Based on your previous research about the country’s economic development, the board has asked you to evaluate financial risks in doing business in this expanded marketplace. Competitive advantage is something that needs to be explored in this new market with the best possible implementation of strategies to differentiate a new product among new customers. In addition to strategic alliances, joint ventures, and other partnership opportunities, some companies prefer to operate within the selected country’s infrastructure versus from the home country’s headquarters.
As part of the evaluation, look at 3 international marketing models relative to your product. These include ethnocentric, geocentric and polycentric models.
This proposal will look at two sections: (1) international business model and strategy considerations, and (2) pricing strategies.
Include the following information in this proposal:
International Business Model and Strategy Considerations
Describe 2 reasons why your company’s product should be introduced in this particular country.
Research and describe the 3 international business models’ 3 dimensions—polycentric, ethnocentric, and geocentric. For more information, click here: http://www.businessmate.org/Article.php?ArtikelId=12
Research and explain an international business strategy that can be applied to your company. For additional information, read more about these strategy options here: http://www.businessmate.org/Article.php?ArtikelId=13. Discuss why this is the best international strategy for your particular company and product.
Decide which one could work best for gaining comparative advantage with your company’s product in this new market. Comparative advantage occurs if the country or company experiences the lowest opportunity cost in producing the good. Justify why this model is best for your company’s product.
International Product/Service Approaches
The United Arab Emirates (UAE) is an attractive region for oil and gas production as well as marketing. Oil and gas production and marketing provides a lucrative opportunity for Exxon Mobil, which plans to invest in the region. One of the major reasons why Exxon Mobil should invest in the region is the favorable government policy. The UAE government has established tax-free zones where foreign companies can set up businesses (“UAE Embassy,” 2017) In the recent past, the UAE government has expressed interest in increasing the total oil and gas production in the region by engaging international corporations. Exxon Mobil will take advantage of this opportunity to invest in this region. Another reason for investing in this region is the relative peace and stability. The UAE region enjoys political stability unlike other neighboring states that are battling terrorism.
The EPG model is an important international marketing model for multinational corporations. Under the model, three dimensions characterize the operations of the organization: ethnocentrism, polycentrism, and geocentrism. The aim of the model is to distinguish the organization’s orientation, which affects the generation of costs and profits in the market (Drachal, 2014). The model’s emphasis concerns how multinational corporations conduct business in the international market. The model provides a framework for organizations to identify their strategic profile with regard to the international business strategy. The model enables organizations to develop a deep understanding of their specific focus. There are three marketing dimensions under the EPG model: polycentric, ethnocentric, and geocentric models. These marketing dimensions may concern the marketing of petroleum in the United Arab Emirates (UAE) region.
An ethnocentric orientation occurs when the organization focuses on carrying on with the characteristics of the home country even in overseas countries. In this orientation, the organizational leaders believe that the home country’s culture is superior to others (Drachal, 2014). The leaders further assume that the domestic strategies will apply even in foreign countries. The organization transfers its practices and policies from the headquarters to the subsidiaries. The organization assumes that the practices and policies in the country of origin will also be a good fit in the foreign country. The ethnocentric orientation generates additional costs especially labor costs. This is because the organization must transfer managers to the foreign country; hence, it must provide a hefty compensation packages. Another drawback is the dominance of foreign culture in the new country. One of the key benefits in applying this orientation is the flow of knowledge and skills from the home country to the new country.
Polycentric orientation involves a focus towards the host country. One major aspect of this orientation is that activities are individualized to fit the needs or preferences of each geographical region in the host country (Drachal, 2014). Each subsidiary in the host country is managed as an autonomous unit, different from the rest and reflecting the needs of the specific locality. Managers have the freedom to conduct their operations in any way they prefer. The organizational leader may put into consideration various factors as cultural diversity of the host country, customer expectations, and marketing strategy. The basic premise in applying this orientation is that it is better to use local methods at solving local problems rather than use foreign solutions. A major drawback of polycentrism is that it can lead to conflicts and lack of coordination among subsidiaries having different cultures. Another drawback is that managers in subsidiaries may decline to follow directions given from the headquarters.
The geocentric orientation focuses on developing a culture that fits the global market. In applying the geocentric orientation, the organization assumes the entire foreign market to be a single global market (Drachal, 2014). As such, the organization treats all foreign markets as one. This organizational orientation ignores the differences that exist in the global market. In this orientation, the organization aims to develop a global strategy that transcends the cultural boundaries. The organization hopes that customers will appreciate a universal approach that does not reflect the culture of any single group. Organizations that adhere to this orientation do not draw any distinctions between the domestic and foreign market.
An applicable international business strategy is the multidomestic strategy. This strategy focuses more on the conditions in the local market (Khan, 2016). This strategy is appropriate since it will allow innovation in the foreign subsidiaries. The multidomestic strategy encourages subsidiaries to increase their responsiveness and aim for self-sufficiency (Khan, 2016). The subsidiaries have the autonomy to make critical decisions including strategic and operational decisions. The organization may require local solutions in order to remain competitive in the oil and gas industry. Local innovations will enable the organization to stay ahead of competition in the UAE region. Oil and gas mining are largely influenced by the factors in the host country. As such, it is important to give the subsidiary the autonomy to make all the critical decisions. This will improve the pace of developing critical solutions. The multidomestic strategy provides organizations with the necessary flexibility in adopting localized solutions to particular regional problems.
Drachal, K. (2014). What do we know from EPRG model? Ecoforum, 3(2): 85-91.
Embassy of the United Arab Emirates (UAE Embassy). (2017). UAE history. Retrieved from http://www.uae-embassy.org/about-uae/history
Khan, M. A. (2016). Multinational enterprise management strategies in developing countries. Hershey, PA, USA: Business Science Reference.