The attitudes of companies and managers can affect how they successfully adapt to foreign cultures. Polycentrism is one type of attitude towards cultural diversity in which the company believes that its business units must mirror its local competitors as much as possible. The problem with a Polycentric orientation is that the company can become too cautious about certain countries and pass up good opportunities. Also, home-country practices may actually work well in a foreign country, yet the company that is too Polycentric will not implement its home-country practices in its business units abroad.
Another management orientation towards cultural diversity is Ethnocentrism. This is the belief that what works in the home-country should work in the host-country as well. The problem with Ethnocentrism is that it ignores important cultural variables in the foreign country. Sometimes, companies understand the environmental factors affecting their industry, but fail to change their objectives to fit the foreign market. This results in a loss of long-term competitiveness in the foreign market as the business unit cannot perform as well as its local competitors.
Geocentrism is a third orientation that is between the extremes of Polycentrism and Ethnocentrism. This approach is implemented when the company adapts to the cultural differences abroad while also adopting some of the practices that are successful within the home market. This allows the company to increase its innovation as well as success rate in its international operations.
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