Role of International Marketing in Economic Development

Muhammad Adnan 1635-112251 1

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Muhammad Adnan 1635-112251 2

Table of Contents

Sr. No. Contents

Page No.

1 Introduction to Marketing 3

2 International Marketing 3

3 Economic Development 4

4 Economic Growth 4

5 Difference between economic development and economic Growth 6

6 Key Indicators of Economic development 7

7 Role of International Marketing in Economic Development 8

8 Per Capita Income 8

9 National Income 9

10 Physical quality of life index 9

11 Human Development Index 10

Muhammad Adnan 1635-112251 3

Marketing

“Marketing is the activity, set of institutions, and

processes for creating, communicating, delivering,

and exchanging offerings that have value for

customers, clients, partners, and society at large.”

The Chartered Institute of Marketing define marketing as

“The management process responsible for identifying, anticipating and

satisfying customer requirements profitably”

International Marketing

"At its simplest level, international marketing

involves the firm in making one or more

marketing mix decisions across national

boundaries. At its most complex level, it

involves the firm in establishing

manufacturing facilities overseas and

coordinating marketing strategies across the

globe." Doole and Lowe.

"International marketing is the application of marketing orientation and

marketing capabilities to international business.”

Muhlbacher, Helmuth, and Dahringer

Muhammad Adnan 1635-112251 4

Economic Development

The definition of economic development given by Michael Todaro is

“An increase in living standards, improvement in self-esteem needs and

freedom from oppression as well as a greater choice”

The most accurate method

of measuring development

is the Human Development

Index which takes into

account the literacy rates &

life expectancy which

affects productivity and

could lead to Economic

Growth. It also leads to the

creation of more

opportunities in the sectors

of education, healthcare,

employment and the

conservation of the environment. It implies an increase in the per capita

income of every citizen.

Economic Growth

“An increase in a country's real level of national output which can be caused by

an increase in the quality of resources (by

education etc.), increase in the quantity of

resources & improvements in technology or in

another way an increase in the value of goods

and services produced by every sector of the

economy”

Economic Growth can be measured by an

increase in a country's GDP (gross domestic

product).

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Comparison chart

Economic

Development

Economic

Growth

Concept: Normative concept Narrower concept than

economic development

Scope: Concerned

with structural changes in

the economy

Growth is concerned with

increases in the economy's

output

Growth: Development relates to growth

of human capital indexes, a

decrease in inequality figures,

and structural changes that

improve the general

population's quality of life

Growth relates to a gradual

increase in one of the

components of Gross

Domestic Product:

consumption, government

spending, investment, net

exports

Implication: It implies changes in income,

saving and investment along

with progressive changes in

socio-economic structure of

country(institutional and

technological changes)

It refers to an increase in the

real output of goods and

services in the country like

increase the income in savings,

in investment etc.

Measurement: Qualitative.HDI (Human

Development Index), gender-

related index (GDI), Human

poverty index (HPI), infant

mortality, literacy rate etc.

Quantitative. Increase in real

GDP.

Effect: Brings qualitative and

quantitative changes in

the economy

Brings quantitative changes in

the economy

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Indicators OF Economic Growth

There is misunderstanding among the economists over the indicators of

economic development. Some of the economists have taken national product

as the indicator of economic development. Some other economists have taken

per capita income as the indicator of economic development. Likewise some

other economists have taken economic welfare as the indicator of economic

development. Various economists have taken material living standard index as

the indicator of economic development. Economists of this thought have taken

life-span, death rate, literacy rate as the bases. Similarly United Nations

Development Program (UNDP) has developed Human Development Index

(HDI) as the indicator of economic development. The indicators are income,

literacy and life expectancy. The pointed of indicators lies between 0 and 1.

The position up to 0.5 is the lower class of human development. From 0.5 to

0.8 is the middle class and above 0.8 is the upper class. The base of economic

development indicators are as follows.

1- Per Capita Income Criteria

2- National income criteria

3- Physical quality of life index – PQLI

4- Human development index – HDI

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Role of International Marketing in Economic

Development There are several economic sectors which get affected from

international marketing and they are efficiency enhanced through

international marketing.

Here are some key sectors those are affected from international

marketing.

Per Capita Income

National Income

Physical quality of life index – PQLI

Human development index – HDI

Per Capita Income

“Income per person in a population” Per capita income is often used to

measure a country's standard

of living.

Per capita income or average income

or income per person is a measure of

mean income within an economic

aggregate, such as a country or city.

It is calculated by taking a measure of

all sources of income in the aggregate

(such as GDP or Gross National

Income) and dividing it by the total

population. It does not attempt to

reflect the distribution of income or

wealth.

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International marketing is key tool to increase per capita income. Direct

foreign investment increase the employment opportunities that leads to

increase in GDP and GNP that is divided to total no. of peoples and result

in increased per capita income.

Per capita income of Seven Rich Countries of the world.

Country Per-capital income (in US dollar)

1. Norway 76,450

2. Switzerland 59,880

3. Denmark 54,910

4. Ireland 48,140

5. Sweden 46,060

6. United States of America 46,040

7. Netherlands 45,820

(Source: World Development Report 2009)

Likewise per-capital income of south Asian countries is as follows:

South Asian Countries and their Per-Capita Income

Country Per-capital income (in US dollar)

1. Bangladesh 470

2. India 950

3. Nepal 340

4. Pakistan 870

5. Sri Lanka 1540

(Source : World development report 2009)

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National Income

National income is related with

the final goods and services

produced in a country.

If a marketer makes investment

to some other country to

produce goods and services

which he may produce at low

cost. Then national income of that country will be increased and country

may be rated as increasing trend of economic development.

Physical quality of life index - PQLI

This is non-income indicator of economic development because this uses

physical quality of life as the indicator. This method of measuring

economic development is based on the following three things. They

are:–

(a) Life expectancy

(b) Infant mortality

(c) Literacy.

The scale of all these things

measured is between zero

(0) and hundred (100)

shows the lowest level and

100 shows the highest level.

If in any country life

expectancy measured is

maximum, ie. 100 and the

other two indicators are

measured minimum i.e.,

zero then giving equal

weight age to each indicator a competitive index is prepared from the

average of all three. Likewise index of a country with high literacy rate

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will be 100. Countries having low life expectancy, low literacy rate and

high infant mortality will have low index (ie. 0). If in any country PQLI is

increasing then it indicates the increase in the physical quality of the life

of people:

Increase in per-capita income does not necessarily indicate the increase

in the facilities like healthy food, health, situation, education, etc.

International marketing gives sense of ethics, high moral values, sense of

living and liberty to choice. This is all because of competition in

international firms conducting business in a particular country.

Human development index - HDI

Human development index is new and modern indicator of economic

development. This indicator was for the first time developed by United

Nations Development Program (UNDP) in the year 1990 AD. This

indicator is based on three things; They are as follows:

(a) Income for decent living

(b) Education

(e) Life expectancy.

As PQLI, HDI also divides all nations of the world in the scale of 0 to 1 on

the basis of three

objectives of

development. In

this method

minimum of 0 and

maximum of 1

value is given. This

method has

classified all

nations of the

world in three

different classes.

Low human

development in

from 0 to 0.50, Medium human development in from 0.51 to 0.79 and

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high human development is from 0.80 to 1.0. Since this method

measures the relative level of human development, this focuses on life

expectancy, education and physical choice. This takes per-capita income

as an indicator the change in monetary value is adjusted in GNP. This is

measured on the basis of the unofficial education and middle age of

school going population. In this method on the basis of the development

of skill of all the adults and infant mortality and the nutritious food they

get. When all three indicators are included an important indicator of

human HDI is measured development will be obtained. On the basis of

this, human development index (HDI) of different countries is obtained.

When MNCs enter in other countries then they provide quality product

and services, they introduce modern technology, advanced finished

goods, hygienic food items, medicine of international standard.

These directly increase the life expectancy with the help of hygienic food

items and medicines.

Modern and advanced equipment and machinery improvise local

citizens to get higher and quality education to get familiar with this new

equipment.

Direct foreign investment leads to increases production plant and

services. Which open the employment opportunities that provide

citizens with the high income level and buying power.

Besides from all these major indicators of economic development, there are

large number of indicators those are also improved with the help of

international marketing, which are as follows :-

(a) Equality improvement.

(b) Poverty alleviation

(c) Quality of life

(d) Capital formation

(e) Fulfillment of basic needs.

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(f) Population growth rate

(g) Increase in employment opportunities.

(h) Decrease in dependence on agriculture

(i) Increase in entrepreneurship

(j) Utilization of natural resources

(k) Increase in export of finished goods.

(l) Trade diversification

(m) Extension of infrastructures

(n) Extension of markets.

(o) Improvement in technology

(p) Urbanization, Gender equality, Human rights, etc.