IntroductionTheodore Levitt’s 1983 article The Globalization of Markets has been described as a seminal and influential article in globalization and business discourse (Vignali 2001). In this article, Levitt outlined his bold global standardization hypothesis in which he argued that the future for large corporations in a rapidly homogenizing market driven by technology was to go global by offering standardized products and not customizing products for markets as was the practice for multinational corporations. This essay will critically analyze Theodore Levitt’s The Globalization of Markets. First, the essay will summarize Levitt’s main ideas and arguments in The Globalization of Markets.
The essay will then will discuss some of the strengths and weaknesses of Levitt’s views and analyze counter arguments to Levitt’s hypotheses. The Globalization of MarketsIn The Globalization of Markets, one of the key pillars of Levitt’s argument is that the world is rapidly being driven into convergence through modern technology. From the onset, he argues that new technologies have “proletarianized” communication, transport and travel and people from all corners of the globe have been exposed to modern products (Levitt 1983, p 2).
As a result, he points that that the new commercial reality is characterized by global markets for these modern standardized consumer products that transcend regional and national preferences. People seem to prefer these global products at affordable or low prices irrespective of their presumed national preferences. From this premise, Levitt outlines which strategies companies should use in the global market to remain relevant and competitive. He compares two types of corporations; the global corporation as a superior and the traditional multinational corporation which is facing its demise.
He makes the distinction between the two by comparing the global corporation to a hedgehog and the multinational corporation to a fox (Levitt 1983 p 7). The multinational is presented as a company which operates in different national markets, with its products paying attention to or accommodating the different tastes and preferences in each market (customization), while the global corporation simply treats the global market as a single entity (Baker and Sterenberg 2002). He lauds the global corporation’s business model as superior due to their high-quality standardized products produced at low prices.
He reinforces this position by stating that standardized markets come with advantages such as economies of scale in production, distribution, marketing and management unlike customized markets. Levitt argues that for companies to survive, they must adopt a global business strategy, producing high quality and low cost standardized goods. Using examples such as McDonald’s, Sony and Coca Cola, he demonstrates how global corporations have successfully transcended ethnic and regional barriers of preferences by offering high quality standardized products at low prices. He gives examples of the global proliferation of commodities unique to ethnicities such as Chinese food as evidence of homogenization of consumer choices.
According to Levitt, consumers prefer value and dislike scarcity and would therefore desire low priced and higher quality modern products such as Television sets, cosmetics and Levi jeans regardless of national preferences. He argues that these differences have become vestigial and companies that struggle to accommodate them do so at their expense. As an example, he attributes Hoover’s failure in the European market due to their attempt to accommodate national preferences while a low priced machine backed by heavy promotion would have succeeded (Levitt 1983).