Explain how U.S. multinational companies (MNCs) differ from European multinational companies (MNCs) in their approaches to control.

Question

What will be an ideal response?

Answer 1

One comparative study found that a major difference is that U.S. firms tend to rely much more heavily on reports and other performance-related data. Americans make greater use of output control, and Europeans rely more heavily on behavioral control. Commenting on the differences between these two groups, the researcher noted: "This pattern appears to be quite robust and continues to exist even when a number of common factors that seem to influence control are taken into account." Some specific findings from this study include:

1. Control in U.S. multinational companies (MNCs) focuses more on the quantifiable, objective aspects of a foreign subsidiary, whereas control in European MNCs tends to be used to measure more qualitative aspects. The U.S. approach allows comparative analyses between other foreign operations as well as domestic units; the European measures are more flexible and allow control to be exercised on a unit-by-unit basis.
2. Control in U.S. MNCs requires more precise plans and budgets in generating suitable standards for comparison. Control in European MNCs requires a high level of companywide understanding and agreement regarding what constitutes appropriate behavior and how such behavior supports the goals of both the subsidiary and the parent firm.
3. Control in U.S. MNCs requires large central staffs and centralized information-processing capability. Control in European MNCs requires a larger cadre of capable expatriate managers who are willing to spend long periods of time abroad. This control characteristic is reflected in the career approaches used in the various MNCs. Although U.S. multinationals do not encourage lengthy stays in foreign management positions, European MNCs often regard these positions as stepping-stones to higher offices.
4. Control in European MNCs requires more decentralization of operating decision making than does control in U.S. MNCs.
5. Control in European MNCs favors short vertical spans or reporting channels from the foreign subsidiary to responsible positions in the parent.

These differences help explain why many researchers have found European subsidiaries to be more decentralized than U.S. subsidiaries. Europeans rely on the managerial personnel they assign from headquarters to run the unit properly. Americans tend to hire a greater percentage of local management people and control operations through reports and other objective, performance-related data. The difference results in Europeans' relying more on socio-emotional control systems and Americans' opting for task-oriented, objective control systems.