Control• Where are decisions made?• How can the company

optimize globally?• How should country units

report to headquarters?1

DEFINITION

Is the planning, implementation, evaluation, and correction of performance to ensure that

organizational objectives are achived

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FACTORS MAKE CONTROL MORE DIFFICULT INTERNATIONALLY THAN IT IS DOMESTICALLY:

Distance Diversity Uncontrollable

s Degree of

certainty

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DistanceIt takes more time and expense to

communicate.

The geographic distance (especially when operations span multiple time zones) and

cultural disparity separating countries the time, expense, and possibility of error in

cross-national communications.

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DiversityCountry differences make it hard to compare

operations

When go internationally MNE need to adjust their operations (market size, nature of product, labor cost, currency & types of

competition) to unique situations encountered in each country in which it

operates. Differentiate operations among countries,

make the task of evaluating performance or setting standards to correct or improve business functions extremely complicated.

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Uncontrollables

There are more outside stockholders and governmental dictates.

Performance evaluation is less use in maintaining control unless to take

corrective action. Effective corrective action may be minimal because foreign

operation must contend with outside stockholder, whose objectives may differ

from the parent company, and with government regulations over which the company has no short-term influence.

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Degree of UncertaintyThere often are rapid changes in the

environment and data problems

Control implies setting goals and developing plans to meet organization’s goal; Economic and industry data are much less complete and accurate for some countries than for

others, political also subject to rapid change. All these situations impede planning, especially for long term planning, and reduce the certainty of results from

implementation.

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CONTROL PROCESS1. Planning2. Organizational Structure3. Location of Decision

Making4. Control Mechanism5. Special Situations

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Planning

The process of setting goals, developing strategies and outlining tasks and schedules to accomplish the goals

The essence of planning is company must adapt its unique resources and objectives to different and changing international competitive situations.

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Organizational Structure• Defines how individuals and

organizational units are grouped to carry out company activities

• Consists of formal structure and lines of communications

• Types of organizational structure:-- International Division- Functional Division- Product Division- Geographic (area) division- Matrix

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International Division

• Grouping international activities into their own decision

• Allows their own personnel to handle task such as export documentation, forex transaction & relation with foreign governments

• Depend on the domestic divisions for product to sell, personnel, technology & other resources

• Best suited for multidomestic strategies

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International Division

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Functional Division

Use among companies with narrow product lines

It ideal when product & production methods are basically undifferentiated among countries

To ensure the effectiveness of division specialization

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Functional Division

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Product Division• Use among international companies

with diverse products• Both foreign & domestic operations

report to the same head

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• Use companies with large foreign operations that are not dominated by a single country or area

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Geographical (area) Division

Product Division

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Geographical (area) Division

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Matrix• Use to integrate or separate foreign

operations• Subsidiary reports to more than one

group• Each group shares responsibility

over foreign operations, the groups will become more interdependent, exchange information, and ultimately take strategic global perspectives as they seek to exchange resources with each other.

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Matrix

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Location of Decision Making• Companies must determine where

decisions will be made even though organizational structure outlines who reports to whom within the MNE.

• The choice of decision location should be based on:-1. balancing pressures for global integration vs pressures

for local responsiveness,2. balancing the capabilities of headquarters vs subsidiary personnel, and3. balancing the expediency vs the quality of decisions.

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• Corporate culture – The common values shared by employees in a corporation

• Reports – reports must be timely in order to allow companies to respond to their information

• Management vs subsidiary performance – companies should evaluate managers on things they can control. Subsidiaries should be evaluated separately from their managers so that managers are not penalized for conditions or occurrences outside their control.

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Control MechanismC

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Cost and accounting comparability – different cost structures among subsidiaries may prevent a meaningful comparison of their operating results.

Evaluate measurement systems – companies must evaluate results in relation to budgets (to evaluate performance look at the budget agreed upon by HQ and subsidiary managers, so company can differentiate between subsidiary’s worth and its management’s performance).

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Control Mechanism cont..

Planning information acquisitions – management should reevaluate information needs periodically to keep costs down and should ensure that information is being used. Information include subsidiary cash balances and needs, analyses of local political and economic conditions, feedback from parent to local subsidiaries such as R&D findings, lateral info between related subsidiaries and information for external reporting needs. 23

Control Mechanism cont..

Control in Special Situation

Shared Ownership (such as Wholly Owned / Joint venture)

Sharing ownership limits the flexibility of corporate decision making.

AcquisitionCriteria in evaluating performance may be

different from that of the acquired company’s accustomed performance criteria.

When to centralize certain decision-making procedure or to change operating method may results distrust, apprehension, and resistance to change.

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