Page 236 - DMGT545_INTERNATIONAL_BUSINESS

Unit 12: Basics of International HRM

can be greater still if, as often occurs, expatriate managers are paid significantly more than notes
host-country nationals.
Second, an ethnocentric policy can lead to “cultural myopia,” the firm’s failure to
understand host country’s cultural differences that require different approaches to
marketing and management. The adaptation of expatriate managers can take a long time,
during which they may make major mistakes. For example, expatriate managers may fail
to appreciate how product attributes, distribution strategy, communications strategy, and
pricing strategy should be adapted to host-country conditions. The result may be costly
blunders. They may also make decisions that are ethically suspected simply because they
do not understand the culture in which they are managing. In one highly publicized
case in the United States, Mitsubishi Motors was sued by the Federal Equal Employment
Opportunity Commission for tolerating extensive and systematic sexual harassment in a
plant in Illinois. The plant’s top management, all Japanese expatriates, denied the charges.
The Japanese managers may have failed to realize that the behaviour that would be viewed
as acceptable in Japan was not acceptable in the United States.

Did u know? It is still a widespread practice in MNCs, to fill key positions with home
country nationals.
2. The Polycentric Approach: A polycentric staffing policy recruits host-country nationals
to manage subsidiaries while parent-country nationals occupy key positions at corporate
headquarters. In many respects, a polycentric approach is a response to the shortcomings
of an ethnocentric approach. One advantage of adopting a polycentric approach is that the
firm is less likely to suffer from cultural myopia. Host-country managers are unlikely to
make the mistakes arising from cultural misunderstandings to which expatriate managers
are vulnerable. A second advantage is that a polycentric approach may be less expensive to
implement, reducing the costs of value creation. Expatriate managers can be very expensive
to maintain.
A polycentric approach also has its drawbacks. Host-country nationals have limited
opportunities to gain experience outside their own country and thus cannot progress
beyond senior positions in their own subsidiary. As in the case of an ethnocentric policy, this
may cause resentment. Perhaps the major drawback with a polycentric approach, however,
is the gap that can form between host-country managers and parent-country managers.
Language barriers, national loyalties, and a range of cultural differences may isolate the
corporate headquarters staff from the various foreign subsidiaries. The lack of management
transfers from home to host countries, and vice versa, can exacerbate this isolation and lead
to a lack of integration between corporate headquarters and foreign subsidiaries. The result
can be a “federation” of largely independent national units with only nominal links to
the corporate headquarters. Within such federation, the coordination required to transfer
core competencies or to pursue experience curve and location economies may be difficult
to achieve. Thus, although a polycentric approach may be effective for firms pursuing a
localization strategy, it is inappropriate for other strategies.

The federation that may result from a polycentric approach can also be a force for
inertia within the firm. After decades of following a polycentric staffing policy, food and
detergents giant Unilever found that shifting from a strategic posture that emphasized
localization to a transnational posture was very difficult. Unilever’s foreign subsidiaries
had evolved into quasi-autonomous operations, each with its own strong national identity.
These ‘little kingdoms’ objected strenuously to corporate headquarters’ attempts to limit
their autonomy and to rationalize global manufacturing.
3. The Geocentric Approach: A geocentric staffing policy seeks the best people for key
jobs throughout the organization, regardless of nationality. This policy has a number of

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