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MARKETING:Demerits of Product Mix, Development of new product, SMEDA

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SME Management (MGT-601)
VU
Lesson 34
MARKETING
Product Mix.
It refers to number of products offered by a company. It is not uncommon to find small firms selling ultiple
products. Product mix is done to optimize profits.
Advantages of product mix
a) It enables the firm to serve different segments of the market.
b) It gives steady sales & profits to the firm.
c) The firm can keep all its bases covered.
Demerits of Product Mix
a) It makes greater demand on firm's resources in the form of increased investment in production facilities
and inventory.
b) Marketing Problems.
The firm should weigh the pros and cons of a wider versus narrow product mix. The ultimate decision
would rest on such considerations as the available resources, existing and future market opportunities and
strategies of competitors. Phillips kotler has suggested the following indicators of firm's sub optional
product mix;
a) Disproportionately high percentage of total profits from a few products;
b) Insufficient product breadth to exploit sales force;
c) Excessive productive capacity on a chronic or seasonal basis;
d) Steadily declining sales or profits.
Development of new product.
Small firms should consider the frequent introduction of new or improved product as part of their market
strategy. The procedure for generating new product ideas and implementing them is described below:
I). Making creative Search for new product ideas.
II). Scrutiny of ideas for their worthwhileness.
III). Evaluating whether the idea is compatible with firm's objectives.
IV). Establishing technical and market feasibility.
V). Reviewing internal resources and capabilities.
VI). Product development and product testing.
VII). Test Marketing.
VIII). Commercial sales.
State Assistance in Marketing
·Export Promotion Bureau.
·Export Promotion Zone Authority.
·Small & Medium Enterprise Development Authority.
Export Promotion Bureau.
Exhibitions.
Export Promotion Zone Authority.
Small & Medium Enterprise Development
Authority.
(Marketing Services Division)
· Internal Support.
· External Support.
· Marketing Support to SME.
· Packaging Support.
· Advertisement & Media Support.
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SME Management (MGT-601)
VU
SMEDA
(Marketing Services Division)
·
Internal support
·
External support
·
Marketing support to SME
·
Packaging support
·
Advertisement and media support
Marketing Facts
(A World Bank Survey)
·
Most small enterprise work for domestic center.
·
Only 8% work in export sector
·
4% work for govt. sector
·
Tough bargaining on price 36%
·
Credit customer 34%
·
28%are optimistic to grow in the next 2 years while the real number is 30%
·
Export Potential of SME in Developing Countries. II
Relationship between SMEs and Export Development
While in certain circumstances SMEs enjoys some advantages of flexibility, in general they suffer from
structural handicaps in their operations arising from small size, particularly where exports are concerned.
Even SMEs that are highly successful domestically, for a variety of reasons, do not find it easy to upgrade
production to production for exports.
Problems faced by SMEs in developing countries typically include:
·
Scarcity of capital.
·
Limited and unequal access to institutional credit markets.
·
Irregular access to domestic and imported inputs coupled with higher cost.
·
Inadequate infrastructure facilities.
·
Weak managerial and technical skills.
A large number of SMEs have successfully overcome these formidable difficulties, established a sound base
in the domestic market, and may be potentially capable of breaking into export markets. However they may
be hampered by a variety of circumstances:
·
Lack of information on possible export market.
·
Absence of guidance on export regulations and procedures.
·
Inability to identify sources of assistance for product development and product upgrading for
export.
·
Lack of information on export credit and insurance facilities as well as for export requirements.
·
Lack of information on operation of indirect marketing channels like merchant export houses.
·
Absence of guidance on basic management issues relevant exporting firms.
·
Absence of sound steps that need to be taken to enter in export field.
SMEs are often uninterested and unprepared to enter export field owing to: Lack of market information,
Lack of incentives, Lack of credit, Lack of staff and organization and Difficulties in obtaining export
licenses, export guarantees and foreign exchange. Thus, while in many developing countries SMEs are now
receiving greater attention and aid from both the public and the private sector in many developing
countries, little attention has so far been focused on the specific help needed to increase exports from
SMEs.
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SME Management (MGT-601)
VU
Developing the export capabilities of SMEs is difficult because of their special problems. Yet it is often
assumed that the needs of SMEs are adequately net by `traditional sources' of assistance, which are usually
geared to the needs of larger firms. While most developing countries have well-established SME support
programmes with agencies. Yet it can be argued that many of the techniques used to stimulate and support
small business growth in general can be extended to support the export activity of SMEs.
This argument is based on the fact that the development of export capability in small firms is just one more
aspect of their business development. In the essence exporting means moving to improve basic
organizational capabilities: such as management control, financing, costing and pricing, design and
marketing management.
General support structure for SME development to be linked with export support. This structure
demonstrates the linkage between the general support infrastructure for SMEs and the specific export
support infrastructure and their different goals.
The former has as its objective the development of capability of SMEs for survival and growth, the latter
the development of specific capability for export. Whereas in the context of the firm the development of
general organizational capability and that of specific organizational capability for export are obviously
closely linked, casual observation indicates that there is often no close linkage between the general support
infrastructure for SMEs and the export support infrastructure.
SMEs assistance institutions can be considered in terms of a number of characteristics including: Whether
they are public, private or mixed. Whether they are local, regional or national. And their degree of coverage.
Whether they provide integrated forms of assistance, meeting a variety of different kinds of needs; whether
they are general or concentrated upon particular industry sectors or sectors of the population; whether they
are strong in terms of resources and capability; and finally whether they are long established traditional
sources of small business support with a good track record.
Strategy for Development of Exports from SMEs.
Today, export promotion in general by most of the developing countries and particularly by SMEs is not
easy. This is true for a variety of reasons. Some of which are listed below.
First, the products available in most developing countries are generally known in international markets and
discovery new product capabilities is not likely to be as regular and frequent as before.
Second, international marketing techniques are well disseminated in most developing countries, though they
are not equally well known in the interior of the countries.
Third, as more developing countries penetrate in world markets, path to other developing countries will be
that much harder and competition correspondingly greater.
Finally, international markets are tending to become less open to manufactured products from developing
countries.
Common Difficulties at Various Levels
A summary of some of these problems is given below.
At the national level
·
It is often observed that a well-planned strategy to develop exports from SMEs does not exist. The
objectives are frequently not well defined and the available policy instruments for industry and
trade are frequently not aimed at developing the SME sector and its exports.
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SME Management (MGT-601)
VU
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Where support for SMEs is a stated objective, there is often inadequate follow-up in terms of
specific measures and mechanisms. In many instances, the institutional infrastructure is sub-optimal
with a lack of coordination among trade service institutions.
·
The environment is often not conducive to the creation and growth of marketing channels for
SME exports such as merchant export houses, export development companies, joint marketing
arrangements, export consortia, etc.
At the level of trade organization (TPOs) and industry export institutions
·
There is often an inadequate focus on issues of concern and relevance to SMEs and a lack of
appreciation of the special features and difficulties of SMEs in their export efforts.
·
Many service institutions do not have well-defined programmes with clear objectives for assisting
SMEs in export development.
·
The channels of communication between service institutions and SMEs are frequently inadequate.
At the level of Enterprise
·
In many situations, special difficulties are encountered, leading to inadequate and more costly
access to factor markets.
·
Individual SMEs are often not in a position to identify sources of assistance for product
development and product upgrading for export.
·
SMEs generally have difficulty in obtaining information and guidance on export markets and are
unable to undertake direct export marketing.
·
Absence of indirect export marketing channels like merchant export houses, export development
companies, etc. in many situations inhibit export market access for SMEs.
·
Training facilities in export management are often not readily available.
Involving SME Development agencies
The trade organizations and export service agencies in many developing countries interface only with
exporting SMEs, though the majority of the SMEs are usually linked with national level with SME
development agencies and institution. Many governments have established a network of SME institutions
which are in close touch with SMEs.
There is a need to deliver an export orientation programme to a new target audience, that is, established
SMEs in the region who are currently not participating in exports.
It is important to create awareness in SME development institutions and through them among the
enterprises themselves of export potential for export. To achieve this, it will be necessary to strengthen
SME development institutions capacities to provide export development services.
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Table of Contents:
  1. THE HISTORY:Cottage Industry, CONCEPT OF SMALL BUSINESS
  2. THE RELATIONSHIP BETWEEN SMALL AND BIG BUSINESS:The SME’S in Pakistan
  3. THE ROLE OF ENTREPRENEURSHIPS IN SMEs:Focus and Perseverance Guide the Entrepreneur
  4. THE ROLE OF ENTREPRENEURSHIPS IN SMEs:Kinds of Entrepreneurs
  5. SMALL ENTREPRENEURS IN PAKISTAN:National Approaches
  6. THE DEVELOPMENT OF SMES IN PAKISTAN:The Industrial History of Pakistan
  7. GOVERNMENT’S EFFORT TOWARDS SME DEVELOPMENT:Financing Programs
  8. THIS LECTURE DEFINES THE ROLE OF NGOS AND SMEDA:Mission Statement
  9. ISSUES AND POLICY DEVELOPMENT FOR SME:Monitoring Developments
  10. ISSUES IN SME DEVELOPMENT:Business Environment, Taxation Issues
  11. LABOR ISSUES:Delivery of Assistance and Access to Resources, Finance
  12. HUMAN RESOURCE DEVELOPMENT:Market and Industry Information, Monitoring Developments
  13. MARKET AND INDUSTRY INFORMATION:Measuring Our Success, Gender Development
  14. LONG TERM ISSUES:Law and Order, Intellectual Property Rights, Infrastructure
  15. THE START UP PROCESS OF A SMALL ENTERPRISE:Steps in Innovative Process
  16. TECHNICAL FEASIBILITY:Market Feasibility, Market Testing
  17. FINANCIAL FEASIBILITY:Financial resources and other costs, Cash Flow Analysis
  18. ASSESSMENT OF PERSONAL REQUIREMENTS AND ORGANIZATIONAL CAPABILITIES:Analysis of Competition
  19. Post Operative Problems of a New Enterprise:Environmental Causes
  20. HOW TO APPROACH LENDERS:Bank’s Lending Criteria, Specific Purpose, Be Well Prepared
  21. WHAT A BANK NEEDS TO KNOW ABOUT YOU:General Credentials, Financial Situation
  22. COMMERCIAL INFORMATION:Checklist for Feasibility Study, The Market
  23. GUARANTEES OR COLLATERAL YOU CAN OFFER:Typical Collateral
  24. Aspects of Financial Management:WINNING THE CASH FLOW WAR, The Realization Concept
  25. MEANING OF WORKING CAPITAL:Gross Working Capital, Net Working Capital
  26. RECRUITMENT, SELECTION AND TRAINING:Job Description, Job Specification
  27. SELECTION AND HIRING THE RIGHT CANDIDATE:Application Blank, Orientation
  28. TRAINGING AND DEVELOPMENT:Knowledge, Methods of Training
  29. CONDITIONS THAT STIMULATE LEARNING:Limitations of Performance Appraisal, Discipline
  30. QUALITY CONTROL:Two Aspects of Quality, Manufactured Quality
  31. QUALITY CONTROL:International Quality Standards, MARKETING
  32. MARKETING:Marketing Function, MARKETING PROCESS - STEPS
  33. MARKETING:Controllable Variable, Marketing Uncontrollable, Marketing Mix
  34. MARKETING:Demerits of Product Mix, Development of new product, SMEDA
  35. ROLE OF TECHNOLOGY:Training programmes, Publications
  36. ROLE OF TECHNOLOGY:Measure to Undertake for Promoting Framework.
  37. EXPORT POTENTIAL OF SME IN DEVELOPING COUNTRIES I:Commonly Seen Assistance Programme
  38. EXPORT POTENTIAL OF SME IN DEVELOPING Countries. II:At the national level
  39. WORLD TRADE ORGANIZATION (WTO):WTO Agreements: Salient Features
  40. WTO MINISTERIAL CONFERENCES:PAKISTAN AND WTO
  41. WORLD TRADE ORGANIZATION (WTO) PAKISTAN & WTO. II:International Treaties
  42. WORLD TRADE ORGANIZATION (WTO) PAKISTAN & WTO. III:Agriculture
  43. WORLD TRADE ORGANIZATION (WTO):PAKISTAN & WTO. III
  44. WORLD TRADE ORGANIZATION (WTO):CONCLUSIONS AND RECOMMENDATIONS
  45. SUMMARY & CONCLUSIONS:Financing Tool, Financing Tool