Cross-Border Strategy and Operations: Finnish Companies in Russia. A Collection of Cases (250,00 руб.)

196 Pages·02.154 MB·Russian

by  Medvedev Andrey G. , Latukha Marina O.

Copyright ОАО «ЦКБ «БИБКОМ» & ООО «Aгентство Kнига-Cервис»
Saint Petersburg State University
Graduate School of Management
CROSS-BORDER STRATEGY
AND OPERATIONS:
FINNISH COMPANIES IN RUSSIA
A Collection of Cases
Edited by
Andrey G. Medvedev and Marina O. Latukha
St. Petersburg
2012
Copyright ОАО «ЦКБ «БИБКОМ» & ООО «Aгентство Kнига-Cервис»
Reviewers:
Marina Yu. Sheresheva, Professor, National Research University Higher School of Economics;
Karina V. Khabacheva, Executive Director, St. Petersburg International Business Association
Cross-Border Strategy and Operations: Finnish Companies in Russia.
A Collection of Cases / Edited by Andrey G. Medvedev and Marina O. Latukha. —
SPb.: SPbSU GSOM, 2012. — 196 p.
The aim of this book is to develop an understanding of strategic and operational
decisions in internationalization process of Finnish companies entering the Russian
market. The case book reflects on experiences of several Finnish firms doing business
in Russia and provides insights for the various challenges, objectives and decision-
making alternatives companies face in real internal and external organizational set-
tings. The presented collection of cases reveals the main managerial functions to be
applied in the field of international business, in particular, strategic management,
organization design, marketing, and operations management.
This book is recommended for students of Bachelor, Master, and MBA levels
at business schools as well as professional managers in decision-making on entering
foreign markets.
ISBN 978-5-9924-0074-8
Copyright © 2012 SPbSU GSOM
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CONTENTS
Preface ............................................................................................5
Atria: Post-Acquisition management solutions
for the Russian subsidiary
Andrey G. Medvedev ...................................................................9
Nokian Tyres: A variety of investment decisions for Russia
Andrei Yu. Panibratov ..............................................................39
YIT in Russia: Expansion to the East or escape from the West?
Andrei Yu. Panibratov ..............................................................59
Valio: Will Viola processed cheese maintain a leading position
in the Russian Market?
Sergei A. Starov and Igor V. Gladkikh ........................................75
Konecranes: Balancing scale of operations and quality of services
in the Russian B2B market
Andrei Yu. Panibratov and Marina O. Latukha ............................125
K-Rauta: Expansion in Russia in a time of world crisis
Vitally I. Cherenkov .................................................................143
Skanska: Withdrawal from the Russian market —
failure or part of a strategy?
Andrei Yu. Panibratov ..............................................................175
List of Contributors .......................................................................194
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PREFACE
This book is the result of multi-year collaboration between two lead-
ing European business schools: Aalto University School of Economics and
St. Petersburg State University Graduate School of Management. Together
with the authors’ extensive experience in research and teaching in inter-
national management (with the main focus, for obvious reasons, on Finn-
ish companies and Russia as a primary destination for internationaliza-
tion) this has finally led to the appearance of this book.
Historically, Russia and Finland have an extensive tradition of scien-
tific and business cooperation. With its very long shared border, Finland
has always been closely connected with Russia and Finnish companies
have become very familiar with the Russian business and policy environ-
ment. At present, the cooperation between Russia and Finland focuses on
Northwest Russia, in particular the Republic of Karelia, the Leningrad
Region, Murmansk Region, and the City of St. Petersburg. This is clearly
one of the main reasons why Finnish companies, in most cases, choose to
start their foreign operations in Russia and St. Petersburg and why many
Finnish and Russian universities have recently conducted various studies
on Russia, its business environment, company strategies, and management
practices.
The outward movement of Finnish companies is an increasingly im-
portant phenomenon. Despite recent setbacks in the world economy, the
growth of companies entering emerging economies continues and Russia
is still seen to be a challenging direction for companies that are expand-
ing around the world. The knowledge gained from joint research activities
and long business and economic relationships between Finland and Russia
is mirrored in educational collaboration, such as in developing graduate
and postgraduate programs in universities in both countries. Courses such
as Doing Business in Russia or Business Strategy for Emerging Markets
are included in the curriculum of almost all international business sub-
jects taught in business schools. Many Finnish universities invite Russian
colleagues (including the authors of this book) as visiting professors for
these courses. An interesting fact is that these courses are usually based
on examples of real companies showing concrete strategic and operational
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Preface
decisions taken by Finnish firms. In other words, each course is always
followed by a set of case studies aimed at integrating theoretical concepts
and practical experience.
The main feature of this book is that it consists of a collection of
case studies. Each case is devoted to a specific company and identifies
the real business situation the firm faced on entering and operating in
the Russian market. Starting with cases about the strategic opportunities
for Finnish companies in Russia, the book includes cases devoted to the
post-entry operational decisions in the areas of marketing, finance and
organizational behavior. This not only shows the variety of managerial
practices that can be vital for understanding how firms operate in a for-
eign business environment but also helps identify and develop a helicopter
view for planning and implementing an internationalization strategy.
There is no doubt that the use of case studies in business education
is very popular. The reason for using case studies is to simulate real
situations in a classroom where a range of discussions would usually be
needed to understand the complexities of the decision-making process. In
addition to developing analytical skills for critical thinking and problem
solving, case studies actually show problems, managerial tasks, strategic
and operational objectives, and challenges for managers in a changing in-
ternational environment. The case method often involves students analyz-
ing business situations both in complex and in detail with a factual de-
scription of a challenge or task faced by a company together with the ex-
ternal and internal environment, and management alternatives. Any case
study used during the education process pushes students to understand
and develop their own views on solving a wide range of organizational
problems. The case method helps students not only find, understand and
analyze the information, but also conceptualize and lay it out for deci-
sion making. During case study analysis students may also play differ-
ent roles such as researcher, investigator, creator, ideas generator, etc.
that develop very important competencies for business and management.
Therefore, we took the case method for explaining company results as it
proved to be the main and only effective tool for connecting theory and
practice in the educational process.
The purpose of this book is to familiarize management students with
practical implications of international business theory and some rules on
how to undertake business activities in Russia including foreign trade
operations, industrial cooperation deals, and foreign direct investment
projects. The book is aimed at those readers who are interested in under-
standing why Finnish companies go abroad, how they internationalize, and
what their perspectives are. Therefore, the book’s first, principal objective
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Preface
is to enhance the reader’s understanding of the real internationalization
motives of Finnish companies. The second is to show the range of strate-
gies and explain the choice of entry modes and post-entry operations by
Finnish firms in Russian markets. The third is to discuss the prospects
for future development of Finnish companies in Russia.
The book may serve as a useful support for international manage-
ment studies at all levels of business education. The stories presented in
this book are widely used at St. Petersburg State University Graduate
School of Management as instructive cases to be analyzed by students at
Bachelor, Master, and MBA levels. In particular, these cases are used on
the International Management course of the school’s bachelor programs.
Some cases may be effectively used on the International Business Strategy
course delivered to students of CEMS-MIM and Master in International
Business programs. They may also help when studying Marketing and In-
ternational Marketing courses at both Bachelor and Master levels.
The Nokian Tyres and YIT cases are good illustrations of how firms
decide on their foreign operation methods for their initial foreign entries
and may be used while studying the foreign entry mode topic. These com-
panies followed several stages for developing their activities in Russia
before selecting a greenfield mode for establishing a substantial presence
in both the Russian industry and the Russian market of car tyres and
construction services. Post-acquisition management solutions are well il-
lustrated by the Atria case, which focuses on how to integrate the activi-
ties of a newly acquired subsidiary into the overall corporate set of oper-
ations. This case may be included in the subsidiary-level strategy topic in
the International Management or International Business Strategy course.
Marketing issues are better presented in the K-Rauta and Valio
cases. In particular, these cases illustrate how firms have adjusted their
consumer products or services to non-domestic conditions; therefore they
may be used in topics such as market segmentation, branding, or promo-
tion policy within the Marketing or International Marketing course. In
the Industrial Marketing course, the Konecranes case may provide a good
platform for discussing B2B relations, long-term cooperative agreements,
and strategic alliances. This case may also find its application in the Op-
erations Management course and in topics devoted to quality management
in companies.
As industrial characteristics may significantly influence decisions tak-
en by company managers in foreign countries, the YIT and Skanska cases
are of particular interest in showing how management solutions are af-
fected by regulations and competition in the Russian construction sector.
These case studies may be considered in several International Management
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Preface
course topics. The Skanska case is particularly important in understand-
ing the reasons to divesting operations in a foreign country.
The authors are certain that the cases presented in this book will
help both students and acting managers understand better how to make
decisions on entering foreign industries and markets, which foreign op-
eration methods to select and how foreign operations should be integrated
into the corporate set of activities. This book could also be interesting for
managers and specialists from different industry-related companies that
are planning to go abroad or already have foreign operations, in order to
gain practical experience from the examples presented in this book.
Andrey G. Medvedev
Professor, Graduate School of Management,
St. Petersburg State University
Marina O. Latukha
Associate Professor, Graduate School of Management,
St. Petersburg State University
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Andrey G. Medvedev
ATRIA:
POST-ACQUISITION MANAGEMENT SOLUTIONS
FOR THE RUSSIAN SUBSIDIARY
In 2005 Finland-based Atria entered the Russian industry by acquiring St. Pe-
tersburg–based Pit-Product which is now a subsidiary of Atria Plc. Established in
1996, Pit-Product is the largest meat processing company in the City of St. Pe-
tersburg and surroundings. This case describes the activities Atria undertook in
Russia, emphasizing the post-acquisition integration of Russian operations into
the overall Atria strategy. It includes the description of the pre-acquisition situation
and arguments in favor of Atria’s Russian expansion; the process of selecting
an internationalization mode, the terms of the acquisitions and of Atria’s other
deals in Russia; the benefi ts of the Russian expansion for the Atria Group; the
situation that emerged at Pit-Product and other Atria divisions in Russia and
post-acquisition solutions.
INTRODUCTION
In March 2006, Juha Ruohola, recently appointed as Atria Russia
and Baltic Director, was preparing for a meeting with other members of
the Atria Management Group to present his views of how to integrate
Pit-Product, a newly acquired subsidiary of Atria in the City of St. Pe-
tersburg, into the Atria Group. He was still working as the Purchasing
and Investment Director of the Group and had considerable credibility
with the Management Group. Yet, as he clearly acknowledged, there were
significant problems in governing the integration process with the aim
of improving the St. Petersburg subsidiary’s effectiveness. Operations in
Russia posed a challenge to the company’s overall know-how, and success
in meeting it would support the Group’s further progress.
The author would like to appreciate Juha Ruohola, Executive Vice President,
Atria Russia, and Sergey Ivanchenko, General Manager, Atria Russia, for their kind
support and valuable remarks.
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Atria: Post-Acquisition Management Solutions for the Russian Subsidiary
He looked at the slides again. „I have to emphasize how strongly
the new Russian project fits our internationalization strategy”, Ruohola
thought. Entry into Russia appears to be the next logical step for Atria.
For several years, Atria Group’s vision was to become the industry leader
in offering meat products and meal solutions in the Baltic Sea region.
The Baltic Sea region is a natural substrate for Atria Group’s growth.
Despite its national and market-related special characteristics, the Baltic
Sea region is evolving into a contiguous market region. This provides
Atria with opportunities for furthering both its turnover and its profit-
ability.
Ruohola recalled his scholars at Turku School of Economics, where he
graduated with an EMBA in 1999. They always emphasized that a firm
developing its foreign expansion strategy must have clear answers to five
questions. These questions are „why”, „what for”, „where”, „when” and
„how”. The answer to the first question, „why”, is evident to managers at
many Finnish companies. They recognize clearly that developing the do-
mestic operations in the traditionally small domestic market at the same
rate as international operations is hardly possible.
Thus, Atria being a leading meat processing company in Finland (see
the brief overview of the company in the next paragraph), had little op-
portunity to achieve significant growth on the domestic market. Growth
through M&A in the Finnish meat processing industry would inevitably
be blocked by the antimonopoly authorities.
OVERVIEW OF ATRIA (2005)1
Established in 1903 in Finland, when its oldest owner co-operative
was founded, Atria Group Plc operates in the food industry, in particular,
in meat and poultry slaughtering, cutting and processing and the manu-
facturing of meat products, such as sausages, frankfurters and all-meat
products, meat delicatessens and convenience food. Atria’s customers are
the retail sector, restaurants, and hotels, the public sector (schools, hos-
pitals, armed forces etc.) and industry. The Group’s factories are located
in Finland, Sweden, Lithuania and Estonia. Its foremost brands are Atria,
Dukes, Forssan, Lithells, Grillköket, Maks & Moorits, Vilniaus Mesa and
others. Atria Concept AB, a fast-food division of Atria Group owns the
Sibylla brand, which is well recognised in Northern and Eastern Europe.
Atria’s market share in Finland is 30%; the Group is the largest manu-
facturer of meat products in the Baltic Sea Area. In 2005, the Group
had a turnover of €976.9 million and an operating profit of €40.2 million.
1 Atria’s overview is based on the company records and data.
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