Creating flexible foreign operation mode strategy in an emerging economy: The case of Dong Energy in Poland

Irina Khansen

Student thesis: Master thesis

Abstract

The thesis is investigating how a Danish utility company DONG Energy can create operation mode flexibility in Polish wind power market. In order to answer the research question, the theoretical part introduces such concepts as foreign operation modes, mode packaging as well as operating flexibility. The theoretical framework by Petersen and Welch (2002) helps to understand the reasons to why a company decides to combine different operation modes in a foreign market. During the analysis of the case of DONG in the Polish wind power market, it has been determined that the company has been using mode packaging method: it has used a subsidiary (originally, an acquired Polish engineering consultancy company) and a non-equity alliance (with a Polish company) in the period from mid-2000s until the present time. However, DONG‟s mode package installation has not been stagnant. In order to achieve the necessary flexibility, the company has been changing the roles played by the single foreign operation modes within the overall mode package. As a result of applying of the method of systematic combining (Dubois and Gadde, 2002) and due to the fact that DONG has been in the process of internalizing its operations in Poland, the theoretical framework by Petersen and Welch (2002) has been refined the following way: an energy utility company can combine foreign operation modes within an overall mode package in order to achieve the specific goals set for a certain emerging market, and it can do that in steps which would eventually help it to internalize its operations. These steps can be taken by adding or deleting roles of the already existing single modes within the overall mode package. Finally, the following conclusion has been drawn: DONG‟s flexibility within the Polish wind power market has two preconditions: 1) mode package in place, 2) ability to switch from one operation mode to another within the overall mode package (i.e. operating flexibility) which comes at a certain transaction cost, i.e. either in the form of financial expenses (e.g. firing / hiring the employees in the subsidiary and compensating them for that), or in the form of time and energy spent on the re-negotiating of the details of the cooperation with the local Polish company (even if no formal contract has been signed).

EducationsCand.merc.smc Strategic Market Creation, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2010
Number of pages68