L3 DIPLOMA IN TOURISM AND HOSPITALITY ESSENTIALS OF TOURISM AND HOSPITALITY OPERATIONS
STUDENT SUPPORT
Programme: L5 Diploma in Hospitality Management
Module: Strategic Marketing in the Tourism and Hospitality Section: 5. Revision Cards Date: JAN-2014
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Revision Cards This study resource is designed for multi-functional purposes to aid and assist students in enhancing their knowledge and preparing them for their final assessment. This booklet provides simplified revision notes to help students identify key areas in the syllabus and gain an understanding on them. Students can sift through the pages of our web based resource or take a print out and arrange a pocket size set of revision cards that can be reviewed whilst having meals, whilst travelling or just before the exam!
Table of contents 1.1 Evaluate the interface between sales and marketing 01
Contribute to the development of marketing and sales strategies in the tourism and hospitality industry
1.2 Offer contributions that meet strategic and operational objectives and priorities of a tourism and hospitality business 1.3 Identify sales and marketing targets and objectives that are realistic and relevant to the market 1.4 Assess international and cultural influences in the tourism and hospitality industry 2.1 Design marketing communications that appeal to a range of target customers
02
Optimise marketing communications in the tourism and hospitality industry
2.2 Optimise the use of a range of different media 2.3 Evaluate the effectiveness of marketing communications
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Table of contents 3.1 Identify gaps and areas of market saturation 03
Build strategic partnerships in the tourism and hospitality industry
3.1 3.2 Identify potential partners that are capable of furthering organisational objectives 3.2 3.3 Analyse the requirements of production, quality and distribution channels 3.3 3.4 Negotiate agreements that are consistent with organisational objectives, priorities and values 4.1 Characterise the market for new or adapted products and/or services
04
Develop new products and/or services (NPD) in hospitality or tourism
4.1 4.2 Generate and screen practicable ideas against agreed criteria through market testing 4.2 4.3 Clarify any intellectual property issues 4.3 4.4 Price product or service in accordance with pricing strategy 5.1 Identify potential business opportunities that are commensurate with strategic objectives from an analysis of emerging trends
05
Understand the purpose and components of an organisational business plan in the tourism and hospitality industry
5.1 5.2 Ensure the coherence of different functional priorities and plans 5.2 5.3 Explain the allocation of operational resources in line with strategic and operational priorities 5.3 5.4 Explain the consultation process relating to business planning
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01. Contribute to the development of marketing and sa les strategies in the tourism and hospitality industry 1.1 Evaluate the interface between sales and marketing The concept of marketing
The concept of sales
According to Philip Kotler, marketing is a system of activities designed to price, place (distribute) and promote products and services that satisfy the needs and wants of target customers/markets in order to achieve business objectives.
Kotler describes sales as the process of persuading customers to purchase the company’s product or service. In the strictest sense, sales can be considered part of promotion in the Four Ps which are:
The core difference between marketing and sales:
Functions of Marketing
◦
Product
◦
Price
◦
Place
◦
Promotion
Functions of Marketing cont.
Market information
Identifying the needs, wants and demands of the consumers and analyzing the information to make decisions for successful marketing of products and services
Market planning - This aims at achieving the marketing objectives by covering aspects of production levels, promotions and other action programmes. Exchange functions -This is about ensuring the offerings are available in sufficient quantities to meet customer demands.
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Product designing and development
This helps in making the product attractive to the target market.
Physical distribution
This function involves transporting and storing.
Standardisation and grading
This involves producing goods at predetermined specifications to ensure that product offerings meet established quality and quantity.
Financing
This involves providing credit for channel members or consumers.
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Risk-taking
Packaging, labeling and branding
Customer support
This refers to uncertainty about consumer purchase resulting from creation and marketing of goods and services that consumers may purchase in future.
Packaging involves designing the package for the product. Labeling means putting information specified on the product’s covering. Branding distinguishes the generic commodity name to a brand name.
It involves pre-sales counseling, after sales service, handling the customer complaints and adjustments, credit service, maintenance services and consumer information.
The Role of Marketing
The Role of Marketing continued
Component - B
Component - A
Marketing touches customers, prospects, and industry leaders. Marketing conducts interviews and gathers input from customers and prospects on feature requirements.
Component - C
Component - D
Marketing works with development to define requirements, plan products, and bring products to the market. Marketing must assure the delivery of a reliable and "complete" products.
Marketing trains the sales force on new products, manages the prospects, and industry analysts, performs win/loss analyses, and gathers input on customer and prospect requirements.
Marketing supports the Executive Team in developing business strategy by identifying market opportunities and generating and executing marketing strategies and plans that support attainment of business objectives.
General Marketing
Responsibilities
of
Understanding the economic and competitive features of a sector
Identifying target markets
Identifying segments within a target market
Developing new products
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L5 DIPLOMA IN HOSPITALITY MANAGEMENT STRATEGIC MARKETING IN THE TOURISM AND HOSPITALITY
Auditing customers’ brand experience Establishing environmental scanning for opportunities and threats Understanding an organisation’s strengths and weaknesses Creating a sustainable competitive advantage Understanding where a brand needs to be in the future
6
Relationship between Business, Marketing and Sales
Marketing and Sales as Part of the Value Chain Kotler and Keller (2006, 38) identified five key processes in the Porter (1985) value chain in which companies have to be excellent in order to outperform their competitors:
New offering realisation process
Market sensing process
New offering realisation process
Customer acquisition process
Customer
relationship
management
and
preparing
Sales is convincing the customer to buy and then exchanging the goods for money.
customers
them for the sales process.
Business is the activity of obtaining and selling goods on a continuing basis.
Market sensing process
This includes all activities related to information management, communicating new insights throughout all relevant parts of the chain.
process
Fulfilment management process
This consists of market research, development
Customer acquisition process and the customer relationship management process
and realising new products.
◦ ◦
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potential
Marketing is a subset of business and consists of the process of reaching
The processes of business, marketing and sales are interrelated.
These are both related to targeting and understanding the customer’s needs In order to be superior in these four processes marketing and sales need to interact properly
Fulfilment management process
This is not referring to the marketing and sales relationship but to the order, fulfilment and supply of the chain management process and therefore belongs to the primary activities.
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1.2 Offer contribution that meet strategic and operational objectives and priorities of a tourism and hospitality business
Market Profile
Importance of Market Profile
It is a set of characteristics that identify a target
It provides valuable market activity information that is not available elsewhere
It demonstrates how the profile can identify opportunities that are not easily visible
It identifies price value areas in any time frame
group of population or a market segment.
◦ ◦ ◦ ◦ ◦
Measurable Accessible by communication and distribution channels Different in its response to a marketing mix Durable Substantial enough to be profitable
Market segmentation
The division of market into different homogeneous groups of consumers is known as market segmentation
A market segment should be:
Consumer Market Segmentation
Demographic Segmentation is based on variables such as age, gender,
Geographic segmentation is based on regional variables such as region, climate, population density and population growth rate.
ethnicity,
education,
occupation,
income and family status.
Psychographic
Segmentation
is
based on variables such as values, attitudes and life styles.
Behavioral segmentation is based on variables such as usage rate and patterns, price sensitivity, brand loyalty and benefits sought.
Business Market Segmentation
Geographic segmentation is based on regional variables such as customer concentration, regional industrial growth rate and international macroeconomic factors.
Customer types are bases on factors such as the size of the organisation, its industry, position in the value chain, etc.
Buyer behaviours is based on factors such as loyalty to suppliers, usage, patterns and order size.
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Customer Profile
Customer Profiling
It is a description of a customer or set of customers that includes demographic, geographic, and psychographic characteristics, as well as buying, patterns, creditworthiness, and purchase history.
Demographic Profiling
Customer profiling is a process which offers
how
it
affects
preferences.
their
lifestyle
and
Understand untapped market potential
Manage the customer database
Improve target marketing
Build strong customer relationships
Manage credit portfolio and level of credit risks
Create more successful marketing campaigns
Acquire the most profitable kinds of prospects
Through this method, the organisation study the buying habits of people in order to determine what kind of products a particular customer requires.
Lifestyle Coding
Psychological profiling can be used to tell a lot about a person by understanding their psychological motivations.
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understanding of the target market.
Importance of Customer Profiling
what class a person belongs to and
Affinity Profiling
organisation to identify and gain a deeper
Demographic profiling is used to understand what kind of products click with a particular customer. It looks into various details such as geographical location, marital status, and educational qualifications of a person to figure out what the organisation can sell to them.
Cluster coding helps to understand
Customer Profiling Methods
more insight into the customers and to help the
Psychological Profiling
Cluster Coding
8
Lifestyle coding helps to understand the way a person leads their life by looking at their hobbies and habits.
Create
more
successful
marketing
campaigns
Acquire prospects
.
the
most
profitable
kinds
of
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1.3 Identify sales and marketing targets and objectives that are realistic and relevant to the market
Values in Business
Categories of Organisational Values
Values are qualities that define people, organizations and products / services at their most basic level. They establish a foundation onto which expectations and trust (or distrust), is built.
There are three categories from which an organisation’s value base is created
Organisational values
Physical Values
Organisational Values
Psychological Values
Psychological values
Communications of up, down, and sideways within the company, with customers and vendors Cooperation (teamwork) Standardisation Coordination between departments in terms of plans, activities, and systems.
Benefits of the Concept of Green Marketing
Encourages the marketers to develop energy
Strategies to Incorporate Green Marketing
efficient products.
Encourages the concept of sustainability.
Helps to save money in the long run.
Helps companies to develop innovative products
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Continuous Improvement Creativity Customer Delight Innovation Loyalty to and from suppliers, customers, and employees Respect for the individual
Adopt new technology/process or modify existing technology to reduce adverse environmental impact. Establish a management and control system to ensure adherence to stringent environmental safety norms.
Physical Values
Maximum utilisation of resources Orderliness/cleanliness Punctuality and timeliness Quality of products and services Reliability Responsiveness
The Concept of Green Marketing Green marketing is the marketing of products that are presumed to be environmentally safe.
Using more environment-friendly raw materials at the production stage itself.
Exploring possibilities of recycling the used products.
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The Concept of Fair Trade
Transactional Marketing
The Core of Transactional Marketing Price
A movement which strives for fair treatment for farmers. In a fair trade agreement, farmers, who in other situations might be more susceptible to the will of the purchaser, will negotiate with the purchasers in order to receive a fair price for their products.
It
Pricing -- Establishing a product price that will be profitable while still attractive to consumers. Placement -- Establishing an efficient distribution chain for the product. Promotion -- Creating a visible profile for the product that makes it appealing to customers.
Advantages and disadvantages transactional marketing:
Six Markets Framework in Relationship Marketing
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Internal Markets
Internal marketing maintains the relationships between employees in the organisation.
is
a strategy used
in
business
targeting customers in making "one
off"
or point of sale transactions.
of
Product -- Creating a product that meets consumer needs
Relationship Marketing Relationship marketing is a strategy designed to foster customer loyalty, interaction and long-term engagement.
Customer Markets
In this marketing, it maintains the relationship with customers.
Referral Marketing
It develops a plan for referral motivation and can be characterised based on the type of relationship.
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The transactional approach is based on the four traditional elements of marketing referred to as the four P's:
Recruitment Markets
It is a market-related task so that it maintains the relationship with educational institutions, labour unions and recruitment partners.
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Influence Marketing
Supplier Markets
The Importance of Relationship Marketing
This market consists of different types of sub-
This approach matched with the developments
markets
within the Supply Chain Management and
like
stockholders,
government
agencies and consumer associations.
deals
with
the
supplier
issues
in
the
organisation.
It will help prevent customers from turning to the competitors.
It promotes word-of-mouth marketing.
Company's value equity and retention equity can be improved by enhancing customer satisfaction.
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Network Marketing
Direct selling method in which independentagents serve as distributors of goods and services, and are encouraged to build and manage their own sales force by recruiting and training other independent agents.
Relationship marketing helps to understand the customers better. It is easier to make modifications that will please the customers and increase sales turnover. It helps reduce costs incurred from the research and development process.
Benefits of Network Marketing
Low investment Support and training Personal growth Passive income Low or no overhead Provides a good lifestyle
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1.4 Asses international and cultural influences in the tourism and hospitality industry
Environmental Influences on Marketing of Hospitality and Tourism Industry Environmental influences on International Marketing can be defined as the different forces of the external environment that impact on the international marketing, such as the PESTEL.
Economic factors in consumer choice
Government factors in consumer choice
Consumer laws
Deceptive and misleading advertising
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Political
Economic
Social and cultural
Ethical factors
Legal
Technological
Price discrimination
Ethics and marketing
Engaging in fair competition
General Influences on Marketing Hospitality and Tourism Industry
of
Factors affecting consumer choice Psychological factors in consumer choice Socio-cultural factors in consumer choice
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02. Optimise marketing communications in the tourism and hospitality industry 2.1 Design marketing communications that appeal to a range of target customers
Marketing Communication
Core importance of marketing communication:
Picton et al (2001) defines marketing communications as “all the promotional elements of the marketing mix which involve the communications between an organization and its target audiences on all matters that affect marketing performance.”
Inform
Persuade
Image creation
Reinforcement
The Aim of Marketing Communication Marketing communication has two principal aims: 1. To develop brand values by using advertising to set up feelings, to create visions and to improve beliefs.
2.
To make customers behave a
beneficial way in order to make then buy the product and use the service.
Factors affecting Communication 1.
Marketing
resistance in mass-market broadcasting.
Marketing Communication Strategies
Pushing the product through marketing channels to final consumers. Personal selling and trade promotion are emphasised.
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Changing Marketing Strategies
Fragmented market and more personalised marketing strategies.
Changing Consumers
The availability of information and increased
Push Strategy
2.
3.
Changes in Technology
E.g. Internet, mobile, Ipod, satellite and cable
Pull Strategy
Producers direct marketing activities directly to consumers to induce their demand for the product.
Advertising and promotion are emphasised.
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Factors
to
Consider
in
Marketing
Segmentation
Communication
◦
Determining
who
the
actual
and
Segmentation
Targeting
Positioning
Variables for Segmentation
Segmenting is the process of dividing the market into segments based on customer characteristics and needs.
The main activity segmenting consists of four sub-activities.
Targeting
potential customers are
◦
Identifying segments
◦
Analysing the intensity of competitors in
Target Market consists of a set of buyers who share common needs or characteristics that the company decided to serve.
the market ◦
Selecting
the
attractive
Target Market
customer
segments
Target Marketing
It is the process of developing measures of segment attractiveness for selecting target segments.
The four sub-activities within targeting are: 1. Defining the abilities of the company and resources needed to enter a market. 2. Analysing competitors on their resources and skills.
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3. Considering the company’s abilities compared to the competitors' abilities. 4. Deciding on the actual target markets.
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Targeting Approaches
Undifferentiated marketing
The company decides to develop a single
Differentiated marketing
Focused marketing
The development of different products and
The company does not aim to compete in the
marketing programmes for each segment of
majority of the market, but rather specialises in
the market.
one segment, or a small number of segments.
marketing mix for the whole market. .
. Positioning
The process of positioning includes two main actions;
“The act of designing the company’s offering and image to occupy a distinctive place in the mind of the target market.”
(Kotler - 2003)
•
Advertising:
Any paid
form
of
non-
Identifies the differential advantages in each segment, Decides on a different positioning concept for each of these segments.
•
Public relations and publicity: A variety of programmes designed to promote or protect a company’s image or its individual products.
•
Public relations and publicity: A variety of programs designed to promote or protect a company’s image or its individual products.
personal presentation and promotion of ideas, goods or services by an identified sponsor. •
Sales promotion: A variety of short-term incentives to encourage trial or purchase of a product or service
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Communication Mix The marketing communications mix consists of some combination of the following major modes of communication: advertising, sales promotion, events and experiences, public relations (PR) and publicity, direct marketing, interactive marketing, word-ofmouth communication, and personal selling.
•
•
Personal selling: Face-to-face interaction with one or more prospective purchasers for the purpose of making presentations, answering questions, and procuring orders. Direct and interactive marketing: Use of mail, telephone, fax, e-mails, or internet to communicate directly with or solicit response or dialogue from specific customers and prospects
L5 DIPLOMA IN HOSPITALITY MANAGEMENT STRATEGIC MARKETING IN THE TOURISM AND HOSPITALITY
Integrated Marketing Communication Integrated marketing communications (IMC) is a strategic business process that marketers use to plan, develop, execute and evaluate coordinated, measurable and persuasive brand communication programmes over time with targeted audiences.
Components of Integrated Marketing Communication 1.
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The
Importance
of
Integrated
Marketing
Integrated marketing communication scores over traditional ways of marketing as it focuses on not only winning new customers but also maintaining long term healthy relationships with them.
Integrated marketing communication saves time which is often lost in figuring out the best marketing tool.
Communication
Integrated marketing communication plays an integral role in communicating brand message to a larger audience. Integrated marketing communication goes a long way in creating brand awareness among customers at a minimal cost.
5.
Communication Tools
Integrated Marketing Strategy
6.
Promotional Tools
7.
Integration Tools
Integrated marketing strategy integrates relevant marketing tools to deliver similar messages to a larger audience.
The components of an integrated marketing strategy:
The Foundation
2. The Corporate Culture
3. Brand Focus 4. Consumer Experience 5. Communication Tools 1. Customer focus 6. Promotional Tools 2. Co-operation 7. Integration Tools 3. Database Communication 4. Leverage 5. Profitability
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Levels of Communication
Integrated
Marketing
Developing a Communication Plan
Communications plan is a framework that outlines the strategies for developing, implementing and controlling the firm’s communication activities.
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Main Components of the Communication Mix
•
Advertising: Any paid form of nonpersonal presentation and promotion of ideas, goods or services by an identified sponsor.
•
Sales promotion: A variety of short-term incentives to encourage trial or purchase of a product or service.
.
Public relations and publicity: A variety of programmes designed to promote or protect a company’s image or its individual products. Personal selling: Face-to-face interaction with one or more prospective purchasers for the purpose of making presentations, answering questions, and procuring orders.
Advantages and Disadvantages of the Main
•
•
Direct marketing: is the promotion of a product from the producer directly to the consumer or business user without the use of any type of channel members. Events and experiences are companysponsored activities and programmes designed to create daily or special brand interactions.
Interactive marketing refers to online activities and programmes designed to engage customers or prospects and directly or indirectly raise awareness, improve image, or elicit sales of products and services.
• Factors Influencing the Communication Mix
Promotional Methods
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Nature of the market
Nature of the product
Stage in the product life cycle
Price
Promotional budget
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2.2 Optimise the use of a range of different media
Media Marketing
Social Media Marketing
Media marketing is a relatively new concept used by businesses in developing an online community, which allows satisfied customers to congregate and extol the virtues of a particular brand.
Social Media Marketing Tools Hospitality and Tourism industry
for
Facebook, LinkedIn Twitter Google+, Pinterest
Provide Great Customer Service. Listen and respond to what your customers are saying about the organisation
Keep the Customers Coming Back. Build deeper relationships so customers will get to know, like, and trust the organisation.
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Social media generally refers to websites featuring user-generated content or material created by visitors rather than the website publishers.
•
Flickr
•
TweetDeck
•
HootSuite
•
YouTube
Social media marketing is the way to use that technology to build relationships, drive repeat business and attract new customers through friends sharing with friends.
Importance of Social Media Marketing
Spread the Word. Show customers and prospects what the business is and what can be done for them.
E-Marketing Email marketing is a process of sending email messages with the purpose of enhancing the relationship of a merchant with its current or previous customers, to encourage customer loyalty and repeat business.
Drive Sales. Give customers offers that are so good they will share them with their friends. Types of E-Marketing
Transactional Emails
The primary purpose of a transactional email is to convey information regarding the action that triggered it.
L5 DIPLOMA IN HOSPITALITY MANAGEMENT STRATEGIC MARKETING IN THE TOURISM AND HOSPITALITY
Direct Emails
Direct email involves sending an email solely to communicate a promotional message.
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Advantages of E-Marketing
Wider prospect reach Cost-effective approach Reduction in costs through automation and use of electronic media 24/7 marketing possibility Personalised one-on-one marketing Increased interactivity
Brand Identity
Brand Image
Brand image is the current view of the customers about a brand and it can be defined as a unique bundle of associations within the minds of target customers.
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Defining Brand
Brand identity is the aggregation of all an organisation does. It is an organisation’s mission, personality, promise to the consumers and competitive advantages.
Brand image develops and conveys the product’s character in a unique manner different from its competitor’s image.
The brand image consists of various associations in consumers’ mind – attributes and benefits.
It is a distinguishing symbol, mark, logo, name, word, sentence or a combination of these items that companies use to distinguish their product from others in the market.
A brand means different things to a consumer and a seller.
It is a means of identifying and distinguishing one organisation from another.
Brand identity leads to brand loyalty, brand preference, high credibility, good prices and good financial returns.
Brand Identity vs. Brand Image
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Branding
The process involved in creating a unique name and image for a product in the consumers’ mind, mainly through advertising campaigns with a consistent theme.
The Process of Branding
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Branding aims to establish a significant an differentiated presence in the market that attracts and retains loyal customers.
Benefits of Branding
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Core Objectives of Branding
Prepares the organisation for differentiation Memorability - A brand serves as a convenient container for reputation and goodwill Retention of customer Increase credibility of the business Increase familiarity
Delivers the message clearly Confirms the organisation’s credibility Connects the target prospects emotionally Motivates the buyer Concretes user loyalty
Loyalty - The brand identity helps to create and to anchor loyalty.
Premium image, premium price Branding can lift what the organisations’ sell out of the realm of a commodity
Greater company equity
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2.3 Evaluate the effectiveness of marketing communications
Market Positioning
An effort to influence consumer perception of a brand or product relative to the perception of competing brands or products
Its objective is to occupy a clear, unique, and advantageous position in the consumer's mind.
Core Concepts of Market Positioning
Essentials in Market Positioning
There are three types of positioning concepts:
Availability of adequate resources to occupy and sustain that position
Relevance of sticking with a particular positioning strategy
Perfect matching of the creative approach with the chosen positioning strategy
Common Errors in Market Positioning
Under positioning
This is a scenario in which the customer’s have a blurred and unclear idea of the brand
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Market Positioning Strategies 1.
Leveraging on existing brands' strategy
2.
Corporate brand positioning strategy
3.
Product features and benefits positioning strategy
4.
Price-quality positioning strategy
5.
Over positioning
This is a scenario in which the customers have too limited awareness of the brand
5.
Gather from the market the current position of the brand or product or service in the target consumer's mind. Clear thoughts on the achievement of the desired position in the market The competitors to be dealt with while establishing that position
Competitive positioning strategy 6
User positioning strategy
7. strategy
Product category positioning
Double positioning
This is a scenario in which customers do not accept the claims of a brand
Confused positioning
This is a scenario in which the customers have a confused opinions of the brand.
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Unique Selling Proposition A unique selling proposition (USP) is a description of the qualities that are unique to a particular product or service and that differentiate it in a way which will make customers purchase it rather than its rivals.
Methods for Obtaining a Unique Selling Proposition in the Hospitality and Tourism Industry
By offering the lowest price
By offering the highest quality
By being exclusive
Examples of Unique Selling Proposition
Avis’ “We’re only number two. We try harder” campaign.
Domino’s “30 minutes or it’s free” promise.
FedEx’s “When it absolutely, positively has to be there overnight.”
Southwest’s claim to be the lowest-priced airline.
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Unique - It clearly sets an organisation apart from the competition, positioning the organisation as the more logical choice. Selling - It persuades another to exchange money for a product or service. Proposition - It is a proposal or offer suggested for acceptance.
By offering the best customer service
By offering the widest choice
By giving the best guarantee
Market Penetration
It is a measure of the amount of sales or adoption of a product or service compared to the total theoretical market for that product or service.
This strategy involves selling more to current customers and to new customers who can be thought of as being in the same marketplace.
Examples of Unique Selling Proposition
Avis’ “We’re only number two. We try harder” campaign. Domino’s “30 minutes or it’s free” promise. FedEx’s “When it absolutely, positively has to be there overnight.” Southwest’s claim to be the lowest-priced airline.
Process of Unique Selling Proposition
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Market Penetration Methods
Increase present customers’ rate of use; ◦ ◦ ◦
Increasing the size of purchase Maximising the rate of product obsolescence Finding new uses for your product
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Attracting the competitors’ customers
Attract non-users to buy your products
Importance of Market Penetration Methods
Understanding risk and growth Understand the value of incremental sales Increasing market share Increasing usage Creating barriers to entry
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03. Build strategic partnerships in the tourism and hospitality industry 3.1 Identify gaps and areas of market situation
New Product Development
The Core of New Product Development
The development of original products, product
product-
Product development is a specialised activity. It is done to improve the existing product or to introduce a new product in the market. It is also done to improve the earlier features or techniques or systems.
Product
Importance of New Product Development
improvements, product modifications, and new brands
through
the
firm's
own
development efforts.
Main
Functions
of
New
Development
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Consumer "needs and wants" continuously change. Products reach the end of its Product Life Cycle Product is at The Maturity Stage of its Product Life Cycle Environmental changes Competitors may force change. All Products Experiencing Problems
The Process of New Product Development
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3.2 Identify potential partners that are capable of furthering organisational objectives
Strategic Analysis
Main Strategic Analysis Techniques
SWOT Analysis
It is the process of conducting research on the
SWOT analysis
A SWOT analysis is a simple but widely used
business
an
PEST analysis
tool that helps in understanding the strengths,
organisation operates and on the organisation
Porter’s five forces analysis
weaknesses,
Four corner’s analysis
Value chain analysis
environment
within
which
itself, in order to formulate strategy.
SWOT Analysis Diagram
Porter’s Five Forces Analysis This
model
identifies
and
analyses
5
competitive forces that shape every industry, and helps determine an industry's weaknesses and strengths.
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threats
Key Components of PEST Analysis
PEST analysis is a scan of the external macro-environment in which an organisation exists. It is a useful tool for understanding the political, economic, socio-cultural and technological environment that an organisation operates in.
Components Analysis
and
involved in a project or business activity.
PEST Analysis
opportunities
of
Porter’s
Five
Forces
1. Political factors 2. Economic factors 3. Social factors 4. Technological factors
Analysing the Five Competitive Forces:
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Competitor Analysis
Threat of new entrance
Rivalry refers to the competitive struggle for market share between firms in an industry.
Potential competitors refer to the firms which are
Bargaining power of suppliers ◦
potential of the suppliers to increase the prices of inputs (labour, raw materials, services, etc.) or the costs of industry in other ways.
Business' direct competitors
Regulatory sources
Indirect competitors
Social and technological changes
◦
Threat of substitutes
Substitute products refer to the products having the ability to satisfy customers’ needs effectively. Substitutes pose a ceiling on the potential returns by setting a limit on the price that firms can charge for their product in an industry.
Four Corner’s Analysis
down the prices charged by the firms in the
The four corner’s analysis is a useful tool
Competitive Environment in the Hospitality Industry
A competitive environment encompasses all the external factors that compete with the services or products of the small business.
Elements in a competitive environment:
Importance of Four Corner’s Analysis
To develop a profile of the likely strategy changes a competitor might make and how successful they may be.
To determine each competitor’s probable response to the range of feasible strategic moves other competitors might make.
for analysing competitors.
It emphasises that the objective of competitive analysis should always be on generating insights into the future.
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This refers to the potential of buyers to bargain
demanding better quality and service of product.
the potential to do so if given a choice.
Bargaining power of the suppliers refer to the
Bargaining power of buyers
industry or to increase the firms cost by
not currently competing in the industry but have
Rivalry among current competitors
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Components of Four Corner’s Analysis
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Value Chain Analysis It is a high-level model of how businesses receive raw materials as input, add value to the raw materials through various processes, and sell finished products to customers.
Three Steps for Conducting Value Chain Analysis
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3.3 Analyse the requirements of production, quality and distribution channels
Objectives
More
precise
Importance of Creating Objectives
and
ideally
quantifiable
statements of the organisation’s goals over
Developing objectives helps the organisation create specific and feasible ways in which to carry out the mission. Completed objectives can serve as a marker to show members of the organisation, funders, and the greater community what the organisation’s initiative has accomplished.
some period of time.
Long Term Objectives
Time specific – state a time by which they
Smart Objectives
of
an
organisation,
intended to be achieved over a period of five years or more.
Short Term Objectives
Importance of Short Term Objectives
The Incremental goals and benchmarks meant to aid in accomplishing the longterm objectives of an organisation and which can be used to measure the effectiveness of the methods employed to accomplish the longterm objectives and the progress toward attaining those objectives.
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Visualises
an
immediate
target,
Flexible Measurable Motivating Suitable Understandable
The Process of Setting Objectives which
motivates all to reach the goal.
Rewards and generates excitement.
Creates a feeling of immense satisfaction and thrill of achieving a goal.
Specific – stating clearly what is trying to be achieved. Measurable – capable of numeric measurement. Achievable – attainable by the people involved. Realistic – able to be achieved given the resources available. Time specific – state a time by which they should be achieved
Qualities of Long Term Objectives
should be achieved.
Performance goals
Prepares to face the next hurdle on the way to the ultimate goal.
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Market Constraints Element, factor,
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Main Types of Constraints or subsystem that works as
Equipment
an entity, project,
People
or system such as a manufacturing or decision
Policy
a bottleneck.
It
restricts
Typical Constraints in Hospitality industry 1. The size of the market 2. The nature of demand in the market
making process from achieving its potential or
3. The availability of supply
higher level of output with reference to its goal
5 The availability of finance
4. The nature of the competition
Production and Resource Requirements
The Five Focusing Steps of Constraints
Production consists of all those processes
6 The quality and skills of employees
which involve converting inputs into finished 7 The quality of direction and
outputs that can be sold in the marketplace.
management
Key Resources Required for Production
Raw materials
Management and labour
Machinery
Climate
Finance
Quality
Quality in Hospitality and Tourism Quality in the hospitality industry is defined as
Quality
is
the
totality
of
features
and
characteristics of a product or service that bear
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on its ability to satisfy stated or implied needs. Kotler and Armstrong ( 2001)
“the consistent delivery of products and guest services according to expected standards”.
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Components of Quality in the Hospitality
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Quality Management
Importance of Quality Management
Industry
Consider the guests being served Determine what the guests desire Develop procedures to deliver what guests want Train and empower staff
The act of overseeing all activities and tasks needed to maintain a desired level of excellence. This includes creating and implementing quality planning and assurance, as well as quality control and quality improvement.
Implement revised systems goal
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Ensures superior quality of product and services. It is essential for customer satisfaction which eventually leads to customer loyalty. Helps organisations to reduce waste and inventory.
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3.4 Negotiate agreements that are consistent with organisational objectives, priorities and values
Distribution
Distribution/Marketing Channel
Importance of Distribution Channels
The movement of goods and services from the source through a distribution channel, right up to the final customer, consumer, or user, and the movement of payment in the opposite direction, right up to the original producer or supplier.
The path through which goods and services travel from the vendor to the consumer or payments for those products travel from the consumer to the vendor.
Benefits of Distribution Channels
Main Types of Marketing Channels
1. 2. 3. 4. 5.
Conventional Channel or Non- Integrated Channel
Information Promotion Contact Matching Negotiating
9. Strategic Alliances
•
towards common objectives.
2. Horizontal channel
Potential Challenges of Strategic Alliances
Access to supplementary services
Choosing the right partner
Opportunity to reach new markets
Building a mutually beneficial alliance
Increased brand awareness
Upholding trust and honesty
Access to new customer base
Knowing when to reassess the alliance
more independent firms
to work together
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channels
Manufacturer to consumer Manufacturer to retailer to consumer Manufacturer to wholesaler to retailer to consumer
Benefits of Strategic Alliances
It is an agreement for cooperation among or
Integrated Channel or Non conventional
1. Vertical channel • •
6. Physical distribution 7. Financing 8.
two
Intermediaries can provide economies by reducing the amount of work that must be done by both producers and consumers. Intermediaries transform the assortments of products made by producers into the assortments wanted by consumers.
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Joint Ventures Joint ventures are domestic or international enterprises involving two or more companies joining temporarily to undertake a particular project.
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Main Types of Joint Ventures
Unincorporated Joint Ventures
Incorporated Joint Ventures
Unit Trust Joint Ventures
The Risks of Joint Ventures
Partnerships
It is a type of business organisation in which
The objectives of the venture are not totally clear and communicated to everyone involved The partners have different objectives for the joint venture The partners don't provide sufficient leadership and support in the early stages
Advantages of Partnerships 1. Simplicity in formation 2. Simplicity in dissolution 3. Sufficient capital 4. Skilled workers
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Advantages of Joint Ventures
Access to new markets distribution networks
Increased capacity
Sharing of risks and costs with a partner
and
Structural Diagram of Partnerships
two or more individuals pool money, skills, and other resources, and share profit and loss in accordance with terms of the partnership agreement.
Disadvantages of Partnerships
Service Level Agreements
1. Unlimited liability
It
2. Limited life of firm
provider and
is
a
contract between a customer,
it
a service details
the
nature, quality, and scope of the service to be 3. Limited capital 4. Limited abilities
provided.
It
level contract.
is
also called
service
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Elements of an Service Level Agreements
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Negotiation
Negotiation Strategies
Definition of services
It is a strategic discussion that resolves an
Reaction time and availability
issue in a
find
overall approach used throughout the
Performance
acceptable. In a negotiation, each party tries
negotiation, a tactic is particular
Problem management
to persuade the other to agree with his or her
action used at a specific time during
Reporting
point of view.
the negotiation to serve a more limited
way that
both parties
Whereas a strategy provides the
role or purpose.
Strategy is the overall approach for conducting the negotiation.
Tactics are particular actions used to implement a strategy.
Extrinsic Rewards Extrinsic rewards are those external things
Negotiation Strategies
Avoidance strategies
A reward is an appetitive stimulus given to a
Competitive strategies
human or some other animal to alter its
Collaborative strategies
behaviour.
Accommodative strategies
Intrinsic Rewards
productivity.
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Incentive Plans
These are internal to the individual and are in many ways less tangible.
Financial rewards paid to workers whose
They are highly subjective.
standard.
that managers provide that may serve as incentives for employees to increase their
Rewards
production
exceeds
a
pre-determined
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Individual Incentive Plans
Piecework plans
Merit pay
Incentives for professional employees
Recognition based awards
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Organisation Wide Variable Pay Plans
Building an Effective Incentive Plan
Profit-sharing plans
Employee stock ownership plan (ESOP)
Gain-sharing plans
Ask: Is effort clearly instrumental in obtaining the reward? Link the incentive with your strategy. Make sure effort and rewards are directly related. Make the plan easy for employees to understand.
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04. Develop new products and/or services (NPD) in hospitality or tourism 4.1 Characterise the market for new or adapted products and/or services
Product
Product Life
Product Life Cycle
A good, idea, method, information, object or
The useful life of a product is the age beyond
service created as a result of a process and
which
serves a need or satisfies a want.
unsuitable for further use due to its inability
A new product progresses through a sequence of stages from introduction to growth, maturity, and decline. This sequence is known as the Product Life Cycle and is associated with changes in the marketing situation, thus impacting the marketing strategy and the marketing mix.
the
product
is
deemed
to
be
to perform satisfactorily.
Stages in Product Life Cycle
Introduction Stage In the introduction stage, the firm seeks to build product awareness and develop a market for the product.
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Introduction stage
Growth stage
Maturity stage
Decline stage
Growth Stage
Maturity Stage
In the growth stage, the firm seeks to build
At maturity, the strong growth in sales
brand
diminishes. Competition may appear with
share.
preference
and
increase
market
similar products.
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Decline Stage As sales decline, the firm has several options:
Maintain the product, possibly rejuvenating it by adding new features and finding new uses. Harvest the product - reduce costs and continue to offer it, possibly to a loyal niche segment.
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4.2 Generate and screen practicable ideas against agreed criteria through market testing
New Product
Reasons for New Products
Types of New Products
A new product concept as defined by (Crawford and Benedetto, 2003), is “a statement about anticipated product features (form or technology) that will yield selected benefits relative to other products or problem solutions already available”.
Create a differential advantage (product differentiation)
1. New-to-the-world products
Support continued growth for the manufacturer
2. New category entries (new product lines) 3. Addition to product lines: Products that are line extensions
Capitalise on technological breakthroughs 4. Product improvements: Current product made better
New Product Development
New Product Development Process
“A disciplined and defined set of tasks and steps that describe the normal means by which
a
company
repetitively
converts
embryonic ideas into saleable products or services.” Belliveau et al., 2002).
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5.
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4.3 Clarify any intellectual property issues
Intellectual Property
Common Types of Intellectual Property
Intellectual property (IP) is a legal concept
Patent
A patent grants an inventor exclusive rights to make, use, sell, and import an invention for a limited period of time, in exchange for the public disclosure of the invention.
.
Trademarks
A trademark is a recognisable sign, design or expression
which
identifies
products
or
services of a particular source from those of others.
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Copyright
A copyright gives the creator of an original work exclusive rights to it, usually for a limited
which refers to creations of the mind for which exclusive rights are recognised.
Industrial Design rights
An industrial design right protects the visual design of objects that are not purely utilitarian. An industrial design consists of the creation of a shape, configuration or composition of pattern or colour, or combination of pattern and colour in three dimensional form containing aesthetic value.
time. Copyright may apply to a wide range of creative, intellectual, or artistic forms, or works.
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4.4 Price product or service in accordance with pricing strategy
Product Pricing
Considerations in New Product Pricing
A method of determining product costs
Costs
whereby a business sets a low cost for its
Price sensitivity
Competition
Product lifecycle
most basic product and then profits from selling more costly accessories. .
Cost-Based Pricing
Marketers begin the process of cost-based pricing by totalling all costs associated with
Economic Theory
It says market price will be set at the point at which the amount of a product desired at a given price is equal to the amount suppliers will provide at that equilibrium price where the amount demanded and the amount supplied are in equilibrium.
Pricing Strategies
Penetration Pricing
Skimming Pricing
Penetration pricing, involves pricing the product relatively low compared to similar goods in the hope that it will secure wide market acceptance that will allow the company to raise its price.
The inputs used are the size of the industry,
offering an item in the market, including
Skimming pricing involves setting the price of the product relatively high
production, transportation, distribution, and
compared to similar goods and then
marketing expenses.
Premium Pricing
Price Determination
gradually lowering it.
Forecasting Revenue
the expected growth rate, the market share of
Premium pricing is the practice of keeping the
Top Down Approach
the company and the expect growth rate of the
price of a product or service artificially high in order to encourage favourable perceptions among buyers, based solely on the price.
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company’s market share.
A top down approach starts with a macro view of the industry and refines the inputs to estimate revenues.
The advantage of this method is that it can be done more quickly as there are fewer figures to deal with.
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Bottom-Up Approach
Impact of New Products on Portfolio
New products strengthen the existing product portfolio if there are declining products
It enables the organisation to gain competitive advantage over the weak products and services in the range.
A bottom-up approach starts with a micro view of the business that is built up to estimate revenues. The inputs required include revenue drivers such as average sales size, average sales per customer and growth drivers such as the expected expansion of customers.
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05. Understand the purpose and components of an organisationa l business plan in the tourism and hospitality industry 5.1 Identify potential business opportunities that are commensurate with strategic objectives from an analysis of emerging trends Strategic environment
Components of Strategic Environment
It consists of all forces and institutions external to the organisation, which influence the organisation's capability to increase. The organisation has to sustain timely, relevant and suitable adaptation to these factors to successfully carry out business operations.
Key External Forces External forces can be divided into following broad categories as PESTEL;
.
Importance of PESTEL Analysis in the
Political Environmental Variables that
Hospitality Industry
Affect the Hospitality Industry
It helps to spot business or personal opportunities It gives the firm advanced warning of significant threats It reveals the direction of change within the business environment Importance of Technological Environment in the Hospitality
Government regulations or deregulations Changes in tax laws Government fiscal and monetary policy changes Environmental protection laws
Legal Environment of Hospitality Business Legal factors include
Business
They can determine barriers to entry
Identifies minimum production level
Influences CTH © Copyright JAN-2013
efficient
outsourcing decisions
Discrimination law Consumer law Antitrust law Employment law Health and safety law
Key Economic Variables that Affect Restaurant Business
Level of disposable income
Propensity of people to spend on food
Interest rates
Inflation rates Components of the Micro Environment
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The Micro-Environment
Company’s internal environment functional areas such as top management, finance and manufacturing, etc. Suppliers - provide the resources needed to produce goods and services.
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The Micro-Environment
The Competitor Analysis
Competitor analysis begins with identifying
.
Customers - five types of markets that purchase a company’s goods and services Competitors - those who serve a target market with similar products and services Public - any group that perceives itself having an interest in a company’s ability to achieve its objectives
present as well as potential competitors.
Importance of the Competitor Analysis
To study the market
To predict and forecast organisation’s demand and supply
To formulate strategy
To increase the market share
To study the market trend and pattern
Near External Environment/Competitor Analysis Technique
According to Porter, the nature of competition in any industry is personified in the following five forces;
Threat of New Entrance
Rivalry Among Current Competitors
Bargaining Power of Buyers
Potential competitors refer to the firms which
Rivalry refers to the competitive struggle for
This refers to the potential of buyers to bargain
are not currently competing in the industry but
market share between firms in an industry.
down the prices charged by the firms in the
have the potential to do so if given a choice.
industry or to increase the firms cost by demanding product.
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better
quality
and
service
of
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Bargaining Power of Suppliers
Threat of Substitutes
Trend Analysis
Bargaining power of the suppliers refer to the
Substitute products refer to the products
It is a method of time series data information
potential of the suppliers to increase the
having ability to satisfying customers’ needs
in sequence over time analysis involving
prices of inputs (labour, raw materials,
effectively.
comparison of the same item such as monthly
services, etc) or the costs of industry in other
sales revenue figures over a significantly long
ways.
Importance of Trend Analysis
period.
Time Series Analysis
Trend analysis is important when examining a firm's financial statements, because financial analysts can see how company assets have grown overtime.
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It is an ordered sequence of values of a variable at equally spaced time intervals.
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5.2 Ensure the coherence of different functional priorities and plans
Stakeholder A person, group or organisation that has interest or concern in an organisation
Internal and External Stakeholders
External Stakeholder
A party such as a customer, supplier, or .
lender that influences and is influenced by an organisation but is not a member of it.
Main Types of Stakeholders
Primary Stakeholders
Internal stakeholders are those that engage in
Secondary Stakeholders
Internal Stakeholder
Individuals who reside inside the company as board members, executives, managers, employees, and trade unions and who benefit directly from their contributions to the growth of the company.
Stakeholder Identification
External stakeholders are those who although they do not engage in direct economic exchange with the business - are affected by or can affect its actions.
economic transactions with the business
Stakeholders and Their Concerns
Factors Affecting Power and Interest
Importance of Analysing Stakeholders
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Stakeholders' interests Mechanisms to influence other stakeholders Potential risks Key people to be informed about the project during the execution phase
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Corporate Objectives
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Hierarchy of Objectives
Purpose of Corporate Objectives
A well defined and realistic goal set by a company that often influences its internal strategic decisions
Provide strategic focus
Measure performance of the firm as a whole
.
Inform decision-making
Set the scene for more detailed functional objectives
Key Areas of Corporate Objectives Primary
Key Types of Operational Objectives
Operational Objectives
An operational or operating objective is a short-term goal whose attainment moves an organisation towards achieving strategic or long-term goals.
Internal Influences on Operational Objectives
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External Influences Objectives
on
Operational
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5.3 Explain the allocation of operational resources in line with strategic and operational priorities
Resource Allocation Resource allocation is used to assign the
Allocating Resources
Human: experiences, skills, knowledge and competencies
Types of Resources
available resources in an economic way. .
brand
names,
patents,
reputation, trademarks, copyrights and Financial: debt, equity and retained
databases
earnings
Intangible:
Physical: buildings, equipment and raw materials
Allocating Resources: Scheduling
Schedules
Plans that allocate resources by detailing what activities have to be done, the order in which they are to be completed, who is to do each, and when they are to be completed. Allocating Resources: Analysis (cont’d)
Linear Programming
A technique that seeks to solve resource allocation problems using the proportional relationships between two variables.
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Allocating Resources: Analysis Program (PERT)
Evaluation
and
Review
Technique
A flow chart diagram that depicts the sequence of activities needed to complete a project and the time or costs associated with each activity.
◦
Events: endpoints for completion
◦
Activities: time required for each activity
◦
Critical path: the path (ordering) of activities that allows all tasks to be completed with the least slack time
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5.4 Explain the consultation process relating to business planning
Business/Management Consultation
Role of Business/Management Consultation
Management consulting is the practice of helping
organisations
to
improve
their
performance, primarily through the analysis of existing organisational problems and development of plans for improvement.
Process of Business/Management .
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Consultation
Research and analyse basic and complex issues surrounding the processes and systems of an organisation.
Makes recommendations surrounding improving processes, efficiency and practices. Process of Business/Management Consultation
Business/Management Consultant’s Role
Accounting and financial planning
Marketing advice and materials
Solving pressing problems