The culprit: Reevaluating Levitt’s Globalization of Markets

Most multinationals have long
resisted targeting the local consumer, preferring instead to transplant
offerings that were developed for their traditional developed markets[i]. Three reasons are often cited for the
reticence to localize. First, it is argued that the mass market in any single
emerging economy is not large enough to justify the effort and cost of
localization. Second, multinational managers rationalize, emerging market
consumers are growing more affluent by the day and are becoming more like their
affluent-market counterparts in terms of preferences and purchasing power. As a
result, they argue, they are better off offering globally standardized products
and waiting for the consumers to evolve towards these. Finally, it is argued
that to adapt to local market conditions in every emerging economy will
undermine core assumptions about standardization that are fundamental to the
success of multinationals.

The culprit behind such
thinking is Theodore Lewitt’s classic article Globalization of Markets that
appeared in HBR in 1993. Levitt espoused that different cultural preferences
are the vestiges of the past, and that the peoples of the globe are becoming
more and more alike, and, in general, needs and wants are becoming
homogenized. The article stated that
consumers throughout the world are increasingly motivated by the same desires
to modernity, quality, and value: they all want a quality product at a low
price. New technology and standardized
methods of production have made global marketing programs feasible.

Says Levitt:

Only global companies will achieve long-term success by concentrating
on what everyone wants rather than worrying about the details of what everyone
thinks they might like
.”

He believed
that market segments in a particular market are not unique, but share
commonalities with other segments elsewhere:

Everywhere, everything gets more and more like everything else as the
world’s preference structure is relentlessly homogenized
."

Companies
must learn to operate as if the world were one large market, ignoring
superficial regional and national differences and selling the same products in
the same way throughout the world. According to Levitt, companies need to look
for similarities instead of differences in the markets in which they operate.

Wither the user?

A full decade has passed
since Levitt’s globalization proposition was issued. What are companies such as Whirlpool doing
today? Have they standardized or
adapted? In general, conventional wisdom has it that industrial goods are the
most likely to be successful in any globalization strategy as are modern
technologically advanced consumer durables. Traditional consumer nondurable products are the most likely to require
customization due to national tastes and habits[3]
and significant differences exist between countries with regard to their
perception of a consumer non-durable product.

In fact, we discover, as
Whirlpool did
, that conventional wisdom flies in the face of real experience.
Customers are as likely to have individual preferences by country for consumer
durables such as major home appliances. 

As Naisbitt comments appropriately:

”The more homogeneous our lifestyles become, the more steadfastly
we shall cling to our deeper values—religion, language, art and
literature. As our outer worlds grow
more similar, we will increasingly treasure the traditions that spring from
within,” what he calls cultural nationalism[ii].


[i] Batra,
Rajeev (1999), “Marketing Issues and Challenges in Transitional Economies,” in
Marketing Issues in Transitional Economies, Rajeev Batra, ed, Kluwer
Academic Publishers, Boston: MA,
3-35.


[ii] John
Naisbitt and Patricia Aburdene, Megatrends 2000: Ten New Directions for the 1990’s Avon Books: New York, 1990

[3] Philip
Cateora, International Marketing Dryden Press 1993

 

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This entry was posted in Business, Design, India/China/Asia. Bookmark the permalink.

One Response to The culprit: Reevaluating Levitt’s Globalization of Markets

  1. DT says:

    It a matter of economics. Its been very difficult to design products focused on localization, and details that your customer may like. We know its the future to create revolutionary products. But business leaders all too easily, fall back into the perranial argument, will this idea sell. Dont know? Well lets follow the leader…

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