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The globalization of markets

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Nina Steinberg

on 27 May 2015

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Transcript of The globalization of markets

The globalization of markets

- Theodore Levitt, 1983
Theodore (Ted) Levitt

born in Germany 1925
emigrated to the United States in the age of ten
professor of Business Administration and head of the marketing area at the Harvard Business School about 30 years
author of several article for Harvard Business Review, e.g. his classic "Marketing Myopia" (1960)
source: The Economist (2009), Theodore Levitt.
The Economist (2009), Theodore Levitt, http://www.economist.com/node/13167376 (Download from 20th of April 2015)

Theodore Levitt (1983): The globalization of markets, published in Harvard Business Review.

Theodore Levitt
Levitt's theory
State of affairs - 1983
Multinational vs. global corporations
Example wasching machine
Why remaining differences
State of affairs in the 80's
many of the world
were still

nearly a
third of its population
lived under

e.g. southeast european states

powerful force
worldwide communication, transport, travel

in the early 80's Levitt's theory looks like a "futuristic fantasy

(except: "Manhattan advertisement" for British Airways
favorite airline")

Emergence of global markets for standardized consumer products.

"Companies must learn to operate as if the world were one large market - ignoring superficial regional and national differences."
Theodore Levitt , 1983
Levitt's theory
Globalization of markets
Multinational vs. Global
- many customized markets

- surveys (wishes, needs)

- adjusted products

- high costs and prices

- treats the world as composed of
standardized markets

- globally standardized product

- high quality and lower price due to economies of scale


Example: Coca-Cola, Japanese companies (Sony)

Conclusion & criticism
End of domestic territoriality
High-value products in smaller markets
Cheaper products with good quality
Multinational corporation
Global corporation
Why remaining differences?

personalized business relationships (different cultures & religions)

form of government

national laws
- transfer of technology & data
- resistance to radio & television interference

"With persistence and appropriate means, barriers against superior
technologies and economics have always fallen."

some differences are unyielding! (e.g. Teradyne Corporation, 2 productlinesc
some different cultural preferences expand to mainstream global preferences (e.g.
ethnic markets
like Chinese food, pizza, jazz)

as a push for economy (Japan's automotive companies)

confirm global homogenization

Levitt's criticism:
unthinking belief in the immutability of differences
- preferences are not only local fixed

Theodore Levitt, 1983
economies of scale
- cost advantages comes from long production runs
learning curve effects

economies of scope
- share expenses by the common use of resources along the value chain
Cost Leadership
(generic competitive strategy)
Porter, M. E., published in "The Competitive Advantage: Creating and Sustaining Superior Performance", 1985
lowest cost of operation industry wide
Example automatic washing machine 1960
McDonald's - Global Strategy & Local Specilization
standardized products
low price segment
many sales
high market share/ competitive
bargaining power against supplier
Other influences:
standardization/ rationalization
process optimization
Thank you for your attention!
Are there any questions?
Levitt's strategy of globalization

global corporation
"technology drives the world toward a converging communality" -
unified desires

emergence of global markets for
standardized consumer products

obsolete multinational corporations
vs. global corporations

high quality & and low costs are compatible - " twin identities

pushing the business

no entirely rejection
for differentiation
- but the last possibility

- global corporation
Differentiation strategy:
Unique Selling Proposition
Benefits (quality, technology, brand image, service)

Surveys/research (identify customer's needs & preferences)
Asking the right questions
top-of-the-line, high-end products (price is quiet indifferent)
Profitable markets/ risks
low costs vs. good quality Red Ocean
Full transcript