ETHNOCENTRIC AND POLYCENTRIC APPROACH FOR INTERNATIONAL BUSINESS

RUCHIR KELKAR

ROLL NO C-27

INTERNATIONAL BUSINESS

In International Business, marketing, HRM is one of the main important element to market the company as well as marketing of the products. Generally the companies follows the four important approaches, that four important approaches are given as follows, from which I am going to explain only two approaches in detail that are Ethnocentric and Polycentric and these two are based on HRM perspective in this assignment.

Four Approches

Ethnocentric

Polycentric

Regiocentric

Geocentric

Regiocentric approach: It means the managing the business according to the locations. It includes some natural boundaries and continents like Asia, Africa, Asia-Pacific, and European Union.

Geocentric approach: This manager sees the one world as a big market so he does not separates the domestic market from international market.

Remaining two are explain in detail as follows,

Ethnocentric approach: When a company follows the strategy of choosing only from the citizens of the parent country to work in host nations, it is called an ethnocentric approach. Normally, on higher-level foreign positions are filled with expatriate employees from the parent country. The general idea behind the ethnocentric approach is that the staff from the parent country would represent the interests of the headquarters effectively and link well with the parent country. The recruitment process involves following stages: Self-selection, creating a candidate pool, technical skills assessment, and making a mutual decision. Self-selection involves the decision by the employee about his future course of action in the international arena. In the next stage, the employee database is prepared according to the manpower requirement of the company for international operations. Then the database is analysed for choosing the best and most suitable persons for global assignments and this process is called technical skills assessment. Finally, the best candidate is identified for foreign assignment and sent abroad with his consent.

Features of ethnocentric approach: 1. Key decisions are centralised. 2. Control and Loyalty towards home country. 3. Equal corporate culture among all the subsidiaries.

Disadvantages of ethnocentric approach: 1. Different promotional strategies as per the home and subsidiaries market. 2. Managers are not able to adopt conditions easily as per the market changes. 3. Poorly trained managers for the assignments.

Example of ethnocentric approach:

In this example the main parent company is in US and the following subsidiaries is in Mexico so we can see that the US company sending their top level management in Mexico to apply same work culture in their subsidiary. Because they feel that home country management is much more superior to their subsidiary.

Polycentric Approach: When a company adopts the strategy of limiting recruitment to the nationals of the host country (local people), it is called a polycentric approach. The companies adopt this approach to reduce the cost of foreign operations gradually. Even those organizations which initially adopt the ethnocentric approach may eventually switch over to the polycentric approach.

The main purpose of hiring local people from subsidiary country is to ensure that the company understands the local market conditions, political scenario, cultural and legal requirements better.

The companies that adopt this method normally have a localized HR department, which manages the human resources of the company in that country. Many international companies operating their branches in advanced countries like Britain and Japan predominantly adopt this approach for recruiting executives lo manage the branches."

Features of polycentric approach: 1. It eliminates the high costs of expatriates the managers. 2. Degree of autonomy in decision making to subsidiaries head. 3. Better approach to adopt the local needs.

Disadvantages of polycentric approach: 1. Loose control over subsidiaries. 2. Home countries manager tend to loose gaining exposure in overseas market.

Example of polycentric approach:

In this example the main parent company is in Australia and its subsidiary is in India so we can see that main parent company appointing the management from the India because they believe that Indian individuals vary much know about the Indian culture, political background also the market conditions. So the management in hands of the Indian people.

Bibliography:

www.wikipedia.com

www.whatishumanresource.com