The EPG Model

It can be difficult for any organization to maintain its focus and direction, but that is especially true of
firms that do business on an international level. When an organization grows to the point of having
operations in more than one country, it will always run the risk of going off in too many different
directions to be successful. Instead of moving in directions that are not going to allow the business to
ultimately reach its desired destination, it is important that the organization remain focused on its core
values and culture to thrive.

It is against that backdrop that the EPG model comes into focus. This is an important business model
which can be used to help organizations who compete on an international level ensure that they are
working toward the right goals and objectives. If the ‘strategic profile’ of the company is out of line with
what they are trying to accomplish, trouble will likely be soon to follow. Fortunately, using this model
can be a quick and easy way to bring things back into line.

The ‘EPG’ in the title of this model stands for the following –

 Ethnocentrism
 Polycentrism
 Geocentrism

Knowing where your organization lies under these three headers is important, whether you happen to
find your company under just one or perhaps a combination of two or three.

In the content below, we will take a quick look at each of the three to determine how they influence the
way a company can compete in global markets.
Ethnocentrism

The idea behind ethnocentrism is the concept that the organization is going to default to the thinking,
traditions, and more of its home country. For instance, if a company is based in the United Kingdom and
has leadership from the U.K., that background is going to shape its decision making. Even if there are
plenty of branch offices in locations around the world, the company will default back to the ways of
doing business in the U.K. because that is what they know best.

There are both positives and negatives to running an organization in an ethnocentric manner. On the
plus side, running the business this way can keep things simple. As noted earlier, it is not easy to run a
business that is operating around the globe, as there will always be the potential to get off -track in
terms of goals and the overall direction of the business. By sticking with an ethnocentric approach, you
should be able to keep everyone moving in the same direction – even if they don’t necessarily always
agree with the decision making or strategy coming from the home office.

On the downside, it can be hard to properly grow the business in other nations when making decisions
based on how things are done at home. Since most decisions are based on the line of thinking that
applies to the home market, those choices might not be entirely relevant in other places. Also, if local
branches are not trusted to make decisions in a manner that they see fit, those employees may look for
other opportunities where they will be more valued as an asset to the business.

Polycentrism

In contrast to ethnocentrism, polycentrism defaults to the strategies, methods, and techniques of the
host country when it comes to decision making for the organization. Instead of looking back to the
country of origin for the business when making choices, an organization working with a polycentric
approach will put more trust in the people working in the various countries in which they operate.
Rather than taking a ‘one-size-fits-all’ approach to decision making and management, there will be more
diversity in the company based on how each individual country should be handled.

As is usually the case, there are positives and negatives to be seen with this pattern. On the plus side,
the local offices around the world tend to be more engaged and more satisfied with their work since
they are valued and trusted. Sales are often boosted as a result, since the company remains in touch
with local trends, cultures, and more. On the downside, however, there is a concern regarding
duplication which can cause costs to rise. Putting more emphasis on the local offices will create a
situation in which those offices are doing the same work that is being done in other parts of the world –
causing costs to rise unnecessarily. Also, the experience and knowledge that is possessed by the home
country office may go to waste, since the emphasis will be placed on locals in branch offices.

Geocentrism

The final element within this model is geocentrism, which is the approach taken by organizations trying
to use a ‘world view’ to run their business. In many ways, this is an approach that falls somewhere
between the first two that we have covered. A geocentric organization will not default to either the
customs and traditions of their home country or the host country. Rather, this kind of organization will
focus only on what they think is best for the needs of the organization and its customers. To the greatest
extent possible, nationalities are largely ignored in this system, with the company being run as a global
enterprise rather than a large corporation which is deeply rooted in one specific nation.

Unification is the goal of a geocentric operation. The company does not want to have divisions within its
ranks based on nationality. Instead, they want to operate as a cohesive unit, just as a company would
that is operating in just one country. While there can be drawbacks to this plan in terms of travel costs
and educational investments, there are also benefits in the form of a better global outlook and an
elevated level of goods and services.

The right way to approach running a business on an international scale is going to depend on the
business at hand, the people involved, and plans. Each of the three options included in this model can
be successful in the right circumstance, and each can fail in the wrong situation. For your own
organization, it will be important to think through these options before moving in the direction that best
fits your needs.

Key Points

 The EPG model is a framework for a firm to better pinpoint its strategic profile in terms of
international business strategy.
 The model states that a multinational organization holds one of three orientations at any point
in time:
 Ethocentric orientation is where the organization’s senior management believe that nationals
from the organization’s home country are more capable to drive international activities forward
than non-native employees.
 Polycentric orientation assumes that host country cultures are different making a centralized
approach unfeasible.
 In Geocentric orientation nationalities are largely ignored, with the company being run as a
global enterprise rather than a large corporation which is deeply rooted in one specific nation.
 The model suggests that most multinationals start out with an ethnocentric view, evolve to
polycentrism and finally adopt geocentrism.
 The EPG Model provides insight in how far an organization has internationalized.