Because learning changes everything.

Part Three: International

Strategic Management

Chapter 11: Management

Decision and Control
International Management:
Culture, Strategy, and Behavior
Twelfth Edition
Jonathan P. Doh, Fred Luthans,
Ajai S. Gaur

© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
 Decision-Making Process and Challenges

• The managerial decision-making process is often linear,

though looping back is common.
• If decision making is centralized, most important decisions
are made at the top.
• If decentralized, decisions are delegated to operating
personnel.
• The way in which decision-making is carried out will be
influenced by a number of factors.

© McGraw Hill, LLC 2

 Factors Affecting Decision-Making Authority

• Efficiency of processes is a major concerns for

organizations.
• Decentralization is emphasized as diversification
increases.
• Experience proves to be a simple indicator of efficiency.
• Protection of goods and services is also important to an
MNC.
• It is most common to find finance, R&D, and strategic
planning decisions being made at MNC headquarters with
the subsidiaries working within the parameters established
by the home office.
• When the subsidiary is selling new products in growing
markets, centralized decision making is more likely.
© McGraw Hill, LLC 3
 Cultural Differences and Examples of Decision Making

Do decision-making philosophies/practices differ from

country to country?
• French managers search for and evaluate alternatives.
• In Germany, managers focus on productivity and quality of
goods.
• Codetermination means workers and managers discuss decisions.
• Swedes focus on work life quality and the importance of the
individual.
• The Japanese use ringisei, a term for “decision-making by
consensus.”
• Tatemae means “doing the right thing” according to the norm.
• Honne means “what one really wants to do.”
• Other cultural difference include how time is viewed and how
decisions are made in teams.
© McGraw Hill, LLC 4
 Total Quality Management Decisions

Total quality management (TQM) is a strategy whose

techniques result in delivering high-quality products or
services to customers
• One of the primary areas where TQM is having a big
impact is in manufacturing.
• A critical issue is how much decision-making to delegate to
subordinates.
• TQM uses employee empowerment.
• Another TQM technique is rewards and recognition.
• Still another technique is the use of ongoing training to
achieve continual improvement.

© McGraw Hill, LLC 5

 Decisions for Attacking the Competition

Another series of key decisions relate to MNC actions designed to

attack the competition and gain a foothold in world markets.
• Ford has been shifting production closer to the local consumer
and away from its stagnant U.S. market.
• In 2017, Ford opened a plant in Nigeria.
• Ford also opened plants in China and Thailand in recent years.
While Audi, Mercedes-Benz, and BMW all share the same goal of
leading the international luxury vehicle market, they take different
approaches.
• Audi targets younger professionals using trendy body designs.
• BMW focuses on more options and personalization for its
consumers.
• Mercedes took a lower-cost strategy, and leads the market.
© McGraw Hill, LLC 6
 Decision and Control Linkages

Decision-making and controlling are two vital and interlinked functions.

• Controlling is the process of evaluating results in relation to plans or
objectives and deciding what action, if any, to take.
• In 2010, BlackBerry had 41 percent of the smartphone market.

• Apple and Samsung introduced touchscreens, BlackBerry did not.

• By the time BlackBerry finally adapted, it was too late.

• Another example is Universal Studios Japan’s design of Osaka Park.

• Creating the new park meant thousands of decisions were made regarding
what to include and what to leave out.

• Efforts to design a uniquely Japanese theme park with an American feel

paid off—Osaka Park is now one of the most-visited theme parks
worldwide

© McGraw Hill, LLC 7

 The Controlling Process

Controlling involves evaluating results in relation to plans or

objectives and deciding what action to take next.
• In 2012 and 2014, ExxonMobil formed a series of JVs with
Russian-based Rosneft to tap into the Russian Arctic oil
and gas fields.
• However, U.S.-imposed sanctions in 2014 resulted in
increased complexity and fines for the company.
• In 2018, ExxonMobil announced its withdrawal from the
JVs, resulting in a US$200 million loss.

© McGraw Hill, LLC 8

 Figure 11-2: Models of PC Manufacturing

Source: Original graphic by Professor Jonathan Doh.

Access the text alternative for these images

© McGraw Hill, LLC 9

 Control Problems

The objectives of the overseas operation and the corporation

conflict.
The objectives of joint-venture partners and corporate
management conflict.
Degrees of experience and competence in planning vary
widely among managers running the various overseas units.
There may be basic philosophic disagreements about the
objectives and policies of international operations.
• Largely because of cultural differences between home-
and host-country managers.

© McGraw Hill, LLC 10

 Types of Control

There are two common, complementary ways of looking at

how M N C’s control operations.

One way is by determining whether the enterprise

chooses to use internal or external control in devising its
overall strategy.

The other is by looking at the ways in which the

organization uses direct and indirect controls.

© McGraw Hill, LLC 11

 Internal and External Control

From an internal control standpoint, an M N C will focus on

the things that it does best.
• At the same time, of course, management wants to ensure
that there is a market for the goods and services that it is
offering.
• The company first needs to find out what the customers
want and be prepared to respond appropriately, requiring
an external control focus.
Cultures differ in the control approach they use.
• Among U.S. M N C’s, it is common to find managers using
an internal control approach.
• Among Asian firms, an external control approach is more
typical.

© McGraw Hill, LLC 12

 Table 11-2: The Impact of Internal- and External-Oriented
Cultures on the Control Process

Internal Control External Control

Dominating, externally aggressive Flexible, compromise keeps peace

Conflict/resistance mean that a Harmony, responsiveness, and

person has convictions. sensibility are encouraged.

Focus is on self, Focus is on others

Change is discomforting Change is “natural”

Tips (for Externals) Tips( for Internals)

“Hardball is a test of opponent Softness, patience are rewarded

“Win your objective” important Relationship are important

You winsome, you lose some You win together, you lose apart

© McGraw Hill, LLC 13

 Direct and Indirect Controls
Direct controls use face-to-
face meetings to monitor
operations.
• Monthly management
meetings.
• Visits by top executives to
overseas subsidiaries.
• Staffing choices.
• The organizational
structure itself is a form of
direct control.
© McGraw Hill, LLC
Indirect controls use
written words to control
operations.
• Monthly operating reports
sent to the home office.
• Financial statements
gauge the unit’s financial
health.
Typically, indirect controls
monitor monthly
performance, and direct
controls are used once/twice
a year.
14
 Approaches to Control

Approaches typically are dictated by the following points:

• The M N C’s philosophy of control.
• The economic environment in which the overseas unit is
operating.
• The needs/desires of the managerial personnel who staff the
unit.
Working within control parameters, M N C’s will structure their
processes so that they are as efficient and effective as possible.
• Typically, the tools used will do the following:
• Give the unit manager the autonomy needed to adapt to changes in the
market as well as to attract competent local personnel.
• Provide coordination of operations, so that the overseas unit operates in
harmony with the M N C’s overall strategic plan.
Some control tools, like financial controls, are universal.

© McGraw Hill, LLC 15

 Some Major Differences

British controls use financial records, top management focuses on broad

problems, control is for guidance, and operating units have autonomy.
• German managers use detailed control and focus on all variances.
• The French control system is closer to the Germans than the British.
Americans make greater use of output control, and Europeans rely more
heavily on behavioral control.
• U.S. M N C’s focus on quantifiable, objective aspects of a subsidiary,
whereas control in European M N C’s measures qualitative aspects.
• U.S. M N C’s require precise plans and budgets in generating suitable
standards, while Europeans agree on appropriate behavior.
• U.S. M N C’s have large central staffs and centralized information-
processing, while Europeans have a network of expatriate managers.
These differences help explain why European subsidiaries are more
decentralized than U.S. subsidiaries.

© McGraw Hill, LLC 16

 Quality Performance

A quality control circle (QCC) is a group of workers who

meet on a regular basis to discuss ways of improving the
quality of work.
• Why are Japanese-made goods of higher quality than
other countries’?
• Clean workplace and all machinery and equipment is maintained.
• Minimize worker error—new employees work with others first.
• Make effective use of QCCs.
• Use early warning systems and resolve problems quickly.
• They help suppliers develop lean manufacturing capabilities.
• Japanese workers train for all jobs on the line—“training overkill.”
From a control standpoint, the major issue is how to identify
quality problems and resolve them as efficiently as possible.

© McGraw Hill, LLC 17

 Figure 11-3: Solving a Quality Problem—Taguchi Method
vs. Traditional Method

Source: Holusha, John. “Improving Quality, The Japanese Way.” The New York Times, July 20, 1988.

Access the text alternative for these images

© McGraw Hill, LLC 18

 Personnel Performance

Besides financial techniques and the emphasis on quality, another key

area of control is personnel performance evaluation.
• The Reputation Institute in conjunction with Forbes magazine,
provides a list of the most reputable companies.
• Consultants at the Hay Group analyzed the best global firms, focusing
on personnel/talent management, identifying seven common themes.
• Executives take mission statements seriously and expect others to do the
same.
• Success attracts the best people—and the best people sustain success.
• The top companies know precisely what they are looking for.
• These firms see career development as an investment, not a chore.
• Whenever possible, these companies promote from within.
• Performance is rewarded.
• The firms are genuinely interested in what their employees think, and they
measure work satisfaction often and thoroughly.

© McGraw Hill, LLC 19

 Appraisal of Work Performance

Awareness of cultural differences is important when

expatriate managers evaluate local managers on the basis of
home-country standards.
• Another difference is how personnel performance control
is conducted.
• Groups are credited in Japan, while individuals in America.

• Other differences relate to rewards and monitoring of

performance.
• An American “lone wolf” may get higher rewards.

• Control of personnel performance by Japanese and U.S.

managers is far more similar than different.

© McGraw Hill, LLC 20

 End of Main Content

Because learning changes everything. ®

www.mheducation.com

© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.