INTERNATIONAL PAPER AND ILIM GROUP

TIMBER, WOODWORKING AND PULP-AND-PAPER

ILIM GROUP AND CHINA

There are two interesting stories in the case of Ilim Group and its internationalization process, which happen to be interdependent.

The first one started in 1996, when Ilim started exporting paper and packaging materials to China. The second case refers to 2006 when Ilim established a joint venture with one of the major competitors, American company called International Paper, in fact, Americans just bought 50%[1] of Ilim, so this case cannot be considered as internationalization of Ilim in the first place[2].

State influence:Ilim Company was privatized from the state in 1992 and no significant official government interference has been detected since then. There is no control and no ownership from the state, despite a very curious fact that some of the very high-profile Russian officials are claimed to have worked within the company in its early days. Recent rumors about the corruption and lobbyism actions of the company, where one of the main characters is Dmitri Medvedev himself do indeed show that there probably is some relation between Ilim and the Government. Still, this influenced more the internal affairs of Ilim, not the international activities[3].

Country	China
Year of entry
Industry/ business area	Paper, Containerboard, Pulp, Corrugated packaging
Entry mode	Direct export through representative office
Motives	China is the biggest market for those kinds of products. Besides, it is geographically close to the main production facilities of the company in Siberia. FDI is not sensible because of the industry and country specificity.
Firm specific advantages used on the foreign market	A combination of price, quality and good reputation. The company had a firstmover advantage in the market[4].
First mover or follower	Ilim was first to go to china among Russian companies. It is the leader in Chinese market so far. Most competitors are North-American companies
Type of state involvement in the process of internationalization	The State did not participate in this process directly.The government just announced that it supports the deal. Ilim is a privately owned company and it was competitive enough. There was no need in government interference, besides in 1996 the situation in the country was not too bright.
Evaluation of the success of the internationalization	It was successful. Ilim is one of the leaders in pulp and paper in PRC. The main reasons are good production facilities and the great amount of resource in homeland as well as the geographical location of the facilities. It was a great strategic decision to move to China. The potential of this countries market was forseen by Ilim earlier compared to the competitors and that played huge role in the companies’ succsess.

INTERNATIONAL PAPER AND ILIM GROUP

The second case of International paper acquiring 50% of Ilim shares from our point of view is not clearly beneficial for Ilim. International paper is the biggest paper manufacturer in the market whereas Ilim was one of the top-10 companies in the world industry. Through this deal both companies intended to increase their market share in China and other dynamic Asian countries, International Paper also looked for a way to strengthen its positions in growing Russian market. Another idea is technology exchange between the companies[5].

The new venture got the board of directors of 8 people, 4 of them representing each company, which is from our point of view decent and strategically very interesting. This decision shows that International Paper is interested in moving forward and not just capitalize from existing possibilities in the market[6].

State influence: again, there is no clear evidence that the federal government was somehow involved in the process, except, perhaps, the Anti-Monopoly Service, which was to confirm the deal between two major players of the market. In reality, we understand, that this decision could not be taken without consultations with top-level officials.

Country	Russia
Year of entry	2006-2007
Industry/ business area	Paper, Containerboard, Pulp, Corrugated packaging
Entry mode	Brounfield, joint venture with industry leader, ILIM GROUP
Motives	Several reasons: 1. Russia is a big and developing market. 2. Russia has the biggest resource base in the world 3. ILIM is the leading producer not only in Russia, but in China as well, so with the deal two markets are targeted simultaneously[7].
Firm specific advantages used on the foreign market	It is experience (IP is the biggest player in the industry), technology and expertise
First mover or follower	Definitely not first-mover, but it is very hard to call a #1 international company buying out 50% of #1national player a follower.
Type of state involvement in the process of internationalization	The State did not participate in this process directly. The government just announced that it supports the deal.Ilim is a privately owned company and it was competitive enough. There was no need in government interference, besides in 1996 the situation in the country was not too bright.
Evaluation of the success of the internationalization	The internationalization was quite successful from our point of view. IP got the access to manufacturing in Russia and keys from Russian and Chinese markets.

Date: 2016-01-05; view: 1522

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