Economics and Marketing

It examines individual part of human kind that is connected to the attainment of mans want through
scarce means. Therefore economics deals with the behavior of mankind. It is connected to the
attainment of materials needs of an individual. Lionel Robbins described economics as the study of
human behavior as the relationship between the means to an end. Marketing on the other hand is
described as the social activity using a set of institution for creating a message, communicating this
message to audience delivering and offering consumers exchanges that add value to the intended
parties.
The ones who agree that is there is relationship between economics and marketing base their
arguments on six main economic principles. The principles are

Individuals in marketing are faced with trade off between different alternative. It affects all
the consumers behavior in economics and marketing. The choices are essential in economics
as buyers try to make choices of what to purchase and what not to purchase given unlimited
human wants that should be satisfied with limited means. In marketing we are not just trying to
compete with competitors for consumers but there is also competition between different
products that are not related. Consumers will make choice between food and clothing.
Therefore the choice to purchase foods is affected by the need to buy a shoe. The implication
for this in marketing is that consumers need to be convinced that your brand is the best in the
market and the brands offers the consumers the best bargain for their money. The marketer
should therefore try to change consumers perception or even try to change the consumers
priorities.
The pricing of commodity is assessed by what the consumers are willing to surrender in order
to get the product. The degree of willingness is different between the different consumers. The
concept therefore explains how price discrimination works. Price discrimination entails the
selling of a similar product in the market for different price to different consumers according to
their willingness and ability. The implication for this is that the marketer sells a product that is
new in the market at higher prices and will reduce the prices as the product becomes more
common in the market. Marketers will also first sell their products to the highest bidder then to
those willing to pay lesser amounts. The concept of price discrimination is also used in
international trade where prices to trading partners are less than those outside your trading
bloc.
Marketers and economists respond to any incentive. Incentives was initially an economic
concept that was used to jump start the supply of commodity. Marketers have also adopted
the concept of issuing incentives by offering coupons for their products. The implication for this
is that consumers will be attracted to coupons and rebates and will go to any length to acquire
them.
There is specialization and division of labor in marketing. There is a big difference between
production in the ancient and modern times. At the start of civilization the early man produced
what he consumed without considering its costs. Things changed as we become more civilized
and the need to be efficient. Therefore each individual aims at producing what he is best at.
This concept of specialization has been borrowed in marketing where firms are willing to
outsource marketer rather than doing their own marketing. This will be cheap to the company
and more efficient.
The schools of thought that do not agree that marketing is related to economics or marketing is
a branch of economics have put forward some points to support their argument. The points are
Consumers act in a rational way. Studying consumers behavior will suggest that consumers
are not rational in there decision making or prioritizing the basic human wants. An example is
that People will spend their rent in vacation without considering what will happen .people are

also affected by some behavioral changes that affects their judgment. The behavioral changes
are habit, peer pressure or even emotions. The implication for this is that emotion will affect
consumers choice more than the rationality. People will tend to spend more when they are
happy or when there is peer pressure. Marketers will therefore create environment that
positively affects consumers behavior to purchase more.
Economist assumes that markets are efficient. Economists assume that there is informational
efficiency and allocation efficiency but this does not exist. People do not have perfect
knowledge of the entire market. Efficiency can only be found in the long run when companies
selling low quality products are driven out of the market. In the short run the consumers have
not tested their products hence there is no perfect information. Marketing will try to drive out
this inefficiency by educating consumers about their products.

Legal Political to Marketing

Political Environment:
Stability of Government Policies: Although the preferred political climate for a global firm is stable and
friendly, organizations may still profit and succeed in traditionally unfavorable conditions. The most
important idea is that the government is stable and the set of rules or codes of behavior that affect
business are predictable and adaptable. If the potential for profit exists and is permitted by
government policies, a global firm can still function.
There are 5 main political causes of instability that affect the international markets:

Some forms of government seem to be inherently unstable

Changes in ruling political parties

Extreme nationalism

Animosity targeted toward specific countries

Trade disputes

Political Risks: Below is a brief list of the kinds of political risks a company faces when doing business
internationally.

Confiscation, Expropriation and Domestication

Economic risks associated with the political environment (exchange controls, local-content
laws, import restrictions, tax controls, price controls, labor problems)

Political Sanctions (boycotting trade altogether or on specific products by one country to

another)

Political and Social Activist and Nongovenrmental Organizations

Violence, Terrorism and War

Cyberterrorism and Cybercrime

In order to understand how the political environment impacts your business, you must analyze how
politically vulnerable your company is. Unfortunately, there are no universal guidelines to do so, but
understanding how much your business is effected by the political environment can identify threats to
your firm. It also important to note that high priority products and industries in a country may have
more favorable government restrictions.
To decrease how vulnerable your business is to political conditions, it is especially important for the
marketer to forecast risk and engage in business ventures that may benefit them. Some examples of
these practices include forming joint-ventures, expanding your investment base, licensing your
products/services, or political bargaining through lobbying.
Legal Environment:
Legal Systems:
Its important to know the rules you must play by. There are four major bases for legal systems:

Common law: found in the UK, the US, Canada and other countries under English influence

Islamic Law: Derived from the Koran and found in Islamic States

Commercial legal system: Found in Marxist-socialist economies and states like China, and the
former Soviet Union

Civil or Code law: found in Germany, France, Japan and non-Islamic and non-Marxist
countries

This is just one way to categorize how different nations practice law. For more information on how law
systems can be classified, click here.
Juridsiction in International Legal Disputes:
There are three different types of international legal disputes; those between governments, between a
company and a government and between two companies. There is no absolute international law
system, so there are many ways to handle conflict. The question most commonly asked in these
instances are Whose law governs?
In order to resolve legal issues, there are three general ways to determine jurisdiction.

On the basis of jurisdictional clauses in contracts

On the basis of where a contract was entered into

On the basis of where the provisions of the contract were performed

Some laws that are essential to focus on that are involved with global marketing are: intellectual
property rights laws, commercial laws within countries (such as marketing laws), environmental laws,
foreign countries antitrust laws, and cyber laws.
Government policies and laws vary from country to country, and doing business abroad means that
government may have a greater level of involvement than what you are used to in domestic business.
Overall, the primary marketing objective is to develop a plan that will be enhanced or at least not
negatively affected by the political and legal environments.
Socio cultural and Marketing
Social and cultural factors are important to consider while creating and implementing a marketing
strategy of a company. These often-linked but somewhat different factors have diverse effects on the
decisions of consumers and buyers. Basically, sociocultural factors are customs, lifestyles and values
that characterize a society. More specifically, cultural aspects include aesthetics, education, language,
law and politics, religion, social organizations, technology and material culture, values and attitudes.
Social factors include reference groups, family, role and status in the society. Small-business owners
should be aware of and understand these factors' connection with buying habits.
Education and Language
The average level of education in a society affects the interests and sophistication of consumers. For
example, in a community in which a high percentage of potential customers have some form of postsecondary education, small-business owners might use more details and explanations while
advertising
and
promoting
products.
The spoken language of the community is a decisive factor on the labeling and advertising of the
products. Consider the foreign language skills in the society while advertising. For example, in
Washington, D.C., different transportation companies use English and Spanish on their brochures.
Social Organization
As part of the culture, social organization is the way a society organizes itself, how it considers
kinship, status system, social institutions and interest groups. For example, the role of women in a
society, whether they are the decision-makers in shopping, for example, is a decisive factor in
marketing. A major interest group in the area -- such as oil companies in Texas -- can also influence
society. The marketing of a small business can be successful by building its advertising strategy on
women or moms, a specific interest group or a leader that has the biggest influence in the community.
Reference Group and Family

Because people are social beings, each person has people around him who influence his decisions in
some way. Reference groups comprise people with whom individuals compare themselves. Family
members, relatives, neighbors, friends, co-workers and seniors at workplace can form reference
groups. Well-known and respected idols in society serve as examples in lifestyle, values and buying
habits.
Family is a specific reference group and can play the most important role in influencing the buying
decisions of the individuals. Spouses, children or grandparents have different needs and necessities.
Being aware of and finding the major reference groups, persons or family structures in a community
and building marketing on them can help small businesses achieve success.
Role and Status in Society
A person's role in society and social status affects her buying decisions. Each person plays a dual
role in society depending on the group to which she belongs. An individual working as president at a
reputed firm is also someones wife and mother at home. The social status is also a relevant factor;
an individual from an upper-middle class would spend on luxurious goods, while an individual from a
lower income group would buy items required for basic needs. Knowing the income information of the
potential customers gives the small-business owner an edge, allowing her to have more information
about customer habits and implement a successful marketing strategy.
Technology to economics
Developing countries generally see a close relationship between technology and economic
development and look for technology transfer by means of networking, foreign direct investment, joint
ventures or licensing of technology. The use of technology is seen as increasing productivity and
enabling the country to achieve a higher output from the same number of labor hours. Technology
also is seen as essential to improving critical infrastructure such as healthcare, education, transport
and telecommunications. In the drive toward development, the adverse effects of technology may be
ignored, with potentially harmful consequences for the environment and human health. Technology
may be used to achieve economic growth, but sustainable development for the whole population
requires the correct decisions on suitable technology and economic development.
Historically, technology has been an important factor in economic growth as the introduction of new
technology into manufacturing processes increases productivity, enabling each labor hour to produce
a greater output. This increases national output and national income where the producers have
access to international markets for their products. The industrial revolution in the United Kingdom, for
example, was built on groundbreaking inventions in industries such as textiles and iron and steel,
leading to developments in transport such as railways and increasing national income to create the
largest economy in the world in the 19th century. Developing countries in the early 21st century now
look to technology to similarly increase efficiency of production and diversify industrial output so as to
reduce reliance on primary industries and just a few products. New technology also may help to
increase the health of the nation, boost educational facilities and enhance transport and
communications, and developing countries see a close link between technology and economic
development.
The achievement of sustainable development requires careful use of sustainable technology so as to
avoid the damaging effects to health and the environment that accompanied the introduction of
technology and economic development in Europe and North America. Sustainable development

requires the use of green technologies and careful planning for employee welfare to avoid detrimental
effects to the standard of living and the inequality between rich and poor. Conventional economic
measures such as gross domestic product (GDP) do not take into account these adverse
consequences of growth, and countries may prefer to use a measure such as theUnited
Nations Development Programme's Human Development Index (HDI). The HDI takes into account life
expectancy, access to education and the standard of living of the population. These may be brought
about by the use of technology and pursuit of economic growth, though care is typically necessary to
ensure the technology doesn't do more harm than good.
legal-Political and market

There are many externalenvironmental factors that can affect your business. It is common for
managers to assess each of these factors closely. The aim is always to take better decisions for the
firms progress. Some common factors are political, economic, social and technological (known
as PEST analysis). Companies also study environmental, legal, ethical and demographical factors.
The political factors affecting business are often given a lot of importance. Several aspects of
government policy can affect business. All firms must follow the law. Managers must find how
upcoming legislations can affect their activities.
The political environment can impact business organizations in many ways. It couldadd a risk factor
and lead to a major loss. You should understand that the political factors have the power to change
results. It can also affect government policies at local to federal level. Companies should be ready to
deal with the local and international outcomes of politics.
Changes in the government policy make up the political factors. The change can be economic, legal
or social. It could also be a mix of these factors.
Increase or decrease in tax could be an example of a political element. Your government might
increase taxes for some companies and lower it for others. The decision will have a direct effect on
your businesses. So, you must always stay up-to-date with such political factors. Government
interventions like shifts in interest rate can have an effect on the demand patterns of company.
Certain factors create Inter-linkages in many ways. Some examples are:

Political decisions affect the economic environment.

Political decisions influence the countrys socio-cultural environment.

Politicians can influence the rate of emergence of new technologies.

Politicians can influence acceptance of new technologies.

The political environment is perhaps among the least predictable elementsin the business
environment. A cyclical political environment develops, as democratic governments have to pursue
re-election every few years. This external element of business includes the effects of pressure
groups. Pressure groups tend to change government policies.
As political systems in different areas vary, the political impact differs. The countrys population
democratically elects open government system. In totalitarian systems, governments power derives
from a select group.
Corruption is a barrier to economic development for many countries. Some firms survive and grow by
offering bribes to government officials. The success and growth of these companies are not based on
the value they offer to consumers.
Below, is a list of political factors affecting business:

Bureaucracy

Corruption level

Freedom of the press

Tariffs

Trade control

Education Law

Anti-trust law

Employment law

Discrimination law

Data protection law

Environmental Law

Health and safety law

Competition regulation

Regulation and deregulation

Tax policy (tax rates and incentives)

Government stability and related changes

Government involvement in trade unions and agreements

Import restrictions on quality and quantity of product

Intellectual property law (Copyright, patents)

Consumer protection and e-commerce

Laws that regulate environment pollution

There are 4 main effects of these political factors on business organizations. They are:

Impact on economy

Changes in regulation

Political stability

Mitigation of risk

IMPACT ON ECONOMY
The political situation of a country affects its economic setting. The economic environment affects the
business performance.
For example, there are major differences in Democratic and Republican policies in the US. This
influences factors like taxes and government spending, which ultimately affect the economy. A greater
level of government spending often stimulates the economy.
CHANGES IN REGULATION
Governments could alter their rules and regulations. This could in turn have an effect on a business.
After the accounting scandals of the early 21st century, the US SEC became more attentive on
corporate compliance. The government introduced the Sarbanes-Oxley compliance regulations of
2002. This was a reaction to the social environment. The social environment urged a change to make
public companies more liable.
POLITICAL STABILITY
Lack of political stability in a country effects business operations. This is especially true for the
companies which operate internationally.
For example, an aggressive takeover could overthrow a government. This could lead to riots, looting
and general disorder in the environment. These disrupt business operations. Sri Lanka was in a
similar state during a civil war. Egypt and Syria faced disturbances too.
MITIGATION OF RISK
Buying political risk insurance is a way to manage political risk. Companies that have international
operations use such insurance to reduce their risk exposure.
There are some indices that give an idea of the risk exposure in certain countries. The index of
economic freedom is a good example. It ranks countries based on how politics impacts business
decisions thereTHE IMPORTANCE OF OBSERVING THE POLITICAL ENVIRONMENT

Firms should track their political environment. Change in the political factors can affect business
strategy because of the following reasons:

The stability of a political system can affect the appeal of a particular local market.

Governments view business organizations as a critical vehicle for social reform.

Governments pass legislation, which impacts the relationship between the firm and its
customers, suppliers, and other companies.

The government is liable for protecting the public interest.

Government actions influence the economic environment.

Government is a major consumer of goods and services.

EXAMPLE: HOW POLITICAL FACTORS AFFECT NIKE

Studies show that Nike has earned high profits from the growth orientated policies of US government.
The policies maintained low-interest rates. Currency exchange stability and internationally competitive
tax arrangements were also maintained. The company has also benefited from government initiatives
in terms of transparency in the global value chain.
One example of this is in membership of the Clinton administrations 1997 Apparel Industry
Partnership. Nike enjoyed changes in the political factors in many ways. However, political pressures
had a negative impact on Nikes employment practices.