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How Markets Become Global

By readoppapers Nov 15, 2010 944 Words
‘Globalization’ is a simple word which has achieved great success. “Globalization of markets” (Levitt 1983) is an expression which related first to demand: taste, preferences and price-mindedness are becoming increasingly universal. Second, it relates to the supply side; products and services tend to become more standardized and competition within industries reaches a world-wide scale. Third, it relates to the way firms, mainly multinational companies, try to design their marketing policies and control systems appropriately so as to remain winners in the global competition of global products for global consumers. Globalization means homogenizing on a world-wide scale. The implicit assumption behind the globalization process is that all the elements will globalize simultaneously. Much of controversy around marketing dates back to Prof. Theodore Levitt’s 1983 seminar article in Harvard Business Review “The Globalization of Markets”. Prof. Levitt argues that marketers were confronted with a “homogenous global village”. He advised organisations to develop standardised, high quality world products and market them around the globe using standardised advertising, pricing and distribution. Some well publicized failures by Parker pen and other companies seeking to follow Levitt’s advice brought his proposals into question. But with the passage of time and years of research, a different flavour of globalization has come into the limelight. Companies have begun to realize that to become truly global they have to “Think globally, Act locally”. Organizations have discovered that consumers from different cultures have different attitudes, perceptions, tastes, preferences and values and remain reluctant to purchase foreign products. Hence, it can be posited that cultural differences remain an important aspect of global marketing because cultural forms and beliefs are powerful forces shaping people’s perceptions, dispositions and behaviours. (Markus and Kitayama, 1991; Triandis,1989 ). Global marketers necessarily have to take this fact into account while designing and adapting their marketing strategies across countries and cultures. Since marketing is based upon satisfying the varied needs and wants of customers, and the needs and wants are very much culturally based, a successful global marketer has to understand the cultural nuances of the country to which he/she is attempting to market. The cultural point of view prior to marketing to the foreign country separates the successful firm from the unsuccessful one.

MANAGEMENT ORIENTATIONS

The form and substance of a company’s response to global market opportunities depend greatly on management’s assumptions or beliefs--- both conscious and unconscious--- about the nature of the world. The worldview of a company’s personnel can be described as ethnocentric, polycentric, egocentric, and geocentric.

A person who assumes his or her home country is superior compared to the rest of the world is said to have an ethnocentric orientation. The ethnocentric orientation means company personnel see only similarities in markets and assume the products and practices that succeeded in the home country will, due to their demonstrated superiority, be successful anywhere. At some companies, the ethnocentric orientation means that opportunities outside the home country are ignored. Such companies are sometimes called domestic companies. Ethnocentric companies that do conduct business outside the home country can be described as international companies; they adhere to the notion that the products that succeed in the home country are superior and, therefore, can be sold everywhere without adaptation.

Nissan’s ethnocentric orientation was quite apparent during its first few years of exporting cars and trucks to the united state. Designed for mild Japanese winters, the vehicles were difficult to start in many parts of the United States during the cold winter cars. Nissan’s assumption was that Americans would do the same thing. Until the 1980s, Eli Lilly and company operated as an ethnocentric company in which activity outside the United States was tightly controlled by headquarters and focused on selling products originally developed for the U.S market.

B) POLYCENTRIC ORIENTATION
The polycentric orientation is the opposite of ethnocentrism. The term polycentric describes management’s often-unconscious belief or assumption that each country in which a company does business is unique. This assumption lays the ground work for each subsidiary to develop its own unique business and marketing strategies in order to subsidiary to develop its own unique business and marketing strategies in order to succeed; the term multinational company is often used to describe such a structure.

Until recently, Citicorp’s financial services around the world operated on a polycentric basis. James Bailey, a Citicorp executive, offered this description of the company; “we were like a medieval state. There was the king and his court and they were in charge, right? No. It was the land barons went and did their thing. Realizing that the financial services industry is global zing; CEO John Reed is attempting to achieve a higher degree of integration between Citicorp’s operating units.

C) REGIOCENTRIC AND GEOCENTRIC ORINTATONS
In a company with a regiocentric orientation, management views regions as unique and seeks to deep an integrated strategy. For example, a U.S. company that focuses on the countries included in the North American Free Trade Agreement (NAFTA)—the United States, Canada, and Mexico --- has a regiocentric orientation. Similarly, a European company that focuses its attention on the EU or Europe is regiocentric. A company with a geocentric orientation views the entire world as a potential market and strives to develop integrated world market strategies. A company whose management has a regiocentric or geocentric orientation is sometimes known as a global or transnational company. The geocentric orientation represents a synthesis of ethnocentrism and polycentrism; it is a “worldview” that sees similarities and differences in markets and countries and seeks to create a global strategy that is fully responsive to local needs and wants.

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