Download Research on the Innovational Pattern of Regional Development Induced by Marketing

Research on the Innovational Pattern of Regional Development
Induced by Marketing
WANG Juan 1, XIONG Kai 2
1. School of Economy, HuaZhong Normal University, Wuhan, P.R. China, 430079
2. Business School, Jianghan University, Wuhan, P.R. China, 430056
1. [email protected]; 2. [email protected]
Abstract: Regional development is a process of increasing regional welfare, along with output increase,
structure change, system transition, space evolvement, income distribution, knowledge advancement,
and idea evolvement. From the view of regional development, promoting regional development by
marketing has been a leading economic activity. Regional marketing could be regarded as a social and
managerial process that regional subject discovers, spreads and exchanges regional value to promote
regional development, whose value includes building regional image, cultivating regional brand,
attracting investment, improving regional life quality, attracting visitors, promoting the growth of
regional revenue, attracting talents, and boosting regional holistic competition and so on. By rational
expectation mechanism and industrial agglomeration & labor division mechanism, regional innovational
pattern induced by marketing leads to the accumulation of regional brand capital, material capital and
economic space, which ultimately promotes incessant development of the region.
Keywords: regional development, regional marketing, rational expectation mechanism.
1 Introduction
Regional development is a process of increasing regional welfare, along with output increase,
structure change, system transformation, space evolvement, income distribution, knowledge
advancement, and conception evolvement. Generally speaking, regional development theory is the result
of space economics and economic geography changing from micro analysis to macro analysis with the
rising of development economics after World War Two. The essential characters of Space economics is
extending micro analysis into structural economic analysis and macro economic analysis, and boosting
the research on regional development (Yang Kaizhong, 1989). From knowledge view of regional
developmental, regional development theory could be divided into three phases: classical regional
development theories, typical regional development theories and new regional development theories.
Classical regional development theories are the theories related to regional development before 1870s;
typical regional development theories mean neoclassicism and structuralism or radicalism from the
1940s to the late 1970s; new regional development theories, which appeared after the 1980s, mainly
include regional development theory of increasing returns and demand-oriented regional development
theory. Based on endogenous mechanism of increasing returns and regional development, increasing
returns regional development theory attempts to open out the mechanism of regional development and
the origin & change of regional disequilibrium from the angle of internal power of regional economic
evolvement and interaction of internal factors and external factors. In the 1980s, Dr Michael porter, a
professor of Harvard Business School, puts forward famous diamond model, which deeply discusses the
impact of market demands inside and outside of the region on regional industrial competition (Porter,
1990). Porter discussed the industrial competition induced by local demands from aspects of regional
market character, the size and growth velocity of regional market, and the capability of regional market
demands turning into inter-regional market demands, and demonstrated the significance of demands
management for regional development, which leads to the research on the new pattern of
demand-oriented regional development.
Although Porter definitely pointed out the significance of market demands for regional
development, he didn’t deeply discuss how to exploit market demands inside and outside of the region
by making use of marketing measure. It is the marketing management school represented by Philip
Kotler, an US marketing master, who really utilizes marketing theory into directing regional
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development practice. Kotler suggests regarding the region as an enterprise, the perspective of regional
development as a product which could be operated, and by being introduced marketing theories and
method of business, the region could be impelled to a way of healthy and sustainable developmental. In
1993, Kotler published the book marketing places, which discussed how US improves investing
environment and tourist environment to attract more investor and visitors. In 1997, extending the idea
and technique of regional marketing into the country level, Kotler, Somkid Jatusripitak and Suvit
Maesincee printed the book The Marketing of Nations, in which they brings forward that a country
should be treated and operated as a special enterprise, and may accumulate national wealth by way of
strategic marketing management. In 1999, in the book Marketing Europe place, Kotler discussed how
European nations attract investment and enhance competence. In 2001, Kotler suggested marketing a
country as a region or a entity or a product and seeking for strategic methods to create national wealth in
his book Marketing country. In 2001, Kotler published his book Marketing Asia places again, in which
he discussed issues about how Asian countries or areas carry through regional marketing all over the
world to gain the market opportunities and competence advantage. According to the experience of many
rapid developed areas, Kotler 2003 thought that every area need integrate all the resource by marketing
measures and form a unique style and ideology in order to satisfy the needs and expectation of investors,
new enterprises and visitors under the condition of economy globalization. From viewpoint of Kotler,
“promoting regional development by marketing has already been a dominant economic activity.”
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2 Analysis on value of regional marketing
According to marketing thinking, regional marketing could be regarded as a social and managerial
process that regional bodies discover, spread and exchange regional value in order to promote regional
development. It is also a process that the idea and method of business marketing are introduced to the
field of regional development. The ultimate aim of regional marketing is to improving regional
competition, and contributing to regional economic development, for example, improving environment,
attracting visitors and employee, attracting investment, increasing regional welfare income. From the
view of the whole region, the value of regional marketing shows on the following aspects.
2.1 Building regional image and cultivating regional brand
Regional image is a holistic image of region, which includes regional political, historical, cultural,
environmental factors. Generally speaking, economic development and regional image facilitate each
other. Favorable image is the base of regional economic development, while economic development
may promote the regional image. Foreign researches suggest that regional image is a pivotal factor
which influences regional investors, talents and tourists choosing where to go. Favorable image could
increase their trust on the region, reduce mental pressure caused by strangeness, and produce a kind of
aspiration, which drive them to invest, work or visit the region. From the view of economics, regional
image and brand are both kinds of public products. Therefore, the direct value of regional marketing
activities is improving the value of regional image and brand, as well as other public products.
2.2 Attracting investment and improving life quality in the region
Regional marketing has the effect of attracting external fund, directly bring regional economic
development, increasing employment and improving regional life quality. Region should invest in all
kinds of establishments about infrastructure, entertainment, communal service and new industries, and
make sure the supply of financial support to satisfy the need of regional sustainable development.
Regional investment is a special regional economic activity, which is a necessary process to realize
regional expanded re-production. Production capability brought by investment will affects regional
social re-production process for a long time. Regional investment could also help to realize full
employment and improve people’s life level of material and culture .The increase of productive fixes
assets brought by expansion of regional investment is the substantial and technological foundation to
develop social production and improve regional material and cultural life. The nonproductive fixed
assets brought by regional investment directly satisfy the demands of regional material and cultural life.
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Local government in a region may emphasize regional cultural and social harmony, promote the new
marketing thinking of sustainable marketing and harmonious marketing from the angle of sustainable
development and regional harmony, which could become an important weight to attract investors, and
gain an advantageous position in the market competition.
2.3 Attracting visitors and increasing regional income
From the angle of economic benefit, the value of regional marketing shows in attracting more
guests and brings more cash inflow to the region. Because of industrial synthesis and economic
multiplier effect of tourism industry, the development of regional tourism has a great “pulling” effect on
regional economy. In fact, the choice of tourist on destination depends on regional favorable image,
environment and tourism attraction to a great extent. Therefore, in order to attract tourists to visit and
travel in the region, when regional marketers sell the whole region, they should satisfy the demands of
both realistic and potential tourists, provide fine establishment and service, and make use of effective
measures of promotion. It is proved in practice that more and more regions are exploiting many
competitive regional tourism products and bringing many tourists to the region, which immediately
improves the growth of regional income.
2.4 Attracting talents and enhancing regional holistic competition
Peter F. Drucker, an authority of American managerial science, said that knowledge is going to be
real capital and chief treasure in modern economy. In modern society, a person with certain knowledge
and laboring skills is the most positive factor of all factors of productivity, which will be the most
decisive factor in the process of economic growth with the development of economic society. It is
obvious that any region should try its best to lay attracting sufficient excellent persons with certain
knowledge, technology, experience and skills on the first place. The local government could build
advantages by marketing so as to make net inflow of persons with ability, and sequentially improve
regional competitive advantage. Talents attracted by regional marketing include not only the technique
talents, such as those with a degree from a foreign university, elite of enterprises, clerisy with advanced
degree, skilled masters and so on, but also those famous persons, such as singers, movie stars, sports
stars and notabilities and so on. In addition, regional talents also include those who are willing to carve
out, obtain employment and settle down, which could improve the regional harmonious development of
economy, society and culture.
3 Regional development mechanism induced by marketing
3.1 Rational expectation mechanism
Regional purchase activities are influenced by many complicated factors, but the most important
factor that influences customer’s demands of consumption and investment is usually the expected
customer delivered value in many cases. That is to say, the management of regional marketing on the
customer delivered value and demands’ change is influenced by rational expectation mechanism. The
conception of rational expectation was firstly put forward by John F. Muth of Indiana University in the
early sixties (John F. Muth, 1961). He used the term to describe the many economic situations in which
the outcome depends partly upon what people expect to happen. In the 1970s, Robert E. Lucas
systematically explained rational expectation assumption. He points out that a rational person always
makes expectation of prices by prevenient available knowledge and chooses the plan with the least risk
though there are all kinds of disturbing factors in the market. In a multiregional system, rational
expectation mechanism may have some influence on interregional demands or regional demands. Owing
to existing difference of the information held by economic bodies, the expectation that subsequently
formatted by them usually variables greatly. If the amount, content, and communicating time of
information are effectually controlled from the headstream and communicating process of information
by marketing activities, the regional marketer could directly or indirectly influence the expectation of
regional buyers and realize the purpose of directing expectation and managing demands.
The rational expectation mechanism of regional demands fluctuation induced by regional
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marketing is represented in the pre-sell phrase and post-sell phrase. Before the selling activities,
marketing subject invest human resources and material resources, dig out and generate regional value,
and deliver the information of value to potential buyers. Based on the previous regional knowledge,
buyers make rational decision, which results in the change of demands. New demands induce the new
purchase activities, which is new activities of regional consumption and investment that promote the
development of regional economy. After the selling activities, marketing subject and buyers, as well as
the whole region, will carry through self- adjusting their information asymmetry and fortune structure
among regions, which leads to relocation of information and fortune. This kind of relocation includes
not only accumulation of regional fortune induced by regional purchase activities and accumulation of
buyers’ knowledge in previous trades, but also the correction of primary regional image, which forms
the accumulation of regional credit. Positive credit makes rational regional buyers generate a fine
expectation on the perspective of regional development, which will influence current demands of region,
and change regional fortune flow and labor division.
Thus it can be seen that the rational expectation mechanism induced by regional marketing
includes several key processes. Firstly, regional marketing activities arouse the increase of investment
and consumption demands by rational expectation mechanism. Secondly, regional purchase activities
arouse the increase of regional productive activities. Thirdly, the improvement of regional labor
productivity enhances regional level of specialization and regional holistic competitive advantage.
Finally, the improvement of regional mechanism advantage boosts the regional expectation of buyers,
which arouses extended regional purchase demands and the increase of regional wealth. Therefore it is
the regional marketing that arouses the nicer feedback process of circulatory accumulate increase, which
promotes the regional development.
3.2 Industrial agglomeration and labor division mechanism
Regional marketing activities not only could promote regional development, but also could arouse
regional industrial agglomeration and the change of space structure. By marketing, a region could
consciously choose the specific industrial type and drive itself to participate in larger scale economic
division, which promotes the optimization of economic space layout. According to new economic
geography theory, under the assumption of incomplete competition and increasing returns to scale, the
dilemma among external economy of scale, transportation cost, non-trade production factors’ prices is
the key to explaining the formation of industrial agglomeration and the structure of regional center and
periphery. Economy of scale arouses the agglomeration of enterprises, and the agglomeration causes the
increase of the prices of non-trade production factors, which has the function of restraining productive
activities further centralized. When the transportation costs decline to a degree, enterprises will gather in
some places and realize productive economy of scale by market externality. So regional profitable
ability could be improved, which arouses new round of agglomeration, until the economy of scale
induced by agglomeration is just counteracted with the increase of non-trade local factors’ prices.
Regional economic development and the formation of space structure are essentially the result of
economic accumulating circulation and self-strengthening mechanism. New economic geography
theories tell us that industry agglomeration is the result of enterprise’s self-organizing under the effect of
scale economy.
However, in modern economic system of regional independence’s incessantly enhancing, industrial
space agglomeration and labor division are more the result of economic hetero-organizing under
regional developmental strategy. According to the transfer effect pattern of Krugman (1999), regional
marketing arouses the increase of regional expected salary and expansion of regional purchase demands
by rational expectation mechanism, which brings about immigration of labors. The immigration of
labors will arouse the increase of local demands so as to make enterprise produce in more economical
scale, which leads to strengthening of enterprise’s profitable ability and agglomeration of enterprise.
And industry agglomeration further enlarges the purchase demands of labor and expectation of region.
By effect of circulation, the region could gather the enterprises and labor, which ultimately improve
regional development. It is obvious that industrial agglomeration is caused by the changing demands,
and demands is the beginning of regional development, which is a controllable variable. Changes of
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demands arouse the holistic regional agglomeration process. The transfer effect theory of Krugman
shows that the region could influence the change of demands by marketing, which ultimately leads to
industrial agglomeration and labor division by the immigration of labor and the effect of scale economy.
4 Innovational pattern of regional development induced by marketing
The deepening of marketization, globalization, informatization and the change of regional
developmental environment promote the transformation of regional developmental theories pattern. The
attention of new regional development pattern has shifted from traditional supply aspect to demands
aspect of regional development, which emphasizes that the region should be treated as a complicated
system in which internal factors and external factors are highly interrelated each other, and that the new
pattern of regional development should be sought for by introducing theory and method of marketing.
From the view of regional developmental reality, one of the main factors restraining regional
development is the limitation of demands, especially for the developing regions. The regional
development pattern of demand-oriented regards marketing idea as the guiding thinking essentially.
Marketing idea shows that the key to realizing an organization’s goal is to correctly identifying demands
and wants of target markets, and supplying more effective products and services to satisfy the demands
and wants of target markets. Therefore, regional marketing requires that the region carry through market
segmentation, seek for own target markets, exactly analyze the demands of customers in the target
market and establish pertinent marketing strategies and tactics to satisfy their demands. By performing
such marketing activities planning, the region could greatly boost its image and well-knownness, which
could bring on a series of circulate accumulative process of positive feedback. Regional marketing
firstly makes the difference among the regional images by information flow, and then arouses the flow
of capital, labor and other production factors by customers’ purchase decision, which promotes the
increase of regional input and output. Speaking in detail, demand-oriented regional development pattern
promotes the regional incessant development mainly by three kinds of processes.
The first process is the accumulation of regional brand capital. The accumulation of regional brand
capital comes from the incessant improvement of regional image. Regional image could regulate the
activities of regional subject including internal publics, social associations, government, enterprises and
media, and it is also the effective measure of region to participate and improve market competition. The
formation of regional image is related not only with the regional suppliers’ factors of resource, products
and environment, but also with the psychological feeling of regional target market. By the activities of
advertisement and promotion, the region could enhance the communication between itself and target
market, and make itself form a distinctive image, which helps to incessantly accumulate the value of
regional brand capital.
The second process is the accumulation of regional material capital. According to rational
expectation theory, the improvement of regional image could rectify regional expectation of customers
and bring more demands coming from target market. This kind of demands includes investment
demands of investors, consumption demands of consumers (for example, tourists), export demands of
products and service flowing among regions. The expansion of regional demands makes capital, labor
and other production factors flow into the region and promote the incessant improvement of labor
productivity, which ultimately leads to increase of regional output. During the accumulative process of
regional material capital, rational expectation mechanism has very important influence on the positive
effect of regional demands.
The third process is the accumulation of regional economic space. The expansion of regional
demands could bring the inflow of regional capital and labor, which changes the original regional
industrial structure and increases the effect of economy of scale. According to the theory of new
economic geography, scale economy promotes the agglomeration of enterprise. And when scale
economy produced by agglomeration is equal to the increase of non-trade local factors’ prices, the space
structure of regional development forms. At the same time, the theory of Krugman’s transfer effect also
explains that as the marketing subject, the region could consciously decide what kind of enterprises is
chosen to gather, where to gather, and to what a degree the enterprises should be mustered to and so on.
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It is obvious that the industrial space agglomeration in the region is the result of the two influences of
both self-organizing of regional scale economy and hetero-organizing of region subject. The
accumulative process of regional economic space leads to the specialization and development of
regional labor division, which ultimately promotes regional development.
5 Conclusions
Today the economic globalization and the development of regional economic are obviously very
important to national macroeconomic development. Traditional regional developmental pattern pays too
much attention to the regional supply aspect, such as location, production factors, resource, and
environment and so on. Promoting regional development by marketing has already been a kind of
leading economic activity (Kotler, 2003). Through rational anticipated mechanism and industrial
agglomeration & labor division mechanism, the demand-oriented regional development pattern induced
by marketing leads to the accumulation of regional brand capital, material capital and economic space,
which ultimately promotes regional continuous development.
References
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to Cities, States and Nations [N]. Free Press, New York, 1993
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1997.
[3] Krugman, P., Increasing returns an economic geography [J], Journal of Political Economy, 1999,
484-499.
[4] Michael Porter, the Competitive Advantage of Nations [M].New York: The Free Press, 1990.
[5] John.F.Muth, Rational Expectations and Theory of Price Movements [J], Econometrica
1961,29:315-35.
[6] Yang Kaizhong, Research on Regional Development in China [M], Beijing: Ocean Press, 1989, 1-16
(In Chinese).
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