What is the difference between a polycentric, ethnocentric, and geocentric approach to international management? What key factors should a firm consider before adopting one of these approaches?
Answer: In polycentric organizations, control is decentralized. In other words, business units in different countries have a significant degree of autonomy from the home office and act like local companies. Polycentrism may be, however, an overly cautious response to cultural variety. Ethnocentrism is the belief that one's own culture is superior to others. In international business, it describes a company or individual so taken with the belief that what worked at home should work abroad that environmental differences are ignored. Geocentrism refers to a situation in which a company bases its operations on an informed knowledge of home and host country needs, capabilities, and constraints. This is the preferred approach to business dealing with another culture because it increases introduction of innovations and decreases the likelihood of their failures. In deciding whether to make changes in either home- or host-country operations, a company should consider several factors: the importance of the proposed changes to every party involved, the cost and benefit to the company of each proposed change, the value of opinion leaders in implementing the changes, and timing.