Corporate Management in Europe (2/4)

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How to get in Europe? Ethnocentric Orientation

Remember Ethnocentric orientation strategy can be built as follows :

o Ethnocentric orientation – home country orientation

Ethnocentric Orientation transmits the culture of headquarter to the foreign subsidiaries. The local culture of the foreign subsidiaries is thus removed

•  Identity : Home country identity is spread worldwide               

•  Staffing : Home country people are sent worldwide for key positions

•  Decision : Decisions remain in the hands of headquarter

•  Communication : Communication is organized by headquarter 

o Mac Donald’s case study : Ethnocentric Orientation Success

McDonald's follows the ethnocentric orientation model. This requires an American management culture in all world's areas inside and outside the company (HRM, production method, training, motivation…)    

McDonald's has created it own world center for training: The "Hamburger University". Headquartered in Oak Brook, Illinois (USA). It offers training programs exclusively for McDonald's employees. These staff, coming from over 119 countries, represents the "McFamily". The training program od the "Hamburger University" aims to develop the McDonald's staff at all levels of the organization. it also aims to train people for a long career at McDonald's, as the policy is based on long-term career's concept and strong possibilities of change and development within the group. It promises simple teammate to move up the ranks quickly. This is a crucial point for McDonald's HRM's communication. In Europe and in spite of cultural diversity, this model demonstrates its large success.

o Ikea Case Study : Ethnocentric Orientation Success

There is a way of doing things better according to Ingka Holding B.V, Ikea’s founder, and the “Ikea way” makes methods and approaches converge to reach this perfect process. There are almost no differences allowed between countries or cultures so much so that management, structure and organization are very similar from one store to another.

Ikea has a conservative policy to internationalization because it builds a strong supplier network before opening a retail outlet. Moreover Ikea’s expansion in Europe and North America has been mainly through company owned subsidiaries whereas franchising has been used mostly in other regions; 231 stores were owned by the Ikea Group and 29 stores by exterior franchisees in 2007.

However no matter what the status of a store is since the headquarter is actively involved in the supply and running of stores, monitoring the results or giving advice to improve performances are necessary.

Ikea’s structure is highly centralized since the head office has control over all the different steps of the value chain to maximize its overall efficiency and minimize costs.

Despite heterogeneous consumer preferences, Ikea has established its own Swedish style and culture so much that it has succeeding in becoming a global player in an industry considered by nature to be local. 

…To be continued

References 

European unity, the history of an idea, The Economist, December 30, 2003

Ikea: Culture as Competitive Advantage, P. Grol, C. Schoch ECCH Collection, Paris Chamber of Commerce and Industry

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