Summary of Levitt’s Article
Technology has changed the nature of business in the modern world. Advancements in travel, rapid transportation have made it possible to incorporate distant and impoverished countries into the global market. Worldwide access to communications has created a unique demand for advanced goods and services. Local and national preferences become sidelined by the convenience offered by global markets. The internationalization of life requires a shift in strategy to global thinking.
The spread of technology to the low-tech countries exposed local populations to the conveniences available to people of developed countries. Subsequently, consumers have generated interest in possessing the latest global goods and services. According to Levitt (n.d.), “the result is a new commercial reality—the emergence of global markets for standardized consumer products on a previously unimagined scale of magnitude” (para. 4). The technological shift requires an organizational readjustment of modern corporations. Companies that base their products on regional preferences lose to competitors that view the world as a single consumer base.
In order to compete successfully in today’s market, multinational corporations should transform into global companies. The difference between the two types of entity is the targeted audience. A multinational enterprise operates within a few regions and specifies its products according to the regional specifics. In contrast, a global company sees the world as an undivided entity, offering the same types of goods and services everywhere.
The current strategy of meeting customers’ needs by asking them is not viable. The desire for previously unknown technologies has shown that customers lack awareness of their needs. Alternatively, brands should generate demand via promotion and highlighting how a particular product can alleviate customers’ hardships. At this point, the world is undergoing the process of homogenization. Companies should offer the same lines of products to all markets.
Differences in conducting business exist, but they do not mean regional distinctions. Some regions require customization of products for a market segment. However, such conditions are not exclusive to a particular area, as similar requirements exist worldwide. Subsequently, a company launches a line of products that are suitable for similar regions, whether it is the basis of price, color, or functionality. Variations are acceptable since complete standardization is not possible, but it is the ultimate goal.
Hoover, Ltd. is an example of a company that failed to properly analyze the consumer needs. The corporation studied the demand for washing machines in Europe. Although Hoover offered semiautomatic as well as automatic machines, which were rare on the market, its country of residence did not provide sufficient demand. The company’s findings indicated that the best strategy was to sell the washing machines according to the success of local businesses. The mistake became apparent later, when the standardized low-priced Italian washing machines sold better, disregarding the national stereotypes.
Overall, technology and globalization define the direction the world is heading. Adaptation to regional preferences is an outdated strategy that will lose global orientation. Customers are not aware of their desires and can be persuaded that standardized products and services will meet their needs. All business offerings should be promoted as having high quality and low costs. Lines of products can be customized according to local preferences, but they have to be global in nature. In the future technology will only enhance the capabilities of global companies, while leaving behind multinational enterprises that work in an old and ineffective regional manner.
Literature on Levitt Concept
Levitt’s article generated substantial reactions from business practitioners as well as economists. As it described developments that were evident on the international level, it became a constant source of reference. Levitt’s case for the unavoidable globalization was in line with the companies that wanted to expand their markets. This compelled authors to explore Levitt’s take on globalization in further detail and ascertain the practical application of his arguments.
The idea of the ensuing global commonality became a popular field of scientific exploration. For instance, in their piece Globalization Matters: Engaging the Global in Unsettled Times, Steger and James (2019) develop Levitt’s idea of corporate necessity to adopt a global approach. They suggest that CEOs of the 80-s should have abandoned the perception of the world as numerous disconnected markets. Corporate managers had to drop the regional and national differences altogether and view the world as a single market.
Levitt suggested that companies start thinking globally in order to handle the international competition. Steger and James (2019) saw the realization of his suggestion in the advertising industry. They write that advertising companies “set about creating “global brands” by means of worldwide marketing campaigns” (Steger & James, 2019, p. 43). In particular, they point to Saatchi and Saatchi as the business that followed Levitt’s concepts in its decision-making. By creating the same slogans for customers worldwide, they managed to
Levitt argued for the inevitability of globalization, which provoked many discussions. The demise of the socialist bloc opened the markets of Eastern Europe to Western companies. Steger and James (2019) refer to the years that followed as the defining period of contemporary globalization. The subsequent inclusion of previously socialist territories into the corporate area of operation reinforced Levitt’s concept of inevitable globalization. The presence of Western brands in the regions that had previously propagated the anti capitalistic attitude also supported Levitt’s point for the demand for global and standardized products.
Another author that supports Levitt’s reasoning is Isaac A. Kamola. In Making the World Global: U.S. Universities and the Production of the Global Imaginary, he underscores the fact that Levitt did not claim the world was global (2019). Instead, Levitt acknowledged the differences in the regions, but he actively propagated to view the world as global. Kamola (2019) suggests that Levitt actually wanted to change mentalities of corporate managers with the aim of globalizing the world. According to Kamola (2019), “Levitt also worked tirelessly to advance his global imaginary within the business world, making sure that the top official at U.S. and international firms had access to his writings” (p. 203). In order to create an effect on all economies, the appropriate mindset is necessary.
Although Levitt codified the term globalization, the process itself was evident before him. Kamola (2019) argues that the world economy stagnated in the 80-s. Corporate strategies of the U.S. companies were failing them in competition. The reason why American corporations could not grow at a fast enough rate lay in their regional orientation. Expanding the presence of companies to the whole world was a solution to overcome their strategic limitations. As such, Kamola (2019) refers to Levitt’s article as “an exercise in creating the marketing imaginaries needed to give American firms an advantage within the stagnating world economy of the early 1980s” (p. 203). As a result, Levitt provided the theoretical background for the companies that were ready to transcend its multinational thinking.
However, Levitt’s hypothesis also received criticism, particularly in terms of the one-sided nature of globalization. In their book Business Despite Borders: Companies in the Age of Populist Anti-Globalization, de Onzoño and Ichijo (2018) offer a different take on the business realities of the XXth century. They argue that the recent economic and political developments serve as arguments against viewing globalization as an irreversible and universal process the world is undergoing.
For instance, Levitt believed that a corporation would prosper if it started to act globally and offer their products on as wide a market as possible. According to De Onzoño and Ichijo (2018), “time would show, however, that companies’ international expansion may not necessarily bring with it the achievement of economies of scale, but could actually multiply costs arising from complexity and coordination” (p. 3). Subsequently, multinational corporations with a smaller structure are more flexible and more quickly adapt to the changing market conditions.
The U.S. Corporation General Motors is an example of a corporate giant that became a victim of its own size. De Onzoño and Ichijo (2018) write that GM had such a large and bureaucratic structure that it was not capable of timely reactions to the customers’ behavior. The 2008 recession diminished car sales, decreasing GM’s revenue. Unable to attract private funding, General Motors had to rely on the loans of the US Treasury to restructure its operations. Had it not oriented itself for mass production across the world, it would have been able to quickly reorganize and prepare for the oncoming crisis.
Later years would offer new obstacles to globalization and even the possibility of its reversal. The start of the century bore witness to the gradual integration of economic association. As economies integrated, tariffs reduced, the movement of goods and people across the border widened. Globalization had always been perceived as a process that will persevere only in one direction. However, the exit of the United Kingdom from the European Union propelled economists to question the permanent nature of globalization. De Onzoño and Ichijo (2018) point that Brexit was the first entry in a series of unforeseen events. Britain’s decision caused a domino effect in the antiglobalization activities.
In 2017, the United States announced new protectionist policies restricting free trade. The same year the US exited Pacific Alliance, which is a Latin American trade bloc. De Onzoño and Ichijo (2018) argue that Washington’s actions prompted a wave of globalization backlash. Countries, including Venezuela and Philippines, began entertaining ideas of nationalism. Within the context of one year, the international attitude to globalization changed dramatically, with reactionary views pioneering.
In retrospect, the purpose of making the world global may ultimately be self-defeating. Levitt believed that by covering the whole world, corporations would create similar conditions everywhere. The customer would receive the same goods and services irrespective of the country of residence. However, “globalization has increased fractures within societies and economic inequality, especially in those with greater levels of growth” (De Onzoño & Ichijo, 2018. p. 6). For example, American consumers found themselves at a disadvantage when companies moved their economic activities and factories to Mexico and China, where labor was cheaper.
Technological advances that made globalization possible backfire in the form of inadequate competition. De Onzoño and Ichijo (2018) refer to Uber and Airbnb as examples of disruptive companies. They argue that digital technology has allowed such businesses to provide services in a cheaper and more agile manner than their local counterparts. De Onzoño and Ichijo (2018) point to Uber as one of the prerequisites of Brexit. Not only did this company outbid domestic competitors, but it also led to the rise of nationalist sentiment. As a result, the success of foreign companies precipitated protectionist measures, trade barriers, and disenfranchisement of trade associations, thus making the world less global.
Reflections on Levitt’s concepts
In my opinion, Levitt correctly identified the tendencies of growing interconnectedness due to the advances in technology. However, the idea that globalization is inevitable and will encompass everyone is premature. In fact, the process the world is undergoing today is regionalization. If globalization presupposes connecting the world into a single region, regionalization means the development of numerous regions coexisting together. Each area retains its distinctive features while being intrinsically connected to the outside world.
Levitt advocated for the adoption of a global corporate mindset that neglects regional preferences in favor of a standardized worldview. The subsequent implication is that the world becomes homogenous, with all customers wanting the same products. However, Levitt himself acknowledged the existence of national differences despite globalization. According to Levitt (n.d.), “there will always need to be some accommodation to differences” (para. 32). Yet, he believed that strategies pinpointing them should be corrected as soon as the distinctions cease to be relevant.
Levitt’s unwavering belief in the inevitable standardization of the world may have reflected the realities of the 80-s and 90-s. As Steger and James (2019) note, that was supported by the spread of global brands to Eastern Europe and the Soviet Union. However, according to de Onzoño and Ichijo (2018), the same processes are “best characterized as regionalization” (p. 167). The ensuing contradiction might blur the understanding of globalization and regionalization.
Regionalization is a process of removing borders and restrictions on economic activity, movement of people, goods, and services within a particular region. A region itself is not necessarily a country delineated by physical borders. Modern transportation and communication make geographical borders obsolete. Taking this into consideration, it becomes apparent that corporations also create regions. This would be a more accurate depiction of what Levitt referred to as globalization of markets.
Although the world is interconnected, it is not a single region; therefore, there is no reason to view it as a single market. There is a reason why economic integrations form within particular territories or incorporate specific members – in their case, integration is easier than with other economic actors. Otherwise, all countries would already be participants of a single trade bloc. Numerous institutions have attempted to unify all states, but even the United Nations does not incorporate the whole world. Neither does the World Trade Organization, which is the largest economic organization in the world.
What globalization actually accomplished was the inner development of regions. The pervasive nature of corporations makes them appear global. It should be noted that globalization itself is not a purely economic phenomenon. It is driven by businesses and economies, but its overall basis is related to identity. A company becomes global when consumers start identifying its brands and logos as omnipresent. In this case, customers know that wherever they go, they will find the same names – McDonalds, Starbucks, General Motors, Shell and others.
Some corporations can rival countries in terms of people employed, GDP produced, or territories owned. In essence, top managers are more political figures than business executives. De Onzoño and Ichijo (2018) provide the advertisement for a chief executive officer of IBM as an example of a requirement for a leader with political skills. They also argue that “a CEO is as visible as many world leaders, and, in the same way, his or her decisions and actions are subject to the same kind of public scrutiny” (de Onzoño & Ichijo, 2018, p. 11). In summary, companies might represent a new form of nation.
Looking at Levitt’s concepts, it is possible to interpret his ideas as a suggestion of organizing people’s lives in the future under a corporate umbrella. Firstly, he states the commonality of preferences around the globe. According to Levitt (n.d.), “almost everyone everywhere wants all the things they have heard about, seen, or experienced via the new technologies” (para. 3). He supports this with multiple examples of technological innovations being borrowed, international brands appearing in distant corners, and a growing interest in well-known products.
Secondly, Levitt argues for global homogenization replacing national features and preferences. According to the author, “ancient differences in national tastes or modes of doing business disappear” (Levitt, n.d., para. 22). Levitt admits that national rules of conducting business will continue to differ, but local customers will not prefer unique regional products to the standardized global offer. From Levitt’s point of view, global brands are more attractive than cultural specifics.
Finally, Levitt believes that customers do not know what they need in a product. He posits that companies that adjusted their lines of products to the demands of a specific client base failed the competition. His calls for companies to manipulate consumers’ desires by marketing and telling them what they really want. As Levitt (n.d.) wrote, “selling a line of products individually tailored to each nation is thoughtless” (para. 58). Instead, corporations should convey the message over what is important to consumers via advertising.
Essentially, Levitt wanted companies to determine the needs and lives of their customers. Following his line of reasoning, the next step would be dropping national boundaries. National economies are already influenced by corporations since major decisions are based on the success of domestic and foreign companies. By setting the trends in demand for goods and services, companies affect lives around the world. Subsequently, a global corporation can supplant a nation-state as it already has as much impact on customers as governments on citizens.
Nevertheless, the modern world shows that globalization is not inescapable. Regions exist where no international brands are present, and companies can withdraw their subsidiaries. Besides, the wave of protectionist and nationalist policies is on the rise. Globalization is no longer seen as a universally positive direction. As trade barriers intensify, market access becomes more restricted. The recent years bore witness to the development of regions rather than a global world.
Overall, Levitt was correct in predicting global standardized products that are in high demand around the world. He failed to realize that brands themselves do not make the markets global. Even the internet cannot connect every consumer into a single network. Instead, technology allowed to deepen the connections inside regions. Global companies help regions interact and develop within the framework of a global world, but the world is not a single entity as Levitt wanted to envision it.
References
De Onzoño, S.I. & Ichijo, K. (Eds.). (2018). Business despite borders: Companies in the age of populist anti-globalization. Springer International Publishing.
Kamola, I. A. (2019). Making the world global: U.S. universities and the production of the global imaginary. Duke University Press.
Levitt, T. (n.d.). The globalization of markets.Harvard Business Review. Web.
Steger, M. B., James, P. (2019). Globalization matters: Engaging the global in unsettled times. Cambridge University Press.