MARKETING AND ECONOMIC DEVELOPMENT

Markets are the context, both physical and conceptual, where exchange takes place. Marketing
includes all activities from the producer to the final including processing and distribution
systems. The term producer includes farmers or pastoralists and the manufacturers of production
inputs when they produce the commodity being marketed. The term consumer is used for anyone
who is the final consumer of a product or the final user of a production input (e.g. pastoralists
may consume butter and veterinary inputs). The retailer is the final link in the chain from
producer to consumer. Hence, an urban butcher is a retailer and so is a vaccinator in the
government veterinary services who delivers a vaccination. The wholesaler delivers the product
to the retailer. The term farm gate is the location of a sale where a farmer keeps his or her
animals or produces his or her crop (i.e. on a farm in the case of settled cultivators or at an
encampment in the case of pastoralists). The terms market actors and market agents are used
interchangeably to represent any persons participating at any level of the market.

The objectives of marketing vary. For the individual producer or consumer, the objectives may be
to maximise benefits from the resources available and to expand marketing operations in order to
increase wealth. From a societal viewpoint, the objectives may be to encourage efficient
allocation of resources, to create wealth and promote economic growth in order to improve the
general welfare of society. Important considerations may also be to improve distribution of
income between sectors of the economy and to maintain some stability of supply and demand for
marketed goods. The concurrence of marketing objectives with national policy objectives
identified in module 2 will be discussed later in this module. Basic marketing science teaches us
that the root of any well-developed strategic marketing plan lies in developing a product that is
“need-driven.” The basic tenant of the “market concept” is that market needs and opportunities
are assessed FIRST, and then products are developed to address and exploit them. Organizations,
then, must not develop a product and then determine where, when, how, and to whom it will be
sold - after the fact. Most company leaders who do not fully understand this fundamental, global
shift in product development strategy are doomed to fail in one way or another, or at the very
least, neglect the prime directive, the optimization of ROI.

This shift is not always accepted as good news to organizations that claim to be “R&D-driven,”
yet we know that proper application of the market concept must never understate the importance
of cutting edge research and development or leveraging intellectual property. The fact is, core
competencies must be aligned with positioning and product differentiation strategies to achieve
and maintain sustainable competitive advantages as well as address changing market forces and
opportunities. Since it is marketing’s role to maintain constant vigilance regarding the dynamic
marketplace, this group is ultimately responsible for ensuring that the right products are
developed for the right market. Then, appropriate pricing, distribution, and promotional strategies
can be developed and implemented to realize organizational objectives.
Cross-Functional Product Development Teams
Does this mean that R&D professionals are relegated to taking a “back seat,” and must therefore
do the bidding of marketing people who have traditionally been viewed as out of touch with
science? Absolutely not! Rather, marketing and science professionals must work together to
create products that afford optimal opportunity for ROI and address real market needs.

Product development and life cycle management is a constant process. New products are
developed to address market opportunity, current products must be constantly altered, and
promotional strategies periodically adjusted to address a host of dynamic internal and external
environmental factors. The savvy organization addresses these necessities by developing and
managing products through “cross-functional” product management teams that include key
players in both marketing and R&D areas, as well as finance, information systems, human
resources, and other functional departments. Organizations can then harmonize market
opportunities and competitive forces with internal capabilities to ultimately produce what
amounts to the most optimal product strategy. Sourcing issues, patents, manufacturing
capabilities, finance, and many other resource-related areas therefore remain as crucial
components in deciding which products must be produced for which markets.

Cross-functional teams that utilize the market concept for optimal product development and
product management not only strive to bring all necessary functional areas together to formulate
an optimal marketing strategy, but also tend to generate much needed “buy-in” among all key
players. In this way, an organization can insure against the squabbling that is so common among
different interests, and develop need-driven products in the most efficient manner possible.

Economic development is the development of economic wealth of countries or regions for the
well-being of their inhabitants. From a policy perspective, economic development can be defined
as efforts that seek to improve the economic well-being and quality of life for a community by
creating and/or retaining jobs and supporting or growing incomes and the tax base. There are
significant differences between economic growth and economic development. The term
"economic growth" refers to the increase (or growth) of a specific measure such as real national
income, gross domestic product, or per capita income. National income or product is commonly
expressed in terms of a measure of the aggregate value-added output of the domestic economy
called gross domestic product (GDP). When the GDP of a nation rises economists refer to it as
economic growth.

The term "economic development," on the other hand, implies much more. It typically refers to
improvements in a variety of indicators such as literacy rates, life expectancy, and poverty rates.
GDP is a specific measure of economic welfare that does not take into account important aspects
such as leisure time, environmental quality, freedom, or social justice. Economic growth of any
specific measure is not a sufficient definition of economic development.

The Lewis-Ranis-Fei (LRF) Model of Surplus Labor is an economic development model and not
an economic growth model. Economic models such as Big Push, Unbalanced Growth, Take-off,
and so forth, are only partial theories of economic growth that address specific issues. LRF takes
the peculiar economic situation in developing countries into account: unemployment and
underemployment of resources (especially labor) and the dualistic economic structure (modern
vs. traditional sectors). This model is a classical model because it uses the classical assumption of
subsistence wage.
Here it is understood that the development process is triggered by the transfer of surplus labor in
the traditional sector to the modern sector in which some significant economic activities have
already begun. The modern sector entrepreneurs can continue to pay the transferred workers a
subsistence wage because of the unlimited supply of labor from the traditional sector. The profits
and hence investment in the modern sector will continue to rise and fuel further economic growth
in the modern sector. This process will continue until the surplus labor in the traditional sector is
used up, a situation in which the workers in the traditional sector would also be paid in
accordance with their marginal product rather than subsistence wage.The existence of surplus
labor gives rise to continuous capital accumulation in the modern sector because (a) investment
would not be eroded by rising wages as workers are continued to be paid subsistence wage, and
(b) the average agricultural surplus (AAS) in the traditional sector will be channeled to the
modern sector for even more supply of capital (e.g., new taxes imposed by the government or
savings placed in banks by people in the traditional sector). In the LRF model, saving and
investment are driving forces of economic development. This is in line with the Harrod-Domar
model but in the context of less-developed countries. The importance of technological change
would be reduced to enhancing productivity in the modern sector for even greater profitability
and promoting productivity in the traditional sector so that more labor would be available for
transfer.