Perlmutter’s EPRG Model

(Dr. Howard Perlmutter (1969) EPG, Mr. David Heenan (1979) R was invented)
Any organisation that wishes to expand its business operation to a new location/environment
have to choose the strategy of subsidiary and the way it’s going to be managed. After
deciding about the strategy, most of the MNCs face dilemma in terms of appointing a person
for a key position. Dr Perlmutter (1969) developed the staffing orientation as egocentric,
polycentric and geocentric approach when the MNC decided to expand abroad. He was the
first researcher to identify the distinctive staffing orientation of international firms
In 1979, David Heenan another researcher, joined with Dr Perlmutter and identified the 4th
orientation as regiocentric approach. It is an extension of polycentric approach and is likely to
fall between polycentric and geocentric. EPRG model helps the organisation to identify the
staffing requirement in subsidiaries and make staffing decisions. It also helps the organisation
to identify the current and desired approach to managing the business internationally. In real
practise, these orientations never appear in a pure form. In most pf the organisations, there
exists a mix of E, P and G staffing approaches
Ethnocentric – It is maintaining the same approach for domestic and international business. In
this approach, organisations perceive that the products and services which have done well in
domestic markets are superior in quality and hence should be introduced in international
markets. These organisations do not give importance to detailed marketing research tailored
products, understanding consumer needs and wants. All the imp export decisions are
undertaken by the company executives and export operations are regulated by marketing staff
to an export department. This approach is most suitable for small and newly internationalized
organisations.
Polycentric – ultimately egocentric organisations realise that international markets require a
distinct approach. So being opposite egocentric approach, this approach understands the
distinctiveness of each country and strives towards adapting to the unique conditions of
foreign markets. Organisations set up their own subsidiaries in international markets which
work autonomously with their own marketing strategies and goals.
Regiocentric – In this, segmentation of markets is fulfilled on the basis of similarities in terms
of regions. A company finds economic, social, political similarities among regions in order to
cover similar needs of potential consumers. When the organisation becomes completely
familiar with overseas market and functions successfully, it starts exporting products to the
country adjacent to the host country. A distinct marketing plan is acquired for these countries,
but the product marketed is same as developed in the polycentric approach
Geocentric – this orientation favours neither home not foreign country where the company
operates. It is called as global approach and the main idea is to target global consumers that
have similar taste. The main idea of this orientation is to borrow from every country what is
the best. The limitation is that it fully depends on global market research which requires a
huge amount of investment and time. This approach is for companies with impressive capital
and who want to become world leaders. The whole world is considered as one country as
geocentric approach. Organisations hire personnel from all over the world and set up
numerous subsidiaries for foreign markets with the HQ monitoring operations. All the
policies, prod design, plans, functions etc are framed by the subsidiaries.
Pros of EPRG – 1. The orientation of senior mgmt. group influences and shapes diverse
aspects of an MNC that includes strategy, structural designing, pricing, resource allocation,
etc. 2. The study made managers aware that the culture was an important aspect to consider in
international business affairs. 3. This model provides insight in how and international
organisation evolves in time and what organisational and staffing challenges lay ahead. The
eprg mix can be used to determine how far an organisation has internationalised
Cons of EPRG – 1. The model is an organisation centred disallowing environmental
influences. Its international orientation is measured solely on internal aspects. 2. In real world
this orientation never appear in a pure form. In any organisation some degree of Ethnocentric,
polycentric or geocentric is present. In later studies it is shown that perlmutter’s
organisational development doesn’t always hold. In certain circumstances, irrespective of
company size and international experience, a country centred strategy similar to perlmutter’s
polycentric view may be the best possible orientation and not a geocentric orientation

PESTLE – Sometimes referred as PEST, is a concept in marketing principle. It is used as a

tool by companies to track the environment their operating in or are planning to launch a new
project. It can be expanded as Political, Economic, Social, Technology, Environment, and
Legal. All the aspects of this technique are crucial for any industry a business might be in.
More than just understanding the market, this framework represents or acts as the backbone
of strategic management.
Political – They are laws, order, and interventions made by the govt. in order to regulate the
business. This regulation influences the operations of the business in a significant way. A
govt. introduces new rules, taxes and tariffs on the industries which affects the costing
strategies. Govt sets the standards as per which the organisations produce goods or services
and also controls the types of goods and services to be produced.
Economic – They are the current and past patterns that exist in the country. These factors
encompass the rate of economic growth, inflation, exchange rates, average income, etc.
which influence the money circulation and regulate the business activities.
Social – These factors are closely knitted with consumption of public which influences the
gross demand for services. These factors involve the rate of population growth etc.
Technology – These factors are one of the prime factors that affect the business operations in
dynamic business environment. They involve arrival of new technology in the market,
automation of business process, research and development, etc.
Environmental – These factors include all the factors that influence or are determined by the
surrounding environment. Factors of a business environmental analysis include but are not
limited to climate, weather, location, global changes in climate, environmental offset, etc.
Legal – These factors have both external and internal sides. There are certain laws that affect
the business environment in a certain country while there are certain policies that companies
maintain for themselves. Legal analysis takes into account both the angles and charts out the
strategy in light of these legislations. E.g Labour laws
Atlas of economic complexity
1. The origin – The atlas online was originally conceived as a versatile interactive tool to
make trade data not only available but also usable and to synthesize insights from research on
economic complexity. Research into economic complexity was led by Mr Ricardo Hausmann
professor of the practice of economic development at the Howard school. The atlas online is
currently being managed at the centre for international economic development. It analyses the
foreign trades of 128 countries and sets up an economic growth ranking which is based on the
economic complexity index (ECI). The basis for the analysis is quantity and complexity of
exported goods and frequency of exports (non-export goods were not included in the study).
The survey has proven that more complex knowledge a country possesses, more its economy
can thrive. Consequently, according to the researchers, besides raw materials, the
competitiveness of a country depends more on the complexity of human knowledge than on
other factors such as quality of governance, level of education and other economic indicators.
Continuing economic complexity reflects the amount of knowledge that is embedded in the
productive structure of an economy.
The atlas online is a powerful interactive tool that enables users to visualize a country’s total
trade, track how its dynamics change over a period of time, explore growth opportunities. It is
used by investors, entrepreneurs, policy makers, and general public to better understand the
competitive landscape of countries around the globe. For any given country, the atlas shows
which products are produced and exported. This information helps us to understand about the
products that the country manufactures and the products that helped to fuel economic growth.
As a dynamic resource, this tool is continually evolving with new data and features that helps
to analyse economic growth and development.
The atlas tool can answer the following questions:
1. What does the country import and export?
2. How has it evolved over time?
3. What are the drivers of export growth?
4 Which new industries are likely to emerge in a particular region and which are likely to
disappear?
5 What are the GDP growth prospect of a given country in next 5-10 years based on its
productive capabilities?
This term is the knowledge of an individual; more precisely, the source of growth and
development which is easy to put to productive use but very hard to transmit and acquire
PORTER’S Diamond Model
In 1990 Michael Porter of Harvard Business School, published the results of an intensive
research effort that attempted to determine why some nations succeed whereas others fail in
international competition. Porter referred innovation as a key to competitiveness. He also
stated that competitiveness fosters primarily due to innovation. A firm should necessarily
equip itself with all the constituents of competition that can influence the competitiveness of
the company which in turn can develop the competitiveness of the country as well.

The diagram illustrates the components of porter’s diamond model as well as other factors
which also play an important role. All four components are interrelated and hence affect each
other. Additionally all the four components get affected by govt. and chance factors.
Factor condition – In order to compete in an industry, how suitable and appropriate, how
suitable and appropriate a country’s factors of production are derives the factor condition of
the country. Porter pointed out that, factor condition is an important source of
competitiveness of a country, yet it is not a lone factor responsible for it. This fact is
explained by two theories of trade: Factor Proportion and Classical Theories. According to
porter, Factor conditions don’t mean only acquiring the necessary factors of production,
rather focussing on regular updation and optimum management of it. E.g. - US have a
competitive advtg over other countries in biotechnology.
Demand Condition – It refers to certain intensity of competition that company should face in
home market. Only those companies can gain competitive advantage which perform
considerably well in local markets. Porter concludes that it’s the demanding customers that
derive competitiveness in the market. Porter refers that demanding customers as character of
markets.
Related and supporting Industry – This component of the model considers suppliers and
related industries to the firm and their competitiveness as well. Since firm and industry are
working together with other related firms, they might derive the advantage of synergic effect
by establishing close relationship with suppliers, other firms and quick movement of
information and product between them.
Firm Structure – The condition of a country either facilitates or obstructs the ability of a
firm to establish and to compete with international firms. It requires a prompt and flexible
company which can take right steps at the right time and adjust itself in different countries,
different situations and at different times.
Role of chance and Govt. –
Following factors are referred as chance factors
1. Inventions and discovery
2. Change in political environment
3. Fluctuations in price of inputs
4. Sudden hike in demand
5. Advancement in any technological environment
Role of Govt. – This can be any decisions taken by govt, in grants, subsidies, tax holidays,
amendments and laws, and provisions related to tax, Change in any laws
FII, FDI ,DII, IIP, ADR, GDR
GDR = 10 underlined shares
Companies from Pak and Bangladesh need clearance from MHA
The automatic route is the route for non-resident investors that doesn't require any approval
from the gov for investing in India
Govt. route - under this, prior to investment approval from govt is required. Proposal for FDI
under govt root is considered by respective administrative ministry or dept.

FDI not allowed: Lottery (govt/pvt)

Gambling & Betting
Chit fund
Real Estate (construction of farmhouse)
Manufacturing of tobacco products, cigars
Sectors not open to pvt sector
Atomic Energy
Railway Ops other than permitted activities mentioned under consolidated policy of FDI
Sectors:
[Link] and animal husbandry - FDI 100%, Automatic root
[Link] - Airports(100%), Air Transport services (upto 49% auto, above that govt), Other
services- Ground Handling service, Maintenance Repair and flying training institutes(100%
under auto root) IMP
3. Insurance (49% through auto root), intermediaries and insurance intermediaries (100%
through auto root) IMP
4. Capital Goods (100% auto)
5. Chemicals (100% auto)
6. Defence (49% auto, above that govt)
7. Electronic system (100% auto)
8. Food processing company (100% auto)
9. Healthcare - Construction of hospitals (100% auto), Healthcare brownfield projects (74%
auto, above that govt root), Greenfield (100 % auto)
10. Leather industry (100% auto)
11. Print media (publication/printing of technical/scientific magazines, 100% govt route)
12. Medical devices (100% auto)
13. Oil and gas- petrol and natural gas (100% auto), Petrol refining by PSU (49% auto)
14. Pharma - Brownfield (upto 74% auto, above that govt route), Greenfield (100% auto)
15. Shipping and port (100% auto)
16. Railway infra (100% auto)
17. Renewable Energy (100% auto)
18. Retail- Duty free shops (100% auto) IMP
19. Ecommerce (100% auto)
20. Food Prods. (100% govt)
21. Multibrand Retail (51% govt) Single brand (100% govt)
22. Roads and highways (100% govt)
23. Telecom Services (upto 49% auto, above that govt) IMP
24. Textiles and garments (100% auto)
25. Thermal Power (100% auto)
26. Tourism and hospitality (100% auto)

GDR – Global Depository Receipts is a general term for a depository receipt where a
certificate is issued by a depository bank which purchases shares of foreign companies,
creates a security on a local exchange backed by those shares. GDR represents ownership of
an underlined number of shares of a foreign company and are commonly used from
developing or emerging markets by investors in developed markets.
Prices of GDR are based on the prices of related shares but they are traded and settled
independently. GDR enables a company, the issuer to access investors in capital markets
outside of its home country. Several intl banks issue GDRs such as JP Morgan Chase, Citi
Grp, Deustche Bank, The Bank of NY Mellon. GDRs are listed in Frankfurt Stock exchange,
London, Luxembourg exchange where they are traded on the intl order book. GDR is an
unsecured security, it can be converted into shares
ADR – American Depository Receipts, is negotiable security that represents securities of a
company that trades in US financial markets. Shares of many non US companies trade on US
stock markets through ADR, which are denominated and pay dividends in US dollars and
may be traded like regular shares. ADRs are also traded during US trading hours.
ADR simplifies investing in foreign securities by having the depository bank that manages
the custody, currency and local tax issues. ADRS are one type of depository receipts which
are any negotiable securities that represent securities of companies that are foreign to the
market on which the ADR trades. Each ADR is issued by a domestic custodian bank. When a
company establishes an ADR program, it decides exactly what it wants out of the program.
For this reason, there are different types of programs or facilities that a company.
1. Unsponsored ADRs – Unsponsored shares traded on over the counter. These shares are
issued in accordance with the market demand and the foreign company has no formal
agreement with the depository bank. Unsponsored ADRs are often issued by more than one
depository bank
2. Sponsored level 1 ADR (OTC Facility) – Level 1 depository receipts are the lowest level
of sponsored ADRs that can be issued. When a company issues sponsored ADR, it has one
designated depository. Level 1 shares can only be traded on the OTC market and the
company has minimal reporting requirements. The company is not required to issue quarterly
or annual reports in compliance with US GAAP.
3. Sponsored Level 2 ADR (listing Facility) – Level 2 DRs are more complicated for a
foreign company. When a foreign company wants to setup its Level 2, it must file a
registration statement with the SEC, in addition the company is required to file a Form 20-F
annually
4. Sponsored Level 3 ADR (offering facility) – A level 3 ADR Program is the highest level a
foreign company can sponsor. Setting up a level 3 program means that the foreign company
is not only taking steps to permit shares from its home market to be deposited into an ADR
program and traded in US. In accordance with this, the company is required to file a Form F1.
5. Restricted Program – Foreign companies that want their stock to be limited to being traded
by certain individuals may set up a restricted program. There are two SEC rules that allows
them to restrict this program, Rule 144-A and Regulation S.

V is also called as the value of the assets or liability

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