An Analysis of the Fundamentals of Marketing (part 10)

A Truly Global Economy?

by

Charles Lamson

Speed is linked to centralization and the emergence of a truly global economy. For example, in UK supermarkets one can buy not only French-grown Golden Deliscious apples but also pak choi flown fresh from Thailand and mange trout and roses from Kenya. By the mid-1990s production of luxury vegetables and flowers has overtaken coffee to become the second most important export after tea, with produce going to thirty countries, with 40 percent going to the UK  (Paxton, 1994). Increased industrial concentration has led to the closure of many UK apple and flower producers while debate rages about the ethics of growing 'luxury' products for Western consumption in countries which can barely afford to feed themselves but which must meet the demands of foreign debt repayments.

In The Marketing Imagination, Levitt (1986) argues that the modernizing power of technology is the major driving force  in the development of a truly global, as opposed to international, economy. He contends that the technological imperative is driving markets and products towards a centralizing 'single converging commonality' which has proletarianized communication, transport and travel, making them easily and cheaply available to the world's most isolated places. The end result is the emergence of global markets and standardized products. Levitt suggests that some part of world debt may be explained away by the demand for countries like Brazil, Romania, Togo and Malawi 'greedily wanting the modernity to which they are so constantly exposed'. He considers that all parts of the world want the most advanced things; they also want them in their most advanced states of functionality, quality, reliability, service levels and price competitiveness. national and regional preferences are disappearing. Linked with this is the rise of the global cooperation that operates with 'resolute constancy' and at low relative costs as if the entire world were a single and largely identifiable entity. Levitt cites the global expansion of companies such as McDonald's, Coca-Cola, Pepsi as well as Greek salad and Hollywood movies as examples of this homogenizing trend.

Levitt's main argument for companies' drive toward standardization is based on a mix of preference and cost factors. He suggests that while product preferences, e.g. for washing machines are different across countries, the costs to a company such as Hoover or Bosch in catering to these different preferences puts the company into a poor price-competitive position in those countries. More contentiously, he argues that there is a high degree of trade between preferences and price.

Tendencies towards globalization and centralization are ingrained into systems of production and distribution. One trend towards centralization that is inexorable unless some major environmental hazard intervenes is the projected growth in the percentage of those living in urban areas. Another trend that is evident in Europe and can be seen in every region around the world is that towards an ageing population.

Another aspect of globalization is the extent of global interdependence in production and distribution which applies to simple products, e.g. yogurt, as well as to complex products, e.g. computers and cars. Paxton (1994) quotes a study which states that to produce strawberry yogurt and to get it to a distribution outlet in south Germany, strawberries were transported from Poland, yogurt from north Germany, corn and wheat flour from the Netherlands, jam from West Germany and sugar beet from the east of the country. The aluminum cover for the strawberry jar was manufactured 300 km away from the yogurt producer. Only the milk and glass were produced locally. In the UK the trend towards centralization particularly is apparent in retail distribution, rising from 40 percent to 60 percent in 1986 to between 70 percent and 100 percent for major retail stores in 1998 (Sheldon, 1998). Over 70 percent of fast-moving grocery product lead times in UK distribution are less than 24 hours. Evidence from the Sustainable Agriculture Food and Environment (SAFE) report is that the same amount of food is being hauled over longer distances, e.g. the distance food is being transported has increased by 50 percent between 1978 and 1993 (Paxton, 1994)

One major question posed by the preceding question is 'Is there a global consumer?' True, there may be people around the world who drink Coke, smoke Marlboro cigarettes and revel in the rush of feeling American for a moment. But is this enough to say that there is a growing homogenization of consumers at the level which Levitt is suggesting? In The End of History and the Last Man Fukuyama (1992) provides support for this view. In the era of the global triumph of capitalism, consumer goods begin to play a key role in satisfying the human desire for recognition. It is fair to say that consumerism is at least a global aspiration and if consumers around the world progressively become more affluent they will have further means of realizing this. Not only is the era of global capitalism; it is the era of the global consumer. However, the question remains as to what extent is the globalization of consumption occurring? Levitt himself does not go so far as to argue that all consumer preferences are homogenized, just that it makes good sense for firms to ignore some of the differences and focus on the mainstream.

*SOURCE: FUNDAMENTALS OF MARKETING, 2007, MARILYN A. STONE AND JOHN DRESMOND, PGS 49-51*

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