Choices about product attributes, distribution strategy, communication strategy, and pricing strategy that a firm offers its targeted markets.
The chapter closes with a look at new-product development in an international business and at the implications of this for the organization of the firm’s R&D function.
The Globalization of Markets and Brands
In a now-classic Harvard Business Review article, the late Theodore Levitt wrote lyrically about the globalization of world markets. Levitt’s arguments have become something of a lightning rod in the debate about the extent of globalization. According to Levitt,
A powerful force drives the world toward a converging commonalty, and that force is technology. It has proletarianized communication, transport, and travel. The result is a new commercial reality—the emergence of global markets for standardized consumer products on a previously unimagined scale of magnitude.
Gone are accustomed differences in national or regional preferences. The globalization of markets is at hand. With that, the multinational commercial world nears its end, and so does the multinational corporation. The multinational corporation operates in a number of countries and adjusts its products and practices to each—at high relative costs. The global corporation operates with resolute consistency—at low relative cost—as if the entire world were a single entity; it sells the same thing in the same way everywhere.
Commercially, nothing confirms this as much as the success of McDonald’s from the Champs Élysées to the Ginza, of Coca-Cola in Bahrain and Pepsi-Cola in Moscow, and of rock music, Greek salad, Hollywood movies, Revlon cosmetics, Sony television, and Levi’s jeans everywhere.
Ancient differences in national tastes or modes of doing business disappear. The commonalty of preference leads inescapably to the standardization of products, manufacturing, and the institutions of trade and commerce.2
This is eloquent and evocative writing, but is Levitt correct? The rise of the global media phenomenon from CNN to MTV, and the ability of such media to help shape a global culture, would seem to lend weight to Levitt’s argument. If Levitt is correct, his argument has major implications for the marketing strategies pursued by international business. However, many academics feel that Levitt overstates his case.3 Although Levitt may have a point when it comes to many basic industrial products, such as steel, bulk chemicals, and semiconductor chips, globalization in the sense used by Levitt seems to be the exception rather than the rule in many consumer goods markets and industrial markets. Even a firm such as McDonald’s, which Levitt holds up as the archetypal example of a consumer products firm that sells a standardized product worldwide, modifies its menu from country to country in light of local consumer preferences. In the Middle East, for example, McDonald’s sells the McArabia, a chicken sandwich on Arabian-style bread, and in France, the Croque McDo, a hot ham and cheese sandwich.4
ANOTHER PERSPECTIVE Toyota’s Ambitious Plan for No 1 Global Market
Yundong, or Cloud Action, is Toyota China’s first-ever strategic plan for its business in China. China is the “most important” market in the world, but the Japanese carmaker has less than 10 percent of the auto market, far behind global rivals such as General Motors and Volkswagen. The auto giant aims to become a company “that is beyond consumers’ expectations and creates happiness and fortune for consumers and the regions where it operates” emphasizing local responsiveness to Chinese customers, but still maintaining a global strategy. The Yundong plan combines the company’s global strategy and local marketing operation which will bring advanced technologies to the local market, improve the local management and marketing system, and build “exciting” products “that touch the hearts of Chinese consumers and are beyond their expectations” according to company officials.
On the other hand, Levitt is probably correct to assert that modern transportation and communications technologies are facilitating a convergence of certain tastes and preferences among consumers in the more advanced countries of the world, and this has become even more prevalent since he wrote. The popularity of sushi in Los Angeles; hamburgers in Tokyo; hip-hop music; Burberry apparel among young, affluent, fashion-conscious consumers worldwide; and global media phenomena such as MTV all support this contention. In the long run, such technological forces may lead to the evolution of a global culture. At present, however, the continuing persistence of cultural and economic differences between nations acts as a brake on any trend toward the standardization of consumer tastes and preferences across nations. Indeed, that may never occur.
Some writers have argued that the rise of global culture doesn’t mean that consumers share the same tastes and preferences.5 Rather, people in different nations, often with conflicting viewpoints, are increasingly participating in a shared “global” conversation, drawing upon shared symbols that include global brands from Nike and Dove to Coca-Cola and Sony. But the way in which these brands are perceived, promoted, and used still varies from country to country, depending on local differences in tastes and preferences. Furthermore, trade barriers and differences in product and technical standards also constrain a firm’s ability to sell a standardized product to a global market using a standardized marketing strategy. We discuss the sources of these differences in subsequent sections when we look at how products must be altered from country to country. In short, Levitt’s globally standardized market is some way off in many industries.