Marketing faculty Ayse Ozturk and Cem Ozturk recently published research in the Journal of International Business Studies that sought to find if consumers across countries are becoming more similar in their spending across multiple product categories. From a bigger picture perspective, their findings could mean trouble for smaller firms and businesses who cannot compete on a global scale with top firms and businesses who can take over the lion’s share of the market with more impactful and widespread marketing tactics.
For the Moore School, Ayse Ozturk is a marketing clinical assistant professor; Cem Ozturk is a Business Partnership Foundation Dean’s Fellow and a marketing assistant professor. Earlier this spring, Ayse Ozturk became a member of the Editorial Review Board for the International Business Review journal. The Ozturks did the research for this paper with Tamer Cavusgil, the Fuller E. Callaway Professorial Chair at Georgia State University’s Robinson College of Business and executive director for GSU’s CIBER.
Read below as Ayse Ozturk explains their research team’s massive data set and what their conclusions mean for marketing across country borders.
In “Consumption convergence across countries: measurement, antecedents, and consequences,”
you and your co-authors did an empirical analysis using data from 71 countries in
21 product categories between 1990-2017. Why did you choose such a large data set?
Why was it important to include so many differing countries and products over such
a long period of time?
Global convergence of consumption refers to the similarity of consumer spending allocation across a variety of product categories across the world. We selected the countries and product categories based on data that was consistently available for the longest time period on Euromonitor — a comprehensive database for global market research on consumer products — to obtain the most comprehensive list of global consumer spending. It was important to capture as many product categories as possible to understand whether there is a more general convergence trend. Finally, consumption convergence is a long-term phenomenon which cannot be captured by focusing on relatively narrow time windows.
You mention in the abstract that consumption convergence has been decelerating over
time. Why do you think consumption convergence has been decelerating over time?
The process of globalization is like the swing of a pendulum — there are forces of convergence and divergence. Our study reveals a convergence trend of increasing globalization. However, this trend of consumption convergence is weakening over time due to the forces of divergence pulling the pendulum toward the opposite end. This deceleration may be due to factors such as protectionist moves in numerous countries, trade tensions among countries and sustained ethnic differences. Although the study does not specifically examine the reasons of this deceleration, the implications of the deceleration are relevant. The slow-down in convergence signals caution for managers who have enjoyed the benefits of globalization - standardization of marketing and receptivity of brands across country markets. This is a warning sign that it may become more challenging to further build and cater to cross-country market segments.
Consumption convergence is also influenced by technological advances, inward trade
openness and ethnic diversity. Why do you think these three aspects so strongly influence
These three factors have different influences on the convergence phenomenon. Higher levels of technological advances increase consumer connectedness and observational learning across country borders, thus leading to greater awareness and motivation of a global cultural identity. This results in an emerging global cultural identity and contributes to consumption convergence across countries.
As for inward trade openness (i.e., imports as a percentage of gross domestic product), convergence increases as similar products and services become more available across borders. Increased availability along with increased familiarity of similar products across countries will likely result in convergence in patterns of consumption.
Finally, ethnic diversity, which refers to the extent of ethnic fractionalization between distinct groups in a country, works against consumption convergence. Higher ethnic diversity hinders engagement in global consumer culture and also increases communication costs. Consequently, consumers are more likely to emphasize their own distinct cultural identity, leading to consumption divergence.
When you say the higher level of consumption convergence, the higher the market concentration
– what does this mean?
Higher market concentration implies that a large share of the market is accounted for by a few competitors. As consumption convergence increases and consumer segments become more similar across countries, it becomes more difficult for companies with less resources — such as smaller firms and potential entrants to the market — to find and attract consumers in niche segments. Large firms can divert their resources from satisfying local needs of previously niche country segments to targeting fewer new segments with more effective global advertising and marketing efforts. Therefore, when consumption converges across countries, we are likely to see fewer, larger firms.
What are the implications your study offers in terms of global marketing?
Our study has several managerial and policy implications in terms of global marketing. First, practitioners can use our empirical framework to identify and track consumption convergence across markets. Second, firms can identify new segments in foreign markets based on consumption convergence rather than rely excessively on geographic proximity for that purpose. Third, the deceleration of the consumption convergence trend implies that the firms have to be wary of the extent to which they can use convergence as an indicator to build and cater to cross-country market segments. Finally, the finding that large firms benefit more from consumption convergence imply reduced competition. Dominant multinational firms pose significant concerns for managers of local and relatively small firms as well as policymakers.