The objective of this study is to identify influence factors for effective foreign operations set up through an FDI (Foreign Direct Investment) in the consumer electronics industry. For the purpose, this study investigates eight cases of foreign operations by a global firm's foreign subsidiaries in the industry.
Two research questions are raised: (i) What are the factors that determine the performance of individual foreign subsidiaries' operations?, (ii) What are the factors that affect the network performance of the operations by the corporate head-quarter (HQ) and foreign subsidiaries as a whole?
Based on the case analysis, we suggest the following conclusions and managerial implications.
First, foreign subsidiary operations must maintain cost competitiveness in the local (foreign) countries. In order to achieve the cost competitiveness, a foreign (operations) subsidiary must make a relatively small-scale investment during an early period, and increase the investment size gradually as its foreign experience accumulates. In addition, the foreign subsidiary must be able to utilize local component suppliers providing low-priced materials, through local component procurement and global sourcing plans.
Foreign operations must adopt a market-focused approach in the local market. That is, the foreign subsidiary must have an established marketing infrastructure and acquire business experiences related to the local market before launching a large-scale investment in that market.
The subsidiaries must continue their efforts to understand the foreign (local) culture and overcome the difficulties due to the cultural differences.
Finally, the HQ and its foreign subsidiaries must have a network perspective that can be critical in enhancing the network performance. In order to nurture the network perspective, they need to integrate their communication channels for synergy effects between the HQ and subsidiaries, and also between the subsidiaries. A global firm must coordinate its subsidiary operations by employing a global sourcing strategy and the differentiation of manufactured goods and intra-company trade.
