GLOBALIZATION OF MARKETS

Application: Affects Pretty Much Every Aspect of Cross Border Marketing Work

The Concept

In the latter half of the 20th century, it became common to talk about “globalization”. The crux of this argument is that a number of powerful forces are driving the world towards convergence and commonality. They include: a growing consensus amongst educated populations (e.g. about sustainability and global warming), the emergence of international trading blocks, greater political integration, and technology (like the internet). These have prompted the free flow of capital and enabled big world-wide markets to evolve. It has allowed suppliers in markets as different as professional services, vacations, information, and commodities (to name but a few) to access much larger groups of customers. A revolution in communications technologies has allowed media like film, music, and the internet to create aspiration amongst massive world-wide audiences; prompting, in turn, the evolution of gigantic markets. In parallel, political initiatives like the GAAT rounds and the emergence of the European Union have added to the creation of common standards in international markets. This has had implications to the capital flows which enable businesses to grow and to the political or legislative frameworks in which they operate. More than one politician and many business leaders have been heard to talk about the inevitability of globalization; that protectionism cannot be resisted, Canute-like, in this fast harmonizing international community.

So, the globalization of markets has become a familiar basis for strategy in the boardroom of businesses throughout the world. It is particularly familiar to technology companies as firms like Microsoft, IBM, Oracle, Nokia, and Ericsson have become famous brands across the world with offices and factories on almost every continent. Marketers must consider how global their offer will be. Is it to be a ubiquitous, world-wide entity which is the same wherever it is used and communicated in the same way with the same methods and message? Many voices would argue that it should.

In the early 1980s, for example, Theodore Levitt published an influential article in the Harvard Business Review on the globalization of markets (Levitt, T., 1983). He pointed out that people around the world have similar aspirations for their life and family. He argued that this was an opportunity for international firms to save costs. They should be able to create common processes in brand management, advertising, and distribution, improving profit through a new international strategy: global marketing. The global approach would be owned by no culture but would serve all equally well with a common offer. While demonstrating his sophisticated understanding of cultural differences, Levitt argued that these were declining in influence in the face of standardized products, which derive from commonality of preference.

In this view, multi-nationals which accommodate national preferences in their approach are thoughtlessly accommodating poor marketing which “means giving the customer what he says he wants”. A global strategy would be to create a cheap, reliable, ubiquitous product, which would appeal to a universal need and would create markets for that proposition by investment in marketing communication or brand advertising. Levitt suggested that marketers should set out to convince different audiences to subsume their cultural tastes; to convince them that a ubiquitous global offer is what they want. Some well established global offers (such as Coca-Cola) were cited as leaders in this approach.

History, Context, Criticism, and Development

Unfortunately we have been here before. Proponents of globalization seem unaware that the world was once very global (enabling the direct marketing of numerous offers and free flow of capital) but drew back from it. In 1920, for instance, the great economist, Maynard Keynes (Keynes, M., 1920) illustrated this by describing the ease of access to international goods in London before the First World War. In the three decades prior to 1910, the world saw an expansion of new, enabling technology (telegraphy, steam ships, and the railway), which created world-wide networks.

This led many to think that there would be an ever closer integration of political structures and greater freedom of trade. H.G. Wells (the scientist and novelist who predicted the internet nearly a century before its advent) even mooted the idea that a “world government” was inevitable. Yet the world community fractured. Around 1880 countries began to introduce tariff barriers to restrict the free flow of goods and (in 1914, with the advent of passports) restrictions on the free flow of people. War and the economic depression then prompted restrictions on the free flow of capital and higher, protectionist, trade barriers.

It is yet to be seen whether the global recession, the credit crunch, and the vast appetite for commodities amongst developing nations, at the start of the 21st century will damage global integration. Nevertheless, there has been a resurgence of national identity and a dislike of some Western offers in much of the world which flies in the face of a ubiquitous, global marketing approach. For the marketer this prompts an horrendous strategic dilemma which could, quite literally, destroy the company. Is the offer going to be presented as a local proposition available in some other countries or a truly global offer? The answer to that question needs to be carefully considered and thoroughly analysed. Investment in the chosen direction needs to be assessed, planned, and carefully controlled. This, combined with high profile failures to achieve global positioning, has caused all but a few established firms to attempt risky investment in truly global strategies. Instead, many are adopting a “think global/act local” strategy, which acknowledges the impact of local cultural differences on marketing. The international Japanese technology company, Fujitsu, is, for example, currently adopting a “trans-national” approach to IT services (see case study in the cultural differences section) and the Chinese white goods manufacturer Haier (see the case study in the international marketing entry) is decentralizing its research, innovation, marketing, and sales capabilities into regional clusters of expertise.

Voices and Further Reading

• “… and then in London, a man could order by his telephone, sipping his morning tea in bed, the various products of the earth, in various quantities that he might see fit, and reasonably expect their early delivery upon his doorstep.” Keynes, M., 1920.
• Levitt, T., “The globalization of markets”, Harvard Business Review, May 1983.
• “… different cultural preferences, national tastes and standards … are vestiges of the past. Some die and some become global propositions (Italian food, American rock music, French wine etc).” Levitt, ibid.
• “An all embracing world system of virtually unrestricted flows of capital, labour and goods never actually existed, but between 1860 and 1875 something not too far removed from it came into being.” Hobsbawm, E., 1999.
• Aaker, D.A. and Joachimsthaler, E., “The lure of global branding”. Harvard Business Review, November–December 1999.
• “Managers who stampede blindly toward creating a global brand without considering whether such a move fits well with their company or their markets risk falling off a cliff. There are several reasons for that. First, economies of scale may prove elusive … Second, forming a successful global brand team can prove difficult. Third, global brands can’t just be imposed on all markets … taking a more nuanced approach is the better course of action.” Aaker and Joachimsthaler, ibid.
• Hollis, N., The Global Brand. MacMillan, 2008.
• “The formula that makes a brand strong in one country may not travel well. Consumer needs and values still differ dramatically from place to place. Few brand positionings readily stretch across different cultures. The process of going global not only magnifies the complexity of building a strong brand but adds new barriers to success.” Hollis, ibid.
• “… globalization creates not a uniform but a diverse culture … Globalization creates universal global culture while at the same time strengthening traditional culture as a counter balance. This is the socio-cultural paradox of globalization, which has the most direct impact on individuals or consumers.” Kotler, P. et al., 2010.

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