Question

focus of control in headquarter level

Answer 1

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Answer 2

The development of multidivisional and multinational organisations can lead to creation of
synergy. It is up to the headquarters of these corporations to control the subsidiaries to
overcome the organisational disadvantages and achieve these synergies. The agency theory is
used to explain the headquarters-subsidiary relationship and demonstrates that control
strategies are required.
The purpose of this study is to identify mechanisms which can be used to control the
subsidiary in order to align the interests of headquarters and subsidiaries. A distinction is
made between strategic mechanisms and structural mechanisms. Strategic mechanisms imply
measures to control the subsidiary which are not directly related to the organisational
structure. Structural mechanisms imply measures which can be taken to control the subsidiary
through organisational structure.

This study focuses on aligning the interest of headquarters and subsidiaries through
combining strategic control mechanisms and structural control mechanism. Headquarters can
design a control system according to the three strategic management styles „Strategic
Planning‟, „Financial Control‟ and „Strategic Control‟. This study will identify which control
mechanisms suit each of the three control styles.
A conclusion is drawn on the influence of control strategies and control mechanisms on the
headquarters-subsidiary relationship. And recommendation is provided on the choice of
strategic management styles and what to take into account when designing a control system.