Ethnocentrism Case Study

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Differing levels of ethnocentric management for international organizations Howard V. Perlmutter introduced the world with his EPG model, an international business model having 3 dimensions: ethnocentric, polycentric and geocentric. While ethnocentrism is of the view that a particular ethnic group's, in this case ethnic group of the home country, system of beliefs and values is morally superior to all others, under a polycentric perspective, the company believes that in international business practices, local preferences and techniques are usually found apt to deal with conditions in the local market. Compared to ethnocentric and polycentrism, geocentrism does not show a bias to preferences of either the host or home country but rather…show more content…
Apart from geographic distance, a lack of day-to-day relationships with headquarters usually represents a major challenge to multinationals. It is very important, hence, to give special attention to the staffing process in these overseas units and subsidiaries. A company can staff its foreign unit in 3 ways: 1. The company can send employees from its home country, referred to as expatriates or home country nationals. 2. It can recruit host country nationals (natives of the host country) 3. It can hire third country nationals, natives of a country other than the host country or the home country. Companies following the ethnocentric approach assume the home country approach is best and employees from other parts of the world should follow it. Managers from headquarters develop practices and also hold key positions in the subsidiaries to ensure consistency. Some of its advantages & disadvantages are: Advantages Disadvantages • Ability to transfer the headquarters' culture to the foreign operation (ensuring central beliefs throughout the organization). • Communication is also easier since there is no language/culture barrier • Greater ability of expatriates to transfer know-how from the parent to the subsidiary. • Rapid substitution of expatriates…show more content…
There are many cases in which companies made terrible errors when they attempted to transfer their management styles to foreign countries. One of them is, Procter & Gamble Co. who lost $25 million in Japan between the years 1973 and 1986 because the company ran ads for its Camay soap, which worked well in the United States and other countries but failed miserably in Japan. In fact, the ad infuriated the Japanese people, who refused to buy the soap. The Procter & Gamble executives learned a lesson, but at a high cost. The main reason why many organizations still represent varying degrees of ethnocentric orientation is because the U.S. market still generates a very high demand on goods and services An absence of ethnocentric way is against the goal of global competitiveness since a company that relinquishes complete control over subsidiaries to local management is in a way cut off from those subsidiaries and cannot know and implement global best

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