Essay on the Management Functions in MNCs

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However, these functions must be applied “appropriately” from one country and culture to the next. Global managers apply the management functions successfully across borders.

(1) Planning:

Since planning inherently means deciding for future operations or making decisions at the present time for future results, it becomes the most difficult function where the environmental conditions, in the long run, are at best erratic.

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Hence management would be more interested in short term planning, rather then long term planning in such countries where the long range political stability is questionable. Another factor which makes long range planning more difficult is forecasting the future foreign exchange rates and the stability of the local currency.

One of the major problems that existed until recently was the inadequacy of communications between the home country and the host country, since major policy decisions and strategic planning decisions are generally made at the headquarters in the home country.

However new technology has vastly improved communication systems. Computer based “Global network” allows home and field officers to share data bases, electronically transfer documents and hold simultaneous conferences through computer networks.

Because of differences in environments among various countries, the international planner must address many political, legal, technological and cultural issues. Political unrest, changes in governing parties, competition from state owned enterprises, changes in tariff barriers and so on, can all throw the best plans into disarray.

Other complications arise in international planning. While the domestic planner usually faces a relatively homogeneous market, the international planner has to deal with more fragmented and diverse set of customers and needs. Accurate data collection in India, for example, on demographics, economic activity and so on can be a formidable task.

(2) Organizing:

Organizations also must be adapted to conditions abroad. Some countries prefer a participative style of management and hence the formal classical structures there are less rigid. For example, the French, Italians and the Dutch prefer rigid bureaucracies while Scandinavian countries prefer formalization with decentralization. Indians prefer centralization but low” formalization. Accordingly, organizational design should be based upon local acceptance.

For organizations that are just becoming multinational, the simplest and common approach is to simply have a vice president in charge of “international division” which serves the worldwide market so that the person in charge will oversee all foreign operations. This is appropriate where international sales are only a small part of the total sales and the company has subsidiaries in a limited number of countries.

A multinational organization which has extensive international involvement usually requires a more complex structural arrangement. This arrangement may be based on “geography” or on a “product”. In a multinational geographic structure, the different geographic areas with similar characteristics in the world are selected and grouped together and production and selling functions are assigned to them.

There are line executives assigned to each area and they report about their activities to the corporate management. The policy decisions are made by the central management and the operational decisions are decentralized. For example, there may be an area manager for East Africa who is responsible for operations in his geographical area.

In the international product structure organizations, the different products have a product executive for each product, who coordinates his product activity with an area specialist assigned by the corporate staff of the central management. Each product group is managed on a worldwide basis but each product sub-group in a given area operates under the guidance of the area specialist who provides expert guidance on the unique needs of various countries and regions.

Staffing international organizations:

Hiring the right personnel for a global organization is a major responsibility and there is heavy reliance on the nationals of the host country.

This indispensible requirement is summed up by one successful international business owner. “Hire competent locals, use competent locals and listen to competent locals.” The practice of hiring local personnel in executive positions has several advantages. These are:

i. The hiring and training costs are lower.

ii. Being a part of the host country culture, the executive understands the cultural surroundings better.

iii. There is an inherent political advantage, especially if the executives are friendly with local politicians.

iv. The local executives are more aware of the marketing opportunities and thus can provide useful feedback.

In general, the hiring, training and promotion of local workers must correspond to the accepted practices of the society, For example, the social code may require that the workers of inferior social status be not promoted to supervisory positions over those of higher social status.

In addition to hiring local personnel, the success in global operations also depends upon the works of “expatriates”. These are personnel from the home office who are sent to be a part of the operations in the host country. It is very important to select the right “expatriates” for foreign assignments.

As one executive said, “there is too much emphasis on executives’ technical abilities and too little on their cultural skills and family situations. When international executives’ relocations fail, they generally fail either because expatriates can’t fathom the customs of a new country or because their families can’t deal with the emotional stress that a company’s relocation entails”.

It is very expensive to transfer personnel from the home office for positions abroad. The salary and fringe benefits are higher in order to make these positions more attractive. Accordingly, the selection of the right and highly motivated persons for posting abroad becomes mandatory for success. Among the foundations for success, some of the personal attributes for overseas assignment are:

a. A high degree of cultural awareness and sensitivity towards race and religion.

b. A real desire and motivation to work abroad.

c. Active support and encouragement from the family.

d. Adaptability and flexibility with regard to food habits, housing, recreational outlets and work ethics.

e. Knowledge of national language and native social environment.

f. Technical competence and leadership traits. A grasp of company procedures and other organizational practices.

(3) Leading:

Leading is inducing others to work towards common goals. In international operations, the personal characteristics’ of the leader must be consistent with the needs and expectations of the people in the host country and must be in harmony with the values, attitudes and practices of the surrounding environment.

The style of leadership that is most suitable to a particular situation is primarily a function of the cultural characteristics of the people in a given country. Some cultures respect an authoritative leader while others like a participative and subordinate-centered leader.

While in America managers are appointed who “take charge”, in Yugoslavia the workers elect their managers. Co-determination is another alternative practiced in Germany where large firms have employee representatives on the board of directors.

In India, the class or the position in the society determines the leadership role. Japanese firms practice “organic” type of leadership where the manager identifies with the organization rather than the function to which he is assigned.

There is no leader if the followers do not follow him. Accordingly, an international manager must identify with the followers of the country and mould himself to accommodate the wishes of the subordinates and the workers.

(4) Controlling:

The degree of control exercised in foreign operations differs from organization to organization and from country to country. Some legal constraints in some host countries may dictate the extent of control in some designated areas. For example, some countries do not allow closing of plants or laying off personnel.

Some parent companies control their operations abroad very tightly and closely supervise the operational elements. Others allow their subsidiaries considerable flexibility. Controlling function is influenced by several environmental factors that are unique to international enterprises and is further complicated by distance and diversity. Because of distances involved, deviations from standards may not be immediately detected or corrected. Diversity may dictate the very definition and concept of control.

In some countries, for example, quality and punctuality is not a matter of highest priority and hence some western standards are not easily accepted. Similarly, accounting records in some countries are scanty and manipulated to reduce taxes, thus making financial controls difficult to administer. In some cultures, the business relationships are a function of personal relationships, kinship, nepotism and reciprocal feelings and hence objective performance appraisal and tough corrective actions may not be tolerated. Accordingly, the performance standards must be designed and set on the basis of realistic objectives in the given country.


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