Globalisation and standardised products

Seminar Paper 2004 11 Pages

Business economics - Offline Marketing and Online Marketing


List of contents

I. Introduction

II. Critical view of the Concept of Standardisation and Globalisation
2.1 The Standardisation concept by Levitt
2.2 Globalisation and global strategies
2.3 Globalisation and Homogenisation

III. Culture and Globalisation
3.1 The Global Culture
3.2 Glocalisation: Towards positive globalisation

IV. Summary and Conclusions

V. Bibliography

I. Introduction

The products, services, and brands of transnational companies of mainly North American origin are flooding almost every part of the world. The so-called “McDonaldisation” transforms different national economies into one global, interdependent market (Ritzer, 2003). McDonald, Coca-Cola and Levi are compelling symbols of the North American lifestyle, representing modernity, convenience and enjoyment. They have enormous influence across political, ethnic, and social boundaries. This combination of ideological appeals, symbolic values, and product quality imply the power these companies maintain in their brands and products, which impact cultures in various contexts (Gajender et al., 2001).

But does economic integration mean also cultural integration? It is possible that long existing and diverse nations, with different histories and cultures, tastes, behaviours and ideas change within a short period of time and fit into the market structure of big companies? The aim of this brief essay is to discuss critically the fundamental background of this question and its key implications.

II. Critical view of the Concept of Standardisation and Globalisation

The concept of standardisation was mainly influenced by the Professor Theodore Levitt (1983) with its Harvard Business Review article “The Globalization of the Markets” which caused since its publication a great debate about this topic. In the further section, the main ideas of his concept will be analysed critically.

2.1 The Standardisation concept by Levitt

The theorist Levitt (1983) put his focus on marketing of standardised products and brands world wide as

1. Customer needs and interests are becoming increasingly homogenous worldwide.
2. People around the world are willing to sacrifice preferences in product features, functions, design, and the like for lower prices at high quality.
3. Substantial economies of scale in production and marketing can be achieved through supplying global markets.

His three perceptions which have been followed by many industries over the last twenty years are criticised.

Referring the first point, global segments with homogenous customer interests and response pattern may be identified in some product markets, but there is substantial evidence for diversity of behaviour within countries, and the emergence of country-specific segments (Czinkota and Ronkainen, 2004). This leads to the conclusion stated by Halliburton and Hünerberg (1993, p.91):

“It is not whether to go global, but for which product/market, at what time, with which aspect of the marketing operation, and to which extent.”

For example products like steel, chemicals, agricultural equipment, and technology intensive industries tend to be less culturally grounded than consumer goods. Moreover, luxury goods have a higher degree of standardisation than food (Czinkota and Ronkainen, 2004).

An implication identified by Kotler (2003) is that companies should focus on similarities and adapt elements of the product like promotion or packaging if necessary (figure 1 – here only European market).

Figure 1: Level of strategic decision making for marketing (in %)

illustration not visible in this excerpt

Source: Schlieper (1994)

Global marketing strategies must therefore start with an analysis of what market characteristics are common to all member states and where national differences must be taken into consideration. For instance, characteristics such as different distribution networks, technical standards, laws, and commercial practices cannot be ignored (Xardel, 1997).

Regarding the second argument of Levitt, there is also a lack of evidence that customers are universally willing to trade off specific product features for a lower price (Meloan and Graham, 1995). Findings of the PIMS project suggest that product quality is the driving force behind successful marketing strategy (Gale et al., 1987). Also emphasis on price positioning may be undesirable since it offers no long term perspective (Meloan and Graham, 1995), so that a company should not just focus on price as cost advantages that can maybe negated by transportation and distribution costs (Porter, 1985).

Against the third argument, there is evidence that the developments in flexible factory automation lowered the minimum effective scale of operation, and makes variety more achievable. In addition, production costs are often a minor component of total cost and therefore result in low economies of scale hence leading not necessarily in high savings through standardisation on every product (Meloan and Graham, 1995).

Generally in Levitt’s view, technological, social, and economic trends are combined to create a unified world marketplace that drives companies to develop globally standard products, which enable them to capture global economies. Many authors have criticised this reduced view of globalisation and claim that Levitt was only focused on the forces for globalisation and disregard the limitations of this concept (Bartlett et al., 2004).



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Title: Globalisation and standardised products