Business: Quality Management Control
Part I
Across borders, executive management control is essential for multinational companies where the many management control mechanisms strive to align foreign subsidiaries with the leading corporate goal (Luthans & Doh, 2017). The design of management accounting and management control dwells on internal factors at the subsidiary and the headquarters as well as internal aspects such as market requirements and culture. Moreover, headquarters and subsidiary relationships, as well as integration to host country settings, present yet another influence on management control and differ from one country to another or from one region to another.
United States Multinational Companies differ in many ways from European multinational companies such as the way they operate and the way they control. For example, European multinational companies have a high affinity towards their regional culture and languages compared to those from the United States. On the other hand, United States multinational companies give much freedom to their employees in decision making and innovation when compared to European counterparts, which has very many strict rules. Whilst United States companies have more control over the world economy when compared to European companies due to their diverse work culture, European companies have more rules in protecting their consumer data as compared to those from the United States.
However, while economic crisis is considered to influence the differences between the United States and European multinational companies, only a few studies examine the effects of the economic crisis on management control of multinational companies, thus calling for longitudinal research on this topic (Sageder & Feldbauer-Durstmüller, 2019). Moreover, over the recent past, protectionist tendencies show an increase in skepticism towards globalization and multinational companies in Euro and America, which could lead to trade restrictions in these regions, and in turn, foreign subsidiaries may be more relevant.
Part II
Diminishing trade barriers and intense global competition are posing a big challenge for businesses to maintain their market share as increased competition from businesses operating in diverse markets have increased (Powell, 1995). This is due to the advancements in information technology and telecommunication that have broken down the traditional barriers to entry, such as trade and geographical barriers. For example, export-based industries in Pakistan are facing an increase in threats from new entrants and over the last five years, Bangladesh has overpassed Pakistan in exporting knitwear garment while China and India are posing critical challenges on Pakistan exports in other textile markets as well as all the other categories of Pakistan exports.
As evident above, global market competition increase necessitates that productivity is not only considered as a measure of efficiency but also as an indicator of effectiveness, although the distinction between the two concepts is often overlooked. For example, a business that manufactures its products according to process specifications will efficiently use its resources. However, Samson (2017) argues that unless it produces what the customer needs, it may not be efficiently using them as there is no point in high-quality manufacturing products that no one needs. Businesses must view productivity from a customer perspective and not from the engineer, thus prompting the management to only gear internal processing towards producing goods and services useful and valuable to customers.
Total Quality Management (TQM) philosophy ensures efficiency and effective by prompting businesses to develop systems and plan products that deliver value according to customers’ expectations. Moreover, numerous studies have validated this philosophy as, eventually, companies that employ total quality management obtain higher effective productivity, market share, and profitability in most types of market settings and form of products (Khan, 2013). A closer look at the specific components of the philosophy exemplifies why.
For example, in Granite Rock Inc., an international firm, after four years of TQM efforts, the customer accounts of the company grew by thirty-eight percent while the overall manufacturing cost in its market area drop by over forty percent (Powell, 1995). Motorola, an international technology company employee productivity improved by 100 percent due to TQ efforts at an annual compound rate of twenty-two percent from 1988 to 1994 (Khan, 2013). The company decreased its manufacturing time per page to less than an hour from forty days. Lastly, Solectron, a multinational manufacturer of electronic designs, product, and support services to a mass producer of original equipment manufacturers, has experienced average revenue growth of forty-seven percent per year well too high over the electronics manufacturing industry of ten percent due to TQ employment (Samson, 2017). As a result, the company has twice increased its market share since 1992.
Considering the current State of multinational competition, it is imperative for businesses to implements a customer developed culture that tailor customer needs in product manufacturing. This will enable efficient and effective use of their resources only to produce products and services that customers want and are willing to pay a premium for them. It prompts the employ TQM culture in manufacturing their products. Therefore, senior executives of the business must clearly understand and believe in the philosophy of TQM.
References
Khan, J. H. (2013). Impact of total quality management on productivity. The TQM Magazine.
Luthans F. & Doh J (2017). International Management: Culture, Strategy, and Behavior. McGraw-Hill Education
Powell, T. C. (1995). Total quality management as a competitive advantage: a review and empirical study. Strategic management journal, 16(1), 15-37.
Sageder, M., Feldbauer-Durstmüller, B. (2019) Management control in multinational companies: a systematic literature review. Rev Manag Sci 13, 875–918
Samson, K. (2017). Effects of Total Quality Management (TQM) on Firm’s Operational Performance (South Korea). Available at SSRN 2922208.