International business CIA 1B

Geocentric Approach
By,

Anjana Parvathy S

1723146

BBA H B
Geocentric Approach is an approach in International Business where companies operating
globally view the entire world economy as one market and similar policies and procedures
are used all over the world, wherever the enterprise has its operations. The Geocentric
Approach works on the model of standardisation, that is similar products and services are
offered globally. This model works unlike the Polycentric Approach and does not consider
the culture and economy of each of the countries the organisation deals with. This approach
also functions on economies of scale.

Taking into consideration the current extensive rate of growth in the technology as well as the
exchange of information, there is an immediate growth of global and transnational firms
whose major characteristic is their geocentric way of going global. This sets them apart in
terms of their product uniqueness and specifications since such decisions are taken as a result
of continuous process of market research. Such kind of an orientation becomes a must for the
firms in case they are not only looking for market success but also for long-term stabilization
in the market worldwide. A few companies that adopt the Geocentric Approach in its
operations are:

AMD (Advanced Micro Devices) is an American multinational semiconductor company

which manufactures microprocessors for laptops, PCs and designs graphics for video games
and motion pictures. This company provides similar products and services to all its
subsidiaries and clients located in different countries. There is no differentiation in the type of
products or services offered to any of its clients and the quality of the microprocessors
offered are the same and they maintain the highest performance standard, which is similar all
over the world. Hence, this company can be categorized as following the geocentric
approach.

Ferrero Group is an international concern dealing with selling chocolates and spreads
worldwide. It is one such enterprise in this industry that provides similar products all over the
world and does not differentiate on the products distributed according to the economy it
ventures into. This enterprise thus operates in the geocentric approach by ensuring a high
standard of quality of products offered to the global market, irrespective of the economy it
operates in.

This approach is very beneficial because the organizations adopting this approach have a
greater market reach and have the power to have a global presence. The firm can easily
incorporate a diversified talent on board in terms of their workforce which will hence allow
them to appeal to the entire world in a much more efficient manner due to the presence of
such easily available personnel. Simultaneously, the geocentric approach can prove to be
disadvantageous because the basic assumption taken for this approach to become a success is
the fact that companies tend to assume that global consumers have similar preferences and
tastes which in turn leads to a failure since there are millions of customers scattered in
different markets that simply don’t share the same preferences as that of the values of the
firm and hence don’t jell along with the firm’s products/services. Also, huge amount of
expenditures are entailed with such kind of an approach due to the right kind of human
resources, setting up of foreign subsidiaries, training and developing existing and new
personnel to get accustomed to the new approach of geo-centrism and many more result in
huge costs.