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MGT520 - International Business - Lecture Handout 13

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The Determinants of Economic Development:

  1. Different countries have dramatically different levels of development, as shown in Map 2.1. GDP/capita is a good yardstick of economic activity, as it measures average value of the goods and services produced by an individual.
  2. But GDP/capita does not consider the differences in costs of living. The UN's PPP index as shown in Table 2.1 shows the differences in the standards of living of people in different countries.
  3. A problem with both GDP/capita and PPP is that they are static in nature. From an international business perspective it is good to look at the rate of growth in the economy as well as the status of its people. Map 2.3 shows that some of the fastest growing countries economically are those have been slower to develop.
  4. A broader approach to assessing the overall quality of life in different countries is the Human Development Index. This is based on life expectancy, literacy rates, and whether (based on PPP indices) incomes are sufficient to meet the basic needs of individuals. Map 2.4 shows the Human Development Index. Notice that some of the worse off countries are heavily populated and have rapidly expanding populations.
  5. What is the relationship between political economy and economic progress? This is a difficult issue. One thing that is generally accepted is that innovation is the engine of long-run economic growth. Another thing that we have come to generally accept in recent years is that a market economy is better at stimulating innovation than a command economy that does not have the same types of incentives for individual initiative.
  6. Innovation also depends on a strong protection of property rights, as innovators and entrepreneurs need some level of assurance that they will be able to reap the benefits of their initiative.
  7. While it is possible to have innovation and economic growth in a totalitarian state, many believe that economic growth and a free market system will eventually lead a country to becoming more democratic.
  8. Geography can also affect economic development. A landlocked country with an inhospitable climate, poor soil, few natural resources, and terrible diseases is unlikely to develop economically as fast as country with the opposite characteristics on each of these attributes.
  9. While it can be hard to do much about unfavorable geography, education is something that governments can affect. Numerous studies suggest that countries that invest more in the education of their young people develop faster economically. Examples include, Japan, South Korea and many Asian countries.

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MGT601 - SME Management - Lecture Handout 32

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Concept of Marketing

Marketing is the process of integrating and coordinating the following.

  • Identifying and measuring the needs of customers for the type of products or services that the firm is equipped to provide.
  • Translating the perceived needs into products or services development.
  • Developing and activating a plan for availability of product or service available.
  • Informing perspective customers about availability of the product/service and stimulating their demand at a price that generates satisfactory profits for the firm.

Marketing Function

The functions that must be performed in the marketing process are as follows:

  1. Buying And Selling
    Exchange process involves buying in anticipation of customer demand and searching for materials that will satisfy those needs. Selling function includes determination of potential customers and using a combination of sales techniques to stimulate demand for those goods or services.
  2. Transportation And Storage
    It involves the movement and handling of goods. Not all goods are sold at the same time they are manufactured. Storage is done so that goods are available at the time and place they are needed.
  3. Risk-Taking, Standardization And Grading
    Stored goods are subject to several types of risks. They may undergo spoilage, obsolescence, destruction. Consumer preferences may change leaving the business owner with a large quantity of unsold goods. Some of the risks can be shifted through insurance coverage. But the most effective means of dealing with risks is the adoption of good management practices. Standardization and grading enable consumers to make a comparison of the products. Standardization establishes uniformity of specifications in the matter of color, weight, composition etc. grading is done in the case of products that cannot be produced uniformly e.g. fruit, egg.

  4. Read more: MGT601 - SME Management - Lecture Handout 32