The company wishes to start its operations abroad ought to choose the character of this subsidiary and the way it is going to be managed. Perlmutter (1969) comes out with the concept of four styles of managing abroad.
Ethnocentric subsidiary is managed mainly by home country nationals, with the home country language and culture. Therefore, the recruitment for majority management positions takes place in home country (Muijen et al 2000). For example, the unwritten policy of Ikea is that CEO of any of its overseas units is more likely to be Swedish. In consequences, companies are using home routines and methods to manage its subsidiary, assuming that something that works in their countries must work in anothers (Permutter 1969). This is somehow wrong attitude and this model fail to take under consideration factors present at the foreign markets such as cultural differences, legal issues and marketing differences in terms of customer's preferences (Heer and Noon 2001). However, enthusiast of this approach very often claim that it is difficult to find sufficient managers on the foreign and in consequence less known market. They also stresses that home country exaptriates give the headquarter
more control over its overseas unit. Enthnocentrism, however widely criticised is still present in some corporate behaviour and only american citizens can reach senior management positions in american company's subsidiary (Perlmutter 1969).
On the contrary, Perlmutter presents the polycentric approach. It assumes that host country cultures are different and difficult to understand. Therefore, local people know more about local culture, employment relations and legal issues regarding human resources management, so then the subsidiary should have strong local identit ...