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Chapter
17 Outline
The Globalization of Markets?
In a now-famous Harvard Business Review
article, Theodore Levitt wrote lyrically about the globalization of world
markets.2 Levitt's arguments have become something of a lightning
rod in the debate about the extent of globalization. According to Levitt:
A powerful force drives the world toward a converging
commonalty, and that force is technology. It has proletarianized communication,
transport, and travel. The result is a new commercial reality--the emergence
of global markets for standardized consumer products on a previously
unimagined scale of magnitude.
Gone are accustomed differences in national or regional
preferences... The globalization of markets is at hand. With that, the
multinational commercial world nears its end, and so does the multinational
corporation. The multinational corporation operates in a number of countries
and adjusts its products and practices to each--at high relative costs.
The global corporation operates with resolute consistency--at low relative
cost--as if the entire world were a single entity; it sells the same
thing in the same way everywhere.
Commercially, nothing confirms this as much as the success
of McDonald's from the Champs Elysees to the Ginza, of Coca-Cola in
Bahrain and Pepsi-Cola in Moscow, and of rock music, Greek salad, Hollywood
movies, Revlon cosmetics, Sony television, and Levi's jeans everywhere.
Ancient differences in national tastes or modes of doing
business disappear. The commonalty of preference leads inescapably to
the standardization of products, manufacturing, and the institutions
of trade and commerce.
This is eloquent and evocative writing, but is Levitt correct?
The rise of global media such as MTV (see the accompanying Management
Focus) and CNN, and the ability of such media to help shape a global culture,
would seem to lend weight to Levitt's argument. If Levitt is correct,
his argument has major implications for the marketing strategies pursued
by international business. However, the current consensus among academics
seems to be that Levitt overstates his case.3 Although Levitt
may have a point when it comes to many basic industrial products, such
as steel, bulk chemicals, and semiconductor chips, globalization seems
to be the exception rather than the rule in many consumer goods markets
and industrial markets. Even a firm such as McDonald's, which Levitt holds
up as the archetypal example of a consumer products firm that sells a
standardized product worldwide, modifies its menu from country to country
in light of local consumer preferences.4 And as we saw in the
opening case, although Procter & Gamble may sell dish soap, disposable
diapers, and laundry detergent worldwide, and although it may use the
same brand names worldwide (e.g., Pampers for diapers), it still customizes
the final product offering and marketing strategy to the conditions that
pertain in individual national markets.
Levitt is probably correct to assert that modern transportation
and communications technologies, such as MTV, are facilitating a convergence
of the tastes and preferences of consumers in the more advanced countries
of the world. The popularity of sushi in Los Angeles, hamburgers in
Tokyo, and grunge rock almost everywhere, support this. In the long
run, such technological forces may lead to the evolution of a global
culture. At present, however, the continuing persistence of cultural
and economic differences between nations acts as a major brake on any
trend toward global consumer tastes and preferences. In addition, trade
barriers and differences in product and technical standards also constrain
a firm's ability to sell a standardized product to a global market.
We discuss the sources of these differences in subsequent sections when
we look at how products must be altered from country to country. Levitt's
globally standardized markets seem a long way off in many industries.
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