Management Orientation Ethnocentric Polycentric Approach By Dr Ravindra

Management Orientation Ethnocentric & Polycentric Approach By Dr. Ravindra Pratap Gupta

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Quote-1 The Future The globalization imperative Vs pressures for regional and national responsiveness Dr. Ravindra Pratap Gupta

EPRG-Internationalization/Globalization � EPRG model, sometimes called also EPG model, is used in the international marketing. It was introduced by Perlmutter (1969). � The strategy of the organization is characterized by three factors: ethnocentrism, polycentrism and geocentrism. Hence, the original name - EPG. � A little later, Wind, Douglas and Perlmutter (1973) extended this model by another factor - regiocentrism. The extended model is known as EPRG model, in short. � This model aims to identify the orientation of the organization. The orientation of a company’s personnel affects as ability of a company to adapt to any foreign marketing environment essentially. � The behavioural attributes of a firm’s management in casual exports to global markets can be described under the EPRG

EPRG-Internationalization/Globalization � The importance of the EPRG model is mainly in the firm's awareness and understanding of its specific focus. Because a strategy based mainly on one of the four elements can mean significantly different costs or benefits to the firm. � It is necessary for a firm to carefully analyze how their firm is oriented and make appropriate decisions moving forward. � In performing an EPG analysis, a firm may discover that they are oriented in a direction that is not beneficial to the firm or misaligned with the firm's corporate culture and generic strategy. In this case, it would be important for a firm to re-align its focus in order to ensure that it is correctly representing the firm's focus.

EPRG-Internationalization/Globalization � A key assumption underlying the EPRG framework is that the degree of Internationalization to which the management is committed or willing to move affects the � Specific international strategies and � Decision rules of the firm. � First thought-The "globalization imperative" is a belief that one worldwide approach to doing business is the key to both efficiency and effectiveness. � Second Thought-In response to pressures for national and regional responsiveness, a growing number of firms have switched to Regiocentric or Geocentric strategies.

Pressures for National and Regional Responsiveness � � � Different product standards Different customer needs and tastes Businesses or consumers prefer locally made products Managing details in a global organization is difficult and complex. Subsidiaries know local market needs and management practices better than headquarters. Employees in subsidiaries seek promotion opportunities.

Orientation of Management & Companies EPRG Model Ethnocentric: Home country is superior; sees similarities in foreign countries Regiocentric: Sees similarities and differences in a world region; is ethnocentric or polycentric in its view of the rest of the world Geocentric : Worldview! sees similarities and differences in home and host countries Polycentric: Each host country is unique; in foreign countries

Ethnocentric Strategic Orientation �The values and interests of the parent company guide strategic decisions

Ethnocentric Strategic Orientation � Mission is profitability. � Top down decision making – major decisions are made at headquarters � Global strategy, determined at headquarters. � Global product (based on needs of home country) � Home country managers hold key positions everywhere. Profits from subsidiaries are repatriated (go back) to corporate headquarters � Headquarters makes decisions about budgets, profit targets, and capital investment for the subsidiaries.

Ethnocentric Orientation � The belief which considers one’s own culture as superior to others is termed as ethnocentric orientation. � It means that a firm or its managers are so obsessed with the belief that the marketing strategy which has worked in the domestic market would also work in the international markets. � Thus, ethnocentric companies ignore the environmental differences between markets. � These companies generally indulge in domestic marketing. � A few companies which do carry out export marketing consider it as an extension of domestic marketing. � These companies believe that just like domestic marketing, export marketing too requires the minimum level of efforts to adapt the marketing mix to the need of the overseas market. � Generally, such companies attempt to market their products in countries where the demand is similar to the domestic market or the indigenous products are acceptable to the consumers in those markets. � Ethnocentric orientation may be of the following types: � (a). The firm becomes so accustomed to certain cause and effect relationships in import activities that certain cultural factors in overseas markets are overlooked

Ethnocentric Orientation…. � Managers need to analyze the cultural variables so as to consider all the major factors before taking a decision � For instance, most Indian handicraft exporters, which are primarily from the SME (small and medium-sized enterprises) sector, hardly appreciate the market difference and need for adaptation of marketing strategy � (b). The environmental differences are recognized by the management but marketing strategy focuses on achieving homecountry objectives rather than international or worldwide objectives � It leads to a decline in the long-term competitiveness of the firm as the firm fails to compete effectively against its competitors and show any resistance to their overseas marketing practices. � The large size of the Indian market provides little motivation to firms to venture into the overseas market, or, even if overseas marketing is undertaken by them, the company tries to find the

Ethnocentric Orientation…. � A number of Indian products sold abroad, such as dresses like Salwar-kurta , Sarees , and food items, such as Dosa mix, Idli mix, Vada mix, Sambhar mix, Gulab Jamun mix, Papad , and Indian sweets are primarily targeted at the Indian population. � The trade statistics reveal that these products also find customers in major world markets, such as Dubai, Singapore, London, Canada, etc. , which have sizeable ethnic Indian or south Asian population. � Ethnocentrism considers overseas operations as a means of disposing the surplus production thereby giving a secondary or subordinate treatment. � Usually, in ethnocentric approach, goods are manufactured at the home base and decisions are taken at the headquarters. � Generally, in the initial stages of internationalization, most companies adopt ethnocentric orientation, but this approach becomes difficult to sustain once a sizeable market share is achieved.

Ethnocentric Orientation…. � Besides, such a strategy can be used in south Asian markets, where the consumer tastes and preferences are more or less the same. � Fifty years ago, most business enterprises – and especially those located in a large country, such as the United States – could operate quite successfully with an ethnocentric orientation � Today, however, ethnocentrism is one of the biggest internal threats a company faces. � Until the 1980 s, Eli Lilly and Company operated as an ethnocentric company in which activity outside the United States was tightly controlled by headquarters and focused on selling products originally developed for the U. S. market. � Electrolux from many years has followed the ethnocentric approach. � The approach to Globalization reflects the ethnocentric attitude with examples of global companies as Alas Cycles, Hero Cycles, Metro Tyres

Polycentric Strategic Orientation �Strategic decisions are tailored to suit the cultures of the countries where the company operates.

Polycentric Strategic Orientation �Mission is public acceptance (legitimacy) �Subsidiaries set their own strategic objectives. �Subsidiaries use national responsiveness strategies (based on local needs). �Products are based on host country needs. �Most profits are retained by the subsidiary. �Subsidiary makes decisions about its budget and capital investment. �Local citizens are trained for key positions.

Polycentric Orientation � Polycentric Orientation Contrary to the ethnocentric approach, polycentric approach is highly market-oriented. � It is based on the belief that substantial differences exist among various markets. � Each market is considered unique in terms of its market environment, such as political, cultural, legal, economic, consumer behaviour , market structure, etc. � The marketing mix decisions as well as product development strategies, pricing strategies, etc. involve local experts and are different for different countries � The decentralization of marketing activities is highest in polycentric orientation. � Although polycentric approach is highly market oriented, it generally needs more corporate resources, little co-ordination among various affiliates, and duplication of certain activities.

Polycentric Orientation…. � Besides, economies of scale is hardly achieved in any corporate house. � This assumption lays the groundwork for each subsidiary to develop its own unique business and marketing strategies in order to succeed. � Citicorp’s financial services around the world operated on a polycentric basis. � Walmart, Barclays Bank, Coco Cola appoints hosts Nationals.

Regiocentric Strategic Orientation �The firm tries to balance its own interests with the interests of its subsidiaries on a regional basis.

Regiocentric Strategic Orientation � Mission is profitability and public acceptance. � Strategy is based on regional integration and national responsiveness. � Strategic objectives are negotiated between regional headquarters and subsidiaries. � Regional product, often with local adaptations � Most profits are retained in the region. � Capital investment decisions are made on a regional basis. � Managers are trained for key positions anywhere in the region.

Regiocentric Orientation � A firm treats a region as a uniform market segment and adapts a similar marketing strategy within the region but not across the region. � Depending upon the convergence of market behaviour on the basis of geographical regions, a similar marketing strategy is used. � Region becomes the relevant geographic unit (rather than by country) � Management orientation is geared to developing an integrated regional strategy. Example European Union , NAFTA � For example, Mc. Donald’s strategy to not to serve pork and to slaughter animals through the halal process is followed only in the Middle East or Muslim-dominated countries and can be termed as Regiocentric. � For example, a U. S. company that focuses on the countries included in the North American Free Trade Agreement (NAFTA) – the United States, Canada, and Mexico – has a Regiocentric orientation. � Similarly, a European company that focuses its attention on the EU or Europe is Regiocentric. � Oracle employs 3200 Indian Citizens playing the Regiocentric Approach

Geocentric Strategic Orientation �The company uses a global approach to decision making.

Geocentric Strategic Orientation…. �Mission is profitability and public acceptance. �Strategy is global integration and national responsiveness. �Strategic objectives are negotiated among subsidiaries, regions, and headquarters. �Global product, with local variations

Geocentric Strategic Orientation…. �Headquarters redistributes profits among subsidiaries to meet capital investment and budget needs. �The best managers are developed for key positions anywhere in the world. �Combines best features of geocentric and polycentric strategies. �Requires more coordination and communication than other strategies. �Coca-Cola accept geocentric approach. It operate 195 Countries & 2/3 of its 31000 work outside USA and mostly managed by other than Americans. �Gillette have managers from France, Egypt & Other Countries.

Geocentric Orientation � The geocentric approach considers the whole world as a single market and attempts to formulate integrated marketing strategies. � A geocentric orientation identifies similarities between various markets and formulates a uniform marketing strategy. � The companies that follow the geocentric approach strive to analyze and manage the marketing strategy with integrated marketing programmes. � The geocentric orientation represents a synthesis of ethnocentrism and polycentrism; it is a “worldview” that sees similarities and differences in markets and countries and seeks to create a global strategy that is fully responsive to local needs and wants.

Differences in Orientation…. � The ethnocentric company is centralized in its marketing management, the polycentric company is decentralized, and the regiocentric and geocentric companies are integrated on a regional and global scale, respectively. � A crucial difference between the orientations is the underlying assumption for each. � The ethnocentric orientation is based on a belief in home-country superiority � The underlying assumption of the polycentric approach is that there are so many differences in cultural, economic, and marketing conditions in the world that it is impossible and futile to attempt to transfer experience across national boundaries.

Permutter’s International States of mind vs Barlett & Ghosal’s Typology � International Stage-Company’s orientation continues to be ethnocentric as the company follows same strategies, products, promotion and distribution policies in all countries. Thus it practices only extension of same strategies. � Multinational Stage-The company formulates unique strategy for each country which is referred to as multinational operation. � This stage emanates out changed orientation from ethnocentric to polycentric mindset of the company. � Thus Multinational companies respond to difference in environments of host countries and evolve different strategies to deliver satisfaction to customers in different nations. � They adjust the marketing mix elements like product price, price and promotion in manner that suit to satisfy the country consumers. � Global Stage-Companies will tend to be characterised by a mix of ethnocentric and polycentric approach. � In Global Operation key activities are sourcing & marketing. � Transnational Stage-Companies by a geocentric attitude as key assets of Transnational company are dispersed, interdependent and specialised.

Key Information -Three Global Attitudes

Quote-2 “"The most serious mistakes are not being made as a result of wrong answers. The truly dangerous thing is not asking the right questions. " Dr Ravindra Pratap Gupta

Question � Q 1. Discuss the Orientation of Management & Companies EPRG Model?

Thanks

Assignment-1

Case for Discussion � Take an example of Indian Company discuss Orientation of Management Company & EPRG Model. Which model you consider the best & why discuss?

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