Brave New World: Revisiting Theodore Levitt’s globalization of markets

By | November 17, 2012

Convergence of global markets and equalizing of purchasing power will finally offer the “global consumer” Theodore Levitt was seeking. ~ @nitibhan

I found myself summing up a search with these words at the end of a series of articles I found while digging around online. Now I want to explore this potentially emerging future a little more and see where its coming from and where it might be going. There seem to be two simultaneous shifts taking place, economically and globally. Even as we see signals of the rise of the “emerging global middle classes”, many of whom could be classified as the former “poor”, we note a concurrent decline in the same classes being noticed in the erstwhile first world.

For example, there’s a special report on GlobalPost titled America the Gutted which covers what they call:

There is a deep unease spreading across the United States of America. As anyone who’s living through it can tell you, the nation’s middle class — the backbone of the world’s largest economy — is in distress.

Median income and net worth are falling. Unemployment remains a persistent and pernicious problem. Millions of houses languish in foreclosure, or drown under mortgages that exceed their market value. Health care, education and other day-to-day costs continue to rise, further pressuring family budgets.

To make matters worse, new technologies are decimating entire industries, and social safety nets are threatened by rising government debt.

and The Telegraph informs us that not only is it expected that the median annual income of the UK’s middle class will fall by £800, but there’s a brain drain as middle class professionals flee overseas for better paying jobs. Anyone old enough to remember the headlines just two decades or more ago will recall similar challenges in places like India or South East Asia. Canada feels their pain.

Which brings us to this chart from the Financial Times:

And they are not the only ones. The venerable Economist, the trend following World Bank and of course, the OECD have all noticed this social and economic transition taking place. From Latin America to Sub Saharan Africa, the tortoise slowly munches the lettuce the hare tripped over. Australia expects succour from China’s emerging middle classes while Brazil’s former BoP get a mainstream soap opera (telenovela) of their own. When the Bottom of the Pyramid (BoP) goes mainstream, Houston, we have a very interesting situation here to be analyzed.

Almost 30 years ago, Theodore Levitt published The Globalization of Markets, a manifesto for global multinationals to focus on an emerging global consumer. The intervening years showed many such companies the challenges and pitfalls of the frontier markets of yesterday – Kellogg in India being the best known such example. Products had to be localized and pricing strategies reframed, the emerging markets were so very different from the domestic consumers of the sophisticated markets of the (sic) “Global North”. The path to development was projected to follow that of the developed countries and much beating of chests occurred when the realization dawned that it meant a billion or two more automobiles on the planetary highway.

No such luck.

The past half decade‘s worth of financial crises and increasing scarcity of resources have led to an increasing equalization in the global water level. Instead of the high tide that would lift all boats, the levelling off of growth is leading to an entirely different equation of purchasing power parity. Tomorrow’s equilibrium seems to imply a more frugal world. One only hopes it means greater cooperation and sharing, with our world as our community and not a fight to the finish scrabbling over the last piece of the pie.

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