The way businesses and staff view the world is described as international management orientations. Howard Perlmutter identified a way of classifying alternative management orientations, which is commonly referred as Perlmutter’s EPRG model. He states that businesses and their staff tend to operate in one of four ways:
These people or companies believe that the home country is superior. When they look to new markets they rely on what they know and seek similarities with their own country. Overseas subsidiaries or offices in international markets are seen as less able and less important than the head office. Typically, these companies make few adaptations to their products and undertake little research in the international markets.
In these companies, opportunities outside the home country are ignored. Such companies are also sometimes referred to as domestic companies. Ethnocentric companies that do business outside the home country can be described as international companies; they adhere to the notion that the products that succeed in the home country are superior and can, therefore, be sold everywhere without adaptation.
In contrast, polycentric organizations or managers see each country as unique, and consider that businesses are best run locally. Polycentric management means that the head office places little control on the activities in each market, and there is little attempt to make use of any good ideas or best practices from other markets.
The term polycentric describes management’s often-unconscious belief or assumption that each country in which a company does business is unique. This assumption lays the groundwork for each subsidiary to develop its unique business and marketing strategies in order to succeed. The term multinational company is often used to describe such a structure.
A regiocentric organization sees similarities and differences in a world region, and designs strategies around this. Often there are major differences between countries in a region. For example, Norway and Spain are both in Europe, but are very different in climate, culture, transport, retail distribution, and so on.
For example, a US company, which focuses on countries included in the North American Free Trade Agreement (NAFTA)- the United States, Canada, and Mexico, has a region-centric orientation. Similarly, if companies of ASEAN member countries focus only on South East Asia, then they are said to have regiocentric orientation.
Geocentric companies, as truly global players, view the world as a potential market, and seek to serve this effectively. Geocentric management can recognize the similarities and differences between the home country and the international markets. It combines ethnocentric and polycentric views; in other words, it displays the “think global, act local” ideology.
The geocentric orientation represents a synthesis of ethnocentrism and polycentricism into a ‘world view’ 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. The case of European Silicon Structures illustrates the practice of geocentric organizations.