Dear AIB members,

The Japan Academy of Multinational Enterprises is pleased to announce that Volume 5, Issue 2 of Japan MNE Insights (newsletter) is now available online (http://www.mne-jp.org/english/pdf/NLfinal_vol5No2.pdf) and in PDF format.

This issue includes two special essays, and we would like to share their summaries with you..

D. Eleanor Westney, “CHANGING MNEs”

Synopsis: In 1972, The Economist published a survey on international business asserting that “a revolution is coming in international business” (Macrae, 1972: viii) and that the large multinational corporations dominating the contemporary world of international business were facing a period of decline. Four and a half decades later, the same magazine has declared that although huge multinational firms dominated the world’s business scene well into the twenty-first century, they are now “rickety and overextended” and that “the global firm is in retreat” (The Economist 2017). The intervening decades witnessed a succession of similar business press predictions that giant MNEs were a dying breed, each pronounced as if it had never been made before.  The reasons given for the MNE’s impending doom are remarkably similar across the decades. In both the 1972 and the 2017 articles, the MNEs’ peril is attributed to three sets of factors: growing internal complexity of MNEs making them more and more resistant to effective managerial control; imminent threats to the openness of the global business environment from national governments; and technological changes reducing the MNEs’ advantages of scale and geographic dispersion. Very large MNEs still, however, have continued to dominate international business and do so to this day.

              These recurring predictions of doom can provide entertaining material for IB classes (and perhaps instill in our students a healthy skepticism about what they read in the business press). While it may be easy to ridicule such dire predictions, however, we should note that there is an underlying reality that goes unrecognized by the journalists and probably by their readers: the large MNEs as they were organized in 1972, such as Unilever, IBM, Shell, or General Motors, are indeed no longer with us, although the companies still are. MNEs have survived and indeed flourished by changing over time in response to shifting internal and external challenges. How they organize their activities and distribute them geographically has been repeatedly transformed over the ensuing decades.

Yet we can question how well the IB field has understood and portrayed these changes in the very large MNEs, as they moved from the world of 1972 to that of 2017. When I was asked to contribute an essay to this publication, I could not resist the opportunity to reflect back on what we have learned and what we have still to learn about the changing form of the world’s largest multinational enterprises. Perhaps it is simply the grumpiness of a recently retired academic, but it seems to me that we in the IB field have not done a good job of grappling with and understanding the organizational form of the world’s largest MNEs since the turn of the century.

              This essay starts with an overview of past research, and then looks briefly at more recent changes in large established MNEs and how the IB field has – or has not – dealt with them. It closes with a short reflection on the potential of deeper, case study-based research, particularly on Japanese MNEs.

Yoshihiro Oishi, “Has Theodore Levitt Returned?”

Synopsis: Theodore Levitt’s paper, Globalization of Markets, was published in the Harvard Business Review in 1983. The famous paper asserted the standardization of global marketing. Levitt argued that technological development in communication, transportation, and travel generated “Global Customers” who prefer standardized products to localized ones. In his opinion, every company should adopt standardized marketing for these homogenous global customers. Standardized global marketing is inevitable but can also remain selective. For example, Levitt leaned global marketing strategy toward standardization, whereas Bartels [1968] and Keegan [1969] retained the balance between standardization and adaptation of global (international) marketing. In another example, Drucker [1969] presented the idea of the “global shopping center,” which Levitt seemed to have adopted, and Ohmae [1990] has called this interlinked world a “borderless word.” Finally, Hisatomi [1991] demonstrated that when customers across Europe, the U.S.A., and Japan decide on which passenger car to buy, they consider the same five of the top six criteria to aid decision making.

As a matter of course, there were many opinions that went against Levitt, such as Fisher [1984], M & MD [1984], Boddewyn, Soehl and Picard [1986], Kotler [1986], Wind [1986], and Douglas and Wind [1987]. They pointed out that climate, culture, political systems, governmental regulation, competitive situation, consumer behavior, and consumer preference still varied greatly across different nations. Wind [1986] and Douglas and Wind [1987] wrote that Levitt’s proposed homogeneous world was “myth,” even though Levitt explained that the technological development in communication, transportation, and travel led to a somewhat homogenous world. These arguments were made in the era when there were no personal computers (PCs), internet, social networking services (SNS), smartphones, LCC, electronic money, mobile payment systems, etc. Even if, in

Levitt’ age, the world appeared to be moving toward homogeneity, especially when compared to the 1960s and the 1970s, it is argued here that this was not the case. It instead remained in the process of homogenization, that is, in the process of convergence.

Levitt’s paper was a result of not only technological development but also popular Japanese products. In the 1960s and the 1970s, Japanese companies succeeded in mass production and mass sale of quality, inexpensive products. They sold to the world, in particular to the U.S.A. Many were products like textiles, apparel, calculators, transistor radios, TVs, cameras, and automobiles. Levitt perhaps incorrectly believed that because Japanese products were standardized, their marketing would also be standardized, and that this was inevitable and marketing would not be selective in the homogeneous world. Further, he felt that world consumers were willing to purchase standardized, quality, inexpensive products, in turn ignoring or deprioritizing their local tastes. In the first place, since they got homogeneous, they would love to buy similar products.

We hope that you will find the contents interesting and share them with your colleagues.

With kind regards,

Dr. Tamiko Kasahara

Editorial member of Japan MNE Insights