Topic :

INTERNATIONAL ORINATATION

BENSHA C SHAJI 2nd Year B.B.A LLB Roll. No : 10

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

There are four (4) orientations are :E

P RG

thnocentric Approach olycentric Approach egiocentric Approacheocentric 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 .

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.

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.

Managing Director

Manager R&D

Manager Marketing

Manager Production

Manager Finance

Manager H.R.

A.M

A.M

A.M

A.M

A.M

A.M

A.M

A.M

A.M

A.M

A.M

A.M

A.M

A.M

A.M

Ethnocentric Orientation

Polycentric ApproachAs 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.

Companies establish foreign

subsidiary and empowers its

executivesMarketing is

normally characterised

by the ADAPTATION STRATEGY

Polycentrism is multi national orientation.

Polycentrism is more or less

the opposite of Ethnocentric Approach

Managing Director

Manager R&D

Manager Marketing

Manager Production

Manager Finance

Manager H.R.

A.M

A.M

A.M

A.M

A.M

A.M

A.M

A.M

A.M

A.M

A.M

A.M

A.M

A.M

A.M

C.E.OSubsidiary

Home CountryPolycentric Orientation

Regiocentric ApproachA 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.

More Economical

and Manageable

Subsidiaries consider regional environment for policy/ strategy

formulation

Providing improved

coordination and control

Regiocentrism is regional

orientation

Managing Director

Marketing Marketing Marketing

C.E.OSubsidiary

Home Country

ManagerR&D

ManagerFinance

ManagerProduction

Manager H.R.

ManagerMarketing

Regiocentric Orientation

Geocentric ApproachA 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.

Geocentrism is global

orientation.

Companies views the

entire world as a single

market.

National environmental

constraints may restricts

multinational operations and

make the approach unfeasible

Managing Director

SubsidiaryU.K Subsidiary

GERMANYSubsidiary

U.S.ASubsidiaryENGLAND

SubsidiaryCANADA

Home CountryGeocentric Orientation

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

Ethnocentric Polycentric Regiocentric GeocentricManagement 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 homeand 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

THE END