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PenelopeFrancks, Japan and the great divergence. A short guide (London: Palgrave Macmillan, Pp. ISBN £41).
Table of contents

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.

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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.

Which strategy is better is not a matter of opinion but of necessity. Worldwide communications carry everywhere the constant drumbeat of modern possibilities to lighten and enhance work, raise living standards, divert, and entertain. The same countries that ask the world to recognize and respect the individuality of their cultures insist on the wholesale transfer to them of modern goods, services, and technologies.

Modernity is not just a wish but also a widespread practice among those who cling, with unyielding passion or religious fervor, to ancient attitudes and heritages. Who can forget the televised scenes during the Iranian uprisings of young men in fashionable French-cut trousers and silky body shirts thirsting for blood with raised modern weapons in the name of Islamic fundamentalism?

In Brazil, thousands swarm daily from preindustrial Bahian darkness into exploding coastal cities, there quickly to install television sets in crowded corrugated huts and, next to battered Volkswagens, make sacrificial offerings of fruit and fresh-killed chickens to Macumban spirits by candlelight. In the isolated Siberian city of Krasnoyarsk, with no paved streets and censored news, occasional Western travelers are stealthily propositioned for cigarettes, digital watches, and even the clothes off their backs.

The organized smuggling of electronic equipment, used automobiles, western clothing, cosmetics, and pirated movies into primitive places exceeds even the thriving underground trade in modern weapons and their military mercenaries. A thousand suggestive ways attest to the ubiquity of the desire for the most advanced things that the world makes and sells—goods of the best quality and reliability at the lowest price. This makes the multinational corporation obsolete and the global corporation absolute.

Daniel J. In business, this trend has pushed markets toward global commonality. Corporations sell standardized products in the same way everywhere—autos, steel, chemicals, petroleum, cement, agricultural commodities and equipment, industrial and commercial construction, banking and insurance services, computers, semiconductors, transport, electronic instruments, pharmaceuticals, and telecommunications, to mention some of the obvious.

Nor is the sweeping gale of globalization confined to these raw material or high-tech products, where the universal language of customers and users facilitates standardization. The transforming winds whipped up by the proletarianization of communication and travel enter every crevice of life. Starting from opposing sides, the high-tech and the high-touch ends of the commercial spectrum gradually consume the undistributed middle in their cosmopolitan orbit.

No one is exempt and nothing can stop the process. Consider the cases of Coca-Cola and Pepsi-Cola, which are globally standardized products sold everywhere and welcomed by everyone. Both successfully cross multitudes of national, regional, and ethnic taste buds trained to a variety of deeply ingrained local preferences of taste, flavor, consistency, effervescence, and aftertaste. Everywhere both sell well. Cigarettes, too, especially American-made, make year-to-year global inroads on territories previously held in the firm grip of other, mostly local, blends.

These are not exceptional examples. Indeed their global reach would be even greater were it not for artificial trade barriers. They exemplify a general drift toward the homogenization of the world and how companies distribute, finance, and price products. The products and methods of the industrialized world play a single tune for all the world, and all the world eagerly dances to it.

Ancient differences in national tastes or modes of doing business disappear. The commonality of preference leads inescapably to the standardization of products, manufacturing, and the institutions of trade and commerce. Small nation-based markets transmogrify and expand. Success in world competition turns on efficiency in production, distribution, marketing, and management, and inevitably becomes focused on price.

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The most effective world competitors incorporate superior quality and reliability into their cost structures. They sell in all national markets the same kind of products sold at home or in their largest export market.

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They compete on the basis of appropriate value—the best combinations of price, quality, reliability, and delivery for products that are globally identical with respect to design, function, and even fashion. That, and little else, explains the surging success of Japanese companies dealing worldwide in a vast variety of products—both tangible products like steel, cars, motorcycles, hi-fi equipment, farm machinery, robots, microprocessors, carbon fibers, and now even textiles, and intangibles like banking, shipping, general contracting, and soon computer software.

Nor are high-quality and low-cost operations incompatible, as a host of consulting organizations and data engineers argue with vigorous vacuity. The reported data are incomplete, wrongly analyzed, and contradictory. The truth is that low-cost operations are the hallmark of corporate cultures that require and produce quality in all that they do.

High quality and low costs are not opposing postures. They are compatible, twin identities of superior practice. The same is true of Safeway and Southland retail chains operating effectively in the Middle East, and to not only native but also imported populations from Korea, the Philippines, Pakistan, India, Thailand, Britain, and the United States. National rules of the road differ, and so do distribution channels and languages. That translates into a drive for standardization at high quality levels. If a company forces costs and prices down and pushes quality and reliability up—while maintaining reasonable concern for suitability—customers will prefer its world-standardized products.

The theory holds at this stage in the evolution of globalization—no matter what conventional market research and even common sense may suggest about different national and regional tastes, preferences, needs, and institutions. Most important, so have their imitators, including companies from South Korea television sets and heavy construction , Malaysia personal calculators and microcomputers , Brazil auto parts and tools , Colombia apparel , Singapore optical equipment , and, yes, even the United States office copiers, computers, bicycles, castings , Western Europe automatic washing machines , Rumania housewares , Hungary apparel , Yugoslavia furniture , and Israel pagination equipment.

They have product lines instead of a single product version, and multiple distribution channels. There are neighborhood, local, regional, ethnic, and institutional differences, even within metropolitan areas. But although companies customize products for particular market segments, they know that success in a world with homogenized demand requires a search for sales opportunities in similar segments across the globe in order to achieve the economies of scale necessary to compete.

Such a search works because a market segment in one country is seldom unique; it has close cousins everywhere precisely because technology has homogenized the globe. Even small local segments have their global equivalents everywhere and become subject to global competition, especially on price. The global competitor will seek constantly to standardize its offering everywhere.

It will digress from this standardization only after exhausting all possibilities to retain it, and will push for reinstatement of standardization whenever digression and divergence have occurred. It will never assume that the customer is a king who knows his own wishes. Trouble increasingly stalks companies that lack clarified global focus and remain inattentive to the economics of simplicity and standardization. The most endangered companies in the rapidly evolving world tend to be those that dominate rather small domestic markets with high value-added products for which there are smaller markets elsewhere.

With transportation costs proportionately low, distant competitors will enter the now-sheltered markets of those companies with goods produced more cheaply under scale-efficient conditions. Global competition spells the end of domestic territoriality, no matter how diminutive the territory may be. When the global producer offers its lower costs internationally, its patronage expands exponentially.

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It not only reaches into distant markets, but also attracts customers who previously held to local preferences and now capitulate to the attractions of lower prices. The strategy of standardization not only responds to worldwide homogenized markets but also expands those markets with aggressive low pricing. This is universal—not simply a motivation but actually a need.

The difference between the hedgehog and the fox, wrote Sir Isaiah Berlin in distinguishing between Dostoevski and Tolstoy, is that the fox knows a lot about a great many things, but the hedgehog knows everything about one great thing.

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  • The multinational corporation knows a lot about a great many countries and congenially adapts to supposed differences. It willingly accepts vestigial national differences, not questioning the possibility of their transformation, not recognizing how the world is ready and eager for the benefit of modernity, especially when the price is right. By contrast, the global corporation knows everything about one great thing. It knows about the absolute need to be competitive on a worldwide basis as well as nationally and seeks constantly to drive down prices by standardizing what it sells and how it operates.

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    It treats the world as composed of few standardized markets rather than many customized markets. It actively seeks and vigorously works toward global convergence. Its mission is modernity and its mode is price competition, even when it sells top-of-the-line, high-end products. It knows about the one great thing all nations and people have in common: scarcity. Nobody takes scarcity lying down; everyone wants more. This in part explains division of labor and specialization of production. They enable people and nations to optimize their conditions through trade.