Globalization Revisited
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Focus on the Customer:
Localism, Differences, and Consumer Behavior

HBS associate professor Luc R. Wathieu led a discussion of a paper titled “Rooting Marketing Strategy in Human Universals,” coauthored with HBS professor emeritus Gerald Zaltman and HBS doctoral student Yu Liu. Wathieu declared that “differences are rooted in commonalities.” He discussed how a women’s fitness magazine adapted itself to vastly different audiences for its Chinese and American editions. The magazine worked with a single philosophy — confirm a reader’s self-identity and at the same time challenge it — but used different content appropriate for each country. In China, the magazine helped readers experience the Chinese concept of a balanced life, while in America, the magazine helped readers regain balance in their lives. The lesson, Wathieu said, contrary to what Levitt implied twenty years ago, is that “it is possible to reconcile standardization and strong emotional connections.”

Zaltman: tapping into deep universal elements of human experience. Photo by Brian Snyder

Zaltman argued that human beings are “programmed to look for and create differences.” But there are deep universal elements to human experience, he declared, noting that the story of Little Red Riding Hood is told around the world, albeit in some forty different versions. “Topline growth — creating demand — requires the ability to anticipate what customers cannot yet articulate they need,” Zaltman said. “With all the changes in technology, they don’t know what they could have. That’s what marketing does.”

HBS assistant professor Douglas B. Holt presented a paper, titled “Managing the Transnational Brand: How Global Perceptions Drive Value,” that he, HBS professor John Quelch, and Earl Taylor of Research International had authored. Noting that consumers associate quality with brands that have worldwide reputations for excellence, Holt pointed out that consumers still ascribe certain attributes to products from particular countries (e.g., quality in apparel design from Italy or in watches from Switzerland). Yet consumers will shun some of a country’s products while accepting others. Products from the United States that convey the “American Dream” (Disney, Levi’s) can be popular for that reason, while other brands, such as McDonald’s or Microsoft, can invite opposition as representatives of American hegemony. Indeed, Holt said, for all companies in every country, to a degree unanticipated twenty years ago, “a core aspect of transnational branding” has become a firm’s commitment and perceived performance with regard to matters of corporate social responsibility and citizenship.

Rangan: For three billion people, globalization is not working. Photo by Brian Snyder

The world has billions of disenfranchised citizens, and globalization has its discontents, as HBS professor V. Kasturi Rangan reminded participants in a passionate presentation, based on his paper “Globalization and the Poor,” coauthored with Research Associate Arthur McCaffrey. In 1983, “Ted Levitt didn’t talk about the folks at the bottom of the pyramid,” Rangan observed. “Globalization is not working for those three billion people. Corporations have a responsibility to create a market process because the role of globalization should be to get folks at the bottom moved up the pyramid.” Accordingly, Rangan proposed more corporate cooperation to help achieve a universal good — the betterment of the world’s have-nots — through a customer-driven conception of globalization leading to more equitable global markets. He acknowledged that this would involve rather dramatic changes in the ways that corporations negotiate deals for infrastructure development. Despite its shortcomings, Rangan concluded that globalization holds the key: “The poor are worse off because of too little of the right kind of globalization and too much of the wrong kind of globalization.”

Getting Ahead:
Organizational Advantage in a Globalized World

In a panel discussion on information technology and globalization, moderated by HBS professor John A. Deighton, participants noted that advances in IT had greatly enabled the implementation of business ideas around the globe. IT has also made possible a greater degree of centralized management, with the old multinational, country-manager structure giving way to the emergence of global market segments. And IT’s data-aggregation capability clearly improves operational efficiency.

Confirming these and other advances, practitioners went on to note that they’ve encountered some difficulty in trying to standardize ideas and IT solutions across the global corporation. IT, they said, still lacks a vision or “big idea” and is not yet well-utilized as a means of anticipating demand for new products and services, or achieving advantage among global competitors. Deighton noted that one major IT development, the Internet, has complicated the organizational mission: There are so many new entry points into an organization that “transparency and honesty have become excruciatingly important.”

In their paper “Organizing Multinational Companies: Building a Collaborative Advantage,” HBS professor Nitin Nohria and INSEAD’s Morten T. Hansen note that global companies used to be able to compete with each other by exploiting scale and scope economies or by gaining advantage in areas such as labor, goods, and capital markets. But now that global markets have become more developed and relatively efficient, gaining advantage has become more difficult. Hansen and Nohria suggested that one way to achieve competitive advantage would be to enhance collaboration between individuals and units within global corporations. Effective sharing of in-house skills, best practice, and knowledge could be a key to boosting companies’ performance and hence their competitiveness.

The authors acknowledge that barriers to greater collaboration are embedded in organizational structures and human behavior but propose ways that they can be overcome or managed. “Culture, language, and impediments to research are all reduced by globalization,” Hansen said, “so in this way, Levitt’s vision is apt.” But with globalized markets having developed to an extent Levitt might not have imagined, “the big opportunity now is in [intra-organizational] collaboration — 90 percent of its potential is untapped,” Nohria asserted. “This is where the action lies if you’re really looking for economic improvement in your business.”

Discussing the paper “Managing Global Supply Chains,” which he coauthored with HBS assistant professor Noel H. Watson, HBS professor Ananth Raman declared that most supply chains, local and global, offer considerable room for improvement. Data are often underutilized and their quality poor. Operational execution may be weak, and sales forecasting and inventory management erratic. These shortcomings, Raman said, are put under even greater stress when the supply chain stretches across continents and cultures. On a global scale, uncertainties and misunderstandings routinely surface between retailers and manufacturers in the areas of contract enforceability, labor and capital costs, product knowledge, cultural factors, infrastructure, exchange rate fluctuations, and longer lead times. One solution, said Raman, can be the use of intermediaries. Interacting with manufacturers and retailers, such firms utilize their ability to bridge cultures, absorb risk, and establish trust to add stability to the supply-chain process.

Quelch: playing a key role in a colloquium that honored a legend, evaluated the past, and shed light on the future. Photo by Brian Snyder

In a concluding session, participants attempted to paint a picture of international business in 2003, compared with twenty years ago. First and foremost, they stressed that global markets are considerably more complex than what Levitt described in 1983. Unknowable then was the extent to which developing countries would force globalization to consider local markets; how seriously local regulations and laws could impede globalization; the frequency with which consumers would resist certain products pushed on their societies; and the degree to which brands would gain in importance.

In the next five to ten years, participants anticipated an extension of American economic and corporate power — “Americanization” as distinct from “globalization.” They also foresaw a proliferation of brands, a rise in the globalization of services, and deeper understanding of the middle ground, the “semiglobal” approach that attempts to combine worldwide standardization with sensitivity to local and regional markets. (Acceptance of such differences, Levitt cautioned in 1983, should only be made “reluctantly” after “relentlessly testing their immutability.”)

What are the correct approaches, and what developments lie ahead? Few dared to emulate the confident authority that Levitt displayed with his HBR predictions. But all agreed the discussion should be resumed in the not-too-distant future, when the globalization of markets will no doubt have taken unexpected twists and turns, driven by forces all its own.