International orientations (EPRG), internationalisation stages, developing countries and strategic decisions

1. International orientations: the EPRG framework

Howard Perlmutter, in “The Tortuous Evolution of the Multinational Corporation” (1969), classified the attitude of a firm’s management towards foreign markets. Wind, Douglas and Perlmutter (1973) added the regiocentric attitude, giving the four-fold EPRG scheme.

• Ethnocentric: simple and cheap, but blind to foreign needs. Many first-time Indian exporters begin here.
• Polycentric: responsive to local tastes, but duplicates effort and loses economies of scale.
• Regiocentric: a middle path, natural for firms operating inside a trading bloc such as the EU or ASEAN.
• Geocentric: the mark of a true global firm — Unilever, Nestlé, Toyota; McDonald’s keeps the global brand but sells vegetarian burgers in India (“think global, act local”, sometimes called glocalisation).

2. Stages of internationalisation

Firms usually go abroad gradually. The Uppsala model (Johanson and Vahlne, 1977) explains that firms first enter psychologically “close” markets and increase commitment as they learn. The common textbook stages are:

1. Domestic company: sells only at home; may receive unsolicited foreign orders.
2. Export stage: exports through agents or merchant exporters, then directly; an export department is set up.
3. International company: sales branches and some production abroad; foreign business is still run as an extension of the home business (ethnocentric).
4. Multinational company: subsidiaries in many countries, each adapting to its market (polycentric).
5. Global or transnational company: the world treated as one market and one production base, with integrated sourcing, research and management (geocentric).

The stages and orientations fit together: as a firm moves up the stages, its outlook usually moves from ethnocentric towards geocentric. Kenichi Ohmae’s five stages of globalisation (used in Unit IV) are a similar ladder. Not every firm follows the ladder: “born global” start-ups, especially in software, sell internationally from the start.

3. Growing economic power of developing countries

• Share of world output: emerging economies, led by China and India, now account for a large and rising share of world GDP measured at purchasing-power parity.
• Trade: China is the largest merchandise exporter; India is among the leading exporters of commercial services; South–South trade has grown faster than North–North trade.
• Emerging-market multinationals: Tata, Infosys, Reliance, Huawei, Lenovo, Samsung (once from a developing Korea) invest in developed countries; Tata Motors owns Jaguar Land Rover.
• Groupings: BRICS (expanded from 2024), the G20 (India held the presidency in 2023, and the African Union became a permanent member at the New Delhi summit), and the developing-country coalitions in the WTO.
• Markets: a growing middle class makes these economies the main source of new demand for consumer goods, which is why multinationals are drawn to them.

Limits remain: lower per capita incomes, dependence on commodity exports for many African and Latin American economies, debt, and weaker technology.

4. Strategic decisions in international business

These are the major, long-term choices a firm makes when it goes abroad. A clear 10-mark answer takes them in this order.

1. Whether to go international at all — weighing the reasons and risks of the first note.
2. Which markets to enter — market selection by size, growth, income, competition, political stability, distance and trade barriers. Firms screen countries with secondary data, then research the short-listed ones in depth.
3. Mode of entry — exporting, licensing, joint venture, subsidiary (see the previous note).
4. Timing and scale of entry — first-mover advantage against learning from others; a gradual (“waterfall”) entry country by country or a simultaneous (“sprinkler”) entry.
5. Standardisation or adaptation of the marketing mix — the product, price, promotion and distribution: one global product (Coca-Cola) or local versions (Maggi’s Indian flavours).
6. Organisation structure — export department, international division, or global product/area structure (Unit III).
7. Production and sourcing location — make at home and export, or produce abroad; where to source components.
8. Financial decisions — financing foreign operations, managing currency risk, repatriation of profit, transfer pricing.
9. Human resource decisions — home-country expatriates, host-country nationals or third-country nationals in management.
10. Competitive strategy — cost leadership or differentiation, and whether to enter alliances with rivals.

How this is examined

The strategic-decisions essay rewards a numbered list of eight to ten decisions, each explained in two or three lines, with the Tata–JLR case at the end. For the stages-and-orientations essay, give the five stages, then EPRG in a table, and a closing paragraph linking the two. A 6-mark note on orientations needs Perlmutter’s name and date, the four attitudes, and one example each.