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What Is The EPRG Framework? EPRG Framework In A Nutshell

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Feb 28, 2024 #EPRG, #Framework, #Nutshell

The EPRG framework describes the various ways businesses decide to enter and operate in global markets, first introduced in 1969 by globalization expert Howard V. Perlmutter this framework categorizes four orientations or approaches to global marketing and staffing: ethnocentric, regiocentric, polycentric, and geocentric.

EPRG Framework Description Analysis Implications Applications Examples
1. Key Elements (KE) The EPRG Framework is a model used to understand a company’s orientation or approach to international business and global marketing. It categorizes orientations into four main types: Ethnocentric, Polycentric, Regiocentric, and Geocentric. – Identify and categorize the company’s international orientation into one of the four EPRG types. – Assess the company’s degree of global integration and local adaptation. – Consider the impact of the chosen orientation on global marketing strategies and operations. – Provides insights into a company’s global strategy and approach. – Influences decisions regarding market entry, product adaptation, and global marketing campaigns. – Impacts the balance between standardized global strategies and localized approaches. – Global market entry and expansion strategies. – International marketing and advertising campaigns. – Cross-cultural management and global workforce planning. Key Elements Example: A multinational corporation adopts a Geocentric orientation, emphasizing a global mindset, the integration of local expertise, and a balance between global consistency and local adaptation.
2. Ethnocentric (E) Ethnocentric orientation is characterized by a domestic market focus, where the company’s products, services, and strategies are primarily designed for the home market. The company may export excess production but maintains a domestic-centric perspective. – Identify the presence of an Ethnocentric orientation, where the domestic market takes precedence. – Assess the company’s approach to international markets, such as minimal customization for foreign markets. – Consider the potential limitations and opportunities of maintaining an Ethnocentric orientation in a global context. – Maintains a focus on the domestic market as the primary revenue source. – May lead to cost savings by minimizing customization for foreign markets. – May limit opportunities for growth and market penetration in international markets. – Companies with strong domestic market positions exploring international opportunities. – Limited international expansion strategies. – Export-oriented business models. Ethnocentric Example: A family-owned bakery business primarily sells its products in the local market but occasionally exports surplus inventory to neighboring countries without significant customization.
3. Polycentric (P) Polycentric orientation involves adapting products, services, and strategies to the specific needs and preferences of individual foreign markets. Decisions and operations are decentralized, with local subsidiaries having autonomy in decision-making. – Identify the presence of a Polycentric orientation, where customization for foreign markets is a priority. – Assess the level of decentralization and autonomy given to local subsidiaries. – Consider the advantages and challenges of Polycentric orientation in tailoring offerings to diverse markets. – Tailors products and strategies to meet the unique needs of local markets effectively. – Enhances responsiveness to local customer preferences and cultural nuances. – May lead to higher operational costs due to decentralization and customization. – Companies operating in diverse international markets with distinct consumer preferences. – Multinational corporations with subsidiaries adapting products and strategies for local markets. – Customized marketing campaigns for different regions. Polycentric Example: A global fast-food chain adjusts its menu and marketing strategies in each country to accommodate local tastes, cultural preferences, and dietary restrictions.
4. Regiocentric (R) Regiocentric orientation focuses on groups of countries or regions with similar characteristics or preferences. Rather than tailoring to individual markets, the company customizes offerings for specific regional clusters. – Identify the presence of a Regiocentric orientation, where groups of countries or regions are targeted with customized strategies. – Assess the company’s approach to regional clustering and market segmentation. – Consider the advantages of leveraging similarities among markets within a region while accommodating regional differences. – Optimizes resources by targeting markets with shared characteristics. – Allows for a balance between customization and economies of scale. – Recognizes the importance of regional variations while achieving operational efficiency. – Companies expanding into multiple markets with shared characteristics within regions. – Regional marketing campaigns and product adaptations. – Strategic clustering of markets for efficient management. Regiocentric Example: An automotive manufacturer designs specific car models for European markets, taking into account regional preferences, regulations, and road conditions while sharing common features among these models.
5. Geocentric (G) Geocentric orientation reflects a truly global approach, where the company seeks to standardize products, services, and strategies worldwide. Decisions are based on the global perspective, and the organization aims for a balance between global consistency and local adaptation. – Identify the presence of a Geocentric orientation, emphasizing a global mindset and the integration of local expertise. – Assess the company’s commitment to global standardization while acknowledging local adaptations. – Consider the potential benefits of a Geocentric orientation in achieving a global brand identity and efficiency. – Aims for a consistent global brand image and product offering. – Leverages global expertise while respecting local nuances. – May require significant coordination and investment in global marketing and operations. – Multinational corporations with a strong global presence. – Companies pursuing global brand recognition and consistency. – Global marketing campaigns and product standardization strategies. Geocentric Example: A global technology company maintains a unified product lineup and brand image worldwide while incorporating localized features and support to meet regional requirements and preferences.

Understanding the EPRG framework

The EPRG framework describes the various ways businesses decide to enter and operate in global markets.

The EPRF framework was first introduced by globalization expert Howard V. Perlmutter in a 1969 journal article entitled The Tortuous Evolution of Multinational Enterprises.

Perlmutter argued that the way a company responds to global market opportunities depends on the assumptions management holds about the nature of international marketing.

These assumptions, which Perlmutter called orientations, dictate how a company manages operations between the headquarters in its home country and its foreign subsidiaries.

The EPRG framework categorizes global marketing strategies according to four orientations which describe various approaches to global staffing. We will take a look at each of these in more detail in the following sections.

Ethnocentric orientation 

Here, the subsidiary must comply with the default policies and procedures of headquarters.

This means the company does not adapt its products to the needs or wants of the other countries they operate in. There are no changes in product specification, price, or promotional strategy. 

Essentially, management believes that employees native to the home market can do a better job driving the company forward overseas than their non-native counterparts.

An ethnocentric orientation may also arise naturally because of a shortage of expertise in a foreign country.

Ethnocentric orientation can lead to problems in foreign markets. When Nissan exported cars to the United States, many vehicles failed to start in the much colder North American winters.

Nissan also made the mistake of assuming drivers would place a blanket over the engine to warm it up – which is what citizens in the freezing north of Japan were accustomed to.

Ethnocentric orientation benefits

  • Coordination – the lack of variation in employee backgrounds results in more coordination between company headquarters and the foreign country.
  • Cost-effectiveness – since there is very little change in terms of product features, price, or promotional strategies, the business can avoid the expenses associated with adapting products for various international markets.
  • Expansion capacity – the ethnocentric orientation may also be used by companies that are making their first foray into other countries. The approach allows them to establish new production facilities and launch products with relative ease.

Regiocentric orientation 

Regiocentric orientation is the belief that countries existing in the same geographic region have economic, social, cultural, or political similarities.

As a result, the strategies developed for one country are effective when deployed throughout.

Coca-Cola has used regiocentric orientation to market its carbonated beverages in the sub-continent region consisting of the Indian, Pakistani, and Bangladeshi markets.

Regiocentric orientation benefits

Effectiveness

The regiocentric approach occupies a favorable middle ground between the more specific polycentric orientation and the more general ethnocentric and geocentric approaches.

Companies tend to be more effective since they can cater to broader audiences across multiple countries without the inherent inefficiencies of catering to smaller or more localized consumer groups.

Cultural fit

Recruiting employees from specific regions can offer a better cultural fit than taking a more general approach to recruitment.

For example, companies operating in North Africa and the Middle East would be able to hire individuals with an Arab background who are more likely to share the same cultural values.

For example, most Arabs are Muslims and speak some degree of classical Arabic. Cultural fit also has the flow-on effect of reducing the costs associated with employee onboarding.

What’s more, it reduces the likelihood that an employee will experience culture shock and leave their role within the company.

Polycentric orientation

With a polycentric orientation, marketing strategies are based on the economic, political, or cultural disparities of the countries where subsidiaries are located.

Polycentrism is the opposite of ethnocentrism in that the business seeks to do things the way locals do.

McDonald’s is perhaps the best example of polycentrism in action because its restaurants are sensitive to the peculiarities of different markets.

In India, McDonald’s serves vegetarian food because Indian citizens view cows as sacred. In France, Germany, and Portugal, restaurants serve wine in addition to soft drinks.

Polycentric orientation benefits

Increased sales

Companies such as McDonald’s that take the time to understand the host market are likely to be more successful as a result.

Consumers in these markets tend to favor international brands that are sensitive to their cultural and societal values and beliefs.

Motivated workforce

By the same token, a local workforce whose values are understood and respected are more likely to be happy and motivated employees who have a vested interest in helping the company succeed.

Third-world application

The polycentric orientation is ideal for companies looking to expand into developing or third-world nations.

Most of these nations are characterized by financial, legal, political, or cultural constraints.

Geocentric orientation

Geocentric orientation means the company sees the whole world as a potential market. In other words, they see a negligible difference between countries because consumers have more or less the same needs.

While differences do exist in reality, the geocentric approach assumes most differences will be forgotten or accepted by the target audience.

Given there are no explicit barriers between the headquarters and its subsidiaries, it can be expensive and challenging to overcome discrepancies in labor standards and customer preferences.

However, with a unified strategy, this orientation rewards the significant investment by making the firm more agile and responsive to change. 

American cable channel MTV is seen all around the world but there is little difference in how the channel is branded or presented.

Each channel is named after the country it operates in, such as MTV India, MTV Korea, and MTV China.

Geocentric orientation benefits:

Global expertise

Those with a geocentric orientation tend to be large corporations with similarly large ambitions.

To achieve their goals, these corporations can establish a pool of senior executives with industry experience and contacts around the world.

Employees are hired based on their skills and abilities and not on their physical location.

Agility

With a core, unified strategy and an assembled team of competent individuals, the geocentric orientation enables companies to be more agile and responsive to change.

Agility is also increased since there are rarely language or cultural barriers to overcome between different regions.

Easier execution

In general, the geocentric orientation is also easier to execute since there is one strategy and not several more intricate strategies.

Many companies will simply replicate their domestic strategies abroad with very little customization.

While less sensitive to specific cultural needs, this approach is more cost-effective.

Additional EPRG framework examples

Let’s conclude with some more EPRG framework examples.

PepsiCo

Like its main rival The Coca-Cola Company, PepsiCo has a regiocentric orientation.

coca-cola-business-strategycoca-cola-business-strategy
Coca-Cola follows a business strategy (implemented since 2006) where through its operating arm – the Bottling Investment Group – it invests initially in bottling partners operations. As they take off, Coca-Cola divests its equity stakes, and it establishes a franchising model, as long-term growth and distribution strategy.

This is reflected in the company’s organizational structure with dominant market divisions based on numerous geographic regions and a small number of business units.

Each region has the autonomy to coordinate its own operations.

As an example, the Africa, Middle East and South Asia division establishes the region’s primary objectives and handles the implementation of the company’s marketing strategy.

The main advantage of this orientation is that Pepsi can focus on the specific needs of consumers across this region. 

Regiocentrism also enables the company to cover a wide range of emerging and developing markets that are vital to Pepsi’s vision of sustainable growth.

what-does-pepsico-ownwhat-does-pepsico-own
PepsiCo was founded in 1902 by American pharmacist and businessman Caleb Bradham as the Pepsi-Cola Company. Bradham, who hoped to emulate the success of Coca-Cola, marketed the beverage from his pharmacy and registered a patent for its recipe the following year. Today, Pepsi is a global company with a portfolio of 23 billion-dollar brands, or brands earning more than $1 billion in annual revenue. Sixteen of these brands are beverage-related, while the remaining seven are associated with snacks and other food products.

Key countries include South Africa, India, Egypt, Saudi Arabia, and Pakistan.

Apple

Generally speaking, Apple has a geocentric orientation because it treats every foreign market in which it operates as a singular, global market.

apple-business-modelapple-business-model
Apple has a business model that is broken down between products and services. Apple generated over $365 billion in revenues in 2021, of which $191.9 came from iPhone sales, $35.2 came from Mac sales, $38.3 came from accessories and wearables (AirPods, Apple TV, Apple Watch, Beats products, HomePod, iPod touch, and accessories), $31.86 billion came from iPad sales, and $68.4 billion came from services.

This tends to be true of many multinational or transnational corporations that are headquartered in the developed world with manufacturing facilities in poorer countries with cheaper production costs.

The universal appeal of the iPhone in countries whose citizens can afford its premium price certainly supports Apple’s geocentric approach.

However, the company may need to adopt an ethnocentric approach if it wants to sell the iPhone in countries where consumers have less purchasing power. 

apple-distribution-strategyapple-distribution-strategy
In 2021, most of Apple’s sales (64%) came from indirect channels (comprising third-party cellular networks, wholesalers/retailers, and resellers). These channels are critical for sales amplification, scale, and subsidies (to enable the iPhone to be purchased by many people). At the same time, the direct channel represented 36% of the total revenues. Stores are critical for customer experience, enabling the service business and branding at scale.

Attempts to sell the much cheaper iPhone 5c in Russia in 2014 were one such attempt at this strategy, but the product still sold for the equivalent of an average monthly middle-class salary.

The entry-level iPhone SE was released in 2016 as an affordable entry point to the smartphone lineup.

More recently, the company has announced the expansion of its App Store and Apple Music businesses into developing countries in Asia and Africa.

It plans to target mostly younger generations of non-English speaking consumers who are not currently part of the Apple ecosystem.

Special trade-in programs designed for used smartphones in these regions were also seen as a way for the company to expand its total addressable market by 65%.

Google

Google takes more of a polycentric approach in some aspects of its business.

how-does-google-make-moneyhow-does-google-make-money
Google (now Alphabet) primarily makes money through advertising. The Google search engine, while free, is monetized with paid advertising. In 2021 Google’s advertising generated over $209 billion (beyond Google Search, which comprises YouTube Ads and the Network Members Sites) compared to $257 billion in net sales. Advertising represented over 81% of net sales, followed by Google Cloud ($19 billion) and Google’s other revenue streams (Google Play, Pixel phones, and YouTube Premium).

This is particularly true of its famous Google Doodle, where the search logo is adapted to celebrate various places, people, anniversaries, holidays, and other notable events.

On August 1, 2022, for example, a doodle celebrating Switzerland’s National Day was released.

The previous day, the company celebrated the French game of pétanque, with users able to hover their mouse over the doodle to play the sport interactively.

While Google engineers have now created 5,000 doodles for search homepages around the world, it’s important to point out that they serve as a highly targeted way to market the company in specific regions.

The doodle celebrating pétanque may have some relevance outside of France, but it’s clear that it was marketed to French searchers.

Doodles celebrating specific events such as Switzerland National Day are even more specific and have very little relevance to users who are not Swiss.

Key takeaways:

  • The EPRG framework describes the various ways businesses decide to enter and operate in global markets. The concept was first introduced in 1969 by globalization expert Howard V. Perlmutter.
  • Fundamental to the EPRG framework is how a company manages the relationship between its headquarters and foreign subsidiaries.
  • The EPRG framework categories four orientations or approaches to global marketing and staffing: ethnocentric, regiocentric, polycentric, and geocentric.

Key Highlights

  • EPRG Framework: The EPRG framework categorizes four orientations or approaches to global marketing and staffing: ethnocentric, regiocentric, polycentric, and geocentric. This framework helps businesses decide how to enter and operate in global markets.
  • Introduction of EPRG Framework: The EPRG framework was introduced by globalization expert Howard V. Perlmutter in 1969. He argued that a company’s response to global market opportunities depends on its assumptions about international marketing, which he called orientations.
  • Ethnocentric Orientation: In the ethnocentric orientation, the company follows its home country’s policies and procedures without adapting products for foreign markets. Management believes that home country employees are better suited to drive the company’s overseas growth.
  • Regiocentric Orientation: The regiocentric orientation assumes that countries in the same geographic region share economic, social, cultural, or political similarities. Strategies developed for one country are applied throughout the region.
  • Polycentric Orientation: In the polycentric orientation, marketing strategies are based on the disparities of the countries where subsidiaries are located. The company adapts its strategies to suit local economic, political, and cultural differences.
  • Geocentric Orientation: The geocentric orientation sees the world as a single potential market, assuming that consumers have similar needs across countries. This approach aims for a unified strategy but may face challenges in overcoming labor and customer preference differences.
  • PepsiCo Example: PepsiCo follows a regiocentric orientation, tailoring its strategies to specific regions’ needs. This approach allows the company to cover a wide range of emerging markets and focus on consumers’ preferences in those regions.
  • Apple Example: Apple adopts a geocentric orientation, treating every foreign market as a global market. This approach is reflected in its product and service offerings and its focus on universal appeal, particularly with products like the iPhone.
  • Google Example: Google takes a polycentric approach in some aspects of its business, such as creating region-specific Google Doodles to market its services to specific countries. This approach helps tailor its offerings to specific cultural events and celebrations.
  • Key Takeaways: The EPRG framework categorizes global marketing strategies into four orientations: ethnocentric, regiocentric, polycentric, and geocentric. These orientations guide how companies manage operations between their headquarters and foreign subsidiaries based on assumptions about international marketing.

PESTEL Analysis

pestel-analysispestel-analysis
The PESTEL analysis is a framework that can help marketers assess whether macro-economic factors are affecting an organization. This is a critical step that helps organizations identify potential threats and weaknesses that can be used in other frameworks such as SWOT or to gain a broader and better understanding of the overall marketing environment.

STEEP Analysis

steep-analysissteep-analysis
The STEEP analysis is a tool used to map the external factors that impact an organization. STEEP stands for the five key areas on which the analysis focuses: socio-cultural, technological, economic, environmental/ecological, and political. Usually, the STEEP analysis is complementary or alternative to other methods such as SWOT or PESTEL analyses.

STEEPLE Analysis

steeple-analysissteeple-analysis
The STEEPLE analysis is a variation of the STEEP analysis. Where the step analysis comprises socio-cultural, technological, economic, environmental/ecological, and political factors as the base of the analysis. The STEEPLE analysis adds other two factors such as Legal and Ethical.

Porter’s Five Forces

porter-five-forcesporter-five-forces
Porter’s Five Forces is a model that helps organizations to gain a better understanding of their industries and competition. Published for the first time by Professor Michael Porter in his book “Competitive Strategy” in the 1980s. The model breaks down industries and markets by analyzing them through five forces.

SWOT Analysis

swot-analysisswot-analysis
A SWOT Analysis is a framework used for evaluating the business’s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.

BCG Matrix

bcg-matrixbcg-matrix
In the 1970s, Bruce D. Henderson, founder of the Boston Consulting Group, came up with The Product Portfolio (aka BCG Matrix, or Growth-share Matrix), which would look at a successful business product portfolio based on potential growth and market shares. It divided products into four main categories: cash cows, pets (dogs), question marks, and stars.

Balanced Scorecard

balanced-scorecardbalanced-scorecard
First proposed by accounting academic Robert Kaplan, the balanced scorecard is a management system that allows an organization to focus on big-picture strategic goals. The four perspectives of the balanced scorecard include financial, customer, business process, and organizational capacity. From there, according to the balanced scorecard, it’s possible to have a holistic view of the business.

Blue Ocean Strategy 

blue-ocean-strategyblue-ocean-strategy
A blue ocean is a strategy where the boundaries of existing markets are redefined, and new uncontested markets are created. At its core, there is value innovation, for which uncontested markets are created, where competition is made irrelevant. And the cost-value trade-off is broken. Thus, companies following a blue ocean strategy offer much more value at a lower cost for the end customers.

Scenario Planning

scenario-planningscenario-planning
Businesses use scenario planning to make assumptions on future events and how their respective business environments may change in response to those future events. Therefore, scenario planning identifies specific uncertainties – or different realities and how they might affect future business operations. Scenario planning attempts at better strategic decision making by avoiding two pitfalls: underprediction, and overprediction.

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