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:

A. Functional Organisation,

B. Product Management Organisation;

C. Market Centred Organisation and

D. Matrix Organisation.

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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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:

A. Functional Organisation,

B. Product Management Organisation;

C. Market Centred Organisation and

D. Matrix Organisation.  

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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Positive Reinforcement Programme

What are the Procedures and rules to follow while implementing Positive Reinforcement Programme ?

Implementing a Positive Reinforcement Programme

If your data reveal that the worker makes the correct response at least once in a while, you need to design a programme that will increase the percentage of correct response. As in anything else there are some basic, general rules that you must master before you implement such a programme. 

Rule 1: Reward Selection  

The only way to increase behaviour without alienating the employee is to make it more rewarding to perform effectively. Before you can change the contingencies in favour of the desired behaviour, you must identify what the employee finds reinforcing. You can only discover this by observing what the employee prefers to do and how he reacts to various rewards. The greatest danger at this point is in managing and the language of the employee. If you think that you can assume that money, praise attention recognition, time-off, or any other common reward is necessarily a reinforcer for an individual employee, you are probably overgeneralising your way into failure as a behaviour manager. Remember that by definition a reinforcer increases the probability of the preceding behaviour. If the frequency of the behaviour doesn't increase, your reward wasn't a reinforcer. The kind of manager who is likely to be reading this chapter is also the kind of manager who would have trouble accepting next week as an extra paid vacation because he would believe that the lost time would interface with his performance. For such a manager both money and time-off fail to function as reinforcers.

The language of the employee leads a behaviour management project astrally when the supervisor decides that he can ask the employee what would be reinforcing rather than directly observing the effects of various rewards. Verbal behaviour is never a substitute of actual observation. At best the questionnaire approach can waste time and create paper work. At worst, it can lead the manager to punish the very behaviours that he wishes to reinforce by using the wrong opportunities as rewards for the right behaviour. Asked in the abstract, our hard-working manager might say that he would love an extra paid week off but this consequence might not reinforce when it came down to taking the time. In the research for rewards, attitude surveys may point a manager in the appropriate direction, but only direct observation of behaviour will identify specific effective reinforcers.

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Resistance to Change

Why do individuals and organizations resist change ? explain instances of resistance to change in any organization and the effectiveness of management strategies to overcome the resistance.

Ans : The main reason behind the employee’s resistance is the underlying fear and anxiety caused by uncertainties of change. In most situations resistance arises out of individual problems rather than technical problems. Resistance is often because of attitudinal factors and blind spots, which the functional specialists have as a result of their concern for and preoccupation with technical aspects of new ideas.

One of the common reasons for resisting change is the feeling of discomfort with the nature of change itself, which may violate their moral belief systems. Another reason for resistance may be the method in which change is introduced. This is observed when authoritarian approach is used and people are not informed. Other reasons for resistance may be inequity where the employees feel that someone is likely to get greater benefit than they are likely to get.

SOURCES OF INDIVIDUAL RESISTANCE :

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