International Business Approaches

The domestic companies normally formulate their strategies

. Their product design and their operations towards the national markets, customers and competitors. But, the excessive production more than the demand for the product, either due to competition or due to changes in customer preferences push the company to export the excessive production to foreign countries. The domestic company continues the exports to the foreign countries and views the foreign markets as an extension to the domestic markets just like a new region. Under ethnocentric approach, the domestic companies view foreign markets as an extension to domestic market. The ethnocentric approach to staffing policy fills key management positions with parent-country nationals

The domestic companies, which are exporting to foreign countries using the ethnocentric approach, find at the latter stage that the foreign markets need an altogether different approach. Then, the company establishes a foreign subsidiary company and decentralists all the operations and delegates decision-making and policy-making authority to its executives. In fact, 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 the people of the host country fill all other vacancies. Under polycentric approach, companies establish foreign subsidiary and empowers its executives. The polycentric staffing policy recruits host country nationals to manage subsidiaries in their own country, and parent country nationals for positions at headquarters it makes sense for firms pursuing a localization strategy

The company after operating successfully in a foreign country thinks of exporting to the neighboring countries of the host country. At this stage, the foreign subsidiary considers the regions environment (for

Example, Asian environment like laws, culture, policies etc.)

Formulating policies and strategies. However, it markets more or less the same product designed under polycentric approach in other countries of the region, but with different market strategies. Under regiocentric approach subsidiaries consider regional environment for policy/strategy formulation.

Under this approach, the entire world is just like a single country for the company. They select the employees from the entire globe and operate with a number of subsidiaries. The headquarter coordinates the activities of the subsidiaries. Each subsidiary functions like an independent and autonomous company in formulating policies, strategies, product design, human resource policies, operations etc

Under geocentric approach, companies view the entire world as a single country. The geocentric staffing policy seeks the best people, regardless of nationality for key jobs

by: govindam

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