Performance Evaluation of Foreign Subsidiaries

Seminar paper from the year 2008 in the subject Business economics - Controlling grade: 17 European Business School - International University Schloß Reichartshausen Oestrich-Winkel course: Seminar Controlling language: English abstract: Long before the globalisation had become a buzz word and an impetus for companies toinvest abroad enterprises enlarged their business playing field into foreign countriesfor various reasons such as to capture a new market to secure resources or to take advantageof local cost levels. Therefore subsidiaries are heavily involved in the valuecreation process for and within multinational corporations (MNCs). However despitethe fact that the measurement of performance is crucial for globally active companiesnot only in steering the value creation for the MNC but also for example in fosteringinternational expansion or guiding resource allocation MNCs differ significantly in theextent to which they are aware of the performance of their subsidiaries.Due to the fact that strategic decisions regarding the global expansion of a MNC requirea wide and clear information basis to be able to assess how successfully a foreign subsidiaryhas conducted its business or under what possibly unfavourable environmentalconditions the business results were achieved multinational enterprises have to implementa system for evaluating the performance of their foreign subsidiaries and theirmanagement. Therefore this paper aims to analyse the central aspects to consider in theevaluation of the performance of foreign subsidiaries.This paper is divided into five chapters. After a short introduction to the theoreticalbackground of performance evaluation in chapter 2 the paper continues in chapter 3with the central issues of an effective performance evaluation system for foreign subsidiarieswith a clear focus on the aspect of separating managerial and subsidiary performance.Then chapter 4 illustrates the measures used for evaluati