Description

This week’s discussion will focus on management decision-making and control in two
companies, American corporation Amazon.com, Inc. and Chinese company Alibaba Group
Holding Limited.
Decision-making and control are two vital, and often interlinked, functions of international
management. Strategic evaluation and control are the processes of determining the effectiveness
of a given strategy in achieving the organizational objectives and taking corrective actions
whenever required. Control can be exercised through formulation of contingency strategies and a
crisis management team.
For your discussion, use the Decision-Making Process (stages 1-9) outlined in the textbook (Fig
11-1) ( page 390 )and this Module’s content. Visit the corporate websites of two
companies, Amazon and Alibaba, and examine what these firms are doing relating to the
strategic evaluation and control process definition in the process above.
For example:
Stage 1: What is one problem perception for each company?
Stage 2: What is the problem identification for each company?
Repeat for stages 3-9.
What overall assumptions can you make using this decision-making process?
Embed course material concepts, principles, and theories, which require supporting citations
along with two scholarly peer-reviewed references supporting your answer
Be sure to support your statements with logic and argument, citing all sources referenced.
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Chapter 11
Management Decision and Control
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Learning Objectives
• Provide comparative examples of decision
making in different countries
• Present some of the major factors affecting
the degree of decision-making authority
given to overseas units
• Compare and contrast direct controls with
indirect controls
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Learning Objectives (continued)
• Describe some of the major differences in
the ways that MNCs control operations
• Discuss some of the specific performance
measures that are used to control
international operations
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Global Online Retail: Amazon versus
Alibaba
• Competitive strategies
– Alibaba is a conglomerate, whereas Amazon
specializes in business-to-consumer sales
– Alibaba acts as a facilitator for third-party sellers,
whereas Amazon acts as a direct merchant itself
• Geographic positioning of both companies
affects their potential future growths
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Managerial Decision-Making Processes
• Involves choosing a course of action among
alternatives
• Often linear but looping back is common
• Degree of managerial involvement depends
on the:
– Structure of the subsidiaries
– Locus of decision making
• Can be centralized or decentralized
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Figure 11.1 – Decision-Making Process
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Table 11.1 – Factors That Influence Centralization or
Decentralization of Decision Making in Subsidiary Operations
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Cultural Differences in Decision Making
• How managers view time in the decisionmaking process
– French managers tend to spend ample time on
searching for and evaluating alternatives
– Danish managers want to act first and take
advantage of opportunities
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Cultural Differences in Decision Making
(continued 1)
• Germans and Scandinavian countries both
have codetermination
– Codetermination: Legal system that requires
workers and their managers to discuss major
decisions
– Germans tend to be fairly centralized, autocratic,
and hierarchical
– Swedes focus more on quality of work life and the
importance of the individual in the organization
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Cultural Differences in Decision Making
(continued 2)
• Japanese are different from Europeans though
they employ a long-term focus
– Use the following decision-making processes:
• Ringisei: Decision making by consensus
• Tatemae: Doing the right thing according to the norm
• Honne: What one really wants to do
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Research Findings on Decision Making
• Swedish teams
– Higher team orientation, flatter organizational
hierarchies, and open-minded and informal work
attitudes
– Transparent and less formal decision making
• German teams
– Willing to accept a changed or unpopular decision
and have clearer responsibilities for the individual
– Faster in decision making as it is largely dominated
by the decision authority of an expert in the field
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Total Quality Management (TQM)
• Organizational strategy and accompanying
techniques that result in the delivery of highquality products or services to customers
• Critical to achieve world-class competitiveness
• Has a big impact in the manufacturing area
– Employs concurrent engineering or interfunctional
teams to develop new products
• Used by MNCs to tailor their output to
customer needs
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Total Quality Management Techniques
• Employee empowerment
– Empowerment: Gives individuals and teams the
resources, information, and authority needed to
develop ideas and effectively implement them
• Rewards and recognition
– Merit pay, discretionary bonuses, pay-for-skills
and knowledge plans, plaques, and public
recognition
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Total Quality Management Techniques
(continued)
• Ongoing training
– Takes a wide variety of forms
• Ranges from statistical quality control to team meetings
designed to generate ideas for streamlining operations
and eliminating waste
– Objective is to apply kaizen, which is a Japanese
term for continuous improvement
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Decisions to Attack the Competition
• Examples
– Ford Motor Company’s decision to challenge other
automakers and to be a major player in
developing markets, such as Asia and Africa
– Audi company’s decision to target younger
professionals in established markets
– BMW company’s decision to focus on providing
more options and personalization for consumers
– Mercedes company’s decision to go for a lowestcost strategy
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ISO 9000 Certification
• Indirectly related to TQM
– To ensure quality products and services
• Examines design, process control, purchasing,
service, inspection and testing, and training
• Necessary prerequisite to doing business in
the EU
• Screening criterion for getting business in the
U.S. and around the globe
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Decision Making and Controlling
• Interlinked functions
• Controlling
– Process of evaluating results in relation to plans or
objectives and deciding what action, if any, to take
– Types of control
• Internal and external control
• Direct and indirect controls
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Figure 11.2 – Models of PC Manufacturing Traditional Model
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Figure 11.2 – Models of PC Manufacturing Direct Sales Model
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Figure 11.2 – Models of PC Manufacturing Hybrid Model
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Control Problems
• Conflict between the objectives of the
overseas operation and the MNC
• Disagreement in the objectives of joint
venture partners and corporate management
• Variance in the degree of experience and
competence in planning among managers
• Basic philosophic disagreements in the
objectives and polices of international
operations due to cultural differences
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Internal and external control
• Internal control – Focuses on the things that
an MNC does best
• External control – Ensures that there is a
market for the goods and services that it is
offering
– By finding out what the customers want and be
prepared to respond appropriately
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Table 11.3 – Impact of Internal- and ExternalOriented Cultures on the Control Process
Source: Adapted from Fons Trompenaars and Charles Hampden-Turner, Riding the Waves of Culture: Understanding
Diversity in Global Business, 2nd ed. (New York: McGraw-Hill, 1998), pp. 160–161.
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forwarded, distributed, or posted on a website, in whole or part.
Direct and Indirect controls
• Direct controls – Use face-to-face or personal
meetings for monitoring operations
– Example – Top executives visit overseas affiliates to
learn of problems and challenges
• Indirect controls – Use reports and other
written forms of communication to control
operations
– Example – Monthly operating reports
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Financial Statements Required from
Subsidiaries for Indirect Controls
• Statements prepared to meet the national
accounting standards and procedures
prescribed by the host country
• Statements prepared to comply with the
accounting principles and standards required
by the home country
• Statements prepared to meet the financial
consolidation requirements of the home
country
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Approaches to Control
• Major differences among countries
– Great Britain
• Financial records were sophisticated and heavily
emphasized
• Top management tended to focus on major problem
areas and not involve in specific matters of control
• Control was used for general guidance than for
surveillance
• Operating units had a large amount of marketing
autonomy
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Approaches to Control (continued)
– Germany
• Managers employed very detailed control and focused
attention on all variances
• Managers placed heavy control on production and
stressed operational efficiency
– France
• Managers employed control systems closer to that of
Germans than to the British
• Control was used more for surveillance than guidance
and was centrally administered
• Less systematic and sophisticated system
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Approaches to Control: U.S. Firms
versus European Firms
• U.S. firms
– Measure quantifiable,
objective aspects
– Need precise plans
and budgets in
generating standards
for comparison
• European firms
– Measure qualitative
aspects
– Need high levels of
knowledge about
appropriate behavior
in supporting the
goals of the firms
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Approaches to Control: U.S. Firms
versus European Firms (continued)
– Need large central
staffs and centralized
information-processing
capability
– Require less
decentralization of
operating decision
making
– Favor long vertical
spans between parent
and subsidiary firms
– Need capable
expatriate managers
willing to spend time
abroad
– Require more
decentralization of
operating decision
making
– Favor short vertical
spans between parent
and subsidiary firms
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Performance Measures for Control:
Financial Performance
• Measured by profit and loss and return on
investment
– Profit is an important part of ROI calculation
• Amount of profit is directly related to how well or
poorly a unit is judged to perform
– Can be affected by fluctuations in currency value
• If a country devalues its currency, subsidiary export
sales will increase
• If a country revalues its currency, export sales will
decline
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Performance Measures for Control:
Quality Performance
• Quality control (QC) – Major function of
production and operations management
– Achieved through quality circles
• Quality control circle (QCC): Group of workers who
meet on a regular basis to discuss ways of improving
the quality of work
• Example
– Reasons why Japanese goods are of high quality
• Minimal worker error, effective use QCCs, use of early
warning systems, use of training overkill, and use of
cutting edge technology
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Performance Measures for Control:
Personnel Performance
• Common approach is the periodic appraisal of
work performance
• Variations are found across countries in:
– Methods used in evaluations
– How the control actually is conducted
– How rewards and monitoring of performance are
handled
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Performance Measures for Control:
Personnel Performance (continued)
• Assessment centers: Identifies individuals
with the potential to be selected for or
promoted to higher-level positions
– Involve the following simulation exercises:
• In-basket exercises that require managerial attention
• Committee exercises that require candidates to work as
a team in making decisions
• Business decision exercises that make participants
compete in the same market
• Preparation of business plans and letter-writing
exercises
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World’s Most Admired Firms
• Common themes based on the analysis from
the consultants at the Hay Group
– Top managers take their mission statements
seriously and expect everyone else to do the same
– Success attracts the best people, and the best
people sustain success
– Top companies know precisely what they are
looking for
– Firms see career development as an investment,
not a chore
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World’s Most Admired Firms (continued)
– Whenever possible, these companies promote
from within
– Performance is rewarded
– Firms are genuinely interested in what their
employees think, and they measure work
satisfaction often and thoroughly
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Be the International Management
Consultant
• If you were a foreign investor, would you want
to invest in a consumer electronics company
in Japan?
– Does the fact that the company has had past
problems requiring government intervention
affect your initial decision?
– How does it impact your decision that you would
be competing with a government-backed
company during the bid process?
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Review and Discuss
1. A British computer firm is acquiring a smaller
competitor located in Frankfurt
– What are two likely differences in the way these
two firms carry out the decision-making process?
• How could these differences create a problem for the
acquiring firm?
– Give an example in each case
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Review and Discuss (continued 1)
2. Which cultures are more likely to focus on
external controls?
– Which cultures would consider direct controls
more important than indirect controls?
3. How would you explain a company’s decision
to use centralized decision-making process
and decentralized control process,
considering the two are so interconnected?
– Provide an industry example of where this may
occur
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Review and Discuss (continued 2)
4. How are U.S. multinationals trying to
introduce total quality management into
their operations? Give two examples
5. Would a U.S. MNC doing business in
Germany find it easier to introduce TQM
concepts into German operations, or would
there be more receptivity to them back in the
United States? Why?
– What if the U.S. multinational were introducing
these ideas into a Japanese subsidiary?
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forwarded, distributed, or posted on a website, in whole or part.
Review and Discuss (continued 3)
6. In what ways could an accelerated decisionmaking process harm a company?
– Using Figure 11–1, which stage(s) do you think
would be most in danger of being overlooked?
7. A company does a personnel performance
evaluation by reviewing the financial
decisions the management has made,
specifically focusing on ROI
– How is this approach beneficial to the company?
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forwarded, distributed, or posted on a website, in whole or part.
Review and Discuss (continued 4)
– Which aspects could the company be neglecting?
– Which cultures are most likely to employ this
method?
– Which cultures would avoid this tactic?
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forwarded, distributed, or posted on a website, in whole or part.
International
Management
TENTH EDITION
Culture, Strategy, and Behavior
Fred Luthans | Jonathan P. Doh
International Management
Culture, Strategy, and Behavior
Tenth Edition
Jonathan P. Doh
Villanova University
Fred Luthans
University of Nebraska–Lincoln
INTERNATIONAL MANAGEMENT: CULTURE, STRATEGY, AND BEHAVIOR, TENTH EDITION
Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2018 by McGrawHill Education. All rights reserved. Printed in the United States of America. Previous editions © 2015,
2012, and 2009. No part of this publication may be reproduced or distributed in any form or by any means,
or stored in a database or retrieval system, without the prior written consent of McGraw-Hill Education,
including, but not limited to, in any network or other electronic storage or transmission, or broadcast for
distance learning.
Some ancillaries, including electronic and print components, may not be available to customers outside the
United States.
This book is printed on acid-free paper.
1 2 3 4 5 6 7 8 9 LMN 21 20 19 18 17 16
ISBN 978-1-259-70507-6
MHID 1-259-70507-2
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All credits appearing on page or at the end of the book are considered to be an extension of the copyright page.
Library of Congress Cataloging-in-Publication Data
Names: Luthans, Fred, author. | Doh, Jonathan P., author.
Title: International management : culture, strategy, and behavior / Fred
Luthans, University of Nebraska-Lincoln, Jonathan P. Doh, Villanova
University.
Description: Tenth Edition. | Dubuque: McGraw-Hill Education, [2018] |
Revised edition of the authors’ International management, [2015]
Identifiers: LCCN 2016055609| ISBN 9781259705076 (alk. paper) | ISBN
1259705072 (alk. paper)
Subjects: LCSH: International business enterprises—Management. |
International business enterprises—Management—Case studies.
Classification: LCC HD62.4 .H63 2018 | DDC 658/.049—dc23 LC record
available at https://lccn.loc.gov/2016055609
The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website
does not indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education
does not guarantee the accuracy of the information presented at these sites.
mheducation.com/highered
Dedicated in Memory of
Rafael Lucea,
A Passionate Advocate for Global Business Education and Experience.
iii
Preface
C
hanges in the global business environment continue unabated and at an accelerated
pace. Many surprising and difficult-to-predict developments have rocked global
peace and economic security. Terrorism, mass migration, the United Kingdom’s exit from
the European Union, and the rise of anti-immigration political movements in Europe, the
United States, and elsewhere have called into question assumptions about the direction
of the global political economy. In addition, rapid advances in social media have not only
accelerated globalization but also provided a means for those who seek political and
economic changes to organize and influence their leaders for more responsible governance, or, in some cases, advance a more narrow ideological agenda (see opening articles
in Chapters 1 and 2). In addition, concerns about climate change and other environmental issues have prompted companies, in conjunction with governments and nongovernmental organizations, to consider alternate approaches to business and governance (see
Chapter 3 opening article).
Some of these developments have challenged longstanding beliefs about the power
and benefits of globalization and economic integration, but they also underscore the
interconnected nature of global economies. Although many countries and regions around
the world are closely linked, important differences in institutional and cultural environments persist, and some of these differences have become even more pronounced in
recent years. The challenges for international management reflect this dynamism and the
increasing unpredictability of global economic and political events. Continued growth of
the emerging markets is reshaping the global balance of economic power, even though
differences exist between and among regions and countries. Although many emerging
markets continued to experience growth during a period when developed countries’
economies stagnated or declined, others, like Russia and Brazil, have faced major setbacks. Further, some developed economies, such as Greece, Italy, Spain, and Portugal,
continue to face formidable challenges that stem from the European debt crisis that began
in 2009. Low or negative interest rates reflect a “new normal” of slower-than-average
growth among many global economies.
The global political and security environment remains unpredictable and volatile,
with ongoing conflicts in the Middle East and Africa and continuing tensions in Iran,
North Korea, Iraq, and Afghanistan and elsewhere. Another crisis stemming from conflict in Syria and elsewhere has resulted in mass migration—and broad dislocations—
across North Africa and Southern, even Northern, Europe (see Chapters 1 and 2 for
further discussion). On the economic front, the global trade and integration agenda seems
stalled, largely due to domestic political pressures in Europe and North America. Although
the Trans-Pacific Partnership (TPP), a proposed free-trade agreement including 12 countries in the Americas and Asia, was concluded, its ratification in the United States is
uncertain. Similarly, the fate of the Transatlantic Trade and Investment Partnership, which
was still under negotiation at the time of this writing, is also unclear.
As noted above, the advent of social networking has transformed the way citizens
interact; how businesses market, promote, and distribute their products globally; and how
civil society expresses its concerns that governments provide greater freedoms and
accountability. Concurrently, companies, individuals, and even students can now engage
in broad “mass” collaboration through digital, online technology for the development of
new and innovative systems, products, and ideas. Both social networking and mass collaboration bring new power and influence to individuals across borders and transform
v
vi
Preface
the nature of their relationships with global organizations. Although globalization and
technology continue to link nations, businesses, and indivi