Theodore Levitt’s 1983 article called about the globalization of markets is one of the most read article till date on the subject. Although, there is much debate about the relevancy of article in today\'s times but even today it is one of the must read articles at the Harvard Business Classes.

1. The Globalization of Markets
Article by Theodore Levitt
Critical Review
By
Nancy Sachdeva
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2. Levitt’s argument
• New technology has “proletarianized” communication,
transport, and travel
• “a new commercial reality—the emergence of global
markets for standardized consumer products”
• Converging Consumption Pattern : Almost everyone,
everywhere wants global products
• Wish for Modernity
• Prefer low prices to supposed national characteristics
• The Earth is Flat
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3. Levitt’s argument
• Global Corporation Vs. Multinational Corporation
• Hedgehog vs. Fox
• The cultural differences are becoming more and more
“homogenized”
• Fox knows lot about a great many things :
Multinational corporations knows a lot about great
many countries and adapts to supposed differences
• Hedgehog knows everything about one great thing :
Global corporation knows everything about one great
thing to be competitive on world basis as well as
nationally.
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4. Strategy
• Companies should move from multinational to
Global Corporation
• Do not adapt to superficial differences but force
suitably standardised products globally
• “Offering everyone simultaneously high-quality, more
or less standardised products at optimally low prices”
• Market standardized products of high quality at a cost
lower than that of competitors due to “enormous
economies of scale in production, distribution,
marketing, and management.”
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5. Strategy
• Few standardized markets instead of many
customized markets.
• Mission is modernity at lowest prices.
• “Nobody takes scarcity lying down; everybody
wants more.”
• There is no other appeal like price. People like
money, and they want to spread it over as
many goods as they can.
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6. Republic of Technology
• Convergence, tendency to become everything
like everything else
• Standardization of High Tech and High Touch
products: McDonalds, Coca-Cola, Pepsi, Sony
Televisions, Revlon cosmetics, Levi jeans,
Hollywood Movies.
• Levitt’s claim “Nothing is exempt.” Not steel,
not automobiles, not food, not clothes. Variety
costs money, and the modern consumer
demanded the best for less.
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7. Distinction vs. Difference
• Language, nation rules, Distribution Channels are
distinctions and not differences. This translates to
Standardization at high Quality levels.
– Japan Cars : Right Hand
– Export Cars to US and Europe : Left Hand
– Japanese Sell office machines through distributors in
the US but directly at home
– Japanese Speak Portuguese in Brazil
– Ramadan Times - business after 10 pm
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8. Distinction or Difference????
• McDonalds - Process may be standardized but
product is not, Menu is customized
• Coca Cola and Pepsi Brand names are Global, but
the product is different in terms of sweet
content.
• Levi Jeans – Styles may be affected by Bollywood
movies, varieties
• Apple - Products Universally Accepted
• Dell - Distribution Channel changed for India
• Islamic Financial Culture : Murabaha
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9. Standardization
• “If a company forces costs and prices down
and pushed quality and reliability up - while
maintaining reasonable concern for suitability
– customers will prefer world standardized
products”
• Henry Ford T model, Japanese companies,
Korea(TV sets) etc
• Economies of Scale in Standardization
• Small local segments => Global equivalents
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10. Marketing Concept
• Multinational corporations are thoughtlessly
accommodating.
• Company should know more about what the
customer wants than the customer himself or
herself does, or at least more than the
customer can articulate.
• Failure of Hoover Washing machine.
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11. McDonalds in Altamura
• Restaurant in Altamura, Southern Italy in 2001
• Forced out of Business by a local baker
• Reasons for Failure :
– Pushing Home Image too hard and too fast
– Did not try to Localize
– Not Understanding Local customers’ preferences
first
– Locals Felt city was being occupied by a Foreign
Entity
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12. Challenging Tradition
• “Wider the company’s global reach, the greater the
number of regional and national preferences it will
encounter for certain product features, distribution
systems, promotional media”
• “Evidence of Failure because of lack of
accommodation is often evidence of other
shortcomings”
• Failure: Revlon in Japan
• Success: Outboard Marine Corporations, Contac
600, Komatsu
• Recent Example : Walmart
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13. Future of Komatsu
• Komatsu: Japan-centric Global Strategy
• Caterpillar redesigned its products to use
identical components and invested in few large
scale manufacturing facilities.
• Centralize Manufacturing of components and
assembly plants in each of major global markets
• Differentiated products to local responsiveness
• Komatsu loss market share to Caterpillar
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14. Organizing to Win
• Product reliability, quality & aggressively low
prices, sales compensation packages,
transformed distribution systems is key to success
• But some differences between nations are
unyielding
• Teradyne corporation – US & Japan. Marketing
Effort?
• No right answer – depends on company,
capabilities, reputations, resources and even the
cultures.
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15. Business Realities
“The successful global corporation does not
abjure customization or differentiation for the
requirements of markets that differ in product
preferences, spending patterns, shopping
preferences and institutional or legal
arrangement. But global corporations accepts
and adjusts to these differences only
reluctantly, only after relentlessly testing their
immutability, after trying in various ways to
circumvent and reshape them.”
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16. Relevancy of Time
• In 1983, there were only a handful of countries in
which corporations had home offices that sold
products or services outside the home country
borders.
• North America, western Europe, and Japan
• These nations accounted for bulk of trade but
very little was with Communist Countries
• Thus when Levitt spoke of globalization, he was
excluding a large portion of the globe as it was at
that time.
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17. Homogenization
• Chemicals, petroleum, steel, sugar and the like
• Industrial and consumer products: handheld
calculators, semiconductor chips. Personal
computers, LCDs
• Reason for success of Apple, Intel
• Homogenization of choices: Not a convergence of
tastes but in the number of choices available to
consumers.
• People can now buy products from all over the
world: global, regional, local, e-buy
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18. Heterogeneity
• Consumers in different Tastes and Preferences and
demanded different types of vehicles
• Automobile Industry
• North American: Pickup Truck but South and West
have it as 2nd or 3rd car
• European countries- pickup trucks as utility
vehicles, Bought by Firms rather than individuals.
• Structural Differences like type of roads, Climate,
Humidity
• Customers themselves
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19. The one-size-fits-all approach is out
• Different marketing practices in Britain and
Japan compared to US - soft sell vs. Hard sell
• Consumer electrical systems : North America
are based on 110V while European countries
on 240V
• Dannon (USA) could not sell its drinkable, low-
fat yoghurts in Europe : Local taste nor meet
the current food-standards requirements.
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20. The one-size-fits-all approach is out
• GSM is common in Europe while CDMA is
common in US and Asia
• Nokia, Motorola Ericsson need to customize
product offering
• Dell changed its model because of Indian
Consumer
• KFC : In Japan, KFC sells tempura crispy strips.
In Holland, it features potato-and-onion
croquettes. In China, KFC's chicken is spicier
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21. Products vs Brands
• Holiday Industry : Mahindra Holidays
• Standardised Brand but not the product
• Coca-Cola has up to 2800 different beverages,
mostly local - Thumbs Up local brand to India
• McDonald's varies its menu to suit local tastes
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22. Economies of Scale vs. Scope
• Technology has changed the economics of production.
• Possibility of economies of scale and also deliver very
discrete, specialized products.
• MTV has different programming to suit different
countries and regions : Digital and Satellite technology
have made localization of programming cheaper and
easier.
• L’Oreal differentiates between the cosmetic products of
its global brands by basing them on the four types of
climate in China, since these determine four skin types
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23. To Conclude….Relevancy to Today
• Ideas right or wrong, relevant or irrelevant to
today’s times but can set off a chain of debate
that results in greater knowledge.
• "So a brilliant idea that may not be right but
that gets people thinking can be of greater
value than a standard idea that doesn't
stimulate thought at all.“ Richard Tedlow,
professor of business administration at HBS
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