonalds

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Once the target markets have been identified, the business can:

 design the product, features, materials, branding and packaging that will appeal to the
target market
 price the product in a way that will represent value to the target market
 efficiently and effectively promote the product usine media and other communication
channels which are likely to be seen by and influence consumers in the target market.
 Ensure the product is available for purchase at convenient places to the target market,
which may be through a range of physical stores or online or even mobile experiences.

Source: Parsons

Activity 3: Describe the target

market using the elements above
for Soda Stream.

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Niche marketing approach

The third way is the niche market. The niche market is a narrowly selected target market segment.
In other words it is a segment within a segment or a micro market. An example of a niche market is
Ferraris. Ferraris are aimed at very rich members of society who have a fine taste in cars. Ferraris
do not mass market or care about having a large market share. They only care about prestige and
satisfying their niche market.

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Activity 4: Complete the following table to summarise the approaches to identifying the target
market for a business.

Definition Examples of businesses Discussion

(State meaning and identify essential that use this approach (Identify issues and provide points for
qualities) (Elaborate on the examples and link and/or against)
to key features of the approach)
Mass
Marketing
Approach

Market
Segmentation
Approach

Niche Market
Approach

Question 5: Outline the mass marketing approach.

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Question 6: In the marketing segmentation approach, a business may be able to identify both a
primary and secondary target market. What are these two target markets?

Question 7: Outline the purpose of using a market segmentation approach.

Question 8: Distinguish between mass marketing and niche marketing.

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Marketing Mix
Once the business owner has established the marketing goals (a statement of what the business
expects to achieve through the marketing activities) and selected a target market, the next step of
the marketing plan is to develop marketing strategies to achieve the goals. Marketing strategies are
actions undertaken to achieve the business’s marketing goals through the marketing mix.

One of the most useful ways of understanding how to develop a marketing strategy is to examine
each of the elements of the marketing mix. The marketing mix refers to the combination of the
four Ps — product, price, promotion and place (distribution). The business has control over these
elements and uses them to reach its target market. These four Ps of the marketing mix are
considered the basic cornerstone of marketing. However, as the service sector within the economy
has grown, three more Ps have been added that apply especially to the service industry. These
three extra Ps — people, processes and physical evidence — now form the extended marketing mix
(you will learn about these in the HSC Marketing topic).

Once the four Ps have been established, the business must then determine the emphasis it will
place on each of the variables. This will largely be determined by where the product is positioned
or its stage in the product life cycle. For example, a product that is being marketed with an image
of exclusivity and prestige will require a marketing mix totally different from a no-frills, generic
item. A different marketing mix will also be required for a product in its introductory stage than
when it reaches the decline stage.

Source: Chapman et al

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Product strategies: The specification of the good or service the business produces, including the
materials, product design, product features, performance, quality, durability, packaging, warranty
and branding. When deciding on a product a business owner needs to determine the following:

● Quality
● Design
● Name
● Packaging
● Labelling
● Exclusive features
● Warranty and guarantee

Lego Product strategies

Source: Parsons

Customers will buy products that not only satisfy their needs but also provide intangible benefits
such as a feeling of security, prestige, satisfaction, or influence.

Product Positioning: This refers to the development of a product image compared with the image
of competing products. For example, a pair of Nike Air Max compared to a pair of Gucci sneakers.
Where do they position themselves in your mind in comparison to each other?

Product Packaging: Packaging involves the development of a container and the graphic design for a
product. Well-designed packaging will give a positive impression of the product and encourage
first-time customers to purchase. Packaging helps preserve, inform, protect and promote the
product.

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Lego Product Packaging strategies Source: Parsons

Product Branding: A brand is a name, term, symbol or design that identifies a specific product and
distinguishes it from its competitors. A brand logo is a graphic representation that identifies a
business or product. How prevalent this brand or logo is, will determine the level of success of the
business. For example, the golden arches or the tick. These automatically trigger the two
businesses of McDonald's and Nike, and ultimately its position in your mind.

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Price Strategies: The price of a product will be determined through a mathematical process (Pricing
methods including cost plus margin) or a strategic process (pricing strategies) having regard to the
novelty of the product and what the business is trying to achieve with the product.

When it comes to price business owners normally choose one of four methods for calculating price.
These four methods are: cost plus margin, market price, competitors price or discount price.

1. Cost plus margin: Calculating the total cost of production and adding a percentage or
margin for profit.
2. Market price: pricing according to the interaction between the quantity that customers are
willing to purchase and the quantity that produces are able to supply. If there is a shortage
of the product, the market price will rise, whereas if there is a surplus market price will fall.
3. Competitors price: choosing a price that is either below, equal to, or above that of the
competitors
4. Discount Price: reducing the price of stock that is not selling to stimulate the demand.

Other pricing strategies include:

Price skimming
Price skimming occurs when a business charges the highest possible price for the product during
the introduction stage of its life cycle. Some consumers are willing to pay a high price for a
product's novelty features because of the prestige or status that ownership gives. Early purchasers
(adopters) of innovative electronic equipment fall into this category. The business essentially 'skims
the cream' off the market. The objective is to recover the costs of research and development as
quickly as possible, before competition enters the market.

Price penetration
At the opposite extreme to price skimming is price penetration. Price penetration occurs when a
business charges the lowest price possible for a product. The strategy aims to quickly achieve a
large market share for a product - sometimes called 'mass-market pricing'. The objective is to sell a
large number of products during the early stages of the life cycle and thus discourage competitors
from entering the market or from taking market share from existing businesses. The main
disadvantage of this strategy is that it is more difficult to raise prices significantly than it is to lower
them. Consequently, a business may be locked into a low sales revenue until it substantially
modifies the product at a later stage.

Loss leader
A loss leader is a product sold at or below cost price. For a special promotion, many businesses,
especially retail stores, deliberately sell a product at a loss to attract customers to the shop.
Although the business makes a loss on this product, it hopes that the extra customers will buy
other products as well. The psychology behind this strategy is that once the consumers are in the
store, they will usually buy other products and spend more than what attracted them into the store
to begin with. The business can recover the loss on the low-price item from the sale of the other
items or services that the consumer buys.

This successful pricing strategy is often used when the business:

 is overstocked or a product is slow to sell.
 wants to increase the traffic flow in the expectation of gaining new customers
 wants to build a reputation of having low prices.

However, the main danger of this practice is that if it is done incorrectly the business can actually
lose money.

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Price points
Price points (or price lining) is selling products only at certain predetermined prices. This pricing
strategy is used mainly by retailers, especially clothing stores and boutiques. The business chooses
a limited number of key prices or price points for selected product lines. For example, a jeweller
may offer a line of watches priced at $55, $75 and $95 regardless of how much they cost at
wholesale. In practice, this means the store would not apply a fixed mark-up to the products.

Using this pricing strategy makes it easier for the customer to find the type of product they need. It
also makes it easier for the business to encourage the customer to 'trade up' to a more expensive
model.

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Promotion Strategies: The specification of how target consumer awareness and interest will be
developed in order to achieve market objectives. Promotion goes beyond just advertising and
refers to the methods used by a business to inform persuade and remind customers about its
products. Without an effective promotion strategy, consumers will not be aware of or purchase the
product thus not helping the business to achieve marketing objectives. It is thus the range of
strategies employed for communication activities that will take place in order to achieve the
marketing objectives of the business. The purpose of promotion is as follows:

 increase awareness of the business and its products

 increase demand for the product amongst those in the target market
 achieve the desired brand for the business
 increase brand recognition
 differentiate the business from its competitors.

The main forms of promotion are: personal selling, sales promotion, publicity, & advertising.

1. Personal selling: this is known as a face-to-face interaction between the seller and the
consumer. We know these as sales reps. The main advantage of this method is that the
message can be modified to suit the individual customer’s needs. However, it is time-
consuming and very expensive
2. Sales Promotion: This includes free samples coupons with cash refunds and loyalty
program such as FlyBuys. These are all activities and materials that are used to attract the
interest and the support for the good or the service.
3. Publicity: The main aim of publicity is to enhance the image of the product using free news
stories about its product. For example, when people line up outside the Apple store from
the night before and camp in tents, and this makes news headlines this is a form of
publicity for Apple. Apple did not pay for this marketing campaign but it just came due to
the demand for their product. However, publicity can also be paid for through using
celebrities as spokespersons. For example, Beyonce who is known for being the face of
Pepsi or David Beckham being the face of Sharpie pens.
4. Advertising: advertising can take on several forms such as print or electronic mass media
or social media or word-of-mouth.

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Place Strategies: The 4th P of the marketing mix is Place which specifies where the product will be
sold in both digital and retail environments. In order to ensure the product or service is sold in the
right location, it will require a distribution strategy. Another term for place is channels of
distribution. there are three main traditional types of distribution channels. Most businesses will
aim to have multiple channels to achieve their marketing objectives. They are: producer to
customer, producer to retailer to customer, producer to wholesaler to retailer to customer.

1. Producer to customer: This is the simplest channel and involves no intermediaries.

Virtually all services, from tax advice to car repairs, use this method
2. Producer to retailer to customer: A retailer is an intermediary who buys from the producer
and resells to customers. This channel is often used for bulky or perishable products such
as furniture or fruit
3. Producer to wholesaler to retailer to customer: This is the most common method used for
the distribution of consumer goods. A wholesaler is an intermediary who buys in bulk from
a producer, then sells in smaller quantities to retailers. Producers will use the services of a
wholesaler when a large number of retailers sell the product and the producer finds it
difficult to deal with them all.

Non-store retailing — that is, retailing activity conducted away from the traditional store — is
gaining popularity. Two of the most rapidly developing methods are:

1. e-commerce, which refers to the buying and selling of goods and services via the internet
2. mobile commerce (m-commerce), which refers to the buying and selling of goods and
services through wireless handheld devices, such as mobile phones and tablets.

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Activity 5: Watch the Gruen Transfer Selling Bottled Water Segment and detail the elements of the
marketing mix–[Link]

Product Place

Promotion Price

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Watch the clip on Coca Cola’s Marketing strategy

[Link]

Activity 6: Describe the Marketing mix for Coca Cola.

Product Place

Promotion Price

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Revision Questions

Set 1:

Matthew is an excellent cook who has worked at the main chef in a range of restaurants in
Sydney’s western suburbs. His partner Jillian has completed a degree in hospitality. The couple are
considering starting a gourmet restaurant that specialises in upmarket burgers and similar food
products that also offers catering services.

a. Outline the possible target market for this business. (2 marks)

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b. Discuss TWO promotional strategies that Matthew and Jillian might use to successfully market
their business (6 marks)
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Set 2:

A small business that sells home office furniture is trying to expand its market share. The business
has decided to do this by implementing a new marketing strategy. The target market will be the
focus of this marketing strategy.

a. Explain why it is important for a business to correctly identify its target market (3 marks)
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b. Recommend ONE promotional and ONE pricing strategy that could be implemented to increase
the market share of the furniture business (4 marks)
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Set 3:

Nadia has been running a successful business for the last 8 years but sales have fallen this year. She
wants to launch a new marketing campaign for her baby food which is 100% organic.

a. Explain how market segmentation can result in an increase in sales and profits. (3 marks)
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b. Describe TWO product strategies which could be used by Nadia’s Natural Foods to increase
sales and market share. (4 marks)
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Set 4:

a. Explain the branding strategy used by Woolworths for the above product (3 marks).
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b. Assess Woolworth’s packaging strategy (4 marks).

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c. Outline the positioning of this product (2 marks).

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d. Examine the product strategies that have been used to market this product (6 marks).

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