Chapter 2 International human resource management

Review and reflect question 1 and HRM in practice 2.1

What are some of the likely advantages and disadvantages of companies pursuing an ethnocentric, polycentric or geocentric approach to internationalization?

Perlmutter’s EPG profile is a neat way to categorize the approaches adopted to internationalization by multinational companies (MNCs). There are likely to be a number of advantages and disadvantages to each of the approaches and as suggested by HRM in practice 2.1 these can vary significantly between MNCs. For those companies adopting an ethnocentric approach the obvious advantage is the ability to retain tight control over overseas subsidiaries, especially in terms of attempting to transfer organizational culture or HRM practices, something which was apparent in Swedco. This strategy also potentially allows for managers to develop their skills in an overseas posting, a process that is part of a broader management development approach. On the other hand there are several disadvantages. The use of home country expatriate managers could cause a good deal of resentment in the host country and may be seen as a very imperialistic device, especially where the home country has previously had a colonial relationship with the host country, something illustrated in the Frenco example. More pragmatically, host country employees and managers may also feel very strongly about the lack of local career development opportunities. A number of these concerns are clearly alleviated by a polycentric approach, which allows local employees and managers a good deal of autonomy in operationalizing MNC strategies in local subsidiaries. This approach also allows for career advancement for local nationals. The obvious disadvantage of a polycentric approach is the potential loss of control over the subsidiaries operation. In an