Internationalization Process

In the article form the executive’s extend there are two hypothesis that describes an interest for a multinational company, first that there is a long term viability of a multinational company, and second is that these MNC contribute positively on a region’s growth in terms of the constructive impact.

Basically there are three mind set in the executive’s mind while building the MNC, the first is ethnocentric (E ) (where they believe that the executives should be from home country), the another is polycentric (P) (where the company appoints local foreigners as the company believes that they can understand the market better as they are locals), and the third is geocentric (G) (world-oriented where the executive seek the best talent and treats everyone equally).

Mostly, R&D turns out to be ethnocentric, Marketing is polycentric, and the company adopts the EPG mix as per the requirement. Now a days, most of the firms senior executive practice the geocentric as they want to promote the best deserving person irrespective of their nationality or any other factor. One of the obstacle in this is from political and economic issues from the local country.

Ethnocentric payoff are for the short term as there is faster communication, transparency and local knowledge. But when Ethnocentric is practiced for the global market, there can be a gap to understand the foreign market. While the geocentric accounts most of its cost for communications and travel expenses.

The IBM World Trade president Jacques who is a French-born explained that a company needs to select whether they want to grow, expand or decline when they are mobilizing their resources. He emphasized that the future belongs to the geocentric companies.

To make a company geocentric, many US firms are promoting non-nationals at senior executive positions.