I was particularly struck by Abramson’s insights into geocentrism, as it relates to the differing approaches of ethnocentrism and polycentrism. He makes a compelling case that an organizational leadership team that practices a geocentric approach will ultimately be more successful in a multinational enterprise (MNE), or “a company that does business in two or more countries” (Abramson, 2018, p. 79), than one with an ethnocentric or polycentric strategy. This is due to the fact that geocentrism acknowledges the best aspects of the other two approaches while maintaining the flexibility and adaptability which is necessary for a multinational environment. In reading through this portion of the text, I was reminded of an incident involving a multinational collaboration between Japanese and American car manufacturers that I will explore later on in this post.
An organization is said to be ethnocentric if it denies “the existence of uncertainty and the need to learn, expecting that existing strategies will be effective in new markets” (Abramson, 2018, p. 79). This way of thinking makes the false assumption that the strategies which are successful in your native environment will be the best strategies in other markets. It does not value the diversity and complexity of our globalized world and thus is destined to be outperformed by another organization more adept at making strategies that are optimized to local markets.
On the opposite end of the spectrum is polycentrism. Polycentrism posits that “strategy must take into account only the competitive dynamics and local practices of that foreign market” (Abramson, 2018, p. 80). in other words, a polycentric MNE would result in a grouping of disconnected teams lacking any centralized leadership or cohesive vision. This is because it would seek to implement strategies purely on the basis of individual foreign markets and omit any valuable knowledge from another market.
This is why geocentrism offers the best chance of succeeding in a globalized marketplace. As Abramson states, “With the geocentric mindset, leaders understand that their greatest success is the combining of what is already known from home markets with what is being learned about success in the new foreign market” (Abramson, 2018, p. 80). Any reasonable consideration of these different approaches would acknowledge that designing strategies for a local market and synthesizing them with the best strategies from other markets would result in the best overall approach.
A real-world scenario in which these concepts played out is when Toyota and General Motors launched a joint car-manufacturing factory in California called NUMMI in 1984.The original GM plant had been underperforming prior to the joint venture, and the intention was for the successful Japanese teams to teach the American GM workforce their production practices and management systems. They did so by training a small task force on-site in Japan (amusingly called the “NUMMI Commandos”) who would then return to the NUMMI plant to train the rest of the Americans. Sadly, the effort was ultimately a failure and the plant eventually shut down, and it was due in part to the fact that the American teams were never fully receptive of the Toyota production principles. The NUMMI Commandos were met with hostility and a “that’s not how we do things here” attitude, which is clearly reflective of an ethnocentric mindset. For the approach to have been successful, the American teams would have needed to embrace the successful ideas from other cultures and markets and the Japanese trainers would have needed to be more understanding of the ways in which they could motivate the Americans. In other words, a geocentric approach would most likely have resulted in more success for the overall multinational enterprise.
Abramson, N. R., Moran, R. T., & Harris, P. R. (2018). Managing cultural differences: global leadership for the 21st century. Abingdon, Oxon: Routledge.