Globalization, as the phenomenon of our age, is the result of the flow of goods and capital in new directions. It used to be that capital from industrialized countries was attracted to lower-cost regions, for the production of goods that were eventually exported back and sold to the end user in the developed nations. This network is no longer the same, and the flow of capital and goods has changed dynamic when compared to the original pattern. We still call it globalization, but the reality now is different, and every day more so than before.
In late February of this year, Chinese online retailer Jingdong Mall offered 300 units of the Mercedes-built Smart car for sale on the local market. All 300 cars were sold within 90 minutes. Although the numbers may seem relatively small, it is a very important sign of the beginning of an overall trend. That a European group like Mercedes is producing cars in Europe and selling them in China is no insignificant fact. Mercedes is a recognized luxury brand, and the Chinese luxury market is in continuing expansion. China is moving steadily away from being the world’s factory and more towards becoming the world’s biggest luxury market. Note also the evolution of the sales network, with less emphasis on the traditional brick-and-mortar store and more on the online get-it-now sales. Paradoxically, the online sales model is stronger in a new luxury market like China than in a traditional market like Europe. Through an internet platform that is in tune with the spending habits of local customers, a well-known luxury brand can expand its sales network in real time to include second and third tier cities that are still evolving in response to the development of the eastern coast cities. This is clearly a phenomenon of globalization, but in the opposite direction of the original model, and more evolved in its way of delivering to the end user via the internet and not a traditional store.
Another atypical situation does not involve a western company producing in China and exporting back to its original market, but a Chinese company that has made the move to start selling in the USA, with its own brand and retail network. Peak Sports, a China-based sporting goods retailer focused on basketball equipment, opened its first store in Los Angeles last month in an attempt to become a global sports brand. The equipment sold in the store is made in China but designed in the United States. The Chinese company is also using evolved marketing instruments typically used by its western competitors. Peak Sports has signed a commercial agreement with the NBA team Miami Heat, which includes courtside advertising and a sponsored “Peak Performance Play of the Day” at select home games. This agreement, in addition to an earlier agreement signed in 2006 between Peak and Miami Heat player Sean Battier, who is already an icon in China, will provide the retailer with increased recognition and credibility. Peak Group is playing its game on both the domestic and US markets using the marketing tactics of a western company, yet another sign that the current waves of globalization are different from those of the past.
Globalization is becoming the only game to play, and the rules of the game are changing. The trend has moved from capital-manufacturing-sales, where industrialized countries produce goods through low-cost countries that then end up back in the western markets, to a system driven by local demand. The overall theatre is global, but the game is being played locally, a new strategy that cannot be neglected if every company from every country wants to be a winner on the final market.