The global environment is chaotic, complex, dynamic and turbulent- all generally increasing the level of uncertainty facing senior managers. How might these environmental characteristics affect the way control is exercised in a multinational firm?

Résumé du document

Multinational companies are moving towards a highly diversified world where domestic and global competition is really strong. In the business world, trends and demands of consumers are changing frequently, and firms have to adapt and struggle to find their way to retain their positions as market leaders. Generally the success of a multinational company is dependent on the efficient control system in the organization. However, control is not easy to exercise. All companies are facing many questions about control: "Where are decisions made? How can the company optimize globally? How should country units report to headquarters?" (Davies, 2008). In addition, control is more difficult for multinational firms as their operations are based abroad. Hence, external factors such as distance and all other uncontrollable characteristics have to be taken into consideration. The aim of this paper is to demonstrate how the environmental characteristics might affect the control process in multinational firms. This essay is divided into two sections. The first section gives details about the global environment which is chaotic, complex, dynamic and turbulent, generally increasing the level of uncertainty facing senior executives. The second section focuses on the way control is exercised in MNCs and provides some alternatives at the end, in order to avoid control problems in a company.

Extraits

[...] Hamilton, Taylor and Kashlak (1996) comment on the Ouchi's conceptual framework for the design of organisational control mechanisms. As the foreign environments are complex and uncertain and that sometimes it is difficult to maintain and achieve goals, MNCs need a control system which mixes “both tasks and environmental characteristics” (Hamilton, Taylor and Kashlak, 1996). Ouchi distinguishes problems with output measurement and problems with behaviour definition (see the graph below) which explain what method to use when these factors are high or low. [...]

[...] The most important bureaucratic controls in subunits within multinational firms are budgets and capital spending rules” (Hill, 2001). Budgets are important in a company and headquarters use them in order to influence the behaviour of subunits. Indeed, it is essential that they respect the budget for a project and do not spend too much. Capitals spending rules are a sort of additional controls which define how the money is spent. “Output controls involve setting goals for subunits to achieve; expressing those goals in terms of relatively objective criteria such as profitability, growth, market share, and quality; and then judging the performance of subunit management by their ability to achieve goals” (Hill, 2001). [...]

[...] He/she must have some training with local managers and know a lot about political (constitution, powerful groups in the country) and economic situations (currency) as well as the industry and its competitors (local or international). This is essential for a manager of a subsidiary to know perfectly the environment in which he is operating, in order to adapt as much as possible to customers tastes and avoid mistakes. Corporate As usually it is difficult to control a subsidiary because of the distance, headquarters and subsidiaries have to work together and communicate as much as possible. [...]

[...] Section The global environment is chaotic, complex, dynamic and turbulent all generally increasing the level of uncertainty facing senior managers This section will detail all the environmental characteristics that MNCs can face and will show that it generally increases the level of uncertainty facing senior managers. The global environment According to Finlay (2000), there are five “components of predictability in the environment”: Chaos, Complexity, Dynamism, Turbulence and Uncertainty. Chaos is situation in which broad patterns are predictable but within these broad patterns detailed features are completely unknowable”. [...]

[...] The dynamic environment Competition: New competitors and new products: a company has to keep an eye open on what it is going on. New competitors constantly enter the market. It is important to know who are these companies, their size (MNC or SME), their share on the other markets, if they are well-known, and if these competitors could be threaten for us. Regarding new products, what are the new trends? What are the new products launched in the market? Is it appeal to customers? [...]