16 Jun 2003  Research & Ideas

Researchers Contribute Globalization of Markets Papers

A summary of papers written for the Globalization of Markets Colloquium.

 

Twenty years has provided time to judge the success or failure of Theodore Levitt's predictions of a global economy populated by standardized products and marketing approaches.

For the colloquium, a number of Harvard Business School and visiting faculty contributed research on various aspects of Levitt's work. Here's a summary.

The Globalization of Markets: An Historical Perspective

Theodore Levitt's "The Globalization of Markets": An Evaluation After Two Decades
Professors Richard Tedlow and Rawi Abdelal acknowledge that "The Globalization of Markets" was not a good predictor of events, but the power and sometimes outrageous language used by Levitt changed the nature of debate on the issue, and created new perspectives for managers to consider as they approach world markets. Levitt's key insight endures: Consumer preference is not a given; good marketing can create new opportunities.

Empires of Profit: Commerce, Conquest and Corporate Responsibility
Author Daniel Litvin presented his evidence that modern companies find it difficult to operate on foreign soil. Big companies, in spite of their wealth, regularly fail to anticipate local social problems. A Western bias blinds them to local issues. And companies often fail to adequately check the actions of their local managers.

Standardized Products, Universal Values?

Global Product Standardization?
Although there is a general perception that standardized products are displacing locally customized products in many categories, the evidence suggests "the global standardization hypothesis has less momentum behind it than is often supposed that to be the case," according to HBS professor Pankaj Ghemawat. "The Globalization of Markets" was probably too extreme—provocative, Ted might say—in the way it emphasized the momentum behind global standardization. Its more enduring contribution seems to be that it correctly flagged demand-side preferences and supply-side economies of simplicity and standardization as the two key economic determinants of standardization versus customization in market outcomes."

Rooting Marketing Strategy in Human Universals
Global and local marketing efforts run at the opposite sides of the spectrum, and both "ignore crucial aspects of consumer behavior," argue HBS professors Luc Wathieu, Gerald Zaltman and co-author Yu Lien. Is there a way to combine the best of both? Yes, if marketers are willing to dig below superficial benefits and attributes to connect products and services to emotions and schemes of thoughts that are almost universally shared among human beings. "The process we advocate allows someone to call a product his while not feeling impoverished or threatened when someone is calling the same product hers."

Global Brands

Managing the Brand-Product Continuum in Global Markets
Dr. Hans-Willi Schroiff and David Arnold argue that global branding is the policy of establishing globally consistent brand names, identities, and positions. By separating brand from product, this approach aims to highlight possible ways in which brand owners in international corporations can address the trade-off between global integration and local responsiveness.

Managing the Transnational Brand: How Global Perceptions Drive Value
A transnational brand is the corporate brand of firms that market globally in order to leverage economies of scale and scope, according to HBS professors Douglas Holt, John Quelch, and co-author Earl Taylor of Research International. Consumers worldwide form preferences for transnational brands based upon five ideas about transnational companies that are prominent in today's global discourse: quality, status, country-of-origin, citizenship, and American values. "Hence, managing the transnational brand requires understanding how the brand stacks up on these dimensions compared to competition, identifying opportunities to enhance global perceptions, and shoring up weaknesses."

The Unglobal Consumer

The "Unglobalization" of Markets: Japan after Twenty Years
Hirotaka Takeuchi,
Dean, Hitotsubashi University Graduate School of International Corporate Strategy, looks at the failure of the Japanese economy in light of Levitt's insights. When Levitt wrote "The Globalization of Markets" in 1983, Japanese companies were held up as model competitors. Today, the Japanese economy and the competitiveness of its companies have fallen on hard times. "Although Levitt's article was primarily concerned about the globalization of the product market, this paper expands the domain to three areas—the labor market, the financial market, and the product market—and investigates the assertion that Japan has not actively participated in the globalization of all three markets."

Globalization and the Poor
Half of the world's population lives in poverty, but their needs and desires are no less real. Efforts by governmental and non-governmental agencies to promote economic globalization and trickle-down benefits to the poor have not worked. What is a corporation to do? HBS professor V. Kasturi "Kash" Rangan and HBS research associate Arthur McCaffrey propose a framework for an "ethic of engagement," that embraces standards for global investment that respect poor people and their habitats.

Globalization of Supply and Distribution

Cost Economies in the Global Advertising and Marketing Services Business
Levitt's work sparked debate on the merits of standardized versus localized advertising campaigns. But what are the economics of firms engaged in the production of global advertising and marketing services required to plan and execute such campaigns? According to HBS professor Alvin J. Silk and MIT professor Ernst R. Berndt, "The long-run cost function for firms in the global advertising and marketing services business is subject to modest scale diseconomies." Modest, but significant for the firms involved.

Managing Global Supply Chains
There are fundamental differences between supply chains and global supply chains, say authors Ananth Raman and Noel Watson, both HBS professors. "The increasing globalization of supply chains makes it imperative that managers adopt, and the ability to more effectively make a global decisions supports, a more global perspective in managing supply chains."

Globalization of Retailing
A study of three global retailers—Carrefour,Wal-Mart, and Ahold—sheds light on the differences between how American and European companies export formats to new countries. What are the keys to their successful global expansions? By HBS professors David Bell, Rajiv Lal, and Walter Salmon.

Global Knowledge Sharing and Performance Drivers

Organizing Multinational Companies: Building a Collaborative Advantage
HBS professors Morten T. Hansen and Nitin Nohria look at the world of multinational corporations, which more and more compete against other MNCs possessing similar size, access to resources, and market penetration. So what can be a source of competitive advantage? The ability to collaborate, share knowledge, and jointly develop ideas among units will increasingly be the basis of an MNC's competitive advantage, the authors argue.

Panel: Globalization of Markets and Information Technology

IT is a powerful force for gaining competitive advantage, but how is it affecting the marketing function? Which marketing elements should be standardized around the globe and which not, and how can IT help or hinder that process? HBS professor John Deighton led the conversation. The three practitioners who shared their companies' experiences were Eric Berg (HBS MBA '90), CIO of Goodyear; Doug Busch, CIO of Intel; and Earl Shanks, Senior VP and Chief Financial Officer of NCR. While IT provides "very good, detailed, fact-based data," according to Berg, nothing substitutes for walking the stores to get an intuitive sense of how things are working out. Added conference participant Paul Kastner of Talbots, "We rely on people in stores to tell us what we don't have."