UNIT III INTERNATIONAL STRATEGIC MANAGEMENT Standardization Vs Differentiation

Standardisation of products means having a particular set of products which are the same for every customer.

Differentiation of products would mean that each product is individual and can be altered according to customer demand.

STRATEGIC OPTIONS Meaning Strategic options are creative alternative action-oriented responses to the external situation that an organization (or group of organizations) faces. Strategic options take advantage of facts and actors, trends, opportunities and threat of the outside world. Strategic options can be identified after an institutional assessment, keeping in mind the aspirations (basic question) of an organization. The tool Strategic options helps to identify and make a preliminary screening of alternative strategic options or perspectives. Steps to develop strategic options (SOP) Assess the external context, in terms of opportunities and threats (e.g. from environmental scan, institutiogramme, coverage matrix and/or stakeholder analysis)
Priorities and cluster opportunities and threats

If you have more than 15 of each, priorities (e.g. through voting) Brainstorm which opportunities and threats can be related to each other Who should participate in the following step? It is often hard to take step 2 with a group of 15 or more people, although that is ideal. Alternatively a core team of 1-5 people can do step 2. However, a process facilitator should not do it alone in a break
Develop strategic options. Formulate strategic options that:

Respond to one or more opportunities and/or threats. Are actions (or results) related to output, input, mission, vision and/or relations
1

 Are straightforward (clearly relate to opportunities and/or threats), but Are also creative (there may be more than the most obvious response. And you may consider new solutions that respond to new trends, opportunities, and threats) You may develop several options relating to the same opportunity or threat. For each threat or opportunity try to formulate at least one strategic option.
Rate the options in terms of relevance to (note that this is only a preliminary selection)

in the SOP matrix. The criteria in your BQ, and The mission and aspiration of the organization. Note: Rating should not be done using the criterion of feasibility, as matching external strategic options with internal possibilities happens only during SOR. Rating can be done individually (give each person around 5 votes) or jointly. Each SO may be given 0-3 votes. Select the 3-6 most relevant options to be further considered during strategic orientation. Follow-up Implement internal organisational analysis of critical elements. Strategic orientation (SOR), the final selection of a (set of) strategic options.

GLOBAL ENTRY STRATEGY 1. Target Market Selection A crucial step in developing a global expansion strategy is the selection of potential target markets A four-step procedure for the initial screening process: 1. Select indicators and collect data 2. Determine importance of country indicators 3. Rate the countries in the pool on each indicator 4. Compute overall score for each country
2

2. Choosing the Mode of Entry Mode of Entry Choice: A Transaction Cost Explanation 3. Exporting Indirect Exporting Export management companies Regarding entry modes, companies normally face a tradeoff between the benefits of increased control and the costs of resource commitment and risk. Transaction Cost Analysis (TCA) perspective Transaction-Specific Assets (assets valuable for a very narrow range of applications)

Cooperative Exporting Piggyback Exporting

Direct Exporting 4. Licensing Licensor and the licensee

Benefits:

Firms set up their own exporting departments

Appealing to small companies that lack resources Faster access to the market Rapid penetration of the global markets

Caveats:

Other entry mode choices may be affected Licensee may not be committed Lack of enthusiasm on the part of a licensee Biggest danger is the risk of opportunism Licensee may become a future competitor
3

How to seek a good licensing agreement: Seek patent or trademark protection Thorough profitability analysis Careful selection of prospective licensees Contract parameter (technology package, use conditions, compensation, and provisions for the settlement of disputes

5. Franchising

Benefits:

Overseas expansion with a minimum investment Franchisees profits tied to their efforts Availability of local franchisees knowledge

Caveats:

Revenues may not be adequate Availability of a master franchisee

6. Contract Manufacturing
Benefits:

Labor cost advantages Savings via taxation, lower energy costs, raw materials, and overheads Lower political and economic risk Quicker access to markets

Caveats:

Contract manufacturer may become a future competitor Lower productivity standards Backlash from the companys home-market employees regarding HR and labor issues Issues of quality and production standards
4

Qualities of an ideal subcontractor: Flexible/geared toward just-in-time delivery Able to meet quality standards Solid financial footings Able to integrate with companys business Must have contingency plans

7. Joint Ventures
Benefits:

Higher rate of return and more control over the operations Creation of synergy Sharing of resources Access to distribution network Contact with local suppliers and government officials

Caveats:

Lack of control Lack of trust Conflicts arising over matters such as strategies, resource allocation, transfer pricing, ownership of critical assets like technologies and brand names

8. Wholly Owned Subsidiaries

Benefits:

Greater control and higher profits Strong commitment to the local market on the part of companies Allows the investor to manage and control marketing, production, and sourcing decisions

Caveats:

Risks of full ownership

5

Developing a foreign presence without the support of a third part Risk of nationalization Issues of cultural and economic sovereignty of the host country

Acquisitions and Mergers Quick access to the local market Good way to get access to the local brands

Strategic Alliances Alliances between partners that are related in terms of products, technologies, and markets Similar cultures, assets sizes and venturing experience A shared vision on goals and mutual benefits

10. Timing of Entry International market entry decisions should also cover the following timing-of-entry issues: When should the firm enter a foreign market? Other important factors include: level of international experience, firm size Mode of entry issues, market knowledge, various economic attractiveness variables, etc.

Reasons for exit:

Sustained losses Volatility Premature entry Ethical reasons Intense competition Resource reallocation

DIFFERENT FORMS OF INTERNATIONAL BUSINESS Types of International Business Activities Importing and Exporting Importing and exporting are often the simplest ways a business may go global.

Importing is the purchasing abroad, either directly from target suppliers or indirectly through sales agents and distributors. Exporting is the selling abroad, either directly to target customers or indirectly by retaining foreign sales agents and distributors.

Products that are made or grown abroad but sold domestically are called imports and products made or grown domestically and shipped for sale abroad are exports. People who engage in this type of international trade are called importers or exporters. A good question is why a country imports or exports certain products. It may be simply that they do not have that resource internally or that it has an excess of that product. It could also be more complex than this simple answer. A country may have an absolute or competitive advantage.

Absolute advantage: when a country can produce something more cheaply than any other country. For example, Saudi Arabia, due to its natural resources, has an absolute advantage in oil. Comparative advantage: when a country can make certain items more cheaply or better than other items relative to other countries. For example, Japan, due to its manufacturing efficiencies, has a comparative advantage in automobiles. Licensing

Licensing does not have to be an international arrangement. Licensing may take place completely within one country. But, it is also a convenient way for a company to spread its products abroad with minimal risk. Licensing is an arrangement whereby a firm (the licensor) grants a foreign firm (the licensee) the right to use intangible property such as a patent, logo, formula, process, etc. The licensee pays a royalty or percent of the profits to the licensor. Licensing allows a business to go global relatively rapidly and simply. Rather than trying to export a product directly, incurring shipping costs and delays, among other barriers, a company can license their methods of doing business to a foreign organization. For example, rather than blend and bottle a soft drink here and then ship overseas, a company may
7

license a foreign bottler who produces the soft drink locally using the licensed formula. This may also allow some adaptation to local tastes and customs. Franchising

Franchising also does not have to be an international arrangement. Franchising may take place completely within one country. There are many examples of nationally-based franchises with which we are sure you are familiar. It is also another convenient way for a company to introduce its products abroad with minimal risk. Franchising is a form of licensing in which the parent company (franchisor) offers some combination of trademark, equipment, materials, managerial guidelines, consulting advice, and cooperative advertising to the investor (franchisee) for a fee and/or percentage of revenues (royalties). As with licensing, franchising allows a business to go global relatively rapidly and simply, however, franchising generally requires a greater commitment, financially and otherwise, than licensing by both parties. The most obvious example is the ubiquitous McDonalds franchise. Some other examples are Starbucks or hotel chains such as Hilton. Franchising may also allow some adaptation to local tastes and customs.

Foreign Direct Investment Foreign direct investment occurs when a company invests resources and personnel to build or purchase an operation in another country. This turns the firm into a multinational company (MNC). A wholly owned subsidiary is a firm that is owned 100% by a foreign firm This is a major decision for an organization because costs and risks of direct investment are greater than with franchising or licensing. Although governments usually welcome foreign direct investment, they are also often concerned about this type of investment for several reasons. Due to their size, MNCs may influence the host countrys economic and political systems. Control of a countrys important resources may pass into the hands of foreign corporations and, perhaps, then governments. Some countries enact programs to counteract these concerns. Joint Ventures and Strategic Alliances Joint ventures and strategic alliances are somewhat different from foreign direct investment in that we are not talking about creating wholly owned subsidiaries. Yet, they can be excellent, strategic ways to penetrate different global markets around the world while limiting exposure at the entry phase. A joint venture is an organization created by two or more companies or a company and a foreign government in which each party contributes assets, owns the entity to some degree, and
8

shares risk. A joint venture allows a company to partner with a firm from another country thus learning about business practices, cultural differences, etc. This is particularly popular among manufacturing concerns. For example, Ford Motor Company (U.S.) entered into a joint venture with the Mazda Company (Japan) and France's PSA Peugeot Citroen has joined with Chinas Dongfeng Motor Corp. A strategic alliance is an agreement between potential or actual competitors to achieve common objectives. Unlike a joint venture they do not actually form a new entity but work cooperatively while maintaining their independence. It allows participants to share costs and risks and to take advantages of each other strengths. Because strategic alliances are built on trust, this type of arrangement should be undertaken with care. A good example of international strategic alliance is the code sharing done by airlines. For example, you may purchase a ticket in the U.S. on Delta airlines for a flight to Italy and find yourself actually on an Alitalia flight carrying a Delta flight number. ORGANISATIONAL STRUCTURE Meaning The framework, typically hierarchical, within which an organization arranges its lines of authority and communications, and allocates rights and duties. Organizational structure determines the manner and extent to which roles, power, and responsibilities are delegated, controlled, and coordinated, and how information flows between levels of management. An organisation structure depends entirely on the organization's objectives and the strategy chosen to achieve them. In a centralized structure, the decision making power is concentrated in the top layer of the management and tight control is exercised over departments and divisions. In a decentralized structure, the decision making power is distributed and the departments and divisions have varying degrees of autonomy. An organizational chart illustrates the organizational structure. Definition Organisation structure is defined as "The logical arrangement of task and the network of relationships and roles among the various positions established to carry out the activities necessary to achieve the predetermined objectives of business". Internal organisation structure constitutes the arteries and veins through which the blood of work flows in the body of organisation.

Organisation as a structure - implies 4 Elements

9

 Intentionally created: In order to attain specific goals, Organisation structure is

deliberately created which converts resources (of management) into a productive enterprise. Provides framework: Organisation structure usually takes the shape of a pyramid. Once established, it acts as a framework that can either constrain or facilitate managerial actions. Use of Chart: In an Organisation, the structural relationships are normally shown through organisation charts. These charts indicate the intended final relationships at a given time. Provides formal picture: Organisation structure may be horizontal or vertical. The horizontal aspects display basic departmentalization and vertical aspects display creation of hierarchy of superiors and subordinates. Types of Organisation Structure Internal Organisation structures can be broadly classified into the following types/forms: 1. 2. 3. 4. Line organisation structure. Functional organisation structure. Line and staff organisation structure. Product organisation structure. 5. Committee and matrix organisation structure. Line organisation Structure Line organisation is the oldest and the simplest form of internal organisation structure. It was first developed by the Roman army and later adopted by armies all over the world. Factory owners also used line organisation structure in its purest form in the nineteenth century in England. In the line organisation, the line of authority moves directly from the top level to the lowest level in a step-by-step manner. It is straight and vertical. The top-level management takes all major decisions and issues directions for actual execution. The general manager, for example, issues order to various departmental managers. Thereafter, the departmental manager issues instructions to works manager. The works manager will issue instructions to foreman. In this manner, the orders and instructions will be issued to the workers working at the lowest level. Thus authority moves downward and also step-by-step. The responsibility, on the other hand, moves in the upward direction. Advantages of Line Organisation Structure

10

1. Simplicity: Line organisation structure is easy to understand and follow by superiors and subordinates. It is simple and clear as regards authority and accountability. 2. Prompt decisions: Line organisation facilitates prompt decision-making at all levels as the authority given is clear and complete. 3. Discipline: It brings discipline in the organisation due to unity of command, delegation of authority and direct accountability. 4. Economical: Line organisation is economical as experts are not appointed. 5. Attraction to talented persons: Line organisation brings out talented workers and develops in them quality of leadership. It offers opportunities of self-development to employees. 6. Quick communication, high efficiency, flexibility and high employee morale are some more advantages of line organisation structure. Line organisation structure is given in the following chart:

Limitations of Line Organisation Structure 1. Heavy burden on line executives: The line executives are given too many duties and responsibilities. Even the quality of the decisions of executives may suffer due to heavy burden of duties and responsibilities. 2. Non-availability of services of experts: There is absence of skilled experts in line organisation. Expert assistance is not available promptly when needed by line executives.
11

3. Favoritism: There is wide scope for favoritism and nepotism in the line organisation. Leadership of departmental executive is autocratic due to heavy concentration of powers. He may favour some employees at the cost of others. 4. Too much dependence on limited executives: In the line organisation, all powers are concentrated in the hands of a few executives. Naturally, the success and stability of the entire organisation depends on their personal skill, initiative and interest. Special difficulties arise when one executive is to be transferred/replaced/promoted. 5. Rigidity: There is rigidity in the working of line organisation. 6. Delays in communication, limited freedom to employees and unsuitability to modern large business units are some more demerits of line organisation. Functional Organisation Structure F.W.Taylor, founder of scientific management, conceived the functional organisation structure. According to him, it is unscientific to overload a foramen with the entire responsibility of running a department. He introduced a system of functional foremanship in his organisation. In his functional foremanship, there will be eight specialists' foremen who will be required to guide, direct and control the work. Workers at the plant level will have to follow the instructions of all these eight specialists called bosses. In the functional organisation suggested by F.W.Taylor, the job of management is divided according to specialization. As a result, functional departments are created. For example, the personnel department will look after the recruitment, selection, training, wage payment, etc. of all persons of the organisation. Similar will be the position of other departments like production, sales, etc. The scope of work of the department is limited but the area of authority is unlimited. In the functional organisation structure, there will be separation of planning of work and execution of the plan prepared. The basis of division is the function and naturally the organisation structure created will be called "Functional Organisation". In the functional foremanship, there will be eight specialists/functional heads called bosses. Out of eight bosses, four bosses will be at the planning level and the remaining four will be at the slop floor level. Foremen At Shop Floor Level (Shop Floor) 1. Gang Boss: He assembles and sets up various machines; and tools for a particular piece of work. He is in-charge of assembling line of production.

12

2. Speed Boss: He is concerned with the speeding of machines used for production. He keeps proper speed of the machines and see that workers complete the production work as per the schedule time. 3. Repair Boss: The repair boss looks after the proper maintenance of machines, tools and equipments required during the production process. 4. Inspector: The inspector controls quality of the products by keeping adequate check/control when the production work is in progress. The functional organisation structure is given in the following chart:-

Merits of Functional Organisation Structure 1. Facilitates specialization: Functional organisation structure facilitates division of work and specialization. Each boss has specialized knowledge of his functional area. He is in a better position to guide and help the workers. 2. Benefits of large-scale operations: Functional organisation offers the benefit of economy of large-scale operation. In this organisation, one administrative unit manufactures all products. The available machinery, equipment and facilities are used fully for large-scale production. 3. Facilitates effective coordination: Functional organisation facilitates effective coordination within the function. This is possible as one boss is in-charge of a particular function and he looks after all activities, which come within that function. 4. Operational flexibility: Functional organisation possesses operational flexibility. Necessary changes can be introduced easily to suit the needs of the situation without any adverse effect on the efficiency.
13

5. Ensures effective supervision: Functional organisation facilitates effective supervision by the functional heads and foremen. Due to specialization, they concentrate on the specific functional area and also keep effective supervision on their subordinates. Demerits of Functional Organisation Structure 1. Absence of unity of command: Unity of command is absent in the functional organisation as each worker gets orders and instructions from several bosses. 2. Fixing responsibility is difficult: In functional organisation, responsibility is difficult to fix on a specific person. This is because the responsibility itself is divided among many. 3. Unsuitable to non-manufacturing activities: Functional organisation can be introduced in the case of manufacturing activities. However, its application to non-manufacturing activities such as marketing, etc. has not been successful. 4. Costly: Functional organisation is costly, as more specialists are required to be appointed. 5. Creates confusion among workers: Functional organisation is based on specialization as function is taken as a base for dividing the work. The authority is overlapping the responsibility is divided. This confuses workers. 6. Conflicts among foremen, delays in decision-making and limited discipline within the departments are some more demerits of functional organisation. Line and Staff organisation Structure In the line and staff organisation, line executives and staff (specialists) are combined together. The line executives are 'doers' whereas staff refers to experts and act as 'thinkers'. The following chart shows line and staff organisation structure:

14

The line executives are concerned with the execution of plans and Policies. They do their best to achieve the organizational objectives. The staff concentrates their attention on research and planning activities. They are experts and conduct advisory functions. Staff specialists are regarded as 'thinkers" while execution function is given to line executives who are "doers". The staff is supportive to line. The staff specialists offer guidance and cooperation to line executives for achieving organizational objectives. This reduces the burden of functions on the line executives and raises overall efficiency of the organisation. For avoiding the conflicts between line and staff, there should be clear demarcation between the line and staff functions. This avoids overlapping of functions and possible conflicts. In short, the line and staff functions are different but are supportive and can give positive results if adjusted properly i.e. by avoiding the conflicts. They suggest/recommend but have no power to command the line executive. However, their advice is normally accepted because of their status in the organisation. According to Louis Allen, "Line refers to those positions and elements of the organisation, which have the responsibility and authority and are accountable for accomplishment of primary objectives. Staff elements are those which have responsibility and authority for providing advice and service to the line in attainment of objectives". Characteristics of Line and Staff organisation 1. Planning and execution: There are two aspects of administration in this organisation, viz., planning and execution. 2. Combining line and staff: Planning function is entrusted to staff specialists who are 'thinkers' while execution function is given to line executives who are 'doers'. The staff is supportive to line. 3. Role of authority: The line managers have authority to take decisions as they are concerned with actual production. The staff officers lack such authority. 4. Guidance from staff: The staff provides guidance and advice to line executives when asked for. Moreover, line executives may or may not act as per the guidance offered. 5. Exercising control: The staff manager has authority over subordinates working in his department. 6. Scope for specialization: There is wide scope for specialization in this organisation as planning work is given to staff and execution work is given to line executives. 7. Possibility of conflicts: Conflicts between line and staff executives are quite common in this organisation but can be minimized through special measures. 8. Suitability: Line and staff organisation structure is suitable to large-scale business activities.

15

Merits of Line and Staff organisation 1. Less burden on executives: Line executives get the assistance of staff specialists.This reduces the burden of tine executives. This raises overall efficiency and facilitates the growth and expansion of an enterprise. 2. Services of experts available: The benefits of services of experts are provided to line managers. Highly qualified experts are appointed and they offer guidance to line executives. 3. Sound decision-making: Line and staff organisation facilitates sound management decisions because of the services of experts and specialists. The decisions are also taken in a democratic method i.e. in consultation with the experts. 4. Limited tension on line managers: The pressure of work of line bosses is brought down as they are concerned only with production management. 5. Benefits of specialization: There is division of work and specialization in this organisation. Naturally, the benefits of division of work and specialization are easily available. 6. Training opportunities to employees: Better opportunities of advancement are provided to workers. The scope for learning and training for promotions are available. Demerits of Line and Staff organisation 1. Delay in decision-making: The process of decision-making is delayed, as line executives have to consult staff experts before finalizing the decisions. The decisions of line managers are likely to be delayed due to this lengthy procedure. 2. Buck passing among executives: The line bosses are concerned with actual execution of work. However, they depend on staff experts for guidance. If something goes wrong, the attempt is made to pass on the blame by one party to the other. Thus, there is shifting of responsibility or buck-passing. 3. Conflicts between line and staff executives: In this organisation, quarrels and conflicts between line managers and staff specialists are quite common. The line managers are generally not interested in the advice offered by experts. Secondly, specialists feel that the line bosses lack knowledge of new ideas. Such conflicts lead to bitterness. 4. Costly organisation: Line and staff organisation is a costly organisation as the line executives are supported by highly paid staff executives who are experts. All this adds to the overhead expenses and the cost of production increases. 5. Complicated operation: This organisation is too complicated in actual operation because of dual authority, division of functions and too much dependence on staff. The unity of command principle is violated. 6. Internal discipline is affected adversely: The internal discipline is likely to be affected adversely due to decentralisation and division of loyalty of subordinates.

16

CONTROLLING OF INTERNATIONAL BUSINESS To give a clear definition of what is meant by control of business is a demanding task. The concept of control is very elusive it has different meanings within different social communities, which varies with time and the communitys level of cohesion, its organizational stage and cultural origin. If we manage to define control, we are still left with another deceptive concept that of business. Nowadays everybody seems to know what business is, but when the question of business control and regulation arises it is challenging to structure a control scheme that will comprise and be adequate to all its various types and forms. And as if the task was not demanding enough, the control of business is closely related with the legal origins of a social community, so that there is no uniform resolution to the definition of business control. In this paper we discuss the various concepts of control in different social and economic circumstances, giving insight to the legal origin of control and the areas in which control is exercised. We analyze the effects that different levels and types of control have on the business environment. Origins of Control Nowadays this organized structure of power is represented by the state and newly established regulatory bodies. In that sense we can argue that control became more expert than power and social orientated. This social control is exercised in behalf of the society and its groups; therefore it should include all of the different interests that we encounter within this socio-economic cohesion. However the level of social cohesion is variable it changes together with the evolution of the demographic and economic factors, and it alters social interests hindering the efficiency of social control. In an era of business internationalization and booming trans-national business transactions, the interests that should be protected and controlled are growingly divergent. The origins of control are different if we analyze the American business environment or the European one. Every research in the origins of control should include a specific period of American economic history the Great Depression and the New Deal arrangement. That period transformed the character of business, the concept of economic life and economic relations of every market actor, redefining the powers and responsibilities of the community toward business. This revolution of business perception did not affect only the American business environment its arrangements and consequences spread throughout the European continent transforming the European industry of the time. After a period of economic prosperity mostly due to the rapidly growing oil and electric power industry which revolutionized the way in which business was led, the United States were left with an inflated bubble. Like every other economic anomalism, this bubble burst in October 1929, crashing the Wall Street stock market and, together with other structural factors and followed by a widespread run on banks, initialized the period of Great Depression that will give incentive to a worldwide trend of economic instability. The American political and economic establishment reacted promptly, adjusting nations values, inserting social
17

control within the structure of industry. A restructuring of the economy and democratization of business was stimulated by the New Deal arrangement (1933-1937) including programs that sought reform of the financial system, institution re-structuring, and just competition in all industries. APPROACHES TO CONTROL Control means, Some sort of systematic effort to compare current performance to a predetermined plan of objective, presumably in order to take any remedial action required. This is a very general definition of the term. However, as a management function, it has been defined as the process by which managers assure that resources are obtained and used effectively and efficiently in the accomplishment of the organizations goals. Controlling is tool for achieving organizational goals and activities. Control is managements planning, implementation, evaluation, and correction of performance to ensure that the organization meets its objectives in the short, medium and long terms. In the case of MNEs, the top managements toughest challenge is to balance the companys global needs with its need to adapt to country-level differences. According to Henry Fayol , Control of an undertaking consists of seeing that everything is being carried out in accordance with the plan which has been adopted, the orders which have been given, and the principles which have been laid down. Its object is to point out mistakes in order that they may be rectified and prevented from recurring According to EFL Breach, Control is checking current performance against predetermined standards contained in the plans, with a view to ensure adequate progress and satisfactory performance. According to Harold Koontz and ODonnel, Controlling is the measurement and correction of performance in order to make sure that enterprises objectives and the plans devised to attain them are accomplished. From these definitions, it could be deduced that control, one of the managerial functions like planning, organizing, etc. is an important function because it helps ensuring that the planned goals are attained through a system of checks, monitoring, corrective actions and forward thinking so that errors are removed, and corrective actions taken timely so that deviation from standards are minimized, if not eliminated. Control in management means setting standards, measuring actual performance and taking corrective action. Thus, control comprises these three main activities. According to modern concepts, attributed to Peter Ferdinand Drucker, Control is a foreseeing action and better is self-directed to be more effective. Self control is the best control, because informed self is well aware of its deficiencies and also measures toward off the same. Planning and controlling go together. Planning is a process by which an organization. Objectives and the methods to achieve the objectives are established, and controlling is a process
18

which measures and monitors the actual performance conform to planned objectives of the organization. Thus, planning and control are often referred to as Siamese Twins of management. A control system is necessary in any organization in which the activities of different divisions, departments, sections, and so on need to be coordinated and controlled. Most control systems are post-action-oriented or feed-back control type and consequently are inefficient or fail. For example, there is little an employee can do today to correct the results of actions completed two weeks ago. Steering control or feed-forward control system , on the other hand, is future-oriented and predict adjustments to be made to put back on remedial course before the outcome drifts from planned scheme. In between there is a system of control called concurrent or real time control ,which make corrective courses made continuously as executions happen. But, there is no forward stretch to predict possible mishaps in the later phases, due to current actions and having a plan to stop such mishaps from happening. PERFORMANCE OF GLOBAL BUSINESS There are two fundamental ways in which managing political risk improves global business performance: 1. Protecting new and existing global investments and operations 2. Capitalizing on opportunities resulting from political change It is our belief that by establishing a systematic approach to political risk management, multinational companies can drive business performance improvement. We know that the task of managing political risk is not easy. Not only do political changes pose direct risks to firms, but politics is also a component of other external risks. Regulatory changes have the potential to promote or inhibit market competition, social risks often have political bases and responses, and political mismanagement can turn natural or human-made events into catastrophes. Moreover, political risk is often perceived to be outside of managements control, making it difficult to define, predict, and align with objectives. Given the complexity of these issues, it is no wonder that corporations often fail to address political risk in a systematic way.

PERFORMANCE EVALUATION SYSTEM

The opportunity to promote employees job progress and professional development. A way to develop and evaluate the employees professional development training plan.

19

 A system for providing employees with feedback on the degree employees are achieving

duties. A way to identify and document employees special talents, skills, and capabilities. A system for planning personnel moves and placements that will best utilize each employee capabilities. An opportunity for each employee to discuss job problems and interests with supervisor. A system for assembling data for use of a guide, although not necessarily the sole governing factor, for salary adjustments, promotions, disciplinary actions and termination.

20