1. International Management
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2. Management Decision and Control
Chapter 11
Management Decision and Control

3. Learning Objectives
Provide comparative examples of decision making in different countries
Present some of the major factors affecting the degree of decision-making authority given to overseas units
Compare and contrast direct controls with indirect controls

4. Learning Objectives (continued)
Describe some of the major differences in the ways that MNCs control operations
Discuss some of the specific performance measures that are used to control international operations

5. Global Online Retail: Amazon versus Alibaba
Competitive strategies
Alibaba is a conglomerate, whereas Amazon specializes in business-to-consumer sales
Alibaba acts as a facilitator for third-party sellers, whereas Amazon acts as a direct merchant itself
Geographic positioning of both companies affects their potential future growths

6. Managerial Decision-Making Processes
Involves choosing a course of action among alternatives
Often linear but looping back is common
Degree of managerial involvement depends on the:
Structure of the subsidiaries
Locus of decision making
Can be centralized or decentralized

7. Figure 11.1 - Decision-Making Process

8. Table Factors That Influence Centralization or Decentralization of Decision Making in Subsidiary Operations

9. Cultural Differences in Decision Making
How managers view time in the decision-making process
French managers tend to spend ample time on searching for and evaluating alternatives
Danish managers want to act first and take advantage of opportunities

10. Cultural Differences in Decision Making (continued 1)
Germans and Scandinavian countries both have codetermination
Codetermination: Legal system that requires workers and their managers to discuss major decisions
Germans tend to be fairly centralized, autocratic, and hierarchical
Swedes focus more on quality of work life and the importance of the individual in the organization

11. Cultural Differences in Decision Making (continued 2)
Japanese are different from Europeans though they employ a long-term focus
Use the following decision-making processes:
Ringisei: Decision making by consensus
Tatemae: Doing the right thing according to the norm
Honne: What one really wants to do

12. Research Findings on Decision Making
Swedish teams
Higher team orientation, flatter organizational hierarchies, and open-minded and informal work attitudes
Transparent and less formal decision making
German teams
Willing to accept a changed or unpopular decision and have clearer responsibilities for the individual
Faster in decision making as it is largely dominated by the decision authority of an expert in the field

13. Total Quality Management (TQM)
Organizational strategy and accompanying techniques that result in the delivery of high-quality products or services to customers
Critical to achieve world-class competitiveness
Has a big impact in the manufacturing area
Employs concurrent engineering or interfunctional teams to develop new products
Used by MNCs to tailor their output to customer needs

14. Total Quality Management Techniques
Employee empowerment
Empowerment: Gives individuals and teams the resources, information, and authority needed to develop ideas and effectively implement them
Rewards and recognition
Merit pay, discretionary bonuses, pay-for-skills and knowledge plans, plaques, and public recognition

15. Total Quality Management Techniques (continued)
Ongoing training
Takes a wide variety of forms
Ranges from statistical quality control to team meetings designed to generate ideas for streamlining operations and eliminating waste
Objective is to apply kaizen, which is a Japanese term for continuous improvement

16. Decisions to Attack the Competition
Examples
Ford Motor Company’s decision to challenge other automakers and to be a major player in developing markets, such as Asia and Africa
Audi company's decision to target younger professionals in established markets
BMW company's decision to focus on providing more options and personalization for consumers
Mercedes company's decision to go for a lowest-cost strategy

17. ISO 9000 Certification Indirectly related to TQM
To ensure quality products and services
Examines design, process control, purchasing, service, inspection and testing, and training
Necessary prerequisite to doing business in the EU
Screening criterion for getting business in the U.S. and around the globe

18. Decision Making and Controlling
Interlinked functions
Controlling
Process of evaluating results in relation to plans or objectives and deciding what action, if any, to take
Types of control
Internal and external control
Direct and indirect controls

19. Figure 11.2 - Models of PC Manufacturing - Traditional Model

20. Figure 11.2 - Models of PC Manufacturing - Direct Sales Model

21. Figure 11.2 - Models of PC Manufacturing - Hybrid Model

22. Control Problems
Conflict between the objectives of the overseas operation and the MNC
Disagreement in the objectives of joint venture partners and corporate management
Variance in the degree of experience and competence in planning among managers
Basic philosophic disagreements in the objectives and polices of international operations due to cultural differences

23. Internal and external control
Internal control - Focuses on the things that an MNC does best
External control - Ensures that there is a market for the goods and services that it is offering
By finding out what the customers want and be prepared to respond appropriately

24. Table 11.3 - Impact of Internal- and External-Oriented Cultures on the Control Process

25. Direct and Indirect controls
Direct controls - Use face-to-face or personal meetings for monitoring operations
Example - Top executives visit overseas affiliates to learn of problems and challenges
Indirect controls - Use reports and other written forms of communication to control operations
Example - Monthly operating reports

26. Financial Statements Required from Subsidiaries for Indirect Controls
Statements prepared to meet the national accounting standards and procedures prescribed by the host country
Statements prepared to comply with the accounting principles and standards required by the home country
Statements prepared to meet the financial consolidation requirements of the home country

27. Approaches to Control Major differences among countries Great Britain
Financial records were sophisticated and heavily emphasized
Top management tended to focus on major problem areas and not involve in specific matters of control
Control was used for general guidance than for surveillance
Operating units had a large amount of marketing autonomy

28. Approaches to Control (continued)
Germany
Managers employed very detailed control and focused attention on all variances
Managers placed heavy control on production and stressed operational efficiency
France
Managers employed control systems closer to that of Germans than to the British
Control was used more for surveillance than guidance and was centrally administered
Less systematic and sophisticated system

29. Approaches to Control: U.S. Firms versus European Firms
Measure quantifiable, objective aspects
Need precise plans and budgets in generating standards for comparison
European firms
Measure qualitative aspects
Need high levels of knowledge about appropriate behavior in supporting the goals of the firms

30. Approaches to Control: U.S. Firms versus European Firms (continued)
Need large central staffs and centralized information-processing capability
Require less decentralization of operating decision making
Favor long vertical spans between parent and subsidiary firms
Need capable expatriate managers willing to spend time abroad
Require more decentralization of operating decision making
Favor short vertical spans between parent and subsidiary firms

31. Performance Measures for Control: Financial Performance
Measured by profit and loss and return on investment
Profit is an important part of ROI calculation
Amount of profit is directly related to how well or poorly a unit is judged to perform
Can be affected by fluctuations in currency value
If a country devalues its currency, subsidiary export sales will increase
If a country revalues its currency, export sales will decline

32. Performance Measures for Control: Quality Performance
Quality control (QC) - Major function of production and operations management
Achieved through quality circles
Quality control circle (QCC): Group of workers who meet on a regular basis to discuss ways of improving the quality of work
Example
Reasons why Japanese goods are of high quality
Minimal worker error, effective use QCCs, use of early warning systems, use of training overkill, and use of cutting edge technology

33. Performance Measures for Control: Personnel Performance
Common approach is the periodic appraisal of work performance
Variations are found across countries in:
Methods used in evaluations
How the control actually is conducted
How rewards and monitoring of performance are handled

34. Performance Measures for Control: Personnel Performance (continued)
Assessment centers: Identifies individuals with the potential to be selected for or promoted to higher-level positions
Involve the following simulation exercises:
In-basket exercises that require managerial attention
Committee exercises that require candidates to work as a team in making decisions
Business decision exercises that make participants compete in the same market
Preparation of business plans and letter-writing exercises

35. World’s Most Admired Firms
Common themes based on the analysis from the consultants at the Hay Group
Top managers take their mission statements seriously and expect everyone else to do the same
Success attracts the best people, and the best people sustain success
Top companies know precisely what they are looking for
Firms see career development as an investment, not a chore

36. World’s Most Admired Firms (continued)
Whenever possible, these companies promote from within
Performance is rewarded
Firms are genuinely interested in what their employees think, and they measure work satisfaction often and thoroughly

37. Be the International Management Consultant
If you were a foreign investor, would you want to invest in a consumer electronics company in Japan?
Does the fact that the company has had past problems requiring government intervention affect your initial decision?
How does it impact your decision that you would be competing with a government-backed company during the bid process?

38. Review and Discuss
A British computer firm is acquiring a smaller competitor located in Frankfurt
What are two likely differences in the way these two firms carry out the decision-making process?
How could these differences create a problem for the acquiring firm?
Give an example in each case

39. Review and Discuss (continued 1)
Which cultures are more likely to focus on external controls?
Which cultures would consider direct controls more important than indirect controls?
How would you explain a company’s decision to use centralized decision-making process and decentralized control process, considering the two are so interconnected?
Provide an industry example of where this may occur

40. Review and Discuss (continued 2)
How are U.S. multinationals trying to introduce total quality management into their operations? Give two examples
Would a U.S. MNC doing business in Germany find it easier to introduce TQM concepts into German operations, or would there be more receptivity to them back in the United States? Why?
What if the U.S. multinational were introducing these ideas into a Japanese subsidiary?

41. Review and Discuss (continued 3)
In what ways could an accelerated decision-making process harm a company?
Using Figure 11–1, which stage(s) do you think would be most in danger of being overlooked?
A company does a personnel performance evaluation by reviewing the financial decisions the management has made, specifically focusing on ROI
How is this approach beneficial to the company?

42. Review and Discuss (continued 4)
Which aspects could the company be neglecting?
Which cultures are most likely to employ this method?
Which cultures would avoid this tactic?