It is important for the MNC to separate the evaluation of the manager of a division from the evaluation of the division. The manager’s evaluation should not include factors over which he exercises no control, such as currency fluctuations, income taxes, and so on. Instead, managers should be evaluated on the basis of revenues and costs incurred. It is particularly difficult to compare the performance of a manager of a division (or subsidiary) in one country with the performance of a manager of a division in another country. Even divisions that appear to be similar in terms of production may face very different economic, social, or political forces. The manager should be evaluated on the basis of the performance he or she can control. Once a manager is evaluated, then the subsidiary financial statements can be restated to the home currency and uncontrollable costs can be allocated.
International environmental conditions may be very different from, and more complex than, domestic conditions. Environmental variables facing local managers of divisions include economic, legal, political, social, and educational factors. Some important economic variables are inflation, foreign currency exchange rates, income taxes, and transfer prices. For example, MNCs have invested heavily in developing countries. The result is that those countries have built considerable manufacturing capacity and are now competing aggressively around the world. This has led to lower prices and deflation on a global basis. As a result, MNCs, used to dealing with the inflationary environment of the 1970s and 1980s, will have to shift gears to deal with deflation. In this case, cost control is essential.
Legal and political factors also have differing impacts. For example, a country may not allow cash outflows or may forbid the import of certain items. U.S. agricultural laws do not allow rooted plants to enter the country. This posed a problem for U.S. florists who sell poinsettias during the Christmas season. They need many poinsettias, but they do not have the greenhouse capacity to grow them throughout the rest of the year. Mexico provides an ideal growing environment for the plants. However, potted plants cannot enter the United States. Plant science advances solved the importation problem. The plants are imported as cuttings that have been quick cooled, bagged, and shipped in dry ice. They clear Customs in this form, arriving at their destination within the 72-hour window. The result is a thriving poinsettia-growing industry in Mexico and many more of the colorful plants available for U.S. consumers.
Educational, infrastructure, and cultural variables affect how the multinational firm is treated by the subsidiary’s country. For example, when Wal-Mart expanded into Brazil, its system of just-in-time restocking of shelves did not work. In Brazil, the company did not own its distribution system, meaning that stores in Brazil processed up to 300 deliveries daily, versus seven in the United States. On the cultural front, Wal-Mart had to change its credit policies by accepting postdated checks the most common form of credit in Brazil.15 Many clothing distributors in the United States depend on factories in developing countries to do the manufacturing. However, first, those companies had to develop the area, putting in roads and communication equipment and providing training for workers.
International environmental conditions may be very different from, and more complex than, domestic conditions. Environmental variables facing local managers of divisions include economic, legal, political, social, and educational factors. Some important economic variables are inflation, foreign currency exchange rates, income taxes, and transfer prices. For example, MNCs have invested heavily in developing countries. The result is that those countries have built considerable manufacturing capacity and are now competing aggressively around the world. This has led to lower prices and deflation on a global basis. As a result, MNCs, used to dealing with the inflationary environment of the 1970s and 1980s, will have to shift gears to deal with deflation. In this case, cost control is essential.
Legal and political factors also have differing impacts. For example, a country may not allow cash outflows or may forbid the import of certain items. U.S. agricultural laws do not allow rooted plants to enter the country. This posed a problem for U.S. florists who sell poinsettias during the Christmas season. They need many poinsettias, but they do not have the greenhouse capacity to grow them throughout the rest of the year. Mexico provides an ideal growing environment for the plants. However, potted plants cannot enter the United States. Plant science advances solved the importation problem. The plants are imported as cuttings that have been quick cooled, bagged, and shipped in dry ice. They clear Customs in this form, arriving at their destination within the 72-hour window. The result is a thriving poinsettia-growing industry in Mexico and many more of the colorful plants available for U.S. consumers.
Educational, infrastructure, and cultural variables affect how the multinational firm is treated by the subsidiary’s country. For example, when Wal-Mart expanded into Brazil, its system of just-in-time restocking of shelves did not work. In Brazil, the company did not own its distribution system, meaning that stores in Brazil processed up to 300 deliveries daily, versus seven in the United States. On the cultural front, Wal-Mart had to change its credit policies by accepting postdated checks the most common form of credit in Brazil.15 Many clothing distributors in the United States depend on factories in developing countries to do the manufacturing. However, first, those companies had to develop the area, putting in roads and communication equipment and providing training for workers.
.
0 comments:
Post a Comment