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Group 1: military, space, nuclear power

Introduction

 

Russia inherited a well-developed machine-building sector from the Soviet Union in 1991. Machine building is one of the leading industries in the country, which is concentrated mostly in Moscow, St. Petersburg, the Urals, Volga region, and Westerns Siberia. It provides all other industries with equipment and machinery. The share of machine building in Russian economy reaches almost 30%. Machine building industry is characterized with a dynamic and complex structure which includes over 70 branches and with a deep specialization together with a wide cooperation of production. The most strategically important branches in the machinery industry are electronics, computers, robotics, instrument building, agricultural and transport machine building, railway cars manufacture, aircraft building, ship building etc.

The paper analyzes about 40 multinational companies operating in the machinery industry in Russia in order to examine their activities in the sector, to analyze relationship between these companies and the Russian government and to conclude about the influence of the political issues on the international activity and international expansion of the companies.


 

The multinationals which are selected for the further analysis can be divided into three big groups: Russian military construction, space and nuclear power firms, foreign automotive firms which have production facilities in Russia together with local cars producers and heavy-machinery construction firms which were established in the USSR period and were integrated into holdings in the beginning of 2000s. Each group is analyzed separately.

Group 1: military, space, nuclear power

The first group represents the companies which are related to the military, space and nuclear power construction, or, in other words, those which operate in the strategically important field in the global aspect. Until recently, the activities and operations of these enterprises as well as the location of their facilities was a state secret, but nowadays the military-industrial complex is being under a serious reconstruction due to the conversion which has opened great opportunities of usage of the scientific and technological potential for the economics needs of the Russian Federation.

The multinationals from this group are listed below.

Academician M.F. Reshetnev Information Satellite Systems

Country Not concrete country, but EUTELSAT (European Satellite Communications)
Year of entry
Industry/ business area Satellite design and manufacture
Entry mode Joint project. ISS-Reshetnev in tandem with Alcatel Espace won a tender competition announced by EUTELSAT (European Satellite Communications) for the design and manufacture of the telecommunication satellite SESAT. The satellite was expected to satisfy the need for fixed communication in central and Eastern Europe. The integration of Russian and European technologies let a new satellite come true.
Motives The first contracts laid the foundations for integrating Russian and western technologies which for a very long time had been advancing separately, but nevertheless presented a certain challenge to each other. The idea was to take the best from each technology and create a brand-new product which would surpass both Russian and western achievements.[1]
Firm specific advantagesused on the foreign market The technological and scientific heritage of the USSR developments in the space industry, strong state support.
First mover or follower First mover. It was the first contract between the Russian company and a well-known international organization. The main competitors are foreign companies (mostly American and French ones), in Russia - Khrunichev State Research and Production Space Center.
Type of state involvementin the process of internationalization As it’s a state company, the state participation was definitely direct.
Evaluationof the success of the internationalization The internationalization was successful. SESAT was successfully delivered into orbit on April 18, 2000. It was Russia’s most powerful telecommunications satellite and the first satellite with a 10-year lifetime. The company entered the global market, although it’s market share is only 2,9%.

The JSC “Academician M.F. Reshetnev “Information Satellite Systems“ is Russia’s leading space enterprise specializing in the design, development and manufacture of high performance spacecraft and satellite systems. Information Satellite Systems has participated in more than 30 government and commercial space programs and manufactured over 50 different types of highly reliable LEO, MEO, HEO and GSO spacecraft. All the facilities with 8200 employees are situated in Russia. The sales in 2011 – 585,5 mUSD.

State influence: Reshetnev Company is the joint stock company, 100% state ownership. All the members of the board are representatives of government or federal agencies. It is the key executor of the Federal target programs in space industry. In 2009 the company was included in the state list of strategic enterprises. Participate in Federal target programs: State arms procurement program, the Federal Target program "Global Navigation System", Russian Federal Space Program and others.[2]

 

 

Almaz Antey

Country China, Vietnam, Southern Korea
Year of entry
Industry/ business area air defense missile systems
Entry mode Export.
Motives In fact the enterprises which in 2002 formed the Almaz-Antei holding had been exported since the 1990s. The receiving in late 1990s several profitable contracts from China, Vietnam, Southern Korea was one of the main impetus for holding creating, which defined the structure and strategy of Almaz-Antey.[3]
Firm specific advantagesused on the foreign market The technological and scientific heritage of the USSR developments in the industry, strong state support. The capability to provide the biggest range of air defense missile systems of in the world.
First mover or follower Follower
Type of state involvementin the process of internationalization As it’s a state company, the state participation was definitely direct.
Evaluationof the success of the internationalization The internationalization was successful. Now Almaz-Antei is the 25th top of international defense contractors with the revenue in 2011 of 3.55 billion USD, which exports to more than 50 countries (including China, Vietnam, Southern Korea, India, Algeria, Venezuela, Syria, etc. )[4].

 

Almaz-Antey is one of Russia’s major defense companies. It was set up in 2002 through a merger of two historically rival missile houses - NPO Almaz (used to cater to the Air Defense Troops, was most known for its S-300P SAM system) and Antey Concern (specialized in air defense systems for the Ground Troops, including the S-300V). Almaz-Antey is the designated integrator of all air defence missile manufacturers in Russia, for the exception of MANPADS and some short-range specimens.

State influence: Almaz Antey is the joint stock company, 100% state ownership. Some of the members of the board are representatives of government or federal agencies. It is the key executor of the Federal target programs in space industry. The company is included in the list of state strategic enterprises. Participate in Federal target programs: State arms procurement program, the Federal Target program "The development of electronic components and radio electronics ", “The development of the military-industrial complex of the Russian Federation” and others.[5]

 

AtomEnergoMash

Country Different
Year of entry
Industry/ business area machinery
Entry mode Export; joint venture with Alstom Power (French company) with 51% capital of Atomenergomash and 49% - Alstom, acquisition of Arako (Czech company ).[6]
Motives The international expansion was one of the strategic goals of the company.
Firm specific advantagesused on the foreign market The main advantage is that the equipment produced at the Group's companies was installed at all the USSR’s and its allies’ nuclear power plants. Thus the holding just continued to provide services and equipment to the facilities in Bulgaria, Hungary, the Czech Republic, Slovakia, Finland.
First mover or follower Follower. The holding continued the business of the companies which it consolidated.
Type of state involvementin the process of internationalization As it’s a state company, the state participation was definitely direct.
Evaluationof the success of the internationalization The internationalization was successful. Now Atomenergomash controls 55 power engineering companies including research institutes, production facilities, engineering and service companies in Russia, Ukraine, Czech Republic, Hungary, Kazakhstan, Bulgaria, and Morocco. Equipment produced at Atomenergomash Group enterprises is installed in more than 20 countries worldwide. Along with traditional markets (Russia, CIS, Baltic States, Eastern Europe) the Company’s priority markets are those of Asia-Pacific region, Africa, Middle East and Latin America. The sales on the international market – 12,5% (197,5 of 1591,5mUSD).[7]

 

Atomenergomash Group of Companies was established in 2006 as a subsidiary of Federal Agency for Nuclear Power. Holding company combined several manufacturers of nuclear power plants' components. Today, it is one of the leading power machine building holdings in the Russian Federation. It provides efficient technological solutions for the nuclear and thermal power sectors and for the oil and gas industry. The company includes more than 14 500 employees.

State influence: Atomenergomash is the joint stock company, 85,7% state ownership (70,5%- Atomenergoprom, 9,7% - TVEL, 5,5% - Tekhsnabexport). The mission of the company reflects three strategic initiatives of state corporation "Rosatom", including an independent strategic initiative HEA “The creation of a stable EMC of a sufficient scale” and the two cross-divisional strategic initiatives “Global expansion of VVER technology platform” and “The share of nuclear power generation in Russia increasing”.[8]

 

Center for ground-based space infrastructure facilities operation

Country No particular country
Year of entry
Industry/ business area Space
Entry mode Exported to joint project Sea Launch (spacecraft launch service that uses a mobile sea platform) of Norway, Russia, Ukraine and the United States (managed by Boeing with participation from the other shareholders). In the project Center created technological equipment and technical systems on the launch platform (SP), the Assembly and Command Ship (ACS) and the base port.
Motives Strategic state space initiatives.
Firm specific advantagesused on the foreign market State support and investments.
First mover or follower Follower
Type of state involvementin the process of internationalization State initiative.
Evaluationof the success of the internationalization The internationalization seems to be successful. Now the Center participates in different international programs (“Land Launch” with Ukraine and the USA, “Soyuz at GSC” with France, “Baiterek” with Kazakhstan, “KSLV” with Korea, “Brazilian Project”, etc.) and cooperates with NASA, European SA, Canadian SA, Japanese SA, Ukrainian Federal SA and Kazakhstan National SA.[9]

 

Center for ground-based space infrastructure facilities operation was established with the Russian Space Agency in 1994. The profit of the company in 2011 was 639 mUSD. The main functions of the company are the following: operation of Baikonur Cosmodrome, R&D projects for the improvement of the ground-based space infrastructure, racket fuel provision, space planning etc.

State influence: The Center is the subdivision of Federal Space agency. The main partners and contractors are the state agencies (Ministry of Information Technology and Communications, Russian Space Forces, Federal Space Agency), state enterprises and academic institutions (Khrunichev State Research And Production Space Center, Space Research Institute, etc.). It provides services for launching space vehicles under the Federal Space Program, the federal target program "Global Navigation System" in the interests of national defense and security of the country, international cooperation programs on commercial projects.

Khrunichev State Research And Production Space Center

Country USA
Year of entry
Industry/ business area Space industry
Entry mode Joint venture. Lockheed Khrunichev Energia (LKE), a joint Russia–U.S. venture was established by the Khrunichev Space Center and the Energia Space Rocket Corporation on Russia’s side and Lockheed Corp. on the U.S. side. In 1994 due to merger between Lockheed and Martin Marietta it was transformed to the International Launch Services Inc. with the Khrunichev holding the majority interest.
Motives This step offered the Proton rocket launch vehicle in the international market.
Firm specific advantagesused on the foreign market The soviet space industry academic and technological heritage, state support.
First mover or follower First mover
Type of state involvementin the process of internationalization As it’s a state company, the state participation was definitely direct.
Evaluationof the success of the internationalization The internationalization was successful. Since 1996, ILS has launched most commercial satellite platforms and worked with all major satellite operators. And Khrunichev now holds international projects with USA, Canas,Japan, Southern Korea, states-members of European Space Agency

 

The Khrunichev State Research and Production Space Center was founded on the basis of the Khrunichev Machine Building Plant and the Salyut Design Bureau by Presidential Decree in 1993. The goal was to make the production business and foreign economic relations of major space industry companies more efficient and to more actively promote Russian technologies in the international market. Khrunichev is the major Russian producer of spacecraft and space-launch systems, including the Proton and Rokot rockets. There are 43 000 in Russian and Kazakhstan (Baykonur).

State influence: Khrunichev is the Federal State Unitary Enterprise, thus is completely owned and governed by the State.

 

MIC NPO Mashinostroyeniya

Country Vietnam, Bulgaria
Year of entry 1977-1979
Industry/ business area missile systems
Entry mode Export
Motives Government of the Soviet Union decided to supply some friendly countries with mobile coastal missile systems.
Firm specific advantagesused on the foreign market During the soviet time the members of the communist camp didn’t have any alternatives to the Soviet military production. Then the strong soviet military heritage, government investments and the fact that the cooperation in this field is also defined by the politics (e.g. countries of Latin America or Middle East prefer to cooperate with Russia instead of the USA) played the crucial role.
First mover or follower First mover in its industry
Type of state involvementin the process of internationalization Direct, it’s the state company.
Evaluationof the success of the internationalization The internationalization was successful. Now the company exports to Vietnam, Bulgaria, Syria and Korea, Far and Middle East, South and South-East Asia, Africa, South America, Europe

 

MIC NPO Mashinostroyeniya is one of the leading space and rocketry companies of Russia. JSC MIC Mashinostroyenia, as a prime contractor in the multi-discipline cooperation, provides the National Armed Forces with advanced military equipment and collaborates with foreign partners in the military and technical fields. The firm’s revenue 464.3 mUSD in 2011.

State influence: MIC NPO Mashinostroyeniya is the state-owned corporation. It provides Russian Armed Forces with the latest types of military equipment, carries out military-technical cooperation with foreign partners and is strategically important for Russian Federation.[10]

 

Oboronprom

Country different
Year of entry 2002 – since the company was established
Industry/ business area Airspace industry
Entry mode Export
Motives The subdivision of the holding had already been involved in international cooperation, Oboronprom just joint them.
Firm specific advantagesused on the foreign market There are no competitors in Russia, because of industry consolidation
First mover or follower Follower. Continued the cooperation of its subdivisions
Type of state involvementin the process of internationalization As it’s a state company, the state participation was definitely direct.
Evaluationof the success of the internationalization The internationalization was successful. Now the company exports to more than 110 countries. [11]

 

Oboronprom is a Russian aerospace holding company. The company is involved in helicopter production, engine production, air-defenñe systems, complex radio-electronic systems and leasing. It is part of the corporation "Russian Technologies” and the parent company of JSC Russian Helicopters, JSC United Engine Corporation, JSC Defence systems. The revenue of the company was 7704,8 mUSD in 2011.

State influence: JSC Oboronprom is the joint stock company, 100% state ownership (27,8%-RF, 58,3%-Russian Techologies, 13,9 - other state companies). Some of the members of the board are representatives of government or federal agencies. The company is provides the machinery for Russian Arms, has the strategic value and receives state investments (e.g. 68,7 mUSD in 2011). In 2006 the company was included in the state list of strategic enterprises.[12]

 

RSC Energia

Country different
Year of entry
Industry/ business area Space industry
Entry mode Start wide international integration for the implementation of joint space programs (Czechoslovakia, Poland, Bulgaria, Hungary, Vietnam, Cuba, Mongolia, Romania, France, India, Syria, Afghanistan, Japan, Great Britain, Kazakhstan, Austria, Germany).
Motives State strategic goal to strengthen its position in space and develop the international cooperation with allies in this field.
Firm specific advantagesused on the foreign market The company became the ancestor of almost all areas of the national rocket and space technology.
First mover or follower First mover
Type of state involvementin the process of internationalization As it’s a state enterprise, the state participation was definitely direct.
Evaluationof the success of the internationalization The internationalization was successful. Now the company participates in different joint projects: ISS project involving 15 countries, Sea Launch (Ukraine, USA, Japan, Russia), Land Launch (Ukraine, USA, Russia). The EU (ESA) and USA (NASA) are the main foreign customers.[13]

 

JSC RSC Energia is active in the space industry since 1946. The company became the ancestor of almost all areas of the national rocket and space technology. Today "RSC" Energia " is a leading Russian rocket and space venture and works to create automatic space and missile systems (launch vehicles and inter-orbital transfer), high-tech systems for various applications for use in non-space sectors. The enterprise initiated practically all lines of activity related to national rocket and space technology. Its efforts are focused on building automatic space and rocket systems (launch vehicles and orbital transfer vehicles); high-tech, multi-use systems to be used in areas other than space. The revenue of the company was 641,8 in 2011.

State influence: RSC Energia is the joint stock company, 100% state ownership. Some of the members of the board are representatives of government or federal agencies. In 2004 the company was included in the state list of strategic enterprises.

Tactical Missiles Corporation JSC

Country No particularly
Year of entry 2002 – since the establishment
Industry/ business area weapon manufacturing
Entry mode Export
Motives Tactical Missiles Corporation since its creation used and developed the already established international network of its subdivisions - Zvezda-Strela and others.
Firm specific advantagesused on the foreign market The already established international connections, soviet military heritage, state support.
First mover or follower Follower
Type of state involvementin the process of internationalization As it’s a state enterprise, the state participation was definitely direct.
Evaluationof the success of the internationalization The internationalization was successful. Now the corporation has various export contracts with such countries as India, Algeria, Syria, Indonesia, France, Turkmenistan, Vietnam. The revenue from export was 848.5 of 1209.8 mUSD total.[14]

 

Tactical Missiles Corporation is the major Russian weapon manufacturer, founded on the basis of Zvezda-Strela in 2002. Strategic targets which lead to the Corporation establishment consisted in keeping and developing of missilery’s research and production capacity, supplying national defense capability, resource mobilization needed for highly effective guided missiles and air-based, ground-based, sea-based weapon systems production, also in strengthening military positions of Russia in world armament market. 22 000 employees work on the enterprises of the JSC.

State influence: Tactical Missiles Corporation is the joint stock company, 100% state ownership (Federal Agency for State Property Management (Rosimushchestvo)). Most of the members of the board are representatives of government or federal agencies. The company was included in the state list of strategic enterprises.[15]

TsSKB-Progress

Country International space programs
Year of entry
Industry/ business area space industry
Entry mode Export of services. The subdivision of the holding had already been involved in international cooperation (e.g. in 1990s several Indian satellites were launched). In 1999 4 space crafts of SS/Loral (USA) were launched.
Motives The success of previous international lunches, state strategic goal to strengthen its position in space market.
Firm specific advantagesused on the foreign market The already established international connections, soviet space heritage, state support.
First mover or follower Follower
Type of state involvementin the process of internationalization As it’s a state enterprise, the state participation was definitely direct.
Evaluationof the success of the internationalization The internationalization was successful. TsSKB-Progress continues international projects.[16]

 

TsSKB-Progress is a Russian "Federal State Unitary Enterprise" under the jurisdiction of Roscosmos, the Russian Federal Space Agency responsible for space science and aerospace research. It is the developer of the famous Soyuz-FG rocket used for manned space flight, as well as Soyuz-U used for launching unmanned probes.is one of the leaders of space industry in development, manufacturing and operation of the middle-class launch vehicles. The LV built by the enterprise are used for manned and cargo launches to ISS, as well as for launches of foreign payloads.

State influence: TsSKB-Progress is the Federal State Unitary Enterprise, which means 100% state ownership. Some of the members of the board are representatives of government or federal agencies. The company was included in the state list of strategic enterprises.[17]

 

Summary

This group of the companies obviously gets the strongest and the most intensive governmental support. They are all owned by the government; many of them have politicians and members of the Russian government in the board of directors. Some of the companies from this field have production facilities not only in Russia but also abroad; they collaborate with foreign partners in the developed (the USA, France, the United Kingdom, Germany etc.) as well as in the developing countries (China, Algeria, Latin America, ex-members of the Soviet bloc etc.) and participate in many joint multinational projects (for example, International Launch Services of the Proton rocket in the USA or the participation in the International Space Station project etc.). More than a half of the production of these companies is exported to the countries with developing economies such as India, China, Vietnam, Venezuela, Algeria and others. This is often explained by the political connections and relationships being established long ago in the USSR period. All in all, the international scope of the activities of these companies is huge and this policy is strongly supported by the Russian State legislation. The main directions here are the following:

· Human resources support (federal educational and retraining programs, social perks and benefits for the workers of the military-construction and high technologies complex);

· Providing the companies of the sector with all the necessary infrastructure and giving them a status of scientific centers;

· Informational support (providing with the access to the Russian and international scientific funds and systems, organization of exhibitions of their production samples etc.);

· Financial support of the R&D projects, reconstruction projects; governmental loans and bonds issuing;

· Attraction of foreign investments and advanced technologies into the sector;

· Technical collaboration with foreign partners and investors.

To sum up, it can be concluded that the companies which operate in strategically important fields such as military complex, space industry and nuclear power are:

· All owned by the Russian government;

· Mostly were established in the Soviet times and reconstructed in the 90s, being converted into JSCs but with governmental representatives in the boards of directors;

· Export their production abroad and participate in many joint projects with the foreign colleagues;

· Interested in foreign investments and this interest is highly supported by the Russian government;

· Their international activities and expansion are also supported by the Russian government.

 

Date: 2015-12-24; view: 1002

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