Strategic Management Accounting W12
ACCG330: Strategic Management Accounting
LECTURE 12
CONTROL PROBLEMS AND PRACTICES IN
MULTINATIONAL ORGANISATIONS
ACCG330
Readings: Anthony & Govindarajan (2007, pp.678-696)
ACCG330 Strategic Management
Accounting Session 1, 2012
Learning Objectives
1. Describe management control problems and practices in multinational corporations.
2. Explain problems and issues associated with global organisations: i.
Cultural differences and their impact on management controls. ii. Transfer pricing and related issues in multinational corporations. iii. Effects of exchange rates on multinational corporations and control system design issues.
ACCG330 Strategic Management
Accounting Session 1, 2012
1
Nature of Multinational Corporations (MNCs)
• What is a Multinational Corporation?
– A corporation that owns and operates production facilities in two or more countries. OR
– A corporation with power to coordinate and control operations in two or more countries without owning them.
• Typically have Headquarters in the country of origin
• Build or acquire affiliates or subsidiaries in other countries (the host nation)
ACCG330 Strategic Management
Accounting Session 1, 2012
Basic Structures of MNCs
• A number of basic structures exist that permit an MNC to operate and compete internationally
– Structure must meet the need of both the local market and the home-office strategy of globalization
– Basic structures of MNCs:
• Domestic structure plus foreign subsidiary, or with an:
a) International division
b) Export department
• Global product (divisional) structure, or Functional structure
• Global geographic (area) structure
ACCG330 Strategic Management
Accounting Session 1, 2012
2
Domestic Plus Foreign Subsidiary
Global Product Division
Global Geographic Structure
Companies that operate in multiple countries are often decentralized ACCG330 Strategic Management
Accounting Session 1, 2012
LECTURE 12
CONTROL PROBLEMS AND PRACTICES IN
MULTINATIONAL ORGANISATIONS
ACCG330
Readings: Anthony & Govindarajan (2007, pp.678-696)
ACCG330 Strategic Management
Accounting Session 1, 2012
Learning Objectives
1. Describe management control problems and practices in multinational corporations.
2. Explain problems and issues associated with global organisations: i.
Cultural differences and their impact on management controls. ii. Transfer pricing and related issues in multinational corporations. iii. Effects of exchange rates on multinational corporations and control system design issues.
ACCG330 Strategic Management
Accounting Session 1, 2012
1
Nature of Multinational Corporations (MNCs)
• What is a Multinational Corporation?
– A corporation that owns and operates production facilities in two or more countries. OR
– A corporation with power to coordinate and control operations in two or more countries without owning them.
• Typically have Headquarters in the country of origin
• Build or acquire affiliates or subsidiaries in other countries (the host nation)
ACCG330 Strategic Management
Accounting Session 1, 2012
Basic Structures of MNCs
• A number of basic structures exist that permit an MNC to operate and compete internationally
– Structure must meet the need of both the local market and the home-office strategy of globalization
– Basic structures of MNCs:
• Domestic structure plus foreign subsidiary, or with an:
a) International division
b) Export department
• Global product (divisional) structure, or Functional structure
• Global geographic (area) structure
ACCG330 Strategic Management
Accounting Session 1, 2012
2
Domestic Plus Foreign Subsidiary
Global Product Division
Global Geographic Structure
Companies that operate in multiple countries are often decentralized ACCG330 Strategic Management
Accounting Session 1, 2012