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Unit 14: Management Control of MNC’s

2. Changes in competencies: The larger the total foreign operations, the more likely that Notes
headquarters has specialised staff with international expertise. The larger the operations
in a given country, the more likely that country unit has specialised staff.
3. Changes in operating forms: The use of multiple operating firms such as exporting, licensing
and joint ventures and the move from one to another may create the need to change areas
of responsibilities in the organisation.

Control Mechanism

These are the methods corporates use to help ensure that control is implemented.

Corporate Culture

Every company has certain common values its employees share. These constitute its corporate
culture and form a control mechanism that is implicit and helps enforce the company’s explicit
bureaucratic control mechanism.

Example: Without setting explicit rules, a manager may conform to company tradition
in terms of how they dress, how late they work, whether they socialise with other managers and
whether they go to others in the company for advice. The incompatibility of organisational
cultures is detrimental to the acceptance of knowledge, which MNEs move to transfer from
operations in one country to operations in another to gain competitive advantage.
To try to overcome this problem, many companies encourage a worldwide corporate culture by
promoting closer contact among managers from different countries. The aim is to convey a
shared understanding of global goals and norms for reaching those goals, along with the
transference of “best practices” from one country to another. Frequent transfers of managers
among operations in different countries help develop increased knowledge of and commitment
to a common set of values and objectives, fewer procedures, less hierarchical communication
and less surveillance are thus, needed.

Coordinating Methods

Besides each type of organisation structure having advantages and disadvantages, companies
have developed mechanisms to pull together some of the diverse functional, geographic
(including international) and product perspectives without abandoning their existing structures.
Some of the mechanisms are:

1. Developing teams with members from different countries for planning by building scenario
on how the future may evolve.
2. Strengthening corporate staff (adding or creating groups of advisory personnel) so that
headquarter and subsidiary managers with line responsibilities (decision making authority)
must listen to different viewpoints – whether or not they take the advice.

3. Using more management rotation – for example, between domestic and international
positions-to break down parochial views.
4. Keeping international and domestic personnel in closer proximity to each other - for
example, by placing the international division in the same building or city as the product
division.

5. Establishing liaisons among subsidiaries within the same country so that different product
groups may get combined action in a given issue.

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