Approaches of international business

Approaches of international business / Ethnocentric and polycentric approach to internationalisation.

Approaches to Internationalisation: Approaches to international business and its marketing take the form of an EPRG schema (ethnocentrism, polycentrism, regiocentrism, geocentrism). This typology serves as the basis for the stages of corporate development.

1. Ethnocentric Approaches: The ethnocentric orientation is an assumption or belief that the home country i superior. Someone having this orientation sees the similarities in markets, and thus believe that the products and practices which succeed in the home country are superior and, thus should be used everywhere. In the ethnocentric company, overseas operations are viewed as being secondary to domestic and primarily as a means of disposing off surplus domestic production. Plans for overseas markets are developed in the home office to use policies and procedures identical to those who are employed at home.

There is no systematic marketing research conducted overseas, there are no major modifications to products, and also there is no real attention to consumer needs in foreign markets. The executives at the head office of the company make the decisions related to exports and, the marketing personnel of the domestic company monitor these export operations through an export department.

The company exports the same product designed for domestic markets to foreign countries under this approach. Hence, maintenance of domestic approach towards international business is called as ethnocentric approach.

This approach is suitable for the companies during the early days of internationalisation and also to the smaller companies.

2. Polycentric Approach: The polycentric approach is the unconscious belief that each host country is unique and different and that the way to succeed in each country is to adapt to each country’s unique differences. In the polycentric stage, subsidiaries are established in the overseas markets. Each subsidiary operates independently from the others and establishes its own marketing objectives and plans. Marketing is organised on a country by-country basis, where each country has its own unique marketing policy. The domestic companies that are exporting to foreign countries using the ethnocentric approach find at the latter stage that the foreign markets need an altogether different approach.

The company establishes a foreign subsidiary company and thus decentralises all the operations and delegates decision-marking and policy making authority to its executives.

In this approach, the company appoints executives and personnel including a chief executive who reports directly to the managing director of the company. Company appoints the key personnel from the home country and all the remaining vacancies are filled by the people of the host country.

3. Regiocentric Approach: The company as it is operating successfully in a foreign country thinks of exporting to the neighbouring countries of the host country. At this stage, the foreign subsidiary considers the regional environment to formulate policies and strategies. But it markets more or less the same product which has been designed under polycentric approach in other countries of the region, but with different market strategies.

4. Geocentric Approach: Under this approach, the entire world is same as a single country for the company. They select the employees from the entire globe and thus operate with a number of subsidiaries. The headquarter co-ordinates activities of the subsidiaries and each subsidiary functions like an independent and autonomous company in the formulation of policies, strategies, product design, human resource policies, operations, etc.

In this approach, the multinational environment takes a global approach to its global operations which recognises that subsidiary and corporate makes unique contribution with its unique competency. This is accompanied by a worldwide integrated business & where nationality is ignored to favour ability.