Learning Curve…

Archive for September 2011

MB0047 : a. Bring out the relationship between AI and Neural Network.
 b. what is the difference between DSS and ES?

      Answer: – Artificial Intelligence and Neural Networks

Artificial intelligence is a field of science and technology based on disciplines such as computer science, biology, psychology, linguistics, mathematics and engineering. The goal of AI is to develop computers that can simulate the ability to think, see, hear, walk, talk and feel. In other words, simulation of computer functions normally associated with human intelligence, such as reasoning, learning and problem solving.

Neural network software can learn by processing sample problems and their solutions. As neural nets start to recognize patterns, they can begin to program themselves to solve such problems on their own.

Neural networks are computing systems modeled after the human brain’s mesh like network of interconnected processing elements, called neurons. The human brain is estimated to have over 100 billion neuron brain cells. The neural networks are lot simpler in architecture. Like the brain, the interconnected processors in a neural network operate in parallel and interact dynamically with each other.

This enables the network to operate and learn from the data it processes, similar to the human brain. That is, it learns to recognize patterns and relationships in the data. The more data examples it receives as input, the better it can learn to duplicate the results of the examples it processes. Thus, the neural networks will change the strengths of the interconnections between the processing elements in response to changing patterns in the data it receives and results that occur.

For example, neural network can be trained to learn which credit characteristics result in good or bad loans. The neural network would continue to be trained until it demonstrated a high degree of accuracy in correctly duplicating the results of recent cases. At that point it would be trained enough to begin making credit evaluations of its own.

A neural network is designed to simulate a set of neurons, usually connected by synapses. Each neuron makes a simple decision based on its other input synapses, and places the decision on its output synapses. This model mimics the behavior of a brain, and is considered vital to create a true learning system, though modern computers (barring super-computers) do not have the computational resources to execute a neural network with a sufficient number of nodes to be useful (you would need at least a few million neurons firing in unison to be useful).
Artificial intelligence, of course, is software that is designed to pretend like it’s a living, thinking creature. Older implementations were not learning systems, but rather would take input and offer a conditioned response provided by the programmer ahead of time. These systems seemed to be highly intelligent, so long as you did not leave its realm of preplanned responses. Newer AI systems learn by interacting with the user (for example, remembering their favorite color or music artist), and can sometimes even figure out correlated data based on this information.

However, current AI systems tend to still have limited spheres of knowledge, and without external learning sources, cannot make any intelligent responses or decisions outside this realm of information. The missing component, of course, is a system that is capable of learning information and incorporating what it learns into its current knowledge base. Neural networks hold the promise of bridging this gap in the “learning curve” that AI systems have by allowing the AI to actually learn topics that were not covered during its original “training” or “programming.”

The relationship between these two technologies could be said to be symbiotic in nature; both of these can be implemented without the other (i.e. a NN could be used inside a coffee maker for some advanced coffee-making logic, and an AI can certainly use other sources of information to make valid responses), but the combination of the two would allow for a more realistic AI that would be capable of learning data by making correlations between seemingly unrelated data (which is how humans learn, coincidentally).

Different between expert system and decision support system

  1. DSS aid in problem solving by allowing for manipulation of data & models whereas ES allow experts to ‘teach’ computers about their field so that the system may support more of the decision making process for less expert decision makers.
  2. DSS most often contain equations that the system uses to solve problems or update reports immediately, and the users makes the final decisions on the basis of the information whereas an expert system works from a much larger set of modeling rules, uses concepts from AI to process and store the knowledge base & scans base to suggest a final decision through inference.
  3. DSS only supports the decision making process & a human user is required to weigh all the factors in making a decision whereas ES must acquire knowledge from an expert and apply a large but standard set of probability based rules to make a decision in a specific problem setting.

MB0047 : Explain ERP in detail.
Answer: – Enterprise Resource Planning

Manufacturing management systems have evolved in stages over the few decades from a simple means of calculating materials requirements to the automation of an entire enterprise. Around 1980, over-frequent changes in sales forecasts, entailing continual readjustments in production, as well as the unsuitability of the parameters fixed by the system, led MRP (Material Requirement Planning) to evolve into a new concept : Manufacturing Resource Planning (or MRP2) and finally the generic concept Enterprise Resource Planning (ERP)

The initials ERP originated as an extension of MRP (material requirements planning then manufacturing resource planning). ERP systems now attempt to cover all basic functions of an enterprise, regardless of the organization’s business or charter. Non-manufacturing businesses, non-profit organizations and governments now all utilize ERP systems.

To be considered an ERP system, a software package must provide the function of at least two systems. For example, a software package that provides both payroll and accounting functions could technically be considered an ERP software package.

Examples of modules in an ERP which formerly would have been stand-alone applications include: Manufacturing, Supply Chain, Financials, Customer Relationship Management (CRM), Human Resources, Warehouse Management and Decision Support System.

ERP Advantages and Disadvantages

Advantages – In the absence of an ERP system, a large manufacturer may find itself with many software applications that do not talk to each other and do not effectively interface. Tasks that need to interface with one another may involve:

  1. A totally integrated system
  2. The ability to streamline different processes and workflows
  3. The ability to easily share data across various departments in an organization
  4. Improved efficiency and productivity levels
  5. Better tracking and forecasting
  6. Lower costs
  7. Improved customer service

Change how a product is made, in the engineering details, and that is how it will now be made. Effective dates can be used to control when the switch over will occur from an old version to the next one, both the date that some ingredients go into effect, and date that some are discontinued. Part of the change can include labeling to identify version numbers.

Some security features are included within an ERP system to protect against both outsider crime, such as industrial espionage, and insider crime, such as embezzlement. A data tampering scenario might involve a disgruntled employee intentionally modifying prices to below the breakeven point in order to attempt to take down the company, or other sabotage

Disadvantages – Many problems organizations have with ERP systems are due to inadequate investment in ongoing training for involved personnel, including those implementing and testing changes, as well as a lack of corporate policy protecting the integrity of the data in the ERP systems and how it is used.

While advantages usually outweigh disadvantages for most organizations implementing an ERP system, here are some of the most common obstacles experienced:

Usually many obstacles can be prevented if adequate investment is made and adequate training is involved, however, success does depend on skills and the experience of the workforce to quickly adapt to the new system.

  1. Customization in many situations is limited
  2. The need to reengineer business processes
  3. ERP systems can be cost prohibitive to install and run
  4. Technical support can be shoddy
  5. ERP’s may be too rigid for specific organizations that are either new or want to move in a new direction in the near future.

The Ideal ERP System

An ideal ERP system is when a single database is utilized and contains all data for various software modules. These software modules can include:

a. Manufacturing: Some of the functions include; engineering, capacity, workflow management, quality control, bills of material, manufacturing process, etc.

b. Financials: Accounts payable, accounts receivable, fixed assets, general ledger and cash management, etc.

c. Human Resources: Benefits, training, payroll, time and attendance, etc

d. Supply Chain Management: Inventory, supply chain planning, supplier scheduling, claim processing, order entry, purchasing, etc.

e. Projects: Costing, billing, activity management, time and expense, etc.

f. Customer Relationship Management: sales and marketing, service, commissions, customer contact, calls center support, etc.

g. Data Warehouse: Usually this is a module that can be accessed by an organizations customers, suppliers and employees.

MB0047 : What are dataflow diagrams? Construct a DFD using the different conventions.

Answer: – A Data Flow Diagram (DFD) is a diagrammatic representation of the information flows within a system, showing:

  • how information enters and leaves the system,
  • what changes the information,
  • Where information is stored.

In SSADM a DFD model includes supporting documentation describing the information shown in the diagram. DFDs are used not only in structured system analysis and design, but also as a general process modeling tool. There are a number of commercial tools in the market today which are based on DFD modeling.

SSADM uses DFDs in three stages of the development process:

    • Current Physical DFDs. These record the results of conventional fact finding.
    • Current Logical DFDs. The logical information processing of the current system
    • Required Logical DFDs. The logical information processing requirements of the proposed system.

The DFD conventions:-

DFDs show the passage of data through the system by using 5 basic constructs: Data flows, Processes, Data Stores, External Entities, and Physical Resources.

  1. 1.      Data Flows

A data flow shows the flow of data from a source to a destination. The flow is shown as an arrowed line with the arrowhead showing the direction of flow. Each data flow should be uniquely identified by a meaningful descriptive name (caption).

Flow may move from an external entity to a process, from a process to another process, into and out of a store from a process, and from a process to an external entity. Flows are not permitted to move directly from an external entity to a store or from a store directly to an external entity.

  1. 2.      Processes

Processes are transformations, changing incoming data flows into outgoing data flows. Processes are drawn as rectangular boxes with a descriptive name occupying the middle of the box. The box has a top stripe that contains an identification number in the left, and the location (or the role carrying out the work) on the right (this is optional and used only in the current physical DFD).

The numbering generally follows a left to right convention. This does not indicate priority or sequence. The identification number is purely an identifier. It also helps to associate a high level process with its decomposed sub processes.

The name of the process should describe what happens to the data as it passes through it. An active verb (verify, compute, extract, create, retrieve, store, determine, etc.) followed by an object or object clause is a suggested notation.

  1. 3.      Data Stores

A store is a repository of data; it may be a card index, a database file, a temporary pile of sales orders awaiting processing, or a folder in a filing cabinet. The store may contain permanent data or temporary accumulations (pending documents, daily movements).

A store is represented by an open-ended box and is given a meaningful descriptive name. Each store is also given a reference number prefixed by a letter. In logical and required system DFD, data stores are regarded as computerized and hence only a ‘D’ will be used. Some transient stores may remain and retain the ‘T’.

To prevent a DFD becoming ‘spider’s web’ of crossing lines, the same data store may be included more than once on a DFD. Such duplication is shown by an additional vertical line within the store symbol.

  1. 4.      External Entities (Source or Sink)

The external entity represents a person or a part of an organization which sends or receives data from the system but considered to be outside the system boundary (scope of the project). As with the data stores these may be duplicated on a DFD to simplify presentation. External entities may be further referenced by the use of an alpha character, and this is particularly recommended if at a lower level the entity is being decomposed.

Sometimes external entities are referred to as sources and sinks. An External entity either supplies data to the system, which makes it a source and /or receives data from the system, which makes it a sink.

  1. 5.      Physical Resources

 A physical flow represents the flow of material (as opposed to data flows representing the flow of information), the movement of some resources or goods which are relevant to the information system, from source to destination. They are included to aid communication. A physical flow is represented by a broad arrow. The resource store is represented by a closed rectangle.

MB0047 a. Explain Scott Morton five levels of complexity.

b. Explain objects and its behavior with an example.

Answer: – Scott Morton five levels

 Scott Morton proposes five levels of complexity at which reconfiguration can be applied. The following five levels indicate how it is possible to reconfigure strategic information system based on the influence of IT.

1. Localized exploitation – This is part of the Evolutionary level and exists within individual business functions. It addresses the local efficiency and effectiveness of a information system.

2. Internal integration – this is part of the evolutionary level and exists between different systems and applications. It evolves out of rationalization using a common IT platform. Efficiency and effectiveness are enhanced by coordination and cooperation within the enterprise;

3. Business process redesign – This is part of the revolutionary level. It involves more thorough re-evaluation of the enterprise value-chain and the production process.

4. Business network redesign – This is also part of the revolutionary level. It involves reconfiguration of the scope and tasks of the business network. It also helps in the creation and delivery of products and services. Coordination and cooperation extend, selectively, beyond the enterprise’s boundaries; and

5. Business scope redefinition – It is also part of the revolutionary level. It involves migration of functions across the enterprise’s boundaries. It may change the organization’s conception of the business.


 Objects and its behavior

Objects are key to understanding object-oriented technology. If we look around and we can find many examples of real-world objects: dog, desk, television set, and bicycle.

Real-world objects share two characteristics: They all have state and behavior. Dogs have state (name, color, and breed, hungry) and behavior (barking, fetching, wagging tail). Bicycles also have state (current gear, current pedal cadence, and current speed) and behavior (changing gear, changing pedal cadence, applying brakes). Identifying the state and behavior for real-world objects is a great way to begin thinking in terms of object-oriented programming.

Software objects are conceptually similar to real-world objects: they too consist of state and related behavior. An object stores its state in fields (variables in some programming languages) and exposes its behavior through methods (functions in some programming languages). Methods operate on an object’s internal state and serve as the primary mechanism for object-to-object communication. Hiding internal state and requiring all interaction to be performed through an object’s methods is known as data encapsulation — a fundamental principle of object-oriented programming.

Consider a bicycle, for example:

By attributing state (current speed, current pedal cadence, and current gear) and providing methods for changing that state, the object remains in control of how the outside world is allowed to use it. For example, if the bicycle only has 6 gears, a method to change gears could reject any value that is less than 1 or greater than 6.

Bundling code into objects provides a number of benefits, including:

  1. Modularity: The source code for an object can be written and maintained independently of the source code for other objects. Once created, an object can be easily passed around inside the system.
  2. Information-hiding: By interacting only with an object’s methods, the details of its internal implementation remain hidden from the outside world.
  3. Code re-use: If an object already exists (perhaps written by another software developer), you can use that object in your program. This allows specialists to implement/test/debug complex, task-specific objects, which you can then trust to run in your own code.
  4. Plug ability and debugging ease: If a particular object turns out to be problematic, you can simply remove it from your application and plug in a different object as its replacement. This is analogous to fixing mechanical problems in the real world. If a bolt breaks, you replace it, not the entire machine.

 MB0047 :  Explain in detail the type of information system with an example each.

 An information system is a collection of hardware, software, data, people and procedures that are designed to generate information that supports the day-to-day, short-range, and long-range activities of users in an organization.  Information systems generally are classified into five categories:  office information systems, transaction processing systems, management information systems, decision support systems, and expert systems.  The following sections present each of these information systems.

1. Office Information Systems

An office information system, or OIS (pronounced oh-eye-ess), is an information system that uses hardware, software and networks to enhance work flow and facilitate communications among employees.  Win an office information system, also described as office automation; employees perform tasks electronically using computers and other electronic devices, instead of manually.  With an office information system, for example, a registration department might post the class schedule on the Internet and e-mail students when the schedule is updated.  In a manual system, the registration department would photocopy the schedule and mail it to each student’s house.

 An office information system supports a range of business office activities such as creating and distributing graphics and/or documents, sending messages, scheduling, and accounting.  All levels of users from executive management to no management employees utilize and benefit from the features of an OIS.

The software an office information system uses to support these activities include word processing, spreadsheets, databases, presentation graphics, e-mail, Web browsers, Web page authoring, personal information management, and groupware.  Office information systems use communications technology such as voice mail, facsimile (fax), videoconferencing, and electronic data interchange (EDI) for the electronic exchange of text, graphics, audio, and video.  An office information system also uses a variety of hardware, including computers equipped with modems, video cameras, speakers, and microphones; scanners; and fax machines.

 2. Transaction Processing Systems

 A transaction processing system (TPS) is an information system that captures and processes data generated during an organization’s day-to-day transactions.  A transaction is a business activity such as a deposit, payment, order or reservation.

Clerical staff typically performs the activities associated with transaction processing, which include the following:

1.          Recording a business activity such as a student’s registration, a customer’s order, an employee’s timecard or a client’s payment.

2.         Confirming an action or triggering a response, such as printing a student’s schedule, sending a thank-you note to a customer, generating an employee’s paycheck or issuing a receipt to a client.

3.          Maintaining data, which involves adding new data, changing existing data, or removing unwanted data.

Transaction processing systems were among the first computerized systems developed to process business data – a function originally called data processing.  Usually, the TPS computerized an existing manual system to allow for faster processing, reduced clerical costs and improved customer service.

The first transaction processing systems usually used batch processing.  With batch processing, transaction data is collected over a period of time and all transactions are processed later, as a group.  As computers became more powerful, system developers built online transaction processing systems.  With online transaction processing (OLTP) the computer processes transactions as they are entered.  When you register for classes, your school probably uses OLTP.  The registration administrative assistant enters your desired schedule and the computer immediately prints your statement of classes.  The invoices, however, often are printed using batch processing, meaning all student invoices are printed and mailed at a later date.

Today, most transaction processing systems use online transaction processing.  Some routine processing tasks such as calculating paychecks or printing invoices, however, are performed more effectively on a batch basis.  For these activities, many organizations still use batch processing techniques.

3. Management Information Systems

While computers were ideal for routine transaction processing, managers soon realized that the computers’ capability of performing rapid calculations and data comparisons could produce meaningful information for management.  Management information systems thus evolved out of transaction processing systems.  A management information system, or MIS (pronounced em-eye-ess), is an information system that generates accurate, timely and organized information so managers and other users can make decisions, solve problems, supervise activities, and track progress.  Because it generates reports on a regular basis, a management information system sometimes is called a management reporting system (MRS).

Management information systems often are integrated with transaction processing systems.  To process a sales order, for example, the transaction processing system records the sale, updates the customer’s account balance, and makes a deduction from inventory.  Using this information, the related management information system can produce reports that recap daily sales activities; list customers with past due account balances; graph slow or fast selling products; and highlight inventory items that need reordering.  A management information system focuses on generating information that management and other users need to perform their jobs.

An MIS generates three basic types of information:  detailed, summary and exception.  Detailed information typically confirms transaction processing activities.  A Detailed Order Report is an example of a detail report.  Summary information consolidates data into a format that an individual can review quickly and easily.  To help synopsize information, a summary report typically contains totals, tables, or graphs.  An Inventory Summary Report is an example of a summary report.

Exception information filters data to report information that is outside of a normal condition.  These conditions, called the exception criteria, define the range of what is considered normal activity or status.  An example of an exception report is an Inventory Exception Report is an Inventory Exception Report that notifies the purchasing department of items it needs to reorder.  Exception reports help managers save time because they do not have to search through a detailed report for exceptions.  Instead, an exception report brings exceptions to the manager’s attention in an easily identifiable form.  Exception reports thus help them focus on situations that require immediate decisions or actions.

4. Decision Support Systems

Transaction processing and management information systems provide information on a regular basis.  Frequently, however, users need information not provided in these reports to help them make decisions.  A sales manager, for example, might need to determine how high to set yearly sales quotas based on increased sales and lowered product costs.  Decision support systems help provide information to support such decisions.

A decision support system (DSS) is an information system designed to help users reach a decision when a decision-making situation arises.  A variety of DSSs exist to help with a range of decisions. 

A decision support system uses data from internal and/or external sources.

Internal sources of data might include sales, manufacturing, inventory, or financial data from an organization’s database.  Data from external sources could include interest rates, population trends, and costs of new housing construction or raw material pricing.  Users of a DSS, often managers, can manipulate the data used in the DSS to help with decisions.

Some decision support systems include query language, statistical analysis capabilities, spreadsheets, and graphics that help you extract data and evaluate the results.   Some decision support systems also include capabilities that allow you to create a model of the factors affecting a decision.  A simple model for determining the best product price, for example, would include factors for the expected sales volume at each price level.  With the model, you can ask what-if questions by changing one or more of the factors and viewing the projected results.  Many people use application software packages to perform DSS functions.  Using spreadsheet software, for example, you can complete simple modeling tasks or what-if scenarios.

A special type of DSS, called an executive information system (EIS), is designed to support the information needs of executive management.  Information in an EIS is presented in charts and tables that show trends, ratios, and other managerial statistics.  Because executives usually focus on strategic issues, EISs rely on external data sources such as the Dow Jones News/Retrieval service or the Internet.  These external data sources can provide current information on interest rates, commodity prices, and other leading economic indicators.

To store all the necessary decision-making data, DSSs or EISs often use extremely large databases, called data warehouses.  A data warehouse stores and manages the data required to analyze historical and current business circumstances.

 5.  Expert Systems

An expert system is an information system that captures and stores the knowledge of human experts and then imitates human reasoning and decision-making processes for those who have less expertise.  Expert systems are composed of two main components:  a knowledge base and inference rules.  A knowledge base is the combined subject knowledge and experiences of the human experts.  The inference rules are a set of logical judgments applied to the knowledge base each time a user describes a situation to the expert system.

Although expert systems can help decision-making at any level in an organization, no management employees are the primary users who utilize them to help with job-related decisions.  Expert systems also successfully have resolved such diverse problems as diagnosing illnesses, searching for oil and making soup.

Expert systems are one part of an exciting branch of computer science called artificial intelligence.  Artificial intelligence (AI) is the application of human intelligence to computers.  AI technology can sense your actions and, based on logical assumptions and prior experience, will take the appropriate action to complete the task.  AI has a variety of capabilities, including speech recognition, logical reasoning, and creative responses.

Experts predict that AI eventually will be incorporated into most computer systems and many individual software applications.  Many word processing programs already include speech recognition.

6.      Integrated Information Systems

With today’s sophisticated hardware, software and communications technologies, it often is difficult to classify a system as belonging uniquely to one of the five information system types discussed.  Much of today’s application software supports transaction processing and generates management information.  Other applications provide transaction processing, management information, and decision support. 

MB0047 : a. What are the characteristics of MIS?
b. what is the impact of MIS on Managerial performance.

Answer: – MIS characteristics

  1. It supports transaction handling and record keeping.
  2. It is also called as integrated database Management System which supports in major functional areas.
  3. It provides operational, tactical, and strategic level managers with east access to timely but, for the most, structured information.
  4. It supports decision –making function which is a vital role of MIS.
  5. It is flexible which is needed to adapt to the changing needs of the organization.
  6. It promotes security system by providing only access to authorized users.
  7. MIS not only provides statistical and data analysis but also works on the basis on MBO (management by objectives). MIS is successfully used for measuring performance and making necessary change in the organizational plans and procedures. It helps to build relevant and measurable objectives, monitor results, and send alerts.
  8. Coordination: MIS provides integrated information so that all the departments are aware of the problem and requirements of the other departments. This helps in equal interaction of the different centers and connects decision centers of the organization.
  9. Duplication of data is reduced since data is stored in the central part and same data can be used by all the related departments.
  10. MIS eliminates redundant data.
  11. It helps in maintaining consistency of data. It is divided into subsystems. Handlings with small systems are much easier than an entire system. This helps in giving easy access of data, accuracy and better information production.
  12. MIS assembles, process, stores, Retrieves, evaluates and disseminates the information.


Impact of MIS

Electronic communication increases the overall amount of communication within the organization. You can find the following advantages obtained from MIS.

a) Quicker information availability

b) Anytime anywhere access to information

c) Promotes non redundancy

d) Quick decision-making

e) Fast actions undertaken

f) Effective productivity

g) Reduced transaction rate

Information can be stored, retrieved, and communicated far more easily and effectively. There is an enormous role of information technology (IT) on operations. The following can be the examples you can list for the areas in which MIS is used. When you go to any vendor and ask for catalogues of the product then smart catalogues and databases for simpler customer/ vendor will help you and the vendor in coordination. When you are travelling or driving, the transponder-equipped vehicles can re-route you in real time. Voice-recognition systems for greater warehouse inventory accuracy, collaborative editing of graphics documents by geographically-remote individuals, and even electronic storage/retrieval of documents to reduce volume. You will see the texts and images in electronic forms are effective in communicating ideas from source to destination. When you access money through your credit cards, ATM cards, smart cards you can find that it is technology driven which revolves around wireless electronic gadgets, internet and money cards. When you use it for your identity proof it is your identity cards that detect you from the list of users.

A computerized management information system (MIS) in all registered clients, counseling sessions, and all medical visits provided to the clients with respect to hospital management system of any major hospitals. Non-computerized data from previous years only documented the number and location of counseling sessions while the new MIS provides much more specific and detailed data. The impact of computer-based information systems on manager’s work reflects decisions made by managers themselves about how the technology is used. The impact of MIS is not an individually stable and predictable. As a manager at any organization you can use non linear on-going process of change that evolves over time and situations. In an organization you can develop a system, shape it and also react it to any different way.

MIS in the field of education system also playing a very significant role where we come across usage of LCDs, Smart boards, internet etc in class rooms. In the traffic control system, an Intelligent Transportation System (ITS) disseminates real-time traffic information to travelers. It helps travelers in making their route choice decisions based on the traffic congestion information and make proper decision making in predicting the traffic congestion and choosing the right choice. In the tourism MIS has led to radical changes in booking system, tourist information system, hotel facilities, accommodation facilities, transportation modes available, images of the facilities that could be provided etc.

We cannot limit the impact of MIS to some specific areas. It has wide range of applications and has a unique impact on each system. Now, MIS has become very important fact of all the information systems that we cannot view any system without MIS.

MB0046  : a) Give a note on Product mix pricing strategies.
b) What is Brand development? How is it done?

Answer: –

Note on Product mix pricing strategies

The product mix is the collection of products and services that a company chooses to offer its market. When the product is a part of product-mix, there are five kinds of strategies involved

1. Product Line pricing: Strategy of setting the price for entire product line. Marketer differentiates the price according to the range of products, i.e. suppose the company is having three products in low, middle and high end segment and prices the three products say at Rs 10 Rs 20 and
Rs 30 respectively.

The three levels of differentiation create three price points in the mind of consumer. The task of marketer is to establish the perceived quality among the three segments. If the customers do not find much difference between the three brands, he/she may opt for low end products.

2. Optional Product pricing: this strategy is used to set the price of optional or accessory products along with a main product.

Organizations separate these products from main product so that customer should not perceive products are costly. Once the customer comes to the show room, organization explains the advantages of buying these accessory products.

3. Captive product pricing: Setting a price for a product that must be used along with a main product. For example, Gillette sells low priced razors but make money on the replacement cartridges.

4. By-product pricing: It is determining the price for by-products in order to make the main product’s price more attractive. For example, L.T. Overseas, manufacturers of Dawaat basmati rice, found that processing of rice results in two by-products i.e. rice husk and rice brain oil. If the company sells husk and brain oil to other consumers, then company is adopting by-product pricing.

5. Product bundle pricing: It is offering companies several products together as a bundle at the reduced price. This strategy helps companies to generate more volume, get rid of the unused products and attract the price conscious consumer. This also helps in locking the customer from purchasing the competitors’ products. For example, Anchor toothpaste and brush are offered together at lower prices.

Brand development

Company can develop the brand on the basis of product category and brand name. Some of the different strategies adopted by companies to develop the brands are as follows:

1. Line extension: Company uses its well known brand name to introduce additional items in a given product category such as new forms, flavours, ingredients or package sizes.

For example, Karnataka Milk Federation, uses its top brand name Nandini, to introduce new items like toned milk, full cream milk , curd and milk powder.

It is less risky and requires fewer investments to introduce the product. In the above example Nandini used the extension to meet the excess capacity that it has. The milk procurement was more than the demand from the customer. Hence it started producing the milk powder. But all the products introduced need not to be successful in the market. In case of KMF, Nandini ice creams didn’t click in the market. Another risk of line extension is brand cannibalization, i.e. company’s brand/items compete with each other.

2. Brand extension: A strategy in which company uses one of its familiar brand names for new product category’s items. For example, United Breweries (UB) Limited group used its flagship brand Kingfisher to different categories. Kingfisher was originally a beer brand extended to airlines.

Brand extension gives instant recognition to the brand. In the above example, people required very little time to know Kingfisher airline brand, because parent brand was very well known. Brand extension may hurt the parent brand reputation in the market if it fails.

3. Multi brands: The technique of introducing the product or items in existing product category with a new brand name.

For example, Hindustan Unilever uses different brand names for their home and personal care category. The above example shows us that HUL have Breeze, Dove, Liril, Lux, Lifebuoy and Pears in the bath soap segment itself. It helps the company to come out with new features in the product or product category. Organizations adopt this strategy to avoid brand cannibalization in the given category. The major disadvantage of this strategy is that none of the brands will enjoy major market share and result in lesser profitability.

4. New brands: The strategy indicates coming out with new brands for new category products. In this strategy, company believes that existing brands cannot be extended to the new category. The new brand strategy requires huge resources to build it. The new category, if it already has some brands of other companies, investment requirement will go up. For example, Hindustan Unilever launched Pure-It in the water purifier category. The category and brand are new to the company.


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