Economic ExposureThe subsidiary manager should be held responsible for the dependence effects of exchange rates resulting from economic exposure. It is appropriate for the controlsystem to evaluate the subsidiary manager on decisions that would have enabled thesubsidiary to respond to real exchange rate changes. Real exchange rate changesrequire important strategic and operating decisions. It is good for Xerox to haveregular discussions about the currency and proposals for increasing market share or profits.6. Performance Evaluation of Foreign SubsidiariesThe performance measures are driven by the Manufacturing Support which is thecentral support function. The Venray plant is legally owned by Rank Xerox but it isevaluated by MS. In addition, the Venray product array supports more than one business division; therefore, Venray has to report to several other divisions besidesMS. We suggest Xerox let the local people familiar with the culture and marketmanage their local environment and evaluate its business units according to their legalentities. It is easier for Xerox’s local subsidiary managers to see more of a direct link between their decisions and actions, including related evaluative feedback. Inaddition, this can aid in avoiding distortions of the plant's performance caused bytransfer pricing and currency translation.