globalization
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Read as widely as you can on the concept of ‘globalization’ starting with the Levitt article, ‘The Globalization of Markets’. Ensure you are able to produce a balanced answer. Be able to critique his view on technology driving the world together.
Journal of Consumer Marketing
THE MYTH OF GLOBALIZATION
Yoram Wind
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Yoram Wind, (1986),”THE MYTH OF GLOBALIZATION”, Journal of Consumer Marketing, Vol. 3 Iss 2 pp. 23 – 26
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Nikolaos Papavassiliou, Vlasis Stathakopoulos, (1997),”Standardization versus adaptation of international
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José F. Medina, Mike F. Duffy, (1998),”Standardization vs globalization: a new perspective of brand strategies”, Journal of
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THE MYTH OF GLOBALIZATION
Yoram Wind
Global marketing might be likened to prescriptions
that apply to all situations. There is, however,
a broad framework within which one can examine
the issue of standardization, suggesting
that it might be a perfect strategy for some products,
some companies, and some situations, but totally
inappropriate for others.
First, let’s identify seven specific conditions
under which the standardization approach might
be appropriate, and evaluate these conditions to
see to what extent they really hold.
1. The one that is discussed most often is the
trend toward a homogenization of the
world’s wants. However, there is no strong
empirical evidence that the world is becoming
more homogeneous. True, world
segments are emerging, but these do not
necessarily entail a homogenization of consumer
wants. Furthermore, there is increasing
evidence of an intracountry segmentation
for the United States and many
other countries. Finally, there is correlating
evidence, especially from companies
that are working in different countries,
that different types of market response
functions exist in different countries; as
firms face these different market response
functions, the viability of the global strategy
becomes shaky.
2. The second argument suggested by Ted
Levitt is that people are willing to sacrifice
specific preferences in product features
and functions for lower price and high
quality. Again, there is no evidence that
consumers are becoming universally more
price conscious. In fact, some of the products
often viewed as global are fairly
expensive-Cartier watches, Louis Vuitton
handbags, or Canon cameras. Furthermore,
the desirability of focusing on lowprice
positioning is very questionable. In
fact, from a strategic point of view, proba-
Yoram Wind is the Lauder Professor and Professor of Marketing and Management at the Wharton School, University of
Pennsylvania. He is the Director of the Lauder Institute of Management and International Studies. He joined Wharton in
1967, after receiving his Ph.D. from Stanford University.
Dr. Wind has consulted and conducted research projects for close to 100 companies, including Pfizer, MRCA, Edward D.
Jones and a number of law firms. In addition, he is a frequent lecturer in faculty seminars and executive programs in the U.S.,
Canada, Australia, Japan, Europe, South America, and the Middle East.
The author of a recent book, Product Policy, Dr. Wind has co-authored several books including Advertising Measurement and
Decision Making, Marketing Segmentation, and Organizational Buying Behavior. The marketing literature has included over hundred and sixty of his articles, monographs and chapters on marketing research, buyer behavior and international
marketing.
Dr. Wind is a former Chairman of the Institute of Management Science, and he has received a number of awards, including
two Alpha Kappa Psi Foundation Awards for the best articles published in the Journal of Marketing in 1973 and 1976.
VOL. 3 NO. 2 SPRING 1986 23
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THE JOURNAL OF CONSUMER MARKETING
bly the last thing a company would want to
do is position itself as a low-price producer.
Low price offers no long-term consumer
franchise, and there is always the possibility
that a cheaper technology or lower labor
costs elsewhere will eliminate the company’s
temporary advantage. Furthermore, a
customer who buys based on price will
tend to switch to a lower-price product. Finally,
given the tremendous diversity in
the competitive environment across countries,
very often a standard product will be
overdesigned for some countries and
underdesigned for others; the same product
could then be overpriced in some countries
and underpriced in others.
3. A third argument often presented economies
of scale. Current developments in factory
automation allow, however, product
customization without major cost implications.
More important, with many products
the cost of production is a relatively insignificant
part of the total product
cost-for example, in pharmaceuticals and
cosmetics. Another disturbing factor is
that in much of the discussion on standardization,
the focus is strictly on the product
and technology. What has been ignored is
the role of the other decisions involved.
If one explores, for instance, a very simple sequence
of decisions-positioning, product line,
brand name, packaging, pricing, advertising and
public relations, customer and trade promotion,
and distribution, one has the option for each of
these either to go global or not. By focusing only
on the product, a company would ignore the complexity
of the marketing decision.
Table 1 illustrates a preliminary framework to
evaluate global strategies; the standardized approach
advocated is only the extreme left branch
of the diagram, which, with its eight items, represents
only one out of 256 combinations. The
other extreme approach will obviously be the
fully customized strategy, which again is not very
desirable because it eliminates all the possible synergies
among various country operations.
4. An extremely important condition which
probably by itself can justify opting for a
standardized approach, is the preference
of a number of global market segments for
a uniform physical product and brand
image. This is often the case for industrial
companies, which have a preference for
the same product specifications and the
same service in various parts of the world.
If this is the case, then one can make a
strong argument for at least some of the
components of the marketing strategy to
be globalized. But again, the advisability of
doing this has to be weighed against other
strategic factors: the size and growth of the
segment, the strength of the preference of
this segment, the expected profitability
from the segment, and the ability to reach
the segment effectively.
24
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5. The fifth set of conditions requires that
there be no external constraints on the
firm’s ability to implement the standardized
strategy.
First we have to recognize the fact that operating
around the world there are numerous government
regulations with which a company must
deal.
Second, there are tremendous differences
among countries; Ted Levitt correctly stresses
that one should not focus only on differences, one
should look for commonality and similarity; however,
one cannot ignore the differences and the
need to adapt to them. Most international blunders
stem from instances of cultural insensitivity—
lack of awareness of values, and attitudes-that
cause a strategy which is extremely successful in
one country to prove wrong in another.
Very often a standard product will be
overdesigned for some countries and
underdesigned for others; the same
product could then be overpriced in
some countries and underpriced in
others.
The third factor, which is an important one, is
the fact that there are tremendous interdependencies
between the marketing decision and other
decisions the firm has to make with respect to resource
markets-such as procurement of raw materials,
technology, manufacturing, human resources,
and financial. Marketing decisions
cannot ignore these factors but rather have to
deal specifically with them.
6. Another set of conditions relates to the absence
of internal constraints on the firm’s
ability to implement a standardized strategy.
Two major factors operate in this case:
one is the fact that most firms do have international
operations. They do not start
from scratch and say: “We are a U.S. firm;
let’s look at a world of 170 or so countries,
and decide which countries we want to
reach with a standardized strategy.” Most
companies instead have established operations,
established commitments such as
joint ventures, wholly owned subsidiaries,
long-term contracts with distributors, and
so forth. This network of relationships in
many markets must be taken into account
when a company designs a strategy.
The second factor at stake here presents an interesting
problem. There is much discussion
about the age of entrepreneurship and about
ways to enhance it in corporate settings. There is
concern about large bureaucratic organizations
that kill entrepreneurship and lose employees
who decide to go on their own. This situation has
led to a move toward decentralized structures in
which the authority and responsibility belong to
the local manager. A standardized approach, on
the other hand, takes the initiative and entrepreneurial
spirit away from the country managers; in
this respect, standardization which tends to be associated
with centralization, could create major
problems to the long-term survival of the firm.
7. The final condition that affects the decision
to follow global strategy is the presence
of positive synergy from
multicountry operations. Yet synergy, despite
its importance, is not limited to a
standardized approach. It can be achieved
among non-standardized but integrated
strategies.
Given the problems that we have outlined, and
the increased risk of standardization, what is the
solution? An obvious conclusion is that standardization
is one, and only one, of many possible
strategies.
If we look at these factors more systematically,
we can develop a framework for the classification
and determination of the most appropriate global
strategy. Given the various marketing strategy
components-positioning, segmentation, product
line, brand name, packaging, pricing, and so on—
there are three major types of strategies one can
follow:
The first one is standardization, with the entire
marketing mix strategy being the same worldwide.
This is a very special case.
Network of relationships in many
markets must be taken into account
when a company designs a strategy.
The other extreme is a total differentiation with
a distinct strategy being designed for each country.
This is not very desirable, because it eliminates
all possible operating synergies.
We are then left with mixed strategies, which
25
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THE JOURNAL OF CONSUMER MARKETING
encompass the range of 254 strategies between
those two extremes. There are even more options
if one adds another level in the continuum from
standardization to differentiation-that is, a cluster
of segments or countries. This would increase the
number of options from 256 (28) to 576 (38).
Given the large range of possible strategies, it is
desirable for companies to start profiling their operations
and find out where they are among all
these possible options. Each profiled strategy
should be examined to see whether changes in it,
either toward globalization or toward a more idiosyncratic
strategy per country, would be desirable.
In addition, a useful conceptual guideline
for the selection of the best strategy can be altered
from what I would like to call think globally, act locally.
What this approach suggests is that overall
design follows worldwide perspective but that
every detail of the marketing strategy takes into
account the idiosyncratic country characteristics
and cultural differences. There is no difference in
the approach that we should use to design these
strategies in each country and the one we use domestically.
However, the perspective should be a
global one encompassing the entire range of operations,
looking at the global competitive and market
environment.
A standardized approach takes the
initiative and entrepreneurial spirit
away from the country managers.
By following the strategy of think globally, act locally,
we (a) take advantage of what Ted Levitt
suggested to us, that is, that changes in the world
force us to move away from thinking domestically,
(b) avoid the pitfalls of inappropriate global
standardization and (c) employ marketingoriented
approach and take advantage of our understanding
of the local conditions in each one of
the world markets.
26
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