Perlmutter's four orientations for multinational corporations

Question 1

Headquarters maintains tight control over subsidiaries, who are expected to follow the strategic pattern, values, policies, and practices expressed by headquarters.

Answer 1

Ethnocentric

There is “one best way.” The term “ethnocentric” here refers to the fact that management will usually share a common ethnic background, different from the ethnic make-up of subsidiaries.

Question 2

Subsidiaries are allowed a large measure of independence as long as they are profitable. They may plot their own paths based on the business and cultural contexts of their countries. There are “many best ways.”

Answer 2

Polycentric

Question 3

Subsidiaries are grouped into regions (such as Europe, North America, or Asia-Pacific). Strategic coordination is high within the region but not as high between the region and headquarters.

Answer 3

Regiocentric

Question 4

Subsidiaries are neither satellites taking orders nor independent bodies setting their own course. Headquarters and subsidiaries are participants in a network, each contributing its unique expertise. There is essentially “a team way,” transcending national borders.

Answer 4

Geocentric