The Development of a Foreign Operation Mode Strategy – Operation Mode Changes of a Finnish Industrial Firm in CEE Countries

Abstract

The crucial issue of change in the foreign operation mode strategy has received only modest attention during the years, even though the issue is from a managerial point of view a very important one. In addition, the choices between different foreign operation modes have been seen as clear-cut changes from one operation mode to another, even though the observation of business practices reveals a ‘messier’ reality. The purpose of this study is to explain the development of a foreign operation mode strategy and the usage of foreign operation modes. More insight is also provided on the various factors influencing the change in the operation mode strategy, and consequently leading to the actual change of an operation mode.

In the beginning of the study, the concepts and theories related to the development of an operation mode strategy are discussed. The third chapter provides more insight on the factors influencing the change of an operation mode. In the end of the theoretical part, a summary of the theoretical framework is created on the basis of previous literature. The empirical part of the research is conducted in a form of a multiple case study within one company. The empirical research is limited to a Finnish multinational’s operations in the Central Eastern European markets.

The results of this study suggest that the stages-of-development approach is the best approach to describe the development of the case company’s operation mode strategy. However, the stages-of-development approach failed to explain the phenomenon, whereas, the business-strategy approach provided a better explanation on the drivers of the case company’s operation mode strategy. In addition, this study gives support to the existence of mode combinations in firms’ mode strategy. The most influential change-inducing factors found in the empirical study were market-based and firm-based factors. Both set-up and take-down barriers were proved to have an influence on the case company’s mode changes. Also some examples of actions to avoid additional costs in the mode change situation were presented. Finally, this study supports the notion that the decision to change an operation mode is made based on the perceptions of managers.