Chapter 12 THE DECISION MAKING AND CONTROLLING

INTERNATIONAL DECISION MAKING British are highly decentralized French tend to be centralized Germans are fairly centralized Swedes are also centralized Japanese decide by consensus

FACTORS AFFECTING DECISION MAKING CENTRALIZATION Large company Homogeneous product lines Large capital investment High degree of technology DECENTRALIZATION Small company Heterogeneous product lines Small capital investment Moderate to low degree of technology

Rewards and Recognition TQM DECISIONS U.S. workers value individual recognition and praise Japanese use continuous improvement of quality Rewards and Recognition Manufacturing U.S. has greatly improved the quality of their cars Japanese prefer group rewards

QUALITY OLD MYTH Quality is the responsibility of the people in the Quality Control Department Training is costly It is human to make mistakes Quality improvements are made in small, continuous steps Quality improvement takes time Haste makes waste Suppliers need to be price competitive

QUALITY NEW TRUTH Quality is everyone’s job Training does not cost, it saves Total customer satisfaction is a standard that should be vigorously pursued In improving quality, both small and large improvements are necessary Quality does not take time, it saves time Thoughtful speed improves quality Suppliers need to be quality competitive

TYPES OF CONTROL Direct/Indirect Internal/External

INTERNAL dominating attitude bordering on aggressiveness towards the environment focused on self, function, one’s own group, and one’s own organization discomfort when the environment seems “out of control” or changeable Win some, lose some EXTERNAL flexible attitude, willing to compromise and keep the peace focused on others such as customers, partners, and colleagues Comfort with waves, shifts, and cycles, which are regarded as “natural” Win together, lose apart

Direct Controls Involves face-to-face or personal meetings to monitor operations Ex.) Monthly management meetings Ex.) Visits by top executives to overseas affiliates or subsidiaries Indirect Controls Use reports and other written forms of communication to control operations Ex.) Monthly operating reports that are sent to the home office Ex.) Balance sheet, income statement, cash budgets

CONTROL IN U.S. MNCs Control in U.S. MNCs focuses more on the quantifiable, objective aspects of a foreign subsidiary Requires more precise plans and budgets Requires large central staffs and centralized information processing capability

CONTROL IN EUROPEAN MNCs Requires a high level of company-wide understanding and agreement regarding appropriate behavior Requires more decentralization of operating decisions Requires more capable expatriate managers who are willing to spend long periods of time abroad

CONTROL TECHNIQUES Financial Performance Quality Performance Personal Performance

FINANCIAL PERFORMANCE Based on profit and return on investment Profit = Total Revenues - Total Exp Using Financial Performance alone when controlling a subsidiary for effective performance can be misleading

Brainstorming session Experimental production runs QUALITY PERFORMANCE Taguchi Method: Brainstorming and a few experiments seek to quickly find the problem. Production problem Brainstorming session Employ Taguchi Experimental production runs Confirm results

PERSONAL PERFORMANCE 1. Success attracts the best people--and the best people sustain success 2. The top companies know precisely what they are looking for 3. These firms see career development as an investment, not a chore 4. Whenever possible, these companies promote from within 5. Performance is rewarded