CHAPTER: 2

APPROACH USED TO GO FOR INTERNATIONAL BUSINESS

Different Types approaches for International Business

1. Ethnocentric Approaches:

The ethnocentric orientation is an assumption or belief that the home country is superior.
Someone having this orientation sees the similarities in markets, and thus believe that
the products and practices which succeed in the home country are superior and, thus
should be used everywhere. In the ethnocentric company, overseas operations are
viewed as being secondary to domestic and primarily as a means of disposing of surplus
domestic production. Plans for overseas markets are developed in the home office to use
policies and procedures identical to those who are employed at home.

There is no systematic marketing research conducted overseas, there are no major

The company exports the same product designed for domestic markets to foreign
countries under this approach. Hence, maintenance of domestic approach towards
international business is called as ethnocentric approach. This approach is suitable for
the companies during the early days of internationalization and also to the smaller
companies.

Example

Typical example of ethnocentric approach company is Japanese firms such as Panasonic, Sony
And Hitachi.
Mastic’s staff strategy for branches in Thailand, Vietnam, and India adopted the
ethnocentric system for fulfilling the requirement for corporate communication.

2. Polycentric Approach:

The polycentric approach is the unconscious belief that each host country is unique and
different and that the way to succeed in each country is to adapt to each country’s unique
differences. In the polycentric stage, subsidiaries are established in the overseas markets.
Each subsidiary operates independently from the others and establishes its own
marketing objectives and plans. Marketing is organized on a country by-country basis,
where each country has its own unique marketing policy. The domestic companies that
are exporting to foreign countries using the ethnocentric approach find at the latter stage
that the foreign markets need an altogether different approach.

The company establishes a foreign subsidiary company and thus decentralizes all the
operations and delegates’ decision-making and policy making authority to its executives.

In this approach, 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 all the remaining vacancies are
filled by the people of the host country.

Example

McDonald’s is a well-known example of a company. It takes a polycentric approach. Its

3. Regio-centric Approach:

Regio centric Company views different regions as different markets. A particular region
with certain important common marketing characteristics is regarded as a single market.
Economies of scale. Strategy integration, organizational approach and product policy
 tend to be implemented at regional level. Depending the convergence of market behavior
on the basis of geographical regions, a similar marketing strategy is used.

Example:
The companies like Coca-Cola and Pepsi use region-centric orientation techniques.
However, Pakistan and Bangladesh have been lumped together for marketing purposes
as they all utilize the same marketing technique due to their commonalities.

4. Geocentric Approach:

Under this approach, the entire world is same as a single country for the company. They
select the employees from the entire globe and thus operate with a number of
subsidiaries. The headquarter co-ordinates activities of the subsidiaries and each
subsidiary functions like an independent and autonomous company in the formulation of
policies, strategies, product design, human resource policies, operations, etc.

In this approach, the multinational environment takes a global approach to its global
operations which recognise that subsidiary and corporate makes unique contribution
with its unique competency. This is accompanied by a worldwide integrated business &
where nationality is ignored to favor ability.

Example:

Natives from various countries are employed at the UK parent company’s headquarters
and the US subsidiary.
 Approach that we are going for International Business of Cool
Fizzy
We will be using ethno-centric approach to export sugar. The primary reason to use
this approach is that it is a commodity product so there is not much difference in the way
people buy or consume the product. When it comes to companies or services that have to
cater to people and make them use their product or come to their stores, other
approaches like poly- centric approach or regio-centric approaches can be useful.
Because for such companies or products, consumers and their needs and buying
behavior varies.

A McDonald cannot use the same strategy or products to enter and cater other markets
because the nature of the consumer and consumption changes. So it has to change its
menu when it comes to India or any other market. In other approaches, you have to
change your products according to the market, you need to change marketing and
positioning of the company accordingly. But our product i.e. is soft drink, is consumed
in the same manner all across the world. There is no specific need for us to have any
other approach because we don’t need to market the product nor we need to meet
different costumer needs. Soft drink market and consumer behavior is same to a large
extent in all the parts of the world. According to the market and the consumer behavior
we have to change the taste of the cold drink and the packaging also for making it more
attractive for consumer to buy and try it. Also, other companies have variations or types
of different burgers. For example, there many different types of pizzas and burgers, so
one needs to change as per the region or market, but soft drinks can be made a bit
different as per the market there are variants on a larger scale. Hence, there is no need
for us to think of each market as a unique market and develop our strategies and
products accordingly.