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7/26/2019 FAM Introduction
http://slidepdf.com/reader/full/fam-introduction 1/16
Ch1. Financial Aspect of Marketing
7/26/2019 FAM Introduction
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Marketing vs Finance – thebattle
Marke ting
Vs
Finance
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• The marketing manager is unhappy with
the accountant when the latter tightlycontrols the marketing sta!s travelinge"penses or the sales promotion bu#gets.
• An accountant!s aim of keeping thecompany!s interest cost low frustrates the
marketing manager$ as he aims ate"ten#ing cre#it to the value# customersor hol#ing more stocks at #istributionpoints.
• The attempt of the management
accountant to prepare a realistic bu#getfor the company is seriously hampere# bythe marketing manager!s highly optimisticor highly pessimistic pre#ictions.
Marketing vs Finance – thebattle
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• Marketing functions by an# large lie outsi#e the organi%ation.
• &n the one si#e$ there is the marketplace an# on the other$ there is theorgani%ation.
• The marketplace is continuously aecte# by economic$ political an#social changes.
• All such changes an# forces an# interactions at the marketplace are
transmitte# to the organi%ation through marketing.• 'ase# on such factors an# forces the organi%ation takes certain
#ecisions which are again re(ecte# in the marketplace.
• Finance function by its very nature is internal to the organi%ation.
• An important part of the )nance function$ is responsible to outsi#ers$vi%.$ sharehol#ers$ *overnment authorities$ au#itors etc.
• 'ut all other functions un#er )nance #o not owe any allegiance tooutsi#ers an# the #egree of #epen#ence$ too$ is little.
• Financial management$ particularly to the e"tent it relates to makingavailable )nancial resources from outsi#e$ is in(uence# by e"ternal
factors$ especially capital market situations. 'ut this in(uence issigni)cantly #ierent both in character an# +uality from the in(uences
Marketing , Finance –in#epen#ence
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• Marketing an# Finance nee# to reali%e that they are working for a
common cause in or#er to ful)ll common corporate ob-ectives ofsurvival$ pro)tability an# growth.
• There are +uite a few important areas where marketing an#)nance speciali%ations ten# to overlap – – ro#uct planning inclu#ing pro#uct selection$ retention an# aban#onment as
well as #ilution in pro#uct portfolio/
– ro#uct pricing inclu#ing both short0range an# long0range pricing policies an#strategies.
– valuation of marketing performance – both general an# speci)c marketingfunctions like pro#uct pro)tability analysis.
– Functional Cost Analysis to achieve cost eectiveness an# also for e"ercisinga systematic an# meaningful control over marketing costs an# e"penses/
– 2ntro#uction an# operation of an eective bu#getary control system inmarketing/
– Control of marketing operation – both the employment of fun#s an# the cost
of inputs/ an#
– Marketin investment #ecisions inclu#in monitorin their im lementation.
Marketing , Finance – 2nter#epen#ence
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Marketing Finance – a broa#er#e)nition• Marketing Finance to refer to any eort to +uantify the contribution of
marketing to increase# business value.
• MF consi#ers marketing in its broa#est an# most strategic sense$ namely as
the 3creation$ communication an# #elivery of customer value.4 The focus
of Marketing Finance is therefore the quantitative measurement of
any action designed to increase customer value.
• This is a broa#er #e)nition than others use where the term refers to the
economic an# )nancial mo#eling of marketing actions. The problem with
this narrow focus is that it restricts the )el# of stu#y to those marketing
activities that can be e"plicitly mo#ele# in terms of a supply an# #eman#
curve or #irectly linke# to speci)c transactions.
• 2t e"clu#es activities that are in#irect in their impact 6for e"ample$
investments in customer service7 an#8or take time to have an impact 6for
e"ample$ a change of corporate i#entity7. Jonathan Knowles, Marketing Finance
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Calculations
• Market 9i%e – Aggregate 9ales of all companies within a
market.
• Market 9hare – Market share is the ratio of the sales of a
company #ivi#e# by the market si%e
• Market *rowth
0 An increase in the #eman# for aparticular pro#uct or service over time
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Market 9i%e
Calculating Market Size (per period)
:umber of units sol# in market 6perperio#7
;nits 1<<$<<<
Average selling price 6=s7 in market 9 1>
Market si%e ? 6;nit " 97 M9i%e 1$><<$<<<
Aggregate Sales of all companies within a market.
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Market share 6 @ 7
Company SalesMarket
share
u" B>$<<< B @
*o#re- :o.1 D>$<<< 1E @Cinthol <$<<< 1 @
&thers 11<$<<< DD @
Total ><$<<< 1<<
Market share ofA ?
9ales of A 6volume orvalue7 " 1<<
Total in#ustry8segmentsales
Market share is the ratio of the sales of a company divided by the market size
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Market share
Company Sales
u" B>$<<<
*o#re-
:o.1 D>$<<<Cinthol <$<<<
&thers 11<$<<<
Total !"#"""
MktShare
B@
1E@
1@
DD@
$""@
u" / B@
*o#re- :o.1 / 1E@
Cinthol / 1@
&thers/ DD@
Market ShareSoap Market (%ndia# "$)
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Market *rowth
Calculating the Market &ro'th ate ()
"ampleG
Market 9i%e 6=s.7 This Hear 6H17 H1 D$B<<$<<<
Market 9i%e 6=s.7 ast Hear 6H<7 H< D$<<$<<<
Change in Market 9i%e 6=s.7 6H1 0
H<7
D<<$<<<
ercentage Change 6@7 ? 6H1 0 H<78H<
I.>@
*n increase in the demand for aparticular product or service over time
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roblem1
,ro-lem $
Top 1< 2n#ia Mobile Jan#set Ven#ors G<1=evenues in Crores
<1101 <1<011 Market*rowth =ate
6@7
Market9hare @
:okia 11$I> 1$II9amsung K$EI1 >$K<Microma" 1$IKE $EI
'lackberry 1$DB< 1$I><Larbonn 1$K 1$<<D
JTC I D><9pice KI< I<* KE< 1EDJuawei K>< BB*Five BK< 1BTotal #/0/ 0#"/
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roblem1 0 9olution
,ro-lem $ 1 Solution
Top 1< 2n#ia Mobile Jan#set Ven#ors G <1=evenues in Crores
<1101 <1<011 Market *rowth=ate 6@7
Market 9hare @
:okia 11$I> 1$II 0E@ D1.E>@9amsung K$EI1 >$K< E@ K.BI@
Microma" 1$IKE $EI 01D@ B.ID@
'lackberry 1$DB< 1$I>< 0>@ >.1@
Larbonn 1$K 1$<<D @ D.BB@
JTC I D>< 1<>@ .D@
9pice KI< I< 01D@ .KK@
* KE< 1ED 0>K@ .KD@
Juawei K>< BB <@ .B@
*Five BK< 1B 0DI@ .>@
Total #/0/ 0#"/
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roblem 0 Market share an# MoM
*rowth @
Sales Figures
Nun1 May1 Market *rowth =ate6 @7
Market 9hare6@7
Maruti E$>1 EI$DKE2yundai <$D>< 1$K1<Mahindra 1I$>I <$BKTata 1K$DD <$><Toyota 1D$K<< 1>$><1Chevrolet K$>< B$<KIFord B$>K B$<B34 >$K< D$>BDSkoda D$I $E1
5issan D$1BK $1E2onda $BBK 1<$DFiat E<> 1<<
enault KEK DE2M1Mitsu-ishi K D>
Total $#06#67 #$#6"
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roblem 0 9olution
8un 9$ May 9$ Market &ro'thate ( )
Market Share()
8un $
Maruti E$>1 EI$DKE 0B.B>@ D.@
2yundai <$D>< 1$K1< 0.IK@ 1>.D<@
Mahindra 1I$>I <$BK 0B.BE@ I.KD@
Tata 1K$DD <$>< 01>.I<@ E.K@
Toyota 1D$K<< 1>$><1 0>.1K@ K.D@
Chevrolet K$>< B$<KI <.I1@ .K@
Ford B$>K B$<B .BB@ .1B@
34 >$K< D$>BD 1K.BB@ .K@
Skoda D$I $E1 K.I<@ .DI@
5issan D$1BK $1E .KI@ .11@2onda $BBK 1<$D 0KD.1I@ 1.>@
Fiat E<> 1<< 01I.BB@ <.D1@
enault KEK DE B.E@ <.D<@
2M1Mitsu-ishi K D> 0>.KB@ <.1D@
$#06#67 #$#6" $"".""
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Assignment
• Fin# Market 9i%e$ 9hare an# *rowthof
6 'iscuits &= Oetergents &= any otherpro#uct 7