National Institute of Business Management

Ist Floor, Swathandrya Samara Smrithi Bhavan, Nandavanam Road

Palayam P.O. Trivandrum – 695 033
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Assignments of Two year MBA Program

Semester - III
Total Marks :100
1. Students are requested to go through the instructions carefully.
2. The Assignment is a part of the internal assessment.
3. Marks will be awarded for each Assignment, which will be added to the total marks.
Assignments carry equal marks.
4. Assignments should submit in your 'portal' on/before the 'completion date'
mentioned.

1. Management Research
You are in charge of promoting a new flavour of tooth paste yet to be produced in a tooth
paste manufacturing unit which sampling techniques will you use to get the required data
from a population.
2. Quality Systems Management
What are the points you will keep in mind about the concept of quality control and
inspection if you are the quality systems manager of a rubber products
manufacturing unit?
3. Business Environment
Imagine yourself as a new businessman what are the objectives of business that
you will keep in mind if you have to launch a new business.
4. Quantitative techniques for Business Analysis
Suppose you are heading a business unit in India which are the points about
statistics you will keep in mind for doing business profitably. In other words what
is the relevance of Business statistics in you venture.
5. Managerial Economics
Suppose you are the Marketing Manager of Bayer & Company Ahmedabad,
which are the techniques you will apply in forecasting demand of a product yet to
be manufactured.

Managerial Economics Suppose you are the Marketing Manager of Bayer &
Company, Ahmedabad, which are the techniques you will apply in forecasting
demand of a product yet to be manufactured. The firm must plan for the future.
Planning for the future involves forecasting. A forecast is an estimation or prediction
about situations which are most likely to occur in near or distant future. No
businessman can afford to ignore forecasting if he wants to thrive and prosper in his
business.

The firm has to forecast the future level of demand for its product under different
possible circumstances; such as prices, competition, promotional activities and
general economic activity. Similarly forecasting will be necessary with reference to
costs under changing conditions of availability of raw materials and their respective
prices, changing technology, wage rates, labour training and capital acquisition
programmes. Forecasting does play a key role in managerial decisions and hence
forecasting is emphasized in the study of managerial economics.

The objective of business forecasting is to minimize risk and the margin of

uncertainty in business. Techniques of Demand Forecasting Many techniques are
available that can be used in forecasting economic variables. Some forecasting
techniques are quantitative, others are qualitative. When quantitative information is
not quite available then qualitative technique is to be relied upon for getting the
required forecasts. There are, as such, two approaches to demand forecasting.

First is to obtain information about the intentions of the spenders through collecting
experts’ opinion or by conducting interviews with the consumers. Second is to use
past experience as the guide and using or projecting the past statistical relationships
to obtain the expected level of future demand. The first method is also considered to
be qualitative and is mostly used for short-term forecasting; whereas the second
method is quantitative and is used for long-term forecasting.

We can forecast the demand for existing product by using any one or even mix of
the above methods, but to forecast demand for new product we have to use survey
method only because the new product has no past or historical data to offer. How is
demand forecast determined? There are two approaches to determine demand
forecast – (1) the qualitative approach, (2) the quantitative approach. The
comparison of these two approaches is shown below: Description| Qualitative
Approach| Quantitative Approach| Applicability| Used when situation is vague &
little data exist (e. . , new products and technologies)| Used when situation is stable
& historical data exist(e. g. existing products, current technology)| Considerations|
Involves intuition and experience| Involves mathematical techniques| Techniques|
Jury of executive opinionSales force compositeDelphi methodConsumer market
survey| Time series modelsCausal models| Qualitative Forecasting Methods Your
company may wish to try any of the qualitative forecasting methods below if you do
not have historical data on your products’ sales.

Qualitative Method| Description| Jury of executive opinion| The opinions of a small

group of high-level managers are pooled and together they estimate demand. The
group uses their managerial experience, and in some cases, combines the results of
statistical models. | Sales force composite| Each salesperson (for example for a
territorial coverage) is asked to project their sales. Since the salesperson is the one
closest to the marketplace, he has the capacity to know what the customer wants.

These projections are then combined at the municipal, provincial and regional levels.
| Delphi method| A panel of experts is identified where an expert could be a
decision maker, an ordinary employee, or an industry expert. Each of them will be
asked individually for their estimate of the demand. An iterative process is
conducted until the experts have reached a consensus. | Consumer market survey|
The customers are asked about their purchasing plans and their projected buying
behavior.
A large number of respondents is needed here to be able to generalize certain
results. | Quantitative Forecasting Methods There are two forecasting models here –
(1) the time series model and (2) the causal model. A time series is a s et of evenly
spaced numerical data and is o btained by observing responses at regular time
periods. In the time series model , the forecast is based only on past values and
assumes that factors that influence the past, the present and the future sales of your
products will continue.

On the other hand, t he causal model uses a mathematical technique known as the
regression analysis that relates a dependent variable (for example, demand) to an
independent variable (for example, price, advertisement, etc. ) in the form of a linear
equation. The time series forecasting methods are described below: Time Series
Forecasting Method| Description| Naive Approach| Assumes that demand in the
next period is the same as demand in most recent period; demand pattern may not
always be that stableFor example:If July sales were 50, then Augusts sales will also be
50| Time Series Forecasting Method| Description|

Moving Averages (MA)| MA is a series of arithmetic means and is used if little or no

trend is present in the data; provides an overall impression of data over timeA
simple moving average uses average demand for a fixed sequence of periods and is
good for stable demand with no pronounced behavioral patterns. Equation:F 4 = [D
1 + D2 + D3] / 4F – forecast, D – Demand, No. – Period(see illustrative example –
simple moving average)A weighted moving average adjusts the moving average
method to reflect fluctuations more closely by assigning weights to the most recent
data, meaning, that the older data is usually less important.

The weights are based on intuition and lie between 0 and 1 for a total of 1.
0Equation:WMA 4 = (W) (D3) + (W) (D2) + (W) (D1)WMA – Weighted moving average,
W – Weight, D – Demand, No. – Period(see illustrative example – weighted moving
average)| Exponential Smoothing| The exponential smoothing is an averaging
method that reacts more strongly to recent changes in demand by assigning a
smoothing constant to the most recent data more strongly; useful if recent changes
in data are the results of actual change (e. g. seasonal pattern) instead of just
random fluctuationsF t + 1 = a D t + (1 – a ) F tWhereF t + 1 = the forecast for the next
periodD t = actual demand in the present periodF t = the previously determined
forecast for the present period• = a weighting factor referred to as the smoothing
constant| Time Series Decomposition| The time series decomposition adjusts the
seasonality by multiplying the normal forecast by a seasonal factor. | Quantitative
Techniques for Business Analysis Suppose you are heading a business unit in India
which are the points about statistic you will keep in mind for doing business
profitable.

In other words what is the relevance of Business statistics in your venture. The basic
objective with which Business Statistics is used for making inferences that is reaching
a decision or conclusion and predictions and assumptions. In business, decision
making is a very critical phase and is used in all the fields of business. The use of
statistics makes comparisons and analysis easier which relatively quickens the
decision-making process and also makes it a little easier. But using statistics the
relationships of different variables can be studied.
Statistics makes it possible to do what-if analysis. Regression analysis is used for
studying the relationship between variables and the dependency of one upon the
other. Research shows that the use of statistical models improves the decision
making process. By using probabilities, different predictions can also be made in
business · Statistical skills enable to intelligently collect, analyze and interpret data
relevant to their decision-making. Statistical concepts and statistical thinking enable
them to: – solve problems in a diversity of contexts. add substance to decisions. –
reduce guesswork. It is always better to use the concepts which are already used so
that it is very easy to the head making the business profitable and a slight innovation
or advancement is needed in order to prevent the idea from carbon copy. The use of
statistics is a comparison and hence comparison plays a vital role. When a business
is statistically implemented the flaws are reduced because it solves the problem very
easily it helps making proper decision and reduces redundancy. The bottom line.

That’s what many business people look at to gauge the profitability of a company.
While important, the bottom line doesn’t always provide the entire picture, and using
it as the sole barometer of company performance could have serious fiscal
repercussions. Ratios: Gross Profit on Net Sales Net Profit on Net Sales Management
Rate of Return Net Profit to Tangible Net Worth Rate of Return on Common Stock
Equity Analytical Procedures: Comparative Statements Index-Number Trend Series
Common-Size Statements Analysis of Financial Statement Components Purpose of
Profitability Analysis

A properly conducted profitability analysis provides invaluable evidence concerning

the earnings potential of a company and the effectiveness of management. II.
Profitability Ratios Profitability ratios are the most significant – and telling – of
financial ratios. Similar to income ratios, profitability ratios provide a definitive
evaluation of the overall effectiveness of management based on the returns
generated on sales and investment. The adequacy of your company’s earnings can
be measured in terms of (1) the rate earned on sales; (2) the rate arned on average
total assets; (3) the rate earned on average common stockholders’ equity; and (4) the
availability of earnings to common stockholders. The most widely used profitability
measurements are profit margin on sales, return-on-investment ratios, and earnings
per share. Gross Profit on Net Sales You can use the following ratio to determine the
percentage of gross profit on net sales: Net Sales – Cost of Goods Sold = Gross Profit
Rate Net Sales Your gross profit rate helps you determine whether your average
markup on goods will consistently cover your expenses, therefore resulting in the
desired profit.

If your gross profit rate is continually lower than your average margin, something is
wrong! Be on the lookout for downward trends in your gross profit rate. This is a sign
of future problems for your bottom line. Note: This percentage rate can – and will –
vary greatly from business to business, even those within the same industry. Sales,
location, size of operations, and intensity of competition are all factors that can
affect the gross profit rate. Net Profit on Net Sales Earnings after Taxes = Net Profit
Rate Net Sales This ratio provides a primary appraisal of net profits related to
investment.

Once your basic expenses are covered, profits will rise disproportionately greater
than sales above the break-even point of operations. Note: Sales expenses may be
substituted out of profits for other costs to generate even more sales and profits.
Management Rate of Return This profitability ratio compares operating income to
operating assets, which are defined as the sum of tangible fixed assets and net
working capital. Operating Income = Rate of Return Fixed Assets + Net Working
Capital This rate determines whether you have made efficient use of your assets.

You can calculate for your entire company or for each of its divisions or operations,
determines whether you have made efficient use of your assets. The percentage
should be compared with a target rate of return that you have set for the business.
Net Sales to Tangible Net Worth Net Sales = Net Sales to Tangible Net Worth Ratio
Tangible Net Worth* This ratio indicates whether your investment in the business is
adequately proportionate to your sales volume. It may also uncover potential credit
or management problems, usually called overtrading and undertrading.

Overtrading, or excessive sales volume transacted on a thin margin of investment,

presents a potential problem with creditors. Overtrading can come from
considerable management skill, but outside creditors must furnish more funds to
carry on daily operations. Undertrading is usually caused by management’s poor use
of investment money and their general lack of ingenuity, skill or aggressiveness.
*Tangible Net Worth = owners’ equity – intangible assets Rate of Return on Common
Stock Equity Instead of focusing on total assets, this ratio takes a reading on the rate
of return on stockholders’ equity.

Earnings after Taxes = Rate of Return Tangible Net Worth III. Analytical Procedures
Procedures you can use to analyze your business’s profitability are generally broken
up into two categories: (1) those based upon financial data from two or more fiscal
periods, or (2) financial data from only the current fiscal period. To complete a
thorough review of your company’s financial standing, we recommend you utilize
both types of analytical procedures. IV. Commonly Used Analytical Procedures The
most common types of analytical procedures are: (1) comparative statements; (2)
index-number trend series; (3) common-size statements; (4) nalysis of financial
statement components; and (5) vertical analysis. V. Comparative Statements A first
look at your business’s current financial figures can be quite overwhelming and,
more often than not, a little confusing. But, if you were to compare that data to your
business’s historical performance, it becomes significantly more meaningful.
Compare your company’s current financial numbers with monthly, quarterly, or
annual data from previous fiscal years. You should notice some trends that will help
you map out the future of your business. VI.

Index-Number Trend Series If you are trying to analyze financial data that span a
long period of time, simply trying to compare financial statements can turn into quite
a cumbersome task. If you find yourself in this boat, try to create an index-number
trend series to alleviate some of your confusion. First, choose a base year to which
all other financial data will be compared. Usually, the base year is the earliest year in
the group being analyzed, or it can be another year you consider particularly
appropriate. Next, express all base year amounts as 100 percent.

Then state corresponding figures from following years as a percentage of the base
year amounts. Keep in mind that index-numbers can be computed only when
amounts are positive. Example : YearSalesIndex-Number Trend 1998100,000100 %
1999150,000150% 2000175,000175 % The index-number trend series technique is a
type of horizontal analysis that can provide you with a long range view of your firm’s
financial position, earnings, and cash flow. It is important to remember, however,
that long-range trend series are particularly sensitive to changing price levels.

For instance, between 1975 and 1985 the price level in the United States doubled. A
horizontal analysis that ignored such a significant change might suggest that your
sales or net income increased dramatically during the period when, in fact, little or
no real growth occurred. Data expressed in terms of a base year can be very useful
when comparing your company’s figures to those from government agencies and
sources within your industry or the business world in general, because they will
often use an index-number trend series as well.

When making comparisons, be sure the samples you use are in the same base
period. If they aren’t, simply change one so they match. VII. Common-Size
Statements When performing a ratio analysis of financial statements, it is often
helpful to adjust the figures to common-size numbers. To do this, change each line
item on a statement to a percentage of the total. For example, on a balance sheet,
each figure is shown as a percentage of total assets, and on an income statement,
each item is expressed as a percentage of sales.

This technique is quite useful when you are comparing your business to other
businesses or to averages from an entire industry, because differences in size are
neutralized by reducing all figures to common-size ratios. Industry statistics are
frequently published in common-size form. When comparing your company with
industry figures, make sure that the financial data for each company reflect
comparable price levels, and that it was developed using comparable accounting
methods, classification procedures, and valuation bases. Such comparisons should
be limited to companies engaged in similar business activities.

When the financial policies of two companies differ, these differences should be
recognized in the evaluation of comparative reports. For example, one company
leases its properties while the other purchases such items; one company finances its
operations using long-term borrowing while the other relies primarily on funds
supplied by stockholders and by earnings. Financial statements for two companies
under these circumstances are not wholly comparable. Example Common-Size
Income Statement YearSalesCost of GrossExpensesTaxesProfit SalesProfit
2000100%65%35%27%2%6% 1999100%68%32%27%1%4%
1998100%70%30%26%1%3% Service Marketing

Selective food marketing has answered the call and was created to represent the
way a foodservice broker should. As our industry rapidly evolves, yet condenses, the
demand for qualified & experienced representation is great. Selective food service
marketing’s philosophy is to execute our principals’ agenda with thorough operator
penetration & effective service to our distributors. A conservative prospectus of
manufactures, but go to market aggressively to succeed. What is the your vision to
represent a food manufacturing company in a way that they are proud to say that
they have selective food marketing services?
Food Marketing: Food products often involve the general marketing approaches and
techniques applied the marketing of other kinds of products and services. In food
marketing, topics such as test marketing, segmentation, positioning, branding,
targeting, consumer research, and market entry strategy, for example, are highly
relevant. In addition, food marketing involves other kinds of challenges–such as
dealing with a perishable product whose quality and availability varies as a function
of current harvest conditions.

The value chain–the extent to which sequential parties in the marketing channel add
value to the product–is particularly important. Today, processing and new
distribution options provide increasing opportunities available to food marketers to
provide the consumer with convenience. Marketing, services, and processing added
do, however, result in significantly higher costs. In the old days, for example,
consumers might have baked their own bread from locally grown flour. Today, most
households buy pre-manufactured bread, and it is estimated that the farmer
receives only some 5% of the price paid by the consumer for the wheat.

Demographics and Food Marketing: The study of demographics involves

understanding statistical characteristics of a population. For food marketing
purposes, this may help firms (1) understand the current market place (e. g. , a firm
interested in entering the market for sports drinks in a given country, or worldwide,
might investigate the number of people between the ages of fifteen and thirty-five,
who would constitute a particularly significant market) or (2) predict future trends. In
the United States and

Germany, for example, birth rates are relatively low, so it can be predicted that the
demand for school lunch boxes will probably decline. Therefore, firms marketing
such products might see if they, instead, can shift their resources toward products
consumed by a growing population (e. g. , bait boxes for a growing population of
retired individuals who want to go fishing). Food marketers must consider several
issues affect the structure of a population. For example, in some rapidly growing
countries, a large percentage of the population is concentrated among younger
generations.

In countries such as Korea, China, and Taiwan, this has helped stimulate economic
growth, while in certain poorer countries, it puts pressures on society to
accommodate an increasing number of people on a fixed amount of land. Other
countries such as Japan and Germany, in contrast, experience problems with a
“graying” society, where fewer non-retired people are around to support an
increasing number of aging seniors. Because Germany actually hovers around
negative population growth, the German government has issued large financial
incentives, in the forms of subsidies, for women who have children.

In the United States, population growth occurs both through births and immigration.
Since the number of births is not growing, problems occur for firms that are
dependent on population growth (e. g. , Gerber, a manufacturer of baby food). Social
class can be used in the positioning of food products. One strategy, upward pull
marketing, involves positioning a product for mainstream consumers, but portraying
the product as being consumed by upper class consumers. For example, Haagen-
Dazs takes care in the selection of clothing, jewelry, and surroundings in its
advertisements to portray upscale living, as do the makers of Grey Poupon mustard.

Another strategy, however, takes a diametrically opposite approach. In at level

positioning, blue collar families are portrayed as such, emphasizing the working class
lifestyle. Many members of this demographic group associate strongly with this
setting and are proud of their lifestyles, making this sometimes a viable strategy. An
advertisement for Almond Joy, for example, features a struggling high school student
being quizzed by his teacher remarking, “Sometimes you feel like a nut, sometimes
you don’t! ” Nowadays, by the way, ocial class is often satirized in advertising, as
evident in the Palanna All-Fruit commercials while the matron faints because the
police officer refers to the fruit preserves as “jelly. ” Demographics in the U. S. have
significantly affected demand for certain food products. With declining birth rates,
there is less demand for baby foods in general, a trend that will continue.
Immigration has contributed to a demand for more diverse foods. Long working
hours have fueled a demand for prepared foods, a category that has experienced
significant growth in supermarkets since the 1980s.

Food Marketing and Consumption Patterns: Certain foods—such as chicken, cheese,

and soft drinks—have experienced significant growth in consumption in recent
years. For some foods, total market consumption has increased, but this increase
may be primarily because of choices of a subgroup. For example, while many
Americans have reduced their intake of pork due to concerns about fat, overall per
capita consumption of pork has increased in the U. S. This increase probably results
in large part from immigration from Asia, where pork is a favored dish.

Consumption of certain other products has decreased. Many consumers have

replaced whole milk with leaner varieties, and substitutes have become available to
reduce sugar consumption. Beef and egg consumption have been declining, but this
may be reversing as high protein diets gain increasing favor. Some food categories
have seen increasing consumption in large part because of heavy promotional
campaigns to stimulate demand. International Comparisons: Americans generally
spend a significantly smaller portion of their income on food than do people in most
other countries.

Part of this is due to American affluence—in India and the Philippines, families are
estimated to spend 51% and 56% of their incomes on food, respectively, in large part
because of low average incomes. Food prices also tend to be lower in the U. S. than
they are in most industrialized countries, leaving more money for other purposes.
Americans, on the average, are estimated to spend 7-11% of their income on food,
compared to 18% in Japan where food tends to be very expensive. This is because
food prices are relatively low, compared to other products, here.

Food outlets: Food, in the United States, is sold in a diversity of outlets.

Supermarkets carry a broad assortment of goods and generally offer lower prices.
Certain convenience products—e. g. , beverages and snacks—are provided in more
outlets where consumers may be willing to pay higher prices for convenience.
Distinctions between retail formats are increasingly blurred—e. g. , supermarkets,
convenience stores, and restaurants all sell prepared foods to go. A small number of
online retailers now sell food that can be delivered to consumers’ homes.

This is usually not a way to reduce costs—with delivery, costs are usually higher than
in supermarkets—but rather a way to provide convenience to time-pressed
consumers. Internationally, there are large variations: In developing countries, food
is often sold in open markets or in small stores, typically with more locally produced
and fewer branded products available. Even in many industrialized countries,
supermarkets are less common than they are in the U. S. In Japan, for example,
many people show in local neighborhood stores because it is impractical to drive to
a large supermarket.

In some European countries, many people do not own cars, and thus smaller local
shops may be visited frequently. Food is increasingly being consumed away from the
home—in restaurants, cafeterias, or at food stands. Here, a large part of the cost is
for preparation and other services such as ambiance. Consumers are often quite
willing to pay these costs, however, in return for convenience and enjoyment.
Government Food Programs: Government food programs, in addition to helping low
income households, do increase demand for food to some extent.

In fact, increasing demand for farm products was a greater motivation than helping
poor people for the formation of the U. S. food stamp program. The actual impact on
food stamps on actual consumer demand is limited, however, due to the fungibility
of money. It is estimated that one dollar in food stamps increases the demand for
food by 20 cents, but when food stamps are available to cover some food costs,
recipients are likely to divert much of the money they would otherwise have spent to
other necessities. Food Marketing Issues: The food industry faces numerous
marketing decisions.

Money can be invested in brand building (through advertising and other forms of
promotion) to increase either quantities demanded or the price consumers are
willing to pay for a product. Coca Cola, for example, spends a great deal of money
both on perfecting its formula and on promoting the brand. This allows Coke to
charge more for its product than can makers of regional and smaller brands.
Manufacturers may be able to leverage their existing brand names by developing
new product lines. For example, Heinz started out as a brand for pickles but
branched out into ketchup.

Some brand extensions may involve a risk of damage to the original brand if the
quality is not good enough. Coca Cola, for example, refused to apply the Coke name
to a diet drink back when artificial sweeteners had a significantly less attractive taste.
Coke created Tab Cola, but only when aspartame (NutraSweet) was approved for use
in soft drinks did Coca Cola come out with a Diet Coke. Manufacturers that have
invested a great deal of money in brands may have developed a certain level of
consumer brand loyalty—that is, a tendency for consumers to continue to buy a
preferred brand even when an attractive offer is made by competitors.

For loyalty to be present, it is not enough to merely observe that the consumer buys
the same brand consistently. The consumer, to be brand loyal, must be able to
actively resist promotional efforts by competitors. A brand loyal consumer will
continue to buy the preferred brand even if a competing product is improved, offers
a price promotion or premium, or receives preferred display space. Some
consumers how multi-brand loyalty. Here, a consumer switches between a few
preferred brands.

The consumer may either alternate for variety or may, as a rule of thumb, buy
whichever one of the preferred brands are on sale. This consumer, however, would
not switch to other brands on sale. Brand loyalty is, of course, a matter of degree.
Some consumers will not switch for a moderate discount, but would switch for a
large one or will occasionally buy another brand for convenience or variety. The
“Four Ps” of Marketing. Marketers often refer to the “Four Ps,” or the marketing
portfolio, as a way to describe resources available to market a product:

Product: Firms can invest in the product by using high quality ingredients or doing
extensive research and development to improve it. Both McDonald’s and Burger
King, for example, literally spend millions of dollars to perfect their French fries! In
today’s Western markets with varying tastes and preferences, it has generally been
found that products that offer a specific benefit—e. g. , a very tart taste in jam—tend
to fare better than “me, too” products that merely imitate a competitor’s products.
Less is known about Eastern and developing countries. Price: Different strategies
may be taken with respect to price.

Generically, there are two ways to make a profit—sell a lot and make a small margin
on each unit or make a large margin on each unit and settle for lesser volumes.
Firms in most markets are better off if the market is balanced—where some firms
compete on price and others on other features (such as different taste preferences
for different segments). The same idea applies at the retail level where some
retailers compete on price (e. g. , Food-4-Less and Wal-Mart) while others (such as
Vons Pavillion) compete on service while charging higher prices. Distribution: Most
supermarkets are offered more products than they have space for.

Thus, many manufacturers will find it difficult to get their products into retail stores.
Promotion involves the different tools that firms have to get consumers to buy more
of their products, possibly at higher prices. Advertising is what we think of by default,
but promotion also includes coupons, in-store price promotions, in-store
demonstrations, or premiums (e. g. , if you buy a package of Jimmy Dean hotdogs
this week, you get a free package of Kraft mustard). The Value Chain: A central issue
in food marketing is the value chain, the process by which different parties in
between the farmer and the consumer dd value to the product. In an extreme case,
the farmer only receives about five cents for every dollar ultimately charged for
bread in the store. Part of the added cost results from other ingredients, but much
of the value is added from processing (e. g. , milling), manufacturing, distribution
(transportation, wholesaling, and retailing) and brand building. The value chain
provides an opportunity for many firms to add value to a product. This, of course,
pushes up the ultimate retail prices of foods. However, these added costs usually
result from consumer demand where consumers are willing to pay for additional
convenience.
In recent years, for example, there has been a sharp increase in the demand for
prepared foods—from supermarkets or from dine-in or take-out from restaurants. It
is important to note that the value chain comes about in large part because a
sequence of contributors allows each to specialize in what it does best or is most
comfortable—and best qualified—to be doing. Farmers, for example, tend to be
most interested in doing actual farming tasks and may be uncomfortable making
deals with processors and manufacturers. Agents may specialize in this task. The
costs of learning can be spread across many different farmers.

The farmer may then be better off paying the agent and spend his or her time on
farming instead . For the agent, having a large number of farmers as clients is
profitable. Most farms would not have a sufficient volume to justify setting up milling
operations, but large processors can take advantage of economies of scale by
servicing many farmers. Large manufacturers can invest in brand building, and
distributors can combine goods from many different suppliers to distribute and sell
efficiently. The Food Marketing Environment: The food market is affected by many
different forces—e. . , sociological (fewer children mean less demand for certain
products), government regulations, international trade conditions, science and
technology, weather and other conditions affecting harvest conditions, economic
cycles, and competitive conditions. Food Markets: Characteristics Food Marketing
Efficiency refers to providing consumers with desired levels of service at the lowest
cost possible. This does not necessarily mean to minimize costs after materials leave
the farm. Services added later in the process may be very valuable to the consumer.

Raw wheat would not be very valuable to most end consumers. The objective, then,
is to add the needed value steps as efficiently as possible. Wal-Mart is extremely
efficient in providing the retail (and effectively wholesale) part of the value chain
even though that service ultimately costs money. Few consumers would want to
drive a long distance to a bakery, and even if they did, the baker would then have to
provide the retail services. The baker would probably have to spend more money on
hiring people and maintaining the store than Wal-Mart adds to the cost by
performing these services.

Characteristics of Food Products and Production: Certain problems are introduced

by the characteristics of agricultural production: Large crop variations: Weather and
other environmental factors greatly influence the size of a crop during any given
year. At the farm level, demand for agricultural products is generally very inelastic.
That means that a small change in the crop size can greatly affect prices. If the
orange harvest is only 5% above normal, orange juice manufacturers have a lot of
farmers to buy from.

Since it is difficult to increase consumer demand much in the short run,

manufacturers are unlikely to significantly increase the quantities purchased, and
prices may go down by much more than the 5%. Seasonal effects: Certain products
—such as turkeys, pumpkin pie, and cranberries—are demanded mostly during
selected periods of the year. Other products—such as oranges for orange juice—are
demanded more uniformly year-round, but are available in larger quantities during
the season. Fresh peaches, for example, are abundantly available in the U. S. uring
the summer, but usually need to be imported—at high costs—during the winter
season. Increasing production levels: Scientific advances have enabled farmers to
produce more crops on a given amount of land. This has dramatically increased the
supply of certain products, often more than the increase in population and export
markets. This has made markets more competitive. Geographic concentration and
varying production costs: Certain products are grown most efficiently in certain
parts of the country. Wheat and corn could be grown in the South, but at a higher
cost than in colder climates.

Oranges tend to fare better in warmer climates. This means that many products
need to be transported over long distances. Derived demand: Farmers need farm
supplies (e. g. , fertilizer, seeds) and equipment (e. g. , tractors). Thus, when there is
an increase in market demand for a particular crop, this will tend to result in
increased demand for products supplied to farmers. Problems in Agricultural
Marketing: Farmers tend to face serious problems due to their limited control over
market conditions. In the long run, farmers can to some extent control their own
production levels, but they have no control over others.

If other farmers increase their production, thus increasing supply and resulting in
decreased market prices, there is nothing that the farmer can do about it. Another
problem is that it takes time for the farmer to adjust his or her output. To increase
production of hogs, for example, it is necessary to breed more stock. This takes time,
and by the time the larger stock is available, prices may have reversed—i. e. , the
farmer decided to raise more hogs when prices went up, but by the time the stock is
ready, market prices may have declined (either because of an increasing supply from
other farmers or because of a change in consumer tastes).

Farmers have low bargaining power in dealing with buyers. Processors or

manufacturers have many farmers to choose from. They do not need the product
from any one particular farmer since commodities are seen as identical. Farmers,
therefore, end up having to sell at a market price that may or may not be profitable
at a given time. Farmers often face a “cost-squeeze” when market prices change.
When market prices decline (usually due to supply conditions), prices paid to farmers
decline. However, the farmer’s costs are unlikely to decline, leaving the farmer to
absorb this loss.

Such price fluctuations may change a crop from being mildly profitable to being
causing significant losses. Decisions on Marketing Efforts: Certain food product
producers have decided to collectively promote their crops—e. g. , Florida oranges,
Washington apples, and beef growers. For a commodities product, it is generally not
worthwhile for the individual farmer to promote. Thus, promotion efforts are
typically undertaken by trade groups such as the Beef Council. If participation is
voluntary, many producers would be likely to free-ride—that is, benefit from others’
efforts without contributing themselves.

In many jurisdictions, participation in various programs in mandatory. In some cases,

farmers can petition for a refund, but must then go through a great deal of effort.
Manufacturers frequently engage in brand building—e. g. , Kraft promotes Kraft
cheese as being of especially high quality. Here, the manufacturer benefits, and thus
may have an incentive to spend money on these promotional efforts. Trends in Food
and Agricultural Marketing: Science has allowed both for significant increases in
productivity and for adapting products to market needs.

For example, it is now possible to produce firmer fruits that are less likely to be
bruised or spoil in transit. (This may happen at some cost in taste, however). Other
research may be conducted to optimize tastes and appearances for one or more
consumer segments. This research is often proprietary—sponsored by specific
manufacturers and kept secret as a competitive advantage. In order to meet the
demands of consumers and manufacturers, there is now an increased need for
growers, processors, and manufacturers to work together to create products that
meet needed standards.

It is also possible today to produce an increasing number of niche products—

products that appeal to one particular segment of the market. Competition is
increasingly global, with both suppliers and buyers being spread increasingly across
the world. Because of the increasingly complex marketplace, managers increasingly.
Quality Systems Management What are the points you will keep in mind about the
concept of quality control and inspection if you are the quality systems manager of a
rubber products manufacturing unit?

Quality control (QC) is a procedure or set of procedures intended to ensure that a

manufactured product or performed service adheres to a defined set of quality
criteria or meets the requirements of the client or customer. QC is similar to, but not
identical with, quality assurance (QA). QA is defined as a procedure or set of
procedures intended to ensure that a product or service under development (before
work is complete, as opposed to afterwards) meets specified requirements. QA is
sometimes expressed together with QC as a single expression, quality assurance and
control (QA/QC).

In order to implement an effective QC program, an enterprise must first decide

which specific standards the product or service must meet. Then the extent of QC
actions must be determined (for example, the percentage of units to be tested from
each lot). Next, real-world data must be collected (for example, the percentage of
units that fail) and the results reported to management personnel. After this,
corrective action must be decided upon and taken (for example, defective units must
be repaired or rejected and poor service repeated at no charge until the customer is
satisfied).

If too many unit failures or instances of poor service occur, a plan must be devised to
improve the production or service process and then that plan must be put into
action. Finally, the QC process must be ongoing to ensure that remedial efforts, if
required, have produced satisfactory results and to immediately detect recurrences
or new instances of trouble. In general, the application of the concept of Quality
Control and Inspection for a rubber products manufacturing unit would consist of: 1.
Receiving Inspection – to assure the product/material received meets the required
specifications before it is manufactured. . In-process Inspection (On-going basis)- to
assure the parts 3. Finished Goods Inspection (to ensure any secondary operations
are performed to specifications and that product meets all requirements) This is the
inspection side. Keeping all of this in mind, the concept of quality is to ensure the
product is manufactured correct the first time. a. Receiving Inspection: It means as a
Quality systems manager the product or the material received from various sources
should be tested or evaluated to know whether it meets the specifications.

If not the Raw-material should be dismissed and not to be used. b. In process

Inspection: This means the products have to be tested while on the production or
while they are In-process. This will give the fair idea to the QA manager whether the
products are generating the expecting outcome. If he thinks the rubber material
doesn’t producing the expected outcome it should be terminated immediately. c.
Finished goods Inspection: This means the products have to be tested to assure
100% quality.

The QC manager has to take the full in charge and pass the “QC test” The above said
methods are critical and it should be followed strictly without which the product may
not meet the specifications of Quality control and inspection. Zero-level defect must
be assured to get 100% quality of rubber goods. Management Research You are in
charge of promoting a new flavor of tooth paste yet to be produced in a tooth paste
manufacturing unit. Which sampling techniques will you use to get the required data
from a population?

Sampling is that part of statistical practice concerned with the selection of individual
observations intended to yield some knowledge about a population of concern,
especially for the purposes of statistical inference. Each observation measures one
or more properties (weight, location, etc. ) of an observable entity enumerated to
distinguish objects or individuals. Survey weights often need to be applied to the
data to adjust for the sample design. Results from probability theory and statistical
theory are employed to guide practice.

In business, sampling is widely used for gathering information about a population It

is incumbent on the researcher to clearly define the target population. There are no
strict rules to follow, and the researcher must rely on logic and judgment. The
population is defined in keeping with the objectives of the study. Sometimes, the
entire population will be sufficiently small, and the researcher can include the entire
population in the study. This type of research is called a census study because data
is gathered on every member of the population.

Usually, the population is too large for the researcher to attempt to survey all of its
members. A small, but carefully chosen sample can be used to represent the
population. The sample reflects the characteristics of the population from which it is
drawn. Sampling methods are classified as either probability or non-probability. In
probability samples, each member of the population has a known non-zero
probability of being selected. Probability methods include random sampling,
systematic sampling, and stratified sampling. In non-probability sampling, members
are selected from the population in some non-random manner.

These include convenience sampling, judgment sampling, quota sampling, and

snowball sampling. The advantage of probability sampling is that sampling error can
be calculated. Sampling error is the degree to which a sample might differ from the
population. When inferring to the population, results are reported plus or minus the
sampling error. In non probability sampling, the degree to which the sample differs
from the population remains unknown. Random sampling is the purest form of
probability sampling. Each member of the population has an equal and known
chance of being selected.

When there are very large populations, it is often difficult or impossible to identify
every member of the population, so the pool of available subjects becomes biased.
Systematic sampling is often used instead of random sampling. It is also called an
Nth name selection technique. After the required sample size has been calculated,
every Nth record is selected from a list of population members. As long as the list
does not contain any hidden order, this sampling method is as good as the random
sampling method. Its only advantage over the random sampling technique is
simplicity.

Systematic sampling is frequently used to select a specified number of records from

a computer file. Stratified sampling is commonly used probability method that is
superior to random sampling because it reduces sampling error. A stratum is a
subset of the population that share at least one common characteristic. Examples of
stratums might be males and females, or managers and non-managers. The
researcher first identifies the relevant stratums and their actual representation in
the population. Random sampling is then used to select a sufficient number of
subjects from each stratum. Sufficient” refers to a sample size large enough for us to
be reasonably confident that the stratum represents the population. Stratified
sampling is often used when one or more of the stratums in the population have a
low incidence relative to the other stratums. Convenience sampling is used in
exploratory research where the researcher is interested in getting an inexpensive
approximation of the truth. As the name implies, the sample is selected because
they are convenient. This non-probability method is often used during preliminary
research efforts to et a gross estimate of the results, without incurring the cost or
time required to select a random sample. Judgment sampling is a common non-
probability method. The researcher selects the sample based on judgment. This is
usually an extension of convenience sampling. For example, a researcher may
decide to draw the entire sample from one “representative” city, even though the
population includes all cities. When using this method, the researcher must be
confident that the chosen sample is truly representative of the entire population.
Quota sampling is the non-probability equivalent of stratified sampling.

Like stratified sampling, the researcher first identifies the stratums and their
proportions as they are represented in the population. Then convenience or
judgment sampling is used to select the required number of subjects from each
stratum. This differs from stratified sampling, where the stratums are filled by
random sampling. Snowball sampling is a special non-probability method used when
the desired sample characteristic is rare. It may be extremely difficult or cost
prohibitive to locate respondents in these situations. Snowball sampling relies on
referrals from initial subjects to generate additional subjects.

While this technique can dramatically lower search costs, it comes at the expense of
introducing bias because the technique itself reduces the likelihood that the sample
will represent a good cross section from the population. If I were an officer to
promote a new flavour of toothpaste yet to be produced, I would use RANDOM
SAMPLING METHOD Random sampling: Random sampling- all members of the
population have an equal chance of being selected as part of the sample. You might
think this means just standing in the street and asking passers-by to answer your
questions.

However, there would be many members of the population who would not be in the
street at the time you are there; therefore, they do not stand any chance of being
part of your sample. To pick a random sample, it is necessary to take all the names
on the electoral register (A list of all the people who live in a particular area) and pick
out, for example, every fiftieth name. This particular person needs to be interviewed
to make the sample truly random. Random sampling is very expensive and time
consuming, but gives a true sample of the population.

Types of Random sample: A simple random sample is selected so that all samples of
the same size have an equal chance of being selected from the population. A self-
weighting sample, also known as an EPSEM (Equal Probability of Selection Method)
sample, is one in which every individual, or object, in the population of interest has
an equal opportunity of being selected for the sample. Simple random samples are
self-weighting. Stratified sampling involves selecting independent samples from a
number of subpopulations, group or strata within the population.

Great gains in efficiency are sometimes possible from judicious stratification. Cluster
sampling involves selecting the sample units in groups. For example, a sample of
telephone calls may be collected by first taking a collection of telephone lines and
collecting all the calls on the sampled lines. The analysis of cluster samples must take
into account the intra-cluster correlation which reflects the fact that units in the
same cluster are likely to be more similar than two units picked at random Pros and
Cons: 1. There are lot of bias in Random sampling 2.

It is feasible and simple as the sampling is done on a random basis. 3. Can make
sample units in groups. 4. Very expensive and time consuming, but gives a true
result of the population 5. While in toothpaste case, the users can given a sample
piece of toothpaste randomly to get the feedback or their opinion from the chosen
population Conclusion: Though the Random sampling has couple of de-merits it will
help to figure out the result from the chosen population. While all other also may
provide the result which may not be best comparing to the sampling method which I
have chosen (Random Sampling)

Business Environment Imagine yourself as a new businessman what are the

objectives of business that you will keep in mind if you have to launch a new
business? Business Objectives Objectives give the business a clearly defined target.
Plans can then be made to achieve these targets. This can motivate the employees. It
also enables the business to measure the progress towards to its stated aims. The
most effective business objectives meet the following criteria: S – Specific –
objectives are aimed at what the business does, e. g. hotel might have an objective of
filling 60% of its beds a night during October, an objective specific to that business.
M – Measurable – the business can put a value to the objective, e. g. €10,000 in sales
in the next half year of trading. A – Agreed by all those concerned in trying to achieve
the objective. R – Realistic – the objective should be challenging, but it should also be
able to be achieved by the resources available. T- Time specific – they have a time
limit of when the objective should be achieved, e. g. by the end of the year. The main
objectives that a business might have are:

Survival – a short term objective, probably for small business just starting out, or
when a new firm enters the market or at a time of crisis. Profit maximization – try to
make the most profit possible – most like to be the aim of the owners and
shareholders. Profit satisfying – try to make enough profit to keep the owners
comfortable – probably the aim of smaller businesses whose owners do not want to
work longer hours. Sales growth – where the business tries to make as many sales as
possible. This may be because the managers believe that the survival of the business
depends on being large.

Large businesses can also benefit from economies of scale. A business may find that
some of their objectives conflict with one and other: Growth versus profit: for
example, achieving higher sales in the short term (e. g. by cutting prices) will reduce
short-term profit. Short-term versus long-term: for example, a business may decide
to accept lower cash flows in the short-term whilst it invests heavily in new products
or plant and equipment. Large investors in the Stock Exchange are often accused of
looking too much at short-term objectives and company performance rather than
investing in a business for the long-term.

Alternative Aims and Objectives Not all businesses seek profit or growth. Some
organisations have alternative objectives. Examples of other objectives: Ethical and
socially responsible objectives – organisations like the Co-op or the Body Shop have
objectives which are based on their beliefs on how one should treat the environment
and people who are less fortunate. Public sector corporations are run to not only
generate a profit but provide a service to the public. This service will need to meet
the needs of the less well off in society or help improve the ability of the economy to
function: e. . cheap and accessible transport service. Public sector organisations that
monitor or control private sector activities have objectives that are to ensure that the
business they are monitoring comply with the laws laid down. Health care and
education establishments – their objectives are to provide a service – most private
schools for instance have charitable status. Their aim is the enhancement of their
pupils through education. Charities and voluntary organisations – their aims and
objectives are led by the beliefs they stand for. Changing Objectives

A business may change its objectives over time due to the following reasons: A
business may achieve an objective and will need to move onto another one (e. g.
survival in the first year may lead to an objective of increasing profit in the second
year). The competitive environment might change, with the launch of new products
from competitors. Technology might change product designs, so sales and
production targets might need to change. Personal objectives are:- 1. Provide a
benefit. A new business stands a greater chance at success if it is responding to a
need of a consumer.

Your potential customers will buy your products or service if they see that it provides
some benefits to them. You must be able to respond to their “what is it for me”
question. As a new business owner, your main task is to understand the difference
between the features of your business and the benefits it provides. For example, if
you are in the business of selling baby gift boxes, the feature and benefits are:
Feature: Baby toys, books, CDs and videos not found in department stores Benefit:
The customer will be able to conveniently find in one location the baby gift items she
or he wants.

Remember, customers buy on the basis of the benefits, and not the features of your
products. This is what you are going to use as your main selling proposition, or what
you will highlight to convince people to buy your products and services. By
understanding the business and its benefit to consumers, entrepreneurs can
differentiate their business and create niches in the market where they can enter
and survive long enough to build 2. Determine the fit with your market. Before you
can start marketing your new business, you first need to determine your target
market.

That’s right: not everyone is your customer. Some people erroneously think that they
should sell to everybody, and that targeting will limit the scope of their pool of
potential customers. Wrong! The purpose of defining your market is to make your
life easier and increase the effectiveness of your promotional activities. You can’t
strike anywhere: you need to focus your energy and money. To identify your market,
you need to look at your market data and personality attributes of those whom you
think would most likely buy your products.

Aside from the demographics of your potential customers (age, gender, income
level, geographic location, etc. ), you also need to determine lifestyle factors. Are
there any special interest activities that they belong to? Are there any social factors
and cultural involvement that govern your customers? How do you think your
market will use your products or services? 3. Right timing is everything. Some new
businesses are way ahead of their times. You may have a brilliant idea, but if the
market is not ready for your products, the venture will fall by the wayside.

If you have a product that is so new in the market, be prepared to take on the cost of
informing the buyers. Since they are not familiar with your products, show them how
it will benefit their lives and demonstrate how they can use it. Infomercials, while
costly, are very good vehicles for very new products. 4. Be ready to support your
business. One business reality is that you need money to earn more money. You
need resources to allow you to buy equipment, supplies, procure or manufacture
products, package your products well and market it.

Will your existing capital allow you to buy all the assets that you need in your
business? How are you going to finance your inventory? If you are starting an online
business, do you have the resources to create your site and pay for its upkeep? If
your business does not show a profit within the year, do you have the money to
support yourself? When starting a new business, you need to consider three major
expenses and plan for them accordingly: your living expenses, direct costs and
overhead. Living expenses is the “salary” you must produce to support yourself and
your family.
Direct costs include supplies, materials, and others that you need to produce your
product or deliver your service. Overhead is the cost of running a business, and it
covers marketing, utilities, office furniture and equipment. Sure, you can start a
business even with little cash, but you need to be extremely creative in stretching
your money and be prepared to compromise the growth of your business. You will
have no choice except to build your business gradually. However, having money is
not enough to assure success. The dot-com woes, especially, showed that you can
burn millions and millions of dollars only o end up a failure. Digital Convergence, for
example, got $250 million of funding for investors to distribute Cue Cats barcode
readers for free yet laid-off most of their staffs after their business model showed to
be unsustainable. The key is to use whatever money you have– smartly. 5. Develop a
blueprint for success. You cannot go into a business unprepared. It is important to
have a plan. Think of going to business like going to war: you need to develop
strategies to help you overcome your enemies. Without thinking through what you
want to achieve and how to get there, you are a sitting duck waiting to be clobbered.

Starting a new business entails a thorough and objective analysis of both your
personal abilities and the business requirements. You need to have a clear strategy
for marketing and the production aspects of your business. If you are a retail store,
you need to have a plan in terms of procurement and sourcing. For all the
excitement of a new business, you need to know where and how you will get the
funds to finance your business. Do you have the available resources to make this
business a success? And a million other details. A business plan is essential.

Even if you do not want to write it all down (especially if you do not have investors),
the process of preparing a business plan allows you to think through of every aspect
of your business. It makes you think about the viability of your business and helps
you avoid costly mistakes. When starting a business, you base your projected
performance on a set of assumptions. If you have a plan, you will be able to test your
planning assumptions and create fall-back measures in the event that real life proves
to be vastly different from your initial visions.

If you think through your business well, you can discover problem areas early on and
initiate efforts to correct the problem. Remember, the business owner with a
realistic plan has the best chances for success. 6. Market, market, market. In this
world dominated by hype, you must be prepared to publicize the business or its
chance for success will be slim. Unless you are a nationally known name with built-in
clientele or your business is located in a prime location, you need to promote
customer awareness for your business. If you’re on the Web, you cannot expect to
just sit in a corner and expect people to stumble on your site.

Your marketing plan should revolve around three goals. The first is to inform
customers what you have. You can do this by letting customers know what you have
for sale, either through press releases for possible publication in print and TV media,
brochures for your customers and leaflets distributed in your neighborhood. The
second goal is to persuade potential customers to do what you want them to do –
buy from you. If you’re in e-business, you do this by writing a very good sales copy
on your site including testimonials from satisfied clients.
If you have sales representatives, they could do the persuading in your behalf. The
third function of marketing your business is to remind existing customers to come
and buy again. If you are a Web marketer, you do this by sending a regular product
updates, special offers and promos to customers’ emails. As a smart marketer, you
know that you need to hold on to your existing customer base as it is much harder
(and more expensive) to get a new customer than to sell to someone who already
knows your product and the quality of your customer service.

6. Service Marketing
Selective Food Marketing has answered the call and was created to represent
the way a foodservice broker should. As our industry rapidly evolves, yet
condenses, the demand for qualified and experienced representation is great.
Selective Food service Marketing’s philosophy is to execute our principals’
agenda with thorough operator penetration and effective service to our
distributors. A conservative prospectus of manufacturers, but go to market
aggressively to succeed. What is your vision to represent a food manufacturing
company in a way that they are proud to say that they have Selective Food
Marketing services?