ECONOMIC DEVELOPMENT

Just as important as differences in culture are differences in the level of economic development. We discussed the extent of country differences in economic development in Chapter 3. Consumer behavior is influenced by the level of economic development of a country. Firms based in highly developed countries such as the United States tend to build a lot of extra performance attributes into their products. These extra attributes are not usually demanded by consumers in less developed nations, where the preference is for more basic products. Thus, cars sold in less developed nations typically lack many of the features found in developed nations, such as air-conditioning, power steering, power windows, radios, and CD players. For most consumer durables, product reliability may be a more important attribute in less developed nations, where such a purchase may account for a major proportion of a consumer’s income, than it is in advanced nations.

Contrary to Levitt’s suggestions, consumers in the most developed countries are often not willing to sacrifice their preferred attributes for lower prices. Consumers in the most advanced countries often shun globally standardized products that have been developed with the lowest common denominator in mind. They are willing to pay more for products that have additional features and attributes customized to their tastes and preferences. For example, demand for top-of-the-line four-wheel-drive sport utility vehicles—such as Chrysler’s Jeep, Ford’s Explorer, and Toyota’s Land Cruiser—has been largely restricted to the United States. This is due to a combination of factors, including the high income level of U.S. consumers, the country’s vast distances, the relatively low cost of gasoline, and the culturally grounded “outdoor” theme of American life.

PRODUCT AND TECHNICAL STANDARDS

Even with the forces that are creating some convergence of consumer tastes and preferences among advanced, industrialized nations, Levitt’s vision of global markets may still be a long way off because of national differences in product and technological standards.

Differing government-mandated product standards can rule out mass production and marketing of a standardized product. Differences in technical standards also constrain the globalization of markets. Some of these differences result from idiosyncratic decisions made long ago, rather than from government actions, but their long-term effects are profound. For example, DVD equipment manufactured for sale in the United States will not play DVDs recorded on equipment manufactured for sale in Great Britain, Germany, and France (and vice versa). Different technical standards for television signal frequency emerged in the 1950s that require television and video equipment to be customized to prevailing standards. RCA stumbled in the 1970s when it failed to account for this in its marketing of TVs in Asia. Although several Asian countries adopted the U.S. standard, Singapore, Hong Kong, and Malaysia adopted the British standard. People who bought RCA TVs in those countries could receive a picture but no sound!11

• QUICK STUDY

1. What do we mean when we say that a product is a bundle of attributes?

2. How might cultural differences across countries affect a company’s choice of product attributes to emphasize?

3. How might differences in economic development across countries affect a company’s choice of which product attributes to emphasize?

4. How might differences in technical standards across countries affect a company’s choice of which product attributes to emphasize?