1. The challenge of controlling
strategies and operations abroad
International Business I

2. OBJECTIVES
• To understand what the managerial control
process is.
• To identify the different types of control.
• To identify the problems of control in an
international company.
• To understand the relationship between the
environments and control systems.
• To be able to advice (and / or design) an effective
international control system.

3. GLOBAL STRATEGY, STRUCTURE AND
CONTROL
• IC strength recognize and capitalize on opp.
abroad and capacity to respond to global
threats.
• Control: Ensure that strategic, operational and
tactical plans are implemented correctly.
– Corrective actions if required.

4. THE MANAGERIAL CONTROL PROCESS
• Used to ensure that operations and personnel
adhere to plans.
• Elements:
– Setting Standards
– Monitoring Performance
– Performance Vs. Plan
– Correction

5. SETTING STANDARDS
• Based on objectives  Hierarchy – degree of
importance.
• Realistic
• Concrete
• Specific
– Note: some areas cannot be expressed in specific
and concrete terms.

6. MONITORING PERFORMANCE
• Establishment of measurement tools.
– Budgets (assigned resources)
• Supplemental (Support a plan)
• Alternative (Plan B)
• Variable (according to sales)
– Financial Statements
• Income statement
• Balance Sheets

7. PERFORMANCE Vs. PLAN
• Evaluate whether performance is sufficiently
close to the company’s original plan.
– What is “Sufficiently close”?
– Feedback (Reactive)
– Feed-forward (Proactive)

8. CORRECTION
• Keep track: Positive actions
– Promotions
– Salary increase
– Increased responsibility
– Privileges
• Get back on course: Negative actions
– Salary reduction
– Memos
– Finish contracts

9. TYPES OF CONTROL SYSTEM
• INPUT CONTROL
• BEHAVIOR CONTROL
• OUTPUT CONTROL

10. INPUT CONTROL
• Employee selection and training.
– Training before assuming responsibility
– Multiple evaluations before hiring an individual

11. BEHAVIOR CONTROL
• Takes into account the environment.
• Regulates the transformation process.
• Top-down control
• Motivation: Close supervision

12. OUTPUT CONTROL
• Regulates the results vs. the targets.
– Financial results
– Productivity
– Sales
• Evaluation and Comissions
• Motivation: Incentives

13. CONTROL PROBLEMS
• Geographic distance  prevents face to face
communication.
• Cultural distance  Language: spoken, silent
and body language.
• Different reference frames between PC and FA
 Hierarchy, Relevant matters.

14. HOST-COUNTRY ENVIRONMENTAL
FACTORS
• Cultural distance
• Political Risk
• Economic factors

15. CULTURAL DISTANCE
• Initial expansion to a similar country.
• It affects:
– Behaviors
– Decisions
– Values
– Patterns of negotiation
Input control system
Output and behavior system

16. POLITICAL RISK
• Restrictions.
– Profit repatriation limits
– Price controls
– Protectionist trade policies
– Tax and monetary policies
– Legal restrictions
• Opportunistic behavior from the government.
• Government or societal actions

17. ECONOMIC FACTORS
• Foreign exchange rate fluctuations.

18. DESIGNING AN EFFECTIVE CONTROL
SYSTEM
• No reliability of reported profits and ROI
• HQ are responsible for the decisions.
• Eliminate external factors (out of the
subsidiary’s control)
• Non financial measures only  market share,
productivity, public image, staff morale,
unions, etc.

19. PC – FS RELATIONSHIP
• Strategic Leader
– Core competence of the subsidiary 
– Strategic importance of the Host Country 
• Contributor
– Core competence of the subsidiary 
– Strategic importance of the Host Country 
• Implementer
– Core competence of the subsidiary 
– Strategic importance of the Host Country 
• Black Hole
– Core competence of the subsidiary 
– Strategic importance of the Host Country 

20. PC – FS RELATIONSHIP
• Dependent: the subsidiary is unable to
generate strategic resources.
(Ex. Operating in a competitor’s home market)
• Independent: the subsidiary generates all the
resources on its own.
(Ex. Operating in a country with restrictions on IT)
• Interdependent: PC and the subsidiary
generate some of the resources.