subject business economics paper no and title 15

BUSINESS ECONOMICS

PAPER No. : 15, MARKETING MANAGEMENT MODULE No. : 28,MARKETING ORGANIZATION

Subject Business Economics

Paper No and Title 15, Marketing Management

Module No and Title 28, Marketing Organization

Module Tag BSE_P15_M28

BUSINESS ECONOMICS


TABLE OF CONTENTS

1. Learning Outcomes.

2. Introduction.

3. Need and Principles of Marketing organization.

4. Types of Marketing Organization Structure.

4.1.Function Oriented Marketing Organization

4.2. Product Oriented Marketing Organization

4.3. Marketing Oriented Marketing Organization

4.4. Customer Oriented Marketing Organization

4.5. Mix type of Marketing Organization

5. Evaluation and Control of Marketing effort.

5.1. Marketing Audit

5.2. Market share analysis

5.3. Marketing cost analysis

5.4. Management Information System

5.5. Management by Objectives

6. Summary.

7. References.

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1. Learning Outcomes

After studying this module, you shall be able to

Know about marketing organization.

Learn types of marketing organization.

Identify the various principles in marketing organization.

Evaluate the techniques of marketing control.

Analyze importance of marketing organization.

2. INTRODUCTION

Marketing Organisation can be best understood after a thorough understanding of the meaning of

marketing itself. Marketing is generally understood to be the sale and purchase of goods and services.

This is only a partial or incomplete perspective. Marketing is the entire process of satisfying the needs and

wants of consumers. It includes all activities which are associated with providing value and satisfaction to

consumers.

The term marketing has been defined by many eminent authors. According to the American Marketing

Association, “Marketing is the performance of business activities that direct the flow of goods and

services from producer to consumer or user”1. H.L. Hansen elaborates on the same, “Marketing is the

process of discovering and translating consumer needs and wants into product and service specifications,

creating demand for these products and services and then in turn expanding this demand”2. It is truly said

that marketing is not just an activity. It is a process which starts with the discovery of consumer wants

and it continues till these needs are effectively satisfied. The main emphasis is on the satisfaction of

consumer wants to such an extent that all the activities revolve around these needs.

Organization means proper arrangement. It is a process where different resources of the enterprises

coordinate with each other. It aims at achieving the maximum possible results with minimum possible

efforts. The term Organization has been defined by many authors:

L. Urwick highlighted on the same, “Organization is to determine the activities to accomplish a job and to

arrange the distribution of activities among the people”3.

L.H. Haney also elaborates on the same, “Organization is a harmonious adjustment of specialized parts

for the accomplishment of some common purpose or purposes”4.

On the basis of the above definitions it can be concluded that ‘organization’ is the process of coordinating

the efforts of all the resources of an enterprise to achieve optimum results at minimum cost. The process

of organization includes the performance of five activities:

1 Seth, J.N and Sisodia, R., p.235 2 Hansen, H.L.,(1971) p. 4 3 Urwick, L.,p.3 4 Haney, L.H,p. 87

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To decide the main objects of the organization,

To divide the activities into different groups on the basis of similarity,

To select the suitable persons to perform these activities and to place them on their proper jobs,

To assign the duties, responsibilities and powers to appointed personnel and

To explain the mutual relations of different personnel working in the enterprise.

Thus, it can be said that marketing organization is the organizational structure designed for the successful

operation of marketing activities. Cundiff and Still and Govani also defined marketing organization as

“Marketing organization provides the vehicle for making decisions on products, market channels,

physical distribution and promotion channels”.5 It can be, therefore, concluded that marketing

organization is an organizational structure which implements the policies of the enterprise, helps in taking

decisions regarding production, packing, advertisement, sales promotion, branding and helps in directing

the efforts of marketing for the achievement of marketing objectives decided by the organization. Thus, it

helps in achieving the objectives of the organization that were predetermined. Under Organizational

structure various departments are established in the enterprise according to the requirements of marketing

activities. These departments may be the sales department, advertisement department, sales promotion

department etc. The objectives of all the departments are determined specifically. The duties, rights and

liabilities of all the employees of these departments are clearly defined and assigned to them.

3. Need and Principles of Marketing Organization

The need of marketing organization arises after the development of the modern concept of marketing. In

the modern concept of marketing, customers are considered as the king of the market and all the

objectives of the enterprise are designed to satisfy the varied needs and wants of consumers. Therefore,

the marketing efforts of an enterprise begin with the discovery of needs and wants of consumers. The

efforts end with the satisfaction of the varied needs of consumers.

To satisfy the needs and wants of consumers, it becomes essential that the goods and services provided to

consumers be of best quality. Further, the prices of the commodity be reasonable and the best channel of

distribution be selected to send the goods at right place and at right time. These marketing efforts can be

fulfilled when there is a sound marketing organization. Thus, marketing organization is a crucial tool to

satisfy the needs and wants of consumers.

C. Kenneth emphasizes, “Poor marketing organization may destroy a good product but a sound marketing

organization having a poor product may compete a better product”6. According to Peter Drucker,

“Organizational structure is an indispensable means and wrong structure will seriously impair the

business performance and may even destroy it”7. Thus, it is truly said that the marketing organization is

the ‘rock-solid’ foundation upon which the building of marketing efforts may be constructed to enable

efforts may be directed for the achievement of predetermined objectives of the enterprise. The success of

an enterprise depends on marketing organization.

5 Cundiff and Still 2000 p.2 6 Kenneth, C. 2004. 7 Drucker, P. 1974.

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Marketing organization of an enterprise must be developed keeping in view the specific needs and

requirements of the enterprise. This will may help in the achievement of predetermined objectives of the

enterprise. Marketing organization is based on some specific principles. These principles are:

3.1Specialization:

According to this principle the distribution of task among workers of the enterprise must be made in such

a manner that each worker may get the job according to his ability and skills.

3.2 Objective:

According to this principle there must be similarity between the objectives of the enterprise and the

objectives of the marketing organization. Every part of the marketing organization and every activity of

the enterprise must be exclusively object oriented.

3.3. Authority:

According to this principle the authority of the workers working in the organization should be clearly

defined and it should be in accordance with the duties assigned to them.

3.4. Responsibility:

The responsibilities of each and every worker in the organization should be clearly defined. Every worker

should be aware of his responsibilities.

3.5. Assignment of work:

This means that each employee work should be specific and they should know what work they have to

perform.

3.6. Exception:

Duties and responsibilities must be given to all the employees so that they may perform their duties

properly. Marketing manager must be responsible to take decision on key issues while routine problems

should be solved by all employees.

3.7. Span of control:

The span of control of all the officers must be limited so that they may exercise effective control over all

the activities of the enterprise. According to L.Urwick, an executive can control the performance of 6

subordinates in a easy manner.8

3.8. Co-ordination:

8 Urwick, L.,p.3

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All the departments must be coordinated with each other and should work in harmony. All the activities

of the enterprise should be mutually coordinated with each other.

3.9. Unity of Command:

The employee should get instruction form only one boss so that he may clearly follow the instructions.

There should be only one executive who should give instructions to particular employees because

multiplicity of superiors will create confusion in the mind of employees that whose instruction to be

followed or not.

3.10. Unity of direction:

According to this principle the plans of the enterprise should be clear and all the activities of the

enterprise should be carried out according to these plans. Each and every employee should work in one

direction so that the objectives of the enterprise can be achieved easily.

3.11. Flexibility:

This is one of the most important principles of marketing. According to this principle marketing

organization should be prepared in such a way that whenever changes are required it can be made easily.

Flexibility does not mean that the enterprise may make frequent changes but this principle says that

changes to be made in the enterprise whenever circumstances changes and it is the need of the hour to

make such a change. This principle means only the adjustment of necessary changes.

3.12. Continuity:

According to this principle the marketing organization should be prepared for a longer period. The

organizational structure of the enterprise must meet its requirements at least for a period ranging from 10

to 15 years.

3.13. Scalar Principle:

Scalar principle specifies which employee will work under the supervision of which executive. It also

specifies the supervisor with his team of subordinates. All must be clearly defined and properly

communicated to all concerned employees, executives and supervisors in the organization.

3.14. Leadership:

Marketing organization must provide effective leadership of the activities of the enterprise so that all the

employees of the organization may contribute their efforts in achieving the predetermined objectives

under the guidance of a proper leader.

4. Types of Marketing Organization Structure

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Marketing Organization Structure is the structure of an organization which is being prepared for the

smooth functioning of the marketing activities so that the predetermined objectives of the organization

may be achieved on time. There are different types of marketing organization structure which are adopted

by different businesses and industrial enterprise according to their nature and need of marketing activities.

A particular structure of marketing organization depends on many factors like the number of products,

nature of products, quantity of production, marketing area, types of channel of distribution, nature and

types of consumers and financial resources of the enterprise. Thus there are five types of organizational

structure:

4.1 Function Oriented Marketing Organization:

This is the oldest and simplest form of marketing organization. Under this type, the activities of the

enterprise are divided on the basis of functions to be performed. Under this type of organization the

activities of the enterprise are divided into four main departments- Marketing, Finance, Production and

Human Resource. Four separate managers are appointed to look after the working of these departments.

Then the activities of each department are divided into different sub functions. For example, the activities

of the marketing department of an enterprise may be sub divided into following activities: product

planning, product development, marketing research, advertisement, sales distribution, physical

distribution, and after sales service. Each sub function is delegated to a separate manager. The entire sub

manager works under the guidance of main departmental managers. Thus, this type of organizational

structure can be explained with the help of following diagram (figure 1):

Figure 1: Function Oriented Organization

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The above diagram gives a clear view that the shareholders of the company appoint the Board of directors

for the real management of affairs of the company. Managing Director works in consultation with the

board of directors. Four managers, the Production Manager, the Marketing Manager, the Finance

Manager and the Human Resource Manager work under the control and supervision of the Managing

Director. The function of the marketing manager is subdivided into sub functions and separate managers

are appointed to look after these sub functions. Thus, we come to the conclusion that function oriented

marketing organization is based upon the division of a function into sub functions. This type of

organization brings greater efficiency in the performance of activities, because all the sub functions are

being performed by functional experts. This type of structure is suitable for small enterprise and for the

enterprises having only one type of product. This type of organization also brings elasticity in the

organization.

4.2. Product Oriented Marketing Organization:

When large numbers of products are being manufactured by the organization then product oriented

structure of marketing organization is most suitable. This type of structure is used by the enterprises

having number of products of different types and nature requiring different marketing programs and

strategies. Under this type of marketing organization the departments of marketing research, product

planning and development, advertisement and sales promotion, physical distribution are established as

central departments of separate managers and are appointed for selling different types of products. All the

departmental managers work under the supervision and control of the marketing manager. This structure

can be depicted with the help of following diagram (figure 2):

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Figure 2: Product Oriented Organization

The above diagram gives a clear view that sales managers are appointed for different activities and the

activities of marketing research, advertisement and sales promotion, physical distribution are performed

by one manager for all the products. This type of organization is very useful for the enterprise producing

different products and brands. The success of marketing efforts can be individually evaluated for different

products.

4.3. Marketing Oriented Marketing Organization:

Under this method, the functions of the marketing department of an enterprise are subdivided on the basis

of regions. It is used by the company which serves a very large number of customers spread over the

whole country. Under this type, the whole market is divided into several selling regions and a separate

manager is appointed for each region and the regional manager works under the guidance and control of

sales manager. The number of region depends upon the requirement of the enterprise but generally the

total area is divided into four or five regions. Each region is sub divided under the supervision of sales

supervisors. The number of sales supervisors in a particular region depends on the nature and

requirements of a particular region. The sales supervisor works under the control of sales manager of the

particular region. Thus the whole market is divided into sales territories. The structure of this organization

is depicted in the following diagram (figure 3):

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Figure 3: Market Oriented Organization

The above diagram gives a clear view of marketing research, advertising, sales promotion and physical

distribution are performed as central activities. The activities of the sales department are divided into

different regions. The regional managers work under the control of the sales manager. This type of

marketing organization is very useful where customers are present throughout the country. It results in an

efficient service to the consumers.

4.4. Customer Oriented Marketing Organization:

When the consumers of a company have different nature, taste and habits, then it becomes essential that

the marketing efforts of the organization be divided according to these factors. Particular efforts must be

made to attract the particular group of customers. This type of marketing organization is most suitable

when consumers are to be arranged in groups on the basis of their characteristics. Customers are grouped

according to their habits and tastes. Under this method of marketing organization the activities of

marketing research, product planning and development, advertisement and sales promotion etc are

performed as central activities but the activities of sales department are subdivided according to the

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characteristics of group of customers and separate sales managers are appointed for each group of

customers. All these sub managers work under the supervision and control of sales manager. Thus, this

type of marketing organization can be explained with the help of following diagram (figure 4):

Figure 4: Customer Oriented Organization

The above diagram gives a clear view that activities of sales department are divided into two parts-

Wholesale and Retail. These parts have been further subdivided into a) inland sales and b) exports.

Salesmen are appointed to look after these activities. This type of organization is very suitable when

customers are to be arranged in groups on the basis of their characteristics.

4.5. Mix type of Marketing Organization:

The four organizational structures were the basic organizational structures. However, an enterprise may

adopt a mixture of any two types. For example: Function and product oriented; Function and consumer

oriented; Consumer and market oriented; Product and consumer oriented; Market and product oriented;

Function, product and consumer oriented; Function product and market oriented etc.

The organizational structure of marketing department of an enterprise is also dependent on various

factors. The factors which are to be taken into consideration so that the objectives of the enterprise can

achieved on time.

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These factors are:

Main objects and policies of the enterprise,

Size of the enterprise,

Geographical area of the enterprise,

organizational policy of the management,

Number or lines of product,

Nature of consumers,

Organizational structure of other enterprises of similar,

Sales volume,

Ability of marketing personnel,

Marketing programme and strategies.

5. Evaluation and Control and Market Effort

Market control is the tool for ensuring that the marketing programmes and activities of the firm are

always directed towards its marketing objectives. It provides the means of testing the performance of

marketing team in achieving firm’s goals. It involves predetermined performance standards, evaluating

actual performance, comparing it with set standards, taking corrective action if deviations exist by

readjusting the mix to the marketing goals. The various techniques of marketing control are:

5.1. Marketing Audit:

This is the systematic and objective study of the total marketing efficiency of the firm. It is also

characterized as a systematic, comprehensive, objective and independent approach which helps in

assisting the manager to understand the working of the individual parts of the organization. It is also a

comprehensive assessment of all marketing angles in the organization.

5.2. Market share analysis:

This technique helps in developing long term sales forecasts and evaluates marketing results at micro and

macro level.

5.3. Marketing cost analysis:

It compares marketing and distribution cost with actual sales to check profitability. It can also be defined

as a strategy which is applied in marketing where the cost connected with various marketing functions

like selling, advertising, and distribution of products are analyzed in order to determine the profitability of

the seller.

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5.4. Management Information System:

It keeps a watch on various changes in marketing environment which plays a critical role in marketing

efforts. It is an integrated system which provides information to managers on various marketing changes

which helps the management in analysis and decision making functions of the organization.

5.5. Management by Objectives:

It helps in fixing of objectives in important areas of business and it also helps in identifying key result

areas. It also helps in evaluating results of the enterprise. It is a process designed for managers in which a

manager and his subordinates jointly work to set specific objectives. The objectives are to be

accomplished within a set time framework and the subordinates are held directly responsible for the non-

fulfillment of the objectives.

6. Summary

Marketing organization is the organizational structure designed for the successful operation of

marketing activities. There are 14 principles to be taken into consideration while designing the marketing

organizational structure. Marketing organizational structure is the structure of organization which is prepared for the

efficient and smooth performance of marketing activities so that the predetermined objectives of

the enterprise may be achieved. There are five types of marketing organizational structure. Function oriented market organization is the oldest and simplest form of marketing organization

structure.

Product oriented organization is opted by enterprise where there are large number of products.

Market oriented organization is divided on the basis of regions.

Customer oriented organization is used where there are large number of consumers with different

tastes and habits.

7. References

Seth, J.N and Sisodia, R. “Does marketing need reforms? A fresh perspective on the future”.

Routledge Chapter 12, p.235. Hansen, Harry L. Marketing: Text, Techniques, And Cases. Homewood, Ill.: R.D. Irwin, 1967.

Print.

Urwick, L.“Business Study Policy Review” .Vol. 17-20, p, 3.

Haney, L.H.“The marketing environment”, p. 87, 5th edition.

Cundiff and Still (2000). “Basic Marketing” p.2.

Laudon, K., & Laudon, J. (2004). Management information systems. Upper Saddle River, N.J.:

Prentice Hall.

Drucker, P. (1974). Management. New York: Harper & Row.

subject business economics paper no and title 15

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