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Tuesday, January 14, 2014

Developing Sustainable Marketing to Foster Societal Development


Sustainable marketing is an activity that supports sustainable economic growth. That leaves open the question of what sustainable growth is. To some it may focus on wealth generation while to others it is societal development. Of course, this doesn’t do much if that wealth only makes its way into a few hands. Sustainable marketing and sustainable growth must therefore include concepts of greater system development that makes its way throughout the societal networks to raise the status of all members. A paper by Shelby Hunt helps describe two theories of economics that focus on creating sustainable systems. 

Sustainable economic growth can be seen as improvements in the ecological (environment), social (equity), and financial (economic) arenas (Savitz & Weber, 2006). A collapse or deficiency in anyone of these areas can impact the trajectory of growth. For example, an ecological collapse based upon pollution could lower life expectancy, human growth, and raise costs. Likewise, social in-equity is unstable and can cause riots, fighting, and crime. The decline of the economic engine can cause damage in other areas leading to collapse. 

Two economic models help put together a framework for growth. These include the necoclassical static-equilibrium growth theory (Solow, 1966) and resource-advantage theory (Hunt, 2000). Neoclassical theory maintains that growth comes from investment. As investment increases so does growth. The resource-advantage theory indicates that growth comes from competitive innovations brought about by institutions that foster economic freedom. 

The neo-classical theory attempts to use investment to spur growth. It can be written into a Cobb-Douglass formula:

Y=A(t)K1-βLβ
Y is the net national product, A is the level of technology, K is the stock of capital, L is the stock of Labor and β relates to the output of labor. Therefore, net national output is a function of technological development, capital available for growth, personal abilities of labor, and labors total output.
The author focuses more on the resource-advantage theory as more valid in creating economic growth. This theory rests on the following premises:

-demand is heterogeneous across industries, within industries and is dynamic.
-consumer information is imperfect and costly.
-firms objectives are related to financial growth.
-firm’s information is imperfect and costly.
-firm resources are financial, physical, legal, human, organizational, informational and relational.
-resources are heterogeneous and mobile.
-management’s responsibility is to create and modify strategies.
-competition is based on disequilibrium. 

 In resource-advantage theory growth comes from societal resources and societal institutions. Resources are things like comparative advantages/disadvantages and parity. These resources lead into a market position that includes competitive advantages/disadvantage and parity. Public policy can foster or damage that growth creating a system of constant disequilibrium that seeks to develop to find an elusive homeostasis. 

The authors contend that resource-advantage theory follows the Schumpeterian model and is proactive in promoting innovation and technology. It strives off of the entrepreneurial mindset in an effort to encourage the highest levels of growth and development. The greater the competitive advantage of companies within the system the more likely they will draw in new resources. The theory promotes positive social responsibility and increasing economic growth. 

Comment: These two theories are not mutual exclusive but work together. Investments are necessary but how and where we use those investments will determine if our process is sustainable. When initial investments create greater wealth than their cost and in turn generate more investment the system becomes sustainable. Technology is a key place for investment because it increases productivity and decreases costs.   It is the chasing of mutual self-interest and reinvestment that creates the highest levels of self-perpetual growth. 

Hunt, S. (2011). Sustainable marketing, equity, and economic growth: a resource-advantage, economic freedom approach. Journal of Academic Marketing Science, 39

Hunt, S. (2000). The competence-based, resource-advantage, and neoclassical theories of competition: Toward a synthesis. In R. Sanchez & A. Heene (Eds.). Competence-based strategic management: Theory and research. Greenwich: JAI Press. 

Savitz, A. & Weber, K. (2006). The triple bottom : how today’s best-run companies are achieving economic, social and environmental success-and how you can too. NY: John Wiley.

Solow: R. (1956). A contribution to the theory of economic growth. Quarterly Journal of Economics, 70.

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