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MARKETING INTELLIGENCE & PLANNING 11,2

Is a holistic philosophy the most effective one for a global multinational corporation to pursue?

A Philosophy for Globalization

Richard Kustin
Marketing Intelligence & Planning, Vol. 11No.2,1993, pp. 4-8. MCB University Press, 0263-4503

During most of the past ten years, research has concentrated on the tangible aspects of the marketing mix, with special attention to programme and process attributes. However, little or no clear position has been established concerning a philosophy of globalization. One possible aspect of the conceptual foundation of a globalization philosophy stems from the loss of US prominence in international trade. This resulted in a re-evaluation of the international strategy model used by US multinationals. Another result was implementation of global strategy techniques used by Japanese multinationals. Due in part to Japanese marketing success and a fascination for Japanese managerial techniques, abundant theories of Japanese managerial philosophy have been produced (Ouchi, 1981; Pascale, 1978). Similarly, a philosophy supporting globalization theory, is also required in order to utilize effectively the benefits of globalization.
American and Japanese Business Foundations

A Brief History of Globalization

More than 30 years have passed since the concept of standardizing the marketing mix, in whole or part, was introduced to marketing. Over this period a great volume of research, both theoretical and empirical, has emerged. More recently, the amount of empirical research has increased, thereby reducing dependence on anecdotal support of standardization (globalization). The earliest introduction of standardization came in the area of advertising (Elinder, 1961), followed by standardization of the marketing mix (Keegan, 1969). Marketing mix theories were empirically tested (Sorenson and Weichmann, 1975) as were theories of advertising standardization (Green et al., 1975). The gap between academic theorizing about standardization and corporate practice remains extreme. By the late 1970s, the USA was experiencing a deficit trade balance, and American companies were no longer the only dominant force in international markets (Hayes and Abernathy, 1980). Levitt's article (1983) introduces a revisited version of standardization theory which challenges traditional international marketing concepts. His globalization theory of marketing, although devoid of empirical evidence, regards product standardization as the most effective strategy for global marketing. During the past decade, Levitt's thesis has been tested repeatedly. The result has been unclear as to the extent and special use of globalization but, in general, research supports globalization theory (Akaah, 1991; Kotabe, 1990; Samiee and Roth, 1992).

The issue here is more than a managerial concept of the Japanese. The fundamental structure of a holistic philosophical theory is founded on the basic differences between Western and Eastern business cultures. American business stems from a history of vast quantities of available land, large markets, an educated labour force and, in the nineteenth century, a laissez-faire government (Yoshida, 1992). Coupled with religious freedom and a predominant Judaeo-Christian ethic, a strong sense of individualism prevailed. These conditions lasted through a major portion of the 1900s creating the largest domestic market and the leading global exporter. The USA leads the world in total exports, but it is no longer profitable in international trade. These, and other conditions, have led to a stronger, more influential central government with the business community. By contrast, the Japanese developed their business in an environment of limited available land, a strong feudal system, and a religious following of Buddhism and Confucianism which supports the unit (i.e. family unit) rather than the individual (Yoshida, 1992). A strong central government replaced the feudal system and Shogun, and the Keiretsu replaced the trading cartels. By the latter half of the twentieth century, Japan has closed its domestic market again and become the leading world exporter in terms of trade balance and profit. American and Japanese corporations have been organized and structured along diametrically opposed conceptual foundations of business: American corporations are essentially analytical, while Japanese ones are holistic. American companies need targeted, measurable objectives. Japanese companies need broadly defined objectives, in general terms and fundamentally unstructured: "The Japanese are comfortable with far-reaching, broadly encompassing, abstract statements unsupported by specific

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examples of elaboration" (Yoshida, 1989, p. 13). The holistic philosophy suggests the whole is greater than the sum of its parts. Management functioning under this view is able to realize that while results are conclusive, long-term goals play a larger role over time than the means accomplishing the goals.

Holistic Contingencies and Globalization

The global multinational corporation functioning within a holistic corporate philosophy should be able to focus on certain conditions which need to be met in order to execute a strategy of globalization effectively. There are ten conditions integrating globalization theory and holistic corporate philosophy. This relationship with the global multinational is illustrated in Figure 1. These conditions, are outlined as follows: (1) Convergence of products. In effect, the needs and wants of consumers are becoming the same worldwide. Pens, cars, luggage, eyeglasses, and wristwatches are all in demand by consumers sharing the same standard of living in different parts of the world. This means one can buy a Coke virtually anywhere in the world. There are, however, differences in marketing this approach. One view provides a limited, customized product focus to fit the environment (Quelch and Hoff, 1986). Another position markets the product, in a wide variety of product extensions, as a means of capturing larger market share through economies of scale (Jatusriptak et al., 1985). (2) Technology. This is perhaps the cornerstone to globalization theory. Technology is often the equalizer between companies with financial capabilities, and those with technical abilities. Less developed countries (LDCs) such as South Korea can compete with Japan and the USA due to low labour costs and technological capabilities. (3) Convergence of markets. Broadly interpreted, this suggests that the USA, Europe and Japan can be viewed as a triad market with similar characteristics in terms of gross national product, personal income

Holistic Philosophy and Globalization Objectives in a holistic corporate philosophy are specific but less quantitative than an analytical philosophy. The analytical view tends to focus on the means to an end, rather than on the accomplishment or objective itself. The analytical view seeks departmental quarterly profit and assumes the year will be profitable. The holistic view seeks customer support and assumes the future will be successful because the customer supports the company and its products. This in turn will produce a profit for the company. Multinationals operating under an analytical concept assume if their departments and divisions competing for limited resources operate effectively (make a profit contribution), then the organization will operate effectively. Under a holistic concept profit contribution, or effective operation often is not as important as other less tangible criteria: customer satisfaction, market share or support of community projects.

A holistic concept is more amenable

Given the controversies surrounding globalization marketing, it is little wonder than multinational corporate marketers find difficulty in implementing global strategies. One version of globalization is to market standard products (Honda's Accord) in a global homogeneous marketplace, with similar target markets (Ohmae, 1990). Another strategy is to market a single standard product, such as Coca-Cola, with modified adjustment to the marketing mix, in heterogeneous markets (Porter, 1990). Regardless of the strategy, the global organization must have a philosophy allowing it to function in diverse multicultural conditions. A holistic philosophy is a more amenable concept allowing hundreds of small, difficult steps to be taken towards an ultimate goal, often years into the future. This process often subjects some part of the company to a financial loss before any appreciable results develop. After 18 years of attempting to penetrate the British market, Sony Corporation manufacturing colour television sets, finally produced a marginal profit.

MARKETING INTELLIGENCE & PLANNING 11,2

and product perception. Implementing this method, products are distributed into huge markets, with virtually identical products (Ohmae, 1990). By the late 1960s, the Japanese were able to establish dominance in black and white televisions by concentrating on a market segment of small screen and portable sets in the USA (Hamel and Prahalad, 1985). In turn, this strategy was transferred into the more profitable console colour television segment, helping the Japanese to develop their products and establish a presence in Europe and other less developed countries (LDCs). (4) Standard products. This is the focus of globalization. Simply stated, the global multinational markets standardized products, produced at the lowest possible costs, at the highest quality, and sells them at the lowest possible prices (Levitt, 1983). This position considers success among global multinationals by how effectively they are able to implement this strategy. (5) Joint alliances. One answer to the problem of reducing high fixed costs is corporate affiliations and joint alliances. This is a solution not often welcomed by American corporations. However, there is a growing list of American corporations which have been successful in their affiliations with foreign companies. Xerox and Fuji Films forming Fuji Xerox, Mazda and Ford, General Tire and Yokohama Tire, PPG and Asahi Glass are several examples (Ohmae, 1989b). Other alliances outside the USA have proliferated also: ICL (UK) and Fujitsu (Japan), Thompson (France) and JVC(Japan),NEC (Japan), Honeywell (USA) and Philips (The Netherlands) are among a few of the more prominent joint ventures (Hamel et al., 1989). There are two primary reasons to form a joint alliance. The first is a method to defray the heavy burden of fixed costs needed to support a global marketing research programme (Bolt, 1988). The second reason is that technological R&D tends to increase the fixed cost of product development. R&D is difficult to maintain on a continual basis and to apply over an extended period. By sharing technology as well as costs, both of the allied corporations are able to take advantage of market research and product development (Hamel et al., 1989). (6) Low prices. Effective competition in global markets requires the multinational corporation to market its products at aggressively low prices (Levitt, 1983). (7) Fixed costs. Lowering fixed costs is critical in global marketing because it supports global expansion. The possibilities of penetrating previously untouched

markets in turn provides increased market share. All of these factors ultimately result because of standardized product strategy responding to global homogenized markets at aggressively low prices based on fixed cost optimization. (8) Modernity. Consumer demand for a higher standard of living, quality of life, and modern lifestyle are concepts which describe values that consumers strive to obtain globally. This is not a description of American, Japanese, Italian, Thai, Brazilian or Israeli societies' standards of living. Rather it is a description of anyone, anywhere seeking a better life, who has obtained what is generally called "middle class" status. Consumers everywhere will seek out evidence to support the lifestyle they want or have. Being modern is having whatever trappings represent a specific denition at that time and place. This has little reference to cross-cultural realities, social class, or social groups (Cateora, 1987). There is a strong need, however, for middle class consumers to preserve their identity in order to prove they have arrived. Examples exist of people in different cultures, Third World as well as the industrial West, wearing Levi jeans, listening to Sony transistor radios, wearing Seiko digital watches and drinking CocaCola. (9) Global sourcing. The global multinational has the ability to out-source its raw materials and support goods wherever they can be provided and purchased effectively. This ability can reduce costs and create, at the same time, new market opportunities. Nike and Bata manufacture their running and leisure shoes in areas of Asia and Africa which have low per capita income. Because of manufacturing, local consumers can purchase these products. Product standardization by European and Japanese multinationals trading within the triad market had a high correlation with off-shore material sourcing (Kotabe, 1990). (10) Harmony. The Japanese concept of maintaining the status quo and striving for a corporate ideal of "one" is the essence of harmony. Harmony is more than co-operation. It allows the individual to give something up in order to help benefit the organization as a whole. Global multinationals are cross-culturally diverse organizations which need a unifying mechanism: harmony. In the extreme, some Japanese multinationals have approached harmony/co-operation by "doing more, better". This is a process whereby Japanese corporations outperform their competition to such an extent that they have destroyed whole industries (Ohmae, 1989a). This process is called "companyism" and personifies the single-mindedness and co-operative

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direction of many Japanese multinationals. The semiconductor, shipbuilding, VCR, small copier and colour TV industries are examples of Japanese strategies where "companyism" and low price, market over saturation (dumping) and heavy product advertising have eliminated or reduced competition. The structure and organization of the global multinational is sufficiently different from that of the traditional corporation to warrant a need to organize the multinational differently in order to be effective in a global environment (Raffe and Kreutzer, 1989). Part of this new structure requires headquarter's management to regard host managers as full participators in the decision-making process. Globalization programmes often falter within a region when local host subsidiary management fails to support the programme. Harmony and co-operation can provide a mechanism which allows for intercultural communication and breaks away the traditional top-down hierarchical approach often making the process inefficient.

corporate philosophy accepting short-term failures in the hope of long-term successes. A holistic philosophy for global marketing can incorporate easily the essential benefits of globalization. Convergence of markets and products, technology and consumerism are closely related to, and supported by, national differences which demand a sameness of product, availability, low price and high quality. Those global multinational corporations able to operate within this strategy must be supported by some broadly conceived corporate philosophy. This can help the global organization to accomplish its marketing objectives when making its products readily available. Global multinational marketers assisted by an effective corporate philosophy encourage changes in organization structure, global marketing and a willingness to wait for success. This perspective of the organization should prove to be more responsive in a borderless marketplace. Whatever products are standardized, or modified and differentiated for market penetration, the consequence of a corporate philosophy for globalization strategy is required. This article suggests a holistic corporate philosophy will support globalization marketing. Whether this strategy will prevail over those multinational corporations not prepared to globalize their marketing effort remains an unresolved question.

Conclusion

A holistic global philosophy supports globalization marketing and the global multinational in an effort to reconcile the differences and often the difficulties of diverse cultural aspirations and leadership. The consequence of this philosophical position among corporate managers is to readjust their objective priorities.

References

Management should look for long-term results

Management, rather than asking for quarterly successes, should look for the long-term results of market penetration, establishing the product, positive consumer response and support from the community. In the larger context of a global multinational operating in a borderless environment, the consequences of a corporate philosophy depending on a holistic approach should have greater advantages than one which is analytical. An organization as diversified as General Electric can operate as holistically as Mitsubishi because both must function with very broadly focused objectives and guided acceptances of corporate accomplishments. With the exception of having to respond to stockholders' scrutiny, General Electric can suffer limited setbacks in industries holding great potential, without affecting any significant aspect of the organization. General Electric can operate similarly to Mitsubishi by organizing under a holistic

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MARKETING INTELLIGENCE & PLANNING 11,2

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Richard Kustin is an Assistant Professor of Marketing, specializing in global marketing, based at the School of Business, Australian Catholic University, North Sydney, New South Wales, Australia.