Importance of Marketing on Organization's Goodwill Assignment

Importance of Marketing on Organization's Goodwill - Assignment Example G. and. Schneider, 1995). This is achieved by providing clients with company’s production. That’s why marketing is considered to be the one of the leading functions of the strategic management. For a great number of organizations marketing is the key function that secures their successful activity depending on how they follow their goals and which strategies they realize. Kotler & Keller (2012) state that according to the philosophy of management, the company should avoid just making unfavorable products trying to sell them to the client by all means, and in this case marketing is becoming something more than separate function of management (Kotler & Keller, 2012). In the modern world marketing influences all the spheres of company’s activity. The concept â€Å"goodwill† implies the readiness of the buyer to pay bigger or smaller sum of money than the net assets of the company that he wants to purchase may cost. The goodwill can be positive or negative. In many cases business owners tend to overestimate the influence of their intangible assets and as a result the realized value of business increases substantially (Massoud, M. F. and Raiborn, C, 2003). It is important to take into account the fact that intangible capital should convert into income and the index of this income should be substantially higher than the market average one. The given paper will discuss the importance of marketing for establishing goodwill. The review of literature will be implemented in order to answer the question. The main goal is to investigate the importance of marketing on organization’s goodwill Literature review a) The notion of goodwill According to Johnson and Petrone (1998), goodwill is a strong management team and developed market strategy, high level quality of production, high credit measures as well as corporate culture and favorable location, good relations with suppliers (Johnson and Petrone, 1998). Day states that â€Å"goodwill is the difference between the value of a business enterprise as a whole and the sum of the current fair values of its identifiable tangible and intangible net assets. Net assets are the assets that are left after subtracting the company’s liabilities. Goodwill is only recorded when its amount is substantiated by an arm’s-length transaction. Goodwill cannot be sold or acquired separately but has to be included in a purchase with the net assets of a business enterprise† (Day 2008: 1). It is clear that the cost of organization that is represented by the single property complex differs much from the assets and liability cost of the organization. The great amount of mergers and takeovers in the USA and Europe can serve as a proof of such statement. It is enough to recollect the time when companies were bought by the sums of money, which were considerably bigger or smaller than the cost of company assets (Samuelson, 1996). The difference between these two indicators is ca lled goodwill. It means that brand is less valuable in case if it fails the competitive struggle and does not allow to sell the product at the higher price than the similar product of the competitors is sold at. Accrodign to Stolley (2013), in this case goodwill is negative and has a negative impact on the final cost of the company. It can be easily explained as it will be more difficult to realize the production with the same tangible assets than with the positive goodwill (Stolley, 2013). b) The evaluation of goodwill According to Wang, the estimation is made with the help of management account and provides the owners and managers with the important information (Wang, 1995). In order to find the answer to the question, it is essential to determine how the goodwill is