390 decision making The process of choosing al course of action among alternatives. Figure 11-1 Decision-Making Process Part 3 international Strategic Management Whether Amazon's strategy as a specialized direct seller or Alibaba's strategy as a third- party facilitator will lead to greater long-term success is yet to be seen. As Internet usage increases and ecommerce expands beyond North America, managers of companies like Amazon and Alibaba will need to implement new strategies to adapt to the changing marketplace. The advent of online retail has certainly challenged some aspects of managerial decision making for all ecommerce companies. Decision-Making Process and Challenges The managerial decision-making process, choosing a course of action among alternatives. is a common business practice becoming more and more relevant for the international manager as globalization becomes more pervasive. The decision-making process is often linear, though looping back is common, and consists of the general phases outlined in Figure 11-1. The degree to which managers are involved in this procedure depends on the structure of the subsidiaries and the locus of decision making. If decision making is cen- tralized, most important decisions are made at the top; if decision making is decentralized, decisions are delegated to operating personnel. Decision making is used to solve a myriad of issues, including helping the subsidiary respond to economic and political demands of the host country. Decisions that are heavily economic in orientation concentrate on such aspects as return on investment (ROI) for overseas operations. In other instances, cultural differences can both inspire and motivate the process and outcome of decision making. For example, Ford Motor Company designed and built an inexpensive vehicle, the Ikon, for the Indian market. Engineers took apart the Ford Fiesta and totally rebuilt the car to address buyer needs. Some of the changes that were made included raising the amount of rear headroom to accommodate men in turbans, adjusting doors so that they opened wider in order to avoid catching the flowing saris of women, fitting intake valves Stage 1 Chapter 11 Management Decision and Control. 2 3 4 5 6 7 8 Process 9 Problem perception Problem identification Problem formulation Search for alternatives Evaluation of alternatives Choice of alternatives Start of operation Control Source Je Schrann-Niehen, "Cutural Dimensions of Decision Making Denmark and France Compared Jumal of Mana Psychology 16, no. 6 (2001) p. 408 Implementation to avoid auto flooding during the monsoon season, toughening shock absorbers to handle the pockmarked city streets, and adjusting the air-conditioning system to deal with the intense summer heat. As a result of these decisions, the car sold very well in India. Ford replicated that same strategy with the Ikon's successor, the Fiesta Mark VI Santander, the largest bank in Europe by market capitalization, is vesting more autonomy in its subsidiaries by listing subsidiaries in its principal foreign markets and thereby strengthening their independence and autonomy from the Spanish headquarters. A num- ber of European banks, including Santander and HSBC Holdings PLC (see In-Depth Integrative Case 4.1 at the end of Part Four), establish foreign subsidiaries as opposed to direct branches. Santander Chief Executive Officer Alfredo Saenz said, "We also believe it's good for the local management teams, because having local minority share- holders breathing down their neck keeps them on their toes, and it's a good way of identifying the franchise as local, instead of foreign." In addition, the IPO boosted the visibility of the bank in Brazil, resulted in greater access to local capital, and put a higher value on the franchise than what analysts were giving it before the float. When Santander sold 15 percent of its Brazilian unit, the unit alone was valued at €34 billion, more than European rivals Deutsche Bank or Société Générale.¹5 The way in which decision making is carried out will be influenced by a number of factors. We will first look at some of the factors, then provide some comparative examples in order to illustrate some of the differences. Factors Affecting Decision-Making Authority A number of factors influence international managers' conclusions about retaining author- ity or delegating decision making to a subsidiary. Table 11-1 lists some of the most important situational factors, and the following discussion evaluates the influential aspects. One of the major concerns for organizations is how efficient the processes are that 391
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