Management Control Instruments

The definition of the dialogue instruments is closely linked to the management of the knowledge that companies want to implement and should contribute to the proper functioning of the management control tools and to the sharing, application, and knowledge creation within the organization. In this chapter, some knowledge management techniques will be presented, which should be defined, taking also into consideration the management control systems to be implemented. In view of the constant changes in the business environment, the company must be market-oriented, and adequate information by segments will be highlighted for decision making. Being important to obtain efficiencies in the realization of internal work processes, the authors also describe some topics of the activity-based costing and activity-based management. As organizations are becoming more complex and decentralized, the information system should also adapt. In this sense, the authors describe organizational types and the adaptation of the management control instruments.

Critical Analysis

Given the specific challenges of the internationalization process for emerging markets, which require a constant adaptation of the organizational structure and of management control systems, this chapter aims to analyze the evolution of activity over the years studied, taking into account three key aspects: the assessment of the financial performance, focusing on the analysis of the value creation capacity and on the comparison with the values of the Portuguese industry; the assessment of the internationalization process, where several proposals are made in order to reduce business risk, both in terms of approach to the markets and in terms of the use of credit and exchange risk hedging techniques; the assessment of the management control systems implemented, with a reflection on the various types of instruments used (piloting, behavioral orientation, and dialogue) and elaboration of system optimization proposals, aiming a greater involvement and alignment of managers to organizational goals and business sustainability.

The Company

This chapter presents a Portuguese company of the information technologies industry that did an internationalization process and has implemented a management control system with a very interesting complexity level and that, in reality, crosses the theory present in the different bibliographical references on the subject, with the experience and business practice of its management. Such management practices were so helpful that, in a short period, the company could internationalize its activity and turnover went from 10 million euros to 60 million euros, becoming a reference of its industry in Portugal. It should be noted that the case study was developed through the triangulation of different information sources, such as interviews and meetings, direct observations of management control practices, as well as consultation of documents and internal reports. The authors characterize the company and its evolution, national and international, as well as the management control system implemented with reference to the instruments developed in the previous chapters.

Characterization of the Information Technology Industry

In this book, we present a case study of a Portuguese company of the information technologies industry that has traveled through an internationalization process and has implemented a management control system with a very interesting complexity level. Thus, this chapter will begin with the definition of the scope of the industry and the supply typology, and then the situation is analyzed both globally, regionally, and at Portugal's level (the company's nationality) in order to enable the understanding of the competitive environment. It seeks to develop the analysis of the sector's attractiveness level, showing how competitive conditions can be felt in company performance. Finally, the main trends, challenges, and management variables that need to be implemented to ensure a good performance in the industry are presented.

Management Control Systems

In the current business context, characterized by uncertainty and constant innovation, management control systems may have a prominent role in organizations' success because they can contribute to decision making based on more credible and personalized available information on the origins of both value creation and value destruction. This chapter is about the importance of management control systems to achieve business success and intends to give an insight into the potential contribution of management control instruments to a more effective response to the current challenges of the competitive context and, consequently, to business success.

Risk Management Strategies in International Markets

On an operational level, companies with processes of internationalization are confronted with credit risks, interest rate risks, and foreign exchange risks in trade and financial operations that they perform daily within their operating cycle, transforming sometimes great opportunities into financial catastrophes. As these risks strongly affect companies' normal activities in international markets through higher financial costs arising from receipts that don't occur, from unfavorable exchange differences or negative evolution's in the interest rates, different strategies to manage these risks will next be addressed. At first, the payment techniques and sources of financing in international trade that allow to mitigate the credit risk and to protect the company's treasury will be presented. Then, the techniques to hedge exchange risk and interest rate risk will be studied to highlight how they could improve the international businesses' margins.

Internationalization Strategy

This chapter, devoted to the theoretical framework of internationalization strategy, intends to perform a reflection on its main theories and studies. The authors discuss the main motivations that firms face to internationalize their activity as well as the aspects related to the success of approaching new markets. Then it also characterizes the main risks associated with the decision of internationalization and international trade. The authors will also present developed tools to support the two starting decisions that companies face in this type of projects: where and how to internationalize. They also intend to go into the decision of direct investment in international markets, providing knowledge about different perspectives, as several empirical studies show a more detailed vision of this strategic option and its main financial impacts on business. Finally, it discusses the main conclusions about the relation between internationalization and the performance of companies.

Management Control Instruments' Characterization

A number of important themes should be the basis of the definition of management control tools, through the collection and production of the necessary information for monitoring the activity and its competitive context and management control adequacy at different business development stages with very different planning and controlling requirements. In addition to the use of management control instruments for piloting the activities, they can also be instruments conducive to behavior modulation and dialogue. This chapter gives a description of management control instruments and their pilot function, and as guides of behavior and dialogue. The various models of organizational performance evaluation are also described.