The reason why people are ethnocentric is because our own experiences are the only reality we have, and it is normal to assume that it is the natural basis of reality. Our beliefs help us to organize life experiences and gives meaning to daily and life span activities. The problem with ethnocentrism is that we see things in the context of our life experiences, and not others context which could lead to misunderstandings.
This lack of understanding or ethnocentrism problem can be clearly seen when looking at the emerging nationalistic sentiments in many countries and regions of the world.
The term "ethnocentrism" stems from a more general concept developed by Sumner [1906]. Sumner defines ethnocentrism as: "the view of things in which one's group is the center of everything, and others are scaled and rated with reference to it. Each group nourishes its own pride and vanity, boasts itself superior, exalts its own divinities, and looks with contempt on outsiders." [Sumner, 1906].
The relevance of the ethnocentrism concept in multinational corporations is obvious when considering social interactions. There is a necessity for efficient relations between individuals in a cross-cultural process. If we are to cooperate or negotiate with people from another culture and if we are to act as advisers, superiors, or partners, what we need to know is what makes our counterparts tick. One important aspect of individual behavior and group behavior in organizations is the level of ethnocentrism.
Much emphasis has been placed on the investigation of "consumer ethnocentrism," an attempt to transfer and use the sociology concept of ethnocentrism in a business context. Based on the individual point of view of supporting the domestic economy by favoring domestic products over foreign products, consumer ethnocentrism expresses the wish to contribute to economic growth, and thus the domestic political, social, and economic welfare.