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PULP MILL HOLDING AND ARKHANGELSKY CBK

Pulp Mill Holding is another multinational company, based in Austria, which used brownfield strategy entering Russian pulp and paper industry. For entering the market in 2003, the Austrian company bought 65% of shares of one of the biggest paper-production companies of North-Western Russia – the “Arkhangelsky CBK”. This huge enterprise was privatized in the perestroika times just as many others from the cases we have already reviewed.[11]

“Arkhangelsky CBK” was and still is one of the leaders of the Russian market for paper. As an example, the company is the leading producer of exercise books (òåòðàäåé) in Russia and the whole market share of the company on the domestic market is estimated as 25%. It also had already gone international by that time, exporting paper to Europe, China and Brazil. By now the Austrians have 100%[12] shares package[13].

In recent several years company introduced a new chloride whitening technology, which made the products even more competitive by quality and allowed to increase their export operations to European countries.

Country Russia
Year of entry
Industry/ business area Paper, Pulp, Corrugated packaging
Entry mode FDI – brownfield. Bought out one of the leading producers.
Motives Company was searching entrance to the new and developing market of Russiaand the extensive resource base.
Firm specific advantages used on the foreign market New competitive technologies, quality and pricing.
First mover or follower As we can see, it is a common practice to go brownfield. The company obviously uses the follower strategy because of the similar actions of other big companies in Russian market.
Type of state involvement in the process of internationalization Local government was probably interested in it, because the modernization was needed. In other ways, the government did not interfere in private business.
Evaluation of the success of the internationalization Successful. Company gained market share and introduced new kinds of quality productsfor the international and Russian markets.

 

KONDOPOGA OAO

A very different story happened to the huge paper factory in Kondopoga city. This factory was equipped with cutting edge technology in the soviet times while the special focus wasmade on newspaper paper production.

After the fall of the Soviet Union the company was privatized and converted into OAO. The newly established venture soon became one of the leading newspaper paper manufacturers in the world. Due to the lack of the lack of domestic demand and instability. The company used its contacts from soviet past, when the paper was exported to Eastern-European countries and tried to expand it.

Nowadays 95% of all production of KONDOPOGA OAO is newspaper paper 80% of which goes for export. The geography of sales is very broad, from Norway to Namibia and from the US to Korea. 60% of all exports are direct deals with clients. Several years earlier the company created a “daughter enterprise”, a special trading house, through which it now distributes 40% of export production.[14]



Country World
Year of entry
Industry/ business area Newspaper paper
Entry mode Export, direct and indirect (through subsidiary)
Motives Small domestic market, historical collaboration with the western companies
Firm specific advantages used on the foreign market Technology (they constantly innovate), price and good reputation.
First mover or follower They were the firstin the industry in Russia to do so, but used follower strategy in the global market
Type of state involvement in the process of internationalization Local government was probably interested in it, because the modernization was needed. In other ways, the government did not interfere in private business.
Evaluation of the success of the internationalization It was. The company is successful in the market, constantly gaining bigger market share and increasing revenues. Still the prospects of the market segment are not clear and it should be considered for the future.

 


 

MISCELLANEOUS

GLORIA JEANS

Country Ukraine
Year of entry (1988) 2001
Industry/ business area Light industry
Entry mode In the very beginning (2001) the company entered the Ukrainian market exporting its goods there. Then (2003-2010) they offered their franchise to local companies. GJ followed the same strategy in Baltic countries, Belorussia and Kazakhstan. Finally, in 2006, GJ decided to implement the strategy of brownfield FDI and bought 80% of shares of a Ukranian factory “Stil”[15] (2004 revenues of $9.9 mln). The sum of purchase was not made public. By 2011 the retail net of GJ in Ukraine consisted of 24 shops. Besides these countries, GJ own a number of design laboratories and research and marketing centers in Stambul, Shanghai, San-Paolo, Chicago, Los-Angeles, Seul, Tokio and some cities in Vietnam. In all of these countries GJ creates new facilities and hires local employees. The company also has plan of future retail expansion in these countries and in Iran and Brasil. However, these are long-run plans and the company has not yet announced which strategy the will follow in these countries; still, most probably, in this case they will choose greenfield FDI. We make this assumption based on several interviews with company’s management where they underline the desire to build their own retail net not only in Russia but also abroad.
Motives Vl.Melnikov says: “In several years it will be impossible to show 15-20% growth in Russia”; “We expand our production and retail net in Ukraine because due to the enormous taxes it becomes more and more difficult to make business in Russia. This is the reason why we lose the competition with China[16]”. The choice of Ukrainian market is explained by several reasons: plants are well-equipped; labor is cheap; taxes are lower; “Stil” has contracts with foreign companies which will make GJ expansion easier.
Firm specific advantages used on the foreign market The rate of recognition in Russia is almost 100%, every second schoolchild wears GJ clothes. Due to cultural similarities and close relationship between citizens of two countries brand is also well-known in Ukraine. The company uses latest trends in fashion and marketing The company plans to spend about 30% of its revenues in Russian on the development of retail and production in Ukraine, which is much more than most Ukrainian companies may afford.
First mover or follower In terms of the scope of GJ company, we assume that it is of the first movers in its industry and segment. Moreover, some other Russian companies which follow similar strategy of expansion in CIS countries are only at the level of franchising and in much less sope (e.g. INCITY: 326 shops in Russia, Ukraine and Kazakhstan in total).
Type of state involvement in the process of internationalization State did not openly participate in the process of internationalization. Moreover, as one of the major motives of entering other markets were high taxes, we believe, that no participation is likely to occur.
Evaluation of the success of the internationalization Since it is not possible to find any concrete information on revenue of GJ in Ukraine, we cannot judge on success or failure of expansion. Still, as the company continues to expand there and its total revenues also grow, we assume that this market is beneficial for the company and the process of integration was not a failure.

 

MCDONALDS

Country Russia
Year of entry
Industry/ business area Fast food
Entry mode McDonalds entered Russia using a Greenfield strategy. Firstly, it established a joint venture between McDonald’s Restaurants of Canada Limited and the Moscow City Government (1988). Russia's government would hold 51% ownership, and McDonlad's 49%The approximate FDI was $50 mln. Then, when actually opening its first restaurants in Russia, it coordinated with small and medium-sized local suppliers, thus creating demand for their services. Moreover, only its restaurants created more than 80,000 jobs in Russia.
Motives Russia was chosen for the entry first of all because it was a developing economy, which is very promising for new business. Moreover, the management believed that “the size of the Russian market, the traditional Russian diet of beef and potatoes, and a lack of viable fast food alternatives could allow Russia to become one of the most successful markets in the world for McDonald's food”[17]
Firm specific advantages used on the foreign market First and foremost the company’s main competitive advantage on the market was its brand, extremely popular in Russia. Then, McDonalds offered traditional “American” menu items, food quality and consistency, clean facilities, friendly service, convenient locations, and reasonable prices to drive growth. Moreoover, McDonalds adapts its menu according to the local taste.
First mover or follower At that time there were no fast food restaurants in Russia, so McDonalds was a first mover. KFC, which came later, has already based on the experience of McDonalds when developing its strategy in, for instance, customer preferences.
Type of state involvement in the process of internationalization State supported McDonalds entry as it was seen as a driver for the opening of Russian to the foreign companies. The conditions upn which McDonalds entered Russia were such that first time McDonalds received were divided 50/50 between the company and Russian Government.
Evaluation of the success of the internationalization This expansion was extremely successful. Nowadays McDonalds is one the biggest restaurant net in Russia, represented in numerous cities. Despite the fact that today there are much more competitors in the sector, the company still keeps the leading positions in terms of revenues and customer loyalty.

 

TETRA PAK

Country USSR, Russia
Year of entry
Industry/ business area packaging
Entry mode   In 1959 Tetra Pak concluded the first contract with the Soviet Union for delivery of the package. Later, the company switched to FDI and chose a brownfield strategy. They have created a number of joint ventures and invested $60 mln in four Soviet plants. In 1994 there were ZAO "Tetra Pak AB" - a subsidiary of Tetra Pak in Russia and Belarus. In 1997 the company established the “Petmol Project” in St Petersburg. The local dairy Petmol and eight farms around St Petersburg made up the foundation of the project. In 2007 the first plant of Tetra Pak was open in Moscow region, which is the biggest package production plant in Russia and the Eastern Europe.Today company has a very wide geography in Russia.
Motives By now, besides Russia, the company is represented in more than 170 countries. The main goal was to get a bigger market share on the global market and to raise milk consumption. Russia in 1959 was particularly attractive as it was a developing economy.
Firm specific advantages used on the foreign market The company had a unique technology of package and product preservation. Moreover, it is able to invest heavily in its subsidiaries and joint ventures. Finally, it has a strong and trustworthy brand all over the world.
First mover or follower Tetra Pak was the first foreign company which cooperated with in the USSR plants in package production.
Type of state involvement in the process of internationalization As we speak about the times of the Soviet Union, the state could not but participate in the process of entry. However, due to the large gap in time, no particular information is available.
Evaluation of the success of the internationalization The entry in Russia was undoubtedly successful as even by now there are almost no competitors for Tetra Pak in the country. According to the official data, in 2010 total net operating revenues increased with 9.76%, from RUB 22,943,930 thousands to RUB 25,182,519 thousands.

 

SISTEMA JSFC

Sistema JSFC holds 53% of MTS shares. Therefore, in this case we take a look at MTS expansion in India as one of the most relevant expansions of Systema JSFC company.

Country India
Year of entry
Industry/ business area Telecommunication
Entry mode The company entered the Indian market using FDI and following the brownfield strategy: they established a joint venture of Sistema JSFC (57%) and Shyam Group (24%), but also the Government of the Russian Federation (17%). Later the Sistema Shyam SSTL, known as MTS India, was created. Nowadays MTS India is present is all 22 telecom circles in India and serves 16 mln customers.
Motives The general motive for international expansion for MTS were to enter new developing markets, to gain a bigger market share and to expand its advanced technologies abroad making competitive advantage of it. India was chosen because of its economic situation (it is one of the most intensively developing markets) and because of large population and high demand for the services.
Firm specific advantages used on the foreign market MTS has already possessed a strong brand and had certain vision of it. They offered control over online billing and CRM systems and were members of the GSMA board. Then, MTS has a better quality of connection than most of its competitors. Finally, they provided a large outlet network to its customers.
First mover or follower The company was the first Russian company which entered Indian market. This gave it a certain competitive advantage, but also a,de it more difficult as they are the first to find the best way to the market.
Type of state involvement in the process of internationalization The state held 17% of the first joint-venture established in India. It is logical to assume that the state is very interested in the development of this sector of business in Russia and acquiring influence abroad, that is why it got involved into the process of international expansion of the company.
Evaluation of the success of the internationalization The process of internationalization is still developing and it is difficult to judge if it was successful or not. Still. MTS has a wide net of customers in India, and although it also encounters tough competition, it still is considered a significant player on the local market.

Besides, in 2011 System JSFC planned to merge MTS with another part of the group “Komstar-OTS”, which has subsidiaries in Armenia and Ukraine. As MTS already has its offices in these countries, it would obviously help to develop new joint enterprises there together.

 


Date: 2016-01-05; view: 317


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