FINANCIAL SYSTEM, FINANCIAL DEVELOPMENT AND FIRM SURVIVAL:

Contributors

Adnan Kara

Chapter One: Marketing Finance, Infrastructure, and Entrepreneurship

Abstract: This chapter examines the relationship between marketing finance, infrastructure, and entrepreneurship. The aim of the study is to show that countries’ financial development improves infrastructure, reduces risks, and increases entrepreneurship. Marketing finance is the provision and management of monetary funds in order to carry out marketing activities. Marketing infrastructure is the existence of physical systems such as logistics, advertising agencies and research companies that carry out marketing activities. Marketing entrepreneurship is the transformation of innovative ideas into economic activities in coordination with marketing process management. In conclusion of the study, the development of the financial system affects the competitiveness. Thus, more marketing investments are made in a more competitive environment.

Keywords: Marketing entrepreneurship, marketing finance, marketing infrastructure, marketing risk

Introduction

Marketing helps raise standards in society and develop distribution channels. In the economic system supported by advanced distribution channels, suitable environments for entrepreneurship are created.

As seen on Fig. 1, marketing entrepreneurship is conclusion of risk, infrastructure, and finance. In high-risk environments, marketing entrepreneurs maximize profit and minimize risk. Sophisticated infrastructure and financial system facilitate this marketing task.

1 Marketing Finance

Marketing mostly focuses on intangible assets such as brand, image, and promotion. Finance, on the other hand, focuses on short-term cash flows. Finance can be expressed as a common branch of economy and business that allows individuals and institutions to invest. Price instability, weakness of financial contracts, inability to protect intangible assets, and inadequate technologic improvements are the characteristics of undeveloped financial systems (Braun, 2003). These factors are indicative of how the development of the financial system may affect marketing. For example, in a politically unstable country, uncertainties about ←11 | 12→the future are very high. Therefore, any company's financial department will be reluctant to invest in a long-term brand name.

Venture capital is long-term investments made by investors with surplus capital funds for the formation and operation of companies with high development potential. The aim of the venture capital investment is to obtain the profit from ←12 | 13→the increase in efficiency of the project-based technologic initiatives. In addition to providing funds for venture capital, it also provides consultancy support from the investor in strategy, finance, marketing, and management (Fig. 2).

It can be said that marketing has a key role in providing competitive environment which is important for consumers. The task of marketing is to determine the needs and desires of the market and to effectively fulfill them. The task of production is to efficiently convert inputs into outputs in line with marketing decisions. Basically, without production capabilities, marketing cannot fulfill its duties. One of the major inputs of production is capital. In this respect, economies with advanced financial system are superior in terms of high-scale production capabilities. According to a study conducted with panel data of 65 countries for 30 years, the proportion of goods produced in the Domestic National Product is high in the countries with advanced financial system; and produced goods constitute a high proportion of total exports (Beck, 2002). Economies with advanced financial system are also successful in marketing due to their high production capabilities. The best examples of these are that countries such as Japan and China first succeed in production productivity and technological development, and then release their global brands.

An undeveloped financial system presents many problems for enterprises. Especially financial crises are a big obstacle for marketing. Developments in financial markets are also hampered by crises. Financial crisis arises as a result of the sudden depreciation of a large part of the financial services institutions or ←13 | 14→assets. Financial crisis, a subspecies of economic crises, has many causes. Some reasons are speculative attacks, weaknesses in financial structure, deterioration in the structure of the economy, increase in interest rates, excessive fluctuations in capital movements, global financial situation, deterioration of financial sector balance sheets and increased uncertainties (anapara.com, 25.06.2019). According to the surveys conducted with managers within the scope of the global competitiveness index survey prepared by the World Economic Forum (WEF), access to finance is one of the biggest obstacles in doing business in most economically underdeveloped countries. Due to the cash shortage experienced during crises that restrict access to finance, the majority of firms cut their marketing budgets. Therefore, marketing is one the most affected by crises.

Each year, the world’s largest publicly traded global companies are listed on the Fortune Global 500 list. A total 87.5% of the companies in the Fortune Global 500 2018 list are from only nine countries (www.gfmag.com, 15.07.2019). Table 1 shows the countries’ WEF global competitiveness index scores and the number of brands in the Fortune Global 500.

Tab. 1: Comparison of Countries’ Global Brand Quantities and Competitiveness Index