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Ch1.

Financial Aspect of Marketing

Marketing vs Finance the


battle

Marketing
Vs
Finance

Marketing vs Finance the


battle
The marketing manager is unhappy with
the accountant when the latter tightly
controls the marketing staffs traveling
expenses or the sales promotion budgets.
An accountants aim of keeping the
companys interest cost low frustrates the
marketing manager, as he aims at
extending credit to the valued customers
or holding more stocks at distribution
points.
The
attempt
of
the
management
accountant to prepare a realistic budget
for the company is seriously hampered by
the marketing managers highly optimistic
or highly pessimistic predictions.

Marketing & Finance


independence

Marketing functions by and large lie outside the organization.


On the one side, there is the marketplace and on the other, there is the
organization.
The marketplace is continuously affected by economic, political and
social changes.
All such changes and forces and interactions at the marketplace are
transmitted to the organization through marketing.
Based on such factors and forces the organization takes certain
decisions which are again reflected in the marketplace.
Finance function by its very nature is internal to the organization.
An important part of the finance function, is responsible to outsiders,
viz., shareholders, Government authorities, auditors etc.
But all other functions under finance do not owe any allegiance to
outsiders and the degree of dependence, too, is little.
Financial management, particularly to the extent it relates to making
available financial resources from outside, is influenced by external
factors, especially capital market situations.
But this influence is
significantly different both in character and quality from the influences

Marketing & Finance Interdependence

Marketing and Finance need to realize that they are working for a
common cause in order to fulfill common corporate objectives of
survival, profitability and growth.
There are quite a few important areas where marketing and
finance specializations tend to overlap
Product planning including product selection, retention and abandonment as
well as dilution in product portfolio;
Product pricing including both short-range and long-range pricing policies and
strategies.
Evaluation of marketing performance both general and specific marketing
functions like product profitability analysis.
Functional Cost Analysis to achieve cost effectiveness and also for exercising
a systematic and meaningful control over marketing costs and expenses;
Introduction and operation of an effective budgetary control system in
marketing;
Control of marketing operation both the employment of funds and the cost
of inputs; and
Marketing investment decisions including monitoring their implementation.

Marketing Finance a broader


definition
Marketing Finance to refer to any effort to quantify the contribution of

marketing to increased business value.


MF considers marketing in its broadest and most strategic sense, namely as

the creation, communication and delivery of customer value. The focus


of Marketing Finance is therefore the quantitative measurement of
any action designed to increase customer value.
This is a broader definition than others use where the term refers to the

economic and financial modeling of marketing actions. The problem with


this narrow focus is that it restricts the field of study to those marketing
activities that can be explicitly modeled in terms of a supply and demand
curve or directly linked to specific transactions.
It excludes activities that are indirect in their impact (for example,

investments in customer service) and/or take time to have an impact (for


example, a change of corporate identity).

Jonathan Knowles, Marketing Finance

Calculations
Market Size
Aggregate Sales of all companies within a
market.

Market Share
Market share is the ratio of the sales of a
company divided by the market size

Market Growth
- An increase in thedemandfor a
particularproductorserviceover time

Market Size
Calculating Market Size (per period)
Number of units sold in market (per
period)
Average selling price (Rs) in market
Market size = (Unit x SP)

Units

100,000

SP
MSize

15
1,500,000

Aggregate Sales of all companies within a market.

Market share ( % )
Company

Sales

Market
share

Lux

65,000

26 %

Godrej No.1

45,000

18 %

Cinthol

30,000

12 %

Others

110,000

Total

250,000

44 %
100

Market share of
A
=

Sales of A (volume or
value)
x 100
Total industry/segment
sales
Market share is the ratio of the sales of a company divided by the market size

Market share
Company

Sales

Lux

65,000

Godrej
No.1

45,000

Mkt
Share

Market Share
Soap Market (India, 2012)

26%
18%

Cinthol

30,000

12%

Others

110,000

44%

Total

250,000

100%

Lux ; 26%
Others; 44%
Godrej No.1 ; 18%
Cinthol ; 12%

Market Growth
Calculating the Market Growth Rate (%)
Example:

Market Size (Rs.) This Year (Y1)

Y1

4,600,000

Market Size (Rs.) Last Year (Y0)

Y0

4,200,000

Change in Market Size (Rs.) (Y1 Y0)

400,000

Percentage Change (%) = (Y1 Y0)/Y0

9.52%

An increase in thedemandfor a
particularproductorserviceover time

Problem1
Problem 1

Top 10 India Mobile Handset Vendors :


2012
Revenues in Crores
2011-12

Nokia
Samsung
Micromax
Blackberry
Karbonn
HTC
Spice
LG
Huawei
G'Five
Total

11,925
7,891
1,978
1,460
1,327
923
790
780
750
670
28,494

2010-11

Market
Growth Rate
(%)
12,929

5,720

2,289

1,950

1,004

450

920

1834

626

1326

29,048

Market
Share %

Problem1 - Solution
Problem 1 - Solution

Top 10 India Mobile Handset Vendors : 2012


Revenues in Crores
2011-12

Nokia
Samsung
Micromax
Blackberry
Karbonn
HTC
Spice
LG
Huawei
G'Five
Total

2010-11

Market Growth Market Share %


Rate (%)

11,925
7,891
1,978
1,460
1,327
923

12,929
5,720
2,289
1,950
1,004
450

-8%
38%
-14%
-25%
32%
105%

41.85%
27.69%
6.94%
5.12%
4.66%
3.24%

790
780
750
670
28,494

920
1834
626
1326
29,048

-14%
-57%
20%
-49%

2.77%
2.74%
2.63%
2.35%

Problem 2 -

Market share and MoM

Growth %
Sales Figures
Jun'12
Maruti
Hyundai
Mahindra
Tata
Toyota
Chevrolet
Ford
VW
Skoda
Nissan
Honda
Fiat
Renault
HMMitsubishi
Total

83,531
30,450
19,259
17,244
14,700
7,350
6,257
5,370
4,923
4,167
2,667
805
787

May'12

Market Growth Rate Market Share


( %)
(%)
89,478

31,710

20,637

20,503

15,501

6,079

6,036

4,564

2,831

3,138

10,334

1002

482

273
425
1,97,783 2,12,720

Problem 2 - Solution
Jun '12

May '12

Market Growth
Rate ( %)

Maruti
Hyundai
Mahindra
Tata
Toyota
Chevrolet
Ford
VW
Skoda
Nissan
Honda
Fiat
Renault
HMMitsubishi

83,531
30,450
19,259
17,244
14,700
7,350
6,257
5,370
4,923
4,167
2,667
805
787
273
1,97,783

89,478
31,710
20,637
20,503
15,501
6,079
6,036
4,564
2,831
3,138
10,334
1002
482
425
2,12,720

Market Share
(%)
Jun 12

-6.65%
-3.97%
-6.68%
-15.90%
-5.17%
20.91%
3.66%
17.66%
73.90%
32.79%
-74.19%
-19.66%
63.28%

42.23%
15.40%
9.74%
8.72%
7.43%
3.72%
3.16%
2.72%
2.49%
2.11%
1.35%
0.41%
0.40%

-35.76%

0.14%
100.00%

Assignment
Find Market Size, Share and Growth
of
( Biscuits OR Detergents OR any other
product )