ABSTRACT
The decision on operation mode is one of the most critical ones in international marketing, because it determines how resources and control of marketing activities are distributed between the marketing partners. This chapter gives an overview of different operation modes that are relevant in international marketing. It is based on Luostarinen's taxonomy, dividing between operation modes with or without investments, and with or without local production of goods and services. The businessperson would typically state that there are two main factors that determine operation mode strategy: internal strategic goals and resources, and the external business environment. Political risk is another factor to be considered, particularly regarding foreign direct investments. In politically-unstable countries, the risk of a shift in the regime may wipe out all foreigners from the market. Transaction cost economics (TCE) predicts that high specific investments in the relationshop incite the firm to integrate in order to protect these investments.
