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Producers and Consumers - History

Producers and Consumers - History


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I(Product Safety, Pollution etc.)

Americans business was not immune from the effects of the social reforms of the 1960s. Affirmative action policies initiated in the 1960s helped expand female and minority participation in the business world. In addition, various government programs offered low-interest loan and guaranteed private commercial loans against default. This provided opportunities for women and minorities previously excluded from access to capital, facilitating increased entrepreneurship among women, African-Americans, and other traditionally disadvantaged groups.

Another movement that influenced American industry was the Consumer Movement. The movement was largely sparked by the 1965 publication of Ralph Nader's Unsafe at Any Speed: The Designed-in Dangers of the American Automobile, a critique of the auto industry. Unsafe at Any Speed contained charges against General Motors, and Nader followed up on his accusations by testifying before a Senate committee. General Motors hired people to follow Nader and sabotage his career, for which Nader sued GM and received $280,000. In 1966, Congress passed a car safety law, largely due to Nader's efforts. He used the royalties from his book and other funds for research, extending his studies to the meat-packing industry, unsafe trucks, polluting paper mills, dishonest banks, and cheating supermarkets.

The Environmental Movement also affected American firms. Rachel Carson's concern about environmental pollution was eloquently expressed in Silent Spring, published in 1962, Silent Spring was largely responsible for the founding of the environmental movement and the introduction of environmental legislation. President Kennedy read her work and, despite attacks from the chemical industry, instructed his Science Advisory Committee to investigate. The panel confirmed her results in 1963, after which Congress passed legislation to protect the environment, much of which was championed by Senator Edmund Muskie. In addition to the chemical industry, the oil industry was the object of many attacks due to business policies harmful to the environment. One of the most dramatic incidents was the Santa Barbara oil spill of 1969. During January and February of that year, a great deal of oil leaked from Union Oil Company's off-shore drilling installations near Santa Barbara, California. The result was property damage, water pollution, and destruction of fish and other wildlife in the area. After the oil spill, the federal government passed strict laws regulating oil exploration.

In the last years of the decade, American firms performed poorly with respect to productivity. While output per worker in non-agricultural business increased at an average annual rate of 3.4% from 1960 to 1968, it only grew at about 1.7% annually from 1968 to 1973. Agriculture fared better than manufacturing and service sectors, except in 1968. U.S. output per hour grew at an increasing rate until the mid-1960s, peaked in 1964, then declined through late 1960s. American firms lost ground in innovation. Research and development expenditures fell from about 2.1% of GNP in 1964 to about 1.8% of GNP in 1970. While the United States had been the first to market 82% of all major innovations, by late 1960s, the figure was only 55%.

Large firms maintained a significant market share throughout the 1960s. The term "conglomerate" came into general use around 1964, although business mergers had been on the rise since the 1950s. While the largest 100 firms held relatively constant market share in the early 1960s, they expanded their control between 1965 and 1968. In 1967, the Supreme Court ruled 7 to 0 against Procter & Gamble in an antitrust suit filed by the Federal Trade Commission. The suit, originally filed in 1957, was introduced when Procter and Gamble Co., the leading American soap manufacturer and advertiser, purchased the Clorox Chemical Co., the largest American producer of liquid bleach. At the very end of the decade and into the early 1970s, small and mid-sized firms began to decentralize the American market, although the economy remained a concentrated one.
Market Share Share of 100 biggest % change Share of 200 biggest % change
YEAR corporations corporations

1950 38.4 — 46.1 —
1955 43.0 11.98 51.6 11.93
1960 45.5 5.81 55.2 6.98
1965 45.9 .88 55.9 1.27
1968 48.8 6.31 60.4 8.05
1974 44.4 -9.01 56.7 -6.13

Annual Rates of Productivity Increases
Year Total Agr. Mining Constr. Manuf. Transp. & Trade Svcs. Govt.
Non-farm Publ. (Wholesale, (Fin. &
Utilities Retail) other)

1961 2.6 4.7 4.7 1.6 2.2 4.3 2.8 2.3 0.3
1962 4.3 4.1 5.3 0.9 4.2 4.6 5.7 3.2 2.0
1963 3.5 2.3 5.8 0.2 7.0 5.4 3.6 -0.8 -0.7
1964 3.6 5.4 2.7 4.9 5.2 3.4 7.5 1.2 0.8
1965 3.3 6.1 1.8 1.6 3.6 5.5 3.7 2.5 1.1
1966 2.6 3.9 4.8 1.2 1.3 4.5 3.7 0.6 -0.9
1967 1.6 8.6 4.6 1.2 0.3 1.7 2.2 0.9 0.9
1968 3.2 -0.2 4.1 3.0 4.4 5.4 4.5 1.7 0.4
1969 -0.3 5.6 0.6 -7.8 1.3 -0.5 0.8 0.8 0.8
1970 0.1 7.7 2.2 -4.2 0.8 1.9 1.1 2.3 1.0
AVG 2.45 4.82 3.66 0.26 3.03 3.62 3.56 1.47 0.57

U.S. Output per hour
YEAR Index of output per hour (1967=100) % change
1960 78.8
1962 80.7 02.4
1963 84.5 04.7
1964 90.4 07.0
1965 95.2 05.3
1966 98.2 03.2
1967 99.7 01.5
1968 100.0 00.3
1969 103.6 03.6
1970 104.9 01.3
1960-65 24.6
1965-70 06.4


How Humans Became 'Consumers': A History

Until the 19th century, hardly anyone recognized the vital role everyday buyers play in the world economy.

“Consumption is the sole end and purpose of all production,” Adam Smith confidently announced in The Wealth of Nations in 1776. Smith’s quote is famous, but in reality this was one of the few times he explicitly addressed the topic. Consumption is conspicuous by its absence in The Wealth of Nations, and neither Smith nor his immediate pupils treated it as a separate branch of political economy.

It was in an earlier work, 1759’s The Theory of Moral Sentiments, that Smith put his finger on the social and psychological impulses that push people to accumulate objects and gadgets. People, he observed, were stuffing their pockets with “little conveniences,” and then buying coats with more pockets to carry even more. By themselves, tweezer cases, elaborate snuff boxes, and other “baubles” might not have much use. But, Smith pointed out, what mattered was that people looked at them as “means of happiness." It was in people’s imagination that these objects became part of a harmonious system and made the pleasures of wealth “grand and beautiful and noble."

This moral assessment was a giant step towards a more sophisticated understanding of consumption, for it challenged the dominant negative mindset that went back to the ancients. From Plato in ancient Greece to St. Augustine and the Christian fathers to writers in the Italian Renaissance, thinkers routinely condemned the pursuit of things as wicked and dangerous because it corrupted the human soul, destroyed republics, and overthrew the social order. The splendour of luxus, the Latin word for “luxury,” smacked of luxuria—excess and lechery.

The term “consumption” itself entered circulation with a heavy burden. It originally derived from the Latin word consumere and found its way first into French in the 12th century, and from there into English and later into other European languages. It meant the using up of food, candles, and other resources. (The body, too, could be consumed, in this sense—this is why in English, the “wasting disease,” tuberculosis, was called “consumption.") To complicate matters, there was the similar-sounding Latin word consummare, as in Christ’s last words on the cross: “Consummatum est,” meaning “It is finished." The word came to mean using up, wasting away, and finishing.

Perhaps those meanings informed the way that many pre-modern governments regulated citizens’ consumption. Between the 14th and 18th centuries, most European states (and their American colonies) rolled out an ever longer list of “sumptuary laws” to try and stem the tide of fashion and fineries. The Venetian senate stipulated in 1512 that no more than six forks and six spoons could be given as wedding gifts gilded chests and mirrors were completely forbidden. Two centuries later, in German states, women were fined or thrown in jail for sporting a cotton neckerchief.

To rulers and moralists, such a punitive, restrictive view of the world of goods made eminent sense. Their societies lived with limited money and resources in an era before sustained growth. Money spent on a novelty item from afar, such as Indian cotton, was money lost to the local treasury and to local producers those producers, and the land they owned, were heralded as sources of strength and virtue. Consumers, by contrast, were seen as fickle and a drain on wealth.

Adam Smith’s reappraisal of this group in 1776 came in the midst of a transformation that was as much material as it was cultural. Between the 15th and 18th centuries, the world of goods was expanding in dramatic and unprecedented ways, and it was not a phenomenon confined to Europe. Late Ming China enjoyed a golden age of commerce that brought a profusion of porcelain cups, lacquerware, and books. In Renaissance Italy, it was not only the palazzi of the elite but the homes of artisans that were filling up with more and more clothing, furniture, and tableware, even paintings and musical instruments.

It was in Holland and Britain, though, where the momentum became self-sustaining. In China, goods had been prized for their antiquity in Italy, a lot of them had circulated as gifts or stored wealth. The Dutch and English, by contrast, put a new premium on novelties such as Indian cottons, exotic goods like tea and coffee, and new products like the gadgets that caught Smith’s attention.

In the 1630s, the Dutch polymath Caspar Barlaeus praised trade for teaching people to appreciate new things, and such secular arguments for the introduction of new consumer products—whether through innovation or importation—were reinforced by religious ones. Would God have created a world rich in minerals and exotic plants, if He had not wanted people to discover and exploit them? The divine had furnished man with a “multiplicity of desires” for a reason, wrote Robert Boyle, the scientist famous for his experiments with gases. Instead of leading people astray from the true Christian path, the pursuit of new objects and desires was now justified as acting out God’s will. In the mid-18th century, Smith’s close friend David Hume completed the defense of moderate luxury. Far from being wasteful or ruining a community, it came to be seen as making nations richer, more civilized, and stronger.

By the late 18th century, then, there were in circulation many of the moral and analytical ingredients for a more positive theory of consumption. But the French Revolution and the subsequent reaction stopped them from coming together. For many radicals and conservatives alike, the revolution was a dangerous warning that excess and high living had eaten away at social virtues and stability. Austerity and a new simple life were held up as answers.

Moreover, economic writers at the time did not dream there could be something like sustained growth. Hence consumption could easily be treated as a destructive act that used up resources or at best redistributed them. Even when writers were feeling their way towards the idea of a higher standard of living for all, they did not yet talk of different groups of people as "consumers." One reason was that, unlike today, they did not yet single out the goods and services that households purchased, but often also included industrial uses of resources under the rubric of consumption.The French economist Jean-Baptiste Say—today remembered for Say’s law, which states that supply creates its own demand—was one of the few writers in the early 19th century who considered consumption on its own, according the topic a special section in his Treatise on Political Economy. Interestingly, he included the “reproductive consumption” of coal, wood, metal, and other goods used in factories alongside the private end-use by customers.

Elsewhere, other economists showed little interest in devising a unified theory of consumption. As the leading public moralist in Victorian England and a champion of the weak and vulnerable, John Stuart Mill naturally stood up for the protection of unorganized consumers against the interests of organized monopolies. In his professional writings, however, consumption got short shrift. Mill even denied that it might be a worthy branch of economic analysis: “We know not of any laws of the consumption of wealth as the subject of a distinct science," he declared in 1844. “They can be no other than the laws of human enjoyment." Anyone pitching a distinct analysis of consumption was guilty by association of believing in the possibility of “under-consumption," an idea that to Mill was suspect, wrong, and dangerous.

It fell to a popular French liberal and writer, Frédéric Bastiat, to champion the consumer—supposedly his dying words in 1850 were “We must learn to look at everything from the point of view of the consumer." That may have sounded prescient but it hardly qualified as a theory, since Bastiat believed that free markets ultimately took care of everything. For someone like Mill with a concern for social justice and situations when markets did not function, such laissez-faire dogma was bad politics just as much as bad economics.

By the middle of the 19th century, then, there was a curious mismatch between material and intellectual trends. Consumer markets had expanded enormously in the previous two centuries. In economics, by contrast, the consumer was still a marginal figure who mainly caught attention in situations of market failure, such as when urban utilities failed or cheated their customers, but rarely attracted it when it came to the increasingly important role they’d play in the expansion of modern economies.

Theory finally caught up in 1871, when William Stanley Jevons published his Theory of Political Economy. “The theory of economics," he wrote, “must begin with a correct theory of consumption.” Mill and his ilk had it completely wrong, he argued. For them the value of goods was a function of their cost, such as the cloth and sweat that went into making a coat. Jevons looked at the matter from the other end. Value was created by the consumer, not the producer: The value of the coat depended on how much a person desired it.

Further, that desire was not fixed but varied, and depended on a product’s utility function. Goods had a “final (or marginal) utility," where each additional portion had less utility than the one before, because the final one was less intensely desired, a foundational economic concept that can be understood intuitively through cake: The first slice may taste wonderful, but queasiness tends to come after the third or fourth. Carl Menger in Austria and Léon Walras in Switzerland were developing similar ideas at around the same time. Together, those two and Jevons put the study of consumption and economics on entirely new foundations. Marginalism was born, and the utility of any given good could now be measured as a mathematical function.

It was Alfred Marshall who built on these foundations and, in the 1890s, turned economics into a proper discipline at the University of Cambridge. Jevons, he noted, was absolutely right: The consumer was the “ultimate regulator of demand." But he considered Jevons’s focus on wants was too static. Wants, Marshall wrote, are “the rulers of life among lower animals” and human life was distinguished by “changing forms of efforts and activities”—he contested that needs and desires changed over time, and so did the attempts and means devoted to satisfying them. People, he believed, had a natural urge for self-improvement and, over time, moved from drink and idleness to physical exercise, travel, and an appreciation of the arts.

For Marshall, the history of civilization resembled a ladder on which people climbed towards higher tastes and activities. It was a very Victorian view of human nature. And it reflected a deep ambivalence towards the world of goods that he shared with such critics of mass production like the designer William Morris and the art critic John Ruskin. Marshall believed fervently in social reform and a higher standard of living for all. But at the same time, he was also deeply critical of standardized mass consumption. His hope was that people in the future would learn instead to “buy a few things made well by highly paid labour rather than many made badly by low paid labour." In this way, the refinement of consumers’ taste would benefit highly-skilled workers.

The growing attention to consumption was not limited to liberal England. In imperial Germany, national economists turned to it as an indicator of national strength: Nations with high demand were also the most energetic and powerful, it was argued. The first general account of a high-consumption society, however, came not surprisingly from the country with the highest standard of living: the United States. In 1889, Simon Patten, the chair of the Wharton School of Business, announced that the country had entered a “new order of consumption." For the first time, there was a society that was no longer fixated on physical survival but that now enjoyed a surplus of wealth and could think about what to do with it. The central question became how Americans spent their money and their time, as well as how much they earned. People, Patten wrote, had a right to leisure. The task ahead was no longer telling people to restrain themselves—to save or to put on a hairshirt—but to develop habits for greater pleasure and welfare.

This was more than an academic viewpoint. It had radical implications for how people should consume and think about money and their future. Patten summarised the new morality of consumption for a congregation in a Philadelphia church in 1913:

I tell my students to spend all that they have and borrow more and spend that … It is no evidence of loose morality when a stenographer, earning eight or ten dollars a week, appears dressed in clothing that takes nearly all of her earnings to buy.

Quite the contrary, he said, it was “a sign of her growing moral development.” It showed her employer that she was ambitious. Patten added that a “well-dressed working girl … is the backbone of many a happy home that is prospering under the influence that she is exerting over the household.” Some members at the Unitarian Church were outraged, insisting, “The generation you’re talking to now is too deep in crime and ignorance … to heed you.” Discipline, not spending on credit, was what they needed. Whether they liked it or not, the future would be with Patten’s more liberal, generous view of consumption.

Economists were not the only ones who discovered consumption in the late 19th century. They were part of a larger movement that included states, social reformers, and consumers themselves. These were years when steamships, trade, and imperial expansion accelerated globalization and many workers in industrial societies started to benefit from cheaper and more varied food and clothing. Attention now turned to “standard of living," a new concept that launched thousands of investigations into household budgets from Boston to Berlin and Bombay.

The central idea behind these inquiries was that the welfare and happiness of a household was determined by habits of spending, and not just earnings. A better understanding of how money was spent assisted social reformers in teaching the art of prudent budgeting. In France in the 1840s, Frédéric Le Play compiled 36 volumes on the budgets of European workers. In the next generation, his student Ernst Engel took the method to Saxony and Prussia, where he professionalized the study of social statistics. He fathered Engel’s law, which held that the greater a family’s income, the smaller the proportion of income spent on food. For those of Engel’s contemporaries who worried about revolutions and socialism, there was hope here: Less spending on food translated into more money for personal improvement and social peace.

Above all, it was citizens and subjects who discovered their voice as consumers. Today, the fin-de-siècle is remembered for its cathedrals of consumption, epitomized by the Bon Marché in Paris and Selfridges in London. While they did not invent the art of shopping, these commercial temples were important in widening the public profile and spaces for shoppers, especially for women.

Intriguingly, though, it was not there in the glitzy galleries but literally underground, through the new material networks of gas and water, that people first came together collectively as consumers. A Water Consumers’ Association was launched in Sheffield in 1871 in protest against water taxes. In addition, needs and wants themselves were changing, and this expanded notions of entitlements and rights. In England, middle-class residents at this time were becoming accustomed to having a bath and refused to pay “extra” charges for their extra water. A bath was a necessity, not a luxury, they argued, so they organized a consumer boycott.

The years before the First World War turned into the golden years of consumer politics. By 1910, most working-class families and every fourth household in England was a member of a consumer cooperative. In Germany and France, such groups counted over a million members. In Britain, the Woman’s Cooperative Guild was the largest women’s movement at the time. Organizing as consumers gave women a new public voice and visibility after all, it was the “women with the baskets”, as these working-class housewives were called, who did the shopping.

And it was women who marched in the vanguard of ethical consumerism. Consumer leagues sprang up in New York, Paris, Antwerp, Rome, and Berlin. In the United States, the league grew into a national federation with 15,000 activists, headed by Florence Kelley, whose Quaker aunt had campaigned against slave-grown goods. These middle-class consumers used the power of their purses to target sweatshops and reward businesses that offered decent working conditions and a minimum wage.

“The consumer,” a German activist explained, “is the clock which regulates the relationship between employer and employee.” If the clock was driven by “selfishness, self-interest, thoughtlessness, greed and avarice, thousands of our fellow beings have to live in misery and depression.” If, on the other hand, consumers thought about the workers behind the product, they advanced social welfare and harmony. Consumers, in other words, were asked to be citizens. For women, this new role as civic-minded consumers became a powerful weapon in the battle for the vote. This call on the “citizen-consumer” reached its apotheosis in Britain on the eve of the First World War in the popular campaigns for free trade, when millions rallied in defense of the consumer interest as the public interest.

Even before these movements took shape, many advocates had predicted a steady advance of consumer power throughout the 1900s. “The 19th century has been the century of producers," Charles Gide, the French political economist and a champion of consumer cooperatives, told his students in 1898. “Let us hope that the 20th century will be that of consumers. May their kingdom come!”

Did Gide’s hope come true? Looking back from the early 21st century, it would be foolish not to recognize the enormous gains in consumer welfare and consumer protection that have taken place in the course of the last century, epitomized by John F. Kennedy’s Consumer Bill of Rights in 1962. Cars no longer explode on impact. Food scandals and frauds continue but are a far cry from the endemic scandals of adulteration that scarred the Victorians.

And consumers have remained a focus of academics. Economists continue to debate whether people adjust their consumption over time to get most out of life, whether they spend depending on what they expect to earn in the future, or whether their spending is determined more by how their income compares to others’. Consumption is still an integral component of college curricula, and not only in economics and business, but in sociology, anthropology, and history, too, although the last few tend to stress culture, social customs, and habits rather than choice and the utility-maximizing individual.

Today, companies and marketers follow consumers as much as direct them. Grand critiques of consumerism as stupefying, dehumanizing, or alienating—still an essential part of the intellectual furniture of the 1960s—have had their wings clipped by a recognition of how products and fashions can provide identities, pleasure, and fodder for entirely new cultural styles. Younger generations in particular have created their own subcultures, from the Mods and rockers in Western Europe in the 1960s to Gothic Lolitas in Japan more recently. Rather than being passive, the consumer is now celebrated for actively adding value and meaning to media and products.

And yet, in other respects, today’s economies are a long way from Gide’s kingdom of consumers. Consumer associations and activism continue, but they have become dispersed between so many issues that they no longer carry the punch of the social-reform campaigns of the early 20th century today there are, for example, movements for slow food, organic food, local food, fair-trade food—even ethical dog food.

In hard times, like the First and Second World Wars, some countries introduced consumer councils and ministries, but that was because states had a temporary interest in organizing their purchasing power for war efforts and to recruit them in the fight against profiteering and inflation. During peacetime, markets and vocal business lobbies returned, and such consumer bodies were just as quickly wound up again. Welfare states and social services have taken over many of the causes for which consumer leagues fought a century ago. India has a small Ministry of Consumer Affairs, but its primary role is to raise awareness and fight unfair practices. In many less developed countries, consumers continue to be a vocal political force in battles over access and prices of water and energy. In the richest societies today, though, consumers have little or no organized political voice, and the great campaigns for direct consumer representation four or five generations ago have come to very little. Markets, choice, and competition are now seen to be the consumer’s best friend—not political representation. Consumers are simultaneously more powerful and powerless today than Gide had foreseen.

Today, climate change makes the future role of consumption increasingly uncertain. The 1990s gave birth to the idea of sustainable consumption, a commitment championed by the United Nations in Rio de Janeiro in 1992. Price incentives and more-efficient technologies, it was hoped, would enable consumers to lighten the material footprint of their lifestyles. Since then, there have been many prophecies and headlines that predict “peak stuff” and the end of consumerism. People in affluent societies, they say, have become bored with owning lots stuff. They prefer experiences instead or are happy sharing. Dematerialization will follow.

Such forecasts sound nice but they fail to stand up to the evidence. After all, a lot of consumption in the past was also driven by experiences, such as the delights of pleasure gardens, bazaars, and amusement parks. In the world economy today, services might be growing faster than goods, but that does not mean the number of containers is declining—far from it. And, of course, the service economy is not virtual, and requires material resources too. In France in 2014, people drove 32 billion miles to do their shopping—that involves a lot of rubber, tarmac, and gas. Digital computing and WiFi absorb a growing share of electricity. Sharing platforms like Airbnb have likely increased frequent travel and flights, not reduced them.

Moreover, people may say they feel overwhelmed or depressed by their possessions but in most cases this has not converted them to living more simply. Nor is this a peculiarly American or Anglo-Saxon problem. In 2011, the people of Stockholm bought three times more clothing and appliances than they did 20 years earlier.

How—indeed whether—consumers can adapt to a world of climate change remains the big question for the 21st century. In 1900, many reformers looked for answers to questions about social reform, social responsibility, and consumer representation. Climate change is its own monumental challenge, but there may be lessons that can be learned from that earlier history of the consumer. Consumers were identified as important players in tackling social blight and economic injustice. As buyers, they had some influence over what was produced, its quality as well as quantity. Organizing their interests added an important voice to the arena of public politics. These remain valuable insights: Consumers may not hold the answers for everything, but that does not mean they should be treated as merely individual shoppers in the market.


Contents

A variety of policies have been used to achieve protectionist goals. These include:

    and import quotas are the most common types of protectionist policies. [13] A tariff is an excise tax levied on imported goods. Originally imposed to raise government revenue, modern tariffs are now more often designed to protect domestic producers that compete with foreign importers. An import quota is a limit on the volume of a good that may be legally imported, usually established through an import licensing regime. [13]
  • Protection of technologies, patents, technical and scientific knowledge [14][15][16]
  • Restrictions on foreign direct investment, [17] such as restrictions on the acquisition of domestic firms by foreign investors. [18]
  • Administrative barriers: Countries are sometimes accused of using their various administrative rules (e.g. regarding food safety, environmental standards, electrical safety, etc.) as a way to introduce barriers to imports. : "Dumping" is the practice of firms selling to export markets at lower prices than are charged in domestic markets. Supporters of anti-dumping laws argue that they prevent the import of cheaper foreign goods that would cause local firms to close down. However, in practice, anti-dumping laws are usually used to impose trade tariffs on foreign exporters.
  • Direct subsidies: Government subsidies (in the form of lump-sum payments or cheap loans) are sometimes given to local firms that cannot compete well against imports. These subsidies are purported to "protect" local jobs and to help local firms adjust to the world markets.
  • Export subsidies: Export subsidies are often used by governments to increase exports. Export subsidies have the opposite effect of export tariffs because exporters get payment, which is a percentage or proportion of the value of exported. Export subsidies increase the amount of trade, and in a country with floating exchange rates, have effects similar to import subsidies. control: A government may intervene in the foreign exchange market to lower the value of its currency by selling its currency in the foreign exchange market. Doing so will raise the cost of imports and lower the cost of exports, leading to an improvement in its trade balance. However, such a policy is only effective in the short run, as it will lead to higher inflation in the country in the long run, which will, in turn, raise the real cost of exports, and reduce the relative price of imports.
  • International patent systems: There is an argument for viewing national patent systems as a cloak for protectionist trade policies at a national level. Two strands of this argument exist: one when patents held by one country form part of a system of exploitable relative advantage in trade negotiations against another, and a second where adhering to a worldwide system of patents confers "good citizenship" status despite 'de facto protectionism'. Peter Drahos explains that "States realized that patent systems could be used to cloak protectionist strategies. There were also reputational advantages for states to be seen to be sticking to intellectual property systems. One could attend the various revisions of the Paris and Berne conventions, participate in the cosmopolitan moral dialogue about the need to protect the fruits of authorial labor and inventive genius. knowing all the while that one's domestic intellectual property system was a handy protectionist weapon." [19]
  • Political campaigns advocating domestic consumption (e.g. the "Buy American" campaign in the United States, which could be seen as an extra-legal promotion of protectionism.)
  • Preferential governmental spending, such as the Buy American Act, federal legislation which called upon the United States government to prefer US-made products in its purchases.

In the modern trade arena, many other initiatives besides tariffs have been called protectionist. For example, some commentators, such as Jagdish Bhagwati, see developed countries' efforts in imposing their own labor or environmental standards as protectionism. Also, the imposition of restrictive certification procedures on imports is seen in this light.

Further, others point out that free trade agreements often have protectionist provisions such as intellectual property, copyright, and patent restrictions that benefit large corporations. These provisions restrict trade in music, movies, pharmaceuticals, software, and other manufactured items to high-cost producers with quotas from low-cost producers set to zero. [20]

Historically, protectionism was associated with economic theories such as mercantilism (which focused on achieving positive trade balance and accumulating gold), and import substitution. [ citation needed ]

In the 18th century, Adam Smith famously warned against the "interested sophistry" of industry, seeking to gain an advantage at the cost of the consumers. [21] Friedrich List saw Adam Smith's views on free trade as disingenuous, believing that Smith advocated for freer trade so that British industry could lock out underdeveloped foreign competition. [22]

Some have argued that no major country has ever successfully industrialized without some form of economic protection. [23] [24] Economic historian Paul Bairoch wrote that "historically, free trade is the exception and protectionism the rule". [25]

According to economic historians Douglas Irwin and Kevin O'Rourke, "shocks that emanate from brief financial crises tend to be transitory and have a little long-run effect on trade policy, whereas those that play out over longer periods (the early 1890s, early 1930s) may give rise to protectionism that is difficult to reverse. Regional wars also produce transitory shocks that have little impact on long-run trade policy, while global wars give rise to extensive government trade restrictions that can be difficult to reverse." [26]

One paper notes that sudden shifts in comparative advantage for specific countries have led some countries to become protectionist: "The shift in comparative advantage associated with the opening up of New World frontiers, and the subsequent “grain invasion” of Europe, led to higher agricultural tariffs from the late 1870s onwards, which as we have seen reversed the move toward freer trade that had characterized mid-nineteenth-century Europe. In the decades after World War II, Japan's rapid rise led to trade friction with other countries. Japan's recovery was accompanied by a sharp increase in its exports of certain product categories: cotton textiles in the 1950s, steel in the 1960s, automobiles in the 1970s, and electronics in the 1980s. In each case, the rapid expansion in Japan's exports created difficulties for its trading partners and the use of protectionism as a shock absorber." [26]

According to some political theorists, protectionism is advocated mainly by parties that hold far-left, far-right or left-wing economic positions, while economically right-wing political parties generally support free trade. [27] [28] [29] [30] [31]

In the United States Edit

According to economic historian Douglas Irwin, a common myth about US trade policy is that low tariffs harmed American manufacturers in the early 19th century and then that high tariffs made the United States into a great industrial power in the late 19th century. [32] A review by the Economist of Irwin's 2017 book Clashing over Commerce: A History of US Trade Policy notes: [32]

Political dynamics would lead people to see a link between tariffs and the economic cycle that was not there. A boom would generate enough revenue for tariffs to fall, and when the bust came pressure would build to raise them again. By the time that happened, the economy would be recovering, giving the impression that tariff cuts caused the crash and the reverse generated the recovery. 'Mr. Irwin' also attempts to debunk the idea that protectionism made America a great industrial power, a notion believed by some to offer lessons for developing countries today. As its share of global manufacturing powered from 23% in 1870 to 36% in 1913, the admittedly high tariffs of the time came with a cost, estimated at around 0.5% of GDP in the mid-1870s. In some industries, they might have sped up development by a few years. But American growth during its protectionist period was more to do with its abundant resources and openness to people and ideas.

According to Irwin, tariffs have serve three primary purposes in the United States: "to raise revenue for the government, to restrict imports and protect domestic producers from foreign competition, and to reach reciprocity agreements that reduce trade barriers." [33] From 1790 to 1860, average tariffs increased from 20 percent to 60 percent before declining again to 20 percent. [33] From 1861 to 1933, which Irwin characterizes as the "restriction period", the average tariffs increased to 50 percent and remained at that level for several decades. From 1934 onwards, which Irwin characterizes as the "reciprocity period", the average tariff declined substantially until it leveled off at 5 percent. [33]

Economist Paul Bairoch documented that the United States imposed among the highest rates in the world from around the founding of the country until the WWII period, describing the United States as "the mother country and bastion of modern protectionism" since the end of the 18th century and until the post-World War II period. [34] The industrial takeoff of the United States occurred under protectionist policies 1816-1848 and under moderate protectionism 1846–1861, and continued under strict protectionist policies 1861–1945. [35] Between 1824 and the 1940s, the U.S. imposed much higher average tariff rates on manufactured products than did Britain or any other European country, with the exception for a period of time of Spain and Russia. [36] Indeed Alexander Hamilton, the nation's first Secretary of the Treasury, was of the view, as articulated most famously in his "Report on Manufactures," that developing an industrialized economy was impossible without protectionism because import duties are necessary to shelter domestic "infant industries" until they could achieve economies of scale. [37] In the later 1800s, higher tariffs were introduced on the grounds that they were needed to protect American wages and to protect American farmers. [38] Up until the end of World War II the United States had the most protectionist economy on Earth. [39]

The Bush administration implemented tariffs on Chinese steel in 2002 according to a 2005 review of existing research on the tariff, all studies found that the tariffs caused more harm than gains to the US economy and employment. [40] The Obama administration implemented tariffs on Chinese tires between 2009 and 2012 as an anti-dumping measure a 2016 study found that these tariffs had no impact on employment and wages in the US tire industry. [41]

In 2018, EU Trade Commissioner Cecilia Malmström stated that the US was "playing a dangerous game” in applying tariffs on steel and aluminum imports from most countries, and stated that she saw the Trump administration's decision to do so as both “pure protectionist” and “illegal”. [42]

The tariffs imposed by the Trump Administration during the China-United States trade war led to a minor reduction in the United States trade deficit with China. [43]

In Europe Edit

Europe became increasingly protectionist during the eighteenth century. [44] Economic historians Findlay and O'Rourke write that in "the immediate aftermath of the Napoleonic Wars, European trade policies were almost universally protectionist," with the exceptions being smaller countries such as the Netherlands and Denmark. [44]

Europe increasingly liberalized its trade during the 19th century. [45] Countries such as Britain, the Netherlands, Denmark, Portugal and Switzerland, and arguably Sweden and Belgium, had fully moved towards free trade prior to 1860. [45] Economic historians see the repeal of the Corn Laws in 1846 as the decisive shift toward free trade in Britain. [45] [46] A 1990 study by the Harvard economic historian Jeffrey Williamson showed that the Corn Laws (which imposed restrictions and tariffs on imported grain) substantially increased the cost of living for British workers, and hampered the British manufacturing sector by reducing the disposable incomes that British workers could have spent on manufactured goods. [47] The shift towards liberalization in Britain occurred in part due to "the influence of economists like David Ricardo", but also due to "the growing power of urban interests". [45]

Findlay and O'Rourke characterize 1860 Cobden Chevalier treaty between France and the United Kingdom as "a decisive shift toward European free trade." [45] This treaty was followed by numerous free trade agreements: "France and Belgium signed a treaty in 1861 a Franco-Prussian treaty was signed in 1862 Italy entered the “network of Cobden-Chevalier treaties” in 1863 (Bairoch 1989, 40) Switzerland in 1864 Sweden, Norway, Spain, the Netherlands, and the Hanseatic towns in 1865 and Austria in 1866. By 1877, less than two decades after the Cobden Chevalier treaty and three decades after British Repeal, Germany “had virtually become a free trade country” (Bairoch, 41). Average duties on manufactured products had declined to 9–12% on the Continent, a far cry from the 50% British tariffs, and numerous prohibitions elsewhere, of the immediate post-Waterloo era (Bairoch, table 3, p. 6, and table 5, p. 42)." [45]

Some European powers did not liberalize during the 19th century, such as the Russian Empire and Austro-Hungarian Empire which remained highly protectionist. The Ottoman Empire also became increasingly protectionist. [48] In the Ottoman Empire's case, however, it previously had liberal free trade policies during the 18th to early 19th centuries, which British prime minister Benjamin Disraeli cited as "an instance of the injury done by unrestrained competition" in the 1846 Corn Laws debate, arguing that it destroyed what had been "some of the finest manufacturers of the world" in 1812. [34]

The countries of Western Europe began to steadily liberalize their economies after World War II and the protectionism of the interwar period. [44]

In Canada Edit

Since 1971 Canada has protected producers of eggs, milk, cheese, chicken, and turkey with a system of supply management. Though prices for these foods in Canada exceed global prices, the farmers and processors have had the security of a stable market to finance their operations. [ citation needed ] Doubts about the safety of bovine growth hormone, sometimes used to boost dairy production, led to hearings before the Senate of Canada, resulting in a ban in Canada. Thus supply management of milk products is consumer protection of Canadians. [49]

In Latin America Edit

According to one assessment, tariffs were "far higher" in Latin America than the rest of the world in the century prior to the Great Depression. [50] [51]

There is a broad consensus among economists that protectionism has a negative effect on economic growth and economic welfare, while free trade and the reduction of trade barriers has a positive effect on economic growth. [5] [6] [7] [2] [52] [53]

Protectionism is frequently criticized by economists as harming the people it is meant to help. Mainstream economists instead support free trade. [21] [54] The principle of comparative advantage shows that the gains from free trade outweigh any losses as free trade creates more jobs than it destroys because it allows countries to specialize in the production of goods and services in which they have a comparative advantage. [55] Protectionism results in deadweight loss this loss to overall welfare gives no-one any benefit, unlike in a free market, where there is no such total loss. According to economist Stephen P. Magee, the benefits of free trade outweigh the losses by as much as 100 to 1. [56]

Living standards Edit

A 2016 study found that "trade typically favors the poor", as they spend a greater share of their earnings on goods, as free trade reduces the costs of goods. [57] Other research found that China's entry to the WTO benefitted US consumers, as the price of Chinese goods were substantially reduced. [58] Harvard economist Dani Rodrik argues that while globalization and free trade does contribute to social problems, "a serious retreat into protectionism would hurt the many groups that benefit from trade and would result in the same kind of social conflicts that globalization itself generates. We have to recognize that erecting trade barriers will help in only a limited set of circumstances and that trade policy will rarely be the best response to the problems [of globalization]". [59]

Growth Edit

According to economic historians Findlay and O'Rourke, there is a consensus in the economics literature that protectionist policies in the interwar period "hurt the world economy overall, although there is a debate about whether the effect was large or small." [44]

Economic historian Paul Bairoch argued that economic protection was positively correlated with economic and industrial growth during the 19th century. For example, GNP growth during Europe's "liberal period" in the middle of the century (where tariffs were at their lowest), averaged 1.7% per year, while industrial growth averaged 1.8% per year. However, during the protectionist era of the 1870s and 1890s, GNP growth averaged 2.6% per year, while industrial output grew at 3.8% per year, roughly twice as fast as it had during the liberal era of low tariffs and free trade. [60] One study found that tariffs imposed on manufactured goods increase economic growth in developing countries, and this growth impact remains even after the tariffs are repealed. [61]

According to Dartmouth economist Douglas Irwin, "that there is a correlation between high tariffs and growth in the late nineteenth century cannot be denied. But correlation is not causation. there is no reason for necessarily thinking that import protection was a good policy just because the economic outcome was good: the outcome could have been driven by factors completely unrelated to the tariff, or perhaps could have been even better in the absence of protection." [62] Irwin furthermore writes that "few observers have argued outright that the high tariffs caused such growth." [62]

According to Oxford economic historian Kevin O'Rourke, "It seems clear that protection was important for the growth of US manufacturing in the first half of the 19th century but this does not necessarily imply that the tariff was beneficial for GDP growth. Protectionists have often pointed to German and American industrialization during this period as evidence in favor of their position, but economic growth is influenced by many factors other than trade policy, and it is important to control for these when assessing the links between tariffs and growth." [63]

A prominent 1999 study by Jeffrey A. Frankel and David H. Romer found, contrary to free trade skeptics' claims, while controlling for relevant factors, that trade does indeed have a positive impact on growth and incomes. [64]

Developing world Edit

There is broad consensus among economists that free trade helps workers in developing countries, even though they are not subject to the stringent health and labor standards of developed countries. This is because "the growth of manufacturing—and of the myriad other jobs that the new export sector creates—has a ripple effect throughout the economy" that creates competition among producers, lifting wages and living conditions. [65] The Nobel laureates, Milton Friedman and Paul Krugman, have argued for free trade as a model for economic development. [5] Alan Greenspan, former chair of the American Federal Reserve, has criticized protectionist proposals as leading "to an atrophy of our competitive ability. . If the protectionist route is followed, newer, more efficient industries will have less scope to expand, and overall output and economic welfare will suffer." [66]

Protectionists postulate that new industries may require protection from entrenched foreign competition in order to develop. This was Alexander Hamilton's argument in his "Report on Manufactures", [ citation needed ] and the primary reason why George Washington signed the Tariff Act of 1789. [ citation needed ] Mainstream economists do concede that tariffs can in the short-term help domestic industries to develop, but are contingent on the short-term nature of the protective tariffs and the ability of the government to pick the winners. [67] [68] The problems are that protective tariffs will not be reduced after the infant industry reaches a foothold, and that governments will not pick industries that are likely to succeed. [68] Economists have identified a number of cases across different countries and industries where attempts to shelter infant industries failed. [69] [70] [71] [72] [73]

Economists such as Paul Krugman have speculated that those who support protectionism ostensibly to further the interests of workers in the least developed countries are in fact being disingenuous, seeking only to protect jobs in developed countries. [74] Additionally, workers in the least developed countries only accept jobs if they are the best on offer, as all mutually consensual exchanges must be of benefit to both sides, or else they wouldn't be entered into freely. That they accept low-paying jobs from companies in developed countries shows that their other employment prospects are worse. A letter reprinted in the May 2010 edition of Econ Journal Watch identifies a similar sentiment against protectionism from 16 British economists at the beginning of the 20th century. [75]

Conflict Edit

Protectionism has also been accused of being one of the major causes of war. Proponents of this theory point to the constant warfare in the 17th and 18th centuries among European countries whose governments were predominantly mercantilist and protectionist, the American Revolution, which came about ostensibly due to British tariffs and taxes, as well as the protective policies preceding both World War I and World War II. According to a slogan of Frédéric Bastiat (1801–1850), "When goods cannot cross borders, armies will." [76]

Since the end of World War II, it has been the stated policy of most First World countries to eliminate protectionism through free trade policies enforced by international treaties and organizations such as the World Trade Organization. [ citation needed ] Certain policies of First World governments have been criticized as protectionist, however, such as the Common Agricultural Policy [78] in the European Union, longstanding agricultural subsidies and proposed "Buy American" provisions [79] in economic recovery packages in the United States.

Heads of the G20 meeting in London on 2 April 2009 pledged "We will not repeat the historic mistakes of protectionism of previous eras". Adherence to this pledge is monitored by the Global Trade Alert, [80] providing up-to-date information and informed commentary to help ensure that the G20 pledge is met by maintaining confidence in the world trading system, deterring beggar-thy-neighbor acts and preserving the contribution that exports could play in the future recovery of the world economy.

Although they were reiterating what they had already committed to, last November in Washington, 17 of these 20 countries were reported by the World Bank as having imposed trade restrictive measures since then. In its report, the World Bank says most of the world's major economies are resorting to protectionist measures as the global economic slowdown begins to bite. Economists who have examined the impact of new trade-restrictive measures using detailed bilaterally monthly trade statistics estimated that new measures taken through late 2009 were distorting global merchandise trade by 0.25% to 0.5% (about $50 billion a year). [81]


Focus

Preparation

To prepare for today's lesson, I collected pictures of living organisms within Yellowstone National Park. To build upon background knowledge and connect lessons, I specifically gathered pictures of plants and animals that were also featured on the Yellowstone Poster from yesterday's lesson.

I want to inspire interest in today's lesson and capitalize on student curiosity, so I hand out a page of pictures to each team, Yellowstone Pictures, and ask students to cut out the pictures and to begin sorting them in groups. I purposefully don't tell students how to sort the pictures. I want them to think deeply, collaborate, and share prior knowledge.

As students begin sorting, I walk around the room to ask probing questions and to observe student reasoning. Students develop a variety of ways to categorize the pictures:

  • Biomes
  • Predators & Prey
  • Food Chain Roles (Decomposers, Producers, Consumers)
  • Meat-Eaters, Plant-Eaters, Meat & Plant Eaters
  • Animals & Plants

Conferences

During this conference, Predators & Prey, students at first wanted to categorize the pictures by biomes. Then, they gravitated toward predators and prey. One student connects their categories with the food chain and explains that plants are at the bottom of the food chain and predators are at the top.

Here, Animals & Plants, students categorize the pictures by animals and plants. I want to push their thinking a bit so I ask them to further categorize their pictures. One student mentions meat-eaters and then the group takes off!

This group, Meat & Plant Eaters does a great job categorizing the living organisms by what they eat. I ask them to explain their thinking about bacteria. Most students in the class are confused about bacteria, if it's really living, and if it is a plant or in it's own category.

After about ten minutes of sorting, we discuss how each group sorted their pictures as a class. Then, we pushed the pictures aside into a pile and moved on with the lesson!

Changes with Pictures

As a side note, I have added a few more pictures to the Yellowstone Pictures document since I taught this lesson. Next year, I would want to provide more examples of Yellowstone decomposers: earthworms, thermophile (archaebacteria that thrives in Yellowstone thermal features), and beetles. I almost omitted the picture of the sun as it isn't a producer, consumer, decomposer, or a living organism for that fact, however, it inspired great conversations with students (Is the sun a producer? What category is the sun in?) so I decided to leave it!

Lesson Introduction & Goal

I introduce today's learning goal: I can identify and explain the roles of different organisms within an ecosystem. I explain: Yesterday, we began learning about the variety of living organisms in Yellowstone National Park. However, what we didn't talk about is the fact that each organism has a very special role. So today, we are going to take our learning one step further by investigating the different roles that organisms fill within an ecosystem.


The benefits to producers and consumers of the US Free Enterprise System include freedom of owning private property, producers producing at their own profit, both consumers and producers can control themselves, increased efficiency and adequate use of the available resources.

Free Enterprise as Law and Economics However, free enterprise is distinct from capitalism. Capitalism refers to a method by which scarce resources are produced and distributed. Free enterprise refers to a set of legal rules regarding commercial interaction.


Importance of Advertising: For Manufacturers, Middlemen, Consumer and Society

Importance of Advertising – With Benefits to Manufacturer, Middlemen, Sales Force, Consumer and Society

Advertising is an integral part of our economic and social life. As a power­ful technique of promoting sales, it has been doing wonders in the area of distri­bution. The role of advertising can be analyzed from five different angles namely, manufacturers middleman sales force customer and society.

1. Importance of Advertising to Manufacturers:

Every manufacturer and producer, who wants to make available his goods to people at profit, do take full advantage of advertising to popularize their products and services.

The major benefits that are available to manufacturer are:

(a) Increasing Sales – Even the best product cannot be sold on its own, unless people know about the product. In today’s highly sensitive and competitive market, a firm cannot maximize its profit, unless it multiplies its sales turnover. A regular and frequent advertising helps the producer to obtain this objective.

(b) Helps in maintain existing market and explore new market – Every forward looking company eyes on future prospects without losing its current position. A company’s success is reflected by how it maintains its current position and future expansion. Advertising helps the manufacturer, in this regard, to face competition effectively.

(c) Helps to control price of product – Through advertising, it is possible to control price of the product especially in retail market. Very often greedy retailer charge higher price from the customer. The manufacturer can help them by printing the price on the packages.

2. Importance of Advertising for Middlemen:

Middlemen are essential link between producer and consumer.

The benefits which advertising offers to middlemen are:

(a) Quick Sale – Every retailer holds stock of different producer. Advertising, by making the range of products known to customer, helps the retailer to quickly sell its stock.

(b) Act as Salesmen – Advertising has been rightly described as salesmanship in print. Advertising perform task of travelling salesmen at least cost. That is why most of the retail organizations do not employ large number of travelling salesman. Instead, they spend on advertising, which attracts customers to the shops, where counter salesmen cater to their need.

3. Importance of Advertising for Consumer:

Ultimate aim of all marketing efforts is to satisfy the needs of the customer by providing the goods and services.

Advertising is essential for consumer due to following reasons:

(a) Quick decision making and saves time – In today’s competitive world market is full of different types of product which satisfy needs and want. Every producer claims his product to be superior one. In such situation, advertising helps the consumer in comparing features price utility quality etc. of the product, and select the best.

(b) Better Quality Product at Reasonable Price – Advertising promotes good quality product by printing their image in the minds of consumer. Due to this, bad product goes out of the market. Moreover, it increases competition in the market, which helps consumer in getting the product at reasonable price.

4. Importance of Advertising for Society:

Advertising is not only beneficial for manufacturer retailer and customer but also for the society.

Various benefits offered by advertising to the society are:

(a) Uplift Standard of Living – Advertising has made it possible for general public to use those products which were luxuries of yesterday. Advertising increases the consumption pattern, it results in more production at least cost, which in turn increases earning of the society and thus, standard of living of the society.

(b) Generates Employment – Advertising generates gainful employment opportunities both directly and indirectly. It directly generates employment painters artist photographers technician etc. Indirectly, it gives employment by supporting all those industries like – paper colour electronic etc. which supply inputs for the advertising activities.

Importance of Advertising – As a Promotional, Marketing and Business Activity

For an organization, advertising is important both as a promotional and as a marketing activity. As a business activity it holds its importance for an economy.

1. As a Promotional Activity :

Advertising could have following effects:

i. To generate awareness for the product.

ii. To impart knowledge about product to the customer.

iii. To cause the change in attitude.

iv. To induce trial behaviour for the product.

v. To have direct purchase action.

Advertising effects differ in different market situations. For a ‘less expensive frequently purchased product’ the use of repetitive advertising may cause trial purchase. In case the trial experience is satisfactory, it is expected to result into final purchase of a product. For routine or habitual kind of purchases like purchase of glucose biscuits, the mere exposure to an advertisement is likely to trigger a direct purchase action.

On the other hand, for the purchase of a product like automobile advertising is primarily used to generate awareness and impart knowledge about the product. Since such decision-making situation requires more of buyer’s deliberations, it is less likely that attitude change occurs due to advertising only. The use of repetitive advertising, however, provides reassurance like in the case of Surf Excel ads and helps in reinforcing the product choice.

2. As a Marketing Activity :

Advertising holds its significance for decisions concerning other promotion tools as well as other marketing decisions concerning product, price, and place. The nature and scope of advertising for a product in turn depends upon the mix of various marketing tools in a given situation.

Product is at the very heart of an advertising programme. A, successful advertising programme requires knowledge about product attributes and a clear notion about its positioning. Packaging, trade mark and various other attributes of product as its taste, colour, texture, aroma, style and design are other essential elements of effective advertising.

The potential of these attributes in affecting product sale is analyzed before incorporating them in the advertising message. Though advertising does not add any intrinsic value to the product, it makes possible selling the product by informing the consumers. Advertising is one of the major parts of brand building exercise.

In case advertising carries a price tag, it helps in comparison between various brands also. Otherwise the media choice, the message content, and its execution for an advertising activity do convey a certain notion about the product price to the consumer. There is a perception about positive relationship between the product price and the level of advertising activity for a product.

Brands with relatively high advertising budget are presumed as charging premium prices and brands that spend less than their competitors on advertising charge lesser price. At each product life cycle stage the level and the kind of advertising is related to its price strategy. The positive relationship between high relative advertising and price level is supposed to be stronger for products in the later stages of PLC. This is especially found true for market leaders and for low cost products.

The level of advertising exposure is related to distribution objectives and strategies. Product distribution can be intensive or selective or exclusive. Advertising as a mass communication mode facilitates an intensive distribution of product. It works as a pull factor in the market and creates demand for the product. In case of selective or exclusive distribution strategy adopted for the product, advertising is mainly used to provide information about the product availability.

Advertising is often regarded as ‘salesmanship in print which pre-sells the product verbally and makes it comfortable for sales personnel to approach the target audience. Advertising facilitates the implementation of various sales promotion techniques in the market. Quite often, marketers make use of sales promotion tools like gifts, coupons, discounts, etc. to give immediate boost to the declining product sales or to counter the competitive strategy.

Advertising creates awareness about these tools and makes the environment conducive to bring success in terms of increase in product sales. Similarly, for public relation and publicity to be effective in their goals, advertising provides a viable platform to make people aware of such promotional initiatives.

In a nutshell, advertising appears to be one among many marketing activities being taken up to communicate with the customers. An insight into the interdependencies between advertising decisions and those on product design, pricing and dealer’s choice. Thus, the ability of advertising decisions to contribute to the goals of an organization depends on other decisions and also the coordination with these decisions.

The productivity of advertising decisions increases when the quality of decisions in other areas of marketing mix improves. There is some kind of communication which occurs at every phase of marketing and at the end product itself performs the principal and decisive act of communication.

But when advertising is used it generally assumes a dominant position in the overall marketing and promotional strategy of an organization. The actual aim of advertising is therefore not to ‘sell’ but to induce people to try the product or service offered and to prepare them for satisfaction in its use by ‘pre-sampling’ it verbally.

Over the years, advertising industry has witnessed the annual growth of over 15 per cent and it reflects the buoyancy and optimism in Indian economy. The booming stock market, price rationalisation across categories, exploding real estate and entertainment industry has opened up new markets for the advertisers.

Along with Telecom and Auto sectors the growth of advertising industry is driven mainly by advertising for new product categories including Mutual Funds, IPO’s, Aviation and also the increased ad spend for rural markets and the markets with low price points. There is reported an increase of 45.5 per cent in inbound traffic and additional earnings of Rs 8,274 crores in the year 2005 over that in the year 2003.

3. As a Business Activity :

Advertising as a business activity also has its importance in an economy. The size of advertising industry, rate of increase in its profitability increased budget allocations for ad spend at the organizations level, and the multiplicity of products being advertised provide evidence in this regard.

Advertising informs consumers about the availability of substitutes and helps them in making informed choices of the products. Consumers learn about new and improved products and how to use the product innovations for their best purpose.

Advertising affects the sensitivity of product’s demand to changes in its price. But there are no conclusive evidences that whether advertising reduces or increases price elasticity of demand. According to one school of thought advertising makes people to learn more about the product and it substitutes which may reduce the price elasticity of a product’s demand.

On the other hand, the counter view holds that advertising provides information about the alternatives and makes the demand more sensitive to differences in price across various alternatives. There is also research evidence which supports both the views and holds that ‘advertising not only provides information about which substitutes exist, it also provides consumers with recall cues so that they consider more substitutes at the time of purchase’.

From producers’ perspective, the increase in product demand due to advertising enables production at a large-scale. The large-scale production brings economy of scale and affects the cost of production and in turn the product price. In other words, advertising may be considered as a cost reducing exercise taking place due to a rise in product demand.

Advertising is not just demand catalyst it leads to changes in people’s lifestyle too. Advertising mirrors fashion and design. The exposure to new and improved products, new consumption situations, new activities and new values encourages aesthetic sense in consumption decisions. Some of the products, through their repeated exposure at times, become a matter of lifestyle statement for its consumers.

In a nutshell, when economies achieve abundance, the situation where supply exceeds demand advertising informs and persuades its members with respect to goods, services, ideas, people and places and creates demand in the economy.

Advertising is the most important part of functioning of market economies. It helps firms to enter the market and facilitates the growth of market economic systems based on competition and availability of information. It is a useful tool for sustaining honest and ethically responsible competition which works as an impetus to the economic growth.

Growth of media, whether it is print or broadcast, undoubtedly is based on its content. To sustain its growth, media houses always attempt to improve TRP’s (i.e. target rating points which shows media preference among its audiences) of their programme/editorial content. There is an expectation that good TRP’s will attract advertisers. At times, the content is adjusted to the requirements of the advertisers to ensure the continuity in the flow of advertising revenue which usually is the major source of revenue for media.

Advertising has an immense potential for employment generation in the economy. It involves multiplicity of advertising activities involved in the development of an ad which add to its scale of operation in the economy.

It gives boost to creativity and creates more jobs for copywriters, art directors, film producers, researchers, analysts and many other people associated with advertising industry. The creation of more and better number of jobs lead to higher levels of income for the people and thus provides a more decent and human way of life for them.

Since its origin, advertising has undoubtedly been an integral part of economic and socio-cultural growth of any market based economy. Now there is a global concern about advertising for its role in saving the earth in the wake of deteriorating environment and the need for sustainable products. At the same time, ‘…. advertising has power to dictate. The cumulative effects of non-stop ads on television, radio, print, and outdoor ads can be overwhelming and there is an involvement of advertising in the increased popularity of socially questionable behavior-cigarette smoking. The evidence demonstrating the manipulative power of advertising is shaky because so many factors contribute to the choices we make. Still advertisers are not objective and often slant and omit information to their benefit.’

Importance of Advertising

Advertising has become increasingly important to business enterprises- both large and small. Outlays on advertising certainly attest to the management’s faith in the ability of advertising efforts to produce additional sales.

It would be difficult to conceive of a firm that does not attempt to promote its product in some manner or another. Most modern institutions simply cannot survive without advertising.

Non-business enterprises have also recognised the importance of advertising. The attempt by army recruitment is based on a substantial advertising campaign, stressing the advantages of a military career. The health department popularises family planning through advertising.

Even labour organizations have used advertising to make their viewpoints known to the public at large. In fact, it is reasonable to say that promotion now plays a larger role in business than it ever did in the past.

If for no other reason than that it is an activity that employs several thousands of people, advertising assumes real economic importance. More importantly, however, is the fact that effective advertising has offered to society benefits not otherwise available.

For example, the criticism that “advertising costs too much” views an individual expense item in isolation. It fails to consider the possible effect of advertising on other categories of expenditure.

Advertising strategies that increase the number of units sold stimulate economies in the production process. The production costs assigned to each unit of output are lowered. Lower consumer prices then allow these products to become available to more people.

Similarly, the price of newspapers, professional sports, radio and TV programmes, and the like might be prohibitive without advertising to share the expense. In short, advertising pays for many of the enjoyable entertainment and educational aspects of contemporary life, as well as lower product costs.

The criticism that “most advertising messages are tasteless” and that “advertising contributes nothing to society’s well-being” some­times ignore the fact that there is no commonly accepted set of standards or priorities within our social framework. We live in a varied economy characterized by consumer segments with differing needs, wants and aspirations. What is tasteless to one group may be quite informative to another.

An advertising strategy generally suffers from the averaging problem that escapes many of its critics. The one generally accepted standard in our society is freedom of choice for the consumer customer buying decisions will eventually determine what an acceptable practice in the market place is.

Advertising has become an important factor in the campaigns to achieve such societal-oriented objectives as the discontinuance of smoking, family planning, physical fitness, and the elimination of drug abuse. Advertising performs an informative and educative task that makes it extremely important in the functioning of the modern Indian society.

Importance of Advertising – To Producer, Consumers and Society

Advertising has become inevitable in the contemporary business environment. It is necessary for producers, consumers as well as the society.

(A) Importance of Advertising to Producers:

1. To Introduce New Products:

Advertisement of the new product is necessary so that consumers become aware about the product, its availability, its utility, its price etc., thus, advertising is crucial to promote the sale of a new product.

2. To Induce Potential Customers:

Advertising is one of the best means by which the sale of an existing product can be increased. For this purpose, the advertisement should emphasize the usefulness of the product, its quality, price advantages, etc., so as to win over the potential buyers and make them actual buyers.

In a competitive market, new products are introduced frequently. All these products are advertised in the market. As a result, old brands are likely to be forgotten by the consumers. To offset this possibility, manufacturers continue to advertise their products to maintain the buyers’ interest. Thus, advertise­ments are also designed to serve as a reminder to existing customers.

4. To Create Brand Image:

Business firms very often advertise for establishing an image for the product and creating customers’ loyalty for that product. When customers develop brand loyalty, they are unlikely to switch to other brands easily.

5. To Highlight Brand Character:

For certain products, consumers feel that a particular characteristic is very important. Its existence determines the buyer’s choice of a particular brand out of several brands. If the product has that feature, advertising is used to stress it and demonstrate its advantages.

6. To Educate Customers about New Uses of a Product:

Advertising is sometimes, used to convey new uses of an existing product to the customers or to draw their attention to some new features of the product. The basic objective of advertising in this case is to convince the customers about the superiority of a product in comparison with other products in the same line.

Sometimes, the aim of advertisement is to provide support to dealers and distributors. Thus, there are many advertisements in newspapers in which the list of dealers and distributors is given along with the particulars of the product.

(B) Importance of Advertising to Consumers:

1. Improved Quality of the Product:

It is absolutely essential to improve the quality of the product to maintain confidence of the customers and ensure brand loyalty. Hence, advertised goods are usually of good quality.

2. Protects Consumers from Exploitation:

Advertising also acts as an information service and educates the consumer. It enables him to know exactly what he wants and where to get it.

Advertising stimulates production and reduces the cost per unit. This reduction in the cost is generally passed on to the consumer and that is why price of well-advertised goods is found to be generally lower than other goods of the same quality which are not so well advertised.

4. Facilitates Direct Selling:

Advertising also makes it possible to sell direct to the consumer by Mail Order Business. Thus, consumers from remote areas can also enjoy the comforts and luxuries available only in the cities or towns. In this way advertising improves social welfare.

5. Improved Consumer Satisfaction:

As manufacturers control the price of well- advertised goods, price-cutting is not available to the retailers and the shopkeepers as they try to attract customers by giving better and more satisfactory service.

Advertising helps consumers find best product for themselves by facilitating comparison among various products available in the market. When consumers are aware about the range of products, they are able to compare the price, quality and characteristics and pick up the best from among them.

(C) Importance of Advertising to Society:

1. Advertising helps in increasing awareness among people. Advertising dealing with social issues such as child labour, liquor consumption, female foeticide, smoking, family planning etc. and promotes social welfare.

2. Advertising provides direct employment to large number of people engaged in designing, writing and issuing advertisements. Indirectly, advertising increases employment opportunities by increasing the volume of production and distribution.

3. Advertising helps in improving the standard of living of people by promoting variety and quality in consumption. It educates people about new uses of a product and provides information for developing better ways of leading life.

Importance of Advertising – Marketing, Politics, Consumer Satisfaction and Economic Growth

Advertising has gained a significant place in the different areas of society. It has now entered the areas of politics, social achievements and economic growth.

1. Marketing:

Advertising assists in the realisation of marketing objectives of a company within a specified period of time. It is a form of communication which informs, persuades and reminds customers of the qualities of the product. Potential customers are approached through suitable advertising media.

The producer can put forth the appealing points of his product to influence and attract customers. Advertising can also evaluate the desires and needs of the people. The four functions of advertising are – creating demand, retaining the market for established products, increasing the use of the product, and image-building of the producers.

Advertising can develop the marketing system. New products are made familiar to consumers through advertising. Middlemen can increase their profits because advertising helps in the expansion of their sales. The consumers needs and wants are assessed so that suitable products may be provided for them.

The upgrading of marketing is possible through advertising. Today, the role of advertising has increased so widely that it has become an essential function of business. No business can succeed without suitable advertising, for advertising makes people aware of new products, and of the new want-satisfying attributes of these products. Advertising has become the backbone of modern national and international marketing.

2. Politics :

The significance of the role of advertising in politics becomes vividly clear when political parties resort to different media of advertising to present their election manifestoes and promises to serve the public. The newspaper, the radio, the television and magazines are employed to project the democratic needs of the country, so that the public may judge their qualifications and integrity and cast their valuable votes for the most suitable candidates.

Many statesmen have appreciated the role of advertising in politics and business. Sir Winston Churchill once said that advertising brought together fertile unions. Man can set goals for better homes, clothing and food by selecting appropriate suppliers. Franklin Delano Roosevelt once said that he would go into advertising in preference to other kinds of business.

3. Consumer Satisfaction :

Advertising promotes consumer satisfaction. It helps them to select the more useful, cheaper and better quality products. The prices of the same type of product may vary from producer to producer. Advertising helps people to choose the best and the cheapest goods. Life style and value systems are modified by advertisements. In India, the materialistic attitudes have won over spiritual thinking through advertisement.

4. Economic Growth :

Advertising influences the economic growth of a country. The people, the producers and the working class are made aware of the government policies and plans for the economic development of the country. These policies and plans are delivered to the public through newspapers, radio and television with a view to ensuring their participation in the economic growth of the nation.

Advertising is considered a source of market power. It promotes competition, which is desirable for the growth of a free economy. It helps maintain competition and discourages monopoly. Prices are maintained at a competitive level to benefit the masses and producers.

Since customers and producers are well aware of the differing demands of society, economic development is channelised towards definite objectives and goals. Whatever is produced cannot be sold and whatever is in demand cannot be produced unless society and the economy can afford to do so. In this way, scarce resources can be exploited for more essential, purposes.

Importance of Advertising – For Manufacturer, Consumer and Society

In modern marketing, advertising plays a very important role in creating awareness and demand for the products.

Its importance can be explained as follows:

1. Role of Advertising Related to Manufacturers:

Advertising plays a very important role for manufacturers.

The same is explained as follows:

i. Reputation and Goodwill:

Advertising helps to popularize a product among the consumers. It builds a favourable image about the product in the minds of the consumers and hence enhances the image of the brand. This builds long term goodwill and reputation for the organization.

Advertising creates awareness about the products on a large scale. It also highlights the benefits, advantages and the method of usage of the product. Hence, a customer may get interested in purchasing the product. Advertising thus increases the demand for a product. Since advertising is done on a large scale, the demand of the product increases in wider and unexplored markets too.

iii. Increases Production:

Advertising helps in creating awareness about a product which leads to increase in its demand. However, the level of production needs to be increased in order to meet this increase in demand. The producer thus tries to introduce innovative production techniques to increase the level of production. The innovative production techniques not only help to increase the level of production but also improve the quality of the product. Most modern production techniques also ensure a reduction in the overall cost.

iv. Creation of Demand:

Advertising helps in keeping the consumers informed about the arrival of a new product. This arouses the interest of the consumers in the product and motivates them to try it out once. Thus, advertising leads to the creation of demand for the product.

2. Role of Advertising Related to Consumer:

Advertising helps the consumers in the following ways:

Advertising plays an important role in the modern competitive market. It keeps the consumer posted about the latest products available in the market. Since the customer is aware of the products, he selects the product that is best suited for his needs. At the same time, advertising also keeps the producers updated about the competing products available in the market.

This enables a producer to improve the quality of his product in comparison to the competitors’ products. To ensure that customers are retained and new customers are attracted, the manufacturer has to adhere to quality standards and offer the best quality of goods to the consumers.

ii. Knowledge of New Products:

Advertising provides information about new products to the consumers. Thus, consumers can make an informed decision and buy a product that suits their preferences.

iii. Saves Time and Money:

Advertisements provide detailed information about the product to the consumers. The consumer thus gets the detailed information effortlessly and does not have to spend any additional time and money in procuring the information.

Advertising helps in generating demand for the product. This encourages the manufacturer to increase production. Increase in production leads to lower cost of production per unit. This benefit is ultimately passed on to the consumers in the form of reduction in price.

Advertisements create awareness about the product. It promotes all the features and attributes of the product. Since the consumer is aware about the product, the manufacturer cannot supply an inferior product than what was promised. In case the manufacturer tries to do so, the consumers can seek protection under the Consumer Protection Act.

3. Role of Advertising Related to Society:

The role of advertising related to society is as follows:

i. Employment Opportunities:

Advertising is a large function that needs the services of artists, painters, writers, designers, publishers etc., every single day. All the activities related to advertising need human resources to work creatively, efficiently and constructively. Thus, advertising creates employment opportunities for a large section of people.

ii. Standard of Living:

Advertising- helps in launching many new products in the market. Thus, the consumers become aware about the products available in the market. Purchasing these products helps in raising their standard of living. Also, advertising raises the demand for the product and hence the level of production goes up. This increase in the level of production leads to reduction in cost. Consumers can thus avail products at a much lower rate which helps in raising their standard of living.

iii. Education / Educative Value:

Advertisements provide qualitative information about various products using facts, figures, slogans etc. This helps in educating the general public about the benefits of the products.

iv. Exchange of Culture:

Advertising plays a very important role in highlighting the culture of a nation across various nations. Since the advertisements have educative value, they affect the thoughts, gestures and behavior of people.

Advertisements help various media like newspapers, magazines etc., to cover a major portion of their costs. This cost benefit is passed on to the readers.

Importance of Advertising – With Direct Beneficiaries: Benefits to Producers and Manufacturers, Customers, Salesman and Society

Advertising is considered to be an important and compulsory activity on the part of manufacturers. They are compelled by the recent developments and the cut throat competition resulting into the question of survival. It has become promotional tool not only for producers but also for consumers and society at a large to know about the availability of goods and services. Mainly, the four groups can be identified who are the direct beneficiaries of advertising. They are the producers and manufacturers, customers, salesmen and the society as a whole.

Importance # 1. Benefits to Producers and Manufacturers:

Every producer introduces a new product or services to the consumers. Every product is distinct and unique in nature as compared to other competitors. Therefore, it is necessary for him to make it known to the users, convince and appeal to them to create demand. In this way, he finds to reach the consumers and operate profitably in the market. His survival and continuation depends on has best he reaches the users and makes them to buy his/her products.

Therefore, the following benefits accrue to producers:

i. Successful Introduction of New Product:

The advertising is undertaken to introduce an altogether new product. There cannot be 100% similarity between two products. A producer can introduce a new product by explaining the unique features of his product and can create awareness among consumers in order to gain their acceptance. Almost all producers introduce their products to market through celebrities who have powerful impact on consumers. An indelible impact can be created by effective advertisement which lays foundation for rushing of a product in any intended market.

ii. Creation of Regular Demand:

Advertising is helpful to create regular and steady demand for products. The public memory is short, if an advertisement is stopped, there are chances of consumers forgetting about that product and direct to other products which repeatedly appear before them. Production and marketing heed to be continuous and throughout the year, both in busy and off seasons. Therefore, manufacturers advertise about the usefulness of product in all the seasons.

iii. Impressing New Uses of a Product:

The consumer’s base is to be expanded. The more and more uses of a product are convinced, the widest base for product can be created. It warrants production on large scale to meet the demand of increased number of consumers. It is helpful in explaining how a single product is useful to every kind of customers. By promoting different uses of a product, advertising helps consumption of that product at a variety of occasions. This will result in increased product usage and the demand for the same. A producer can shift from small scale to medium and to large scale production.

iv. Enjoy Economics of Scale:

As advertising helps to create and maintain sustained demand throughout the year, the large scale production needs to be undertaken. With large scale operations, the cost of production decreases and results in increased earnings. Because, there are certain fixed costs which are incurred at all levels of production. If production is at small scale, the burden of fixed costs will be more and profitability would be lesser. On the contrary, the large scale production reduces the average cost per unit and increase earnings.

v. Confidence in Facing of Competition:

Advertising is an attempt to attract consumers. In most of the advertisements, the producers makes efforts to convince the superiority of products by comparing with that of competitors brand loyalty is created by highlighting the strong uses of one’s products. It is quite common that the products known to customers are demanded by them in market. Most of the children demand products in the market by being impressed and influenced by advertisement. Lack of information throws away any producers out of market.

vi. Creation of Corporate Image:

Advertisement is not only carrying messages of a product but also the history and culture of a firm. It helps in creating a good image and reputation for a firm and helping to fight competition in the market. It ensures repeated demand from the satisfied services provided by a firm. Majority of consumers can repeat the names of Tata, Reliance, Airtel, Sony, Vodafone etc. Because, they have created their corporate image and become household names.

Importance # 2. Benefits to Customers:

The customers in particular and the whole society in general shall be benefited from the advertisement. The advertisements not only provide information about products but also some of healthy lips, psychological changes, good behavior etc. This will enhance the understanding level and knowledge of remote areas.

Some of the benefits enjoyed by customers are:

An advertisement gives many information relating to product, firm, nation etc. Such information increases the knowledge base of customers who can develop the ability of evolution and analysis. The customers are educated about proper way of using a product, the comparative and competitive prices, promotional offers with limited time frame etc.

These will certainly help customers and general public to gauge the growth and sophistication of manufacturing sector, distribution efficiency and role of a firm in national development also. For instance, the water purifier advertisement enriches the knowledge of safe drinking water, motorbike advertisement tells about economy in oil usage etc.

ii. Planning before Shopping:

As the advertisements give almost every information about product, availability, prices offers etc, the customers can plan well before going for shopping. It may be about availability of family budget, how to bring a product, packing, payment, quantity needed etc. A planned shopping gives happiness and the unplanned results into either dissatisfaction or sadness. Where? When? How much? What? Who? Of the shopping can be precisely planned and executed.

iii. Reasonable Prices:

The advertisement facilitates quick sales and also increased demand. These will force to undertake production on large scale and this will reduce the per unit cost of production. The result of this will be in reduced prices and availability of needed goods at reasonable prices.

Importance # 3. Benefits to Salesman:

The personal salesmanship is not possible and not suitable also for all the products. It has limited access. This requires more time to convince all the customers personally about each and everything about product. Therefore, the advertisement reaches the customers much before a salesman visits.

The benefits enjoyed by salesmen are:

i. Less Time – They need to explain only those things not cleared by an advertisement. Therefore, the salesmen have to spend little time with customers.

ii. Easy Convincing – As the advertisements had done some part of giving information to customers, salesmen can very easily convince the customers.

iii. More coverage – The necessity of spending less time for each customer definitely helps salesmen in covering more number of customers in a single visit.

iv. Ready to receive – The brand image created by advertising prepares the ground for the visit of salesman. In fact, the customers wait for the visit of salesman to get confirmed about the advertised products.

Importance # 4. Benefits to Society:

While the manufacturers, customers and salesman are the direct beneficiaries, the indirect benefits will be for the whole society. Advertisements introduce new products and services. This will help in raising the standard of life of people. There will be peaceful life among the people when they regularly get what they wish. Advertising is emerging as a profession which offers vast employment opportunities. All Medias of advertising flourish in operations and provide solution to many of the societal problems.

The society benefits in the following ways:

i. Improved Standard of Living:

Advertisement introduces successfully the new variety of products and convinces about the reasonableness of prices. It also educated the people regarding the use of products, better ways of life, healthy family etc. The matured thinking about their life and acquiring new products will increase the standard of life. For example, Ola cab, Uber services have reached customers through advertisement and people prefer cabs to bikes or auto services. This makes their life comfort.

ii. Creates Employment Opportunities:

With the technological advancements, the variety of Medias has made their entry in advertising sector. Advertising agencies need designers, copywriters, graphic designers, media planners, production houses and many other agencies. Thus, the advertising sector generates direct employment to large number of creative and enthusiastic people.

iii. Solves Societal Problems:

In every society, there are problems like drug addiction, illiteracy, female feticide, gender bias etc. The advertisement helps in fighting there societal problems. The products are offered to all types of customers regardless of the caste, religion, and creed, such advertisements plead about eradication of casteism.

Advertising is a good source of revenue which encourages entry of number of agencies. The press media gets sustenance due to good circulation of newspapers and at reasonable price. Press media cannot continue only with price paid by the readers, the advertisements bring sizeable amount revenues and it will be a strong financial support for the press.

Importance of Advertising in the Retail Sector

Advertising is not only a provider of information about products, services, and availability at different retail loca­tions, but also an important link between the advertiser and the receiver of the message in the retail sector. Its imperativeness has increased in this era of ‘globalization and liberalization’ around the world.

It has certain ben­efits not only for the manufacturers and traders but for the retailers as well. Raymond, the apparel retail chain, primarily used television and print advertising to promote the experiential aspects associated with shopping at its stores.

Benefits of Retail Advertisements for Customers :

The benefits of retail advertisements for customers are as follows:

i. It helps in creating awareness among the customers about the existence, prices, and availability of products at differ­ent locations

ii. It educates customers about new products and their diverse uses

iii. It increases the utility of existing products, and

iv. It encourages manufacturers to improve the quality of prod­ucts through research and development. Thereby it ensures the supply of products of better quality to customers.

Importance of Advertisement – Introduction of New Product, Mass Appeal, Increasing Sales Volume, Providing Information to Customers and a Few Others

1. Introduction of New Product:

Advertisement helps to introduce a product to the customers by providing every detailed feature about the product. Customers are introduced with the new products available in the market and are induced to buy the new product available. Advertisement displays the features, uses and benefits of the new product. Advertisement draws the attention of the prospective buyers, creates consciousness among the buyer about the need for the product and creates demand for the product.

Advertisement has a mass appeal and can create demand amongst a large number of customers and can stimulate the interest of the large number customers. This helps to create a large market base for the firm.

3. Increasing Sales Volume:

Advertisement creates and increases demand of the consumers for the product and thus helps to increase and maintain the sales volume. Advertisement also helps to expand the scope of the market geographically. Advertisement induces the current customers to buy the product and aims at retaining the current customers and also attracts new prospective customers towards the product and converts them into loyal customers. It not only assures maximising current sales volume but also improves future sales volume.

4. Providing Information to Customers:

Competitive business environment requires efficient communication of information to the customers about the product. This helps customer in their buying decision. It provides information regarding the quality, weight, price, size, packaging and the brand.

5. Cost Effective :

Advertisement is a cost effective tool for promotion of a product. Wide reach of advertisement – its ability to reach a large number of targeted customers simultaneously and its long lasting impact on the mind of customers makes this mode of promotion more cost effective in comparison to other promotional techniques like personal selling.

6. Long Lasting Impact :

Advertisement is an audio – visual mode of communication and hence its impact on the customer is long lasting and people remember the product for a long time. This improves the popularity and familiarity of the product. This also enhances the goodwill of the manufacturer.

7. Countering Competition :

Advertisement helps to counter competition. When competition is intense and the competitor undertakes intensive advertisement to promote their product, it becomes essential for the marketer to advertise for their product. Advertisement helps to create product differentiation and build a favourable image in the mind of the consumer.

Importance of Advertising

Nothing except the Mint can make money without advertising. Mass production and mass distribution totally depend on all forms of advertising and publicity. We can tell numerous people about a product or service in the quickest time interval at the lowest possible cost.

Advertising by facilitating mass production and mass distribu­tion has provided immense employment opportunities to people. It is responsible for creating and delivering rising standard of living to innumerable people. It has made possible tremendous industrialisa­tion and economic development in many countries. It is the back­bone of modern national and international marketing.

Many modern amenities like refrigerators, motor cars, cameras, radio, vacuum cleaners, and other appliances are sold in mass markets at very reasonable prices —much lower than the prices at which they were initially introduced in the market. Modern advertising informs, guides, educates as well as project buyers, so that they can buy in­telligently and raise their standard of living.

In the marketing pro­gramme of a business enterprise, advertising is an indispensable tool supplemented by salesmanship and sales promotion. Advertising is to business what steam, electric or nuclear energy (motive power) is to industry. The wheels of industry and commerce cannot move with desirable speed without the propelling power of promotion-mix.

The importance of advertising lies mainly in the assistance that it provides to salesmen in the process of selling. Advertising allows manufacturers and sellers to place their products before the likely prospects, to attract their attention and awaken their interest. It provides the likely prospects with information about the product, and, by the use of apt words, and pictures attempts to persuade them to buy the product.

Advertising makes an appeal to the prospects to buy and use the product. This prior communication with the prospects makes the work of the salesman much easier and simpler. When the salesman goes to visit the prospect with a view to persuade him to buy the product, advertising has already prepared the customer’s mind to the uses and benefits of the product – conse­quently, the salesman does not have to educate the prospect. He has only to remove the objections of the prospect and apply the close. Advertising thus prepares the ground work for the salesman to com­plete his sale.

In recent times, the importance of advertising has increased many-fold due to many reasons. The complexities of modern distri­bution have made advertising very essential for successful marketing of goods.

One factor which has led to this increase in importance is the growth in the size of the market. Both numerically and geographi­cally, the size of the market has greatly increased, making it well-nigh impossible for manufacturers to reach the prospects through sales­manship alone. Salesman can only cover a limited market, while advertising can reach a very large and geographically widespread market with complete ease.

The introduction of a new product is also made possible by the use of proper advertising. Advertising prepares the way for the launching of a sales campaign or sales promotion campaign for the introduction of a new product. Creating awareness and interest among the public in respect of the new product is easily achieved through the use of advertising media.

In this era of fierce competition, advertising comes to the assistance of the manufacturer in facing the competition and creat­ing and maintaining the demand for his products. Many advertisers carry on advertising to create a brand image or an institutional image of their organization.

Advertising is also important for the role it plays in social education and welfare. Advertising can be successfully used to build up or change public opinion, to create awareness of social problems, and to introduce social reforms.


My question is simply this: for “Austrian Economics, Step by Step” on “Scope and Methods of Economics” under section three “Scope of Economics: Human Action” at around 17:45 the instructor states that one of the differences between producer goods and consumer goods is that the producer gets embedded into the good. The only example given is that steel used to make a fender for an automobile becomes embedded into the fender in that it becomes the fender. Power tools are producer goods but they’re not embedded into the good. What then is the difference between a producer and a consumer good if it isn’t only that a producer good is embedded?

The difference between a consumer good and a producer good is that a consumer good satisfies a person’s end directly and a producer good satisfies a person’s end indirectly. A person can act with the consumer good to attain his end, but with producer goods he must use them to make a consumer good and then use the consumer good to attain his end.

I believe I was making the point about producer goods becoming embedded in consumer goods in order to distinguish them from money. Money is neither a producer good nor a consumer good. Money is, however, a material good like other materials used as producer goods to make consumer goods. But, unlike them, money does not become embedded in the consumer goods. Plant and equipment and labor become embedded in consumer goods, at least in a metaphorical sense. One could say that “they are dissipated in production.” But the point is money retains its full physical integrity when a person uses it to make an exchange while producer goods are used up, fully in the case of materials and labor services and partially in the case of plant and equipment.


Personal Freedom Requires Limited Government

Government powers in the new nation were severely controlled, for it was felt that the government’s power should be limited to national defense and the court system. The only power they felt really necessary in the government was one which would permit strong enough controls to repress any person or persons who endangered the freedoms of the majority who were existing peacefully. Realizing that the government which governs best governs least, the founding fathers incorporated the principles of this idea into the constitution.

Over and over again history has shown that man’s freedom is in inverse proportion to government rule, for man is only free when government is contained. The more fragmented the government, the more freedom man gains.

Our liberties and our freedoms are to be cherished and can easily be lost because they are literally tied to the apron strings of a free-market economy.

One often hears the view expressed that mankind is basically good, but in Romans, we are warned that "there is none righteous no not one" and Jeremiah adds that "the heart is deceitful above all things and desperately wicked." In other words, man must be continually aware of the necessity to discipline his thoughts and actions. It is easy for man to be evil it is hard for man to be good.

This is why man, who finds himself in a position of power, will tend to put himself first and his fellow man last. This is why power, in whatever form, is a potential danger. History has shown us wars, depressions, and hatreds that have pitted man against man, brother against brother, and parent against child, and at the root lies the lust for power.

Therefore, when the consumer starts applying the above truths of good and evil to economics, he can see that for his own personal well-being it is to his advantage to work at being wary so that he is able to consume wisely. Our liberties and our freedoms are to be cherished and can easily be lost because they are literally tied to the apron strings of a free-market economy.


Key figures

The most important key figures provide you with a compact summary of the topic of "Meat industry in China" and take you straight to the corresponding statistics.

Meat production in China

Number of pigs in China 2010-2020

Domestic bird slaughter volume in China 2008-2018

Meat production change in China 2018, by type

Revenue share of WH Group 2020, by operating segment

Consumption and consumers in China

Greater China's share of the beef consumed in the world 2018, by region

Average per capita mutton consumption in urban China 2013-2019

Willingness to consume lab-grown meat in China 2019

Willingness to consume lab-grown meat in China 2019, by age group


Who is the Middleman in Business?

Who is the middleman or is what is the middleman?

Whether ‘who’ or ‘what’, a middleman in business can be defined as any person or entity that makes the goods that are produced by a producer reach the public or the final consumer. A middleman comes between the producer and the consumer and makes sure that the final consumer gets access to the goods produced by the producer. It is for this reason that people or entities that engage in this type of business are called middlemen – they are basically intermediaries between producers and consumers.

Middlemen therefore include a vast number of people and entities such as wholesalers, retailers, agents, brokers, shop owners, street vendors, hawkers, etc.

The two major middlemen in business are the wholesaler and the retailer.

Who is the wholesaler? The wholesaler is the person that buys goods in bulk directly from the producer and then distributes them in smaller quantities to the retailer. The wholesaler is therefore the link between the producer and the retailer. Wholesalers don’t have direct contacts with the final consumer.

Who is the retailer? The retailer is any one that gets the goods from the wholesaler and sells them to the consumers. Examples of retailers include show owners, street vendors, hawkers, etc. The retailer does not deal directly with the producer. The retailer is the link between the wholesaler and the final consumers.

Although it is not very common for the final consumers to bypass the middlemen and deal directly with the producer, sometimes it does happen. When the final consumer bypasses the middlemen and buys directly from the producer, we call that disintermediation.

About 99.9 percent of the time, the middlemen are responsible for getting the producers’ goods to the final consumers.

The roles of the middleman

The roles of the middlemen include the following:

  • Acting as intermediaries in order to get the goods produced by the producers or manufacturers to the consumers
  • The middlemen get the goods to the consumers wherever the consumers are located
  • Middlemen store the goods they buy from the producers while they search for markets to distribute them to
  • They bear all risks associated with the goods they collect from the producers – especially if these goods are perishable goods
  • The middlemen also play the roles of marketers by advertising the goods to potential customers
  • Middlemen send feedback to producers regarding how their goods are performing in the market, which is very important information for producers

Despite all the important roles that the middlemen seem to be performing, not too many people are pleased with the middlemen. Many see the them as nothing but annoying parasites that come between the producers and the final consumers to exploit both parties. The final consumer tends to have no trust for the middlemen. Many see the middlemen to be responsible for making the goods that the producers produce to be more expensive to the consumer.

The two main categories of middlemen are: the wholesaler and the retailer. In another article we shall take a detailed look at who a wholesaler is vis-à-vis a retailer.


Watch the video: Producers and Consumers (May 2022).

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