Let us look at some of the components of IMC
1. The Foundation
As the name suggests, foundation stage involves detailed analysis of both the product as well as target market. It is essential for marketers to understand the brand, its offerings and end-users. You need to know the needs, attitudes and expectations of the target customers. Keep a close watch on competitor’s activities.
2. The Corporate Culture
The features of products and services ought to be in line with the work culture of the organization. Every organization has a vision and it’s important for the marketers to keep in mind the same before designing products and services. Let us understand it with the help of an example.
Organization A‘s vision is to promote green and clean world. Naturally its products need to be ecofriendly and biodegradable, in lines with the vision of the organization.
3. Brand Focus
Brand Focus represents the corporate identity of the brand.
4. Consumer Experience
Marketers need to focus on consumer experience which refers to what the customers feel about the product. A consumer is likely to pick up a product which has good packaging and looks attractive. Products need to meet and exceed customer expectations.
5. Communication Tools
Communication tools include various modes of promoting a particular brand such as advertising, direct selling, promoting through social media such as facebook, twitter, orkut and so on.
6. Promotional Tools
7. Integration Tools
Organizations need to keep a regular track on customer feedbacks and reviews. You need to have specific software like customer relationship management (CRM) which helps in measuring the effectiveness of various integrated marketing communications tools.
During the 1980s, many companies came to see the need for more of a strategic integration of their promotional tools. These firms began moving toward the process of integrated marketing communications (IMC), which involves coordinating the various promotional elements and other marketing activities that communicate with a firm’s customers.
IMC is the coordination and integration of all marketing communication tools, avenues, functions and sources within a company into a seamless program that maximizes the impact on consumers and other end users at a minimal cost.
- Process for managing customer relationships that drive brand value
- Its foundation is communication
- Cross-functional process for creating and nourishing profitable relationships with customers other stakeholders by strategically controlling or influencing all messages sent to these groups and encouraging data-driven, purposeful dialog with them.
Integrated marketing communications (IMC) is the coordination and integration of all marketing communication tools, avenues, and sources within a company into a seamless program that maximizes the impact on consumers and other end users at a minimal cost. This integration affects all firm’s business-to-business, marketing channel, customer focused, and internally directed communications.
A task force from the American Association of Advertising Agencies (the “4As”) developed one of the first definitions of integrated marketing communications:
A concept of marketing communications planning that recognizes the added value of a comprehensive plan that evaluates the strategic roles of a variety of communication disciplines — for example, general advertising, direct response, sales promotion, and public relations — and combines these disciplines to provide clarity, consistency, and maximum communications impact.
Comparison of Traditional versus IMC perspectives
|Traditional Marketing Communications||Integrated Marketing Communications|
|Separate functions: fragmentation||Integrated into one strategy: synergy|
|Starts with organization (goals, products)||Customer orientated|
|Fragmented communication programmes||Consistent communication programmes|
|Shorter-term objectives||Relationship/brand building objectives|
|Mass audiences||Targeted to stakeholder segments|
The integrated marketing communications approach seeks to have a company’s entire marketing and promotional activities project a consistent, unified image to the marketplace. It calls for a centralized messaging function so that everything a company says and does communicates a common theme and positioning.
To understand the relationship of advertising and integrated marketing communication is to think of a marketing communication as a pyramid made out of playing cards. Advertising, sales promotion, public relation, direct marketing, digital marketing and viral communication, are the cards which contributes towards making of pyramid. A well balanced communication will always require all to work together in sync so as right and clear messages are delivered. Hence when strategizing a plan, think integrated marketing communication as everything that an organization does to facilitate dialog between company and consumer.
Advertising is means of mass communication reaching the masses. It is a non-personal communication because it is addressed to masses.
Advertising informs the buyers about the benefits they would get when they purchase a particular product. However, the information given should be complete and true.
The advertiser expects to create a favorable attitude which will lead to favorable actions. Any advertising process attempts at converting the prospects into customers. It is thus an indirect salesmanship and essentially a persuasion technique.
4. Profit Maximisation
True advertising does not attempt at maximising profits by increasing the cost but by promoting the sales. This way It won‟t lead to increase the price of the product. Thus, it has a higher sales approach rather than the higher-cost approach.
5. Non-Personal Presentation
Salesmanship is personal selling whereas advertising is non-personal in character. Advertising is not meant for anyone individual but for all. There is absence of personal appeal in advertising.
6. Identified Sponsor
A sponsor may be an individual or a firm who pays for the advertisement. The name of reputed company may increase sale or products. The product gets good market because of its identity with the reputed corporate body.
7. Consumer Choice
Advertising facilitates consumer choice. It enables consumers to purchase goods as per their budget requirement and choice. Right choice makes consumer happy and satisfied.
8. Art, Science and Profession
Advertising is an art because it represents a field of creativity. Advertising is a science because it has a body of organised knowledge. Advertising is profession is now treated as a profession with its professional bodies and code of conduct for members.
9. Element of Marking Mix
Advertising is an important element of promotion mix. Advertising has proved to be of great utility to sell goods and services. Large manufactures spend crores of rupees on advertising.
10. Element of Creativity
A good advertising campaign involves lot of creativity and imagination. When the message of the advertiser matches the expectations of consumers, such creativity makes way for successful campaign.
Strategy is not just for top executives, middle and lower level managers too must be involved in strategic-planning process to the extent possible. In most of the organizations there are three levels of strategies: corporate, business and functional levels.
1. Corporate Level Strategy
Corporate level strategy is fundamentally concerned with the selection of businesses that the organization should compete and with the development and coordination of that portfolio of business. It includes all the objectives and scope of the organization to satisfy stakeholder’s expectation. It is an essential level since it is to a great extent affected by investors in the business and acts to guide strategic decisions across the enterprise.
2. Business Unit Level Strategy
It is responsible for how a business competes successfully and beating rivals in its particular market. At this level competitive strategy is usually formulated. These are strategic decisions on the choice of products, satisfying customer needs, gain an advantage over competitors, exploiting or creating new opportunities, etc.
3. Functional Strategy (Departmental Level or Operational Strategy)
It focuses on how every part of business is organized to present the corporate and also business-unit level strategic path. Strategy of the functional areas like marketing, financial, productive and human resources are based on the functional capabilities of an organization. For each functional area, first major sub-areas are identified and then for each of these sub functional areas, functional content strategies, important factors, and its importance in the process of implementing the strategy is identified.
In an organization there are burst of high performance and then there is a lull, most of the companies can manage short-term bursts of high performance, but only a few can sustain it over a longer period of time. In order to be successful in the long-run organizations should not only be able to execute their plans, but also adapt those activities to satisfy new and market changes.
Strategic management allows an organization to be more proactive than reactive in shaping its own future; it allows an organization to initiate and influence (rather than just respond to) activities—and thus to exert control over its own destiny. Small business owners, chief executive officers, presidents, and managers of many for-profit and nonprofit organizations have recognized and realized the benefits of strategic management.
Strategic management enhances the problem-prevention capabilities of organizations because it promotes interaction among manager’s at all divisional and functional levels. Interaction can enable firms to turn on their managers and employees by nurturing them, sharing organizational objectives with them, empowering them to help improve the product or service, and recognizing their contributions.
A survey of nearly 50 corporations in a variety of countries and industries found the three most highly rated benefits of strategic management to be:
- Clearer sense of strategic vision for the firm.
- Sharper focus on what is strategically important.
- Improved understanding of a rapidly changing environment
Historically, the principal benefit of strategic management has been to help organizations formulate better strategies through the use of a more systematic, logical, and rational approach to strategic choice. This certainly continues to be a major benefit of strategic management, but research studies now indicate that the process, rather than the decision or document, is the more important contribution of strategic management.
Communication is a key to successful strategic management. Through involvement in the process, in other words, through dialogue and participation, managers and employees become committed to supporting the organization.
Greenley stated that strategic management offers the following benefits:
- It allows for identification, prioritization, and exploitation of opportunities.
- It provides an objective view of management problems.
- It represents a framework for improved coordination and control of activities.
- It minimizes the effects of adverse conditions and changes.
- It allows major decisions to better support established objectives.
- It allows more effective allocation of time and resources to identified opportunities.
- It allows fewer resources and less time to be devoted to correcting erroneous or ad hoc decisions.
- It creates a framework for internal communication among personnel.
- It helps integrate the behavior of individuals into a total effort.
- It provides a basis for clarifying individual responsibilities.
- It encourages forward thinking.
- It provides a cooperative, integrated, and enthusiastic approach to tackling problems and opportunities.
- It encourages a favorable attitude toward change.
- It gives a degree of discipline and formality to the management of a business
Strategy implementation is “the process of allocating resources to support the chosen strategies”. This process includes the various management activities that are necessary to put strategy in motion, institute strategic controls that monitor progress, and ultimately achieve organizational goals.
According to Steiner, “the implementation process covers the entire managerial activities including such matters as motivation, compensation, management appraisal, and control processes”.
Based on the above definitions, we can understand the nature of strategy. A few aspects regarding nature of strategy are as follows:
- Strategy is a major course of action through which an organization relates itself to its environment particularly the external factors to facilitate all actions involved in meeting the objectives of the organization.
- Strategy is the blend of internal and external factors. To meet the opportunities and threats provided by the external factors, internal factors are matched with them.
- Strategy is the combination of actions aimed to meet a particular condition, to solve certain problems or to achieve a desirable end. The actions are different for different situations.
- Due to its dependence on environmental variables, strategy may involve a contradictory action. An organization may take contradictory actions either simultaneously or with a gap of time. For example, a firm is engaged in closing down of some of its business and at the same time expanding some.
- Strategy is future oriented. Strategic actions are required for new situations which have not arisen before in the past.
- Strategy requires some systems and norms for its efficient adoption in any organization.
Strategy provides overall framework for guiding enterprise thinking and action. The purpose of strategy is to determine and communicate a picture of enterprise through a system of major objectives and policies. Strategy is concerned with a unified direction and efficient allocation of an organization’s resources. A well-made strategy guides managerial action and thought. It provides an integrated approach for the organization and aids in meeting the challenges posed by environment.
The implementation of organization strategy involves the application of the management process to obtain the desired results. Particularly, strategy implementation includes designing the organization’s structure, allocating resources, developing information and decision process, and managing human resources, including such areas as the reward system, approaches to leadership, and staffing.
Managerial economics employs economic concepts and principles, which are known as the theory of Firm or ‘Economics of the Firm’. Thus, its scope is narrower than that of pure economic theory
At its simplest level, a business enterprise represents a series of contractual relationships that specify the rights and responsibilities of various parties (see below diagram). People directly involved include customers, stockholders, management, employees, and suppliers.
The economic theory of the firm holds that stockholders should be the prime beneficiaries of an organization’s activities. The theory is associated with top-down leadership and cost cutting through rationalization and downsizing. With immediate stock price dominating management activities, the economic theory of the firm has been criticized as being too short-term, as opposed to the longer-term thinking behind stakeholder theory.
Firms are a useful device for producing and distributing goods and services. They are economic entities and are best analyzed in the context of an economic model.
Theory of the firm is related to comprehending how firms come into being, what are their objectives, how they behave and improve their performance and how they establish their credentials and standing in society or an economy and so on. The theory of the firm aims at answering the following questions:
- Existence – why do firms emerge and exist, why are not all transactions in the economy mediated over the market?
- Which of their transactions are performed internally and which are negotiated in the market?
- Organisation – why are firms structured in such a specific way? What is the interplay of formal and informal relationships?
- Heterogeneity of firm actions/performances – what drives different actions and performances of firms?
Important concepts in theory of firm are
1. Short run vs. Long run
The behaviour of cost is usually analysed under two set of conditions. Short run is a time period in which the amounts of some input are fixed. Long run is a time period during which there is sufficiently long time to allow full flexibility in all inputs used.
2. Explicit vs. Implicit cost
Explicit cost is a cost that is incurred when an actual cash payment is made for inputs. Explicit costs are those which are clearly stated and recorded such as material costs (prices paid to suppliers), Labour costs (wage paid), depreciation cost on fixed asset and other expenses such as building rental. Implicit cost is the opportunity cost of inputs used in production for which no actual payment is made.
3. Accounting profit vs. Economic profit
Accounting profit consist sales revenue minus the explicit cost of the business. Economic profits consist of sales revenue minus total opportunity cost that is both explicit cost and implicit cost.
The concept of market efficiency was first developed in the finance literature and its full form was first explained by Engene Fama. But now-a-days this concept is being used in other areas also. Efficient market is defined as one where prices fully reflect all the available information. By definition then there should not exist any unexplained opportunities for profit.
It states that it is impossible to beat the market because prices already incorporate and reflect all relevant information. This is also a highly controversial and often disputed theory.
The definition of efficient market is a little vague and its vagueness it seems, is intentional. It can be shown that, under certain circumstances, it is not required all market operators to share exactly identical views on the future price. Some investors may be better informed than others.
The implication of the concept of market efficiency in forex market is interesting. Let us assume that both spot and forward markets of a currency are characterized by the following condition: (a) There are a large number of investors with ample funds available for arbitrage operations, and (b) There are not exchange controls and also no transaction costs.
In this situation suppose an American investors thinks that spot price of deutsche mark (DM) in terms of the dollar is going to be 15 per cent higher in twelve months than it is to day. The investor may be able to profit by buying DM forward, and then selling DM spot at the end of 12 months. If his judgment proves right, his profit will be 15 per cent less the premium paid for forward DM (transaction cost is nil as assumed). As the market information is perfect, other investors will follow suit, and the forward DM will be bid up until the premium is high enough to prevent any further speculation.
One interesting question is: how long will the speculation continue in the market to have a share of the profit. This is not indefinite, as at some point investors will realize that, although the potential of profit from speculation is not zero, the probable reward is not great enough to compensate for the risk of being wrong. Thus equilibrium will be reached and speculation will spot at the point where the gap between the forward rate and the expectation of the market of the future spot rate is just equal to the required risk premium charged, or in equation it becomes
Ft (t+1) = Et(St+1) + rt
Where LHS is the logarithm of forward price of DM at time t for delivery at period (t+1) and rt is the risk premium. In the above equation the forward rate reflects both the publicly available information congealed in the rational expectation Et(St+1) and the attitude of the market towards risk revealed in the risk premium. Thus the equation shows the equilibrium in the efficient market. The interpretation of efficiency explained here corresponds to what E. Fama called semi-strong form of efficiency (FAMA, 1970). Strong form of efficiency applies when the market price reflects all information, whether publicly available or not.
It is quite possible to imagine a situation where the market price reflects only the restricted information set which can be used in the formation of weakly rational expectations. Here the expected value in the equation would be conditioned on the past value of the time series, and not on the universe of publicly available information. This helps in defining a weakly efficient market.
A weakly efficient market is one where the market price reflects the market information in its own past history. It implies that there no longer exists any opportunity to profit by making use of past time series of prices alone.
One interesting aspect of weakly efficient market is that there will normally remain opportunities to make a profit by the exploitation of information additional to the past time series of prices. Another implication of market efficiency is the unbiasedness of the market.
A forex market is said to be unbiased when the forward market is efficient and investors are risk neutral, so that the forward rate is equal to the mathematical expectation of the spot rate at the time of the maturation of the contract.
Efficient of inefficient players in the forex market are big and they are equipped with very powerful computers with dedicated software. In spite of the fact that they have access to massive data set and powerful software, calculations go wrong and survey data repeatedly point out irrational movement of expectations. May be this is another mystery of the market forces.
Reference: Fama E F, Efficient Capital Markets: A Review of Theory and Empirical Evidence, Journal of Finance, 25, 1970, 383-417
Prof. Hawley, an American economist in 1907, propounded the risk-bearing theory of profit. Prof. Hawley remarks, “The profit of an undertaking, or residue of the product after the claims of land, labour and capital are satisfied, is not the reward of management or coordination but of the risk and responsibilities that the undertaker subjects himself to“.
So, according to this theory, profit is the reward for risk-taking in business. Every business involves some risk or other. Since the entrepreneur undertakes the risk, he is entitled to receive profit. If he does the reward, he will not be prepared to undertake the risks. Hence, higher the risk, the greater is the possibility of profit. This profit of the entrepreneur exceeds the ordinary return on capital. If it were less than the ordinary return on capital, the entrepreneur would not be prepared to undertake the risk.
Knight identifies entrepreneurship as:
- Recipient of pure profit
- Pure profit is bearing the cost of uncertainty
- For which self-confidence is important
Criticisms of this theory
- No Direct relationship between Risk and Profit
- Reward for Risk avoidance
- Unforeseeable Risk
Prof. Knight asserted that the essential functions of an entrepreneur are to bear non insurable risks or uncertainties; he propounded what has come to be known as uncertainty bearing theory of profit.
A business plan is not just a document; it is a white paper on your business. Every new business you one needs to start must begin with a business plan. If you look at most of the successful businesses today all had a very good business plan in place at the inception. One can say that business owners that develop and follow a business plan are more likely to succeed than business owners who do not have a business plan.
There are several reasons why Business Plan is important, some of them are:
Secure Financing for your business
So often it is observed that those people who have business ideas do not have enough capital to start their own business. They need to obtain financing from various financial institutions. Any financial institution would not lend money just because you have an idea; you need to present to them a business plan. A well-written business plan shows lenders and investors that you are serious about your business idea and have spent sufficient time in the planning process.
To plan for uncertain future
Planning is vital at any stage of the organization in any business. If you pen down your business plans you understand your business better and also specific courses of action can be taken to improve it. You can list down all the alternative solutions and ideas, in future these can be used in case of any eventuality.
Plan and Think about all aspect of Business
As mentioned earlier once you sit to draft a business plan, you start to think about each and every aspect of the business. This will help you think of business strategy, recognize limits and identify the problems that you might face.
Communicate Ideas of Others
When you sit to write your business plan you would have already thought what business you want to venture into. Once you begin to start to write toy will begin to believe that your business would succeed. Once you have entered your ideas and plan on paper it will also help you convince the readers. Once your ideas are communicated to the readers they will also gain confidence in your business plan and this can help you get quick financing and also winning the confidence of suppliers.
Tool for Managing the Business
Once the business is up and running you can use the plan to supplement your decision making and planning your future decisions. It can also be used to track whether your business is developing according to plan