Page 273 - DMGT514_MANAGEMENT_CONTROL_SYSTEMS

Management Control Systems

Notes function, it may be necessary depending upon the size of the organization to include a third, the
functional dimension. The figure below depicts the evolution of a matrix organization structure
by area and product from either product dimension structure or from an area division structure.
The matrix organization provides us with a dual structure for managing both the product and
market dimensions with the multinational firm. Under the matrix structure, a product manager
is appointed for each product or product group alongwith an area manager for each geographical
area.

Product managers often assume roles similar to that of a programme manager having full
responsibility for the profitability of the product on a worldwide basis and yet no formal
authority over the functional descriptions employed on the product. The area manager has
responsibility for overall profitability of his division and full authority over functional personnel
assigned to that division. Basically, product managers of multinational firm are generally
concerned with current business, new business, and technological developments of the product.
They use their technical and business knowledge together with their influence and creditability
to convince corporate and area managers of technical and business programmes that will improve
the profitability of their product line on a worldwide basis.
14.5.1 Location of Decision-making

Basically, companies should choose a location based on a combination of the following three
trade-offs:

1. Balancing pressures for global integration versus pressures for local responsiveness:
(i) Decisions on moving goods or other resources internationally are more likely to be
made centrally.

(ii) Global standardisation usually reduces cost but some revenues can be lost in the
process.
(iii) The more the foreign environment requires adaptation, the more pressure there is
to decentralise.
(iv) Trans-national strategies imply gaining knowledge and capabilities from anywhere
in the organisation and two-way information flows both horizontally and vertically.

2. Balancing the capabilities of headquarters versus subsidiary personnel:
(i) The more confidence there is in foreign managers, the more delegation occurs.
(ii) Contra centralisation may hurt local managers because they can perform as well
and they do not acquire training through increased responsibility.
3. Balancing the expediency versus the quality of decisions:
(i) Companies must consider how long it takes to get help from headquarters vis-a-vis
how rapidly a decision must be made.
(ii) More important decisions are made at higher organisation levels.

14.5.2 Control in the Internationalization Process

Various factors influence the extent of control needed at different stages of internationalisation.

1. Level of importance: The more important the foreign operations, the higher in the
organisation structure they report.

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