A powerful force drives the world toward a converging commonality, and that force is technology. It has proletarianized communication, transport and travel. It has made isolated places and impoverished peoples eager for modernity's allurements. Almost everyone everywhere wants all the things they have heard about, seen, or experienced via the new technologies.
The result is a new commercial reality - the emergence of global markets for standardized consumer products on a previously unimagined scale. Corporations geared to this new reality benefit from enormous economies of scale in production, distribution, marketing and management. By translating these benefits into reduced world prices, they can decimate competitors that still live in the disabling grip of old assumptions about how the world works.
Gone are accustomed differences in national or regional preference. Gone are the days when a company could sell last year's models - or lesser versions of advanced products — in the less developed world. And gone are the days when prices, margins and profits abroad were generally higher than at home. The globalization of markets is at hand. With that, the multinational commercial world nears its end, and so does the multinational corporation.
The multinational and the global corporation are not the same thing. The multinational corporation operates in a number of countries, and adjusts its products and practices in each - at high relative costs. The global corporation operates with resolute constancy - at low relative cost - as if the entire world (or major regions of it) were a single entity; it sells the same things in the same way everywhere.
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Given what is everywhere the purpose of commerce, the global company will shape the vectors of technology and globalization into its great strategic fecundity. It will systematically push these vectors toward their own convergence, offering everyone simultaneously high-quality, more or less standardized products at optimally low prices, thereby achieving for itself vastly expanded markets and proflts. Companies that do not adapt to the new global realities will become victims of those that do.
"The globalization of markets" by Theodore Levitt
ReplyDeleteTheodore Levitt is widely credited with coining the term globalization through an article entitled "Globalization of Markets", which appeared in the May-June 1983 issue of Harvard Business Review. However, as a NYTimes article notes, the term 'globalization' was in use well before (at least as early as 1944) and had been used by economists as early as 1981. However, Levitt popularized the term and brought it into the mainstream business audience. Between 1985 and 1989, he headed the Harvard Business Review as an editor.
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