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Sunday, November 24, 2013

MATRIX ORGANISATION


Matrix Organisation

The principles of organisation apply whether you are designing the entire organisation or a department within it. The three most basic functions necessary for any business organisation are finance, production and marketing. Each of these functions is organised separately. Thus, within the organisation structure of the firm you would have distinct organisations for each function.

Broadly speaking, marketing is concerned with all aspects of the product, pricing, promotion and distribution. All sub-functions or activities relating to these four basic dimensions are included in the marketing function. You have to account for these various activities when designing the marketing organisation.

The structure of a marketing organisation can be studied at different levels, such as overall firm level or divisional level or market level.

There are many ways of organising the marketing department. We shall discuss in detail the four basic methods:

D. Matrix Organisation 

Methods other than these four are either their derivatives or combinations.  

MATRIX ORGANISATION

We have learned companies which market different products to the same market or the same product to different markets. In the first case, organising around the product management concept provides an effective solution. In-the second case, the marketing organisation can effectively be organised around each market. But what if a company has a number of products and a number of markets to which these products are sold? A company such as Godrej has a product range which includes steel office furniture, refrigerators, almirahs, soaps and detergents, and each of these products caters to a different market. Similarly, Food Specialities Limited has a wide range of products including infant milk powder, instant coffee, ketchup, noodles each of which fulfils a different market need. How should the marketing department be organised to effectively take care of the different characteristics of the product as well as the market? The manager has to formulate and implement strategies suitable for each individual market and also keep in mind the different characteristics of each product. For managing so many products and so many markets, the manager has to cope with an immense amount of information. The sheer quantity of information and the range of its diversity usually makes it impossible for a single person to manage. Further, each product may be so different from the others that each product needs a separate manager. Similarly, the unique buyer and the characteristics of a market merit the full attention of an individual. Thus, a multi-product and multi-market firm needs both product and market managers. But how should the product managers and market managers be integrated to form a workable organisation structure.  

The solution lies in a matrix organisation where tasks may be differentiated on the basis of functions and products; functions and markets; or functions, products and markets; and integrated by means of co-ordinating functions (such as finance, R & D, information system etc.). In the functional, product and market-centred organisation discussed earlier, each manager has only one point of focus; function, or product or market. However, in the matrix organisation the points of focus are more than one. These focal points may be either functions and products; or functions and markets; or functions, markets and products. As is Obvious from these figures, the matrix may have two or more bases for differentiating the functions.
The origin of the formal matrix organisation can be traced to the aerospace industry in USA, The different manufacturers in the aerospace industry were organised functionally; but the US Government wanted each project to have specialised attention and imposed a project management type of organisation on the industry. The horizontal project groups were superimposed over the vertical functional organisations and the result was a matrix organisation. But informally, the matrix organisation has been in existence much before its introduction in USA. In an advertising agency, each client is assigned to a specific accounts executive who is responsible for understanding the client's objectives and needs and getting them translated into advertising campaigns. For translating client objectives into specific advertisements or campaigns, the accounts executive draws on the agency's functional specialists: artists, copywriter, photographers, visualisers, etc. Thus on the one side you have the functional specialists while on the other you have the accounts executive who can be thought of as a market manager (each client represents a separate market) and only a few clients are assigned to each accounts executive.
 
The distinguishing characteristics of a matrix organisation are:
-      members are allotted to two, or three groups with each group having its own boss,
-      the groups are work-related, though each on a different base (e.g., functional, product or market related),
-      the groups are formally arranged rather than evolving informally or on an ad-hoc basis,
-      information management is central to the concept and management of matrix organisation.  

Thus the matrix organisation is a blend of grouping by functions and/or markets and/or products, with the objective of retaining the advantages of specialisation and gaining the advantage of a sharper focus on a task or project. The specific advantages and disadvantages associated with the matrix organisation are described in Tables 1 and 2.  

Table 1: Advantages of a Matrix Organisation

1. Permits task/project focus without losing benefits of specialisation.
2. Provides for increased information-processing capability, catering to information needs of each group.
3. Permits greater decentralisation of decision-making since there are specialists in each area equipped with the necessary knowledge.
4. Provides a flexible structure, capable of adapting to new situations while retaining the basic framework of the structure.
5. Provides a means of coping with increased information processing needs and co-ordinating when the tasks are highly uncertain, complex and inter dependent.  

Table 2: Disadvantages of a Matrix Organisation

1. Tendency to conflict exists because the different groups are organised on different bases and each group may try to superimpose its own group objectives rather than the organisational objectives.
2. There is ambiguity in roles because each person reports to two bosses and this undermine the effectiveness of organisation.
3. Proves costly because of larger volume of information processing and the additional need of coordinating and supporting roles.
4. May be prone to power struggles and politics as each group tries to dominate.
5. Problems of designing a suitable information system, which now needs to cater to different requirements.
 

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MARKET-CENTRED ORGANISATION

Market-Centred Organisation

The principles of organisation apply whether you are designing the entire organisation or a department within it. The three most basic functions necessary for any business organisation are finance, production and marketing. Each of these functions is organised separately. Thus, within the organisation structure of the firm you would have distinct organisations for each function.

Broadly speaking, marketing is concerned with all aspects of the product, pricing, promotion and distribution. All sub-functions or activities relating to these four basic dimensions are included in the marketing function. You have to account for these various activities when designing the marketing organisation.

The structure of a marketing organisation can be studied at different levels, such as overall firm level or divisional level or market level.

There are many ways of organising the marketing department. We shall discuss in detail the four basic methods:


Methods other than these four are either their derivatives or combinations.

MARKET CENTRED ORGANISATION

We have seen that some companies with a product manager organisation have started to group together products which serve similar needs. Thus the basis for differentiation is-shifting from products to customers. A group of customers with similar needs and a common link between them constitute a market. When different markets, rather than functions or products form, the basis for differentiating marketing roles, the organisation is known as market-centred.

A company marketing building hardware such as door and window handles, window frames and locks has two distinct customers. One, hardware retailers who sell to individual household customers and second, construction companies. These two distinct customer segments represent separate markets each requiring a different marketing mix of advertising, distribution channel, and pricing. Airlines, railways, and road transportation companies have two major distinct markets to serve. They provide transportation for people (passengers) and goods (cargo). Each market (passenger vs. cargo) has its distinct characteristics and needs a suitable marketing strategy and a matching marketing organisation with relevant skill to formulate and implement the strategy.

A market-centred firm seeks its growth by serving new needs in markets where it is already well established. Since knowledge and access to the market is the basis for organising the marketing set-up, the question to be asked is "what other needs of the markets that we know well can we serve profitably?" For instance, an airlines company, within the passenger markets can further identify markets such as group travel, and charter flights. This constitutes an instance of growth through intensively serving a well establish need (transportation) in a well established market (people). However, a market-centred organisation also has the flexibility to grow extensively by searching out closely related needs and entering new businesses around these. The airlines may enter a new business by providing a courier service. The need is still that of transportation, but the market is not people, or cargo but important documents and parcels. Through the extensive and intensive approach, a market-centred firm seeks to grow by the meeting the greatest number of inter-related needs of every market it serves.

In terms of organisation structure, a market-centred organisation can be organised in the same way as a product management organisation. Instead of product managers, with detailed knowledge of the product you would have market managers each having thorough knowledge about his market. However, we have seen that there are problems of control and authority associated with the product manager organisation. To overcome these, a market-centre should be treated as a profit centre and its manager be assigned the role of a business manager with full accountability for generating profits. The business manager is the chief `line' officer, with full authority overall the other functions supporting and reporting to him.

At this stage, you may like to ask the question "why should I reorganise my marketing organisation to being a market-centred organisation?" There are two specific situations in which a market-centred organisation can be more effective than any other kind of organisation and if you happen to be facing any one of them, a change to a market-centred marketing organisation is advisable.
 

1.   When competitors have developed the same level of product sophistication and quality as the market leader and the leader's supremacy based on price advantage is seriously threatened. In such a situation, market centring can help the leader revive its competitive advantages, detailed knowledge of customer and retailers helps frame creative marketing strategies.

2.   When a firm wants to diversify either to expand the profit base, or gain a total hold on existing customers.  

The first objective can be served by adding on higher margin products and services to the existing product line. The second objective is served by marketing a package or system of correlated products and services, enabling the firm to act as a one-stop supplier for each market.
 

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Saturday, November 23, 2013

PRODUCT MANAGEMENT ORGANISATION

Product Management Organisation

The principles of organisation apply whether you are designing the entire organisation or a department within it. The three most basic functions necessary for any business organisation are finance, production and marketing. Each of these functions is organised separately. Thus, within the organisation structure of the firm you would have distinct organisations for each function.

Broadly speaking, marketing is concerned with all aspects of the product, pricing, promotion and distribution. All sub-functions or activities relating to these four basic dimensions are included in the marketing function. You have to account for these various activities when designing the marketing organisation.

The structure of a marketing organisation can be studied at different levels, such as overall firm level or divisional level or market level.

There are many ways of organising the marketing department. We shall discuss in detail the four basic methods:


Methods other than these four are either their derivatives or combinations. 
 
PRODUCT MANAGEMENT ORGANISATION

The functional organisation works well when there is a single product. But when there are multiple products and/or the products are very different from one another, the functional marketing organisation is no longer effective. The functional specialists cannot possibly coordinate all aspects of the marketing mix of each of the diverse products, with the result that some products are neglected and eventually become money losers.

Such a situation given rise to the concept of product manager. In a product management organisation, the marketing organisation is differentiated on the basis of different products. Each product or product group is assigned to a manager who is known as the product manager. The product manager is responsible for managing all aspects of the marketing mix pertaining to a specific product. Thus in a multi-product firm you would have as many product managers as the number of products. If there are many brands within. the same product, as in the case of soaps, each brand may be assigned to an individual manager who is known as a brand manager. Table-1 describes the typical responsibilities of a product manager.
 
The role of a product manager in relation to his specific product is to:

-      design strategies
-      make plans
-      monitor progress
-      provide information relating to the product and
-      interface with other departments within the organisation and outside with customers, distributors, and advertising agencies.  

The first three roles are self-explanatory but the last two need some elaboration. In today's competitive world, a manager's power is based on information or the access to the information he has. This is especially true in case of product manager who is a man placed in a conceptual and informational hub of the organisation. To maintain competitive position and profit of his products, with his performance starkly exposed to higher management, he must strive to be the best informed man about any aspect substantially affecting their future. He must arrange and nurture a number of information interfaces.

'As described in Table-1, the product manager has a number of diverse responsibilities. To discharge the responsibilities he has to interact with other departments in the firm. Though on paper the product manager is assigned all the responsibilities, but in practical terms he is rarely given the requisite authority to effectively discharge them. At best, he may be given direct authority over one or two areas say advertising and may be marketing research. For getting co-operation from the other departments he has to use all his persuasive charms and skills, which may not work all the time, resulting in conflicts and tensions.

It is this interfacing aspect of the product manager's role which has potential for all types of conflicts and leads to erosion of his power. Responsibility without authority over resources could reduce the role of product manager from that of a product `mini president' to a bureaucratic clerk. Instead of being a decision maker responsible for profits the product manager is reduced to a low level coordinator.

These problems can be solved by clearly defining the limits of the product manager's role, giving him authority over the resources which affect his products' profitability, taking into account areas of potential conflict between product managers and functional specialists, and establishing a system for their amicable settlement.

Despite this role ambiguity and potential for conflict the product manager concept is gaining .acceptance. In Richardson Hindustan Limited (manufacturing and marketing the Vicks and Clearasil range of products) the marketing organisation comprises 20 product teams. Each product team includes junior and middle level managers representing marketing, manufacturing, R & D, and purchase. In the words of the company president, Mr. Gurcharan Das, "we tell them it is they who are responsible, and that the senior people should be looked upon as resources only. With delegation of power they are more creative, more innovative and ideas come from the lowest level". The organisation on product team basis has led to greater decentralisation of responsibility and decision-making within the company and the result is vastly improved performance.

The product manager concept introduces a number of advantages into the marketing organisation. Firstly, given the increased complexity of the marketing mix and diversity of products and brand, the product manager offers a way of coping with these complex marketing inputs in a balanced way. It ensures that all products and brands get proper attention and no product is allowed to languish. Secondly, it introduces flexibility into the system as the product manager can react quickly to a changed market condition since he has the overall responsibility for managing the product’s profitability and does not have to waste time over long consultations. Quick reaction and timely action sometimes prove to be the winning factors in a fast changing market situation.

Third, the product manager concept provides a focal point for integrating and co-ordinating all efforts and resources for planning and implementing the marketing strategy.

Fourth, the product manager role provides excellent training for future managers, as they are exposed to all the operational aspects of management viz., marketing, finance and production.

However, there are some disadvantages of the product management organisation as follows:

The anomaly of responsibility without control over resources, and lack of a direct line of authority lead to a situation in which conflict is always simmering under the surface, ready to explode at the slightest provocation.

A product manager is in a situation which can be aptly described as `jack of all trades but master of none'. A product manager has a general and cursory knowledge of all functions but no specialised skill in any one function. This lack of expertise often puts him at a disadvantage when dealing with functional specialists, who are able to brow-beat him on technical points (often to the detriment of the product success).

The product manager has usually too many interfaces to manage, which consume a great deal of his time, with the result that important strategic decisions may be delayed or even ignored. The product manager concept may turn out to be costly, as even minor products with a small sales turnover are assigned to full time managers.

Figure-I : Types of Product Manager Organisation
(a)

In recent times the product manager organisation has been undergoing a number of changes. In many firms the product manager has given way to product team. The product team may be arranged vertically or in a triangular form (Figure-I). Some other companies have introduced the concept of horizontal product teams. Each team is headed by a leader who is supported by functional specialists. This horizontal product team organisation considerably reduces the potential for conflict with other departments, since now the product manager has his own independent resource pool of functional specialists. Finally, some companies are combining two or three brands/products under one product manager. This is done when the products are individually not important enough to require full time attention or they serve similar customer needs, so that clubbing them together is meaningful and can help serve the customers better.

If you wish to adopt the product management concept, you must define the role in precise terms, clearly specifying the limits of his authority. Moreover, you must bear in mind that the contribution of the product to the company's total turnover justifies the expenses of a full time product manager.

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FUNCTIONAL ORGANISATION

Functional Organisation

In the functional organisation, various functions performed as part of the overall marketing function are the basis for organising the marketing set-up. Each function is assigned to a specialist who reports to the marketing manager. The most common functions in marketing are:

-      Sales
-      Distribution
-      Advertising and Sales Promotion
-      Marketing Research Marketing Information System
-      Dealer Development Customer Service
-      New Product Development
-      Marketing Planning 

It is possible that in your firm you may be using terms different from these to describe various functions. You will be able to identify the functions according to the terms used here once you have gone through the description of each function. Moreover depending on the nature of product, service or industry to which you belong you may have some functions not described here. For instance, in a bank, public relations would be an important marketing function.

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Friday, November 22, 2013

MARKETING ORGANISATION DESIGNING


METHODS OF DESIGNING THE
 MARKETING ORGANISATION 

An organisation’s design is a function of the objectives which it has to accomplish, the diversity and complexity of the tasks to be performed and the environment in which the organisation operates. Similarly, a marketing organisation's design is a function of the diversity of products, markets and product/market combinations that it is involved with and its environment comprising competition, technology, socio-economic and legal factors, and the marketing objectives. Depending on the combination of these factors and the relative importance of each, of them in achieving the marketing objectives, you can design an organisation which is suited to your specific requirements. 

Designing an Organisation 

Organisation refers to any system, body or group of people, comprising various sub-systems or parts which are inter-related and or inter-dependent on each other. An organisation may be informal or formal. An informal organisation has no specific objective to achieve. A formal organisation has specific objectives to achieve and that is the very reason for the organisation's existence. Objectives may relate to making profit or there may be no consideration of profit whatsoever. Thus, when we refer to an organisation it can mean a firm or company involved in business, a non-business organisation such as university, hospital, a social organisation such as club, charitable trust, or a government agency. Irrespective of the nature of an organisation, the principles involved in its design are the same. These are:  

Specialisation: The division of labour on the basis of which a particular type (or set) of activity is differentiated from another. Jobs are assigned to individuals on the basis of their specialisation. 

Departmentalisation: The integration of differentiated (or specialised) activities. and grouping of individuals into departments, divisions etc.

Standardisation: The existence of procedures and systems, which help integrate the entire organisation.

Formalisation: The extent to which all procedures, systems and policies are written, so that the organisation becomes independent of the person(s) who founded it and acquires a life-span substantially longer than any one individual.

Centralisation: The level at which authority for decision-making is concentrated. It involves designing formal reporting relationships and information systems, leading to hierarchical levels and spans of control.

Evaluation: Providing systems for appraisal and compensation.

Structure: The total configuration or arrangement of individuals, departments, reporting ' relationships, information flows, span of control, all of which give the organisation its specific 'shape'.  

Given these basic principles, you have many kinds of organisation structures to choose from. In making the choice, you must evaluate the alternative structures on the basis of:  

-          facilitating achievement of objectives and accomplishment of tasks,
-          managerial control, and
-          cost  

What is Marketing Organisation

The principles of organisation apply whether you are designing the entire organisation or a department within it. The three most basic functions necessary for any business organisation are finance, production and marketing. Each of these functions is organised separately. Thus, within the organisation structure of the firm you would have distinct organisations for each function.
Broadly speaking, marketing is concerned with all aspects of the product, pricing, promotion and distribution. All sub-functions or activities relating to these four basic dimensions are included in the marketing function. You have to account for these various activities when designing the marketing organisation.

The structure of a marketing organisation can be studied at different levels, such as overall firm level or divisional level or market level.
There are many ways of organising the marketing department. We shall discuss in detail the four basic methods:


Methods other than these four are either their derivatives or combinations.

READ MORE...

Wednesday, November 13, 2013

MARKETING MIX


MARKETING MIX
 
The marketing mix consists of the following four major activities usually referred to as elements of Marketing mix.

1. Product: activities relating to the product, service or idea to be offered.
2. Price: activities relating to the price to be charged for the product, service or idea.
3. Promotion: activities relating to promotion (advertising, personal selling, sales promotion and publicity, called promotional mix) of the product, service or idea.
4. Place: activities relating to distribution of the product, service or idea (physical distribution and channels of distribution).  

Sometimes marketing research-the systematic gathering of information to solve marketing problems, is also included in marketing mix.  

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