Question 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) 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. Keep in mind that these scholarly references can be found in the Digital Library
by conducting an advanced search specific to scholarly references.
Be sure to support your statements with logic and argument, citing all sources
referenced (APA 7 style). Post your initial response early and check back often to
continue the discussion. Be sure to respond to your peers’ posts as well.
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Part 3 International Strategic Management
Whether Amazon’s strategy as a specialized direct seller or Alibaba’s strategy as a thirdparty facilitator will lead to greater long-term success is yet to be seen. As Internet usage
increases and ecommerce expands beyond North America, managers of companies like
Amazon and Alibaba will need to implement new strategies to adapt to the changing
marketplace. The advent of online retail has certainly challenged some aspects of
­managerial decision making for all ecommerce companies.
■ Decision-Making Process and Challenges
decision making
The process of choosing a
course of action among
alternatives.
Figure 11–1
Decision-Making Process
The managerial decision-making process, choosing a course of action among alternatives,
is a common business practice becoming more and more relevant for the international
manager as globalization becomes more pervasive. The decision-making process is often
linear, though looping back is common, and consists of the general phases outlined in
Figure 11–1. The degree to which managers are involved in this procedure depends on the
structure of the subsidiaries and the locus of decision making. If decision making is centralized, most important decisions are made at the top; if decision making is decentralized,
decisions are delegated to operating personnel. Decision making is used to solve a myriad
of issues, including helping the subsidiary respond to economic and political demands of
the host country. Decisions that are heavily economic in orientation concentrate on such
aspects as return on investment (ROI) for overseas operations. In other instances, cultural
differences can both inspire and motivate the process and outcome of decision making.
For example, Ford Motor Company designed and built an inexpensive vehicle, the
Ikon, for the Indian market. Engineers took apart the Ford Fiesta and totally rebuilt the
car to address buyer needs. Some of the changes that were made included raising the
amount of rear headroom to accommodate men in turbans, adjusting doors so that they
opened wider in order to avoid catching the flowing saris of women, fitting intake valves
Stage
Process
1
Problem perception
2
Problem identification
3
Problem formulation
4
Search for alternatives
5
Evaluation of alternatives
6
Choice of alternatives
7
Start of Perception
operation
Problem
8
Implementation
9
Control
Source: Jette Schramm-Nielsen, “Cultural Dimensions of Decision Making: Denmark and France Compared,” Journal of Managerial
Psychology 16, no. 6 (2001), p. 408.
Chapter 11 Management Decision and Control
391
to avoid auto flooding during the monsoon season, toughening shock absorbers to handle
the pockmarked city streets, and adjusting the air-conditioning system to deal with the
intense summer heat.14 As a result of these decisions, the car sold very well in India.
Ford replicated that same strategy with the Ikon’s successor, the Fiesta Mark VI.
Santander, the largest bank in Europe by market capitalization, is vesting more autonomy
in its subsidiaries by listing subsidiaries in its principal foreign markets and thereby
strengthening their independence and autonomy from the Spanish headquarters. A number of European banks, including Santander and HSBC Holdings PLC (see In-Depth
Integrative Case 4.1 at the end of Part Four), establish foreign subsidiaries as opposed
to direct branches. Santander Chief Executive Officer Alfredo Saenz said, “We also
believe it’s good for the local management teams, because having local minority shareholders breathing down their neck keeps them on their toes, and it’s a good way of
identifying the franchise as local, instead of foreign.” In addition, the IPO boosted the
visibility of the bank in Brazil, resulted in greater access to local capital, and put a higher
value on the franchise than what analysts were giving it before the float. When Santander
sold 15 percent of its Brazilian unit, the unit alone was valued at €34 billion, more than
European rivals Deutsche Bank or Société Générale.15
The way in which decision making is carried out will be influenced by a number
of factors. We will first look at some of the factors, then provide some comparative
examples in order to illustrate some of the differences.
Factors Affecting Decision-Making Authority
A number of factors influence international managers’ conclusions about retaining authority or delegating decision making to a subsidiary. Table 11–1 lists some of the most
important situational factors, and the following discussion evaluates the influential aspects.
One of the major concerns for organizations is how efficient the processes are that
are put in place. The size of a company can have great importance in this realm. Larger
organizations may choose to centralize authority for critical decisions in order to ensure
efficiency through greater coordination and integration of operations. The same holds
true for companies that have a high degree of interdependence because there is a greater
need for coordination. This is especially relevant when organizations provide a large
investment because they prefer to keep track of progress. It is quite common for the
Table 11–1
Factors That Influence Centralization or Decentralization
of Decision Making in Subsidiary Operations
Encourage Centralization
Encourage Decentralization
Large size
Large capital investment
Relatively high importance to MNC
Highly competitive environment
Strong volume-to-unit-cost relationship
High degree of technology
Strong importance attached to brand
name, patent rights, etc.
Low level of product diversification
Homogeneous product lines
Small geographic distance between
home office and subsidiary
High interdependence between the units
Fewer highly competent managers
in host country
Much experience in international business
Small size
Small capital investment
Relatively low importance to MNC
Stable environment
Weak volume-to-unit-cost relationship
Moderate to low degree of technology
Little importance attached to brand name,
patent rights, etc.
High level of product diversification
Heterogeneous product lines
Large geographic distance between home
office and subsidiary
Low interdependence between the units
More highly competent managers in host
country
Little experience in international business
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investing company to send home-office personnel to the subsidiary and report on the
situation, and for subsidiary managers to submit periodic reports. Both of the above
scenarios imply that the subsidiary is of great importance to the MNC, and it is customary in these situations for subsidiary managers to clear any decisions with the home
office before implementation. In fact, MNCs often will hire someone who they know
will respond to their directives and will regard this individual as an extension of the
central management staff.
Another efficiency checkpoint arises when competition is high. In domestic situations, when competition increases, management will decentralize authority and give the
local manager greater decision-making authority. This reduces the time that is needed for
responding to competitive threats. In the international arena, however, sometimes the opposite approach is used. As competition increases and profit margins are driven down, homeoffice management often seeks to standardize product and marketing decisions to reduce
cost and maintain profitability. Many upper-level operating decisions are made by central
management and merely implemented by the subsidiary, although, in some instances, companies still opt to decentralize operations if product diversification is necessary. Kraft Heinz
Company provides an example of a recent effort to centralize operations to improve efficiency and competitiveness. Following H. J. Heinz’s 2015 acquisition of the Kraft Foods
Group, seven manufacturing facilities were closed to consolidate processes. Roughly 2,600
manufacturing jobs, representing 6 percent of the company’s workforce, were eliminated
by the closures. Additionally, 2,500 office jobs were eliminated to remove redundancy in
management positions. The consolidation aims to increase global growth while decreasing
costs, resulting in US$1.5 billion in savings. Kraft Heinz plans to invest millions in upgrading the remaining manufacturing facilities to meet increasing product demand, strengthening the acquired company and making the combined firm leaner and better positioned
globally.16 Firms that are able to produce large quantities will have a lower cost per unit
than those that produce at smaller amounts, and home-office management will often take
the initiative to oversee sourcing, marketing, and overall strategy to keep costs down.
Efficient processes become increasingly important as diversification or differences
between the parent and subsidiary increase. This refers not only to specific products and
services that may need to be tailored to geographic areas, but also to the socioeconomic,
political, legal, and cultural environments in which the subsidiary exists. In this case, the
subsidiary would have superior staff and resources that would only become increasingly
skilled in manufacturing and marketing products at the local level over time. Decentralization is emphasized here, and there exists a direct relationship between the physical
distance and different environments between the parent and subsidiary and the level of
decentralization. In other words, the farther apart the two units are in either geographical
area or cultural beliefs, the higher the level of decentralization.
Experience proves to be a simple indicator of efficiency. For example, if the subsidiary has highly competent local managers, the chances for decentralization are
increased because the home office has more confidence in delegating to the local level
and less to gain by making all the important decisions. Conversely, if the local managers
are inexperienced or not highly effective, the MNC likely will centralize decision making
and make many of the major decisions at headquarters. Furthermore, if the firm itself
has a great deal of international experience, its operations will likely be more centralized
as it has already exhibited a high efficiency level and increasing management decision
making at the local level may slow processes.
Protection of goods and services is also important to an MNC. It would not be a
very lucrative experience to spend valuable time and money on R&D processes only to
have competitors successfully mimic products and essentially take away market share.
For this reason and many others, it is common for MNCs to centralize operations when
dealing with sophisticated levels of technology. This is particularly true for high-tech,
research-intensive firms such as computer and pharmaceutical companies, which do not
want their technology controlled at the local level. Furthermore, a company is likely to
centralize decision-making processes when there are important brand names or patent
rights involved as it wants to create as much protection as possible.
Chapter 11 Management Decision and Control
In some areas of operation, MNCs tend to retain decision making at the top
(­centralization); other areas fall within the domain of subsidiary management
­(decentralization). It is most common to find finance, R&D, and strategic planning decisions being made at MNC headquarters with the subsidiaries working within the parameters established by the home office. In addition, when the subsidiary is selling new
products in growing markets, centralized decision making is more likely. As the product
line matures and the subsidiary managers gain experience, however, the company will
start to rely more on decentralized decision making. These decisions involve planning
and budgeting systems, performance evaluations, assignment of managers to the subsidiary, and use of coordinating committees to mesh the operations of the subsidiary with
the worldwide operations of the MNC. The right degree of centralized or decentralized
decision making can be critical to the success of the MNC.
Deloitte, the accounting and management consulting firm, describes some of the
challenges associated with postmerger integration in the area of centralization and
decentralization:
The union of two European engineering companies is a prime example of a merger that brought
together companies with very different structures—a business unit of a much larger corporation
and a stand-alone company. The business unit had a more decentralized management approach
with responsibilities delegated within functional areas such as procurement and IT. In contrast,
the stand-alone company had a more centralized approach with a strong corporate headquarters
retaining control over IT, finance, procurement and HR. Bringing these two disparate structures
together without reconciling these differences almost destroyed the new company. Sales plummeted and key people left, unable to adjust to the new corporate structure. Within three years
the company collapsed, to be swiftly scooped up by a competitor.17
Cultural Differences and Comparative Examples of Decision Making
Culture, whether outside or within the organization (see Chapters 4 and 6, respectively),
has an effect on how individuals and businesses perceive situations and subsequently react.
This knowledge raises the question: Do decision-making philosophies and practices differ
from country to country? Research shows that to some extent they do, although there also
is evidence that many international operations, regardless of foreign or domestic ­ownership,
use similar decision-making norms.
One study showed that French and Danish managers do not approach the decisionmaking process in the same manner.18 The French managers tend to spend ample time
on searching for and evaluating alternatives (see Figure 11–1), exhibiting rationality and
intelligence in each option. While the French approach each opportunity with a sense of
creativity and logic, they tend to become quite emotionally charged rather quickly if
challenged. Middle managers report to higher-level managers, who ultimately make the
final decision. Therefore, the individualistic nature of the French creates an environment
in which middle managers vie for the recognition and praise of the upper management.
Furthermore, middle-management implementation of ideas tends to be lacking because
that stage is often seen as boring, practical work that lacks the prestige managers strive
to achieve. Control, discussed later in the chapter, is quite high in the French firms at
every level, so where implementation fails, control will compensate.
Danish managers tend to emphasize different stages in the decision-making process
(see Figure 11–1). They do not spend as much time searching or analyzing alternatives
to optimize production but instead choose the option that can be started and implemented
quickly and still bring about the relative desired results. They are less emotionally responsive and tend to take a straightforward approach. Danes do not emphasize control in
operations because it tends to be a sign that management lacks confidence in the areas
that “require” high control. The cooperative as opposed to individualistic emphasis in
Danish corporations, coupled with a results-oriented environment, breeds a situation in
which decisions are made quickly and middle managers are given autonomy.
Overall, the pragmatic nature of the Danes and the French need for intellectual
prowess mark why each is more adept at different stages of the decision-making process.
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The French tend to be better at stages 4, 5, and 9, while the Danes are more adept at
stages 6, 7, and 8 (see Figure 11–1). As one Danish manager in France says:
They [Danes and Frenchmen] do not analyze and synthesize the same way. The French tend
to think that the Danes are not thorough enough, and the Danes tend to think that the French
are too complicated. At his desk, the Frenchman tends to keep on working on the case. He
seems to agree neither with his surroundings nor with himself. This means that when he
has analyzed a case and has come to a conclusion, then he would like to go over it once
more. I think that Frenchmen think in a more synthetic way . . . and he has a tendency to
say: “well, yes, but what if it can still be done in another maybe smarter way.” This means
that in fact he is wasting time instead of making improvements.19
codetermination
A legal system that requires
workers and their managers
to discuss major decisions.
ringisei
A Japanese term that means
“decision making by
consensus.”
tatemae
A Japanese term that means
“doing the right thing”
according to the norm.
honne
A Japanese term that
means “what one really
wants to do.”
total quality management
(TQM)
An organizational strategy
and the accompanying
techniques that result in the
delivery of high-quality
products or services to
customers.
In Germany, managers focus more on productivity and quality of goods and services than on managing subordinates, which often translates into companies pursuing
long-term approaches. In addition, management education is highly technical, and a legal
system called codetermination requires workers and their managers to discuss major
decisions. As a result, German MNCs tend to be fairly centralized, autocratic, and hierarchical. Scandinavian countries also have codetermination, but the Swedes focus much
more on quality of work life and the importance of the individual in the organization.
As a result, decision making in Sweden is decentralized and participative.
The Japanese are somewhat different from the Europeans, though they still employ
a long-term focus. They make heavy use of a decision-making process called ringisei,
or decision making by consensus. Under this system, any changes in procedures and
routines, tactics, and even strategies of a firm are organized by those directly concerned
with those changes. The final decision is made at the top level after an elaborate examination of the proposal through successively higher levels in the management hierarchy,
and results in acceptance or rejection of a decision only through consensus at every
echelon of the management structure.20
Sometimes Japanese consensus decision making can be very time-consuming. However, in practice most Japanese managers know how to respond to “suggestions” from the
top and to act accordingly—thus saving a great deal of time. Many outsiders misunderstand how Japanese managers make such decisions. In Japan, what should be done is
called tatemae, whereas what one really feels, which may be quite different, is honne.
Because it is vital to do what others expect in a given context, situations arise that often
strike Westerners as a game of charades. Nevertheless, it is very important in Japan to
play out the situation according to what each person believes others expect to happen.
Another cultural difference is how managers view time in the decision-making
process. As we saw from the French-Danish example earlier, the French do not value
time as much as their counterparts. The French want to ensure that the best alternative
was put into action, whereas the Danes want to act first and take advantage of opportunities. This is key in many international decision-making processes, as globalization has
opened the door to extreme competition, and all players need to be able to both identify
and make the most of profitable prospects.
In another study of decision making in teams composed of Swedes, Germans, and
combinations of the two, researchers found Swedish teams featured higher team orientation, flatter organizational hierarchies, and more open-minded and informal work attitudes. In this study, German team members were perceived to be faster in decision
making, to have clearer responsibilities for the individual, and to be more willing to
accept a changed or unpopular decision. In Swedish teams, decision making appeared
more transparent and less formal. On German teams, the process is largely dominated
by the decision authority of an expert in the field. This is in contrast to the group
decision-making style used in Swedish teams.21
Total Quality Management Decisions
To achieve world-class competitiveness, MNCs are finding that a commitment to total
quality management is critical. Total quality management (TQM) is an organizational
Chapter 11 Management Decision and Control
strategy and accompanying techniques that result in delivery of high-quality products or
services to customers.22 The concept and techniques of TQM, which were introduced in
Chapter 8 in relation to strategic planning, also are relevant to decision making and
controlling.
One of the primary areas where TQM is having a big impact is in manufacturing.
A number of TQM techniques have been successfully applied to improve the quality of
manufactured goods. One is the use of concurrent engineering/interfunctional teams in
which designers, engineers, production specialists, and customers work together to
develop new products. This approach involves all the necessary parties and overcomes
what used to be an all-too-common procedure: The design people would tell the manufacturing group what to produce, and the latter would send the finished product to retail
stores for sale to the customer. Today, MNCs taking a TQM approach are customerdriven. They use TQM techniques to tailor their output to customer needs, and they
require the same approach from their own suppliers.23 Recently, Lenovo has transformed
its design process from an engineer-driven one to a customer-driven one. In 2016, the
company developed and began using an application that pulls together unstructured customer feedback from a variety of sources, including YouTube comments, online forums,
and traditional call centers, and organizes the data in a useful way so that Lenovo can
design tablets and products that best meet consumer demands.24
A particularly critical issue is how much decision making to delegate to subordinates. TQM uses employee empowerment. Individuals and teams are encouraged to
generate and implement ideas for improving quality and are given the decision-making
authority and necessary resources and information to implement them. Many MNCs have
had outstanding success with empowerment. For example, General Electric credits
employee empowerment for cutting in half the time needed to change product-mix
­production of its dishwashers in response to market demand.
Another TQM technique that is successfully employed by MNCs is rewards and
recognition. These range from increases in pay and benefits to the use of merit pay,
discretionary bonuses, pay-for-skills and knowledge plans, plaques, and public recognition. The important thing to realize is that the rewards and recognition approaches that
work well in one country may be ineffective in another. For example, individual recognition in the U.S. may be appropriate and valued by workers, but in Japan, group rewards
are more appropriate as Japanese do not like to be singled out for personal praise.
Similarly, although putting a picture or plaque on the wall to honor an individual is
common practice in the United States, these rewards are frowned on in Finland, for they
remind the workers that their neighbors, the Russians, used this system to encourage
people to increase output (but not necessarily quality), and while the Russian economy
is beginning to make headway, it was once in shambles in part due to poor decision
making.
Still another technique associated with TQM is the use of ongoing training to
achieve continual improvement. This training takes a wide variety of forms, ranging from
statistical quality control techniques to team meetings designed to generate ideas for
streamlining operations and eliminating waste. In all cases, the objective is to apply what
the Japanese call kaizen, or continuous improvement. By adopting a TQM perspective
and applying the techniques discussed earlier, MNCs find that they can both develop and
maintain a worldwide competitive edge. A good example is provided by Herman Miller,
the American office furniture company. Herman Miller manufactures some of the bestselling office task chairs worldwide. Over the last 15 years, the company has used the
kaizen mindset to improve quality by 1,000 percent and productivity by 500 percent.
Originally, it took approximately 82 seconds for Herman Miller to produce a single chair
from its production line. Today, it only takes 17 seconds.25 Table 11–2 provides some
examples of the new thinking that is now emerging regarding quality.
Ford Motor Company has been able to thrive in the post-global recession environment due in part to its implementation of kaizen principles. As a former vice president
at Boeing, Ford CEO Alan Mulally brought the philosophy with him when he came to
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empowerment
The process of giving
individuals and teams the
resources, information, and
authority they need to
develop ideas and
effectively implement them.
kaizen
A Japanese term that means
“continuous improvement.”
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Table 11–2
The Emergence of New Beliefs Regarding Quality
Old Myth
New Truth
Quality is the responsibility of the people
in the Quality Control Department.
Quality is everyone’s job.
Training is costly.
Training does not cost; it saves.
New quality programs have high initial
costs.
The best quality programs do not have up-front
costs.
Better quality will cost the company a lot
of money.
As quality goes up, costs come down.
The measurement of data should be kept
to a minimum.
An organization cannot have too much relevant
data on hand.
It is human to make mistakes.
Perfection—total customer satisfaction—is a
standard that should be vigorously pursued.
Some defects are major and should be
addressed, but many are minor and can be
ignored.
No defects are acceptable, regardless of
whether they are major or minor.
Quality improvements are made in small,
continuous steps.
In improving quality, both small and large
improvements are necessary.
Quality improvement takes time.
Quality does not take time; it saves time.
Haste makes waste.
Thoughtful speed improves quality.
Quality programs are best oriented toward
areas such as products and manufacturing.
Quality is important in all areas, including
administration and service.
After a number of quality improvements,
customers are no longer able to see additional improvements.
Customers are able to see all improvements,
including those in price, delivery, and
performance.
Good ideas can be found throughout the
organization.
Good ideas can be found everywhere, including in the operations of competitors and organizations providing similar goods and services.
Suppliers need to be price competitive.
Suppliers need to be quality competitive.
Source: Reported in Richard M. Hodgetts, Measures of Quality and High Performance (New York: American Management
Association, 1998), p. 14.
the company in 2006. By focusing on implementing more efficient procedures, Ford was
able to create 5,000 new jobs in the United States in 2014.26
Indirectly related to TQM is ISO 9000, International Standards Organization (ISO)
certification, to ensure quality products and services. Areas that are examined by the ISO
certification team include design (product or service specifications), process control
(instruction for manufacturing or service functions), purchasing, service (e.g., instructions for conducting after-sales service), inspection and testing, and training. ISO 9000
certification is becoming a necessary prerequisite to doing business in the EU, but it also
is increasingly used as a screening criterion for bidding on contracts or getting business
in the United States and other parts of the world.
Decisions for Attacking the Competition
Another series of key decisions relates to MNC actions that are designed to attack the
competition and gain a foothold in world markets. An example is Ford Motor Company’s
decision to challenge other automakers, like Tata, and to be a major player in developing
markets, such as Asia and Africa. As a result of this decision, Ford has been shifting
production closer to the local consumer and away from its stagnant U.S. home market.
In 2015, Ford announced plans to open a manufacturing plant for its pickup truck, the
Ranger, in Lagos, Nigeria. As Ford’s first plant in Africa outside of South Africa, the
new Lagos facility aims to provide Ford with the infrastructure and manufacturing

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