“The Globalization of Markets” by Theodore Levitt – Free Essay Examples

“The Globalization of Markets” by Theodore Levitt

Article Summary

For Levitt, the two forces defining business change around the world are globalization and industrialization. The scientist interprets these core concepts in terms of marketing. In The Globalization of Markets, Levitt argues that people around the world have essentially the same needs, and that technology helps to homogenize human desires and behaviors. For Levitt, all the inhabitants of the “global village” are becoming the same, while there is an increase in the homogenization of their value systems. This process creates true global markets, defines the fact that the concept of a multinational company becomes obsolete, and makes the actors of local markets even more vulnerable to competition from truly global corporations.

Levitt believes that there is a process of globalization of markets and communications that the world is unifying; tastes and needs of people are becoming increasingly more similar, and common global styles of life and needs are emerging. As an argument for such a global community of tastes, he cites the success of McDonald’s, Coca-Cola, and other global brands around the world (Levitt, 1983). In his opinion, Coca-Cola is the “perfect example” of a global commodity (Levitt, 1983). Acting within the framework of this concept, the manufacturer and transnational corporations promoting the brand are guided by approximately the same socio-demographic groups in different countries, affecting the “global nerve” permeating target markets.

The key idea of the article is that the future belongs not to transnational companies, but to “global corporations,” which should unify the offer and think not so much about the tastes of consumers in local markets as about reducing costs. Levitt (1983) states that well-managed companies have shifted their focus from custom-made products to offering globally standardized products that are innovative, functional, reliable, and affordable. If all cultures merge, it will no longer be necessary to study the cultural aspects of marketing.

Levitt understood globalization as a purely market phenomenon. With this term, he designated the unification, the integration of markets for individual products manufactured by the world’s dominant TNCs. As the leitmotif of his book, one can consider the thesis predicting the imminent end of such TNCs, whose market strategy is aimed only at differentiated, specific markets of certain countries. He has long been a proponent of the globalization of markets for certain goods (such as consumer durables) based on price and high quality. He argues that due to advances in technologies affecting the development of communications, transport, and tourism in different countries, similar segments have emerged at the same time (Levitt, 1983). For Levitt, a fundamental subcomponent of the forces of industrialization and globalization is a technology and its ability to homogenize. On the one hand, technology makes markets global by managing the convergence of people’s needs and desires, and, on the other hand, it makes it possible to homogenize services.

Arguments in Support and Opposition of the Article

Levitt concludes that new technologies have brought about a “proletarianization” of markets. The development of communications, transport, and travel has led to the emergence of a “new commercial reality” – global markets for standardized consumer goods have opened, where TNCs increase sales due to low prices and receive super-profits. Following Levitt, at the turn of the 1980s-1990s, the concept of globalization acquired a new meaning. Following the popularizer of this term, the famous American economist of Japanese origin K. Ohmae, it began to be used to denote qualitatively new features and characteristics of the world economy development. The concept described its current state, which differs from the previous stages of its evolution. Believing that the world economy is determined by the interdependence of the three centers of the “Triad” (EU, USA, Japan), Ohmae argued that the economic nationalism of individual states became meaningless against the background of the activities of “global firms” (as cited in Germain, 2013). Not everyone agrees with such statements, but, nevertheless, Ohmae’s position became the starting point of discussions on the topic of globalization.

Robertson also played a special role in spreading the concept of globalization. He believed that the most important feature of globalization is the fact that in the modern world all societies seem to be in one place, and this place requires everyone to develop a certain attitude towards it (as cited in Pradella, 2016). The unity of place, in this case, means that the conditions and nature of social interactions in any part of the world are the same and that events in very distant parts of the world can be conditions or even elements of one process of social interaction. The world becomes a single social space, devoid of significant barriers and fragmentation into specific zones (Pradella, 2016). That is, a characteristic feature of globalization is not only the close relationship and interdependence of national states and their economies but also the formation of a special consciousness, the worldview of individuals – global.

Namely, the above-mentioned consciousness will contribute to the transformation of the world into a single socio-cultural place. Although Levitt correctly recognized the future for globally oriented TNCs looking for their chances all over the world, his purely market-based interpretation of the globalization of the economy, exclusively at the corporate level, seems, according to Veltmeyer (2016), too narrow and does not give an adequate interpretation of this category. Levitt does not distinguish between the concepts of globalization and globality.

The confusion in understanding the nature of globalization is due to the fact that many researchers identify the categories “globality” and “globalization,” which differ both in their essence and in the form of external manifestation. “Globality” indicates that the modern world has acquired a new quality, in which many problems are common for all mankind, for all countries. The solution to these problems is impossible without joint efforts and common relations. These include pollution of the environment, demographic problems, hunger, militarization, international terrorism, and financial disasters. (Helpman, 2018). At the same time, globalization lies in the dominance of TNCs in the world economy, in the ideology of neoliberalism, based on the use of new methods of managing the world economy.

Unlike Levitt and his followers in assessing the globalization of the economy, the famous Russian scientist Dolgov did not reduce the latter to various manifestations of the market strategies of TNCs. He correctly assessed it as a complex, multifaceted, multifactorial phenomenon and gave a meaningful analysis of some of its most important features (directions) (as cited in Amelina et al., 2014). The priority given to the authorship of the term “globalization” to Levitt is explained by the fact that until the end of the 20th and the beginning of the 21st centuries, the processes of globalization mainly affected the economic life of society, only later beginning to exert a noticeable influence in the social and political spheres. The multitude of spheres of public life in which modern globalization processes are taking place has led to the fact that the structure of globalization as a phenomenon of social life and the development of mankind have become more complicated. At the same time, Levitt offers an overly simplified vision.

In addition, as Levitt and Ohmae later noted, global corporations will gradually oust states as the main players in the world economy, making globalization a new source of prosperity for countries and peoples and raising living standards. They viewed globalization as an exceptionally new stage in the development of the world economy, occurring spontaneously and being irreversible (Sachs, 2020). Thus, a liberal concept of globalization was formed, which, over the next decade, was justly harshly criticized since globalization from a source of growth in national prosperity turned into the main threat to economic security and the sovereignty of states.

One of the first alternative concepts was put forward in 2002 by the World Bank experts Collier and Dollar in their report Globalization, Growth, and Poverty. Taking as a basis a set of statistics on world trade, migration, and capital flows, they identified three waves of globalization. The first wave of globalization, driven by declining transport costs, lasted for about 45 years, starting in 1870 (Veltmeyer, 2016). In their opinion, the integration processes were interrupted by the outbreak of the First World War in 1914, after which protectionist sentiments began to prevail in the world until 1945. Even though transport costs continued to decline, sharply increased trade barriers became an obstacle to integration, as many countries began to adhere to the so-called “beggar-thy-neighbor” policy (Veltmeyer, 2016). After 1945, there was a revival of world trade thanks to the joint efforts of countries to overcome protectionism. Thus, against the background of falling trade barriers and transport costs, the second wave of globalization developed, returning the world economy to the state of the first wave.

The third wave of globalization, which developed after 1980, marked the entry into the international market for industrial goods and services of developing countries. In about twenty years, from 1980 until the turn of the century, the structure of developing countries’ exports underwent significant changes: the share of finished goods increased from 25% to over 80% (Helpman, 2018). Thus, developing countries which previously specialized in commodities began to compete directly with developed ones. Despite the fact that the globalization of the economy was one of the key themes of the Collier’ and the Dollar’ report, their main goal was to find ways to overcome the growth of poverty on a global scale and to use the opportunities of globalization for this purpose.

The position of the so-called skeptics should also be noted. Claiming that globalization is nothing more than a myth, skeptics say that the current level of economic and political integration is significantly lower than it was in the 19th century (Germain, 2013). Moreover, the current situation not only does not represent a deep integration of the economy, but is a pronounced regionalization. The modern world is very clearly divided into several political, economic, and cultural blocks, and this division continues to grow.

Taking into account the fact that the blocks are quite clearly localized geographically, there is no reason to talk about globalization at all. These ideas are most consistently developed by such well-known Western scientists as Hirst, Thompson, Wollerstein, Weiss (as cited in Germain, 2013). It should be noted that a fairly large part of the representatives of this direction, nevertheless, admit the presence of the phenomenon of globalization, but only as an increase in world interdependence. At the same time, it is fundamentally pointed to the continuing division of the modern world into regional and civilizational blocks, as well as to the growing state of conflict between them.

Another important thesis of skeptics is the assertion that the modern world economic and political system is very hierarchical. Against the background of the growing economy of the North, there is an even greater exclusion of the rest of the world. There are obvious dominant players in modern politics and economics. As skeptics demonstrate, the idea of global transnational corporations is also a myth since the main flow of investment and trade is concentrated in the most developed countries, and corporations themselves to a greater extent represent the interests of the countries from which they originated (Sachs, 2020). Despite the fact that this direction is mainly represented by works in the field of economics, considerable attention is also paid to the cultural aspects of the modern development of the world system. Along with challenging the idea of a global economy, scholars of this area are seriously questioning the existence of global culture and global civilization.

Feedback and Overall Implications

Levitt’s work is not without controversy and paradox; a few examples are sufficient to illustrate what has been said – in particular, his arguments regarding differentiation and globalization. On the one hand, the scientist claims that any generic goods and services are subject to individualization, but on the other hand, he recognizes that people who purchase them are becoming increasingly more similar to each other – that is, the process of differentiation is neutralized. Similar conceptual relationships can be found in his discourse on services. Levitt suggests that tangible generic goods can be differentiated by intangible (for example, services), and that intangible services must go through a stage of industrialization. The paradox here is that if we follow Levitt’s advice, we will face an ever-increasing homogenization of services, that is, they will acquire an increasingly generic character (for example, ATM services), which will again be aimed at weakening the original differentiation process. Throughout his career, the scientist’s views constantly fluctuate between product orientation and consumer orientation.

In addition, if world-class sellers like P&G are faced with obvious cultural problems in Europe and Japan, it is clear enough that the market has not become homogeneous even among the most developed countries. The economic gaps between the Global North and Global South are very noticeable. It cannot be assumed that people in the third world should be offered the same commodity as people in developed countries.

Coca-Cola is arguably the world’s most famous brand, and it has good reason to be one of the first, if not the very first, universal standard product in the world. However, when the Coca-Cola Company began aggressively selling its products in China, it became clear that they were not accepted there. Contrary to expectations, Sprite – Coca-Cola’s number two brand – was sold significantly better in China than Coca-Cola’s flagship. It was also quite obvious that the universal ad model in China was not being well perceived. As a result, the advertising product for China began to be produced specifically (Sachs, 2020). A new ad, launched in 1992, featured favorite Chinese imagery, such as close family ties, wedding ceremonies, Chinese New Year, and the Great Land (Sachs, 2020). These cultural themes are, no doubt, unique to China and the Chinese. In this way, consumers have not become a homogeneous audience, and the impact of culture has not disappeared anywhere.

It should also be noted that Levitt’s approach led to the fact that studies of the direct impact of globalization on economic growth were primarily concerned with the analysis of world trade. Less attention was paid to such elements of globalization as foreign investment, international labor migration, and technology transfer. Nevertheless, one should agree with Levitt’s position that in the conditions of the formation of a global community, the institutions of the nation state level are no longer able to control and coordinate the processes that arise on their territory. It occurs since these processes, due to the high degree of the integration of the world economy, depend on the processes in other territories. For example, as it is known, corporate lobbyism expresses the interests of TNCs. Political power is particularly dependent on the activities of TNCs and their lobbying structures since TNCs directly or indirectly support political power. Given the huge capital resources and production capacity, TNCs, through the use of lobbying, can get favorable conditions in economic and military transactions. To sell a large mass of manufactured products, including military ones, TNCs working in the military-industrial complex need access to large markets, and to maintain a constant sales market, wars and conflicts, or the image of an enemy, are needed.

At the same time, the national economy and culture are being eroded by the global flows of goods, people, capital, and information. This further enhances the role of global governance institutions. The constant transnational interaction of people through the global communication infrastructure leads to an increased awareness of common interests and problems, which, in turn, leads to the formation of a global civil society and global consciousness. An analysis of the views of Levitt and his followers – hyperglobalists – testifies to the fact that they view the modern world as a single global market, global civilization, and global civil society.

Within this global community, there is no place for local boundaries, and one of the most striking manifestations of the local – the nation state and specific culture – is gradually disappearing altogether. Local economies and cultures are developing within the framework of a global civilization and a global market. However, within this global system, there is a fairly strong division. The traditional division into center and periphery, north and south, and the first and third worlds is no longer geographic and geopolitical, but social.

The course of globalization has shown a much more complex picture of social change in the world and in individual communities than Levitt wrote. The broad modernization, linear upward trend was by no means the only one, as it seemed to early theorists of globalization, such as Levitt. However, as it turned out, the unprecedented opportunities for the growth of material production in the global market economy did not lead to the expected social effects.

Based on the above opinions of scientists, it can be stated that researchers have not yet given an unambiguous definition of globalization, and this term is used by the authors to describe quite different trends. Globalization has proven difficult to conceptually define and show empirically. In a sense, one can say that globalization has focused on itself all the contradictions and conflicts of the modern world. Globalization represents interacting processes that share the variables that characterize them, and the performance of one process affects the outcome of another. “Variables” in this context require a broader interpretation; either competing processes or processes that work together for a common aim can interact. The influence that interacting processes have on each other is not always predictable and reproducible.

References

Amelina, A., Nergiz, D., Faist, T., & Schiller, N. (2014). Beyond methodological nationalism: Research methodologies for cross-border studies. Routledge.

Germain, R. (2013). Globalization and its critics: Perspectives from political economy. Palgrave Macmillan.

Helpman, E. (2018). Globalization and inequality. Harvard University Press.

Levitt, T. (1983). The globalization of markets. Harvard Business Review, 3, 92-102

Pradella, L. (2016). Globalization and the critique of political economy: New insights from Marxʼs writings. Routledge.

Sachs, J. (2020). The ages of globalization: Geography, technology, and institutions. Columbia University Press.

Veltmeyer, H. (2016). New perspectives on globalization and antiglobalization: Prospects for a new world order? Routledge.

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UniPapers. "“The Globalization of Markets” by Theodore Levitt." June 14, 2022. https://unipapers.org/free-essay-examples/the-globalization-of-markets-by-theodore-levitt/.

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UniPapers. 2022. "“The Globalization of Markets” by Theodore Levitt." June 14, 2022. https://unipapers.org/free-essay-examples/the-globalization-of-markets-by-theodore-levitt/.

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UniPapers. (2022, June 14). “The Globalization of Markets” by Theodore Levitt. https://unipapers.org/free-essay-examples/the-globalization-of-markets-by-theodore-levitt/

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UniPapers. (2022) '“The Globalization of Markets” by Theodore Levitt'. 14 June.