DBM1309: ENTREPRENEURSHIP & SMALL BUSINESS DEVELOPMENT

Pre-requisites: ENTREPRENEURSHIP
Purpose: To equip students with the necessary knowledge, skills and attitudes that will enable
them to start, operate and manage in an individual or a group business enterprise
To instill the drive necessary for any of them to venture into profit making business activities
Expected Learning Outcomes of the Course
By the end of the course unit the learners should able to:-
i. Identify variable business opportunity
ii. Identify the factors liable to effect the success of a business
iii. Apply entrepreneurial competencies in business situations
Course Content
Entrepreneurship self-employment: Self-employment; Entrepreneurship; contribution to national
development; Role of entrepreneur in business; Entrepreneurial opportunities: Business
opportunities; Assessing product demand; Matching skills and resource to the changing
technology; Evaluating of the business environment; Entrepreneurial awareness:
Course outline
WEEK 1: Introduction
 Definitions of concepts
 Overview of Entrepreneurship
WEEK 2: Starting Up New Business Ventures (Setting Up a Business Enterprise (Business
Plan)
 Key elements of a well-designed new venture
 start-up process of business ventures
 environmental opportunity and threat
 technical issues of organizational structure
 financial model
 Ownership and control in new ventures.
 The business Lifecycle
WEEK 3: Entrepreneurial and Intrapreneurial Mind.
 The entrepreneurial process
 managerial versus entrepreneurial decision making
 climate for intrapreneurship
 establishing intrapreneurship in the Organization
WEEK 4: An Overview of Management Of Business Environmental Challenges And
Survival Strategies.
 Operation issues
 Resources requirement
 Marketing of product and services.
 General characteristic of owner/managers of small business:
 Personality, skills and knowledge
WEEK 5 CAT 1:
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WEEK 6: Creativity and Innovation
 Creativity and innovation;
 sources of new ideas;
 methods of generating ideas;
 Creative problem solving.
WEEK 7: Managing Challenges and Problems Facing Small Business
 Managing cash flow
 hiring and retaining key employees
 networking with suppliers and customers
 problems of family business
 partnership relationship
 dealing with cultural factors
 Institutional and political issues in running small business.
WEEK 8 CAT 2:
WEEK 9: Growing Small Business
 Using market development as a growth option: benefits and constraints;
 using product development as a growth option;
 using franchising as a growth option;
 Evaluation of other growth options for small businesses.
WEEK 10: Renewal and Turnaround For Small Businesses
 Strategic options of turning around small business
 renewal strategies
 handling a failing situation
 the exit decision
 management succession plan
 selling the business to outsiders
 Selling the business to insiders.
WEEK 11: Writing a business plan.
Teaching / Learning Methodologies
Lectures and tutorials; Group discussion; Demonstration; Individual assignment; Case studies
Instructional Materials and Equipment
Projector; Text books; Design catalogues; Computer laboratory; Design software; Simulators
Course Assessment
Continuous assessment tests and assignments
(CAT) 20%
Assignments 10%
End of Semester Examination70%
Total 100

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 DBM1309 ENTREPRENEURSHIP AND SMALL BUSINESS
MANAGEMENT

Definition and nature of Entrepreneurship

Entrepreneurship is the practice of starting new organizations or revitalizing mature organizations,
particularly new businesses generally in response to identified opportunities. Entrepreneurship is
often a difficult undertaking, as a vast majority of new businesses fail. Entrepreneurial activities
are substantially different depending on the type of organization that is being started.
Entrepreneurship ranges in scale from solo projects (even involving the entrepreneur only part-
time) to major undertakings creating many job opportunities

An entrepreneur is a person who is willing and able to convert a new idea or invention into a
successful innovation. Entrepreneurship forces "creative destruction" across markets and
industries, simultaneously creating new products and business models. In this way, creative
destruction is largely responsible for the dynamism of industries and long-run economic growth.

Entrepreneurship is about taking risk. The behaviour of the entrepreneur reflects a kind of person
willing to put his or her career and financial security on the line and take risks in the name of an
idea, spending much time as well as capital on an uncertain venture.

Two elements of Entrepreneurship Innovation

Doing something new or something different is a necessary condition to be called a person as an
entrepreneur. The entrepreneurs are constantly on the look out to do something different and
unique to meet the changing requirements of the customers. They may or may not be inventors of
new products or new methods of production, but they possess the ability to foresee the possibility
of making use of the inventions for their enterprises

Risk-Bearing
Starting a new enterprise always involves risk and trying for doing something new and different is
also risky. The enterprise may earn profits or incur losses because of various factors like increasing
competition, changes in customer preferences, and shortage of raw material and so on. Infact, he
needs to be a risk-taker, not risk avoider. His risk-bearing ability enables him even if he fails in one
time or one venture to persist on and on which ultimately helps him succeed.

Entrepreneurial Characteristics
a) Risk Taking
b)Self-Confidence
c) Optimist
d) High need of achievement
e) Need for independent
f) Need for power
g) Creativity
h) Foresight
i) Effectiveness
j) Imaginative

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k) Respect for feedback
l) Learning from experience
m) Future oriented

Benefits / Opportunities of Entrepreneurship

a)Opportunity of gain control over your own destiny
b)Opportunity to reach your full potential
c)Opportunity to reap unlimited profits
d)Opportunity to contribute to society & be recognized for your effort
e)Opportunity to do what you enjoy

Limitations of entrepreneurship
a)Uncertainty of income
b)Risk (Financial Risk & Career Risk)
c)Long hours & hard work
d)Lower quality of life until the business gets established
e)High level of stress
f)Complete responsibility

Barriers of Entrepreneurship
a)Environmental Barriers
Social: If the social norms expect the people to value discipline and conformity over adventure,
creativity, and independence, it is likely to spoil entrepreneurial spirit

Economical: Capital, labour, raw materials and market are important basics for any enterprise
Cultural: If the cultural values are bound by conventionalism, they may restrain entrepreneurial
spirit
Political: Political policies can help or delay the growth of entrepreneurial ventures in a country

b)Personal Barriers Motivational

All successful entrepreneurs are highly motivated and their drive to achieve become their engine of
accomplishment
Perceptional: Lack of a clear vision and misunderstanding a situation can result in faulty perception

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THE 7 STAGES OF THE SMALL BUSINESS LIFE CYCLE

a) Seed
The seed stage of the small business life cycle is when the small business is just a thought or an
idea. This is the very conception or birth of a new small business.
Challenge: Most seed stage companies will have to overcome the challenge of market acceptance
and pursue one niche opportunity. Do not spread money and time resources too thin.
Focus: At this stage of the small business the focus is on matching the business opportunity with
the skills, experience and passions. Other focal points include: deciding on a small business
ownership structure, finding professional advisors, and business planning.
Money Sources:
Early in the small business life cycle with no proven market or customers the business will rely on
cash from owners, friends and family. Other potential sources include suppliers, customers,
government grants and banks.

b) Start-Up
The small business is born and now exists legally. Products or services are in production and you
havethe first customers.
Challenge: If the small business is in the start-up life cycle stage, it is likely you have
overestimated money needs and the time to market. The main challenge is not to burn through
what little cash you have. You need to learn what profitable needs the clients have and do a reality
check to see if the business is on the right track.

Focus: Start-ups require establishing a customer base and market presence along with tracking and
conserving cash flow.
Money Sources: Owner, friends, family, suppliers, customers, grants, and banks.

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c)Growth
The small business has made it through the toddler years and is now a child. Revenues and
customersare increasing with many new opportunities and issues. Profits are strong, but
competition is surfacing.

Challenge: The biggest challenge growth companies face is dealing with the constant range of
issues bidding for more time and money. Effective management is required and a possible new
business plan. Learn how to train and delegate to conquer this stage of development.

Focus: Growth life cycle businesses are focused on running the small business in a more formal
fashion to deal with the increased sales and customers. Better accounting and management systems
will have to be set-up. New employees will have to be hired to deal with the influx of business.

Money Sources: Banks, profits, partnerships, grants and leasing options.

d) Established
The small business has now matured into a thriving company with a place in the market and loyal
customers. Sales growth is not explosive but manageable. Business life has become more routine.

Challenge: It is far too easy to rest on the laurels during this life stage. The entrepreneur has
worked hard and has earned a rest but the marketplace is relentless and competitive. Stay focused
on the bigger picture. Issues like the economy, competitors or changing customer tastes can
quickly end all you have work for.

Focus: An established life cycle company will be focused on improvement and productivity. To
compete in an established market, you will require better business practices along with automation
and outsourcing to improve productivity.
Money Sources: Profits, banks, investors and government.

e)Expansion
This life cycle is characterized by a new period of growth into new markets and distribution
channels. This stage is often the choice of the business owner to gain a larger market share and find
new revenue and profit channels.

Challenge: Moving into new markets requires the planning and research of a seed or start-upstage
business. Focus should be on businesses that complement the existing experience and capabilities.
Moving into unrelated businesses can be disastrous.

Focus: Add new products or services to existing markets or expand existing business into new
markets and customer types.
Money Sources: Joint ventures, banks, licensing, new investors and partners, profits, banks,
investors and government.
f)Mature
Year over year sales and profits tend to be stable, however competition remains fierce. Eventually
sales start to fall off and a decision is needed whether to expand or exit the company.
Challenge: Small businesses in the mature stage of the life cycle will be challenged with dropping
sales, profits, and negative cash flow. The biggest issue is how long the business can support a

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negative cash flow. Ask is it time to move back to the expansion stage or move on tothe final life
cycle stage...exit.
Focus: Search for new opportunities and business ventures. Cutting costs and finding ways to
sustain cash flow are vital for the mature stage.

Money Sources: Suppliers, customers, owners, and banks. Profits, banks, investors and
government.

g)Exit
This is the big opportunity for the small business to cash out on all the effort and years of hard
work. Or it can mean shutting down the business.

Challenge: Selling a business requires the realistic valuation. It may have been years of hard work
to build the company, but what is its real value in the current market place. If you decide to close
the business, the challenge is to deal with the financial and psychological aspects of a business
loss.

Focus: Get a proper valuation on the company. Look at the business operations, management and
competitive barriers to make the company worth more to the buyer. Set-up legal buy-sell
agreements along with a business transition plan.
Money Sources: Find a business valuation partner. Consult with the accountant and financial
advisors for the best tax strategy to sell or close-out down business

What is a financial model?

A financial model is simply a tool that’s built in Excel to forecast a business’ financial
performance into the future. The forecast is typically based on the company’s historical
performance and requires preparing an income statement, balance sheet, cash flow statement and
supporting schedules (known as a 3 statement model). From there, more advanced types of models
can be built such as discounted cash flow analysis (DCF model), leveraged-buyout, mergers and
acquisitions, and sensitivity analysis.

What is a financial model used for?

The output of a financial model is used for decision making and performing financial analysis,
whether inside or outside of the company. Inside a company, executives will use financial models
to make decisions about:

i. Raising capital (debt and/or equity)

ii. Making acquisitions (businesses and/or assets)
iii. Growing the business organically (i.e. opening new stores, entering new markets, etc.)
iv. Selling or divesting assets and business units
v. Budgeting and forecasting (planning for the years ahead)
vi. Capital allocation (priority of which projects to invest in)
vii. Valuing a business

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 ENTREPRENEURIAL PROCESS

1. Discovery: An entrepreneurial process begins with the idea generation, wherein the entrepreneur
identifies and evaluates the business opportunities. The identification and the evaluation of
opportunities is a difficult task; an entrepreneur seeks inputs from all the persons including
employees, consumers, channel partners, technical people, etc. to reach to an optimum business
opportunity. Once the opportunity has been decided upon, the next step is to evaluate it.

An entrepreneur can evaluate the efficiency of an opportunity by continuously asking certain

questions to himself, such as, whether the opportunity is worth investing in, is it sufficiently
attractive, are the proposed solutions feasible, is there any competitive advantage, what are the risk
associated with it. Above all, an entrepreneur must analyze his personal skills and hobbies, whether
these coincides with the entrepreneurial goals or not.

2. Developing a Business Plan: Once the opportunity is identified, an entrepreneur needs to create a
comprehensive business plan. A business plan is critical to the success of any new venture since it
acts as a benchmark and the evaluation criteria to see if the organization is moving towards its set
goals.

An entrepreneur must dedicate his sufficient time towards its creation, the major components of a
business plan are mission and vision statement, goals and objectives, capital requirement, a
description of products and services, etc.

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3. Resourcing: The third step in the entrepreneurial process is resourcing, wherein the entrepreneur
identifies the sources from where the finance and the human resource can be arranged. Here, the
entrepreneur finds the investors for its new venture and the personnel to carry out the business
activities.
4. Managing the company: Once the funds are raised and the employees are hired, the next step is to
initiate the business operations to achieve the set goals. First of all, an entrepreneur must decide the
management structure or the hierarchy that is required to solve the operational problems when they
arise.
5. Harvesting: The final step in the entrepreneurial process is harvesting wherein, an entrepreneur
decides on the future prospects of the business, i.e. its growth and development. Here, the actual
growth is compared against the planned growth and then the decision regarding the stability or the
expansion of business operations is undertaken accordingly, by an entrepreneur.

The entrepreneurial process is to be followed, again and again, whenever any new venture is taken
up by an entrepreneur, therefore, its an ever ending process.

INTRAPRENEURSHIP
An Intrapreneurship is the system wherein the principles of entrepreneurship are practiced within
the boundaries of the firm. An intrapreneur is a person who takes on the responsibility to innovate
new ideas, products and processes or any new invention within the organization.

An intrapreneur is the individual who thinks out of the box and possesses the leadership skills and
does not fear from risk. Thus, an intrapreneur possesses the same traits as that of an entrepreneur.

The concept of an Intrapreneurship can be well understood in contrast to the entrepreneurship.

Following are the points of distinction between these two terms:

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1. Intrapreneurship is restorative in nature, i.e. an organization encourages the employees to practice
the entrepreneurial principles to counter stagnation within the firm or transform the slow growth of
the company into a high-growth. Whereas the entrepreneurship is developmental in nature, i.e. an
individual creates something that has never existed before, such as a new product, process or a new
venture itself.
2. In intrapreneurship, the major challenge that individual faces are from the company’s
culture itself. Sometimes, the corporate relationships and the mindsets of employees acts as a
hurdle in the path of an intrapreneur. Whereas, in the case of entrepreneurship, the market is the
only enemy. An entrepreneur has to scrutinize the market conditions thoroughly to cross the
hurdles coming in his way.
3. An intrapreneur has an access to firm’s resources such as funds, manufacturing setups, marketing
facilities, and other supporting activities to give shape to his dreams. Whereas an entrepreneur has
to arrange his own resources such as own funds or the borrowed funds, manufacturing facilities,
marketing facilities, etc.
4. An intrapreneur does not have the ownership of a new venture and isnot even independent to take
decisions, whereas an entrepreneur is the whole sole owner of the new venture established by him.
Also, he is independent to take any decisions with respect to his setup.

Thus, an Intrapreneurship is a practice of creating the entrepreneurial environment within the

organization, thereby enabling the employees to apply their entrepreneurial skills in the job roles;
they are assigned to.

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MANAGERIAL Vs ENTREPRENEURIAL DECISION MAKING
The difference between the entrepreneurial style and the managerial style (administrative domain)
involves five business dimensions.

A.Strategic Orientation
1. The entrepreneur’s strategic orientation depends on his or her perception of the opportunity.

2. When the use of planning systems is the strategic orientation, the administrative domain is
operant.

B. Commitment to Opportunity
1. The entrepreneurial domain is pressured by the need for action and has a short time span in
terms of opportunity commitment.

2.The administrative domain is not only slow to act on an opportunity, but the commitment is
usually for a longer time span.

C.Commitment of Resources
1. An entrepreneur is used to having resources committed at periodic intervals, often based on
certain tasks or objectives being reached.

2.In acquiring these resources the entrepreneur is forced to maximize resource use.

3. In the administrative domain, the commitment of resources is for the total amount needed.

4. Administrative-oriented individuals receive personal rewards by effectively administering the

resources under their control.

D. Control of Resources
1. The administrator is rewarded by effective resource administration and has a drive to own or
accumulate as many resources as possible.

2. The entrepreneur, under pressure of limited resources, strives to rent resources on an as-needed
basis.

E.Managerial Structure
1. In the administrative domain, the organizational structure is formalized and hierarchical in
nature.

2. The entrepreneur employs a flat organizational structure with informal networks.

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Five keys to promoting intrapreneurship in a company

1. Facilitate and promote active listening

Although it may seem obvious, intrapreneurship tends to develop in a climate of exchange in

which employees are invited to share ideas on anything, from improving existing processes to
developing new products and services. But the key here is active listening: attentiveness on the
part of management in particular requires the establishing of transparent and inclusive spaces for
the sharing of ideas, empowering budding intrapreneurs by making them responsible for the
execution of their own initiative, and giving those interested the opportunity to get involved in
projects that arise. Without such opportunities, organizations would lack an enabling environment
in which employees feel encouraged to go beyond their assigned duties.

2. Actively involve senior management

As with other corporate processes, intrapreneurship can quickly reach a dead end if senior
management is not involved in its development and deployment. Acceptance and support from
above is essential to motivate and encourage employee participation. If such ratification is
sorely lacking, workers will not feel they are entitled (or perceived well) if they spend their work
hours developing new ideas that go beyond their job role. Support from executives must also go
beyond just “helping out” during the early stage of a project’s realization. The most successful
intrapreneurial endeavors are ones in which employees get direct advice and mentorship from an
organization’s key decision-maker throughout.

3. Define a structure for the intrapreneurship process

Intrapreneurial initiatives that lack clear game rules are often doomed to failure. All calls for
proposals should feature an initial brainstorming stage (for this, companies have various software
solutions at their disposal to carry it out efficiently); a second selection stage that should ideally be
twofold - firstly a popular vote and secondly with feedback from senior management; then a third
and final stage, which should be the project’s execution. During this end stage, companies must be
willing to allow those who proposed the winning idea to develop it during work hours without
being penalized for any dip in productivity regarding their daily tasks.

4. Incentivize

When a worker is given time and space to develop innovative ideas for the company’s
benefit, knowing that senior management is paying attention and willing to let those ideas be
executed, all the elements are in place for the emergence of a strong intrapreneurial spirit within an
organization. That said, it is still necessary to create an incentive system to ensure that the said
projects reach fruition. Intrapreneurial incentives may include public recognition, promotions or
bonuses.

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5. Anticipate and accept failure

Finally, it is very likely that many intrapreneurial projects will not dramatically accelerate
productivity, win greater market share or create groundbreaking products or services, although they
probably will lead a company into incurring development costs. However, it is of the utmost
importance not to blame or punish the promoters of failed ideas. By not stigmatizing any
individuals, you can avoid discouraging the rest of the intrapreneurs within your business who
might not otherwise share their innovations for fear of ridicule or even dismissal.

In short, intrapreneurship can be a real win-win situation for companies and workers if handled
with care. It is a winning force that can motivate employees, make companies more efficient in
identifying where their best opportunities lie and give them huge clues on how to develop new
disruptive products and services.

Since the path to establishing a spirit of intrapreneurship is not likely to run smoothly,
organizations should avoid forcing their workers to come up with ideas. Instead, they should focus
on providing opportunities for free-thinking with the support of senior management;
implementing systems that encourage innovation from within the company; and providing
symbolic as well as tangible incentives and positive reinforcement when ideas don’t work out.
Such innovation is a powerful resource, and when enabled across an organization can effectively
be a catalyst to growth.

BUSINESS AND THE ENVIRONMENT

Business environment is a set of political, economic, social and technological (PEST)forces that
are largely outside the control and influence of a business and that canpotentially have both a
positive and a negative impact on the business. The business environment can be broadly divided
into:

(A)External environment

(B)Internal environment

One of the basic assumptions of business is that organisations are neither self sufficient nor self
contained.Rather , they exchange resources with and are dependent upon the external environment,
defined as all the elements outside an organisation that are relevant to its operations. Organisations
take inputs (raw materials, money, labour, andenergy) from the external environment. The many
rapid changes taking place in the external environment of the organisationsrequire increasing
attention from the managers. The external environment contains numerous resources upon which
the organisations rely. This means that the organisations are inevitably affected by what goes on in
the environment. The external environment has both direct-action and indirect-action elements .
The External Analysis examines opportunities and threats that exist in the environment. Both
opportunities and threats exist independently of the firm. The way to differentiate between a
strength or weakness from an opportunity or threat is to ask: Would this issue exist if the company
did not exist? If the answer is yes, it should be considered external to the firm. Opportunities refer
to favorable conditions in the environment that could produce rewards for the organization if acted
upon properly. That is, opportunities are situations that exist but must be acted on if the firm is to
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benefit from them. Threats refer to conditions or barriers that may prevent the firms from reaching
its objectives. The following area analyses are used to look at all external factors affecting
acompany:

•Customer analysis: Segments, motivations, unmet needs

•Competitive analysis: Identify completely, put in strategic groups, evaluate performance,image,

their objectives, strategies, culture, cost structure, strengths, weakness

•Market analysis: Overall size, projected growth, profitability, entry barriers, coststructure,
distribution system, trends, key success factors

•Environmental analysis: Technological, governmental, economic, cultural, demographic,

scenarios, information-need areas. Goal: To identify external opportunities, threats, trends, and
strategic uncertainties.

GENERAL CHARACTERISTICS OF OWNER/MANAGERS OF SMALL BUSINESSES

Flexible

Striking out to put together a small business takes time, energy and knowledge -- or at least a
willingness to learn. During the process of getting a business off the ground and even after,
problems and issues tend to appear. Small-business owners are flexible in handling these obstacles
and finding workarounds as needed. They don't allow setbacks to stop them from meeting their
goals.
Collaborative

Small-business owners know how to effectively delegate tasks to people within their organization.
They also know how to build successful relationships with everyone they contact through their
business. This includes partners, their management team, employees, vendors, consultants and
customers. The ability of managers to collaborate and delegate gives a small business the
opportunity to experience growth
Proactive

Entrepreneurs are proactive. They have initiative and they are ready to use it to further their
business. They look for opportunities to improve their company, such as implementing services or
marketing products that allow their business to stand out from the competition. They are also open
to opportunities that can help them expand their current business into new areas.
Technically Aware

With all of the technology available to business owners, most are at least technically aware, if not
adept. The use of software, email, websites and smartphones can make running a small business
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more efficient and effective. Successful small-business owners choose to use technology solutions
that can help them and avoid wasting time and money on options they don't need.
Self-Reliant

Part of the reason people start a business is because of their desire to be self-reliant. Rather than
work for someone else, they want to have control of their future. They don't look to others to make
decisions. Instead, they make decisions on their own. They realize that the quality of their future is,
to a large extent, within their control.
Accessible

While running a small business offers owners the ability to set their own schedule, it's important to
ensure products, services and knowledge are accessible to customers. Customers want things as
quickly as possible. If a business owner doesn't deliver the accessibility customers have been
conditioned by society to expect, he won't achieve success, warns home-based consultant James
Stephenson in a book excerpt for Entrepreneur.
Energetic

With all of the responsibilities of running a small business, owners must have a high level of
energy. Typically, the hours are longer and the responsibilities are greater as an entrepreneur when
compared to serving as an employee for someone else. Small-business owners must be willing and
able to give an extra effort at all times since it's their own money and reputation on the line.
Daring

Launching a small business is risky. Even if the business owner has carefully examined all angles
of the venture to give himself some assurance of success, nothing is certain. Small-business owners
have to be willing to take a certain amount of risk in the face of a possible loss.

MARKETING OF PRODUCTS AND SERVICES

Definition of Product Marketing

The entire process, right from the market analysis, to delivering product to the customer and
receiving feedback, is called product marketing. The process is aimed at finding out the right
market for its product and its placement in such a way that it gets good customer response. It
entails promotion and sale of a product to its target audience, i.e. prospective and existing buyers.

Various activities involved in the product marketing involves analysis of the market, identification
of consumer demand, designing and development of product, pricing, pitching of a new product,
communicating, advertising, positioning, distributing, selling, review and feedback.
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Example: Marketing for tangible objects like books, handbags, laptops, mobiles, clothes and so on.

Definition of Service Marketing

When a person or business entity promotes services it offers to its customers or clients, it is known
as service marketing. It is aimed at providing solutions to the problems or difficulties of the clients.
It includes both business-to-business (B2B) and business-to-consumer (B2C) marketing.

A service is an act of performing something for someone in exchange for adequate consideration. It
is intangible, consumed at the time of its production, can’t be inventoried and resold. Each service
offering is unique in itself because it cannot be repeated exactly alike, even if the service is
rendered by the same person.

Example: Marketing of professional services, beauty parlours or salon, spa, coaching centres,
health services, telecommunication, etc.

Key Differences Between Product Marketing and Service Marketing

The process in which the marketing activities are aligned to promote and sell a specific product for
a particular segment is called product marketing. The marketing of economic activities, offered by
the business to its clients for adequate consideration, is known as service marketing.

1. In a product marketing, only 4 P’s of the marketing mix are applicable which are product,
price, place and promotion, but in the case of service marketing, three more P’s are added
to the conventional marketing mix, which are people, process and physical existence.
2. When a product is marketed, the company offers value, as it fulfils customer’s
requirements. Conversely, when service is marketed by a company, it offers a relationship
to its clients.
3. One thing to be noted that, in product marketing, the company promotes something whose
ownership can be transferred/resold to another party. But in the case of service marketing,
the company promotes something, whose ownership can neither be transferred nor it is
resold to the other party.
4. In product marketing, products reach the buyers, as they can be transported from one place
to another through various distribution channels. Unlike service marketing, where
customers come to the services or the service provider visit customer because services
cannot be transported, they are location based.
5. Products are tangible in nature, they can be felt and touched, which make its promotion
easier. On the other hand, services are intangible, people can only experience it, and so
marketing of services is a bit difficult.
6. If the quality of a certain product is not up to the mark, or it does not fulfil the desired
requirement, it can be returned to the seller. However, it is impossible in the case of
services, because once the services are delivered, they cannot be taken back. So, the
marketing of services, should be done keeping the returnability factor in mind.
7. In product marketing, the product can be separated from its producer, and so they are
durable and can be inventoried. On the contrary, in service marketing, services can not be

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 separated from its source, i.e. service provider. Hence the production and consumption of
services are simultaneous; they are perishable.
8. Product offered by a company under a particular segment are standardised; they cannot be
changed or altered as per customer’s requirement. In contrast, services offered by a
company are highly variable and can be easily customised as per the requirements.

9. It is a human tendency, that we respond quickly, to what we see and it is a major pro, of
product marketing that it grabs our attention, and encourages sales. As against this, services
can’t be seen it can only be experienced and so the response it a little slow, while marketing
services.
10. In product marketing, the quality of the product can be measured by making a comparison
between various products, but this is just opposite in service marketing, where the
measurement of services is not possible.

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