Levitt’s article on globalization of markets is a widely read work due to its significant insights on global and multinational corporations’ efficiency and effectiveness. The main determinant being technology, he asserts that communication, travel, transport, and production of goods and services can be made easier (Levitt, 1983). The modern world is greatly influenced by technological advancement, which dictates the dynamic trend of people’s lives globally. Through internet connections, people can easily access international products paving the way for modernity and ultimately commonality of preference. In this manner, Levitt (1983) emphasize the importance of global markets in which products are standardized, sold at low prices, and of high quality. On the other hand, multinational corporations are forced to produce goods and services at relatively higher costs to meet specific country’s or region’s preferences and practices. Since market activities such as promotions and distributions are affected, the prices remain high, and the quality of products, in some occasions, become compromised.
According to Levitt (1983), global corporations have numerous advantages over multinational corporations. For instance, he asserts that due to division of labor and specialization in production, companies can enjoy economies of scale leading to heightened sales (Levitt, 1983). As these firms operate internationally, they tend to treat the world as a single market, holding that people have universal demands constructed by global businesses, which need to be addressed. This kind of commonality is integral part of globalization. Businesses tend to supply customers with products they would want and need as opposed to what they think. In contrast, multinational corporations hold that people require different products in various parts of the world, hence, they explore local demand and adjust their policies, practices, products, and services to meet specific characteristics of each country. The author then compares a fox to multinational companies since they have knowledge about many national markets. Global companies are compared to hedgehog for being well acquainted to standardization of products and addressing the world as one market.
Levitt proposed the globalization of markets as the stable strategy for corporations as it provides more scope for operations. He asserted that the market for multinational firms was deteriorating. It is time for businesses to embrace standardization of products to meet international demands for modernity, low prices, and high quality (Levitt, 1983). Producers should shun superficial differences in the regions but, instead, standardize products to keep the market worth and brand. Another concept explained by Levitt is the motivational factor of buying. He believed that people like money and prefer to buy as many goods as they can with the little they own (Levitt, 1983). To achieve this, products should be standardized to satisfy consumers’ needs and make them available at optimal prices. This phenomenon, however, according to Levitt (1983) cannot be achieved through customized market form. Producing goods and services with same quality worldwide would ensure every consumer’s needs are adhered to, and this is the best perspectives businesses should embrace.
Pertaining to marketing concept, Levitt proposed that firms should know what customers want, recognize, or can articulate. Similarly, they should not shun customization or differentiation on the basis of meeting global markets’ requirements, but rather should embrace and adjust slowly to reshape them. Levitt (1983) asserted that the perspective will enrich operators with the complex knowledge of competing globally. However, it will create ambiguity and confusion to a greater extent which may lead to contradiction and discourage application of the concept. When businesses embrace global strategy with the aid of technological advancement, homogenized world markets can be achieved. Consequently, customers will sacrifice their idiosyncratic preferences in order to exploit competitive advantages in terms of high-quality and low-priced products (Levitt, 1983). Market expansion will be witnessed as customers who previously opted for local preferences will capitalize on lower international prices. As a result, investments will expand due to larger profit margins and exponential decrease in production costs.
Success in global market, therefore, can be achieved through adoption of practices which aid in addressing it as a single entity driven by universal demand. Whatever customers think they want should no longer be the focus for marketing but rather producing goods and services they will want and convincing them to buy. Additionally, more attention should be directed towards economics of simplicity and standardization of products. Cultural differences should not be overemphasized at the expense of commonality of preferences, which is the most integral part of globalization. Levitt also believed that spread of common cultural context is taking shape with the aid of mass media. This is due to the fact that there exist many topics people can relate to and share in social media, hence revealing hidden universal demands. He further predicts that soon all businesses worldwide will find themselves conducting their operations in a single market.
Views for and Against Levitt’s Concept
The “Globalization of Markets” article by Ted Levitt highlights the urgency technology has created in expanding market strategy through global corporations. Operation of businesses has received a greater boost, especially those that have embraced innovation and creativity aided by technological advancement. Burlacu et al. (2018) supports Levitt’s concept because it enhances effectiveness and efficiency in the global world since corporations can successfully compete. Incorporation of higher reliability, value, quality, and reasonable prices in business structures for products can attract more customers and ultimately expansion of investments. To further support Levitt’s concept, Burlacu et al. (2018) emphasized the need for businesses to understand the global market and offer products that customers would want as opposed to what businesses want and know. Companies that decide to go against this perspective have been forced to reduce products’ prices instead of embracing creativity and innovation to create products that meet market demands.
The efficiency of global markets has been applauded for not only expanding corporations but also spurring growth in other economies. Whenever companies gain profits and expand their operations, more opportunities can be created, enabling success to be felt worldwide (Donati, 2017). Wealth equality or living standards would improve among the vast majority as infrastructure and other economic developments progress. Globalization has been applauded for fostering peace and security among nations. For instance, partnership between countries or organizations can make relations more stable, hence enable sustainable world-cooperation. It has been noted that trade relation as a promoter of globalization, has significantly encouraged peace and prosperity. Further accomplishments are expected to be realized, especially in environmental predicaments such as global warming brought about by climate change.
Companies that embrace globalization and explore the support of social media, digital marketing, and online selling, can easily expand their operations as target market both in their regions and across borders are accessible. Entrance into the international markets comes with numerous benefits such as expansion of markets and higher profits. Applying globalization also opens up avenue to outsource customer service at lower costs from other countries which provide the same at nominal manpower (Stiglitz, 2017). The concept makes tasks simpler at lower costs and overheads. As a result, little effort would be required to overcome competition and successfully survive in the market. Usually, it is the bigger firms which have stayed for longer period in the market that enjoy monopoly since they have substantial number of loyal customers. However, due to standardization and technology, even new and small firms can tap into the global market and make considerable sales and profits.
As competition heightens in the global market due to a large number of businesses chasing few customers, operators are always forced to embrace creativity and innovation to remain relevant in the market. Strategic ideas which always emerge majorly work in favor of clients since the quality of products immensely improves. High innovation and novelty, which arise due to competition in the global market, often ensure customers’ needs are met and spurring growth. Since transportation of products and services is one of the key achievements of globalization, as highlighted by Levitt, the same is reinforced in the management article by Bhasin (2019). It is stated that free movement of goods and services in the international market is a win-win situation for both parties involved since products can easily reach the preferred destination at a convenient time.
According to Levitt, the value of products and services is of great importance; as such, firms need to work on improving the value of their produce all the time in order to attract new customers. The same thoughts are supported by Bhasin (2019), who asserts that the realization of globalization enhances brand reach and value. As products continue to access global markets, they attract an international audience, giving them a brand. The target market widens, leading to higher sales, shares, and profits for the firm. Additionally, income level of nations increases as well as those of small and big players. All these have been made possible due to technological advancement, which has turned the entire world into a global village as customers are able to access both domestic and international brands of products.
Despite how reasonable the global strategy assumptions were, some business experts still managed to criticize Levitt’s work pinpointing some weaknesses in his article. Bala (2016), argues that Levitt failed to acknowledge the fact that some market would not respond positively to globalization. Due to cultural differences and diversity among groups of people and nations, rejection of western globalization was a factor that was supposed to be given some consideration. At the time assumptions were made, the world was divided into U.S. and Soviet Union allies due to cold war. Therefore, assuming that all nations, especially China and Russia, would embrace global capitalism was an underestimation. For these reasons, some nations rallied against global strategy, arguing it was not an ultimate solution to the world problems. Bala (2016) further argues that multinational enterprises are the main drivers of globalization owing to their contributions towards interdependence of national markets. Global corporations are, in some occasions, forced to customize products to meet the needs of their customers. Therefore, they are required to use multi-domestic strategy to some extent. For instance, KFC, a fast-food company, which usually use standard approach internationally, in some occasions has been forced to adapt regional strategy to meet regional needs.
Although customer needs, interests, and tastes are generally becoming homogenized, some exceptions are still being experienced. Coca-Cola drinks are standardized globally, but to some, such as Findus and McDonald products, producers are forced to customize to meet regional markets’ demands. Pizza Findus in Britain and France are customized by adding cheese and pineapple toppings. Such kind of recipes for pizza are never accepted internationally. In the recent past, McDonald has used both standardization and local adaptation in some regions. For instance, in India, Japan, China, and Saudi Arabia, locally developed food products are being adopted while concurrently maintaining standardization in other countries. Similarly, car industries such as Toyota customize their products to meet regional demands. For instance, those supplied in the U.S. market and other regions are quite different. The main reason behind such customization is the aspect of cultural difference. It is also believed that regional strategies are the main ridge to local and global initiatives; therefore, standardization cannot exist in isolation without making reference to multinational markets (Pastor & Veronesi, 2018). Companies’ managers are expected to observe flexibility and creativity to avoid potential downfalls and, at the same time, to meet customers’ needs.
Some customers are willing to compromise idiosyncratic preferences for specific goods and services for lower prices and higher quality. Such demands have encouraged multinational corporations to continue producing low-cost products so long as they meet the needs of their customers around the world. Therefore, despite global standardization assumptions being embraced, the global orientation towards low-cost productions to meet lower asking prices by customers is warranting the need to customize products (Alcalde & Vial, 2019). Although this practice can lead to firms focusing on the least desirable customers, research has shown that price-sensitive customers are known for lack of brand loyalty. On the other hand, customers who emphasize quality regardless of product prices can demand for special supply, forcing companies to deviate from standardization to meet their loyal customers’ needs. Cost competition can sometimes be misguided considering different policies from various regions or countries. For instance, government can subsidize local competitors or remove trade tariffs leading to lower cost of production in some countries. It would be difficult to achieve global standardization in such a scenario since some products may cost slightly lower in some regions.
Economies of scales in production and marketing is only possible in the scenario in which the world market is treated as homogeneous. However, due to diversities that exist, centralized production targeting the global market can pose a huge threat to companies’ development and growth. Counter-pressures sometimes force multinational companies to adopt decentralized strategies that meet the demands of the local market only. Inconsistency in exchange rates and regulations occasionally require firms to adopt regional strategies to survive counter-pressures. Assumption that global companies enjoy economies of scale is yet to be actualized. In contrast, some multinational companies have adopted ambitious strategies to promote their products worldwide, and some positive results have been reported (Kordos & Vojtovic, 2016). For instance, Gillette upon developing its ultra-razor products, invested over $200 million to sell and advertise them throughout Europe. Since the plan was a success, the company developed its Senor razor but this time only made a single advertisement in 19 regions. The move was a success with retailers demanding more supplies than what Gillette could produce. In this regard, it can be noted that with appropriate marketing strategy, a multinational company can benefit immensely on economies of scale without having to embrace globalization.
Feedback and Opinion Based on Levitt’s Concept and the Literature Reviewed
Among the key takeaways from Levitt’s article on globalization of markets is the assumption that companies should adopt certain vision and practices addressing the global market as a single entity guided by universal demand. In this regard, the production should aim at availing what customers would want and convincing them to buy instead of what they think. Products should be standardized while putting more focus on economic simplicity to ensure they are of high quality and can be sold at relatively lower price. To achieve this goal, little emphasis should be put towards cultural differences but rather acknowledging commonality of preferences, which is the main driving force towards globalization (Levitt, 1983). Moreover, the aspect of mass media introduced by technological advancement is enabling easy flow and sharing of information, making the spread of common cultural context, hence revealing hidden universal demand. As such, standardized products can easily be accepted among diverse cultures worldwide.
Global corporations can easily access larger markets, enabling them to make substantial profits. With huge yields, the production cost can go down, allowing products to be manufactured in higher quality and sold at a lower price. Firms can further enjoy economies of scale in development and advertising, leading to faster growth. I believe Levitt’s prediction on globalization has been adopted to some extent. This is because the majority of successful businesses have incorporated the concept of creativity and innovation in production and marketing. The perspective in which businesses generate ideas of keeping customers by customizing products to meet their needs has become a thing of the past. This is mainly because technology has enabled production of homogenized products which meet the needs and desires of consumers worldwide. Multinational corporations customize their products, hence, operate at relatively higher costs while global ones treat the world as a single entity and operate at relatively lower costs.
Literatures supporting Levitt’s idea hold that creativity and innovation aided by technology are making an immense difference in the world of business. Mass media is enabling easy transportation, promotion, marketing, and advertisement of products to the customers. As such, larger target markets are easily accessed and well informed on the products. The success of companies is felt in other sectors since job opportunities are created. Better living standards and revenue collections for governments have been recorded to enhance spurring development (Burlacu et al., 2018). Due to positive international relations, sustainable world cooperation is witnessed promoting peace and security. Embracing globalization, especially by new and small firms enables them to enjoy digital marketing and online selling. Entry into the global market is easy so long as products are standardized. In this manner, new and small firms can succeed the same way as bigger companies since little is needed to overcome competition. The latter also comes with massive win for customers since global corporations are forced to embrace creativity and innovation to remain relevant in the market. As a result, it is the consumers who benefit from high quality and value added by innovations.
Globalization however underestimated the cultural diversities which exist globally. Most Asians and French nationals use too much cheese in their food as opposed to other people. Therefore, the idea of standardization in which a product such as pizza is uniformly produced using the same recipe worldwide is not convenient to the diverse consumers. Some countries prefer socialism or communism, forcing other countries to embrace global capitalism is inconsiderate and may tend to infringe on other people’s rights (Bala, 2016). Despite incredible achievements the world can reach through globalization, cultural differences should never be ignored. Since some customers are willing to trade off their idiosyncratic preferences for specific goods and services to access low-priced or high-quality goods, their needs should be met. This is due to the fact that people earn different incomes. Therefore, if individuals wish to go for low quality product which they can afford, that need should be met. Globalization should be alive to the fact that counter-pressures in terms of policies and regulations for businesses from different countries affect the cost of production, hence should be put into consideration.
In conclusion, the globalization concept allows for standardization of products, hence, lower prices and higher quality. The commonality preference being promoted by technological advancement is further enhancing easy exchange of common cultural context. Standardized products are easily accepted among diverse cultures creating universal demand; therefore, firms are able to enjoy economies of scale, more sales, and profits. Competition in global market usually trigger creativity and innovation among businesses, hence, high quality and value are attained. However, cultural diversity should be put into consideration when companies tend to apply standardization of products.
Alcalde, P., & Vial, B. (2019). Implicit trade-off in replacement rates: Consumer preferences for firms, intermediaries, and annuity attributes. Intermediaries and Annuity Attributes. Web.
Bala, R. (2016). Globalization and inequality. International Journal in Management & Social Science, 4(9), 370-375. Web.
Bhasin, H. (2019). 6 reasons globalization is important for businesses. Web.
Burlacu, S., Gutu, C., & Matei, F. O. (2018). Globalization–pros and cons. 19(S1), 122-125. Web.
Donati, P. (2017). Globalization of markets, distant harms and the need for a relational ethics. Rivista Internazionale di Scienze Sociali, 125(1) 13-42. Web.
Kordos, M., & Vojtovic, S. (2016). Transnational corporations in the global world economic environment. Procedia-Social and Behavioral Sciences, 230, 150-158. Web.
Levitt, T. (1983). The globalization of markets. Harvard Business Review. Web.
Pastor, L., & Veronesi, P. (2018). Inequality aversion, populism, and the backlash against globalization. National Bureau of Economic Research. Web.
Stiglitz, J. E. (2017). The overselling of globalization. Business Economics, 52(3), 129-137. Web.