What is an ethnocentric company?

An ethnocentric company is characterized by a management approach where the headquarters maintains a strong influence and control over its foreign operations. This means that decision-making processes are centralized, often reflecting the parent company's practices, culture, and standards. Such companies tend to assume that what works well in their home country will also be effective in foreign markets, leading them to impose similar structures, policies, and practices across all locations.

This centralized control can manifest in various ways, including the appointment of home-country nationals to key management positions within subsidiaries and a focus on aligning foreign operations with the company's domestic strategies. By doing so, ethnocentric companies may ensure consistency and adherence to the parent company's objectives but may also risk overlooking the unique cultural and operational needs of the local markets in which they operate.

In contrast, a decentralized management structure would allow for more autonomy among foreign subsidiaries, enabling them to adapt and operate according to local conditions. A company that permits freedom in foreign operations would prioritize local decision-making, which is not a hallmark of the ethnocentric approach. Similarly, a company with no foreign operations would not fit the definition, as ethnocentricity applies specifically to organizations engaged in international business. Therefore, the option indicating strict control by headquarters accurately captures the essence of