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What is a global vs.

multidomestic
industry?
In global industries, competitors compete in all markets and offer uniform (standardized)
products. In multi-domestic industries, firms compete in each national market
independently of other markets.
Companies such as GE, Apple, Sony and Gillette pursue a global strategy by competing
in all markets, providing the same product for each market, strong centralized control,
identifying customer needs and wants across international borders, and locating value
adding activities where they can achieve the lowest cost.
A global strategy is effective when differences between customers in countries are small
and competition is global.
A multi-domestic strategy involves producing products/services tailored to individual
countries. Following this strategy innovation comes from local R&D; managers
decentralize decision making; and encourage local sourcing. This strategy may result in
higher production costs because of tailored products and duplication of effort across
countries.
Four drivers determine which strategy is best for a specific company.
1) Market drivers like degree of homogeneity of customer needs, global distribution
networks, opportunities for shared marketing.
2) Cost drivers like potential for economies of scale, transportation cost, and product
development costs.
3) Government/political drivers like trade policies, compatible technical standards and
common marketing regulations, ownership rules.
4) Competitive drivers. The more that competitors and customers are following a global
market strategy the greater the tendency for a ll firms in industry to follow a
differentiated globalization strategy.

Why are some industries multidomestic?


1) Customized products are needed in some countries
2) National competitors are common
3) Countries have unique distribution channels
4) There are no or few economies of scale
5) Local/national firms have some inherent advantages in the host country over global
competitors
Why are some industries global?
1) Homogenized product needs across markets
2) Customers are global firms
3) High R&D expenditures require more than one market to recover development costs
4) There are many economies of scale in production, international logistics, or
marketing
5) The firm has global product differentiation, proprietary product technology, and
production mobility.
The following are examples of industries where many competitors have a global market
strategy and are considered global industries: Aircraft, Energy, Entertainment, Media,
and Communications, Financial Services, Information Technology, Clothing/shoes, Ship
building and Fast Food.
Multidomestic industries include cutlery and hand tools, railroads, structural metal
products, personal care, bedding and furniture.
A multidomestic industry virtually all company value-added activities are located in a
single country. Until recently, a perfect example of this was the funeral industry which
operated within nations. The simple global industry has some or limited external
linkages, but the focus remains on the domestic market. Integrated global activities
occur when value-added activities of firms are significantly driven by the need for global
scale. Finally, industries that are highest on globalization are ones where companies
integrate most or all value-added activities with similar industries in other countries.

Multidomestic
Examples:
McDonalds
In 1955, McDonald's opened its first restaurant in Des Plaines, Illinois. Today, 2008, it
operates over 31,000 restaurants worldwide, in 119 countries, on six continents,
employing more than 1.5 million people all over the world. I consider McDonalds a
multidomestic company because they adjust to the cultures of their host countries. This
is most seen in their branch in India. Cows are held sacred in the Indian religion of
Hinduism which is why McDonalds India doesnt serve beef. Can you imagine? A
McDonalds restaurant without beef? Indian McDonalds burgers are purely vegetarian
and they serve several other products that are 100% beef free like several kinds of
wraps and pans. We see this aspect of McDonalds even here in the Philippines where
they serve rice burgers.

McDonalds
Im lovin it! Those famous golden arches are recognizable from miles away. This
leading global corporation stands out because of its brand management, global
presence, leadership in sustainable practices and consumer interaction.
Their glocal initiatives (global brand that caters to each market with their specific items)
is what makes McDonald's such a powerhouse chain.
Below are some examples of McDonalds tasty glocal marketing initiatives:

Middle East: McArabia, chicken flatbread sandwich


Germany: McCroissant sandwich
Eastern Canada: Seasonal McLobster sandwichthe list goes on!

Coca Cola is a large, U.S.-based multinational corporation based in Atlanta, Georgia.


Coca Cola has a large market presence in scores of countries around the world. Their
offerings range from Coke to Fanta to a host of other products. The products sold in
different countries are tailored to meet the consumer demand in each specific country.
Coca Cola has locally based operations in countries in which it has significant sales. In
addition, before Coca Cola started buying its bottlers to cut costs, the majority of its
bottlers were locally owned.
Procter & Gamble has followed a multi domestic strategy. The R&D unit at its
Japanese subsidiary, responding to the low storage space in the typical Japanese
home, invented technology that reduced the thickness of an infant's diaper without any
loss of absorbency. This innovation created value for Procter & Gamble in Japan and,
eventually, for Procter & Gamble worldwide.

A multinational corporation or company (MNC) is an enterprise or corporation which


is involved in the manufacture of goods and services in two or more countries. It is also
known as an international corporation or company. Its headquarters is located in a
certain country which is called its home country, and it has offices in several other
countries called the host countries where it also operates. It must adhere to the policies
of the host countries and adapt its products to cater to the needs of the host countries.
They are usually companies that have already made a name in the market for their
particular product and are equipped with a huge financial capability to expand to other
countries.

An

example

of

an

MNC

is

Adidas.

Global companies sell the same products or services in every market using the same
image and maintaining the characteristics that their companys products are popular of.
An example of a global company is McDonalds which has stores in most parts of the
world.

Summary:
1.A multinational corporation, or MNC, is a company which produces
goods and services and has offices in several other countries while a
global corporation or company is a company which also has trade
relations

with

several

other

countries.

2.MNCs usually pay local workers a lower salary rate than global
companies.
3.MNCs have official headquarters while global companies do not.
4.Global companies sell the same product with their characteristic
image while MNCs adapt their products to the needs of the host
countries.

Ethnocentric Orientation:

Present Day Politics


To solidify the definition of ethnocentrism, looking at the present day politics of the
United States is helpful. With instances occuring since its conception, the United States
has often thought of itself as more powerful, more economically sound, and just
generally "better" than other nations. This has been shown by the country's tendency to
dabble in situations occuring in other nations, such as the country's current involvement
with affairs in the Middle East.
Although the idea of every citizen in the United States belonging to one ethnicity is
certainly debatable, since the country has citizens who originally came from all over the
world, the feeling of national pride can stand in for a pure ethnicity in this case.

The Mandate of Heaven


One of the most prominent examples of ethnocentrism was the Sinocentric system
developed out of the idea of the "Mandate of Heaven" proliferated by the Chinese
philosopher Confucias. The "Mandate of Heaven" meant that the Chinese felt that they
had received divine power which entitled them to exert heavy rule over the citizens, and
that they had power over the rest of the world. In fact, the Emperor was referred to as
the "Son of Heaven" exemplifying the intense control he had over the people.
While this system of government formally ended in the nineteenth century, some
scholars believe that the Chinese ethnocentrism lives on.
Polycentric Orientation:
Polycentric Approach
A company following this orientation gives an equal importance to every countrys domestic market,
as there is a belief in uniqueness of every market and its need to be addressed in an individual way.
The plans are devised to operate through individually established businesses, i.e. either by wholly
owned subsidiaries or through marketing subsidiaries, separately in each country, allowing complete
autonomy to units to operate as separate profit centres independent of head office (Paul,
2008).When following this approach a company has to be a leader in technological leadership,
produce high quality products or its production costs should be very low. It can also concentrate its
attention on foreign markets which have similar consumer needs and conditions similar to domestic
market. Among disadvantages of this orientation is low possibility of the economies of scale, high
prices of products due to high investments in the research of foreign markets and adaptation of
products to the needs and wants of particular countries. Examples of companies marketing their
brands according to this approach are: Ford Motors, Suzuki, Toyota, General Motors, Nissan, etc.
all these companies adapt their brands to specific needs of each countrys consumer.

Regiocentric Approach
In this approach segmentation of the markets is fulfilled on the basis of similarities in terms of
regions. A company finds economic, cultural or political similarities among regions in order to cover
the similar needs of potential consumers. For example, countries of former USSR can form one
group as needs and tastes of consumers of these countries are very similar as they were
representatives of one nation not so long ago. The same products and strategies can be used in
such set of countries like Denmark, Norway, Finland and Sweden or Pakistan, Bangladesh and India
as they possess a strong regional identity and belong to the same cultural dimensions. Pepsi and
Coca-Cola are examples of international companies which are successfully using this international
marketing orientation.
Geocentric Approach
This orientation favours neither home country nor foreign countries where the company operates. It
is also called a global approach the main idea of which is to target global consumers who have
similar tastes. The main idea of this orientation is to borrow from every country what is best. The
limitation is that it fully depends on constant global market research, which requires a lot of
investment and time. This approach is for companies with an impressive capital that want to
become world leaders... , in this quest ...manufacturers offer homogeneous, identifiable and often
interchangeable services and products in order to integrate them for worldwide operational
efficiency (Paul, 2008). The European Silicon Structures is a pure example of geocentric
international marketing orientation: the company is incorporated in Luxembourg, its headquarter was
established in Munich, research facilities are in England, and France has its factory; the company
went even further by assigning its eight directors from seven different countries.

ETHNOCENTRIC MANAGEMENT ORIENTATION


Management holding an ethnocentric orientation believes that its home country is
superior to any other country in the world regardless of any evidence to the contrary. An
ethnocentrically oriented manager may think: since a product or a service performed
well at home, it should also perform well abroad. Since this is so obvious, no further
research is necessary on foreign markets and no adaptations need to be made to the
products or services to tailor them to global customer preferences and needs. Some
companies are so ethnocentric that they choose to ignore foreign opportunities in the
first place. These companies are called domestic companies. Other companies holding
an ethnocentric orientation do choose to conduct business outside of their home country
and are called international companies. Ethnocentrically oriented international
companies believe that anything that has worked at home must also work abroad. A
company holding this viewpoint would be likely to ignore local managers within different
countries who voiced an opinion contrary to the norm of the home-country. For
example, a local manager may wish to change an advertisements background-color
from white to red since, in his country, white signifies death whereas red signifies
wealth. An ethnocentrically oriented company might ignore this valuable piece of
information. Since white was chosen over red in focus groups inside of the United
States, white must be preferred to red universally regardless of where the product is
being sold.
POLYCENTRIC MANAGEMENT ORIENTATION
Management holding a polycentric orientation, on the other hand, believes that each
country is unique and therefore it allows its subsidiaries to have more control in
developing strategies that will work in a particular country. Since each country is so
unique, complete control should be given to local managers since they obviously know
what is best for the company in that country. As long as these subsidiaries are
profitable, headquarters is apt to leave them alone. Let the Romans do it their way. We
really dont understand what is going on here, but we have to have confidence in them.
As long as they earn a profit, we want to remain in the background (Perlmutter, 2001).
Though an improvement over a purely ethnocentric view, a purely polycentric one has
its flaw in that headquarters and subsidiaries are somewhat cut off from one another.
Headquarters steps aside in the belief that it can not possibly understand local business
processes and foreign subsidiaries are glad that headquarters does not interfere as
they can not possibly understand the local market. So while a polycentric viewpoint is
an improvement over an ethnocentric one in that a company realizes that strategies
should be tailored for specific markets, it does not take into account the potential
benefits of taking a more active role in the running of subsidiaries in those differing
markets. Lastly, it should be noted that though it is realized that each country is
different, the polycentric viewpoint often leads to ethnocentricity within each region
where the company operates. Thus, though a company based in New York will gives its
India-based subsidiary complete control over a project, management still believes that
the home-country is superior.

GEOCENTRIC MANAGEMENT ORIENTATION


Management holding a geocentric orientation believes that the entire world is a potential
market and strives to develop strategies that will work in every market. Instead of stating
that things are inherently different in each market and thus must be handled in a
distinctive manner, a geocentrically oriented company will look for universal as well as
local best practices to help a company thrive in all markets. For example, in a
Polycentric company, management would allow full reign over decision making to take
place at the local level. If that same company began to operate in Switzerland, it would
recreate all business processes based on what the local managers thought. But what if
there were certain things that would work well in both countries? Would it not be more
efficient to leave those processes alone while custom tailoring the processes that really
needed to be differentiated? In geocentrically oriented companies, authority is not
simply placed with headquarters at home or with subsidiaries abroad, but rather a is
dispersed more equally between the two so that a collaboration is formed. Also, a view
of superiority is not based on nationality. A geocentric orientation seeks to find a
compromise between allowing headquarters to do things its way and allowing local
managers to do it theirs. Geocentrism involves a collaborative effort between
subsidiaries and headquarters to establish universal standards and permissible local
variations, to make key allocation decisions on new products, new plants, new
laboratories (Perlmutter, 2001).

Why go Global?

For US-based companies, 75% of sales potential is outside the US.


o About 90% of Coca-Colas operating income is generated outside the US.

For Japanese companies, 85% of potential is outside Japan.

For German and EU companies,

94% of potential is outside Germany.

Ethnocentric Orientation

Assumes home country is superior to the rest of the world; associated with
attitudes of national arrogance and supremacy

Management focus is to do in host countries what is done in the home country

Sometimes called an international company

Products and processes used at home are used abroad without


adaptation

Polycentric Orientation

Management operates under the assumption that every country is different; the
company develops country-specific strategies

Sometimes called a multinational company

Company operates differently in each host country based on that situation

Opposite of ethnocentrism

Regiocentric Orientation

Region becomes the relevant geographic unit (rather than by country)

Management orientation is geared to developing an integrated regional strategy


o European Union

NAFTA

Geocentric Orientation

Entire world is a potential market

Managerial goal is to develop integrated world market strategies

Global companies serve world markets from a single country and


tend to retain association with a headquarters country

Transnational companies serve global markets and acquire


resources globally; blurring of national identity

Acculturation:
Some examples of acculturation:
1) A first generation Italian who lives in an Italian enclave in the United States may
continue to speak just Italian and to follow the norms and mores of his Italian origins.
This person will not have become highly acculturated to American culture.
2) The granddaughter of a Chinese immigrant has gone to American schools and
will now attend an American college. She spends time primarily with her American
friends, dresses as they do and shares their values and interests. She has become
highly acculturated into American culture.

Iceberg Analogy:
1) Above the surface, certain characteristics are visible, but below, unseen to the
observer, is a massive base of assumptions, attitudes and values that strongly
influence decision-making, relationships, conflict and other traits of international
business.
2) 3 layers: High culture, folk culture and deep culture.

Why culture matters in international business:


Managers need to develop not only empathy and tolerance towards cultural differences,
but also acquire a sufficient degree of factual knowledge about the beliefs and values of
foreign counterparts. Cross-cultural proficiency is paramount in many managerial taks,
including:
1)
2)
3)
4)

Developing products and services


Communicating and interacting with foreign business partners
Negotiating and structuring international business ventures
Preparing for overseas trade fairs and exhibitions

Common examples of how cross-cultural differences may complicate workplace


issues:
1. Teamwork: What do managers do if foreign and domestic nationals dont get
along? Try to sensitize each other to differences and develop and appreciation
for them.
2. Lifetime Employment: Workers in some Asian countries enjoy a paternalistic
relationship with their employers and work for the same firm all of their lives. The
expectations that arise from such devoted relationships can complicate dealings
with outside fiorms. American managers struggle with motivating employees who
expect they will always have the same job, regardless of the quality of their work.
3. Pay-for-Performance Systems: In some countries, merit is often not the primary
basis for promoting employees. In China and Japan, a persons age is the most
important determinant in promoting workers. But how do such workers perform
when American firms evaluate them using performance-based measures?
4. Union-Management Relationships: In Germany, union bosses hold the same
status as top-level managers and are required to sit in on corporate board
meetings. In general, European companies have evolved a business culture in
which workers enjoy a more equal status with managers. This approach can
reduce the flexibility of company operations if union representatives resist
change.

union
A union is an organized group of workers who collectively use their strength to have
a voice in their workplace. Through a union, workers have a right to impact wages,
work hours, benefits, workplace health and safety, job training and other workrelated issues.
How do people form a union?
When workers decide to come together to improve their jobs, they work with a union.
Once a majority of workers shows they want a union, sometimes employers honor the
workers choice. If the workers win union representation, they negotiate a contract with
the employer that spells out each partys rights and responsibilities in the workplace.