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ith equal parts flair, foresight, and far-reach-ing controversy, Theodore Levitt predicted the future of world trade for five decades.Born March 1, 1925, outside Frankfurt, Germany, Levitt immigrated with his family to Dayton, Ohio when he was ten years old, an early Nazi escapee. By 1959, an accomplished academic and oil industry advisor, the former refugee joined the faculty of Harvard Business School. From this position, a quarter-century later, he would announce a new era in retail economics. Levitt’s prediction? “Globalization.” Levitt loved to argue—in class and in print. “People don’t want quarter-inch drills,” he famously told his students. “They want quarter-inch holes .” A renowned Harvard Business Review essay expanded the point, demanding managers always answer first, “What busi-ness are you in?” Railroads, for example, said Levitt, let cars, trucks, ships, and planes “take customers away from them becau they assumed themlves to be in the rail-road business instead of the transportation business.”“The Globalization of Markets,” published in June of 1983, would prove the most important—and most debated—of the fearless forecaster’s almost three dozen books and articles. Although Levitt did not coin the term ‘globalization,’ he made it his own with that essay’s still-inflammatory argument: “Gone are accustomed dif-ferences in national or regional pre
ference.” To succeed abroad, in short, standardize, don’t customize.Levitt’s thesis was that technological advances in com-munications, transportation, and travel—the satellite, the containership, the jumbo jet—enhanced similarities and erad differences between the world’s markets. Obrve “McDonald’s from the Champs Elysées to the Ginza,…Coca-Cola in Bahrain and Pepsi-Cola in Moscow ,…rock music, Greek salad, Hollywood movies, Revlon cosmetics, Sony televisions, and Levi jeans everywhere,” Levitt wrote. Superior retailers, shippers, and manufacturers would embrace this “converging commonality”—globalization—by “lling the same things in the same way everywhere.”
The Perils of
Prediction How the Father of Globalization got it
(partly) wrong. By Jeremy N. Smith Photo courtesy Richard Cha
W W W .W O R L D T R A D E m A g .c O m 25
and practices on the entire globe.”
ignore them, too. starting from scratch, Benton-ville bought out existing German big-box retailers to b
oast an eighty-five store, five thousand employee, $2.5 billion sales foot-print almost overnight.Now, however, came the questions. Should the company require non-American sales clerks to smile at customers in a culture that often took such attention as flirting? Should it shun organized labor dealings in a nation who two largest politi-cal parties were the Christian Democratic Union and Social remake Germany?Y ork Times to expand into a country.”indeed be making the world a geographic, and economic—affecting different industries. Cultural variables range from spoken language to existing preferences for or taboos against particular colors. Administrative attributes include forms of gov-ernment and any trade agree-ments or tariffs. Geographic data includes transportation and communications networks—dirt road or superhighway, mailbag-burdened donkey or broadband Internet—while economic status means primarily the wealth or income of consumers. Each of markets to cultural distance? products, and—atop the interviewed German shoppers, W a l -M a r t
Wal-mart’s failure in Germany has become a template for how not to expand in a country.
perils of prediction
meat when [we] like to buy meat from the butcher.” In
South Korea, another country in which Wal-Mart has
invested big but struggled, tall racks forced diminu-
tive shoppers to borrow stockers’ ladders while heavy
bulk packaging frustrated Seoul houwives shopping
by subway instead of car. What Bentonville learned was
新视野大学英语读写教程3答案that though an excited essayist may claim “executives in
yy什么意思
multinational corporations are thoughtlessly accommo-
dating,” the abnce of that accommodation may strike
customers as confusing—or wor, insulting.
How to recover? Logistics leads the way. “All compa-
nies find that major disparities in supply chains and dis-
tribution channels are a significant barrier to business,”
says Ghemawat. “Managers must always be conscious of
distance—in all its dimensions.”
Put another way, differences in national preference
and practice not only remain—ignore them and they
overwhelm.
Yet, Theodore Levitt, too, proves impossible to
ignore. Even as time tempers his theories’ boldest
claims, continuous reprints and canonization in business
school ca studies mean tho theories enjoy an ever-
expanding audience. “Practically everyone is prepared
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to pronounce Levitt’s argument wrong,” say Richard S.
Tedlow and Rawi Abdelal, both also at Harvard Busi-
ness School, authors of a new asssment of Levitt in
The Global Market: Developing a Strategy to Manage
Across Borders. At the same time, they acknowledge,animals英语怎么读
“everyone reads [him] twenty years later.” Why? “It is
one thing to say that what Levitt argued about globaliza-
tion was wrong, that what he predicted did not come
true, and that the implications he derived for manag-
ers were (almost outrageously) overdrawn. It is quite
another to suggest that therefore his analysis was not
deeply insightful.”
What Levitt got right was that globalization allowseastech
management no excus. Modern world trade and the
logistics network that makes it possible require coor-
dinating vastly-disperd materials and workers with
ever-higher precision; the final storefront end of that
ever-shifting effort, however, must prent an impres-
sion of stability. Even $63 billion Wal-Mart International
can find itlf behind a curve and unable to catch up.
Questioned at a 2003 globalization conference, Levitt
himlf conceded McDonald’s India was more profitable
preparing vegetarian patties than convincing Hindus to
eat cow.
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Would he apologize to Wal-Mart, however? Not a
candy意思chance. “If people don’t read what you write,” he liked
to tell colleagues, “then what you write is a muum
piece.”
T edlow and Abdelal agree. “The reason to read Levitt
is to find out not what is true about global markets, but
how a manager ought to begin to think about them.” wt
For reprints of this article, plea contact Jill DeVries at
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