If a firm wants to expand its business and want to explore new opportunities in foreign markets, here the approaches of international business help them in grabbing new, opportunities, managing and organizing the business affairs, managing the workforce requirements of a business, strategic planning, and telling them how to run a sustainable and profit-oriented business. Today in this article we give you an overview about what are the approaches of international business, what is international business, and their examples.
► What is International Business?
International Business is defined as any business that operates across international boundaries and trade of goods, services, raw material, knowledge, and capital take place between two or more nations.
International business provides an opportunity to facilitate the trade of goods and services outside of the home country. It is very helpful there for those countries where domestic trade is not sufficient to fulfill domestic consumer’s demands
Also Read : Scope of International Business
► Approaches of International Business
- Ethnocentric Approach
- Polycentric Approach
- Regiocentric Approach
- Geocentric Approach
✔ 1. Ethnocentric Approach
This approaches to international business focus on the values, ethics, and belief of the home country. All the strategies first formulated for the domestic nation or domestic business focus on the international business is secondary.
Businesses first cater to the demand of the domestic market and trade surplus is distributed to a foreign nation. Overseas operations are operated from the head office of the domestic country by domestic employees.
This approach is very beneficial for small businesses during the early days of internationalization as the investment needed in business is low.
There is no major modification in products that will export to a foreign nation and no marketing research conducting. Businesses mainly rely on exporting goods to foreign nations.
◉ Examples of Ethnocentric Approach – Indian clothes, dresses, food, and beverage are exported to foreign nations where a large number of Indian live.
✔ 2. Polycentric Approach
As per this approach, the business focuses on each host country because they consider that each country is unique in terms of customer demand, customer preference, and taste so if businesses want to succeed in each country they should adapt according to the host country’s requirements.
The business opens its subsidiary in each oversea market and businesses adopt different marketing plans and strategies as per the host country’s needs.
The foreign subsidiary has decision-making power and their operation are decentralized.
Businesses appoint personnel the key positions from their home country, whereas the remaining positions or vacancies are filled by the personnel of the host country.
◉ Examples of Polycentric Approach – McDonald, Starbucks, Google Doodle
Also Read : Theories of International Trade
✔ 3. Regiocentric Approach
Under this approach, businesses divide the whole world into different regions based on their common regional, social & cultural environment, economic, and political factors.
Marketing strategies and business plans are formulated in regional headquarters for the entire group of counties or region
Managers are hired or transferred from different countries lying within the same region.
◉ Example of Regiocentric Approach – Firms divide groups or regions on the basis of unique similarities like SAARC countries, the Baltic region, and the Scandinavian region.
✔ 4. Geocentric Approach
According to the Geocentric approach, businesses consider the whole world is the same as one country for their business operation.
Businesses select the best talent from the entire globe and operate with their large number of a subsidiary that is located around the globe that coordinate with the head office.
This approach is used by big business giants which have large-scale business operations and a significant presence around the globe.
The business following this approach has a uniform and standardized marketing strategy, HR practices, and product design throughout the globe.
This international business approach help in building brand image and earning a great amount of loyalty.
◉ Examples of Geocentric Approach – Apple, Coca-cola, Dell