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FAM Introduction

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Page 1: FAM Introduction

7/26/2019 FAM Introduction

http://slidepdf.com/reader/full/fam-introduction 1/16

Ch1. Financial Aspect of Marketing

Page 2: 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