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Approaches of I.B.

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18 views8 pages

Approaches of I.B.

Uploaded by

suchita
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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INTERNATIONAL

BUSINESS
APPROACHES
International business approaches are similar to the
stages of internationalization or globalization. Douglas
Wind and Pelmutter advocated four approaches of
international business.

They are:
1) Ethnocentric
2) Polycentric
3) Regiocentric
4) Geocentric
Ethnocentric Approach

The domestic companies normally formulate their


strategies. Their product design and their operations
towards the national markets, customers and competitors.
But, the excessive production more than the demand for
the product, either due to competition or due to changes in
customer preferences push the company to export the
excessive production to foreign countries.

The domestic company continues the exports to the


foreign countries and views the foreign markets as an
extension to the domestic markets just like a new region
The company exports the same product designed
for domestic markets to foreign countries under
this approach.

Thus, maintenance of domestic approach towards


international business is called ethnocentric
approach.
Polycentric Approach

The domestic companies, which are exporting to foreign


countries using the ethnocentric approach, find at the
latter stage that the foreign markets need an altogether
different approach. .

Then, the company establishes a foreign subsidiary


company and decentralists all the operations and
delegates decision making and policy-making authority to
its executives.
In fact, 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 the
people of the host country fill all other vacancies.
Regiocentric Approach

The company after operating successfully in a foreign


country, thinks of exporting to the neighboring countries
of the host country.

At this stage, the foreign subsidiary considers the


regions environment (for example, Asian environment
like laws, culture, policies etc.) for formulating policies
and strategies.

However, it markets more or less the same product


Geocentric approach

Under this approach, the entire world is just like a single


country for the company. They select the employees from
the entire globe and operate with a number of
subsidiaries.

The headquarter coordinates the activities of the


subsidiaries. Each subsidiary functions like an
independent and autonomous company in formulating
policies, strategies, product design, human resource
policies, operations etc.

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