Globalization as Growth Driver for Society and Economy Essay (Critical Writing)

Levitt Summary

From the start, Levitt (1983) argues that the globalization of markets is a phenomenon like never seen before, where the international market becomes one whole and there is a demand for modern, popular, standardized products which are advanced, functional, reliable, and affordable. Beforehand, and arguably to this day (2021), some companies operate in the international marketplace on the principle that each regional market is different. What products have to be culturally oriented, and are low-income countries being sold lower-quality goods or not offering such advanced technologies in the market with a lack of spending potential? He suggests the decline of multinational corporations, those that operate in different countries and adjust their production and practices at high relative costs. Meanwhile, global corporations will prosper, operating with constancy and consistency at low cost since they are taking significant advantage of the available economies of scale. These are the companies that will achieve economic and commercial success because demand is universal across the world, particularly for modern and technological products. Levitt was correct in predicting that the world was converging commonality through the force of technology which completely upended communication, transportation, business, and travel – and now even most areas of the world have access to or desire the latest commercial products.

This is described under the principle of the Republic of Technology, where convergency is key, and everything becomes like everything else. The business has pushed towards commonality in a wide variety of sectors ranging from commodities to high tech. However, commercially, the success of global brands such as Pepsi-Cola demonstrates the sweeping force of capitalism, which is enhanced by the proletarianization of communication. Both high-tech and high-end commercial products have swept appeal, and the global preference structure is homogenized. Products such as commercial Coca-Cola drinks or high-tech Apple iPhones (in the modern day) represent standardized products that cross physical, cultural, and national borders, and preferences are welcomed universally everywhere. Ancient means of conducting business disappear in an industrial world.

Levitt argues that there are some local differences and some artificial barriers do exist which may limit completely homogeneous markets. However, these are not fixed preferences, and with a proper political and commercial approach, barriers can be overcome.

Globalization and a homogenous world market do not mean the blind exportation of products without making any accommodations or changes. These are failures in execution and become the cause of the failure of imagination. Levitt uses an example of the introduction of Hoover automatic washing machines to Europe. A poor market analysis focused largely on Britain did not accurately capture the customer needs of the whole of Europe, which were very diverse. Hoover could not meet these needs with high manufacturing costs due to short production for separate features. Furthermore, there were also tariff dues for each country. Overall, the company was in a poor competitive position by attempting to export its fully automatic machines. Levitt then proposes that if Hoover had done an imaginative analysis, they would have seen that Italian automatics with small capacity were growing rapidly, with Italy itself transitioning directly to automatics and reaching popularity in other EU markets. There were other indicators that the market was highly favorable to small, low-powered, and low-speed machines, which were also easy to manufacture. Two elements clearly influenced consumers, low price and strong promotion regardless of price, in order to receive the high-tech product and benefits of automatic machines even when lacking many features. Hoover greatly misread the market and could have easily seen success if they had caught on to the right trends. It highlights that the marketing concept is perverse and multinational attitudes fail when consumers seek standardization. It also emphasizes that data does not yield information, and it takes an imaginative thoughtful approach in the end. Hoover should have taken the initiative to create demand for that standardized product that the population of Europe needed and wanted without overcomplicating the supply chain logistics of separate shipping products to different countries.

Levitt calls upon the audience to accept the common fact that technology always drives consumers towards one common goal of alleviating life burdens in some way. The corporation is an entity where technology comes together with globalization for the world’s benefit. The demand is existent; it is up to corporations to fulfill it respectively with the maximum profit themselves while meeting the demands of the market. The most important thing to remember is that there is always a replacement in the global market.

The transition is ongoing, from national to global and now from ‘global’ to cosmopolitan. The persistence of national economic barriers will eventually fall apart based on the realities of the market. History is changing, and the existence of the past ultimately demonstrates this. Cosmopolitanism is not just the monopoly of intellectual and leisure classes but becoming the established property that is accepted but also defined by characteristics of all sectors. Levitt presents the market as a living force that is breaking down traditional barriers and creating a better version, with a free market where companies can adapt and capitalize on economic convergence. A modern global corporation creates and keeps consumers; it generates demand for the common product rather than attempting to unnecessarily base itself on the desires of others. It is the convergence of human technological preferences and global economic realities. In modern economies, companies that fail to meet these tendencies will be pushed out, while the cosmopolitan force will offer high-quality standardized products at relatively low prices (Levitt, 1983).

Supporting Articles

Globalization is one of the primary drivers of growth for society and the economy. In terms of commercial aspects, it allows for the opportunity to exploit ideas on a larger stage. Firms can develop new products, improve old ones, or find better production methods – all to remain competitive in the global arena and present a product that will appeal to the masses – via the ‘scale effect.’ There is also the concept that knowledge and information – acquired in one part of the world can be used to facilitate research or development in another. Even when the economy is static, globalization leads countries and firms to specialize in economic activities where they hold a comparative advantage. Globalization is at a scale that few can truly comprehend, but it has allowed for the congruence of society due to the diffusion of culture and technology, which is one of the key aspects of globalization growth, sustained growth through perpetual improvements to technologies which are available to a wider number of people (Grossman & Helpman, 2015).

Diallo et al. (2021) suggest that globalization is an open, multidimensional, and multicultural process that corresponds to the interdependence of national economies, firms, consumers, producers, and governments from all over the world. The globalization of marketing activities refers to the concentration of markets/products on groups of consumers that seek similar benefits or want to use the same technologies regardless of their geographical area of residence. However, the reality of globalization can be complex. For example, the concept of ‘glocal marketing’ is where local reality and culture are considered before adaptation and standardization according to context. There are two primary objectives in this case, maximization of marketing activities in terms of standardization and homogenization, and then the optimization of said activities to adaptation and dependency (Diallo et al., 2021).

Ozturk & Cavusgil (2019) examine the debate between convergence and divergence. Globalization has undoubtedly placed society and economics on the trajectory of convergence of consumer spending. Convergence plays a key role in international business decisions regarding consumer spending behavior. However, with the slowdown of globalization, it is suggested that convergence is similar to a pendulum, taking a step back only to continue in that direction later, indicating that it cannot be consistent.

One aspect that globalization has created is the so-known cosmopolitan consumer, seeking to purchase from the cosmopolitan businesses that Levitt mentioned. The cosmopolitan consumer is an ideal one, and it is a goal for international firms in the current global market to identify the correct customer segment and target them across multiple regions. Cosmopolitanism is a dynamic process, once their formation processes are clarified, marketers should consider which processes they should focus on. The cosmopolitan segment is growing as globalization has accelerated the interconnection, interdependence, and exposure of cultures, individuals, and markets across the world. It creates the ultimate benefit of a positive stance towards products originating abroad, contributing to globalization growth and cosmopolitan consumer habits (Shinichiro, 2016).

What comes next for globalization and ubiquitous convergence? It is currently at its peak with what is known as e-commerce, or a digitized global economy. Billions of goods are being purchased online, produced, and shipped through extensive global supply chains and present the penultimate outcome of commercial globalization.

Opposing Articles

While Levitt’s article may have had some insights into the future, globalization became much more complex than most likely anticipated. Globalization, along with its benefits, also created challenges that were difficult to foresee. As a result, globalization is seeing an era of decline to an extent. Global supply chains and businesses are functioning, but the consequences of the last decade, stemming from the 2009 financial crisis to climate change to the aftereffects of the COVID-19 pandemic, there is a much greater emphasis on domestic national priorities among countries.

While globalization had its opponents, the first true movements arose in the midst of the 2009-2009 financial crisis. It became evident that financial globalization, which occurred due to the convergence of businesses and corporations being headquartered around the world, inherently caused the crisis. The insolvent mortgage-backed risk stemming from the U.S. and Europe had worldwide shocks with the rise of net credit, large asset prices, unemployment, and long-term financial depression (Mendoza & Quadrini, 2010). It is at this point that many people came to realize the dark side of globalization, just another economic tool to drive up consumerism.

Levitt (1983) was correct regarding the homogenization of consumer culture and how it became a central avenue in most people’s lives. But he failed to consider the fundamentally broken system that came with globalization. Yes, access to foreign products has been widened, but the majority of consumers in the world cannot afford the resources to participate in Western consumer culture. There are significant consequences of globalization, such as deterritorialization, as people in developing countries are forced to move into cities to find work and food because consumer culture is based in urban centers. Finally, Levitt was incorrect about the approach where Western standardization would occur and be adopted around the world. However, something unexpected happened, as the East also played upon consumerism to introduce certain products such as yoga or supplements, and there began an assimilation of culture between East and West. Finally, glocalization also occurred, which countered Levitt’s hypothesis. Places like China are resistant to globalization and play by their own rules (Sharifonnasabi et al., 2019).

Over the years that globalization was taking place, there was a build-up of backlash and concern, which turned into populism that became popular across the world, both in developed and developing countries, across the past few years. It is a predictable political backlash and is related to the salience of various globalization economic shocks. While Levitt suggests that there will always be restrictions, but those can be resolved with a correct commercial approach, populism has shown the extent to which countries, including those in whose interest it is to promote globalization, attempt to cut themselves off from it. Trade restrictions are a direct consequence of globalization shocks as politicians can mobilize society among cultural divides stronger than ever before. Trade is expected to be much more controlled going forward, and it is unclear whether globalization and free trade experiments (such as the EU) will survive in the future (Rodrik, 2018).

By all measures, Stiglitz (2017) argues that globalization was ‘oversold’ to the public. Its economic impacts on jobs and GDP growth were overestimated, while adverse distributional effects were underestimated. Globalization has provided access to products and lowered prices in some cases, but it largely benefited developed nations and large corporate businesses. It also brought about significant unintended consequences, such as the tremendous wealth gap currently in the world, equality differences, and various other indirect impacts, such as the worsening of climate change due to tremendous CO2 output by extensive supply chains and manufacturing. The economics behind globalization and the business models taking advantage of them put civilization on the wrong path, and now there are extensive calls for greater social protection and radical policies (Stiglitz, 2017). The world is undergoing the end of globalization, most likely, termed ‘slowbalization.’ Potentially, the next steps would be a softer globalization, with culture, technology, information, and science continues to exist on a global scale with a less aggressive version of international trade. The speed of globalization has slowed, and it is changing its nature to soft projection (Olivié & Gracia, 2020). However, it is unlikely globalization will reach the cosmopolitan dynamism that Levitt had predicted.

References

Diallo, M. F., Djelassi, S., & Kumar, V. (2021). Marketing and globalization: Relevance, trends and future research. Recherche et Applications En Marketing, 36(3), 205157072110273.

Grossman, G. M., & Helpman, E. (2015). Globalization and growth. American Economic Review, 105(5), 100–104.

Levitt, T. (1983). The globalization of markets. Harvard Business Review.

Mendoza, E. G., & Quadrini, V. (2010). Financial globalization, financial crises and contagion. Journal of Monetary Economics, 57(1), 24–39.

Olivié, I., & Gracia, M. (2020). Is this the end of globalization (as we know it)?Globalizations, 17(6), 990-1007.

Ozturk, A., & Cavusgil, S. T. (2019). Global convergence of consumer spending: Conceptualization and propositions. International Business Review, 28(2), 294–304.

Rodrik, D. (2018). Populism and the economics of globalization. Journal of International Business Policy, 1(1-2), 12–33.

Sharifonnasabi, Z., Bardhi, F., & Luedicke, M. K. (2019). How globalization affects consumers: Insights from 30 years of CCT globalization research. Marketing Theory, 20(3), 147059311988746.

Shinichiro, T. (2016). Cosmopolitan consumers: research overview and research opportunities. Journal of Internal Business Research, 15(1), 32-45.

Stiglitz, J. E. (2017). The overselling of globalization. Business Economics, 52(3), 129–137.