Perlmutters EPRG-Typology Analysis

Keywords: perlmutter model, perlmutter theory

Introduction

Dr. Howard V. Perlmutter is a pioneer on globalization of firms and other institutions. His invention of the first typology of international human resource management, which goes along with intercultural management, he defined an approach to cluster and evaluate the intangible subjects of internationalization. In 1969 Perlmutter introduced his first approach under the acronym EPG-Typology, which is a derivation of the single components included. However in 1979, together with a colleague David A. Heenan the model was extended with an additional component under the acronym EPRGTypology. Perlutter prescribed: ‘the tortuous evolution of the multinational corporation� in his book of 1969. He depicts various, more or less standardized orientations and denies the implementation of a strict and pure internationalization. (AIB, 2010)

EPRG-Typology

Perlmutters EPRG-Typology is a qualitative method of analysis, which has, in contrast to quantitative measures a higher conceptual acceptance among experts. As visible in appendix 1, Perlmutter�s approach of internationalization (1969) includes three major typologies characterized by their international orientation. Ethnocentrism is the so called home-country orientation typology. All foreign markets are seen as secondary, which may allow disposing of excess productions. The strong, underlying assumption is that the foreign market does not differ from the penetrated domestic

markets, which lead to a one to one adaption of all strategies. In terms of human resource management employees of the home country are recruited and developed for the key positions in these secondary markets. The polycentric typology differs and follows the close examination and identification of individual differences in each market. Each foreign market is being treated unique with its own management strategies. Modified products to suit the local market are a tactical issue, such as price and promotion which are decided locally. Key positions are held by locally recruited and trained employees who have local nationality. However, the approach of the geocentric typology focuses on the world as a whole single market. It aims towards the identification of the individual segments within a market. Uniform policies are developed for approaching the segments which lead to a high comparability in between the product or service and the strategy world wide. In terms of staffing the best employee available, irrespective of his nationality or origin, is developed to serve the world wide customers. Finally the regiocentric typology was added ten years posterior to the existing EPGTypology. It allocates the foreign markets in homogeneous market clusters. Assimiable with the polycentric approach, the regiocentrism focuses on comparable regional market situations to reach market penetration with a standardized product portfolio and eliminates special market adjustments. Key positions are held by employees of the regions origin. They serve markets which are identified to show a homogeneous attitude and culture to the belonging of the employee. (1969, Perlmutter; 1974, Heenan & Perlmutter) 

Development of International Staffing

International staffing strategies are affected by various corporate decisions, which have to be fitted into the market conditions. Arbitration like location, internationalizing strategy or the time of the market entry have to be aligned, besides other factors, to the companies prerequisites. Staffing choice is literally the most important decision to be made. Perlmutter�s market typology got accompanied by determinants which influence the staffing decision, based on the internationalizing strategy, nowadays. Those determinants vary throughout the internationalization strategy and they influence staffing massively. Specificities like the context, the company or the local representation have to be in line, to successful internationalize a corporation. Other and most important determinants are the international human resource management practices, which include the process of selection, training and development, compensation, career management, to name just a few. (Zagelmeyer, 2010)

Perlmutter’s Paradigm versus Globalization

Perlmutter’s invention of the EPRG-Typology was, and still is, a remarkable development in the field of clustering multinational enterprises. However, since the world trade got more and more effected by globalization, a solely reliance on the approach developed more than forty years old is no longer sufficient. Taking the EPRG-Typology as a conceptual framework, the allocation into a single cluster is no longer valid. Furthermore combinations of single components which allow an individualized internationalization to firms are required. If and how companies enlarge their firms on multinational level, should not be constricted by the source of employees for the key positions, based on the strategy applied. An ethnocentric strategy may be sufficient or even more adequate with local staff in key positions. In fact the development of locally recruited employees, allow new opportunities to establish autarkic representations, who still are company driven but include the advantage of having the local market knowledge. Reliance on local employees requires afford to enable them for managerial positions. Nevertheless a reduction of expats assigned is always accompanied by an improvement of the cost situation. Experts see the Geocentric strategy as the most applicable when it comes to internationalization of companies. Independency of markets to be penetrated, allow companies to have an enlarged global view. Those facts are a clear advantage over ethnocentrism, which is no longer applicable in a whole world market place competing with each other. (Barlett, 2008) When it comes to companies being on a polycentric cluster it has to be seen as the pre-stage to develop and enter into a more geocentric mode which will entitle them to a more independent global view. Regiocentrism is not a reasonable strategy to be followed due to the limitation of the markets which will not allow growth on a large scale once penetrated. Permutter had a wide view during the time of the typology invention, which is still valid as a framework. However the changing market conditions and the changing human resource dependencies require thinking out of the box to combine all additional factors successfully.

Closing

Globalization is a quite new, but often used word which describes the trade world moving closer together. Business relationships, to far distanced countries are no longer impossible. However for most of the companies this effect links a direct need to operate globally and to serve customers world wide. Not only the good and service provision is a challenge, furthermore human resources and management occur to be tough to be handled. The human factor is the most important component to make a multinational company work. Where the resources come from and how they are developed does in the end make no difference, as long as the company is internationally successful.

Reference List

Perlmutter, Howard V., The Tortuous Evolution of the Multinational

Corporation, in: Columbia Journal of World Business, 1/1969 Perlmutter, Howard V./ Heenan, David A., How Multinational Should your Top

Manager be?, in: Harvard Business Review, volume 52, November-

December 1974

Barlett, (2008) Transnational Management: Text, Cases and Readings in

Cross-Border Management (5th ed.). New York: McGraw-Hill.

Kutschker, M./ Schmid, S. (2006) Internationales Management (5th ed.). M�nchen: R. Oldenbourg Verlag M�nchen Wien

AIB � Academy of International Business (2004, October). CV of Howard V. Perlmutter. Retrieved December 15, 2010, from www.aib.msu.edu.