The Myth of Globalization

Susan P. Douglas
Yoram Wind
Columbia Journal of World Business. Winter 1997. pp. 19-29.

Prepared By:
Meita Selina, Anabella Nadia Nathaniel & Ehsanullah oria
 Recently Globalization has become talk of the town and necessary for international
marketing strategies, and the phenomena of global product and brands.
 Professor Theodore Levitt (1993) of Harvard, owner of advertising agency “Saatchi and
Saatchi” argued that in a world of growing globally the key to success of a firm is in
developing their products and brands internationally, or to make their products standardize
to the international market levels.
 (Fisher 1984, Kotler 1985, Vedder 1986) on the other hand, pointed out toward numerous
restrictions on standardization and suggest that greater returns has to be obtained from
adopting products and marketing strategies.

 Purpose:
 The purpose of this paper is to critically investigate the theme “ success in international
markets requires the adoption of a strategy of global products and brands”. In this regard
the Author argued that standardization is the only option in the rage of possible strategies
which maybe effective In global markets.
 In this paper the key assumptions to this philosophy and conditions under which the
implementations of the standardization is effective and also barriers to its implementations
are highlighted
 This paper is divide into four main Sections:

1. The Traditional Perspective:

 Focused on standardization and its adoption

2. Key assumptions of philosophy of Standardization:

 Discussing the condition udder which these assumptions are to be proven effective.

3. Constraints to the Implementation of Standardization:

 it includes the External and internal market constraints.

4. Suggestion of more General approaches:

 A more general approach is suggested, enabling consideration of a range of alternative strategies with
different degrees of standardization or adoption.
 Section 1. The Traditional Perspective on
International marketing strategy :
 Traditionally the scholars mainly focused of the uniform strategy worldwide and the adoption to specific local
market conditions.
 From one side, it has been argued that adoption of a uniform strategy globally will enables a company to take
advantage from the cooperation and competition arising from the multi-country operations.
 On the other hand, they argued that adoption of a special strategy to national market is crucial to success on these
markets.
 The traditional Views and arguments Are as follow:
I. Fayerweather (1969):
 pointed out that a multinational firm’s internal pressure leads to adaption of strategy to
spread its boundaries. (Economic imperative) requirements to survival of the economy.
 On the other hand the (political imperative) implies a strategy on national adoption level.
Benefits from international integration and allowing local producers and firms to develop
their own production policies.
 A third alternative is (Administration coordination) in this situation each strategy decision is
made in its own merits, either to response to pressure for national responsiveness or to go for
global internationalization.
II. Porter (1980,1985):
 Argued that Factors such as economies of scales in production, purchasing, reduction in
transportation costs of production, adaption of global markets have led to the competition on
a global scale.
 However barriers like, governmental and institutional restrictions, Tariffs and duties,
discrimination of local firms, transportation costs, differences in customer demands. Calls for
a nationalist strategy.
III. Peebles, Ryans and Vernon (1969):
 Has proposed the Pattern standardization in which global advertisement and promotion or positioning
are being developed but its execution and implementation is adapted to the local market.

IV. Although in 1960s: the usage of technology was firstly introduced but it has taken huge
attention for promotion of Global standardized product.

 Levitt for instance in his article (1983): mentioned: “A powerful force (technology) now derives the
world toward a single converging commonality. The result is a rapid emerge of worldwide market for
globally standardized products”

 Technology has increased the economies of scale in production, distribution, marketing and
management. As a result there was a huge reduction in global prices which is actually an efficient
response for those who still live on old assumptions.

V. Quelch and Hoff (1986): Argued on the role of philosophy and institutional structures in the
implementation of global standardization strategy.
 In his view implementation of standardized strategy depend on the situation of the local management,
If the local management is encouraged to the importance of standardization, compotators may rise in
introducing globally standardized strategies.
 To conclude, there are number of dangers in imposing and implementation of standardization for all
products and services in all markets globally.
 Besides, there are numerous obstacles and difficulties in implementation of these strategies, for instance,
government, and trade regulation, competition, politics, marketing infrastructure etc..
Section 2. Assumptions for Global Standardization Philosophy
The strategy toward global products and brands reveals three key assumptions:

I. Customers demand and interests are increasingly becoming homogenous

worldwide:
 the assumption identifies that the customer demand and interests are increasingly becoming
homogenous, while this might be true for some products but that doesn't mean it will work for all
products.

 Beside, there are lack of evidence of homogenization, for a number of products like watches, perfume,
hand bag, soft drinks and fast foods, companies have successfully identified global customer attractions
and developed global brands and products, Such as Rolex, Omega watches, Dior, ST. Laurent perfumes

 Furthermore a Research by Mitchell (1983) Identified that in US and other developing countries there is
a rise in heterogeneity, while other discovered the major cause of heterogeneity is due to differences in
region and subcultures.
II. Universal Preference for low price at Acceptable Quality
 Another crucial assumption is that people are willing to sacrifice their preference for lower
price at a reasonable quality.
 it is believed that the more lower price in the market with a decent quality which fulfill the
need of customers around the world will expand the market for products globally. This
assumption has three major problems.
a) Lack of evidence: evidence to show that customers are willing to sacrifice their preference at
lower price are lacking. On the contrary, in many products and services, like watches ,
personal computer, household appliances to banking and insurance an increases in the
interest in the multiple product featuring, product quality and services appears to be
growing.
b) Low price strategy is a vulnerable strategy: it has no long-term competitive advantage, it is
vulnerable to technology development which may lower the costs, also a sharp attack from
the competitor with lower labor cost.
c) Standardized Low price can be overprice in some countries and underprice in others: cost
advantages may be effected by transportation and distribution costs and tariffs barriers
also price regulation, which makes a product overdesign and overprice and underprice for
others
 III. Economies of scale of production and marketing:
 The third presumption of the philosophy of global standardization is that a key power driving strategy is
Product technology, and that significant economies of scales can be accomplished by supplying worldwide
markets. this disregard three basic and interrelated points.

a) Technology improvements in flexible factory computerization empower economies of scale to be

accomplished at lower levels of output and don't need creation of a solitary standardized product.

b) Cost of production is often not the critical aspect in determining the total cost of the product.
Example: in many industries such as: cosmetics, detergents, pharmaceuticals, the key success in these
markets are understanding of tastes and purchase behaviour of the customers.

c) Strategy should not stand alone on product but should take other aspects of marketing in to consideration
also. Example: Positioning, Brand name, packaging, Advertising, trade promotion and distribution.
 Crucial Conditions for Global Standardization
 Such a strategy is far from being accepted or appropriate universally, only under particular conditions
it is likely to be accepted in international markets:
a) Existence of a Global market segment:
 In consumer markets these segments are specifically luxury items.
 In industrial markets, companies with multinational operations are typically to have similar needs and
requirements worldwide.
Example: banks and financial institutions, Insurance companies.
b) Synergies associated with Global Standardization:
Countries associated with a global image, opportunities may exist for the transfer ideas for products or
promotional strategies from one country to another. Example: US detergent companies developed a new,
more effective detergent formula which can keep the fabric soft even by washing it in hard waters. These
ideas were also transferred into the European market with success.
C) Availability of an International Communication and Distribution Infrastructure:
Improvement in telecommunication and in logistical system have considerably increased capacity to
manage operations on a global scale and facilitate adoption of global standardization strategies. Example:
the spread of Telex(Telegraph) and satellite linkage, International computer linkage etc…
 Section 3. Operational Constraints to Effective Implementation of a
Standardization Strategy
 There are a number of constraints which severely restrict the firm’s ability to develop and implement a
standardized strategy. These Constraints are divided into two types:

I. External constraints to Effective Standardization:

 The numerous external constraints which impede global standardization are well recognized, and have
been clearly identified in the classic discussion by Buzzell (1968).
There are four major categories are highlighted, namely:

a) Governmental and Trade Restrictions:

 Governmental and trade restrictions, such as tariff and other trade barriers, product, pricing
or promotional regulation, frequently hamper standardization of the product line, pricing or
promotion strategy.
 Regulation of business practices may also affect the feasibility of standardization. Other than
that, the existence of cartels may also impede or exclude standardized strategies in countries
covered by these agreements. In particular, they may affect adoption of a uniform pricing
strategy as the cartel sets prices for the industry.
b) The Nature of the Marketing Infrastructure:
 Differences in the marketing infrastructure from one country to another may hamper use of a
standardized strategy. These may include differences in the availability and reach of various
promotional media, in the availability of certain distribution channels or retail institutions, or in the
existence and efficiency of the communication and transportation network.
 The nature of the distribution system and structure also differs significantly from one country to
another. For example, some countries’ retail sales in industrialized nations are done through small
retailers. This may restrict a company’s ability to use an aggressive price penetration strategy.
c) Interdependencies with Resource Markets:
 Availability and cost of raw materials, as well as labour and other resources in different locations, will
affect not only decisions regarding sourcing of and hence the location of manufacturing activities but
also affect marketing strategy decisions such as product design.
 Cost differentials relative to raw materials, labour, management, and other inputs may also influence
the trade-off relative to alternative marketing mix strategies.
d) The Nature of the Competitive Structure:
The differences can suggest the desirability of adaptation strategy. Even in markets characterized by global
competition, the existence of low-cost competition in certain countries may suggest the desirability of
marketing stripped-down models or lowering price to meet competition. Thus, the existence of global
competition does not necessarily imply a need for global standardization.
II. Internal Constraints to Effective Standardization
 These constraints include compatibility with the existing network of operations overseas, as
well as opposition or lacking of enthusiasm among local management towards a
standardized strategy.
a. Existing International Operations:
 Defenders of global standardization ordinarily take the situation of a beginner company without any
operations in international markets, and neglect to think about the attack of the proposed strategy with
current worldwide exercises.
 For example, licensing contract will impede a firm from supplying the products covered by the
agreement from an alternative location for the duration of the contract, even if it becomes more cost
efficient to do so. Conversely, the establishment of an effective dealer or distribution network in a
country may constitute an important resource to a company.
 Furthermore, overseas subsidiaries may currently be marketing not only core products and brands from
the company’s domestic business, but may also have acquired local or regional products and brands in
response to local market demand.
 Promoters of standardization in this way need to think about the developmental character of worldwide
contribution, which may deliver an all inclusive system of global products and brands sub-optimal.
b. Local Management Motivation and Attitudes:
 Standardized strategies tend to facilitate or result in centralization of international activities, specifically
product development and positioning as well as key promotional themes are likely to be developed at
corporate headquarters.
 The establishment of a standardized strategy by corporate headquarters may therefore reduce the overall
effectiveness of the firm. Moreover, it restricts local management’s ability to adapt to local market
competitive conditions.
 Section 4. A framework For Classifying global Strategy Options
 The development of an effective Global strategy requires a careful Examination of all alternative
international strategic options in terms of standardization vs. adaption open to the firm.

 It is suggested that we should use a strategy that contains standardization and differentiation or a mixed
strategy of both.

 Thus a continuum can be identified, ranging from “pure standardization” to “Pure Differentiation”
where the most options fall into the intermediate category of mixed strategy.

 In the case of Pure Standardization strategy, all dimensions of marketing strategy are standardized or
Uniformed throughout the world.

 In the Case of Pure Differentiation strategy, each component is adapted to specific customers and
environmental characteristics in each country. The management of a country develops its own strategy
independently with no coordination with other countries.

 In the case of Mixed strategy containing both some standardized and differentiated components. Some
component of mix is standardized, while other are adapted to local market factors.
 For Example: Apple computers selling a standardized product line
worldwide, has different positioning, promotional and distribution strategies.

 A firm’s international operations are likely to be characterized by a mix of strategies, not

only global products or brands , but also some regional products and brands. Some target
segment maybe global, others regional, and others National.

 Chart 2, shows some components of the marketing mix, product or advertising are
standardized worldwide, but others, such as distribution policy or pricing are adapted to
specific country or environmental characteristics.

 Example: companies marketing global products or brands may pursue different distribution or
pricing policies in each country.
 Conclusion

 The main Idea of this article is that introducing an effective global

marketing strategy does not necessarily entail the marketing of standardized
products and global brands worldwide. While such a strategy may work for
some companies and certain product line. For other companies adaption to
local or regional differences may give a better result.
 The key to success is rather a careful analysis of the forces driving toward
globalization as well as the obstacles to this approach. and to analyze the
strength and weakness of a company for better resulted attractive
opportunities in marketing.