2  The Global Development Era 

During the first half of the 19th century Britain was the dominant force in the world economy. The main factor underlying Britain's industrial growth was the development in international trade. Britain was first and foremost a trading nation which had secured supplies of raw materials and held a virtual monopoly in the supply of manufactured goods to the relatively underdeveloped countries which collectively made up the British Empire.

The first half of the 20th century saw the emergence of Germany and the United States as competing industrial powers. Although Britain faced fierce competition from the economically emerging nations in the areas of textiles, coal and steel, the British economy continued along a path of industrial expansion in the period up to the First World War. The incomes generated in other countries resulted in a world-wide increase in total effective demand for goods and services. The total value of Britain's trade increased even though its share of international trade started to decline.

Today, we have a situation where a large number of producers compete for a share of a finite world market. Modern industry is based on mass production which necessitates mass consumption. In order for many sophisticated products (e.g. home computers, motor cars, and consumer durables such as washing machines) to be commercially successful they must be produced in a volume sufficient to bring unit costs down to a competitive level. It is no longer enough to produce a good product, as it was in time of shortages or rationing when producers enjoyed a 'sellers' market'. Today, for producers to achieve a sufficient level of effective demand, they must produce goods and services that the market perceives as 'valuable' and, more importantly, that the customers will actually buy in sufficient volume. The final customer's needs and wants not only have to be taken into account, but the identification and satisfaction of these needs and wants has become the most important factor in the long-term survival of a firm.

Commercial enterprises today are much larger and more complex than they were in the 19th century. In a modern organisation, the entrepreneurial function is rarely carried out by one individual, as was often the case earlier. This entrepreneurial function has been developed into the managerial function and overall business philosophy that we now term marketing.

It is really only since the end of the Second World War that marketing has developed as a formalised business concept with a codified philosophy and set of techniques. Marketing was on the curriculum of major American business schools such as Harvard, Stanford and the Wharton School at the University of Pennsylvania, from the very early part of this century. Consequently, many of the techniques of marketing were developed and applied first in the USA. It was not until the early 1960s that marketing was taken seriously by leading British and European companies. Many commentators feel that Britain still has a long way to go in order to become as marketing-orientated as the Americans and blame many of Britain's economic ills on the relatively poor marketing performance of much of its industry and commerce. Even today, there are many firms who pay only 'lip service' to the marketing concept.

2: 1.  The marketing-orientated organisation

Marketing maturity does not happen overnight, but tends to be a gradual developmental process. Many firms who have reached a full marketing orientation have done so by evolving through lower stages of development.

Generally speaking, there are three basic types of business orientation:

1)     production orientation

2)     sales orientation

3)     marketing orientation

These three types of business orientation can be viewed as being hierarchical, and usually sequential, stages of development. Many basically production-orientated firms develop greater sales awareness and begin to place much greater importance on moving products on to the consumer through the use of sales programmes and techniques, rather than simply producing objects and expecting them to sell automatically. Eventually, enlightened firms begin to appreciate that selling itself plays but a part in the overall operation of moving goods from the factory to the consumer. The customer becomes much more than someone to sell to. The satisfaction of consumers' needs and wants becomes the rationale for everything the company does. Such companies have progressed to a marketing orientation.

NB.  An understanding of the lower levels of business orientation is vital for a full appreciation of how a marketing-orientated organisation is superior to other forms of business thinking. Each type of business orientation is now examined in turn:

2: 2.  Production orientation

In the 19th and early 20th centuries, the primary purpose of all business and industrial activity was thought to be production. The production manager was the key figure within the organisation, often reaching the most senior positions in the management hierarchy. Manufacturers were in a 'supplier's market' and were faced with a virtually insatiable demand for anything that could be produced. Firms concentrated on improving production efficiency in an attempt to bring down costs. Generally, firms produced whatever they could produce well, expecting effective demand for their goods and services to present itself automatically. An understanding of customers' requirements was of secondary importance.

This production-orientated philosophy was a workable philosophy as long as a sellers' market existed. The economic recession in the 1920s and 1930s concentrated the collective minds of business people. To simply produce was no longer good enough, as warehouses full of unsold goods and thousands of bankrupt businesses testified.

NB.  The lesson to be learned from this experience was that firms that focus all their attention on existing products and existing markets without paying attention to the changing needs of the market place run the risk of being overtaken by events and becoming obsolete.

Many firms still have this archaic attitude today. They are convinced that they produce excellent products and that if consumers fail to buy them, there can be only two possible reasons: Either the consumer does not appreciate the good quality of the product, or the sales force is inept. It is true that many firms produce excellent products, but not necessarily items of the type or design that potential customers want to purchase. The British motor cycle industry produced many fine machines, but lost their markets to the Japanese on points of styling, design and choice. This is now beginning to change as the British motorcycle industry realised that to be competitive you had to compete on design, style and choice and find it'd `niche' market.

Under a production-orientated philosophy, the salesperson's role is a relatively minor one. The salesperson is there to sell what the firm has produced. Such a firm is likely to be organised in the manner in fig. 2.1.

                    

Managing Director

     Production Director                    Financial Director

     Manufacturing                         Sales forecasting

     Quality control                         Pricing

     Distribution                             Credit management

     Research &                            Accounting

     development               

     Personnel Manager                    Accounts Manager

fig. 2.1.  The organisation of a production-orientated firm.

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