Central Theme
Levitt had authored several texts that became very influential in the business world, and his 1983 article on globalization is one of those texts. The author examines globalization’s phenomenon to stress that large companies that operate internationally have made a qualitative transition from treating the world as a collection of diverse markets to regarding it as one same market. This shift is the driving force of the globalization of markets. To illustrate it, Levitt compares multinational corporations to what he calls global corporations. Operating in several countries, multinational corporations adjust their policies and practices and products and services, to the specific characteristics of each country. It is posited for multinational corporations that people need and want different things in different parts of the world, which is why a significant effort is required to explore local demand and address them.
In contrast, global corporations treat the world as a single market. Unlike multinational corporations, they do not posit that people buy differently in different parts of the world. Instead, they assume that there is universal demand, and they address it. Levitt pays special attention to this universal demand that has become an integral part of globalization. Rather than discovered, this demand is constructed by global businesses to a large extent. The shifting understanding of trade in the 1980s affected the way companies approached the market: previously, the concept had been that companies should supply to customers what customers think they want and need; at the time Levitt’s article was written, the concepts were that businesses should supply to customers what customers will want and need. Somehow, corporations like Coca-Cola managed to have their product drunk in numerous countries across cultures, although it is the same everywhere.
The author compares multinational and global corporations to the fox and the hedgehog, as Isaiah Berlin described. The fox knows a lot about a great many things, and the hedgehog knows everything about one great thing; similarly, a multinational corporation knows a lot about many national markets, and a global corporation knows that the single factor of standardizing what it sells and how it operated will allow it to address the world as a single market.
Critical Analysis
Levitt’s article is written to be understood by both professionals and non-professionals, which makes it appealing. The author provides many examples to support his points, which makes the article valid and reliable. In several textboxes, additional readings are provided, which allows the reader to obtain a more comprehensive understanding of the addressed issue. Levitt’s great mastery of dealing with business concepts is evident in how he explains quite intelligibly the complicated process of globalization of markets. All these are the strengths of the article.
What can be considered a weakness is that the article does not feature illustrations or graphs, which is why it looks like a solid piece of text and should be read accordingly. Also, Levitt does not seem to evaluate globalization processes to address the issue of whether they are beneficial or harmful, i.e., whether they contribute to the well-being of society or represent a trend of social deterioration. From today’s perspective, another weakness is that the article was written almost 35 years ago. The concept of technology and globalization as opposing vectors seems somewhat outdated, as both technology and globalization have changed significantly since then. However, from my perspective, I still think that reading Levitt’s article can be useful for business practitioners, as it provides a valuable understanding of how globalization developed initially.
Main Takeaways
According to Levitt, being successful under global market conditions means adopting a certain vision and practices that allow addressing the global market as a single entity driven by universal demand. The vision is that marketing is no longer to study what customers think they want; it is rather producing something they will want and convincing them that they want it. And the practices are generally those associated with standardization. Levitt stresses the importance of standardization for the globalization of markets, as he declares that what is required from companies is to have a global focus, which means paying attention to the economics of simplicity, and standardizing products is what plays a special role in it.
Global corporations should not overestimate the significance of such factors as cultural differences. Instead, they should acknowledge that the commonality of preferences drives globalization. With the growing amount of common cultural context spread by mass media, people from different countries now have many things they can talk about, and somewhere within this common context, there is a universal demand hidden: something these people would buy despite their differences. According to Levitt, the commonality of preferences signifies the world’s homogenization, which is exactly what global corporations should use to grow and develop.
By standardizing their products and operation, global corporations also manage to drive their prices down, which is also an important aspect of global market success. With low prices and standardized products, companies reach vastly expanding markets and obtain much larger profits. Moreover, they enhance the process of globalization, which Levitt thinks will become more and more important because soon, all the businesses in the world will find themselves operating within a single market.