The document discusses four orientations - or levels of involvement - that firms can take when entering international business:
1. Ethnocentric orientation views foreign markets as an extension of the domestic market. Management and operations are controlled from the home country. This approach has minimal risk but also limited potential.
2. Polycentric orientation establishes independent foreign subsidiaries that adapt to local conditions. Each market is viewed as distinct. This increases commitment but allows for better adaptation.
3. Regiocentric orientation groups countries into regions and coordinates strategy at a regional level. This provides improved control while considering regional differences.
4. Geocentric orientation treats the entire world as a single market. A uniform global strategy is developed
2. The degree and nature of involvement in international
business or the international orientations vary widely.
The analysis provided by Douglas Wind and Perlmutter
within the framework of the modified EPRG scheme is
helpful in understanding the levels of involvement of firms
in international business .The EPRG framework identifies
four (4) types of attitudes or orientations towards
internationalisation that are associated with successive
stages in the evolution of international operations.
Introduction
3. There are four (4) orientations are
:
E
P
R
G
thnocentric Approach
olycentric Approach
egiocentric Approach
eocentric Approach
( Home country Orientation )
( Host country Orientation )
( Regional Orientation )
( World Orientation )
These stages are assumed to reflect the goals and philosophies of
the company in so far as international operations are concerned and
lead to different management strategies and planning procedures
for International operations .
4.
5. Ethnocentric Approach
In the ethnocentric approach, overseas operations are viewed as
secondary to domestic operations and primarily as a means of
disposing of ‘surplus’ domestic productions. The top management
views domestic techniques and personnel as superior to foreign
and also as the most effective in overseas markets. Plans for
overseas markets are developed in the home office , utilising
policies and procedures identical to those employed in the domestic
market. Overseas marketing is most commonly administrated by an
export department or international division, and the marketing
personnel is composed primarily of home country nationals.
Overseas operations are conducted from a home country base, and
there is likely to be a strong reliance on export agents.
6. Ethnocentrism
is pre-
dominantly a
home country
orientation.
The domestic
companies view
foreign markets
as an extension
to domestic
markets.
No international
investment
needed
This approach
entails a
minimal risk and
commitment to
overseas
markets.
No
additional
selling cost
incurred.
8. Polycentric Approach
As the company begins to recognise the importance of
inherent differences in overseas markets, a polycentric
attitude emerges. The prevalent philosophy at this
stage is that local personnel and techniques are best
suited to deal with local market conditions.
Subsidiaries are established in overseas markets, and
each subsidiary operates independently of the others
and establishes its own marketing objectives and
plans. The environment of each market is considered
while formulating the marketing strategy. The important
merit of polycentrism is the adaption of the business
strategies to the local conditions.
9. Companies
establish foreign
subsidiary and
empowers its
executives Marketing is
normally
characterised by
the ADAPTATION
STRATEGY
Polycentrism is multi
national orientation.
Polycentrism is
more or less the
opposite of
Ethnocentric
Approach
11. Regiocentric Approach
A regiocentric company views different regions as
different markets. A particular region with certain
important common marketing characteristics is
regarded as a single market, ignoring national
boundaries. Strategy integration, organisational
approach and product policy tend to be implemented
at regional headquarters on the one hand and
between regional headquarters and individual
subsidiaries on the other.
14. Geocentric Approach
A geocentric company views the entire world as a single
market and develops standardised marketing mix,
projecting a uniform image of the company and its
products, for the global market .The business of the
geocentric multinational is usually characterised by
sufficiently distinctive national markets that the
ethnocentric approach is unworkable and where the
importance of learning curve effects in marketing,
production technology and management makes the
polycentric philosophy substantially suboptimal.
17. Costs Benefits
High communication and travel costs Integrated global outlook
Educational costs at all levels More powerful total company throughout
Time spent in consensus decision-making Better quality of products and services
International headquarters bureaucracy Worldwide use of best resources
"Too wide" distribution of power Improved local country management
Greater commitment to global objectives
Higher global profits
18. Ethnocentric Polycentric Regiocentric Geocentric
Management
orientation
Home country Host country Regional Global
Perception of
market
•Domestic
• focuses on
similarities b/w home
and foreign markets
• foreign markets are
extension of domestic
market
*Each national is
Distinctive
*Focuses on
difference b/w home
and foreign markets
*Markets on the
basis of common
regional
characteristics
* Entire world as
single
Market
Market strategy Extension of domestic
strategy to foreign
markets
Localisation Trade off b/w
localisation and
standardisation
Global
standardisation
Merits •No cost and effort of
localisation
• An easy route to
internationalisation
*Adaptation to the
market characteristics
which help better
exploitation of the
market potentials
*Some of the
advantages of both
the localisation and
standardisation
strategies
*Economies of scale
and lower costs
* Advantages of pace
Demerits Limits the scope of
exploitation of
international market
High cost of
adaptation and delays
Neglect of intra-
regional diff. In
business environment
Standardisation will
not be successful in
many cases