Management Control in Mnc's

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Control and organizational learning
in MNCs: an analysis through the
Abstract :

For any large complex organization the problem of ensuring its constituent activity in accordance with overall policy and, at the same time adapt to its environment, is a central and continuing concern. Thus, the fundamental question which must be answered is ‘what control mechanism can facilitate the adaptation process in the local market?’ In multinational corporations (MNCs), the control mechanism, imposed by headquarters, has an objective to integrate the subsidiaries’ activities to the global strategy. However, the presents on the local market necessitates the adaptation to the local environment characteristics. The objective of this paper is to contribute solving the dilemma between control and learning in an MNC. The interaction between control and learning process will be analyzed. The literature study leads us to develop a typology based on two factors: the stage of the learning process (knowledge production and mobilization) and its locus (local or global). The combination of these two factors provides four configurations. The control system produces knowledge, both locally and globally, which can be mobilized by the local or global units. A proposition to resolve our main problem is formulated. The combinations of these four configurations make it possible for an MNC to resolve the dilemma between control and learning. An application of this typology has been carried out by analyzing case studies of MNCs operating in Indonesia. Keywords: control, organizational learning, multinational corporations, local / global

1 Introduction

For many companies the process of internationalization strategy leads them to operate in many countries spread over whole continents; they are then confronted with the increasing risks related to uncertainty which rapidly developing countries present (e.g. Argentina in 2001 or Asia in 1997). The MNCs must thus deal with a great number of local heterogeneous situations, fast growth in one, crisis elsewhere, which require local adaptive capacities, but at the same time require the implementation of coordination mechanisms or effective control systems, which do not paralyse initiative and innovation.

In order to define the issue of globalization, the question of integration and differentiation can be asked, as was initially developed by Lawrence and Lorsch (1967). The new element which emerges is that of the scale, that of planetary organizations. It is thus a question of answering the centralization / decentralization dilemma which is also described as a local / global dilemma. Beyond the terminologies, this traditionally structural issue has developed in a context where differentiation is at a maximum: national cultures, logistic structures, regulation, local industrial structures and, more generally, multiplicity of specificities. One of them seems worthy of interest to us, the case of a local situation which is characterized by a fundamental crisis. These situations are of particular interest for the researcher: adaptation to major upsets and the decisions taken to respond to these random upsets within a time and space period. This question can also be found in the design of the control mechanisms. Whereas the definition of Anthony (1988) lets us believe that the only purpose of management control is to implement strategy, but the reality is more complex with an explicit role of questioning that strategy (Simons, 1995).

Control appears thus not only one factor of order and integration, which fights against entropy and inefficiencies, but also like a vector for learning intended to restore the effectiveness of inadapted local or global strategies. This aspect is even more relevant when the environment is strongly heterogeneous, even more so when it is changing a lot. While taking into consideration that "the suitability of the control systems to forms of learning which are sought...
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