What Is Polycentric Orientation?
Companies go global for a variety of reasons. However, the driving factor for most companies is the sales potential. The vast majority of the world's population resides outside of the United States, making expansion to other countries highly attractive for U.S. companies. A polycentric orientation is one marketing and sales approach companies take to doing business globally.
Businesses with a polycentric orientation adopt the belief that every country is unique and needs a different approach to match cultural and societal norms. Under this assumption, a company uses a country-specific business and marketing strategy for successfully developing and building its presence in each country it expands to. Large polycentric-oriented companies are often referred to as multinational companies or multinationals. A polycentric orientation contrasts with ethnocentric orientation, in which a company uses the same products and marketing strategy in each country as it does in its home country.
The polycentric orientation operates under the premise that countries around the world have so many differences in cultural and economic mores that striving to translate practices from one country to another may be fruitless. Therefore, when a company assumes a polycentric orientation, it adapts its products, marketing and support functions for each country it operates in. Companies often employ a country manager or divisional president, where the division solely represents one country. In a multinational company country managers operate autonomously and adapt the product, marketing and sales process, literature, messaging and packaging to their particular country.
Operating under a polycentric approach affords companies several advantages. One advantage is that prospective customers in each country often identify the products as local, not foreign. With a well-marketed product, this often leads to greater sales and reduces or eliminates nationalistic backlash. Another advantage: Companies reduce or eliminate marketing faux pas that arise from cultural misunderstandings. In addition, a skilled country manager can greatly increase sales and profitability locally.
Most of the disadvantages of a company operating under a polycentric approach arise from the level of decentralization. Multinational companies typically have reduced economies of scale because products tailored for each country market require localized marketing efforts and smaller productions sizes. The cost of tailoring products for each market drives product costs higher. In addition, because each country division operates autonomously, companies often replicate functions in each market.