Internal/External Essay ⋆ Business Essay Examples ⋆ EssayEmpire

In 1993 Fons Trompenaars and Charles HampdenTurner identified seven dimensions of culture in a model that they outline in their book The Seven Cultures of Capitalism: Value Systems for Creating Wealth in the United States, Britain, Japan, Germany, France, Sweden, and the Netherlands. Five of the seven dimensions deal with challenges of how people relate to one another. The other two dimensions deal with how a culture manages time and how it deals with nature. This latter dimension the two authors labeled internal versus external control. This dimension examined whether a culture believed that it controlled the environment or the environment controlled the culture. The following examines the cultural dimension of control in more detail and specifies the application of the internal-external control dimension to management decision making in multinational corporations (MNCs).

Trompenaars and Hampden-Turner proposed that one way to examine how multinational corporations control their operations is to identify whether the MNC utilizes internal control or external control in their overall strategy. This concept of internal versus external control is derived from the psychological variable known as locus of control. Locus of control refers to a person’s belief about what causes the good or bad results in their life. Locus of control can either be internal—the person believes that she controls herself and her life—or external—his environment, some higher power, or other people control his decisions and his life.

The notion of locus of control was first developed in 1954 by Julian Rotter, who in 1966 developed a scale to measure locus of control. Extending Rotter’s work, Trompenaars and Hampden-Turner propose that cultures with internal control believe they can control their own destiny, and that natural systems and events are there to be conquered. Cultures with external control believe that one’s destiny is predetermined and that one should focus on how to live in harmony with nature and others.

To illustrate the differences between internal and external control cultures, Trompenaars and HampdenTurner presented managers from different countries the following statements: “Nature should take its course, and we just have to accept the way it comes and do the best we can” versus “It is worthwhile trying to control important natural forces like the weather.” More than 50 percent of the managers from Spain and Cuba agreed with trying to control nature, while only 20 percent of managers from Egypt and Kuwait did so. Additionally, when international managers were asked to choose between the statements “What happens to them is their own doing” versus “Sometimes I feel I do not have control over the directions my life is taking,” 82 percent of U.S. managers chose the first statement while only 40 percent of Russian and 39 percent of Chinese managers did. Other countries with internal control include Brazil, Canada, France, and Norway, while Hong Kong, India, and Singapore display external control.

Application

In applying the concept to MNCs, Trompenaars and Hampden-Turner define internal control as an MNC placing its focus on what it does best. At the other end of the spectrum, companies need to know what customers want, which is a focus on external control. MNCs need to give attention to issues of both internal control and external control, but it generally turns out that the corporation emphasizes one type of control over another.

Theoretically, in external control cultures, managers can become fatalistic, believing that situations must be accepted rather than changed. They see luck, chance, and change as powerful and real factors in business success. Conversely, in internal control cultures, managers, confident that they can conquer obstacles, tend to be more proactive. Generally speaking, however, most MNCs are not at the extreme ends of the internal/external control continuum.

For example, those MNCs that focus on internal control often have a dominating attitude toward the environment (sometimes bordering on being aggressive). Management teams in MNCs with a focus on internal control are often uncomfortable when the environment seems changeable, to the point of viewing the environment as out of control. In an internal control environment, conflict and resistance by an individual is seen as a sign the person has convictions. Additionally, an internal control environment has a focus on self, function, one’s own group, and one’s own organization.

By contrast, in an MNC emphasizing external control, harmony, sensibility, and a flexible attitude that encourages compromise and keeping the peace are desired. Additionally, managers are comfortable with the changes that occur in the environment and see them as natural. Finally, the focus of the business is outward, toward customers and partners.

It follows, then, that internal MNCs are competitive, often playing “hardball” with competitors in an effort to win. Additionally, managers often emphasize authority and dominate subordinates. On the other hand, external MNCs are much more oriented to a win-win strategy, seeing relationships with others as more important than winning. They also stress the team over individual achievement.

Interestingly, the results of a survey of senior professional accountants from the world’s major accounting firms in Australia, India, and Malaysia indicate that Australian accountants perceived whistle-blowing as an internal control mechanism compared to Indian and Malaysian cultures. The findings suggest that internal control cultures believe that reporting on wrongdoing is a viable means of being able to effect change, while external control cultures are much more fatalistic, believing such actions are futile.

Bibliography:

Chris Patel, “Some Cross-Cultural Evidence on Whistle-Blowing as an Internal Control Mechanism,” Journal of International Accounting Research (v.2/1,2003);
Julian Rotter, “Internal Versus External Control of Reinforcement: A Case History of a Variable,” American Psychologist (v.45, 1990);
Fons Trompenaars and Charles Hampden-Turner, The Seven Cultures of Capitalism: Value Systems for Creating Wealth in the United States, Britain, Japan, Germany, France, Sweden, and the Netherlands (Piatkus, 1993).

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