Management Orientations

EPRG Concept

• The orientation of a company’s personnel affects ability of a company to adapt to any foreign

marketing environment• The behavioural attributes of a firm’s management

in casual exports to global markets can be described under the EPRG:

(a). Ethnocentric Orientation

(b). Polycentric Orientation, and

(c). Geocentric Orientation• 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.

RegiocentricSees similarities and

differences in a world region; is ethnocentric or polycentric in its

view of the rest of the world

EthnocentricHome country is superior; sees similarities in

foreign countries

GeocentricWorldview; sees similarities and

differences in home and host countries

PolycentricEach host country is unique; in

foreign countries

Orientation of management & Companies

(a). Ethnocentric Orientation

• The belief witch 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

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 home-country 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 market for similar products and consumers with similar tastes and preferences.

• 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• 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• Besides, such a strategy can be used in south

Asian markets, where the consumer tastes and preferences are more or less the same.

• Nissan’s ethnocentric orientation was quite apparent during its first few years of exporting cars and trucks to the United States• Designed for mild Japanese winters, the vehicles

were difficult to start in many parts of the United States during the cold winter months

• In northern Japan, many car owners would put blankets over the hoods of their cars

• Nissan’s assumption was that Americans would do the same thing

• Until the 1980s, 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• 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.

(b). 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• 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

• Until recently, Citicorp’s financial services around the world operated on a polycentric basis

• James Bailey, a Citicorp executive , offered this

description of the company: “We were like a medieval state• There was the king and his court and they were in

charge, right? No• It was the land barons who were in charge• The king and his court might declare this or that,

but the land barons went and did their thing.”

(c). 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• For example, McDonald’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.

(d). 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• A regiocentric manager might be said to have a

worldview on a regional scale; the world outside the region of interest will be viewed with an

ethnocentric or a polycentric orientation, or a combination of the two • Jack Welch’s quote at the beginning of this chapter

that “globalization must be taken for granted” implies that at least some company managers must have a geocentric orientation•

• However, some research suggests that many companies are seeking to strengthen their regional

competitiveness rather than moving directly to develop global responses to changes in the

competitive environment• 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.