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The development of modern economics began in the 17th century. Since that time economists have developed methods for studying and explaining how individuals, businesses and nations use their available economic resources. The central problem of economics is to determine the most efficient ways to allocate the factors of production and solve the problem of scarcity created by society's unlimited wants and limited resources.
We can classify branches of economics according to the approach or methodology that is used. Many economists specialize in a particular branch of a subject. What distinguishes them is the segment of economic life in which they are interested. Labour economics deals with the problems of the labour market as viewed by firm’s employers, and society as a whole. Urban economics deals with city problems: land use, transport and housing.
Economists have two ways of looking at economics and the economy. One is the macro approach, and the other is the micro. Macroeconomics is the study of the economy as a whole; microeconomics is the study of individual consumers and the business firm.
Microeconomic analysis offers treatment of individual decisions about particular commodities or services. It is the study of the behaviour of people and organizations in particular markets. Microeconomics is concerned with things such as scarcity, choice and opportunity costs, and with production and consumption. Microeconomics gives principal emphasis to the study of prices. It looks at how prices are determined and how people respond to changes in the market (for example, changes in the demand for and the supply of products).
Microeconomics tends to offer a detailed treatment of one aspect of economic behaviour, but ignores interaction with the rest of economy in order to preserve the simplicity of the analysis.
Macroeconomics emphasizes the interactions in the economy as a whole. Macroeconomics examines the questions such as how fast the economy is running; how much overall output is being generated; how much total income is. It also seeks solutions to such macroeconomic problems as unemployment and inflation. Economic growth, employment and inflation are important factors that characterize the overall state of the economy and the efficiency of the available resources' utilization.
INFLATION
Inflation is generally defined as an increase in the average price level of goods and services overtime. The average price level may fall as well as rise. A decrease in average prices a deflation - occurs when price decreases on some goods and services outweigh price increases on all others.
Inflation varies considerably in its extent and severity, from mild inflation of a few percent each year to hyperinflation, which entails enormously high rates of inflation. Inflation rate is the annual rate of increase in the average price level. The absence of significant changes in the average price level is referred to as price stability. It is officially defined as a rale of inflation of less than 3 per cent.
Inflation leads to the redistribution, of income and wealth in the society, often, hurting people with little economic power (e.g. pensioners). It affects the country s balance or payments because exports become relatively, more expensive and therefore less competitive, and imports become relatively cheaper.
There are many causes of inflation, according to economists. Two of the most important are:
Two or the most common measures or inflation (inflation indicators) are the consumer price index (the CPI) and the producer price index (the PPI), also known as the wholesale price index. As the names suggest, the CPI measures the price of an average market basket of goods and services for an average family (household) over time, while the PPI measures changes in the prices businesses pay for goods and services over time.
Both inflation indicators are calculated monthly and published in business periodicals. The CPI is the most closely followed, because many companies and government programs base their salary and payment' increases on it. Governments use wage indexing to keep real wages at a high and inflationary level. The PPI usually indicates future consumer prices and is therefore a barometer of future inflation (expectational inflation).
BUSINESS CYCLES (unit 6)
The economy is a very complex system that is continuously developing. When economists describe changes in business activity they speak of business cycles and their phases, boom, contraction, recession, and expansion, also known as economic fluctuations.
The peak of the business cycle is called boom. During peak times business investments and consumer spending are at very high levels. Unemployment is low, consumers have plenty of money to spend and the demand for goods and services is increasing. Such situation leads to the increase in prices and sets stage for the next phase of business cycle - contraction. .
For any number of reasons consumers and businesses begin to reduce their spending. Firms begin to cut back their activities. Production is reduced and many workers are laid off. Workers, who are also consumers, begin to spend less. This leads to still more reductions in production and additional worker layoffs.
When enterprises are operating at less than their capacity and unemployment is at very high levels, the economy enters the period of decline. This is the bottom phase of the business cycle, the phase of recession. At this time the total output of goods and services declines and many businesses fail. Total spending also declines as income falls and unemployment rises. A very severe and long-lasting recession is called a depression.
After a period of recession the economy eventually begins to recover, entering the expansion phase of the business cycle. During the expansion period the conditions start to improve: businesses begin to expand their activities, workers are hired and unemployment declines. This leads to higher levels of consumer spending and still further expansion of employment, output and consumption.
In explaining business cycle fluctuations economists often distinguish between external and internal causes. External factors that lie outside the economic system affect the economy because of population changes, inventions and innovations, and other important political and social events. Internal causes are those within the economy and concern such factors as consumption, business investment, and government activities.
ECONOMIC STABILITY (unit 7)
The way to smooth out economic fluctuations and thus to stabilize the economy has not been found yet. To fight inflation and recession economists have developed two strategies: fiscal policy and monetary policy.
The term fiscal policy refers to the government efforts to keep economy stable by increasing or decreasing taxes and/or government spending. When taxes are reduced, individuals and businesses have more money to spend and thus the total spending begins to increase. Eventually the economy will enter the expansion phase. If taxes are increased, consumers and businesses have less money to spend and thus the total demand for goods and services will decline. The economy, in its turn, will contract, but inflation will be reduced.
Government raises taxes to spend more and more on social and defense programs. When the revenue from taxes is less than spending, the government has to cut spending to balance the budget that is to make income equal spending.
Fiscal-policies can provide effective means to fight recession and inflation. It is the responsibility of the government to time fiscal policies correctly and to apply them at the right moment.
Monetary policy refers to regulating the supply of money as the means to stabilize the economy. Monetary policy is the responsibility of the National Bank of the country. The National Bank is an independent institution and has a goal of keeping the economy stable, encouraging its growth without causing inflation.
When booming economy pushes up prices causing inflation the National bank can apply a tight monetary policy restricting the money supply and increasing interest rates. Less money is available for spending; businesses and consumers are discouraged from borrowing money because of high interest rates. Businesses cut back on production and lay off workers. This slows down the economy and lowers inflation. In the time of contraction and recession the National Bank may put more money into the economy and lower interest rates. These measures stimulate spending and encourage business expansion, which leads to the increase of employment.
Such interventions into free markets have serious consequences for businesses. That is why businesses follow the monetary policy very closely to see what it is now and will be in the future.
MEASURING ECONOMIC ACTIVITY (unit 8)
Measuring economic activity serves two functions: enables economists to identify economic problems and provides an objective basis for evaluating macroeconomic indicators.
All indicators of the overall state of the economy are based on a common measure called the gross national product (the GNP).
The gross national product is the total market value of final goods and services produced in a single year by factors of production owned by a country's citizens, regardless of where the output is produced. This is a measure of economic growth or decline. If the GNP is rising, the economy is said to be relatively strong. If the GNP is falling, the economy is said to be relatively weak.
Economists distinguish between two concepts: the gross national product (the GNP) and the gross domestic product (the GDP). The GDP is the total market value of all final goods and services produced in a single year by factors of production located within a country. As we can see, the GNP is a more comprehensive measure as it evaluates the output of businesses belonging to the citizens of a country regardless of their location.
To distinguish increases in the quantity of goods and services from the increase in their, prices economists use the concepts of real GNP and nominal GNP. Nominal GNP is the value of the final output in current prices (prices of that period), whereas real GNP is calculated in constant prices and takes into account the price index for that period (inflation or deflation): Real GNP = Nominal GNP : price index.
In order to calculate the GNP; economists add the amounts that were spent by the three elements of the economy, namely households, businesses, and government, to purchase the final products, and net exports, which is the difference between the country's exports and imports. We can express this mathematically as C+I+G+E=GNP, where. C – consumer household spending; I - investment, or businesses, G -government purchases of goods and services, E - net exports.
A nation's standard of living is measured by the amount of goods and services available, to its citizens. One way to calculate living standard is to divide the GNP by the population. It is per capita GNP and shows how much of the GNP is available to one person.
When people discuss what share of the "economic pie” should go to the government, they mean what percent of the GNP should be spent on defense, welfare, education, and other government programs. When the GNP is increasing faster than the population, more goods and services are available per person, and living standards are likely to improve.
TYPES OF MARKETS (unit 9)
A market is a social arrangement that allows buyers and sellers to discover information and carry out a voluntary exchange of goods or services. Along with a right to own property, it is one of the two key institutions that organize trade.
The function of/market requires, at a minimum, that both parties expect to become better off as a result of the transaction. Markets generally rely on price adjustments to provide information to parties engaging in a transaction, so that each may accurately gauge the subsequent change of their welfare. Markets are efficient when the price of a good or service attracts exactly as much demand as the market can currently supply. The chief function of a market, then, is to adjust prices to accommodate fluctuations in supply and demand.
Although many markets exist in the traditional sense (such as flea markets) there are various other types of them. Markets may be classified in two broad categories: consumer markets and industrial/ organizational or business-to-business markets. These categories are based on the characteristics of the individuals and groups that make up a specific market and the purposes for which they buy products.
The consumer market consists of individuals or households that purchase goods and services for personal use and who do not buy products primarily to make a profit.
The industrial/organizational market is made up of enterprises that buy goods and services for resale to the consumer market or for their own operations.
A market can also be organized as an auction, as a shopping center, as a complex institution such as a stock market, and as an informal discussion between two individuals.
In economics, a market that runs under laissez-faire policies is a free market. It is 'free' in the sense that the government makes no attempt to intervene through taxes, subsidies, minimum wages, etc.
Markets of various types can spontaneously arise whenever a party has interest in a good or service that some other party can provide. Hence there can be a market for cigarettes, for chewing gum, for contracts, for the future delivery of a commodity, etc. A market arises only in a case when all parties meet the four following requirements:
• They must need or want a particular product or service.
• They must have the ability to purchase the product. Ability to purchase is related to buying power, which consists of resources such as money, goods and services that can be traded in an exchange situation.
• They must be willing to use their buying power.
• They must have the authority to buy the specific products.
MARKETING CONCEPT (unit 10)
The marketing concept can be defined as adopting a consumer orientation in order to achieve long-term success. All of the
organization's efforts are geared to satisfying consumer needs. The philosophy of the marketing concept emerged during the 1950s, as the marketing era succeeded in the production and the sales. The concept can be applied to both profit-oriented and nonprofit organizations. Marketing is the link between the organization and the consumer. It is the way in which consumer needs are determined and the means by which consumers are informed that the organization can meet those needs.
In addition to selling goods and services, marketing is also used to advocate ideas or viewpoints, and to educate people.
Marketing is a total system of business activities designed to plan, price, promote and distribute want-satisfying product and services to present the potential customers.
According to the marketing concept an organization should try to satisfy the needs of customers through a coordinated set of activities that at the same time allows the organization to achieve its goals. Marketing strategy involves creating and maintaining an appropriate marketing mix (product, distribution, promotion, price and people) and selecting and analyzing a target market (a group of people for whom a firm creates and maintains a marketing mix that specially fits the needs and preferences of that group). In other words, marketing is a strategic management process: the business of màrketirïg must be organized, directed, and controlled to be effective.
It has often been said that the key to successful marketing is having the right-product at the right price in the right plate with the right promotion. In the end, the person who decides the ‘rightness’ of these four elements is the customer.
The daily activities of people who work in marketing departments revolve around designing, developing, and enhancing products, setting the prices for those products, promoting the products' features and benefits to the target markets, and distribution the product to the markets. These activities, the core of any marketing system, constitute the four controllable factors that provide the most effective choice for the consumer. They are often referred to as 'the four Ps' of marketing: product!, price, place (distribution) and promotion.
Each of the 4 Ps focuses on the customer and each is related to the other because a decision about one usually affects the others. The most effective combination of the 4 Ps is the right marketing mix for each particular product or service.
Note: The 4 Ps of marketing are now the 7 Ps, because of the increasing importance of services and customer service. They are: product, price, promotion, place, people, process and physical evidence.
Product
A product is everything that is received in an exchange. A product includes its design, quality and reliability. Every product must possess a ‘unique selling proposition’ (USP) - features and benefits that make it unlike any other product in its market.
A product item is a specific version of a product. A product line is a group of closely related product items that are considered a unit because of marketing, technical or end use considerations. The total group of products that an organization makes available to customers is called a product mix.
Every product has a life-cycle, the stages of which are introduction, growth, maturity and decline.
Products can be classified on the basis of the buyers’ intentions. Consumer products are those purchased to satisfy personal and family needs. Industrial or business-to-business products are purchased for the use in a company’s operations or to make other products.
Consumer products can be subdivided into convenience, shopping, specialty and unsought products.
Convenience products are relatively inexpensive, frequently purchased and rapidly consumed items. The buyers spend little time planning the purchase or comparing available brands or sellers.
Items that are more carefully chosen are called shopping products. Appliances, furniture, computers are examples of shopping products.
Products that possess unique characteristics and require a buyer’s considerable effort to obtain are called specialty products. Buyers actually plan the purchase of a specialty product they know exactly what they want and will not accept the substitute.
If a consumer needs to solve a sudden problem, he would purchase what is called an unsought product. Life insurance is an example of unsought product that needs aggressive personal selling.
Industrial products can be classified into seven categories according to their characteristics and intended uses: raw materials, major equipment, accessory equipment, component part, process materials, consumer supplies, MRO (maintenance, repair and operating) items and industrial services.
Branding
A brand is a name, symbol, design or term used singly or in combination to identify the goods or services of a specific producer. Brand names, i. e. (id est) that part of a brand that can be spoken, for example Coca-cola. А brand mark is the element of a brand, represented by a symbol or design, which may be modified for local markets, For example, Microsoft uses its brand name with a butterfly in France, a fish in Portugal and a sun in Spain.
A trademark (TM) is a legally protected brand name that cannot be used without permission from the company that owns it. A trade name is a full and legal name of organization rather that the name of a specific product, for example Ford Motor Company. To protect a brand name or brand mark a company must register it as trademark with the appropriate patenting office. To indicate that the brand is a registered trademark the symbol R is used.
There are three categories of brands: manufacturer brands, own label brands and generic brands. Manufacturer brands are initiated by producers and insure that producers are identified with their products at the point of purchase. A manufacturer brand usually requires the involvement of he producer of distribution, promotion and pricing decision. Own label brands (privet brands, store brands, dealer brands) are initiated and owned by resellers – wholesalers or retailers. Wholesalers and retailers use this brands to develop more efficient promotion, to generate higher profits and to improve store images. Generic brands indicate only the product category (such as aspirin) and do not include the company name or other identifying terms. Usually generic brands are sold at prices lower than those of comparable branded items.
Brand names are created inside an organization by individuals, committees or branding departments, or by outside consultants. Brand names can be devised from words, initials, numbers, nonsense words or a combination of these, as in IBM PC.
If a firm chooses to brand its products it may use either individual branding policy or family branding policy. Individual branding is naming each product differently. The purpose of using individual branding is to enter many segments of the same market. In the case of a family branding when a firm introduces a new product both customers and retailers recognize the familiar brand name as it is already well known.
Brands are an important means of creating product differentiation, establishing competition and encouraging product confidence.
Prices
The price of a product is the amount of money that the seller is willing to accept in exchange for the product at a given time and under given circumstances.
As a product is developed and introduced and as it progress through its life cycle, decisions must be made about the pricing of the product.
Before the price of a product can be set, an organization must decide whether it will compete on the basis of price or of some other combination of factors. Among the important factors considered when setting a price are 1) the costs and business expenses involved in the manufacture or distribution of the product, 2) its fashion and seasonal appeal, 3) the competition, 4) government price regulations, and 5) supply and demand.
Marketers may choose the price above or below the average or current market price. If the price is above competitors` prices, the marketer must offer some unique advantages that are easily seen by the customers. If marketers` price is below the market price, they may attract more customers and increase sales. If the price is the same as others, in this case, the service must be better to attract the customer.
Competition in the market exists in the form of either price competition or non-price competition. Price competition occurs when a seller emphasizes the low price of a product and sets a price that equals or beats competitors’ prices. Competitors can do likewise which is a major drawback of price competition.
Those who choose non-price competition create demand for their products by offering theirs customers attractive credit terms, after-sales services, free repairs and other forms of encouragement.
Prices perform two important economic function they ration scarce resources, and they motivate production. As a rule, the more scarce something is, the higher its price will be, and the fewer people will want to buy it. This is known as the rationing effect of prices.
Price services the function of allocator. First, its allocates goods and services among the customers. Second, price allocates financial resources (sales revenues) among producers according to how well they satisfy consumers` needs. Third, price helps consumers to allocate their own financial resources while choosing a particular product in the market.
Pricing
Pricing is the process of setting a price for a product. Pricing takes account of the value of a product, its quality, the ability of the customer to pay, the volume of sales required, the level of market saturation and the prices charged by the competition.
Pricing involves setting the pricing objectives and selecting a pricing method to achieve these objectives. When determining a pricing objective firm may choose among maximizing profits, maintaining or increasing its share of the market, creating a specific demand for its product, differentiating its product from similar products provided by the competitors.
Once a firm has determining its pricing objectives, it must select a relevant pricing method and strategy. The pricing method offers a `basic` price for each product. Pricing strategies are used to modify the basic price according to pricing objectives and the market situation.
The three kinds of pricing methods are cost-based pricing, demand-based pricing and competition-based pricing. The essence of cost-based pricing is determining the total cost of producing one unit of the product and then adding the markup that is the amount that covers additional costs such as insurance or interest and profit. The resulting sum will be the selling price of the product. In demand-based pricing the breakeven analysis is applied. In this case the total revenue from all units sold must equal the total cost of all units sold. The total revenue is the total amount received from the sales of the certain number of units. The total cost of producing a certain number of units is the sum of the fixed costs and variable costs attributed to those units. In competition-based pricing the firm simply sets the same price that its competitors charge for similar products.
Pricing strategies depend on the firm’s pricing objectives, the markets for its products, the degree of product differentiation, the life-cycle stage of the product, and other factors.
When introducing a new product or innovation the firm sets either the highest possible price to recover more quickly the high costs of production (the strategy of price skimming) or a low price in order to capture a large market share (the strategy of penetration pricing).
Psychological pricing strategies (odd-pricing, multiple-unit pricing, prestige pricing or pricing lining ) are based on consumers’ subjective perception. Firms that apply odd-pricing, multiple-unit pricing, prestige pricing or pricing lining aim at attracting consumers for different reasons: to pay less as with or multiple-unit pricing or to have a wider choice of different brands sold at the same price as with price lining. Whatever the reason the firm increases sales and profits.
Distribution
The idea of distribution is getting product from the producer to the customer, who is usually called the end user (ultimate consumer), in the quickest and most efficient way. This goal is achieved through marketing or distribution channels that link the producer and the user with the aid of middlemen or marketing intermediaries. Middlemen are concerned with the transfer of ownership of products. A merchant middleman, often called a merchant, is a person who actually takes title to products by buying them. A functional middleman , on the other hand, negotiates purchases or sales, or both, but does not take title to the products.
Consumer products may go through various channels of distribution:
1)Producer – sells directly to end users via own sales force. This channel is often called the direct channel.
2)Producer – retailers – end users. A retailer is a middleman who buys from producers or others middlemen and sells to consumers. Producers sell directly to retailers can buy in large quantities.
3)Producer – wholesalers – retailers – end users. This indirect channel is known as the traditional channel, because most consumer goods are directed through wholesalers to retailers. A wholesalers is middleman who sells products to others firms.
4)Producer – agents – wholesalers – retailers – end users. This indirect channel is used for inexpensive, frequently purchased products that are sold through thousands of outlets to millions of ultimate consumers.
Industrial products are sold either directly to industrial users or indirectly through agent middlemen, who serve as independent intermediaries between the producer and industrial users. Agents usually represent sellers and receive commission, that as a percentage of the value of the goods they sell.
After evaluating a number of factors the producer can choose a particular intensify of market coverage. Using intensive distribution the producer saturates the market by selling to any middlemen who are willing to stock and sell the product. Many Through selective distribution manufacturer uses only a portion of outlets in each geographic area, granting franchises for the sale of goods or services. Exclusive distribution is usually limited to a single outlet in each geographic area, dealing with very expensive and prestigious products.
ADVERTISING(unit16)
There is a difference among promotional tools such as advertising, personal selling, word-of-mouth and propaganda. Advertising is a paid, non-personal sales communication through various media directed at a large number of potential buyers. Advertising is often designed and managed by advertising agencies through advertising campaigns. Personal selling is face-to-face communication and does not go through media; thus it is not advertising. Word-of-mouth is not a form of advertising because it does not go through media; it is not paid for.
Two basic types of advertising are product and institutional (corporate). Product advertising involves selling a good or service. Institutional or corporate advertising involves promoting a concept, idea, or philosophy, or the goodwill of an industry, company, organization, or government body to generate its positive publicity
Both product and institutional advertising can be subdivided into three categories according to the purpose: to inform, to persuade, or о remind.
Informative advertising, intended to build initial demand tor product, is used in the introductory phase of the product life-сycle. Persuasive advertising attempts to improve the competitive status of a product institution, or concept. It is used in the growth and maturity stages of the product life-cycle. Reminder-oriented advertising, often used in the late maturity or decline stages of the product life-cycle, tries to remind people of the importance and usefulness of a product, concept, or institution.
The most important and largest of the advertising media are newspapers, magazines, television, radio, direct mail and outdoor advertising. People have the false impression that advertising is not very informative. Newspapers, for example, have full information about products, prices, features and more. Direct mail (leaflets, booklets and other printed matter) is also informative and a tremendous shopping aid for consumers.
The public benefits greatly from advertising expenditures. First, we learn about new products, new features, sales items, and more. We also benefit from free radio and TV and subsidized newspapers and magazines. In short, advertising not only informs us about products but pays for us to watch TV and get the news from magazines and newspapers.
Different kinds of advertising are used by various organizations to reach different classes of potential buyers. Some major classes include:
Retail advertising - advertising to consumers by various retail stores such as supermarkets.
Trade advertising - advertising to wholesalers and retailers by manufacturers to encourage them to deal with their products.
Industrial advertising - advertising from manufacturers to other manufacturers.
WHOLESALING(unit17)
Wholesaling comprises all transactions in which the purchaser intends to use the product for re-sale, for making other products or for general business operations. Wholesaling establishments are engaged primarily in selling products directly to industrial, reseller (e.g. retailers), government and institutional users.
A wholesaler is an individual or organization engaged in facilitating and expediting exchanges that are primarily wholesale transactions.
Wholesalers generally fall into such categories: merchant wholesalers; commission merchants, agents, and brokers; and manufacturer's sales branches and offices.
A merchant wholesaler is a middleman that purchases goods in large quantities and then sells them to other wholesalers or retailers and to institutional, farm, government, professional, or industrial users. Merchant wholesalers usually operate one or more warehouses where they receive, take title to, and store their goods. They are sometimes called distributors or jobbers.
Merchant wholesalers may be generally classified as full-service wholesalers or limited-service wholesalers, depending on the number of services provided. This category includes: general merchandise wholesalers, limited-line wholesalers and specialty-line wholesalers.
In contrast to full-service wholesalers, limited-service wholesalers assume responsibility for a few wholesale services only. This category includes cash-and-carry wholesalers, truck wholesalers, rack jobbers, drop shippers and mail-order wholesalers.
Commission merchants usually carry merchandise and negotiate sales for manufacturers, but they do not take title to the goods they sell. They are generally paid commissions by the manufacturer or producer they represent.
An agent is a middleman that facilitates exchanges, represents a buyer or a seller, and often is hired permanently on a commission basis.
A broker is a middleman that specializes in a particular commodity, represents a buyer or a seller, and is likely to be hired on a temporary basis. They are generally paid commissions by the sellers.
A manufacturer's sales branch is, in essence, a merchant wholesaler that is owned by manufacturer. Sales branches carry stock, extend credit, deliver goods, and offer help in promoting products.
A manufacturer's sales office is essentially a sales agent that is owned by a manufacturer. Sales offices may sell not only the products of the owning firm but also certain products of other manufacturers that complement their own product line.
RETAILING(unit18)
Retailing is selling goods and services to the ultimate consumer. Retailing includes all transactions in which the buyer intends to consume the product through personal, family or household use. Retailers, organizations that sell products primarily to ultimate consumers, are important and the most expensive links in the channel of distribution because they are customers for wholesalers and producers. Retail institutions provide place, time and possession utilities.
Retail stores are often classified according to width of product mix and depth of product lines. The major types of retail stores are department stores, variety stores, hypermarkets, supermarkets, discount sheds, warehouse clubs, specialty shops, convenience stores, discounters, markets and catalogue showrooms.
Specialty retailers offer substantial assortments in a few product lines.
Non-store retailing is the selling of goods or services outside the confines of a retail facility. Forms of non-store retailing include: in-home retailing (selling via personal contacts with consumers in their own homes), telemarketing (direct selling of goods and services by telephone), the Internet, automatic vending (selling through machines), mail order and catalogue retailing (selling by description because buyers usually do not see the actual product until it arrives in the mail).
Franchising is an arrangement whereby a supplier grants a dealer the right to sell products in exchange for some type of consideration. Retail franchises are of three general types 1) a manufacturer may authorize a number of retail stores to sell a certain brand name item; 2) a producer may license distributors to sell a given product to retailers; 3) a franchisor may supply brand names, techniques or other services instead of a complete product.
To increase sales and store patronage, retailers must consider several strategic issues. First, he may provide a convenient location. Second, he often guarantees and services the merchandise he sells. Third, the retailer helps to promote the product through displays, advertising or sales people. Fourth, the retailer can finance the customer by extending credit.