DEFINITION Is the planning, implementation, evaluation, and correction of performance to ensure that organizational objectives are achived 2
FACTORS MAKE CONTROL MORE DIFFICULT INTERNATIONALLY THAN IT IS DOMESTICALLY: Distance Diversity Uncontrollables Degree of certainty 3
Distance It 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. 4 FACTORS MAKE CONTROL MORE DIFFICULT INTERNATIONALLY THAN IT IS DOMESTICALLY
Diversity Country 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. 5 FACTORS MAKE CONTROL MORE DIFFICULT INTERNATIONALLY THAN IT IS DOMESTICALLY
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. 6 FACTORS MAKE CONTROL MORE DIFFICULT INTERNATIONALLY THAN IT IS DOMESTICALLY
Degree of Uncertainty There 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. 7 FACTORS MAKE CONTROL MORE DIFFICULT INTERNATIONALLY THAN IT IS DOMESTICALLY
CONTROL PROCESS Planning Organizational Structure Location of Decision Making Control Mechanism Special Situations 8
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. 9 CONTROL PROCESS
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 10 CONTROL PROCESS
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
11 ORGANIZATIONAL STRUCTURE
International Division 12
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 13 ORGANIZATIONAL STRUCTURE
Functional Division 14
Use among international companies with diverse products
Both foreign & domestic operations report to the same head
Use companies with large foreign operations that are not dominated by a single country or area
Product Division 16
Geographical (area) Division 17
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.
18 ORGANIZATIONAL STRUCTURE
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, and 3. balancing the expediency vs the quality of decisions. 20 CONTROL PROCESS
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.
21 Control Mechanism CONTROL PROCESS
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). 22 Control Mechanism cont..
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 in Special Situation
Shared Ownership (such as Wholly Owned / Joint venture)
Sharing ownership limits the flexibility of corporate decision making.
Criteria 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.