What is EPG model?
The EPG model is a framework that provides companies with guidelines for international business strategies.
This model was proposed by Howard V. Perlmutter in 1969 and consists of three fundamental elements for evaluating a company’s strategic direction: Ethnocentrism, Polycentrism, and Geocentrism.
Based on this framework, companies can accurately identify the characteristics of their international strategies and decide how to approach different markets.
Later, this model was expanded into the EPRG model by adding Regiocentrism.
What are the elements of the EPG model?
1. Ethnocentrism
Ethnocentrism is an approach centered on the company’s home country.
In this model, the values and standards of the home country are considered superior, and companies attempt to apply their home country methods and norms directly in overseas markets.
For example, when a U.S. company enters a foreign market, it may adopt the same management methods or marketing strategies used in its home market.
In this approach, expatriates from the home country manage overseas subsidiaries, and decision-making occurs at the headquarters.
The advantage of ethnocentrism is smooth communication between the headquarters and subsidiaries, and easier control over operations.
However, ignoring local cultures and needs makes it difficult to adapt to local markets, leading to potential failure.
2. Polycentrism
Polycentrism focuses on the local culture and market characteristics of the host country.
In this model, local management teams develop market strategies and make decisions suited to local conditions.
Since local employees take the lead, companies can better adapt to the local market, offering products and services tailored to consumer needs.
For instance, a global company entering the Chinese market might adopt this approach by developing products that align with local culture and consumer preferences.
However, a disadvantage is that each market operates independently, making it harder to achieve synergy or unified control across the company.
3. Geocentrism
Geocentrism views the world as a single global market.
Companies do not favor either the home country or local interests, instead opting for the best-suited people and strategies.
This model emphasizes the integration of the entire company, deploying strategies globally while considering the specific characteristics of each market.
For example, a multinational company might decentralize its R&D across various countries, developing products tailored to regional needs while maintaining a unified global product strategy.
The advantage of geocentrism lies in optimizing company-wide resources to offer higher-level products and services.
However, it comes with challenges like increased communication and travel costs.
How to Apply the EPG Model to Marketing Strategies
The EPG model plays a crucial role in international business expansion.
The success or failure in local markets depends on the international strategy adopted by the company.
Let’s explore how the EPG model can be utilized in marketing strategies.
What is the strategy when utilizing Ethnocentrism?
In an ethnocentric strategy, companies often bring the successful products and marketing methods from their home country to overseas markets. This approach is particularly effective for technical products and industrial goods.
For instance, a German automobile manufacturer might emphasize its technology and product quality established in its home country and offer the same value in foreign markets.
Marketing strategies should highlight the global nature of the brand, emphasize the high quality, and promote the home country’s success stories.
However, ignoring local culture and consumer preferences risks alienating the local market.
What is the strategy when utilizing Polycentrism?
Polycentrism requires understanding the characteristics of the local market and adapting products and services accordingly.
This approach is effective for consumer goods and service industries where preferences vary significantly.
For example, a fast-food chain entering a new country might develop a menu tailored to local food culture, a common use of this approach.
Marketing strategies should focus on localizing advertising and promotions to match the culture and needs of local consumers.
Collaborating with local partner companies or influencers and strengthening region-specific marketing activities are also crucial in this approach.
What is the strategy when utilizing Geocentrism?
A geocentric strategy requires companies to view the global market holistically while responding flexibly to the characteristics of each market.
This approach is particularly effective in industries where technological innovation and R&D are important.
For example, a technology company might develop products that cater to the needs of various regions while maintaining a unified global brand strategy.
Marketing strategies should emphasize the global strengths of products and services, while also customizing them to meet local needs.
Additionally, leveraging digital marketing to consistently deliver global brand messages is effective.
Conclusion
The EPG model is a valuable framework for companies in formulating international business strategies.
Ethnocentrism, Polycentrism, and Geocentrism each have distinct characteristics, advantages, and disadvantages, and companies must carefully consider which approach to adopt in various markets.
Furthermore, the choice of strategy significantly influences marketing strategies, requiring companies to adopt approaches that align with local market characteristics and overall company objectives.
This article uses material from the Wikipedia article “EPG model” which is released under the Creative Commons Attribution-Share-Alike License 4.0. Additionally, the texts and images were generated using ChatGPT.