How valid today are the views expressed in Prof Theodore Levitt’s classic article, The Globalization of Markets?.
A youth in India is using a Nokia mobile phone, a Lenovo laptop, Nike shoes, pulls out a Coke can from a Whirlpool refrigerator, wearing Levi jeans, hops on to Honda Motor cycle wearing Rayban sunglasses ... But in one critical element Prof Levitt was wrong. Most of these products were possibly developed for the Indian market and may not be available in any other part of the world.
Ambi M.G. Parameswaran
Given what is everywhere the purpose of commerce, the global company will shape the vectors of technology and globalisation into its great strategic fecundity. It will systematically push these vectors towards their own convergence, offering everyone simultaneously high-quality, more or less standardised products at optimally low prices, thereby achieving for itself vastly expanded markets and profits. Companies that do not adapt to the new global realities will become victims of those that do.” Those were the closing sentences in the marketing classic The Globalization of Markets by Prof Theodore Levitt in the Harvard Business Review published exactly 25 years ago (May-June 1983).
Prof Theodore Levitt is no more but his article continues to be compulsory reading for all managers around the world.
Now that 25 years have gone by, are all that he said in his article still true?
Prof Levitt had made some prophetic pronouncements and let us look at some of them:
“Gone are accustomed differences in national or regional preferences. Gone are the days when a company could sell last year’s models — or lesser versions of advances products – in the less developed world.”
“A powerful force drives the world towards a converging commonality, and that force is technology.”
“Global competition spells the end of domestic territoriality, no matter how diminutive the territory may be.”
In fact, Prof Levitt had also propounded the theory of a flat world. He had said ‘The earth is flat.’ “The earth is round, but for most purposes it’s sensible to treat it as flat. Space is curved, but not much for everyday life here on earth.”
Prof Levitt had used the case of several consumer durables, such as washing machines, to build a case for one product for one world. He had denounced the need for localisation and customisation of products, especially if such customisation also adds to the cost of the final product.
Management experts have expressed doubts about the longevity of his tenets. Some such as Alan Mitchell have expressed a view that Ted Levitt wasn’t totally wrong about globalisation with his observation: “Globalisation is a hugely important trend, but it is not the only trend” and “…. he probably overestimated the speed and extent of market convergence. And certainly, at times, he seems to equate globalisation with Americanisation” (Marketing Week, June 26, 2003)
In his article The Post-Global Brand, Prof Jean Noel Kapferer (Journal of Brand Management, June 2005) had issued a warning that “Global brands should never forget that the business must also be local: this is the post-global brand”. Prof Kapferer indicates that brands such as Coca-Cola, McDonald’s and Microsoft have all attempted to sell one product promise across the world. But the same cannot be said of many other industries: “The car industry provides a good illustration of why the concept of the global product is in fact a myth”.
Prof Kapferer also says that “the time has, in fact, come to recognise the post-global brand — the brand that no longer tries to adhere unreservedly to the model of total globalisation, which is no longer perceived as ideal. Of course, globalisation at the upstream or production stage remains a priority in many sectors.” So while parts could be standardised on a platform across the globe, individual markets may still command customisation, is Prof Kapferer’s view.
Prof Pankaj Ghemavat in his article in Harvard Business Review (October 2006) makes a point about globalisation not being the apocalypse it is made out to be. Using international trade data Prof Ghemavat says: “… Most types of economic activity that might cross borders are still largely concentrated domestically. Levels of internationalisation of phone calls, management research, charitable giving, investment and even trade cluster much closer to 10 per cent than to 100 per cent”.
The book Bound Together by Nayan Chandra traces the origins of global trade back to the origin of civilisation itself. His view is that globalisation of markets is as old as human civilisation and trade.
With liberalisation, we in India, have had a flurry of new products entering the market over the last 17 years. And if we look around, what Prof Levitt said is possibly more true than ever before. A youth in India is using a Nokia mobile phone, a Lenovo laptop, Nike shoes, pulls out a Coke can from a Whirlpool refrigerator, wearing Levi jeans, hops on to Honda Motor cycle wearing Rayban sunglasses ...
But in one critical element Prof Levitt was wrong. Most of the abovementioned products were possibly developed for the Indian market and may not be available in any other parts of the world.
We are, therefore, not seeing a levelled-out global market but a multi-tiered global-local market structure emerging around the world.
Prof Levitt, if he was alive, would have possibly written a new piece on the ‘multi-globalisation’ of markets. And I would have had to wait another 25 years to write a review. A sobering thought indeed.
(The writer is Executive Director and Chief Executive Officer, Draftfcb Ulka Advertising.)