Varities of Capitalism

1. Introduction

Ever since the defeat of Nazi Germany and its main allies Italy and Japan in 1945, the world’s most influential dictatorships and hereditary monarchies were doomed. Democracy’s way to become the leading global form of governments was paved and accompanied by the neo-American capitalism of the victorious western powers. Today’s literature on the ‘Varities of Capitalism’ (VOC) emphasizes the increasing convergence of international business systems. It asserts that these systems continuously approach each other and that global economies can be segmented into two different types.

Richard Whitley, a professor of the University of Manchester, advocates the above mentioned thesis, by claiming:

‘Despite numerous claims of growing convergence and the “globalization” of managerial structures and strategies, the ways in which economic activities are organized and controlled in […] differ considerably’ (Whitley, 1999: 3).

The following paper will critically evaluate the allegation of Whitley and support its outcome with a case study about Walmart’s market entry approach in Germany.

1. A critique on ‘Divergent Capitalism’ by Richard Whitley

According to Whitley (1999: 3) the consensus of modern literature on VOC on the ‘growing convergence’ of business systems in different countries is not accurate. One of the basic and often-cited introductions into the topic of VOC is the publication of Hall and Soskice (2001). The results of Hall and Soskice on the VOC, fit to the superficial approaches on the topic of VOC that Whitley is criticising. The authors analyse two different types of economies: ‘liberal market economies’ (LME) and ‘coordinated market economies’ (CME) (Hall and Soskice, 2001). In general these types of economies differ from each other through their governmental regulations. Chun Liao (2009: 1) describes their difference through the ‘nonmarket institutional coordination’. According to Hall and Soskice (as cited in Chun, 2009), firms in LMEs are mainly coordinated by their hierarchies and a competitive market mechanism, whereas firms in CMEs heavily rely on nonmarket institutional coordination by their governmental institutions. Typical LMEs are countries like the USA and UK (Hall and Soskice, 2001) and CMEs are China, Brazil and Argentina (Benney, n.d.).

In the above quoted allegation, Whitley (1999: 3) is mentioning the ‘”globalization” of managerial structures and strategies’. In this part Whitley is referring to the article of Theodore Levitt (1983) titled ‘The Globalization of Markets’ in the Harvard Business Review. In his article Levitt (1983) emphasizes ‘the emergence of global markets for standardized consumer products’ and predicts that ‘companies that do not adapt to the new global realities will become victims of those that do’. On the one hand Levitt was right with his assumptions about the need to standardize consumer goods. A look on the recent list of the ‘most valuable global brands’ (Millward Brown, 2014) shows the advantages high ‘economies of scale’, pushing the ‘vectors towards their own convergence’, ‘offering everyone simultaneously high-quality’ and ‘standardized products at optimally low prices’ (Levitt, 1983). On the other hand Levitt’s view might be too superficial and applicable to certain industries.