Page 268 - DMGT514_MANAGEMENT_CONTROL_SYSTEMS

Unit 14: Management Control of MNC’s

The next planning step (ii) is to analyse internal resources alongwith environmental factors in Notes
the home country. These resources and factors affect and constrain each country differently and
sometimes each product differently for the same company. Basically, the most successful
companies, internationally are those that find the right fit between what they need and what
they are good at.

Example: A small firm inexperienced in foreign operations may lack financial and human
resources, even though it may have unique product capabilities. Unlike a large counterpart, it
may have to collaborate with another company perhaps by licensing foreign production rather
than owning facilities abroad.
Only by making an internal analysis (step ii) can a company set the overall objectives for its
international activities (step iii).

!
Caution Managers must examine these activities in conjunction with the means of
competing, such as by keeping prices low or differentiating through brand recognition.
Because each country in which the company is operating or proposing to operate is unique,
managers must do a local analysis (step iv) before examining the final alternative (step v).

The selection among the alternatives is Step v which determines the extent to which a company
follows a global, trans-national or multi-domestic strategy. These alternatives include:
1. The location of value added function: The choice of where to locate each of the functions
that comprise the entire value added chain, from research to production to after sales
servicing.
2. The location of sales targets: The allocation of sales among countries and the level of
activities in each one, particularly in terms of market share.

3. The level of involvement: The choice of operating through wholly owned facilities, through
partially owned facilities or through contract arrangements and whether the choice varies
among countries.

4. The product/services strategy: The extent to which a worldwide business offers the same
or different products in different countries.
5. Marketing: The extent to which a company uses the same brand name, advertising and
other marketing elements in different countries.
6. Competitive Moves: The extent to which a company makes competitive moves in individual
countries as part of a global competitive strategy.
7. Factor movement and start up strategy: Whether production factors are acquired locally
or brought in by the company and whether the operation begins through an acquisition or
start-up.
Managers must rank alternatives so they can easily modify (Step vi) as resource availability
changes. A parent company may, for example, plan to remit dividends from one of its foreign
subsidiaries back to itself. This may not be possible if a government puts foreign exchange
control into effect.
Finally, headquarters and subsidiary management should agree on specific objectives for each
subsidiary and devise way to measure both deviations from the plans and conditions that may
cause such deviations.

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