CH 10 Review and Discuss 1 What types

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CH 10 Review and Discuss 1. What types of political risk would a company

CH 10 Review and Discuss 1. What types of political risk would a company entering Russia face? 2. Most firms attempt to quantify their political risk although without specific weights. Why is this approach so popular? Would assignment of weights be useful? 3. How have terrorist attacks affected political relationshps between countries such as U. S. and Russia? 4. What are some of the challenges associated with managing alliances? How do host governments affect these? 11 -1

chapter eleven Management Decision and Control Mc. Graw-Hill/Irwin Copyright © 2009 by The Mc.

chapter eleven Management Decision and Control Mc. Graw-Hill/Irwin Copyright © 2009 by The Mc. Graw-Hill Companies, Inc. All Rights Reserved.

Chapter Objectives: 1. 2. 3. 4. 5. PROVIDE comparative examples of decisionmaking in different

Chapter Objectives: 1. 2. 3. 4. 5. PROVIDE comparative examples of decisionmaking 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. 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. 11 -3

Decision-Making Processes and Challenges • Managerial decision-making processes: method of choosing a course of

Decision-Making Processes and Challenges • Managerial decision-making processes: method of choosing a course of action among alternatives • Process is often linear • Looping back is common • Managerial involvement in procedure depends on structure of subsidiaries and locus of decision-making 11 -4

Decision-Making Process 11 -5

Decision-Making Process 11 -5

Decision making • Decision making is a key role for any manager or leader.

Decision making • Decision making is a key role for any manager or leader. Surprisingly many people struggle when it comes to taking decisions. This might be due to: • • Fear of failure • • Lack of a structured approach • • Procrastinating • • Lack of clarity 11 -6

Decision making- Problem Definition • 1. Problem Definition – Before you can start to

Decision making- Problem Definition • 1. Problem Definition – Before you can start to take any decisions, you need to be absolutely clear the problem you are trying to reach a decision on. One simple technique is just to write out in a sentence what the problem is that you need to take a decision on. 11 -7

Decision making- Assess the implications • 2. Assess the implications – All decisions have

Decision making- Assess the implications • 2. Assess the implications – All decisions have implications. If it is a decision at work, it has implications for you, your peers, your team and your superiors. Depending on the decision (e. g. a promotion at work) it may even have implications for your family, especially if it involves relocation. 11 -8

Decision making- Explore different perspectives • 3. Explore different perspectives – Perspectives are simply

Decision making- Explore different perspectives • 3. Explore different perspectives – Perspectives are simply different lenses through which you look at the problem. By exploring different perspectives you start to get a feel for those that you are most attracted to. 11 -9

Decision making- Get clear on your ideal outcome • 4. Get clear on your

Decision making- Get clear on your ideal outcome • 4. Get clear on your ideal outcome – When you are faced with a big decision, it is easy to get lost in the detail and circumstances. An alternative is to get clear on your ideal outcome and use this ideal outcome to inform your choices. Imagine you aspire to be a CFO of a Top 100 company. By having clarity on your outcome, you can make choices on promotions and experience linked to this ideal outcome. 11 -10

Decision making- Weigh up pros and cons • 5. Weigh up pros and cons

Decision making- Weigh up pros and cons • 5. Weigh up pros and cons – Another way of looking at a decision is to consider the advantages and disadvantages of each of the options open to you. Simply listing the advantages and disadvantages of each option is a powerful way of moving forward on decisions. 11 -11

Decision making- Decide and act • 6. Decide and act – Once you have

Decision making- Decide and act • 6. Decide and act – Once you have gone through the previous 5 steps, commit to a choice or course of action and start to make it happen. To avoid procrastination, give yourself permission to be okay with any failings that might arise. 11 -12

Decision making • At the end of the day there is no magic formula

Decision making • At the end of the day there is no magic formula for decision making. Following some simple steps and acting can however move you into the realm of effective decision maker. • Article Source: http: //Ezine. Articles. com/? expert=Duncan_Brodie 11 -13

Factors Affecting Decision Making Authority 11 -14

Factors Affecting Decision Making Authority 11 -14

Decision Making 11 -15

Decision Making 11 -15

Comparative Examples of Decision Making • Decision-making philosophies and practices from country to country:

Comparative Examples of Decision Making • Decision-making philosophies and practices from country to country: – Do international operations use similar decisionmaking norms? • French and Danish managers used different approaches to decision-making; each more adept at different stages of the process. • French do not value time as much as counterparts • German co-determination: managers focus more on productivity and quality of goods/services than on managing subordinates. 11 -16

Comparative Examples of Decision Making • Most evidence indicates overall decisionmaking approaches used around

Comparative Examples of Decision Making • Most evidence indicates overall decisionmaking approaches used around the world favor centralization • MNCs based in U. S. – Use fairly centralized decision making in managing overseas units – Ensure that all units are operating according to overall strategic plan – Provide necessary control for developing a worldwide strategy 11 -17

Comparative Examples (continued) • Japanese make heavy use of ringisei (decision making by consensus)

Comparative Examples (continued) • Japanese make heavy use of ringisei (decision making by consensus) • Other Japanese decision-making terms: – Tatemae: “doing the right thing” according to the norm – Honne: “what one really wants to do” 11 -18

The Control Process • MNC methods to control overseas operations – Most combine direct

The Control Process • MNC methods to control overseas operations – Most combine direct and indirect controls – Some prefer heavily quantifiable methods; some prefer qualitative approaches – Some prefer decentralized approaches; others greater centralization 11 -19

Control Process • Three common performance measures: – Financial performance: typically measured by profit

Control Process • Three common performance measures: – Financial performance: typically measured by profit and return on investment – Quality performance: often controlled through quality circles – Personnel performance: typically judged through performance evaluation techniques. 11 -20

Models of PC Manufacturing Traditional Model Manufacturer orders PC parts based on sales forecasts

Models of PC Manufacturing Traditional Model Manufacturer orders PC parts based on sales forecasts PC parts are warehoused until needed by the manufacturer Manufacturer builds PCs & stores them in their warehouse PCs are ordered by distributors & shipped to their warehouse PC orders received from retailers are shipped to them by distributors Customer buy PC from retailer & receives assistance setting PC up Adapted from Figure 11– 1: Models of PC Manufacturing Mc. Graw-Hill/Irwin 11 -21 © 2006 The Mc. Graw-Hill Companies, Inc. All rights reserved.

Models of PC Manufacturing Direct-Sales Model Manufacturer orders a small number of PC parts

Models of PC Manufacturing Direct-Sales Model Manufacturer orders a small number of PC parts from its suppliers Business & individual customers place orders by phone or over the internet Manufacturer builds PCs to customer’s exact specifications Manufacturer ships PCs directly to customer Adapted from Figure 11– 1: Models of PC Manufacturing Mc. Graw-Hill/Irwin 11 -22 © 2006 The Mc. Graw-Hill Companies, Inc. All rights reserved.

Models of PC Manufacturing Hybrid Model Manufacturer builds shells – a case, power supply,

Models of PC Manufacturing Hybrid Model Manufacturer builds shells – a case, power supply, floppy disc, basic circuitry Shells are shipped to distributors & components suppliers establish parts inventory with or near distributor Distributor gathers parts to assemble PC to customer’s specifications Adapted from Figure 11– 1: Models of PC Manufacturing Mc. Graw-Hill/Irwin Customer orders PC through retailer or direct from manufacturer – order is forwarded to distributor Distributor ships PC direct to customer on dealers behalf – dealer provides setup & additional services for separate fee 11 -23 © 2006 The Mc. Graw-Hill Companies, Inc. All rights reserved.

The Controlling Process • MNCs may experience control problems – Objectives of overseas operation

The Controlling Process • MNCs may experience control problems – Objectives of overseas operation and MNC may conflict – Objectives of joint venture partners and corporate management may not agree – Degree of experience and competence in planning vary widely among managers running overseas units – Basic philosophic disagreements about objectives and polices of international operations may exist 11 -24

Types of Control • Two common complementary types: 1. Internal or external control in

Types of Control • Two common complementary types: 1. Internal or external control in devising overall strategy 2. Looking at ways organization uses direct and indirect controls 11 -25

Types of Control: External/Internal: • Internal and external perspectives of control – one is

Types of Control: External/Internal: • Internal and external perspectives of control – one is often given more attention than the other. • External control focus needed to find out what customers want and be prepared to respond appropriately • Management wants to ensure market for goods and services exist 11 -26

Types of Control: External/Internal 11 -27

Types of Control: External/Internal 11 -27

Types of Control: Direct Controls • Use of face-to-face personal meetings for purpose of

Types of Control: Direct Controls • Use of face-to-face personal meetings for purpose of monitoring operations • Examples: top executives visit overseas affiliates to learn of problems and challenges; design structure that makes unit highly responsive to home-office requests and communications 11 -28

Types of Control: Indirect • Use of reports and other written forms of communication

Types of Control: Indirect • Use of reports and other written forms of communication to control operations at subsidiaries • Financial statements – Financial statement prepared to meet national accounting standards prescribed by host country – Statement prepared to comply with accounting principles and standards required by home country – Statement prepared to meet financial consolidation requirements of home country 11 -29

The Controlling Process • Differences across countries: • Great Britain – Financial records are

The Controlling Process • Differences across countries: • Great Britain – Financial records are sophisticated and heavily emphasized – Top management tends to focus on major problem areas; not involved in specific matters of control – Control used for general guidance more than surveillance – Operating units have large amount of marketing autonomy 11 -30

The Controlling Process (continued) • France – Managers employ control systems closer to that

The Controlling Process (continued) • France – Managers employ control systems closer to that of German than British – Control used more for surveillance than guidance – Process centrally administered – Less systematic and sophisticated than in German companies 11 -31

The Controlling Process • U. S. vs. Europeans: – U. S. firms rely much

The Controlling Process • U. S. vs. Europeans: – U. S. firms rely much more on reports and other performance-related data – Americans make greater use of output control; Europeans rely more heavily on behavioral control – Control in U. S. MNCs focus more on quantifiable, objective aspects of foreign subsidiary; control in European MNCs used to measure more qualitative aspects. 11 -32

Planning and Control 11 -33

Planning and Control 11 -33

Control Techniques • Financial performance – Most important part of ROI calculation is profit;

Control Techniques • Financial performance – Most important part of ROI calculation is profit; often manipulated by management – Amount of profit directly related to how well or poorly a unit is judged to perform 11 -34

Control Techniques • Financial performance (continued): – Bottom line (i. e. , profit) performance

Control Techniques • Financial performance (continued): – Bottom line (i. e. , profit) performance of subsidiaries can be affected by a devaluation or revaluation of local currency – If a country devalues its currency, subsidiary export sales will increase – Price of goods will be lower foreign buyers with currencies that have greater purchasing power – If country revalues its currency, export sales will decline – Price of goods foreign buyers rises since currencies now have less purchasing power in subsidiary’s country 11 -35

Control Techniques • Quality performance: Why Japanese goods of higher quality than goods of

Control Techniques • Quality performance: Why Japanese goods of higher quality than goods of many other countries: – – Quality control circle (QCC) Japanese firms train people carefully Staying on technological cutting edge Focus on developing and bringing to market competitively priced goods – Design, engineer, and supply people to ensure product produced at prices customers can bear – Fostering continuous cost-reduction efforts (kaizen) 11 -36

U. S. vs. Japan-owned Auto Plants 11 -37

U. S. vs. Japan-owned Auto Plants 11 -37

Most Admired Global Companies 11 -38

Most Admired Global Companies 11 -38

Most Admired Global Companies 11 -39

Most Admired Global Companies 11 -39

Total Quality Management (TQM) • Organizational strategy and accompanying techniques resulting in delivery of

Total Quality Management (TQM) • Organizational strategy and accompanying techniques resulting in delivery of high quality products or services to customers • Critical to achieve world-class competitiveness – Manufacturing is primary area – U. S. automakers have greatly improved quality of their cars in recent years – Japanese have continuously improved quality and still have the industry lead 11 -40

Total Quality Management • Concurrent engineering/inter-functional teams – Designers, engineers, production specialists, and customers

Total Quality Management • Concurrent engineering/inter-functional teams – Designers, engineers, production specialists, and customers work together to develop new products • Empowerment – Give individuals and teams resources, information, authority needed to develop ideas and effectively implement them • Many successful TQM techniques applied to manufacturing – MNCs use TQM techniques • Tailor output to customer needs • Require suppliers use same approach 11 -41

Total Quality Management • ISO 9000 Certification – Indirectly related to TQM – International

Total Quality Management • ISO 9000 Certification – Indirectly related to TQM – International Standards Organization (ISO) to ensure quality products and services – Areas examined include design, process control, purchasing, service, inspection and testing, and training. • Ongoing Training – Wide variety of forms such as statistical quality control and team meetings --designed to generate ideas – Objective is to apply kaizen (Japanese term for continuous improvement) 11 -42

Quality Concerns 11 -43

Quality Concerns 11 -43

Review and Discuss 1. Which cultures are more likely to focus on external controls?

Review and Discuss 1. Which cultures are more likely to focus on external controls? Which cultures would consider direct controls more important than indirect? 2. How would you explain a company’s decision to use centralized decision-making processes and decentralized control processes, considering the two are so interconnected? Provide an industry example. 11 -44