01 Sep 2003

Globalization Revisited

Highlights from an HBS Colloquium
by Garry Emmons


“The world’s needs and desires have been irrevocably homogenized. This makes the multinational corporation obsolete and the global corporation absolute.” —Theodore Levitt (1983)

They were bold, even breathtaking words at the time. Two decades later, their echoes are still heard at corporate strategy sessions and throughout the halls of academe. They have always sounded with particular resonance at HBS, where, at a two-day colloquium last May, some sixty academics and practitioners gathered to assess the status of globalization and of global corporations, marketing, and brands — the intellectual fiefdom of the School’s legendary marketing professor emeritus, Theodore Levitt. The colloquium was pegged to the twentieth anniversary of Levitt’s seminal article, “The Globalization of Markets” (Harvard Business Review, May–June 1983), from which the epigraph above is taken.

Still relevant today, Levitt’s article caused a minor sensation when it first appeared. Apart from its insightful specifics, its language (“globalization” was a novel term) and expansive vision offered a hopeful alternative to the grim reality of a world economy locked down in an unproductive Cold War standoff. Levitt argued that advances in communications technology were increasingly inspiring consumers around the world to want the same things. Therefore, he declared, international companies should cease to act as “multinationals” that customized their products to fit local markets and tastes. Instead, firms should become “global” by standardizing the production, distribution, and marketing of their products across all countries. Sameness meant efficiency and would be more profitable than difference. From economies of scale would flow competitive advantage.

Much of the framework of the May conference — also titled “The Globalization of Markets”— recalled these and other ideas and developments first discerned by Levitt, now universally hailed as a “marketing guru.” Although he was unable to attend the conference due to ill health, his influence was palpable. (A videotaped retrospective, including an interview with Levitt conducted by HBS professor emeritus Stephen A. Greyser, was shown at the colloquium. See article)

Virtually all colloquium participants acknowledged a debt to Levitt, pointing to elements of his 1983 article that were prescient then and still useful today. At the same time, however, they noted that marketing and the nature of globalization have changed in the last two decades, to a point Levitt could hardly have imagined. Thus, some of his ideas seem to have been overtaken by time, while other important phenomena, so powerful today, are absent from his article. Yet there was no disputing the significance of Levitt’s contribution to the theory and practice of global marketing and to the ongoing assessment of its impact. As HBS professor Richard S. Tedlow noted of Levitt’s work, “It’s all in the question, and Ted Levitt asked the best questions about marketing of anyone.”

The conference, which was cochaired by HBS professors Rohit Deshpandé and John A. Quelch, kicked off with a dinner keynote speech by Sir Martin Sorrell (MBA ’68), chief executive of WPP Group. Ranking Levitt’s article “among the classic works of marketing literature,” Sorrell nonetheless pointed to what he believes was a principal misjudgment: its view of “the globalization of products as a supply-side phenomenon rather than a demand one.” In the 1983 article, Sorrell recalled, “Levitt wrote that ‘instead of adapting to superficial and even entrenched differences within and between nations, it the global corporation will seek sensibly to force suitably standardized products on the entire globe.’” This notion, Sorrell said, ignores the power of the customer. “The consumer is in control,” Sorrell declared. “There will continue to be substantial and enduring differences around the world in what and how consumers consume.”

Sorrell went on to predict that in the coming years, “Companies’ marketing focus will become much more localized, which will call for more, rather than less, emphasis on national management and development.” With this in mind, he added, “Globalization today is far less about leveraging economies of scale than it is about leveraging economies of expertise and knowledge. It’s about taking global advantage by sharing knowledge, instead of reinventing the wheel in every market.” Over the next two days, these and other themes figured prominently in the papers that were presented and discussed at the colloquium. Globalization’s complexities and nuances, compared with twenty years ago, were analyzed and debated with a rigor and enthusiasm that doubtless would have pleased Ted Levitt immensely.

Worldly Intentions:
Smart Ways to Go Global

“The Globalization of Markets” did change the character of debate among scholars and practitioners and established globalization as a lens through which to view the world. So said HBS assistant professor Rawi E. Abdelal while presenting an essay, “Theodore Levitt’s ‘The Globalization of Markets’: An Evaluation after Two Decades,” coauthored with HBS professor Richard Tedlow. Abdelal noted that while Levitt had overestimated globalization’s power to get people to want the same things out of life, he had underestimated its political ramifications. Since the Cold War, Abdelal declared, “Nationalisms have come to embrace capitalism” to an extent neither Levitt nor anyone else could foresee. Indeed, Abdelal observed, such unpredictability and change are inherent in globalization. And as Abdelal and Tedlow write in their paper, “Globalization is transformative. The market is not what firms find; the market is what firms make of it.”

How global retailers enter local foreign markets — and then what they make of them — was the subject of “Globalization of Retailing,” with HBS professor Rajiv Lal leading a discussion of a paper he authored with HBS professor David E. Bell and professor emeritus Walter J. Salmon. The authors examined the overseas experience of retail giants Carrefour (France), Wal-Mart (U.S.A.), and Royal Ahold (the Netherlands). Occupied with their enormous domestic market, many American companies, like Wal-Mart, tend to focus on economic efficiency and doing things right at home. Thus, they typically enter foreign markets late, only after thorough exploitation of the domestic U.S. market. By contrast, European firms tend to venture abroad earlier, into developing markets. The Europeans often export a retail format that adds value by catering to local needs and tastes. “It’s surprising that a firm’s country of origin can shed so much light on global expansion,” commented Lal.

Exactly how globally standardized should a corporation strive to be? HBS professor Pankaj Ghemawat, who said that Levitt’s 1983 essay is the first assignment he gives his students, observed that while Levitt predicted pervasive standardization, Ghemawat’s paper, “Global Product Standardization? A Case Study and a Model,” shows current reality to be otherwise. Ghemawat has found that a number of industries that seem ripe for strategies of global or regional standardization have actually moved in the other direction, toward more localization. Citing the experience of STAR TV in Asia, he said that while television programming in a nascent market may largely consist of standardized, outside fare, once that market has grown large enough to make locally produced programming feasible, latent preferences for such programming over alien, standardized content often manifest themselves. “There are many other dynamics that can also undercut the viability of globally standardized products over time,” Ghemawat said. He added that the proper strategy for multinational firms is often neither globally standardized nor totally localized, but “semiglobalized” — an array of strategic approaches.

The “global but local” approach — clearly a pullback from Levitt’s 1983 vision of all-out globalization — seemed to most colloquium participants like the smart way to proceed in the 21st century. To that “platform” could be added features shared by most successful companies. In “Culture, Customer Centricity, and Globalization,” HBS professor Rohit Deshpandé and the Tuck School’s John U. Farley assert that “organizational factors trump national factors in determining business performance.” Top-performing companies, no matter the country or region in which they are engaged, tend to have competitive, entrepreneurial cultures and are customer-focused, market-oriented, and innovative. “This successful profile,” Deshpandé noted, “holds across all contexts and kinds of firms, be they large or small, consumer or industrial companies.”



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