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INTERNATIONAL
BUSINESS
A MANAGERIAL PERSPECTIVE
Chapter 15
Controlling the International Business
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Prentice
Prentice
Hall ©Hall
2002©International
2002 International
Business
Business
3e 3e
Chapter Objectives
After studying this chapter you should be able to:
• Explain the general purpose of control and the levels of control in
international business.
• Describe how international firms manage the control function.
• Analyze the meaning of productivity and discuss how international
firms work to improve it.
• Explain how firms control quality and discuss total quality
management in international business.
• Analyze how international firms control the information their managers
need to make effective decisions.
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Daimler and Chrysler: A Dream
Partnership?
• In May 1998 Jurgen Schrempp, the president
of Mercedes-Benz, announced a merger with
the Chrysler corporation. Executives at Benz
and Chrysler called the deal a “marriage of
equals.” In reality, however, rather than a
merger the deal was more accurately an
acquisition, with Benz owning 58% of the new
company and retaining most of the senior
management positions.
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Daimler and Chrysler: A Dream
Partnership? (cont.)
• Investors hailed the deal as a dream partnership
and a perfect match. Daimler engineers could
teach Chrysler about quality and technology, and
Chrysler could give the Germans lessons in
efficiency and speed to market.
• To successfully blend the two separate
companies into one and to then capitalize on the
potential benefits of the merger, managers would
have to effectively engage in another crucial
management function, control.
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Control
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Levels of Control in
International Business
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Strategic Control
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Organizational Control
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Generic Organizational Control
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Planning Process Control
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Operations Control
• The third level of control in an international firm is
operations control. Operations control focuses
specifically on operating processes and systems
within both the firm and its subsidiaries and
operating units.
• Strategic control often involves time periods of
several years, while organizational control may
deal with periods of only a few years or months.
But operations control involves relatively short
periods of time, dealing with components of
performance that need to be assessed on a regular
basis.
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Establishing International
Control Systems
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Essential Control Techniques
• Accounting Systems
– Accounting is a comprehensive system for
collecting, analyzing, and communicating data
about a firm’s financial resources. Accounting
procedures are heavily regulated and must follow
prescribed methods dictated by national
governments.
– International firms face more difficulties in
establishing their accounting procedures than do
purely domestic firms.
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Essential Control Techniques
(cont.)
• Procedures
– Firms also use various procedures to maintain
effective control. Policies, standard operating
procedures, rules, and regulations all help
managers carry out the control function.
• Performance Ratios
– A performance ratio is a numerical index of
performance that the firm wants to maintain. A
common performance ratio used by many firms is
inventory turnover.
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Behavioral Aspects of
International Control
• Managers must understand that human
behavior plays a fundamental role in how well
control works.
• Resistance to Control
– People in international firms may resist control for
various reasons. By definition, control regulates
and constrains behavior.
– People may resist control because it may be
inappropriately focused; that is, the firm may be
trying to control the wrong things.
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Behavioral Aspects of
International Control (cont.)
• Overcoming Resistance to Control
– A method to reduce resistance that works
well in most cultures is to create a control
system that has a clearly appropriate focus
and creates reasonable accountability
without overcontrolling.
– A firm may also overcome resistance to
control by providing a diagnostic
mechanism for addressing unacceptable
deviations.
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Productivity
Productivity is an economic
measure of efficiency that
summarizes the value of
outputs relative to the value of
the inputs used to create them.
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Productivity (cont.)
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Managing Productivity
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Improve Operations
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Increase Employee
Involvement
• Productivity can be improved by increasing
employee involvement, particularly in power-
tolerant cultures. The idea is that if managers
give employees more say in how they do their
jobs, those employees will become more
motivated to work and more committed to the
firm’s goals. Also, because they are the ones
actually doing the jobs, the employees
probably have more insights than anyone
else into how to do them better.
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Quality
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The Eight Dimensions of
Quality
• Performance
• Features
• Reliability
• Conformance
• Durability
• Serviceability
• Aesthetics
• Perceived
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Total Quality Management
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Quality Improvement Tools
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Managing Information
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Chapter Review (cont.)
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