2.2 Standardised products
While Theodore Levitt's (1983) classic article about the globalisation of markets accepted that there are fundamental disparities across different local contexts that have to be accommodated (for example, Japan's auto exporters had to adjust to the fact that the USA and continental Europe, unlike Japan, drive on the right), he argued that there was an underlying uniformity in human tastes. Levitt's vision of the globalisation of markets was that it created opportunities for firms to offer globally standardised products that are advanced, functional, reliable and low priced. Accordingly, the introduction of automatic washing machines in the UK, France, (what was then) West Germany and Italy should not focus on local traditions, but on the definition of standardised product-performance characteristics. Common denominators (in this case, the desirable product performance characteristics of a standard washing machine) should transcend local preferences. For Levitt, globalisation was a matter of accepting the inevitable death of differentiation: ‘Regardless of how much preferences evolve and diverge, they also gradually converge and form markets where economies of scale lead to reduction of costs and prices’ (Levitt, 1983, p. 102).
In Levitt's analysis, differences between Italy's apparent preference for small-capacity washing machines without built-in heaters, on the one hand, and (what was then) West Germany's effective promotion of high-priced, high-performance brands, on the other, were beside the point. Such differences should not compromise the fixing of universal tastes. Universal needs should be translated into a standard product that exploited economies of scale. Levitt underscored his point with colourful illustrations:
Modernity is not just a wish but also a widespread practice among those who cling, with unyielding passion or religious fervor, to ancient attitudes and heritages.
Who can forget the televised scenes during the 1979 Iranian uprisings of young men in fashionable French-cut trousers and silky body shirts thirsting with raised modern weapons for blood in the name of Islamic fundamentalism?
In Brazil, thousands swarm daily from pre-industrial Bahian darkness into exploding coastal cities, there quickly to install television sets in crowded corrugated huts and, next to battered Volkswagens, make sacrificial offerings of fruit and fresh-killed chickens to Macumban spirits by candlelight.
During Biafra's fratricidal war against the Ibos, daily televised reports showed soldiers carrying bloodstained swords and listening to transistor radios while drinking Coca-Cola.
In the isolated Siberian city of Krasnoyarsk, with no paved streets and censored news, occasional Western travelers are stealthily propositioned for cigarettes, digital watches, and even the clothes off their backs.
The organized smuggling of electronic equipment, used automobiles, western clothing, cosmetics, and pirated films into primitive places exceeds even the thriving underground trade in modern weapons and their military mercenaries.
(Levitt, 1983, p. 93)
For Levitt (1983, p. 102), technology helps to determine human preferences, while globalisation shapes economic realities by producing standardised products that meet these preferences. The clear implication is that the losers will be those who cling to local ways, while the winners will be those who align their practices with universalism and convergence. Increased access to communications and travel meant that a world that had been largely ignorant of modern products had become aware of what was available in the world's leading economies. While Levitt acknowledged that the development of flexible factory production technology would enable large-scale plants to change the specifications of products quickly, he saw customised products and rapidly changing designs as merely a possibility, noting that: ‘possibilities do not make probabilities’ (Levitt, 1983, p. 96). Hence, supporters of Levitt's perspective might celebrate the apparent ‘death of differentiation’ as the gateway to unparalleled economies of scale.
Levitt (1983) viewed globalisation as a process of convergence in which standardised products coalesced with ‘universal tastes’ to yield compelling economies of scale. To what extent do you feel that globalisation implies an inevitable move towards standardised products? Is there scope, for example, to use technological innovation to generate new market ‘needs’ through innovative products and services?
You might like to make a note of your answer and review your thoughts about the nature and significance of differences between ‘universal’ and ‘context-specific’ approaches to knowledge and knowing as we work through this course.
Levitt's focus on the globalisation of markets for standardised products that appeal to ‘universal tastes’ suggests that there is a single best way of meeting consumers’ needs. Accordingly, global companies compete on price to supply standard products that diffuse across the global market as marginal purchasers become more affluent and/or sensitive to the attractions of ‘modernity’.
To be sure, Coca-Cola and McDonald's Big Mac hamburgers are regarded by many as global icons that are prized for their consistency: they simultaneously signify the nature of the product and symbolise an image that is ‘self-giving’ (Polanyi and Prosch, 1977, p. 74), in the way that a national flag is self-giving. If we focus our attention on canned or bottled Coca-Cola, a Big Mac or our national flag, we tacitly integrate many subsidiary details that underpin our construction of what each item represents. By definition, we do not know exactly what we are tacitly integrating – nevertheless, another type of fizzy drink, meat sandwich or an unfamiliar national flag is unlikely to replicate the self-giving image of the branded or familiar product. Trying to tinker with established iconic images can be counterproductive – when Coca-Cola introduced ‘New Coke’ in April 1985, customers rebelled: Classic Coke was reintroduced six months later.
Brands are ‘built in the mind’ and these mental constructions are often shaped by substantial advertising campaigns that seek to influence the way in which consumers construct their perceptions of the product or service. For example, the market for bottled water is in part segmented by attempts to link the product to factors such as lifestyle and brand image. This may have little to do with the notion of ‘better’ tasting water. The ‘need’ for a particular brand of bottled water is not universal in the sense that the need for safe drinking water is universal.
However, many aspects of today's globally interconnected world reflect a more complicated picture. Although numerous standard products and services do indeed compete mainly on price and/or branding, other segments of global markets are distinguished by fierce competition centred on innovative products and services. Dramatic reductions in product life cycles, coupled to innovative performance characteristics and design features, mean that new products become obsolete long before they wear out. The race to develop new and improved products and services depends on meeting a moving target of user expectations, as out-of-date models fail to compete effectively.
Thus, there are substantial differences between efforts to globalise the innovative features of, for example, gourmet meals or specialist computers and fast food or standardised PCs. Although advances in information and communication technologies (ICTs) are often associated with global convergence on standardised ways of ‘doing things’ – as we will see in the next section – they can facilitate the expansion of specialised products and services. Also, institutional rules of practice (such as those that confer legitimacy on Japan's company-as-family workplace organisations, Chinese guanxi relationships or French bread making) can mediate power in ways that tend to act against pressures for global convergence.