An Approach to Strategic Control in MNCs

Abstract

In this chapter the authors presents the results of their research on the changing nature of the strategic control process between the head office (HO) and subsidiaries. In their research the authors finds that multinational corporation (MNC) in mature businesses increasingly have to depend on "subtle mechanisms" for influencing the strategic direction of their subsidiaries. They suggest that the alternative to substantive control, that is, restricting the flow of strategic resources, is the creation of an organizational context. The task of creating an appropriate organizational context for strategic control is built on two sets of concepts. First, authors develop the notion that an organization is an aggregation of four orientations — cognitive, strategic, power, and administrative. Second, they identify the type of organizational mechanisms that managers can use to manipulate these four orientations. HO managers, in order to influence subsidiary strategy, should be sensitive to the use of both substantive controls and the organizational context as an approach to control.

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