Chapter-8

Marketing, Industrial relations, Sales and Purchases, Advertisement,

Industrial Relations, Wages and Incentive
.
Learning !"ectives#
To explain the meaning and importance of Marketing
To define the marketing concept and explain its essential focus.
To define the concept of market segmentation.
To define the concept of Wages & Incentives
To explain the Various wagesalar! components
Introduction#
Marketing is an organi"ational function and a set of processes for identif!ing# creating#
communicating# and delivering value to customers. In order to capture value from customers in
return# organi"ations are managing customer relationships in wa!s that $enefit itself and
stakeholders .
Marketing is a social process $! which individual and groups o$tain what the! need and want
through creating# offering and freel! exchanging products and services of value with others.
%hilip &otler
Marketing management is the art and science of choosing target markets and getting# keeping#
and growing customers through creating# delivering# and communicating superior customer
value.
The scope of marketing can $e understood in terms of functions that an entrepreneur has to
perform. These include the following'
(unctions of exchange' It includes $u!ing and assem$ling and selling
(unctions of ph!sical suppl!' It includes transportation# storage and warehousing and
distri$ution.
(unctions of facilitation' It consist of %roduct %lanning and )evelopment# Marketing *esearch#
+ales %romotion# (inancing.
+tandardisation# ,rading# %ackaging# -randing#
Marketing Concept
The marketing concept focuses on determining# the re.uirement of potential customers
and suppl!ing products to satisf! their re.uirements. It is an integrated process of
identification# assessment and satisfaction of human needs and wants.
Core Concepts o$ Marketing
/eed 0 food 1 is a must 2
Want 0 %i""a# -urger# )osa 1conversion of a need as per our experience 2
)emand 0 -urger 1conversion of a want as per our willingness and a$ilit! to $u! 2
)esire 0 3ave a -urger in a five star hotel
The components of marketing concept are as following'
Satis$action o$ Customers#
In the modern era# the customer is the focus of the organi"ation as it is rightl! said that
45ustomer is the &ing6. Those goods and services should $e producedserviced $! the
organi"ation# which will lead towards satisfaction of customers.
Integrated marketing#
The functions of production# finance# sales# human7resource and marketing should $e
integrated and linked all together to satisf! the needs and expectations of customers.
Pro$ita!le sales volume#
Marketing is successful onl! when it is competent of maximi"ing profita$le sales and
than achieving long7run customer satisfaction.
Marketing vs% Selling
MAR&'(I)* S'LLI)*
Marketing starts with the $u!er and
it focuses on customers needs.

+elling starts with the seller and it
focuses on sellers needs.

5ustomer en8o!s ultimate
importance.
%roduct en8o!s ultimate importance.
It seeks to convert customers
needs into product.
It seeks to convert product into
cash.
%rofits are determined through
customer satisfaction.
%rofits are determined through
sales volume.
5onsumers determines the price and
price in turn determines the cost.
5ost determines the price.
Integrated approach to marketing is
practiced.
(ragmented approach to selling is
practiced.
The principle of caveat vendor 1let
the seller $eware2 is followed.
The principle of caveat emptor 1let
the $u!er $eware2 is followed.
Marketing is more 4pull6 than
4push6.
+elling involves 4push6 strateg!
Marketing Mi+
9 term consisting of a particular com$ination of marketing varia$les which are controlla$le $!
an enterprise and which are used to appeal a particular market segment is known as Marketing
Mix.
:Marketing mix is the term used to descri$e the com$ination of the four inputs which constitute
the core of a compan!;s marketing s!stem' the product# the price structure# the promotional
activities# and the distri$ution s!stem.:
W. <. +tanton
The $asic= strategic components of a marketing mix elements are known as (our %s.
These >lements are %roduct# %rice# %lace & %romotion.
Marketing Mi+ and its 'lements
Product Price Place Promotion
(eatures ?ist %rice ?ocation 9dvertising
)esign )iscounts Transport %ersonal +elling
Variet! 9llowances 5hannels +ales %romotion
@ualit! %a!ment %eriod 5overage %u$licit!
-rand /ame 5redit Terms Inventor! %u$lic *elations
?a$le and %ackaging %ricing +trateg! 9vaila$ilit! )ispla!s
+i"es 3andling 5harges )eliver! >7mail
+ervices Aut7of 03ome
promotions
Warranties
,-P- s and , .C-s o$ Marketing
Product Customer solution
Price Customer cost
Place Customer convenience
Promotion Communication
Product#
9 %roduct is an!thing which can $e offered to a market for attention# ac.uisition# use# or
consumption that might satisf! a want or need. %roducts include ph!sical o$8ects# persons# places
services# events# ideas or mixes of these.
Price#
The element which affects the volume of sales is the price. It is one of the most difficult tasks for
the marketing manager to finalise and fix sthe right price. The varia$les that significantl!
influence the price of a product are' demand of the product# cost# competition and government
regulation.
Place or Ph/sical 0istri!ution#
This is another ke! marketing mix tool# which stands for the various activities the compan!
undertakes to make the product availa$le to target customers. %lace mix or deliver! mix is the
ph!sical distri$ution of products at the right time and at the right place.
Promotion#
%romotion refers to the various activities undertaken $! the enterprise to communicate and
promote its products to the target market. The different methods of promoting a product are
through advertisement# personal selling# sales promotion and pu$licit!.
Segmentation
Marketers divide the markets into different segments in order to cater the different needs and
wants of the customers. It is the process of dividing the market into homogeneous segments with
similar sets of needs and wants of the customers.
9 market can $e segmented on the $asis of the following varia$les'
B. ,eographic +egmentation' The characteristics of customers fre.uentl! differ across nations#
states# regions# cities or neigh$orhoods. The entrepreneur can decide to operate in one or a few or
all the geographic areas# $ut pa! attention to differences in geographic needs and preferences.
C. )emographic +egmentation' It divides the market on the $asis of varia$les such as age# sex#
education# famil! si"e# income# occupation# religion# race and nationalit!
D. %s!chographic +egmentation' )ividing the market into groups $ased on their personalit!# life
st!le# social class#culture etc. is referred as %s!chographic segmentation. (or example# some
products like television# pens# watches# cosmeticsetc. are designed differentl! for ordinar! men
and status seekers.
E. -ehavioural +egmentation' -u!ers are segmented into groups on the $asis of their perception#
need# motivation# learning7involvement# knowledge# attitude# use# $u!er7readiness # response
etc. to a product.
(arget Market
The markets with the maximum opportunit! is are chosen as the target markets from the
identified segments. (or each target market a firm develops a market offering 1 a com$ination of
product# services# pricing# distri$ution strateg!#promotional information or experiences offered to
a market to satisf! a need or a want2.

Positioning
The market offering is positioned in the minds of the target $u!ers as delivering them certain
central $enefits.
9 products position is the wa! the product is defined $! consumers on important attri$utes7the
place the product occupies in consumers minds relative to competing products.6
&otler and 9rmstrong
Volvo 7 +9(>TF
+corpio 7 ?uxur! of a car plus thrill of a +GV
Tata /ano7>conom!
>xample'
M!ntra# a fashion portal# has roped in advertising agencies ?owe ?intas and %artners and Agilv!
India Worldwide to spearhead its marketing strateg! in a $id to maintain its leading position as
an online apparel retailer. M!ntra aims to $e a *s BH#HHH7crore firm in the next three to four
!ears and is targeting *s B#IHH crore in sales during the next fiscal !ear. The compan! is also
finalising kidswear and men;s formalwear ranges to $e unveiled in the coming months. 9 private
la$el is a range of products manufactured and sold $! a multi7$rand retailer. While third7part!
apparel $rands provide margins of $etween DHJ and EHJ# in7house la$els can provide over KHJ.
9hu8a said the appointment of the two agencies was the next step for the compan!. :-rand
communication is almost as important as the products on offer#: said 9hu8a# M!ntra;s chief
marketing officer.
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Importance o$ Marketing to the societ/
%rovides emplo!ment
*eduction in distri$ution cost
Increase in profits
5ollection of information
Increase in national income
)eliver! of goods and services as per the standard of living
%rotection against $usiness slouch
-etter $usiness planning and decision making
Pro!lems $aced !/ SSI-s pertaining to Marketing
Lack o$ Sales Promotion Programmes# +mall units lack the resources# knowledge and
information for effective sales promotion plans. ?arge scale units have well7known $randed
names and have huge funds to spend on advertisement and other sales promotion tools. +mall
scale units have to pa! a heav! pa!ment and commission to dealers for their selling efforts#
which in turn reduces their profits margins.
Competition $rom large scale sector# +mall entrepreneurs usuall! use inferior technolog! of
due to scarcit! of resources .The outdated technolog! used $! them gets translated into inferior
.ualit! of products and as a result of this their products are not standardi"ed. +mall units are not
a$le to face the competition from large scale units $ecause of inferior# low .ualit! products#
o$solete technolog!#etc. and hence are not successful in capturing maximum market share.
Inade1uate marketing kno2ledge# Most of the small scale entrepreneurs are not highl!
educated or professionall! .ualified and do not possess an! knowledge of marketing concept
and strateg!. Their lack of expertise further restrain their understanding of the existing trends in
the market.
Credit sales# 9t the time of purchasing inputs# small units are deprived of li$eral credit facilities.
9s a result# the! have to $orrow excessive working capital than actuall! demanded and re.uired
which makes it non7competitive $! increasing the general cost of production and prices#
Weaker !argaining po2er# +mall units are not a$le to gra$ .uantit! discounts $ecause of
shortage of funds and on the other hand# large scale entrepreneurs manage to get huge discounts
and credit. It in turn decreases their $argaining power.s
Product 1ualit/# %roduct .ualit! which is inclined towards meeting the standards and
specifications is dependent on proper process control# .ualit! control and testing tools. It is
costl! and difficult for a small unit to have .ualit! testing and evaluating e.uipment.
Advertising
9dvertising is an important form of promotion. 9dvertising is an integration of all the activities
involved in representing a non7personal# oral or visual# sponsored message regarding a product#
service or an idea. This message is called an advertisement and is distri$uted through one or
more media and paid for $! an identified sponsor.
9dvertising is an! paid form of non7personal presentation and promotion of ideas# goods and
services $! an identified sponsor. 0 &otler
It is paid $orm o$ presentation#
9dvertisements are displa!ed in television or cinema screens# newspapers# maga"ines# $ecause
the advertiser has purchased some space or time to communicate information to the potential
customers.
It is non-personal presentation o$ message#
In advertising# there is no face7to7face or direct contact with the customers. It is a non7personal
form of presenting products and promoting ideas and is opposite to personal selling. -! creating
awareness in the minds of potential customers it simplifies the task of the sales force.
(he purpose o$ advertising is to promote idea a!out the products and services o$ a
!usiness#
It is inclined towards increasing the sale of the products and services of a $usiness unit.
Advertisement is issued !/ an identi$ied sponsor#
In advertising# the identit! of the organi"ation$usinessman should $e disclosed.The pu$lic is
informed who is $ehind the advertising in the advertisement itself. If the identit! is not disclosed
tham it ma! lead to distortion# deception of the message.
'conomic e$$ects o$ advertising
It provides information
It helps in maintaining or enhancing $rand e.uit!
It supports the media
It helps in providing emplo!ment opportunities.
It helps in reducing distri$ution cost
It provides product utilit!
It stimulates introduction of new products
Advertising Media
%ress
>lectronic71Television and Internet2
5inema
*adio
Autdoor
Role o$ advertising
To increase awareness of the $rand and information a$out the firm# its products# place of
availa$ilit!# .ualit! and other related details.
To encourage and educate the non7users for trial of the product
To induce the $elief among $oth users and non7users that for reasons P# F# Q# etc. a
$rand is technicall! superior to competitors.
To inform and educate consumers especiall! lapsed consumers that the product has $een
improved or reformulated after extensive *&).
To encourage and motivate the retail traders and vendors to stock and displa! the
products.
Impact o$ Advertising
Advertising *oal- 0A*MAR 30e$ining Advertising goals $or measured advertising result4
It is defined as a marketing approach to measure the end7results of a marketing campaign. It is a
detailed communication task to $e accomplished among a defined target audience to a given
degree in a given period of time.
Sales and Purchases
Sales
+ales involves the process of deliver! and transfer of ownership of the product or service to the
ultimate customer. %ost manufacturing# sales forms the commencement of the latter part of the
suppl! chain. The firm makes the direct and most intimate contact with its customers through
sales. Marketing is responsi$le for conception# creation and ac.uisition of a customer# sales and
after sales service are responsi$le for servicing and retention of the customers.
Methods o$ Selling
+elling through channel partners1distri$utors and dealers2
)irect selling7 It is the person7to7person# sale of a consumer product or service# awa! from a
fixed retail location# marketed through independent sales representatives. 1personal
care#household7 9von#9mwa!# >ureka (or$es2
+ales through large retail chains in house $rands 1Wal7Mart# 3ome )epot2
Mail order sales.
(he Sales rgani5ation
The sales organi"ation is an integration of functions like planning# administration# operations
and execution. In the sales organi"ation# planning comprises of forecasting# $udgeting and
formulation of sales polic!# administrative function comprises of recruitment of sales force#
training# appraisalreward s!stems and control wheras executive functions includes sales
promotion and selling routine i.e. execution of customer orders. 9chievement of the compan!s
sales and profit targets is the prime o$8ective of the sales organi"ation
Wages and Incentives
Introduction#
5ommitment of emplo!ee to the organi"ation can $e maintained and enhanced $! proper wage
and salar! administration. %a! is one of the factor which affects the wa! people work7how much
and how well. Wages# salaries and man! other emplo!ee $enefits and services are form of
compensation received $! an emplo!ee in return of his work.
Concept o$ Wage and Salar/
Wage and salar! forms the most significant constituent of compensation and these are essential
irrespective of the t!pe of organisation. Wage is referred to as remuneration paid to workers
particularl!# hourl!7rated pa!ment. +alar! refers to as remuneration paid to white7collar
emplo!ees including managerial personnel. Wages and salar! are compensated on the $asis of
fixed period of time and usuall! are not linked with productivit! of an emplo!ee at a particular
time.
Wages And Incentives
Wages' Wages is the return given to workers for their mental and ph!sical efforts which the! put
into the production process.
Wages are usuall! paid in cash at the end of one da!# one month or one week. Mone! wage is the
monetar! compensation or price paid $! the emplo!er to his emplo!ee for the services rendered.
+uch compensation is also called wage or salar! or reward given $! an organisation to a person
in return of the work done. Gsuall!# compensation pa!a$le to an emplo!ee includes the
following three components'
-asic compensation for the 8o$ 1wagesalar!2
Incentive compensation for the emplo!ee on 8o$
+upplementar! compensation paid to emplo!ees 1fringe $enefit and emplo!ee services2
!"ectives $ Wage And Salar/ Administration#
9 sound plan of wage and salar! administration seeks to achieve the following o$8ectives'
B. To esta$lish a fair and e.uita$le compensation offering similar pa! for similar work.
C. To magneti"e competent and .ualified personnel.
D. To retain the present emplo!ees $! maintaining wage levels in accordance with
competitive units.
E. To maintain la$our and administrative costs in tune with the capa$ilit! and capacit! of
the organisation to pa!.
I. To enhance motivation and morale of emplo!ees and to develop $etter union
management relations.
K. To pro8ect a good representation of the compan! and to act in accordance with the
legal needs linked to wages and salaries.
L. To set up lines of promotion wherever applica$le.
M. To minimi"e the pro$a$ilit! of favoritisms and $iasness while assigning the wage
rates.
Principles o$ Wage and Salar/ Administration#
The following principles should $e followed for an effective wage and salar! administration =
B. Wage polic! should $e developed after o$serving the views and interests of all related parties
vi".# emplo!er# emplo!ees# the consumers and the societ!.
C. Wage and salar! plans should $e ade.uatel! flexi$le or open to changes as per the d!namics
of the environment and organi"ations condition.
D. >fforts should $e made to make certain that differences in remuneration for 8o$s are $ased on
variations in 8o$ necessities such as skill sets# accounta$ilit!# efforts and mental and ph!sical
re.uirements.
E. Wage and salar! administration plans must $e consistent with the entire organi"ational plans
and programmes.
I. Wage and +alar! administration plans must alwa!s $e in compliance with the social #financial
and economic o$8ectives of the countr! like accomplishment of e.ualit! in income distri$ution#
allocation# controlling inflation# etc.
'lements o$ an Ideal Wage-S/stem#
R,uarantee of minimum wages.
R-ased on aptitude and a$ilit! of the worker.
R>as! and simple to understand
R>ncouraging.
R(lexi$le.
(/pes o$ Wage S/stem#
RTime wage s!stem
R%iece wage s!stem
(ime Wage S/stem#
R Gnder this s!stem# the workers are compensated according to the time used up at the work
place.
>.g' a da!# a week. a month etc. In this s!stem# the efforts $! an emplo!ee involved in
completing assigned work# task or production done are not taken into consideration.
R This is the oldest categor! of wage s!stem.
Merits#
RGnderstanda$le and simple.
R%rovides assured minimum wages.
R9ppropriate for industries where measurement of output is impossi$le.
RWages to $e paid are pre7determined.
RWorkers are not oppressed and demorali"eds which help to maintain harmonious relationship.
R ?a$our turnover rate is reduced.
0emerits#
R(ails to inspire and stimulate efficient and industrious workers.
RWorkers needs supervision which on the other hand increases the supervision cost.
R%ossi$ilities are there# of the worker $eing negligent# casual and unattentive towards work or
production.
R5onflict and env! $etween efficient and inefficient workers crops up.
R5annot $e considered as a progressive wage s!stem.
(ime 2age s/stem suita!ilit/
R@ualit! of production is more important than the output and it is not possi$le to measure the
performance of the task force.
RWork is to $e done carefull!# re.uiring extreme concern and preciseness.
Piece Wage S/stem#
R In this s!stem# wages are remunerated to workers as per their output. This wage s!stem is
directl!
associated to the skill7sets# production capacit!# rate at which work is done and precision of the
worker.
RThis s!stem is also known as PAYMENT BY RESULT SYSTEM.
Merits#
RWorkers skill is taken into account.
R/o need for supervision and inspection.
R>fficient workers are given more incentives and rewards.
R>as! to estimate the cost per unit.
R>as! to calculate wages.
RMore production and $est results is the motto of this s!stem.
0emerits#
R@ualit! is not maintained.
RWorkers intentionall! ignore safet! rules# inviting accidents.
RWorkers are paid different wages.
R+ense of 8o$ satisfaction is at a reduced amount of among workers.
R9dministrative operating expenses are high.
RWorkers ignore their fitness in order to deliver their maximum efforts.
Piece Wage S/stem Suita!ilit/
RMeasurement of units produced is simple.
R5ompetence# skill and attentiveness of worker is elevated and productivit! is dependent upon
%roficienc!.
R>as! to esta$lish principles and standards# flow of work is regular.
6ringe 7ene$its
These include such motle! crowd of emplo!ee $enefits as provident fund# gratuit!# medical care#
hospitali"ation# accident relief# health and group insurance# canteen# uniform# recreation etc.
%er.uisites'
These are allowed to executive and include compan! car# clu$ mem$ership# paidholida!s#
furnished house# stock option scheme and the like. %er.uisites are offered to retain skilled and
proficient executives.
/on7monetar! -enefits '
These include challenging 8o$# responsi$ilities# recognition of merit# career growth prospects#
competent supervision# comforta$le working conditions# 8o$ sharing and flexi$le timings.
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7asic Wage
It is fixed on the $asis of weightage given to 8o$s on the $asis of efforts# .ualifications #skill sets
etc.re.uired for the same #in an organisational at various levels.
0earness Allo2ance
)ue to inflation and market conditions# the real income of emplo!ees goes down. It refers as#
with the same level of wages emplo!ees are not capa$le to $u! goods and services# which the!
were a$le to $u! $efore inflation. )earness 9llowance is paid to emplo!ees $! wa! of
compensating them for the loss of real income caused to them $! increase in the cost of living
due to inflation and market d!namics.
Man! other allowances are also paid to emplo!ees which are as following'
The various allowances given to the emplo!ees are'7
3ouse *ent 9llowance 13*92' The emplo!ees are re.uired to pa! house rent as per the existing
market rates# a considera$le part of their earnings will go as house rent and the emplo!ees will
not have ade.uate amount of mone! to meet their other re.uirements. Therefore# 3*9 is paid to
the emplo!ees in order to ena$le them to pa! house rent for a suita$le accommodation.
?eave Travel 9llowance 1?T92' >mplo!ees along with their famil! mem$ers are paid a
particular amount known as ?T9 to visit their native places or other destinations#s so that the!
get relaxed and re8uvenated for the work.
5onve!ance 9llowance' In order to aid the emplo!ees to come to the work place comforta$l!
and in time# emplo!ers endow with conve!ance allowance to the emplo!ees for availing $etter
transport service# or maintaining and using their own vehicle.
?unch 9llowance and )inner 9llowance' The emplo!ees are remunerated lunch & dinner
allowance who sta! awa! from the usual work place during the lunch or dinner period
>ducation 9llowance' The education allowance is paid to the emplo!ees to aid greater spirit and
support to educate their children.
Gnderground 9llowance' 9ll emplo!ees functioning in underground operations are permitted to
receive this allowance $ecause the underground 8o$ is more exhausting# dangerous and risk!.
Autstation 9llowance' This allowance is remunerated to all emplo!ees who are on outstation
dut!.
5it! 5ompensator! 9llowance' +ome organi"ation remunerate their emplo!ees located in metro
cities $! pa!ing cit! compensator! allowance against the loss of real income caused due to
elevated consumer price index
9part from them# there are other allowances like +ervant 9llowance# +ocial +ecurit! 9llowance#
Avertime 9llowance etc. which differs from organi"ation to organi"ation.
6actors In$luencing Wages And Salaries
There are num$er of factors which influence the remuneration to $e paid to the emplo!ees. These
factors can $e categori"ed as
1i2 >xternal (actors
1ii2 Internal (actors.
'+ternal 6actors
>xternal factors influencing wages and salaries are as following'
B. )emand and +uppl!' The la$our market conditions or demand and suppl! forces function at
the national
and local levels and the! decide an organi"ations wage structure. If the demand of a particular
t!pe of la$our is high and suppl! is less than the wages will $e more or escalated# whereas# if
suppl! of la$our is more than the demand than it will result in lower wage rates.
C. 5ost of ?iving' The wage rates are directl! affected $! cost of living of a place. The workers
will acknowledge a wage which ma! guarantee them a minimum standard of living.
D. Trade Gnions-argaining %ower' The wage rates are also affected $! the $argaining power of
trade unions. The wage rates will $e more if the prevailing trade union is stronger.
E.,overnment ?egislation' ,overnment ma! issue a legislation order for fixing minimum wages
to improve the living condition of workers.
I.%s!chological and +ocial (actors ' Management must take into deli$eration the ps!chological
needs of their emplo!ees while setting up the wage rates so that the emplo!ees take pride and
honour in their work.
K. >conom!' It might $e achieva$le for some organisations to flourish in a recession too# $ut
there is no uncertaint! that econom! affects remuneration decisions. 9 depressed econom! will
possi$l! increase the la$our suppl! which in turn might lower the going wage rate.
L. Technological )evelopment' With the swift growth of industries# there is a scarcit! of skilled
resources. The technological developments have affected the skills levels at a rapid rate.
5onse.uentl!# the wage rates of skilled and experienced emplo!ees constantl! change and an
organi"ation has to maintain its level upto the mark which suits the market re.uirements.
M. %revailing Market *ates' The wage rates remunerated in a particular industr! will form a $ase
for setting up wage rates.
7% Internal 6actors
The important internal factors affecting wage and salar! decisions are as follows'
B. 5apa$ilit! to %a!' The a$ilit! to pa! of an enterprise will affect the rates of wage to $e paid. 9
profita$le and successful venture can pa! more to attract good emplo!ees and workers whereas if
a firm is running into losses then it ma! not $e a$le to pa! higher wage rate .
C.<o$ *e.uirements' -asic wages depend mainl! on the complexit! of the task# difficult! level#
and ph!sical and mental effort re.uired in a particular 8o$. The relative worth of a 8o$ can $e
estimated through 8o$ evaluation. 5omplex# risk!# difficult and challenging tasks with high skill
levels generall! receive high pa! whereas simple# eas!# routine tasks that re.uire minimum skills
will receive relativel! low pa!.
D.Management +trateg!' If the strateg! of the organisation is to attain speed! growth# than the
remuneration ought to $e higher than what competitors compensate and if the strateg! is to
uphold# preserve and protect current earnings# $ecause of the dimnishing fate of the compan!#
remuneration level is re.uired to $e at average or even $elow average position.
E. >mplo!ee' +everal emplo!ee related factors act together to determine the remuneration like
performance or productivit!# seniorit!# work7experience# efficienc!# potential# fortune# etc.
I)C')(I8'S
Meaning o$ Incentive
Incentives are an extra remuneration to $e paid to efficient workers for their meritorious and
commenda$le performance in terms of time# costs and .ualit!. This helps in motivating them to
$e more productive and efficient. Incentives create a "eal for work among the workers#
increasing and enhancing their productivit!. In the a$sence of incentives# lassitude# rigidit!#
frustration and indifference in the minds of the workers will stem up which will lead towards
inefficienc! in the longer run. Incentive rates are to $e paid to the more efficient workers as extra
compensation for their meritorious performance in terms of time# costs & .ualit!. The incentive
rates might take the form of $onus or premium.
Wage incentives are extra financial motivation. The! are designed to stimulate human effort $!
rewarding the person# over and a$ove the time rated remuneration# for improvements in the
present or targeted results6 0 The /ational 5ommission on ?a$our.
4It refers to all the plans that provide extra pa! for extra performance in addition to regular
wages for a 8o$6 0 3ummel and /ickerson.
!"ective o$ Incentive Plans
R Increase in productivit! and efficienc!.
R )ecrease in la$or costs
R *ise in workers pa! packet
R >levated emplo!ee motivation & morale
R +uperior contri$ution towards organi"ational effectiveness
R >ncouraging emplo!ees to accomplish specific organi"ational goals# such as increasing profits#
improving product .ualit!# maintaining timelines. etc.
R Maintain harmonious emplo!ee7 emplo!er relations.
(/pes o$ Incentives#
RMonetar! incentives 1(inancial2
R/on7monetar! incentives 1/on7(inancial2
Monetar/ Incentives3 6inancial Incentives 4
(inancial incentives also known as pecuniar! incentives are the incentives given in the form of
mone!. It $oosts the "est# enthusiasm and self7confidence of the emplo!ees. )irect incentives
include wages# $onus and other incentives directl! given to the workers in the form of cash.
Indirect financial incentives include allowance like travel expenses# medical expenses etc.
)on-Monetar/ Incentives#
/on7financial or non7pecuniar! incentives which include all planned or unplanned elements
which stimulate effort and actions. These incentives not $ased on mone! are hence called non7
monetar!
incentives. /on7monetar! incentives are helpful in increasing productivit! and efficienc!.
T!pes of /on7Monetar! Incentives'
R +ecurit! of <o$
R %romotion
R 9ssignment of responsi$ilit! and authorit!s
R Welfare activities and $asics amenities
R 9dditional incentives such as housing facilities# life insurance# educational and conve!ance
allowances etc.
Merits o$ Incentives
The following are the advantages derived $! providing incentives to emplo!ees'
B. >levated output' Incentives compensated to emplo!ees# can help in ena$ling enthusiasm and
"eal to work $etter. This in turn will leads to higher productivit! effectivel! and efficientl!.
C. ,reater profits' 3igher output results in greater earnings and revenue for the $usiness.
Increased productivit! helps in decreasing the cost per unit and thus the enterprise is also a$le to
fix the selling price low. This results in greater sales and higher customer satisfaction.
D. /o crisis of idle time' In an organisation when suita$le incentives are availa$le# the workers
$ecome time conscious and the! are not engaged in unnecessar! activities which results in time
loss.
E. >fficient workers are capa$le of earning more' Those workers who are extremel! efficient and
hard working are a$le to earn more $! wa! of performance gaining $onus# higher commission
etc.
I. %ossi$le to recogni"e unproductive and dull workers' If# in spite of the incentive schemes# a
num$er of workers are a$le to earn onl! their normal wage# than it means that the! are $asicall!
dull. The top management has to come to a decision whether to retain them or su$8ect them to
rigorous training or fire them from the organi"ation.
K. *ate of la$our turnover is $ound to $e low' >mplo!ees might not have a feeling of
dissatisfaction# if ample of incentives are availa$le to them. The! will possess greater work
commitment# satisfaction and therefore ma! not leave the organi"ation due to which la$our
turnover rate will $e low.
L. )ecline in complaints and grievances' 9s the organi"ation provides suita$le incentives to the
emplo!ees# the! might not have an! matter to complain a$out which will lead towards reduction
in complaints and grievances.
Re1uirements o$ a sound incentive plan
9 good incentive plan should fulfill the following re.uirements'
B. Trust and confidence 0%resence of an atmosphere of trust and confidence $etween the workers
and the management is ver! crucial for its sound implementation. In the a$sence of such an
atmosphere# the emplo!ees might oppose an! such proposal $! the management.
C. 5onsensus re.uired 09greement among the workers and the management is necessar! for the
success of the plan.
D. /o scope for $ias or favoritism7 The principles set under the incentive plan should $e $ased on
o$8ectivit! and should $e no scope for $iasness in the same.
E. +imple to operate 7 The incentive plan should not involve complex and difficult calculations.
I.. -eneficial to $oth the workers and the management 7 The incentive plan should $e useful to
$oth the workers and the management. It should $e cost effective from managements
perspective and from workers; point of view# it should offer supplementar! returns $$for the
extra efforts made $! them.
K. *edressing grievances 7 ,rievances and complaints are su$8ect to arise whenever an!
incentive plan is vague in its description. %roper machiner! should $e installed for the rapid
treatment of all such complaints.
Industrial Relations
Meaning of Industr!' The word Industr! is made from ?atin word industrius meaning
industrious# diligent.
+ection C182 of the industrial disputes 9ct defines74 industr!6 means an! $usiness #trade#
undertaking# or calling of emplo!ers and includes an! calling# service# emplo!ment# handicraft#
or industrial occupation or avocation of workmen.
9n undertaking where capital and la$our co7operate with each other for the purpose of producing
wealth and for earning profits is known as Industr!.
Concept o$ Industrial Relations#
The term Industrial *elations consist of two terms' Industr! and *elations. 4Industr!6 refers
to 4an! productive activit! in which an individual 1or a group of individuals2 is 1are2 engaged6.
4relations6 it means 4the relationships $etween the emplo!er and his emplo!ee that exist within
the industr!.6
The term industrial relations elucidates the relationship among emplo!ees and management
which grows directl! or indirectl! from union7emplo!er relationship.
Industrial relation is an art of living togeter for te !ur!ose of !rodu"tion#
$%&'enr(
9s per International ?a$or Argani"ation 1I?A2 Industr! relations are the relations of all those
engaged in productive work including industr!# commerce# finance# agriculture# mining#
transport and other services.
0eterminants
1i2 Institutional factors
1ii2 >conomic factors
1iii2 Technological (actors
Institutional factors consist of elements such as state polic!# la$our laws# codes of conduct#
collective agreements# la$our unions#communit!# caste# 8oint famil!# creed# s!stem of $eliefs#
etc# attitudes of work# s!stems of power status# relative proximit! to the centers of power=
motivation and influence and industrial relations.
>conomic factors comprises of following criterias' socialist# capitalist# communist# individual
ownership# compan! ownership# government ownership# control of la$our and emplo!ers# the
nature and composition of the la$our force and the $asis of suppl! and demand in the la$our
market.
Technological factors consist of the techni.ues of production# moderni"ation and rationalisation
schemes# capital structures etc.
!"ectives o$ Industrial Relations
To safe guard the interests of all the parties.
To avoid and minimi"e industrial conflict
To raise productivit!
To esta$lish government control on the functioning of the organi"ation.
>nhancing the interest of the workers in the industries in which the! are emplo!ed
To $ring $etter understanding and mutual cooperation $etween emplo!ers and workers
To set up a proper channel of communication $etween workers and management
To administer and ensure constructive contri$ution of trade unions.
Actors in Industrial Relations
Workers 1Trade Gnion2
,overnment 1+ociet!2
>mplo!ers 1 >mplo!ers 9ssociation2
7ene$its o$ 9ealth/ Industrial Relations
R Gninterrupted production 03ealth! industrial relations ensures that there is mutual harmon! in
the organi"ation which in turn leads towards the continuit! of production. The resources are
optimall! utili"ed $ecause of which maximum possi$le production run and economies of scale
are achieved.
R *eduction in Industrial )isputes 0 ,ood harmonious relations reduce the occurences industrial
disputes. Industrial unrest activities such as strikes# lockouts# go7slow tactics# gherao and
grievances do not $oom in an organi"ation if there is an atmosphere of industrial peace. It helps
promoting co7operation and increasing production.
R 3igh morale 0>mplo!ees consider the organi"ation as their famil! and work with great
enthusiasm and "eal to achieve efficienc! with effectiveness. Inclusive unit! of thought and
action is the main accomplishment of industrial peace. It naturall! and logicall! affects
production $ecause strong and small co7operative efforts alone can fa$ricate great results.
R Mental *evolution 0The industrial peace $eholds ultimatel! in a transformed outlook on the
part of emplo!er as well as emplo!ee when $oth the parties are adapta$le and read! for changes.
-oth the parties should consider themselves as partners of the industr! and the role of workers in
such a partnership should $e identified and praised. Workers must also recogni"e the authorit!
of emplo!er.
R *educed Wastage 0 ,ood industrial relations will help in increasing production as their will
not $e an! conflicts and grievances in the mind of workers# moreover the! will treat the
organi"ation as their own famil! resulting in reduction of wastages of man# material and
machines and thus national interest will $e protected.
Industrial 0isputes
Causes $ Industrial 0isputes
The causes of industrial disputes can $e largel! classified into two categories' economic and non7
economic causes. The economic cause includes issues relating to compensation i.e wages# $onus#
allowances# and conditions for work# working hours1durations2# leave and holida!s without pa!#
la!offs and retrenchments. The non economic factors will include unfair treatment with workers#
ill treatment $! staff mem$ers# s!mpathetic strikes# political factors# indiscipline etc.
+trikes
Trade unions and other la$or associations use strike as an significant weapon to get their
demands accepted $! the management. +uspension of work is done $! a group of workers for the
sole o$8ective of $ringing the pressure on their emplo!er to get their demands accepted $! the
top authorit!. +trike is said to occur when workers collectivel! cease the work in a particular
industr!
9ccording to Industrial )isputes 9ct BNEL# a strike is 4a cessation of work $! a $od! of persons
emplo!ed in an industr! acting in com$ination= or a concerted refusal of an! num$er of persons
who are or have $een so emplo!ed to continue to work or to accept emplo!ment= or a refusal
under a common understanding of an! num$er of such persons to continue to work or to accept
emplo!ment6.
Causes o$ strikes#
+trikes can occur $ecause of the following reasons'
R )issatisfaction with compan! polic!
R +alar! and incentive pro$lems
R Increment not provided as per the compan! policies.
R Gnlawful discharge or dismissal of workmen
R Withdrawal of an! concession or privilege
R Working hours and rest intervals
R ?eaves with pa! and holida!s
R -onus# %rovident fund and gratuit!
R *etrenchment of workmen and closure of esta$lishment s
(:P'S 6 S(RI&'
B. >conomic +trike'. In these kinds of strike# workers stop their work and ask for increase in
wages# traveling allowance# house rent allowance# dearness allowance# $onus and other facilities
etc.
C. +!mpathetic +trike' The mem$ers of other trade unions engage themselves in a strike to
support or state their s!mpath! with the mem$ers of unions who are on strike in other
undertakings and this t!pe of strike is called a s!mpathetic strike.
D. ,eneral +trike' Mem$ers of all or most of the unions in a region or an industr! go on strike to
enforce their demands common to all the workers working in the specific industr! or area.. The!
are t!picall! planned to $uild political pressure on the ruling government# rather than on an! one
emplo!er.
E. +it down +trike' In +it )own +trike #workers do not make themselves a$sent from their place
of work when the! are on strike $ut do not work# moreover the! keep control over production
facilities. +uch a strike is also known as ;pen down; or ;tool down; strike. It makes ver! difficult
for emplo!er to def! the union and take the workers; places as the workers den! to leave the
workplace.
I. +low )own +trike' In this t!pe of strike# emplo!ees remain on their 8o$s# do not stop work#
$ut confine the rate of production in a planned manner. The! take up go7slow tactics and strateg!
to create pressure on the emplo!ers.
K. +ick7out 1or sick7in2' When all or a ma8orit! of union mem$ers entitle themselves as sick on
the same da! than it is referred as +ick7Aut strike. The! dont $reak an! rules are not $roken as
the workers have consumed the leave which was allotted to them on the same da!.
L. Wild cat strikes' The strikes which are conducted $! workers or emplo!ees without the
authorit! and consent of unions are referred as Wild cat strikes.
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Lockouts
9 work stoppage in which an emplo!er prevents emplo!ees from working is known as lockout.
It is affirmed $! emplo!ers to create pressure on their workers. Thus# a lockout is emplo!ers
weapon while a strike is raised on part of emplo!ees. 9cc to Industrial )isputes 9ct BNEL# lock7
out means the temporar! closing of a place of emplo!ment or the suspension of work or the
refusal $! an emplo!er to continue to emplo! an! num$er of persons emplo!ed $! him.
Picketing
%icketing is the situation when workers are dissuaded from work $! allocating certain mem$ers
of workers union#at the factor! gates. %icketing is lawful if it does not engage an! violence.
%ickets are workers who are on strike and who have agreed to stand at the entrance to their
workplace. It is mainl! a techni.ue of catching pu$lic notice towards the fact that there is a
dispute $etween the management and emplo!ees.
*herao
In 3indi# ,herao means to enclose or surround. It refers to a collective action initiated $! a
group of workers in which mem$ers of the management are for$idden from leaving the industrial
esta$lishment site $! workers who o$struct the exit gates $! forming human $arricades. The
main o$8ective $ehind gherao is to impose ph!sical and mental torture to the persons $eing
gheraoed and therefore this weapon distur$s the industrial peace to a greater extent.
Measures 6or Improving Industrial Relations
The following measures should $e taken to achieve good industrial relations'
R +trong and +tead! Gnion' 9 strong and sta$le union in each industrial venture represents the
ma8orit! of workers and in turn it is a$le to negotiate a$out the terms and conditions of service
with the management .
R Mutual Trust' Management and la$or should facilitate to develop an atmosphere of mutual
cooperation# poise# harmon! and respect. Management must take up a progressive viewpoint and
should $e ac.uainted with the rights of workers# likewise la$or unions should convince their
mem$ers to work for the common o$8ectives of the organi"ation.
R Workers %articipation in Management' The contri$ution of workers in the management of the
industrial entit! should $e encouraged $! making effective use of works committees# 8oint
discussion and other methods. This will lead towards improving commuication $etween
managers and workers# resulting in increased productivit! with greater effectiveness.
R Mutual 9ccommodation. The emplo!ers must recogni"e the right of collective $argaining of
the trade unions. >mphasis must $e vested on mutual accommodation rather than on conflict.
R Implementation of 9greements. The management should genuinel! emplo! the settlements
agreed upon with the trade unions. The agreements $etween the management and the unions
should $e enforced $oth in written and spirit.
R +ound %ersonnel %olicies' %olicies must $e formulated in discussion with the workers and their
representatives. There ought to $e no confusion and misunderstanding in the mind of an!$od!
and implementation of the policies should $e consistent throughout the organi"ation to make
certain fair treatment to each worker.
R ,overnments *ole' The ,overnment must pla! an important and active role for promoting
industrial peace. It should make law and order for the necessar! acknowledgment of a
representative union in each industrial entit!. It should intrude to settle disputes if the
management and the workers are incapa$le in settling their disputes.
R %rogressive Autlook' 9 progressive outlook of the management should $e maintained in each
of the industrial enterprise. It should $e aware of its o$ligations and responsi$ilities to the owners
of the $usiness# the emplo!ees# the consumers#societ! and the nation. The management must $e
ac.uainted with the rights of workers to organi"e and s!stemati"e unions and to protect their
economic and social interests.
@G>+TIA/+
B. What is marketingS )istinguish $etween marketing and selling.
C. What is market segmentationS )escri$e the $ases on which a market can $e segmented $! a
small scale entrepreneur.
D. What is marketing mixS >xplain its main components.
E. >xplain the importance of marketing for a small scale enterprise.
I.)iscuss the factor influencing of wage and salar!.
K.What are the 5omponents of Wage 9nd +alar! S
L.)efine advertising. What are its important featuresS
M.What the advantages of incentivesS
N.)iscuss the various allowances# $riefl!.
BH. )efine the term Industrial *elations.
BB. What measures should $e implemented $! an organi"ation to improve industrial relations.