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MKT 100 - Quiz 1.doc

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Department
Marketing
Course
MKT 100
Professor
Daryl D' Souza
Semester
Summer

Description
MKT 100 Quiz 1Week 1What is MarketingMarketing 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 largeSchumpeter wealth creation principleInnovation and Creative DestructionThis value that technological innovation large or small adds in use is called the Schumpeter Principle after Joseph Schumpeter who called it creative destructionSchumpeter argued that capitalism exists in the state of ferment he dubbed creative destruction with spurts of innovation destroying established enterprises and yielding new ones So what is MarketingMarketing is responsible for the product development process and the direction of research and development that creates such innovation and creative destructionThe smith wealth creation principleThe first principle of wealth creation is that progress happiness and wealth comes from the value that technological innovation adds in use eg electric cars over gasoline driveThe second fundamental principle of wealth creation is that trading exchanges create addedvalue and wealth We call this the Smith Principle after Adam Smith who used the principle in his famous An Inquiry into the Nature and Causes of the Wealth of Nations argument for global freetrade It is explained in the following exampleValueXowns 10 AsY owns 10 BsFirst1010Second99Third88Fourth77Fifth66Sixth55Seventh44Eighth33Ninth22Tenth11Total Value5555Total wealth1105555 Two individuals X and Y meet X has 10 Units of A in his possession and ownership and Y has 10 units of B in his possession and ownership They discuss whether they would like to barter two units of A for two units of B X agrees because he values two MKT 100 Quiz 1ofB much more than two of his 10 units of A Y agrees because he values two of A much more than two of his 10 units of B They make the exchangeBoth X and Y now own possessions that are much more valuable than before the exchangeValue wealth and welfare have been increased by the trade As A and B generalize to anything including A or B being money It is the principle behind freetrade and the encouragement of more trade that creates more exchanges that creates more wealthMarketing is responsible for all exchange processes with customers and for creating customer exchanges It is also responsible for creating profitable product and service innovations Marketing is responsible for the two and only two wealth creating effects and their dynamic Great and rapid innovation and great and rapid diffusion of the innovation It is one of the most successful meetinganeed marketing success stories ever told and that will ever be told the invention development branding advertising selling pricing distribution and after salesservicing of antibioticsIt is the practice of profitable marketing at its bestThe wealth creation feedback effectThe dynamic is that these two wealth creation effects innovation and exchange amplify each other It is called a positive feedback system When innovation occurs competitors will arise consumers As exchange happens innovation will play along A positive feedback effect is when A increases B B increases A Thus if A increases then B increases which leads to a further increase in A which leads to a further increase in B It can be visualized as the followingInnovations create more exchanges more exchanges create more wealth and capital that is invested in more innovation and creating more exchanges As innovation increases exchanges increase and the wealth and capital increases Capital is both a driver anda product of this dynamicIt is called a virtuous economic cycle or circle that drives economic growth prosperity and capital creation A short story of civilizationTrade and then trading Empires grew out of the production of agricultural surpluses that could be traded and led to the diffusion of all sorts of innovations
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